As filed with the Securities and Exchange Commission on September 21, 2007

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period                      to                     

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 333-11072

KABUSHIKI KAISHA MITSUBISHI TOKYO UFJ GINKO

(Exact name of Registrant as specified in its charter)

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

7-1, Marunouchi 2-chome

Chiyoda-ku, Tokyo 100-8388

Japan

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

$2,000,000,000 aggregate principal amount of 8.40% Global Senior Subordinated Notes due April 15, 2010

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

At March 31, 2007, (1) 10,257,961,942 shares of common stock and (2) 356,700,000 shares of preferred stock were issued.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   ¨    No   x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes   ¨    No   x

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such short period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes   x    No    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17   ¨    Item 18   x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ¨    No   x

TABLE OF CONTENTS

		Page
Forward-Looking Statements		3
Item 1.	Identity of Directors, Senior Management and Advisors	4
Item 2.	Offer Statistics and Expected Timetable	4
Item 3.	Key Information	4
Item 4.	Information on the Company	20
Item 4A.	Unresolved Staff Comments	41
Item 5.	Operating and Financial Review and Prospects	42
Item 6.	Directors, Senior Management and Employees	96
Item 7.	Major Shareholders and Related Party Transactions	110
Item 8.	Financial Information	111
Item 9.	The Offer and Listing	112
Item 10.	Additional Information	113
Item 11.	Quantitative and Qualitative Disclosures about Credit, Market and Other Risk	124
Item 12.	Description of Securities Other than Equity Securities	134
Item 13.	Defaults, Dividend Arrearages and Delinquencies	134
Item 14.	Material Modifications of the Rights of Security Holders and Use of Proceeds	134
Item 15.	Controls and Procedures	134
Item 16A.	Audit Committee Financial Expert	135
Item 16B.	Code of Ethics	135
Item 16C.	Principal Accountant Fees and Services	136
Item 16D.	Exemptions from the Listing Standards for Audit Committees	137
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	137
Item 17.	Financial Statements	137
Item 18.	Financial Statements	137
Item 19.	Exhibits	137
Selected Statistical Data		A-1
Consolidated Financial Statements		F-1

For purposes of this Annual Report, we have presented our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or US GAAP, except for risk-adjusted capital ratios, business segment financial information and some other specifically identified information. Unless otherwise stated or the context otherwise requires, all amounts in our financial statements are expressed in Japanese yen.

When we refer in this Annual Report to “we,” “us,” “our” and “BTMU,” we generally mean The Bank of Tokyo-Mitsubishi UFJ, Ltd. and its consolidated subsidiaries, but from time to time as the context requires, we mean The Bank of Tokyo-Mitsubishi UFJ, Ltd. as an individual legal entity. Similarly, references to “UFJ Bank” are to UFJ Bank Limited as well as UFJ Bank Limited and its consolidated subsidiaries, as the context requires. References in this Annual Report to “yen” or “¥” are to Japanese yen and references to “US dollars,” “US dollar,” “dollars,” “US$” or “$” are to United States dollars. Our fiscal year ends on March 31 of each year. From time to time, we may refer to the fiscal year ended March 31, 2007 in this Annual Report as fiscal 2006 or the 2006 fiscal year. We may also refer to other fiscal years in a corresponding manner. References to years not specified as being fiscal years are to calendar years.

We usually hold the ordinary general meeting of shareholders in June of each year in Chiyoda-ku, Tokyo.

2

Forward-Looking Statements

We may from time to time make written or oral forward-looking statements. Written forward-looking statements may appear in documents filed with the U.S. Securities and Exchange Commission, or SEC, including this Annual Report, and other reports to shareholders and other communications.

The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves. We rely on this safe harbor in making these forward-looking statements.

Forward-looking statements appear in a number of places in this Annual Report and include statements regarding our intent, business plan, targets, belief or current expectations and/or the current belief or current expectations of our management with respect to our results of operations and financial condition, including, among other matters, our problem loans and loan losses. In many, but not all cases, we use words such as “anticipate,” “aim,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probability,” “risk” and similar expressions, as they relate to us or our management, to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those which are anticipated, aimed, believed, estimated, expected, intended or planned or otherwise stated.

Our forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ from those in the forward-looking statements as a result of various factors. We identify in this Annual Report in “Item 3.D. Key Information—Risk Factors,” “Item 4.B. Information on the Company—Business Overview,” “Item 5. Operating and Financial Review and Prospects” and elsewhere, some, but not necessarily all, of the important factors that could cause these differences.

We do not intend to update our forward-looking statements. We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

3

PART I

Item 1.    Identity of Directors, Senior Management and Advisors.

Not applicable.

Item 2.    Offer Statistics and Expected Timetable.

Not applicable.

Item 3.    Key Information.

A.    Selected Financial Data

The selected statement of income data and selected balance sheet data set forth below have been derived from our audited consolidated financial statements. On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc., or MTFG, the parent company of The Bank of Tokyo-Mitsubishi, Ltd., or BTM, merged with UFJ Holdings, Inc., or UFJ Holdings, the parent company of UFJ Bank Limited, or UFJ Bank, with MTFG being the surviving entity. Upon consummation of the merger, MTFG changed its name to Mitsubishi UFJ Financial Group, Inc. The merger was accounted for under the purchase method of accounting, and the assets and liabilities of UFJ Holdings and its subsidiaries were recorded at fair value as of October 1, 2005. Therefore, although the merger of BTM with UFJ Bank occurred and BTM changed its name to The Bank of Tokyo-Mitsubishi UFJ, Ltd., or BTMU, on January 1, 2006, the results of operations of UFJ Bank and its subsidiaries have been included in our consolidated financial statements since October 1, 2005. Numbers as of and for the fiscal years ended March 31, 2003, 2004 and 2005 reflect the financial position and results of BTM and its subsidiaries only. Numbers as of March 31, 2006 reflect the financial position of BTMU while numbers for the fiscal year ended March 31, 2006 comprised the results of BTM and its subsidiaries for the six months ended September 30, 2005 and the results of BTMU from October 1, 2005 to March 31, 2006. Numbers as of March 31, 2007 and for the fiscal year ended March 31, 2007 reflect the financial position and results of BTMU. See note 2 to our consolidated financial statements for more information.

Except for risk-adjusted capital ratios, which are calculated in accordance with Japanese banking regulations based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP, and the average balance information, the selected financial data set forth below are derived from our consolidated financial statements prepared in accordance with US GAAP.

4

You should read the selected financial data set forth below in conjunction with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and other financial data included elsewhere in this Annual Report on Form 20-F. These data are qualified in their entirety by reference to all of that information.

	Fiscal years ended March 31,
	2003			2004			2005			2006			2007
	(in millions, except per share data and number of shares)
Statement of income data:
Interest income	¥	1,256,243		¥	1,116,300		¥	1,194,507		¥	2,249,309		¥	3,444,360
Interest expense		433,200			337,544			388,098			728,762			1,279,212
Net interest income		823,043			778,756			806,409			1,520,547			2,165,148
Provision (credit) for credit losses		287,282			(142,617	)		123,945			163,416			341,570
Net interest income after provision (credit) for credit losses		535,761			921,373			682,464			1,357,131			1,823,578
Non-interest income		716,615			973,689			795,682			556,849			1,220,453
Non-interest expense		966,737			1,028,304			954,258			1,616,828			2,172,027
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		285,639			866,758			523,888			297,152			872,004
Income tax expense		48,406			331,103			237,296			68,921			410,299
Income from continuing operations before cumulative effect of a change in accounting principle		237,233			535,655			286,592			228,231			461,705
Income (loss) from discontinued operations—net		12,277			1,946			1,493			8,973			(817	)
Cumulative effect of a change in accounting principle, net of tax(1)		(532	)		—			(977	)		(8,425	)		—
Net income	¥	248,978		¥	537,601		¥	287,108		¥	228,779		¥	460,888
Net income available to a common shareholder	¥	245,620		¥	527,528		¥	280,392		¥	221,780		¥	449,925
Amounts per share:
Basic earnings per common share—income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle	¥	49.98		¥	104.72		¥	55.76		¥	30.64		¥	44.89
Basic earnings per common share—net income available to a common shareholder		52.49			105.10			55.87			30.72			44.81
Diluted earnings per common share—income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle		46.65			104.43			55.50			27.01			44.21
Diluted earnings per common share—net income available to a common shareholder		49.11			104.81			55.61			27.07			44.13
Number of shares used to calculate basic earnings per common share (in thousands)		4,679,226			5,019,470			5,019,470			7,219,739			10,041,800
Number of shares used to calculate diluted earnings per common share (in thousands)		4,777,359	(2)		5,019,470			5,019,470			8,119,446	(3)		10,289,317	(3)
Cash dividends per share declared during the fiscal year:
—Common share	¥	3.00		¥	7.73		¥	34.71		¥	157.21		¥	43.52
	$	0.03		$	0.07		$	0.32		$	1.33		$	0.37
—Preferred share (Class 1)	¥	41.25		¥	123.75		¥	82.50		¥	41.25			—
	$	0.34		$	1.07		$	0.78		$	0.38			—
—Preferred share (Class 2)		—			—			—		¥	36.42		¥	60.00
		—			—			—		$	0.31		$	0.51
—Preferred share (Class 3)		—			—			—			—		¥	23.85
		—			—			—			—		$	0.21
—Preferred share (Class 4)		—			—			—			—		¥	18.60
		—			—			—			—		$	0.16
—Preferred share (Class 5)		—			—			—			—		¥	19.40
		—			—			—			—		$	0.17
	At March 31,
	2003			2004			2005			2006			2007
	(in millions)
Balance sheet data:
Total assets	¥	77,680,387		¥	85,058,552		¥	92,050,299		¥	158,825,706		¥	153,605,242
Loans, net of allowance for credit losses		38,757,171			39,113,565			42,686,305			84,923,276			85,130,539
Total liabilities		75,744,644			82,286,419			88,883,714			150,556,223			144,919,111
Deposits		55,059,970			58,369,249			60,224,192			114,062,281			113,386,103
Long-term debt		4,607,359			5,086,993			5,196,388			11,925,838			12,263,205
Total shareholder’s equity		1,935,743			2,772,133			3,166,585			8,269,483			8,686,131
Common stock		749,873			749,873			749,873			871,973			871,973

5

	Fiscal years ended March 31,
	2003			2004			2005			2006			2007
	(in millions, except percentages)
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Other financial data:
Average balances:
Interest-earning assets	¥	68,166,517		¥	72,394,249		¥	82,220,483		¥	112,023,359		¥	140,731,722
Interest-bearing liabilities		62,252,204			67,026,490			75,632,995			98,073,940			119,077,306
Total assets		76,642,166			83,474,334			92,584,867			132,835,133			154,208,262
Total shareholder’s equity		1,765,204			2,398,816			2,769,260			5,485,014			8,481,891
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Return on equity and assets:
Net income available to a common shareholder as a percentage of total average assets		0.32	%		0.63	%		0.30	%		0.17	%		0.29	%
Net income available to a common shareholder as a percentage of total average shareholder’s equity		13.91	%		21.99	%		10.13	%		4.04	%		5.30	%
Dividends per common share as a percentage of basic earnings per common share		5.72	%		7.35	%		62.13	%		511.75	%		97.12	%
Total average shareholder’s equity as a percentage of total average assets		2.30	%		2.87	%		2.99	%		4.13	%		5.50	%
Net interest income as a percentage of total average interest-earning assets		1.21	%		1.08	%		0.98	%		1.36	%		1.54	%
Credit quality data:
Allowance for credit losses	¥	1,058,633		¥	649,339		¥	567,651		¥	912,997		¥	993,527
Allowance for credit losses as a percentage of loans		2.66	%		1.63	%		1.31	%		1.06	%		1.15	%
Nonaccrual and restructured loans, and accruing loans contractually past due 90 days or more	¥	2,115,654		¥	1,229,157		¥	1,005,049		¥	1,850,892		¥	1,531,753
Nonaccrual and restructured loans, and accruing loans contractually past due 90 days or more as a percentage of loans		5.31	%		3.09	%		2.32	%		2.16	%		1.78	%
Allowance for credit losses as a percentage of nonaccrual and restructured loans, and accruing loans contractually past due 90 days or more		50.04	%		52.83	%		56.48	%		49.33	%		64.86	%
Net loan charge-offs	¥	573,474		¥	247,429		¥	209,446		¥	107,756		¥	265,246
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net loan charge-offs as a percentage of average loans		1.42	%		0.61	%		0.49	%		0.17	%		0.31	%
Average interest rate spread		1.14	%		1.04	%		0.94	%		1.27	%		1.38	%
Risk-adjusted capital ratio calculated under Japanese GAAP(4)		10.43	%		11.97	%		11.83	%		12.48	%		12.83	%

Notes:

(1) On April 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” Effective April 1, 2004, we adopted Financial Accounting Standards Board Interpretation, or FIN, No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” Effective March 31, 2006, we adopted FIN No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143.”

(2) Includes the common shares potentially issuable pursuant to the 3% exchangeable guaranteed notes due 2002. These notes were redeemed in November 2002.

(3) Includes the common shares potentially issuable by conversion of the Class 3, Class 4, and Class 5 Preferred Stock.

(4) Risk-adjusted capital ratios have been calculated in accordance with Japanese banking regulations, based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP.

6

Exchange Rate Information

The tables below set forth, for each period indicated, the noon buying rate in New York City for cable transfers in Japanese yen as certified for customs purposes by the Federal Reserve Bank of New York, expressed in Japanese yen per $1.00. On September 18, 2007, the noon buying rate was $1.00 equals ¥115.75 and the inverse noon buying rate was ¥100 equals $0.86

	Year 2007
	March		April		May		June		July		August		September(1)
High	¥	118.15	¥	119.84	¥	121.79	¥	124.09	¥	123.34		¥119.76		¥116.21
Low		116.01		117.69		119.77		121.08		118.41		113.81		113.43

(1) Period from September 1 to September 18

	Fiscal years ended March 31,
	2003	2004	2005	2006	2007
Average (of month-end rates)	¥121.10	¥112.75	¥107.28	¥113.67	¥116.55

B.    Capitalization and Indebtedness

Not applicable.

C.    Reasons for the Offer and Use of Proceeds

Not applicable.

D.    Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the risks described below as well as all the other information in this Annual Report, including our consolidated financial statements and related notes, “Item 5. Operating and Financial Review and Prospects,” “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” and “Selected Statistical Data.”

Our business, operating results and financial condition could be materially and adversely affected by any of the factors discussed below. The trading price of our securities could decline due to any of these factors. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks faced by us described below and elsewhere in this Annual Report. See “Forward-Looking Statements.”

We may have difficulty integrating the business and operations previously operated by Bank of Tokyo-Mitsubishi and UFJ Bank and, as a result, may have difficulty achieving the benefits expected from the integration.

Although the merger between The Bank of Tokyo-Mitsubishi, Ltd. and UFJ Bank was completed in January 2006, our ability to fully realize the growth opportunities and other expected benefits of the merger depends in part on the continued successful integration of the domestic branch and subsidiary network, head office functions, information and management systems, personnel and customer base and other resources and aspects of the two banks. To realize the anticipated benefits of the merger, we have been implementing a business integration plan that is complex, time-consuming and costly. Achieving the targeted revenue synergies and cost savings is dependent on the successful implementation of the integration plan. Risks to the successful completion of the ongoing integration process include:

• potential disruption of our ongoing business and the distraction of our management;

7

• delays or other difficulties in coordinating, consolidating and integrating the domestic branch and subsidiary networks, head office functions, information and management systems, and customer products and services of the two banks, which may prevent us from enhancing the convenience and efficiency of our domestic branch and subsidiary network and operational systems as planned;

• corporate cultural or other difficulties in integrating management, key employees and other personnel;

• unanticipated difficulties in streamlining redundant operations and assets;

• delays, increased costs or other problems in transitioning relevant operations and facilities smoothly to a new common information technology system; and

• unanticipated expenses related to the ongoing integration process.

We may not succeed in addressing these risks or other problems encountered in the ongoing integration process. For example, the merger was implemented on January 1, 2006 after being postponed from October 1, 2005 to enable additional testing for connecting the two banks’ systems to minimize risks arising from the merger. We have set the objective of commencing the transfer to our new IT system from the first half of 2008. Significant or unexpected costs may be incurred during the ongoing integration process, preventing us from achieving the previously announced cost reduction targets as scheduled or at all. In addition, previously expected revenue synergies may not materialize in the expected time period if we fail to address any problems that arise in the ongoing integration process. If we are unable to resolve smoothly any problems that arise in the ongoing integration process, our business, results of operations and financial condition may be materially and adversely affected. For additional information on the merger, see “Item 4.B. Business Overview”.

Significant costs have been and will continue to be incurred in the course of the ongoing integration process.

We have incurred and expect to incur significant costs related to the ongoing integration. We will incur, for the first few years following the merger, significant expenses to close overlapping branches and subsidiaries and to integrate IT systems and other operations. We may also incur additional unanticipated expenses in connection with the integration of the operations, information systems, domestic branch office network and personnel of the two banks.

We may suffer additional losses in the future due to problem loans.

We suffered from asset quality problems beginning in the early 1990s. Despite our progress in reducing the level of our problem loans, a number of borrowers are still facing challenging circumstances. Additionally, our consumer lending exposure has increased significantly as a result of the merger between Bank of Tokyo-Mitsubishi and UFJ Bank. Our problem loans and credit-related expenses could increase if:

• current restructuring plans of borrowers are not successfully implemented;

• additional large borrowers become insolvent or must be restructured;

• economic conditions in Japan deteriorate;

• real estate prices in Japan decline or stock prices in Japan decline;

• the rate of corporate bankruptcies in Japan or elsewhere in the world rises;

• additional economic problems arise elsewhere in the world;

• the global economic environment deteriorates generally; or

• conditions relating to the credit market or related derivative market deteriorate.

An increase in problem loans and credit-related expenses would adversely affect our results of operations, weaken our financial condition and erode our capital base. Credit losses may increase if we elect, or are forced by

8

economic or other considerations, to sell or write off our problem loans at a larger discount, in a larger amount or in a different time or manner than we may otherwise want.

Our allowance for credit losses may be insufficient to cover future loan losses.

Our allowance for credit losses in our loan portfolio is based on evaluations, assumptions and estimates about customers, the value of collateral we hold and the economy as a whole. Our loan losses could prove to be materially different from the estimates and could materially exceed these allowances. If actual loan losses are higher than currently expected, the current allowances for credit losses will be insufficient. We may incur credit losses or have to provide for additional allowance for credit losses if:

• economic conditions, either generally or in particular industries in which large borrowers operate, deteriorate;

• conditions relating to the credit market or related derivative market deteriorate;

• the standards for establishing allowances change, causing us to change some of the evaluations, assumptions and estimates used in determining the allowances;

• the value of collateral we hold declines; or

• we are adversely affected by other factors to an extent that is worse than anticipated.

For a detailed discussion of our allowance policy and the historical trend of allowances for credit losses, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Critical Accounting Estimates—Allowance for Credit Losses” and “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

Our exposure to troubled borrowers may increase, and our recoveries from these borrowers may be lower than expected.

We may provide additional loans, equity capital or other forms of support to troubled borrowers in order to facilitate their restructuring and revitalization efforts. We may forbear from exercising some or all of our rights as a creditor against them, and we may forgive loans to them in conjunction with their debt restructuring. We may take these steps even when our legal rights might permit us to take stronger action against the borrower and even when others might take stronger action against the borrower to maximize recovery or to reduce exposure in the short term. We may provide support to troubled borrowers for various reasons, including any of the following reasons arising from Japan’s business environment and customs:

• political or regulatory considerations;

• reluctance to push a major client into default or bankruptcy or to disrupt a restructuring plan supported by other lenders; and

• a perceived responsibility for the obligations of our affiliated and associated companies, as well as companies with which we have historical links or other long-standing relationships.

These practices may substantially increase our exposure to troubled borrowers and increase our losses.

We may experience losses because our remedies for credit defaults by our borrowers are limited.

We may not be able to realize the value of the collateral we hold or enforce our rights against defaulting customers because of:

• the difficulty of foreclosing on collateral in Japan;

9

• the illiquidity of and depressed values in the Japanese real estate market; and

• the depressed values of pledged securities held as collateral.

Corporate credibility issues among our borrowers could increase our problem loans or otherwise negatively affect our results of operations.

During the past few years, high profile bankruptcy filings and reports of past accounting or disclosure irregularities, including fraud, in the United States, Japan and other countries have raised corporate credibility issues, particularly with respect to public companies. In response to these developments and regulatory responses to these developments in the United States, Japan and elsewhere, regulators, auditors and corporate managers generally have begun to review financial statements more thoroughly and conservatively. As a result, additional accounting irregularities and corporate governance issues may be uncovered and bring about additional bankruptcy filings and regulatory action in the United States, Japan and elsewhere. Such developments could increase our credit costs if they directly involve our borrowers or indirectly affect our borrowers’ credit. In addition, the credit review process by credit rating agencies has been subject to debate in the United States and other jurisdictions. The debate may result in new measures or policies that could negatively affect some of our borrowers’ credit or the debt securities that they issue.

Our business may be adversely affected by negative developments with respect to other Japanese financial institutions, both directly and through the effect they may have on the overall Japanese banking environment and on their borrowers.

Some Japanese financial institutions, including banks, non-bank lending and credit institutions, affiliates of securities companies and insurance companies, have experienced declining asset quality and capital adequacy and other financial problems. This may lead to severe liquidity and solvency problems, which have in the past resulted in the liquidation, government control or restructuring of affected institutions. The financial difficulties of other financial institutions could adversely affect us because:

• we have extended loans, some of which are classified as nonaccrual and restructured loans, to banks and other financial institutions that are not our consolidated subsidiaries;

• we are a shareholder of some other banks and financial institutions that are not our consolidated subsidiaries;

• we may be requested to participate in providing assistance to support distressed financial institutions that are not our consolidated subsidiaries;

• if the government takes control of major financial institutions, we will become a direct competitor of government-controlled financial institutions and may be at a competitive disadvantage if the Japanese government provides regulatory, tax, funding or other benefits to those financial institutions to strengthen their capital, facilitate their sale or otherwise;

• deposit insurance premiums could rise if deposit insurance funds prove to be inadequate;

• bankruptcies or government support or control of financial institutions could generally undermine depositor confidence or adversely affect the overall banking environment; and

• negative media coverage of the Japanese banking industry, regardless of its accuracy and applicability to us, could affect customer or investor sentiment and have a materially adverse effect on our business or the price of our securities.

If the goodwill recorded in connection with the merger becomes impaired, we may be required to record impairment charges, which may adversely affect our financial results and the price of our securities.

In accordance with US GAAP, we have accounted for the merger with UFJ Bank using the purchase method of accounting. We allocated the total purchase price to our assets and liabilities based on the proportionate share

10

of the fair values of those assets and liabilities. We have been incurring additional amortization expenses over the estimated useful lives of certain of the identifiable intangible assets acquired in connection with the transaction. In addition, we recorded the excess of the purchase price over the fair values of UFJ Bank’s assets and liabilities as goodwill. If we do not achieve the anticipated benefits of the merger, we may be required to record impairment charges relating to the recorded goodwill, and our financial results and the price of our securities could be adversely affected.

We may experience difficulties implementing effective internal controls.

In order to operate as a global financial institution, it is essential for us to have effective internal controls, corporate compliance functions, and accounting systems to manage our assets and operations. Moreover, under the U.S. Sarbanes-Oxley Act of 2002, which applies by reason of our status as an SEC reporting company, we are required to establish internal control over our financial reporting and our management is required to assess the effectiveness of our internal control over financial reporting and disclose whether such internal control is effective beginning from the fiscal year ending March 31,2008. Our auditors must also conduct an audit on the effectiveness of the internal control over financial reporting, and then render an opinion on it from the fiscal year ending March 31, 2009.

Designing and implementing an effective system of internal controls capable of monitoring and managing our business and operations represents a significant challenge. Our internal control framework needs to have the ability to identify and prevent similar occurrences on a group-wide basis. The design and implementation of internal controls may require significant management and human resources, and result in considerable costs. In addition, as a result of unanticipated issues, we may need to take a permitted scope limitation on our assessment of internal control over financial reporting, may report material weaknesses in our internal control over financial reporting or may be unable to assert that our internal control over financial reporting is effective. If such circumstances arise, it could adversely affect the market’s perception of us.

We may be adversely affected if economic conditions in Japan worsen.

Since the early 1990s, the Japanese economy has performed poorly due to a number of factors, including weak consumer spending and lower capital investment by Japanese companies, causing a large number of corporate bankruptcies and the failure of several major financial institutions. Although some economic indicators and stock prices continued to improve during recent periods, if the economy weakens, then our earnings and credit quality may be adversely affected. For a discussion of Japan’s current economic environment, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Business Environment—Economic Environment in Japan.”

Changes in interest rate policy, particularly unexpected or sudden increases in interest rates, could adversely affect the value of our bond and financial derivative portfolios, problem loans and results of operations.

We hold a significant amount of Japanese government bonds and foreign bonds, including U.S. Treasury bonds. We also hold a large financial derivative portfolio, consisting primarily of interest-rate futures, swaps and options, for our asset liability management. An increase in relevant interest rates, particularly if such increase is unexpected or sudden, may negatively affect the value of our bond portfolio and reduce the so called “spread,” which is the difference between the rate of interest earned and the rate of interest paid. In addition, an increase in relevant interest rates may increase losses on our derivative portfolio and, may increase our problem loans as some of our borrowers may not be able to meet the increased interest payment requirements, thereby adversely affecting our results of operations and financial condition. For a detailed discussion of our bond portfolio, see “Selected Statistical Data—Investment Portfolio.”

11

We may not be able to maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of our operations.

We started calculating our risk-weighted capital ratios based on a new framework relating to regulatory capital requirements based on the Basel II framework established by the Basel Committee on Banking Supervision as of March 31, 2007. We are required to maintain risk-weighted capital ratios above the levels specified in the capital adequacy guidelines of the Financial Services Agency of Japan. The capital ratios are calculated in accordance with Japanese banking regulations based on information derived from the relevant entity’s financial statements prepared in accordance with Japanese GAAP. Our subsidiaries in California, UnionBanCal Corporation and Union Bank of California, N.A., referred to collectively as UNBC, are subject to similar U.S. capital adequacy guidelines. We or our subsidiary banks may be unable to continue to satisfy the capital adequacy requirements because of:

• increases in credit risk assets and expected losses we or our subsidiary banks may incur due to fluctuations in our or our subsidiary banks’ securities portfolios as a result of deteriorations in the credit of our borrowers and the issuers of equity and debt securities;

• increases in credit costs we or our subsidiary banks may incur as we or our subsidiary banks dispose of problem loans or as a result of deteriorations in the credit of our borrowers;

• declines in the value of our or our subsidiary banks’ securities portfolio;

• changes in the capital ratio requirements or in the guidelines regarding the calculation of banks’ capital ratios;

• a reduction in the value of our or our subsidiary banks’ deferred tax assets;

• our or our subsidiary banks’ inability to refinance subordinated debt obligations with equally subordinated debt;

• adverse changes in foreign currency exchange rates; and

• other adverse developments discussed in these risk factors.

If our capital ratios fall below required levels, the Financial Services Agency could require us to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of our business operations. For a discussion of our capital ratios and the related regulatory guidelines, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Capital Adequacy” and “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.”

Our results of operations and capital ratios will be negatively affected if we are required to reduce our deferred tax assets.

We determine the amount of net deferred tax assets and regulatory capital pursuant to Japanese GAAP and Japanese banking regulations, which differ from US GAAP and U.S. regulations. Currently, Japanese GAAP generally permits the establishment of deferred tax assets for tax benefits that are expected to be realized during a period that is reasonably foreseeable, generally five fiscal years. The calculation of deferred tax assets under Japanese GAAP is based upon various assumptions, including assumptions with respect to future taxable income. Actual results may differ significantly from these assumptions. Our ability to include deferred tax assets in regulatory capital has been limited to a certain extent by rule changes that became effective on March 31, 2006. If we conclude, based on our projections of future taxable income, that we will be unable to realize a portion of the deferred tax assets, our deferred tax assets may be reduced and, as a result, our results of operations may be negatively affected and our capital ratios may decline.

12

We may not be able to refinance our subordinated debt obligations with equally subordinated debt, and as a result our capital ratios may be adversely affected.

As of March 31, 2007, subordinated debt accounted for approximately 29.6% of our total regulatory capital, as calculated under Japanese GAAP. We may not be able to refinance our subordinated debt obligations with equally subordinated debt. The failure to refinance these subordinated debt obligations with equally subordinated debt may reduce our total regulatory capital and, as a result, negatively affect our capital ratios.

Recent changes in the business environment for consumer finance companies in Japan have adversely affected our recent financial results, and may further adversely affect our future financial results.

We have a large loan portfolio to the consumer lending industry as well as large shareholdings of consumer finance companies. The Japanese government is implementing regulatory reforms affecting the consumer lending industry. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Law Concerning Acceptance of Investment, Cash, Deposit and Interest Rate, Etc., or the Investment Deposit and Interest Rate Law, which is currently 29.2% per annum, to 20% per annum. The reduction in the maximum permissible interest rate will be gradually implemented in phases from 2007 through 2010, at the latest. Under the reforms, all interest rates will be subject to the lower limits (15-20% per annum) imposed by the Interest Rate Restriction Law, which will compel lending institutions to lower the interest rates they charge borrowers.

Currently, consumer finance companies that satisfy certain conditions are able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law. Accordingly, our consumer finance subsidiaries offer loans at interest rates above the Interest Rate Restriction Law. During the past year, the Supreme Court of Japan rendered decisions concerning interest rates exceeding the limits stipulated by the Interest Rate Restriction Law, and the business environment for consumer finance companies in Japan has been altered in favor of borrowers. Due to such changes, borrowers’ claims for reimbursement of such excess interest payments that they have once made to the consumer finance companies have significantly increased in the past 12 months. Furthermore, new regulations that are scheduled to be enacted before mid-2010 are expected to require, among other things, consumer finance companies to review the repayment capability of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers, which in turn may negatively affect our future financial results.

These and other related developments have adversely affected, and may further adversely affect, the operations and financial condition of our subsidiaries and borrowers which are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan portfolio. For example, there may be increases in the allowance for repayment of excess interest at our consumer finance subsidiaries. In the fiscal year ended March 31, 2007, we recognized ¥184.0 billion of impairment of intangible assets as a result of the downward revision of expected future cash flows at our consumer finance subsidiaries. Additionally, these developments may have indirect negative financial consequences on us, such as a change in our tax circumstances or an increase in our valuation allowance for deferred tax assets as a result of a decline in the estimated future taxable income of our consumer finance subsidiaries and may negatively affect market perception of our consumer lending operations, thereby adversely affecting the future financial results.

If the Japanese stock market declines in the future, we may incur losses on our securities portfolio and our capital ratios will be adversely affected.

We hold large amounts of marketable equity securities. The market values of these securities are inherently volatile. We will incur losses on our securities portfolio if the Japanese stock market declines in the future. Material declines in the Japanese stock market may also materially adversely affect our capital ratios. For a detailed discussion of our holdings of marketable equity securities and the effect of market declines on our capital ratios, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy” and “Selected Statistical Data—Investment Portfolio.”

13

Our efforts to reduce our holdings of equity securities may adversely affect our relationships with customers, and we could also be forced to sell some holdings of equity securities at price levels lower than we would otherwise sell at in order to remain compliant with relevant Japanese laws.

Like many Japanese financial institutions, a substantial portion of our equity securities portfolio is held for strategic and business-relationship purposes. Under Japanese Law, however, bank holding companies and banks, including us, are prohibited from holding stock with an aggregate value that exceeds their adjusted Tier I capital. Additionally, Japanese banks are also generally prohibited by the Banking Law and the Anti-Monopoly Law of Japan from purchasing or holding more than 5% of the equity interest in any domestic third party. In order to comply with this requirement, we are required to sell some holdings of equity securities within five years from January 2006, the date of our merger, so that our holdings do not exceed the 5% threshold.

The sale of equity securities, whether to remain compliant with the prohibition on holding stock in excess of our adjusted Tier I capital, to reduce our risk exposure to fluctuations in equity security prices, to comply with the requirements of the Banking Law and the Anti-Monopoly Law or otherwise, will reduce our strategic shareholdings, which may have an adverse effect on relationships with our customers. In order to remain compliant with the legal requirements described above, we may also sell some equity securities at price levels lower than we would otherwise sell at.

Our trading and investment activities expose us to interest rate, exchange rate and other risks.

We undertake extensive trading and investment activities involving a variety of financial instruments, including derivatives. Our income from these activities is subject to volatility caused by, among other things, changes in interest rates, foreign currency exchange rates and equity and debt prices. For example:

• increases in interest rates may have an adverse effect on the value of our fixed income securities portfolio, as discussed in “—Changes in interest rate policy, particularly unexpected or sudden increases in interest rates, could adversely affect the value of our bond portfolio and financial derivatives portfolio, problem loans and results of operations” above; and

• the strengthening of the Japanese yen against the US dollar and other foreign currencies will reduce the value of our substantial portfolio of foreign currency denominated investments.

In addition, downgrades of the credit ratings of some of the securities in our portfolio could negatively affect our results of operations. Our results of operations and financial condition are exposed to the risks of loss associated with these activities. For a discussion of our investment portfolio and related risks see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Investment Portfolio” and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.”

A downgrade of our credit ratings could have a negative effect on our business.

A downgrade of our credit ratings by one or more of the credit rating agencies could have a negative effect on our treasury operations and other aspects of our business. In the event of a downgrade of our credit ratings, our treasury business unit may have to accept less favorable terms in our transactions with counterparties, including capital raising activities, or may be unable to enter into some transactions. This could have a negative impact on the profitability of our treasury and other operations and adversely affect our results of operations and financial condition.

We may not be able to achieve the goals of our business strategies.

We currently plan to pursue various business strategies to improve our profitability. In addition to the risks associated with the merger between Bank of Tokyo-Mitsubishi and UFJ Bank, there are various other risks that could adversely affect our ability to achieve our business objectives. For example:

• we may be unable to cross-sell our products and services as effectively as anticipated;

14

• we may have difficulty in coordinating the operations of our subsidiaries and affiliates as planned due to legal restrictions, internal conflict or market resistance;

• we may lose customers and business as some of our subsidiaries’ or affiliates’ operations are reorganized, and in some cases, rebranded;

• our efforts to streamline operations may require more time than expected and cause some negative reactions from customers;

• new products and services we introduce may not gain acceptance among customers; and

• we may have difficulty developing and operating the necessary information systems.

We are exposed to new or increased risks as we expand the range of our products and services.

As we expand the range of our products and services beyond our traditional banking business and as the sophistication of financial products and management systems grows, we will be exposed to new and increasingly complex risks. We may have only limited experience with the risks related to the expanded range of these products and services. To the extent we expand our product and service offerings through acquisitions, we face risks relating to the integration of acquired businesses with our existing operations. Moreover, some of the activities that we are expected to engage in, such as derivatives and foreign currency trading, present substantial risks. Our risk management systems may prove to be inadequate and may not work in all cases or to the degree required. As a result, we are subject to substantial market, credit and other risks in relation to the expanding scope of our products, services and trading activities, which could result in us incurring substantial losses. In addition, our efforts to offer new services and products may not succeed if product or market opportunities develop more slowly than expected or if the profitability of opportunities is undermined by competitive pressures. For a detailed discussion of our risk management systems, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.”

Any adverse changes in UNBC’s business may significantly affect our results of operations.

UNBC contributes to a significant portion of our net income. Any adverse change in the business or operations of UNBC may significantly affect our results of operations. Factors that could negatively affect UNBC’s results include adverse economic conditions in California, including the decline in the technology sector, the California state government’s financial condition, a potential downturn in the real estate and housing industries in California, substantial competition in the California banking market, uncertainty over the U.S. economy due to deteriorating credit markets in the United States, the threat of terrorist attacks, fluctuating oil prices and rising interest rates, negative trends in debt ratings and additional costs which may arise from enterprise-wide compliance with applicable laws and regulations such as the U.S. Bank Secrecy Act and related amendments under the USA PATRIOT Act.

For example, on September 14, 2007, Union Bank of California, N.A. agreed to a consent order and payment of a civil money penalty of $10.0 million assessed concurrently by the U.S. Office of the Comptroller of the Currency (OCC) and the U.S. Financial Crimes Enforcement Network (FinCEN) relating to the Bank Secrecy Act / Anti-Money Laundering compliance controls and processes of Union Bank of California. On September 17, 2007, Union Bank of California also entered into a deferred prosecution agreement with the U.S. Department of Justice under which Union Bank of California agreed to a payment of $21.6 million and the government agreed to defer prosecution of a Bank Secrecy Act Program violation primarily related to the discontinued international banking business of Union Bank of California and dismiss prosecution if Union Bank of California meets the conditions of the deferred prosecution agreement, including complying with the OCC consent order for one year. UNBC has committed to a number of improvements and may incur additional expenses relating to such measures.

For a detailed segment discussion relating to UNBC, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Business Segment Analysis.”

15

Our results of operations may be negatively affected by the recent financial instability in the U.S. resulting from subprime mortgages.

The recent credit market instability in the U.S. resulting from concerns with increased defaults of higher risk mortgages to lower income households, or the so-called subprime mortgages, may adversely affect our loan and investment portfolios. For example, some of our investment securities may need to be marked at a significantly lower price because a market price for those securities is depressed or not properly quoted. We may also be affected by credit market deterioration caused by defaults on subprime mortgages. Specifically, the availability of credit may become limited, causing some of our counterparties to default, or some of our credit derivative transactions to otherwise be negatively affected. Moreover, the negative developments in U.S. credit markets may cause significant fluctuations in stock markets globally and foreign currency exchange rates which in turn may affect our financial results. If credit market conditions continue to deteriorate, our capital funding structure may need to be adjusted, and our funding costs may increase.

We are exposed to substantial credit and market risks in Asia, Latin America and other regions.

We are active in Asia, Latin America, Eastern Europe and other regions through a network of branches and subsidiaries and are thus exposed to a variety of credit and market risks associated with countries in these regions. A decline in the value of Asian, Latin American or other relevant currencies could adversely affect the creditworthiness of some of our borrowers in those regions. For example, the loans we have made to Asian, Latin American, Eastern European and other overseas borrowers and banks are often denominated in yen, US dollars or other foreign currencies. These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A devaluation of the local currency would make it more difficult for a borrower earning income in that currency to pay its debts to us and other foreign lenders. In addition, some countries in which we operate may attempt to support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these countries would have to devote more of their resources to repaying their domestic obligations, which may adversely affect their ability to repay their debts to us and other foreign lenders. The limited credit availability resulting from these and related conditions may adversely affect economic conditions in some countries. This could cause a further deterioration of the credit quality of borrowers and banks in those countries and cause us to incur further losses. In addition, we are active in other regions that expose us to risks similar to the risks described above and also risks specific to those regions, which may cause us to incur losses or suffer other adverse effects. For a more detailed discussion of our credit exposure to Asian, Latin American, Eastern European and other relevant countries, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

Our income and expenses relating to our international operations, as well as our foreign assets and liabilities, are exposed to foreign currency fluctuations.

Our international operations are subject to fluctuations in foreign currency exchange rates against the Japanese yen. When the Japanese yen appreciates, Japanese yen amounts for transactions denominated in foreign currencies, including a substantial portion of UNBC’s transactions, decline. In addition, a portion of our assets and liabilities is denominated in foreign currencies. To the extent that our foreign currency denominated assets and liabilities are not matched in the same currency or appropriately hedged, fluctuations in foreign currency exchange rates against the Japanese yen may adversely affect our financial condition, including our capital ratios. In addition, fluctuations in foreign exchange rates will create foreign currency translation gains or losses. For a historical discussion of the effect of changes in foreign currency exchange rates, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Effect of the Change in Exchange Rates on Foreign Currency Translation.”

16

Losses relating to our pension plans and a decline in returns on our plan assets may negatively affect our results of operations and financial condition.

We may incur losses if the fair value of our pension plans’ assets declines, if the rate of return on our pension assets declines or if there is a change in the actuarial assumptions on which the calculations of the projected benefit obligations are based. We may also experience unrecognized service costs in the future due to amendments to existing pension plans. Changes in the interest rate environment and other factors may also adversely affect the amount of unfunded pension obligations and the resulting annual amortization expense. Additionally, the assumptions used in the computation of future pension expenses may not remain constant.

Our information systems and other aspects of our business and operations are exposed to various system, political and social risks.

As a major financial institution, our information systems and other aspects of our business and operations are exposed to various system, political and social risks beyond our control. Incidents such as disruptions of the Internet and other information networks due to major virus outbreaks, major terrorist activity, serious political instability and major health epidemics, have the potential to directly affect our business and operations by disrupting our operational infrastructure or internal systems. Such incidents may also negatively impact the economic conditions, political regimes and social infrastructure of countries and regions in which we operate, and possibly the global economy as a whole. Our risk management policies and procedures may be insufficient to address these and other large-scale unanticipated risks.

In particular, the capacity and reliability of our electronic information technology systems are critical to our day-to-day operations and a failure or disruption of these systems would adversely affect our capacity to conduct our business. In addition to our own internal information systems, we also provide our customers with access to our services and products through the Internet and ATMs. These systems as well as our hardware and software are subject to malfunction or incapacitation due to human error, accidents, power loss, sabotage, hacking, computer viruses and similar events, as well as the loss of support services from third parties such as telephone and Internet service providers.

Additionally, as with other Japanese companies, our offices and other facilities are subject to the risk of earthquakes and other natural disasters. Our redundancy and backup measures may not be sufficient to avoid a material disruption in our operations, and our contingency plans may not address all eventualities that may occur in the event of a material disruption.

These various factors, the threat of such risks or related countermeasures, or a failure to address such risks, may materially and adversely affect our business, operating results and financial condition.

We may be subject to liability and regulatory action if we are unable to protect personal and other confidential information.

In recent years, there have been many cases where personal information and records in the possession of corporations and institutions were leaked or improperly accessed. In the event that personal information in our possession about our customers or employees is leaked or improperly accessed and subsequently misused, we may be subject to liability and regulatory action. The standards applicable to us have become more stringent under the Personal Information Protection Act of Japan, which became fully effective from April 2005. As an institution in possession of personal information, we may have to provide compensation for economic loss and emotional distress arising out of a failure to protect such information in accordance with the Personal Information Protection Act. In addition, such incidents could create a negative public perception of our operations, systems or brand, which may in turn decrease customer and market confidence and materially and adversely affect our business, operating results and financial condition.

17

Transactions with counterparties in countries designated by the U.S. Department of State as state sponsors of terrorism may lead some potential customers and investors in the U.S. and other countries to avoid doing business with us.

We engage in operations with entities in or affiliated with Iran and Cuba, including transactions with entities owned or controlled by the Iranian or Cuban governments, and we have a representative office in Iran. The U.S. Department of State has designated Iran and Cuba as “state sponsors of terrorism,” and U.S. law generally prohibits U.S. persons from doing business with such countries. Our activities with counterparties in or affiliated with Iran, Cuba and other countries designated as state sponsors of terrorism are conducted in compliance in all material respects with both applicable Japanese and U.S. regulations.

Our operations with entities in Iran consist primarily of loans to Iranian financial institutions in the form of financing for petroleum projects and trade financing for general commercial purposes, as well as letters of credit and foreign exchange services. In addition, we extend trade financing for general commercial purposes to a corporate entity affiliated with Cuba. We do not believe our operations relating to Iran and Cuba are material to our business, financial condition and results of operations, as the loans outstanding to borrowers in or affiliated with Iran and Cuba as of March 31, 2007 were approximately $662 million and $8 million, respectively, which together represented less than 0.1% of our total assets as of March 31, 2007.

We are aware of initiatives by U.S. governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran and other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers. In addition, depending on socio-political developments our reputation may suffer due to our association with these countries. The above circumstances could have a significant adverse effect on our business and financial condition.

We have recently been subject to several regulatory actions for noncompliance with legal requirements. These regulatory matters and any future regulatory matters and regulatory changes could have a negative impact on our business and results of operations.

We conduct our business subject to ongoing regulation and associated regulatory compliance risks, including the effects of changes in laws, regulations, policies, voluntary codes of practice and interpretations in Japan and other markets in which we operate. Our compliance risk management systems and programs may not be fully effective in preventing all violations of laws, regulations and rules.

The Financial Services Agency of Japan and regulatory authorities in the United States and elsewhere also have the authority to conduct, at any time, inspections to review banks’ accounts, including ours. Some of our other financial services businesses, such as our securities business, are also subject to regulations set by, and inspections conducted by, various self-regulatory organizations, such as the National Securities Dealers Association in the United States.

In December 2006, we and MUFG entered into a written agreement with the Federal Reserve Banks of San Francisco and New York and the New York State Banking Department, and Bank of Tokyo-Mitsubishi UFJ Trust Company, or BTMUT, our subsidiary, consented to an Order to Cease and Desist issued by the Federal Deposit Insurance Corporation and the New York State Banking Department, to strengthen the compliance framework and operations of us, our New York Branch and BTMUT, respectively, for preventing anti-money laundering. As a result of the written agreement and the consent to the Order to Cease and Desist, we are required, among other things, to implement corrective measures, submit periodic progress reports to the authorities and take other actions. Separately, on September 14, 2007, Union Bank of California agreed to a consent order and payment of a civil money penalty of $10.0 million assessed concurrently by the U.S. Office of the Comptroller of the Currency (OCC) and the U.S. Financial Crimes Enforcement Network (FinCEN) relating to the Bank Secrecy Act / Anti-Money Laundering compliance controls and processes of Union Bank of California. On September 17, 2007, Union Bank of California also entered into a deferred prosecution agreement

18

with the U.S. Department of Justice under which Union Bank of California agreed to a payment of $21.6 million and the government agreed to defer prosecution of a Bank Secrecy Act Program violation primarily related to the discontinued international banking business of Union Bank of California and dismiss prosecution if Union Bank of California meets the conditions of the deferred prosecution agreement, including complying with the OCC consent order for one year. UNBC has committed to a number of improvements and may incur additional expenses relating to such measures.

In February 2007, we received an administrative order from the Financial Services Agency of Japan in respect of compliance management of our operations regarding the occurrence of certain inappropriate transactions. The administrative order requires temporary suspension of extending credit to new corporate customers, training of all directors and staff regarding compliance, temporary suspension of the establishment of new domestic corporate business locations, establishment of a stronger management and internal control framework, submission and implementation of a business improvement plan, and a series of periodical progress reports of such business improvement plan. Further, in June 2007, BTMU received separate administrative orders from the Financial Services Agency of Japan in respect of its overseas business and its investment trust sales and related business in Japan. The administrative orders require BTMU, among other things, to make improvements in its compliance structure and related internal control functions in its overseas business and its domestic investment trust sales and related business, presentation and implementation of a business improvement plan, and reports on the progress of such business improvement plan.

Our failure or inability to comply fully with applicable laws and regulations could lead to fines, public reprimands, damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorization to operate, and may adversely affect our business and outcome of operations. Regulatory matters may also negatively affect our ability to obtain regulatory approvals for future strategic initiatives. Furthermore, failure to take necessary corrective actions, or discovery of violation of laws and regulations in the process of further review of any of the matters mentioned above or in the process of implementing any corrective measures, could result in further regulatory action.

In addition, future developments or changes in laws, regulations, policies, voluntary codes of practice, fiscal or other policies of governmental and regulatory bodies and their effects on us are unpredictable and beyond our control. For example, newly adopted regulations to be enacted before mid-2010 are expected to require, among other things, consumer finance companies in Japan to review the repayment capabilities of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers, which in turn may negatively affect our future financial results.

Our influential position in the Japanese financial markets may subject us to potential claims of unfair trade practices from regulatory authorities and consumers.

We are one of the largest and most influential financial institutions in Japan by virtue of our market share and the size of our operations and customer base. As a result of our influential position in the Japanese financial markets, we may be subject to more exacting scrutiny from regulatory authorities and consumers regarding our trade practices and potential abuses of our dominant bargaining position in our dealings with counterparties, borrowers and customers.

Any claims of unfair trade practices relating to our sales, lending and other operations, regardless of their validity, could create a negative public perception of our operations, which may in turn adversely affect our business, operating results and financial condition.

Our business may be adversely affected by competitive pressures, which have increased significantly due to regulatory changes.

In recent years, the Japanese financial system has been increasingly deregulated and barriers to competition have been reduced. In addition, the Japanese financial industry has been undergoing significant consolidation,

19

which trend may continue in the future and further increase competition. The planned privatization of the Japanese postal savings system and the establishment of a Postal Saving Bank in October 2007, as well as the planned privatization of certain governmental financial institutions, could also substantially increase competition within the financial services industry. If we are unable to compete effectively in this more competitive and deregulated business environment, our business, results of operations and financial condition will be adversely affected. For a more detailed discussion of our competition in Japan, see “Item 4.B. Information on the Company—Business Overview—Competition—Japan.”

We may have difficulty achieving the benefits expected from the recently completed and planned mergers and other business combinations involving our subsidiaries and affiliates.

In line with our ongoing strategic effort to create a leading comprehensive financial group that offers a broad range of financial products and services, we have recently completed and are planning to complete mergers and other business combinations involving some of our subsidiaries and equity method affiliates. For example, UFJ NICOS Co., Ltd., or UFJ NICOS, and DC Card Co., Ltd., our credit card subsidiaries, merged on April 1, 2007, with UFJ NICOS being the surviving entity, to form Mitsubishi UFJ NICOS, Co., Ltd. Diamond Lease Company Limited and UFJ Central Leasing Co., Ltd., our equity method investees, merged on the same day. On September 20, 2007, MUFG announced that it plans to make Mitsubishi UFJ NICOS a wholly-owned subsidiary of MUFG through a share exchange expected to go into effect on August 1, 2008. The growth opportunities and other expected benefits of these business combinations, however, may not be realized in the expected time period and unanticipated problems could arise in the integration process, including unanticipated expenses related to the integration process as well as delays or other difficulties in coordinating, consolidating and integrating personnel, information and management systems, and customer products and services. If we are unable to implement the business and operational integration of our subsidiaries and equity method investees, our business, results of operations and financial condition may be materially and adversely affected. For a more detailed discussion of recently completed and planned mergers and other business combinations involving our subsidiaries and affiliates, see “Item 4.B. Information on the Company—Business Overview” and “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”

Risks Related to Owning Our Subordinated Debt Securities

The indenture will not limit our ability to incur additional debt, including senior debt.

The indenture relating to our 8.40% global senior subordinated notes due 2010 does not limit or restrict the amount of other indebtedness, including senior indebtedness, that we or our subsidiaries may incur in the future.

The subordination provisions in our subordinated debt securities could hinder your ability to receive payment.

Under some circumstances, your right to receive payment on our 8.40% global senior subordinated notes due 2010 will be subordinated and subject in right of payment in full to the prior payment of all our senior indebtedness. We expect from time to time to incur additional indebtedness and other obligations that will constitute senior indebtedness, and the indenture relating to our 8.40% global senior subordinated notes due 2010 does not contain any provisions restricting our ability to incur senior indebtedness.

Item 4. Information on the Company

A.    History and Development of the Company

The Bank of Tokyo-Mitsubishi UFJ, or BTMU, is a major commercial banking organization in Japan that provides a broad range of domestic and international banking services from its offices in Japan and around the world. BTMU is a “city” bank, as opposed to a regional bank. Our registered head office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan, and our telephone number is 81-3-3240-1111. BTMU is a joint stock company (kabushiki kaisha) incorporated in Japan under the Company Law of Japan (Law No. 86 of 2005, also known as the Companies Act or the Corporation Act).

BTMU was formed through the merger, on January 1, 2006, of The Bank of Tokyo-Mitsubishi, Ltd. and UFJ Bank Limited, after their respective parent companies, Mitsubishi Tokyo Financial Group, Inc. and UFJ Holdings, Inc., had merged to form Mitsubishi UFJ Financial Group, Inc. on October 1, 2005.

20

Bank of Tokyo-Mitsubishi was formed through the merger, on April 1, 1996, of The Mitsubishi Bank, Limited and The Bank of Tokyo, Ltd.

The origins of Mitsubishi Bank can be traced to the Mitsubishi Exchange Office, a money exchange house established in 1880 by Yataro Iwasaki, the founder of the Mitsubishi industrial, commercial and financial group. In 1895, the Mitsubishi Exchange Office was succeeded by the Banking Division of the Mitsubishi Goshi Kaisha, the holding company of the “Mitsubishi group” of companies. Mitsubishi Bank had been a principal bank to many of the Mitsubishi group companies, but broadened its relationships to cover a wide range of Japanese industries, small and medium-sized companies and individuals.

Bank of Tokyo was established in 1946 as a successor to The Yokohama Specie Bank, Ltd., a special foreign exchange bank established in 1880. When the government of Japan promulgated the Foreign Exchange Bank Law in 1954, Bank of Tokyo became the only bank licensed under that law. Because of its license, Bank of Tokyo received special consideration from the Ministry of Finance in establishing its offices abroad and in many other aspects relating to foreign exchange and international finance.

UFJ Bank was formed through the merger, on January 15, 2002, of The Sanwa Bank, Limited and The Tokai Bank, Limited.

Sanwa Bank was established in 1933 when the three Osaka-based banks, the Konoike Bank, the Yamaguchi Bank, and the Sanjyushi Bank merged. Sanwa Bank was known as a city bank having the longest history in Japan, since the foundation of Konoike Bank can be traced back to the Konoike Exchange Office established in 1656. The origin of Yamaguchi Bank was also a money exchange house, established in 1863. Sanjyushi Bank was founded by influential fiber wholesalers in 1878. The corporate philosophy of Sanwa Bank had been the creation of premier banking services especially for small and medium-sized companies and individuals.

Tokai Bank was established in 1941 when the three Nagoya-based banks, the Aichi Bank, the Ito Bank, and the Nagoya Bank merged. In 1896, Aichi Bank took over businesses of the Jyuichi Bank established by wholesalers in 1877 and the Hyakusanjyushi Bank established in 1878. Ito Bank and Nagoya Bank were established in 1881 and 1882, respectively. Tokai Bank had expanded the commercial banking business to contribute to economic growth mainly of the Chubu area in Japan, which is known for the manufacturing industry, especially automobiles.

For a discussion of the merger between Bank of Tokyo-Mitsubishi and UFJ Bank and other recent developments, see “Item 4.B. Business Overview” and “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”

B.    Business Overview

We are a major Japanese commercial banking organization. We provide a broad range of domestic and international banking services in Japan and around the world. As of June 30, 2007, our network in Japan included 666 branches, 121 sub-branches, 1,955 branch ATMs and 24,154 convenience store-based, non-exclusive ATMs. We organize our operations based on customer and product segmentation, as follows:

• retail banking;

• corporate banking;

• corporate and investment banking;

• commercial banking; and

• transaction banking;

• global business;

21

• global markets;

• operations and systems; and

• other, including trust and asset management, custody and eBusiness & IT initiatives.

For a detailed analysis of financial results by business segments, which is based mainly on our business organizations, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Business Segment Analysis.” For a detailed analysis of financial results by geographic segment, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Geographic Segment Analysis.”

The merger between us and UFJ Bank Limited. was completed in January 2006. Through the merger, we aim to create a leading comprehensive banking institution that is competitive on a global basis and provides a broad range of financial products and services to a worldwide client base. We believe that our business operations and domestic and global branch networks are highly complementary with those of UFJ Bank. By leveraging the respective strengths of each bank, creating synergies through the merger and reinforcing a customer-focused management philosophy, we seek to improve the standard of our products and services and provide significant benefits expected from the merger to customers and shareholders.

BTMU conducts business activities in a variety of areas, including:

• banking;

• trust banking;

• securities;

• investment trusts;

• credit cards and consumer finance;

• leasing; and

• international banking.

Retail Banking Business Unit

Our retail banking business unit offers a full range of banking products and services, including financial consulting services to individual customers in Japan through its branch offices and other direct distribution channels.

Deposits.    The unit offers a full range of bank deposit products to its customers. In July 2006, we raised interest rates on our ordinary deposits for the first time in almost four years from 0.001% per annum to 0.1% per annum and rates were increased again in February 2007 from 0.1% per annum to 0.2% per annum. We raised interest rates on fixed term deposits in accordance with trends in market interest rates. As yen deposit interest rates rise, our customers’ interest in yen deposits have also increased and we are implementing a variety of preferential interest rate measures such as preferential interest rate campaigns via telephone and internet banking. In January 2007, we launched a membership club, the Quality Life Club, aimed chiefly at senior citizens of the baby-boom generation which provides a combination of financial and non-financial services. In addition to financial services such as consultation with experts on asset management, the club offers privileges such as high value-added services in areas of interest to senior citizens including travel and health. In May 2007, in a joint initiative with Walt Disney Japan, we launched a new type of online banking service for individuals called “Disney Osaihu Plus” using the Internet and mobile phones. The Disney Osaihu Plus service aims to provide a solution for customers who are unfamiliar with banking services, who find banking services difficult to understand or find it hard to adapt to online banking. This service aims to be easy-to-use and to encourage customers to feel comfortable with online banking services.

22

Investment trusts.    We provide a varied line-up of products that allows our customers to choose products according to their investment needs. In fiscal 2006 we introduced a total of 14 investment trusts. In order to provide a strong line-up of investment products to meet the “second life” needs of the baby boom generation in their retirement, we launched the MUFG Fidelity Retirement Allowance Fund in November 2006 and the Mitsubishi UFJ Asset Formation Fund in March 2007. Furthermore, we are strengthening our SRI (Socially Responsible Investment) funds as part of our commitment to CSR (corporate social responsibility), one of the key elements of our business strategy, and we launched the Mitsubishi UFJ SRI Fund in July 2006.

Individual annuity insurance.    Since the removal of restrictions on sales by banks of individual annuity insurance products in October of 2002, we have been actively selling individual annuities in an effort to meet the needs of our customers. Our current line-up of insurance products consists of investment-type individual annuities, foreign currency denominated insurance annuities and yen denominated fixed-amount annuity insurance. Additionally, since January 2005, we have been offering single premium term insurance.

In order to design and introduce products matched to customers’ needs, we formed a business partnership with Manulife Insurance Company in March 2004. Since then we have also formed a business tie-up to develop and sell insurance annuities for individuals with Tokyo Marine and Nichido Financial Insurance of the Millea group in September 2004.

We are steadily strengthening our line-up of products and we launched a single premium term insurance product “Dear My Family” (underwritten by Alico Japan) in May 2007 and an investment type annuity product “Bikkuri Bako” (underwritten by Manulife Life Insurance Company) in June 2007. We are now preparing for the complete removal of restrictions on the sale of insurance products by banks scheduled for December 2007.

Securities intermediation services.    The unit initiated securities intermediation operations in December 2004 following the lifting of the ban of securities intermediation operations by banks, acting as a securities intermediary of Mitsubishi UFJ Securities Co., Ltd., or MUS, and kabu.com Securities Co., Ltd. In September 2005, Mitsubishi UFJ Financial Group and Merrill Lynch & Co., Inc. established a joint-venture company, Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd., to provide private banking services. The unit started providing securities intermediation services to the joint-venture company from May 2006.

By the end of March 2007, BTMU had accepted around 640 personnel from MUS of whom around 550 have been stationed throughout the nationwide BTMU branch network as investment consulting specialists in order to further strengthen our sales system. In addition, we are also expanding our product range to include products such as Japanese government bonds, foreign bonds, foreign and domestic investment trusts and equities (including public offerings).

Loans.    The unit provides loans such as housing loans and credit card loans to its retail clients. In housing loans, in addition to ultra-long term fixed rate housing loans and housing loans incorporating health insurance for seven major illnesses, we began offering the Flat 35 guaranteed housing loan in a tie-up with the Japan Housing Finance Agency. We have also started offering preferential rates on refinancing applications received via the internet as part our effort to develop products to meet a wide variety of customer needs in a time of rising interest rates.

Credit cards.    In October 2004, we began to issue a multi-functional IC card, which combines cash card, credit card and electronic money functions. Our other initiatives to provide convenient solutions to customers include the February 2007 launch of the Super IC Card Suica Mitsubishi-Tokyo VISA in collaboration with East Japan Railway Company.

Our subsidiary, UFJ Nicos Co., Ltd., merged with Kyodo Credit Service Co., Ltd. in October 2006, and with DC Card Co., Ltd., another BTMU subsidiary, in April 2007 to form Mitsubishi UFJ NICOS Co., Ltd.

23

On September 20, 2007, MUFG announced that MUFG will acquire ¥120 billion of newly issued Mitsubishi UFJ NICOS shares on November 6, 2007, thereby increasing MUFG’s holdings to approximately 75% of Mitsubishi UFJ NICOS’ total issued shares. MUFG also announced that MUFG and Mitsubishi UFJ NICOS had entered into an agreement to make Mitsubishi UFJ NICOS a wholly-owned subsidiary of MUFG through a share exchange expected to go into effect on August 1, 2008.

As part of its new medium term business plan, Mitsubishi UFJ NICOS will concentrate resources on the credit card business and transfer its installment credit sales business to JACCS Co., Ltd..

MUFG will also hold discussions with The Norinchukin Bank to expand the business and capital alliance between The Norinchukin Bank and Mitsubishi UFJ NICOS. As part of these discussions, MUFG will consider the possibility of having Mitsubishi UFJ NICOS become an equity method investee of The Norinchukin Bank after Mitsubishi UFJ NICOS becomes a wholly-owned subsidiary of MUFG.

Domestic network.    We offer products and services through a wide range of channels, including branches, ATMs (including convenience store ATMs shared by multiple banks), Tokyo-Mitsubishi UFJ Direct (telephone, internet and mobile phone banking), the BTMU “Telebank” service video conferencing counters (counters that allow face-to-face style contact with operators through the use of broadband internet video conferencing) and mail order.

The Mitsubishi UFJ Financial Group’s integrated financial services are provided at MUFG Plaza branches that combine banking, trust banking and securities services and offer retail customers unified and flexible services at one-stop outlets. As of March 31, 2007, 62 MUFG Plaza branches have been opened.

As an exclusive membership service for high net worth customers, private banking offices have been established since December 2006 featuring lounges and private rooms where customers can receive wealth management advice and other services in a relaxing and comfortable setting. As of March 31, 2007, we have opened seven private banking offices in the Tokyo metropolitan area, Nagoya and Osaka.

In order to strengthen our brand value through raising service levels we have responded to strong customer demand and reduced commissions for ATM transactions. Since May 2006, individual customers with accounts at BTMU or Mitsubishi UFJ Trust and Banking, or MUTB, have been able to make cash card transfers free of charge between the head offices or branches of BTMU or MUTB, and at ATMs and convenience store ATMs. In addition, from March 2007, commissions for using joint-use ATMs in convenience stores have been reduced and ATM transactions are free of charge on weekdays between 8:45 am and 6:00 pm.

We are also promoting services arising from strategic alliances in other business areas. In April 2006, subject to the approval of the relevant authorities, we and KDDI agreed on the establishment of the first mobile phone internet bank in Japan. In May 2006, the research company that will serve as the parent organization of this internet bank was established and preparations are currently being made for an expected launch of operations in the middle of fiscal 2008. Furthermore, in May 2006, we jointly established with DeNA Co., Ltd. and the Norinchukin Bank a joint venture company that will provide payment services for e-commerce using the internet or mobile phone.

Strategic alliances.    In March 2007, we agreed to strengthen our business and capital alliance with kabu.com Securities, an equity-method affiliate of Mitsubishi UFJ Financial Group, in order to strengthen MUFG’s retail online financial services and expand the range of online financial services available. Through the business alliance, we provide a range of services and products in the securities intermediation business to kabu.com Securities and kabu.com Securities offers certain bank agency services to us as our agent.

In terms of the capital alliance, as a result of our public tender offer for shares of kabu.com Securities conducted during March and April 2007, MUFG’s shareholding in kabu.com Securities has increased to 40.4%. In June 2007, directors dispatched from the MUFG held a majority of the seats on the Board of Directors of kabu.com Securities and kabu.com Securities became a consolidated subsidiary of MUFG.

24

We have also reached a basic agreement with Tokyu Corporation in July 2007 for a business alliance for financial services, including the placement of ATMs in Tokyu’s railway stations and the issuance of a joint credit card.

Trust agency operations.    As of the end of July 2007, we are conducting the following eight businesses as the trust banking agent for MUTB: testamentary trusts, inheritance management, asset succession planning, inheritance management agency operations, business management financial clinic, lifetime gift trusts, share disposal trusts, and marketable securities administration trusts.

In October 2006, we accepted approximately 30 financial consultants (sales managers specializing in inheritance business) from MUTB. Because of Japan’s increasingly aging society, customer demand for inheritance-related advice is increasing and we aim to drastically strengthen our sourcing of information from the banking market.

Corporate Banking Business Unit

As part of Mitsubishi UFJ Financial Group’s Integrated Corporate Banking Business Group, our corporate banking business unit provides banking products and services to a wide range of business customers, from large corporations to medium-sized and small businesses, and is responsible for customer relationships. The unit serves these customers through 245 offices in Japan as well as directly from its headquarters. The unit provides traditional commercial banking services, such as deposits, settlement, foreign exchange and loans, as well as investment banking services, electronic banking and highly sophisticated consultancy services to meet its customers’ needs. The unit works closely with other business units, such as the global business unit and global markets.

Subject to approval by the relevant authorities, in November 2007, BTMU will issue and allocate 1,000,000 shares of its first series Class 6 non-voting preferred shares to MUTB to acquire nine of the corporate business outlets of MUTB.

• CIB (Corporate and Investment Banking)

The unit provides CIB solutions mainly to large corporations, financial institutions and public sector organizations. Our product specialists in the unit provide capital markets, derivatives, securitization, syndicated loans, structured finance and other services globally. Our customers with the needs in M&A transactions and debt and equity capital markets are referred to MUS, the securities arm of the Mitsubishi UFJ Financial Group, so that our customers’ needs in CIB services are met fully by the group as a whole.

Capital Markets.    The unit provides arrangement services relating to private placements for mainly medium-sized enterprise issuers and institutional investors. During the fiscal year ended March 31, 2007, we arranged 7,959 issuances totaling ¥1,191.0 billion.

Derivatives.    The unit develops and offers derivatives products for risk management and other financial needs. The unit has trading desks and sales teams specializing in derivatives in Tokyo, Singapore, Hong Kong, Shanghai, London and New York.

Securitization.    In the securitization area, the unit is primarily engaged in asset-backed commercial paper programs and has securitization teams based in Tokyo, New York and London. The unit continues to develop and structure new types of transactions.

Syndicated loans.    The unit structures and syndicates many types of loan transactions, including term loans, revolving credit and structured transactions. The unit has loan syndication operations in Tokyo, New York, London, Hong Kong and Singapore. We arranged syndicated loans with an aggregate principal amount totaling $102.5 billion in the fiscal year ended March 31, 2007.

Structured finance.    The unit engages in project finance, real estate finance, lease related finance, leveraged finance, and other types of non-recourse or limited-recourse and structured financings. The unit

25

provides customers with financial advisory services, loan arrangements and agency services. The unit has teams located in Tokyo, Hong Kong, Singapore, London, New York and Boston.

Other services.    In the United States, the unit offers leasing services through two subsidiaries, BTMU Capital Corporation and BTMU Leasing & Finance. BTMU Capital Corporation offers a wide range of leasing services to non-Japanese customers, while BTMU Leasing & Finance focuses on providing services to the U.S. subsidiaries and affiliates of Japanese corporations.

Wealth management.    The group has two wealth management companies, Mitsubishi UFJ Wealth Management Securities, Ltd. and Mitsubishi UFJ Wealth Management Bank (Switzerland), Ltd. These two subsidiaries provide sophisticated and broad investment services and solutions to high net worth customers.

• Commercial Banking

Financing and fund management.    The unit advises on financing methods to meet various financing needs, including loans with derivatives, corporate bonds, commercial paper, asset backed securities, securitization programs and syndicated loans. The unit also offers a wide range of products to meet fund management needs, such as deposits with derivatives, government bonds, debenture notes and investment funds.

Advice on business expansion overseas.    The unit provides advisory services to clients launching businesses overseas, particularly Japanese companies expanding into other Asian countries.

Risk management.    The unit offers swap, option and other risk-hedge programs to customers seeking to control foreign exchange, interest rate and other business risks.

Corporate management/financial strategies.    The unit provides advisory services to customers in the areas of mergers and acquisitions, inheritance-related business transfers and stock listings. The unit also helps customers develop financial strategies to restructure their balance sheets. These strategies include the use of credit lines, factoring services and securitization of real estate.

Corporate welfare facilities.    The unit offers products and administrative services to help customers with employee benefit plans. As a service to customers, the unit often provides housing loans to customers’ employees. The unit also provides company-sponsored employee savings plans and defined contribution plans.

• Transaction Banking

Settlement services.    The unit provides electronic banking services that allow customers to make domestic and overseas remittances electronically. The unit’s settlement and cash management services include global settlement services, Global Cash Management Services, a global pooling/netting service, and Treasury Station, a fund management system for group companies. These services are particularly useful to customers who do business worldwide.

Global Business Unit

Our global business unit provides a full range of banking services not only to the overseas operations of Japanese corporations but also to non-Japanese corporations. The unit serves these customers through a global network of 64 overseas branches and sub-branches, 17 representative offices and overseas subsidiary banks.

Overseas business support.    The unit provides a full range of financial services to support customers’ overseas activities, including financing, settlement and custody services, in cooperation with other business units, divisions and groups such as the global markets unit, the corporate banking business unit and the trust business division. These financial services are also offered through subsidiaries such as MUS, Mitsubishi UFJ Securities International plc and BTMU Capital Corporation.

26

Global Cash Management Service.    The unit offers the Global Cash Management Service through its foreign branches in corporation with the eBusiness & IT initiatives division. This service allows customers to monitor their foreign accounts and make remittances through their personal computers.

Banking Operation in the United States.    With a particular focus on California, Oregon and Washington, the unit provides a wide range of financial services to consumers, small businesses, middle-market companies and major corporations through UNBC, a publicly traded U.S. commercial bank holding company listed on the NYSE. As of June 30, 2007, we owned 65.2% of UNBC and UNBC comprised, and continues to comprise, a significant portion of our global business unit. Union Bank of California, N.A., UNBC’s subsidiary, is one of the largest commercial banks in California based on total assets and total deposits.

Global Markets Unit

The global markets unit is active in international financial markets, with global markets divisions in Tokyo, New York, London, Singapore and Hong Kong. The three primary functions of the global markets unit are sales and trading, Asset and Liability Management (ALM) and strategic portfolio investment. Additionally, the global markets unit manages our overall credit portfolio with the corporate banking business unit.

The three main functions of the global markets unit are as follows:

Sales and Trading.    The global markets unit is a leading market maker for derivatives and foreign exchange markets in Tokyo. It has a large market share in the US dollar-Japanese yen foreign exchange and currency options markets, as well as in other major cross-yen currency pairs. The unit also actively trades in the Japanese government bonds secondary market. In addition, it works with our other business units to provide various financial products for customers, such as interest rate derivatives, foreign currency forward agreements, currency options and commercial paper.

ALM: Asset Liability Management.    The global markets unit is responsible for our asset and liability management, and centrally monitors and manages all interest rate and liquidity risks by utilizing U.S. and Japanese government securities, asset-backed securities, interest rate swaps, futures and options. We are a leader in yen-dominated markets. The global markets unit is also globally active in the international money markets.

Strategic Portfolio Investment.    The global markets unit also manages our strategic investment portfolio. In order to enhance returns, we manage the portfolio utilizing well-diversified investment tools, including exchange traded funds and commodity funds.

In addition to the three functions above, the global markets unit also provides the following function:

Credit Portfolio Management.    The global markets unit and the corporate banking business unit manage credit risks, utilizing credit derivatives or distributing loans to investors, in order to optimize the return/risk of our overall credit portfolio.

Operations and Systems Unit

Through the operations and systems unit, we provide operations and settlement services to our other business units. The unit also earns fee income by providing settlement and remittance services, including correspondent banking services, to our customers and yen custody services to international institutional investors. In addition, the unit also offers competitive operations and settlement services to other financial institutions to meet their outsourcing needs.

Operations services.    The operations services planning division of our operations and systems unit provides operations services for the commercial banking activities of the retail banking, corporate banking and global business units. We have expanded centralized processes at our operations centers, which increases the efficiency of our branch offices.

27

The trade business division offers outsourcing services in foreign remittance, export and import operations for Japanese financial institutions. As of March 31, 2007, 87 Japanese banks utilized our foreign remittance services offered under our Global Operation Automatic Link (GOAL) service, and a number of Japanese banks outsourced their export and import operations to us.

Correspondent banking and settlement.    The transaction services division (formerly named the payment and clearing services division) of our operations and systems unit maintains financial institutions’ accounts with correspondent arrangements. As of March 31, 2007, we had correspondent arrangements with 3,100 foreign banks and other financial institutions, of which 1,791 had yen settlement accounts with us. We also had correspondent arrangements with 134 Japanese financial institutions, for which we held 181 yen and foreign currency accounts.

The Foreign Exchange Yen Clearing System (FXYCS) in Japan introduced an entrustment procedure for yen clearing through which banks may entrust other banks to conduct yen clearing for them. As of March 31, 2007, 64 regional and foreign banks in Japan outsourced their yen clearing operations to us. We handled approximately 31% of these transactions based on transaction amounts and are a market leader in the yen settlement business.

Our transaction services division is also taking the initiative in the global implementation of the Continuous Linked Settlement (CLS) operation, which is intended to eliminate settlement risks when foreign exchange deals are settled. Further, since December 2006, the division is responsible for the custody business for international institutional investors who invest in Japanese yen securities.

The systems division is responsible for our computer systems.

Other Business Division

In addition to the above, we also have other divisions, including:

• trust and asset management business promotion for companies, including defined contribution plans;

• global securities services, which is responsible for the custody business for Japanese institutional investors;

• eBusiness & IT initiatives, which is responsible for developing and overseeing our information technology as well as related business opportunities; and

• the corporate center, which retains functions such as our strategic planning, overall risk management, internal auditing and compliance.

Competition

We face strong competition in all of our principal areas of operation. The deregulation of the Japanese financial markets as well as structural reforms in the regulation of the financial industry have resulted in dramatic changes in the Japanese financial system. Structural reforms have prompted Japanese banks to merge or reorganize their operations, thus changing the nature of the competition from other financial institutions as well as from other types of businesses.

Japan

Deregulation.    Competition in Japan has intensified as a result of the relaxation of regulations relating to Japanese financial institutions. Most of the restrictions that served to limit competition were lifted before 2000. Deregulation has eliminated barriers between different types of Japanese financial institutions, which are now able to compete directly against one another. Deregulation and market factors have also facilitated the entry of various large foreign financial institutions into the Japanese domestic market.

28

The Banking Law, as amended, now permits banks to engage in the securities business by establishing or otherwise owning domestic and overseas securities subsidiaries with the approval of the Financial Services Agency, an agency of the Cabinet Office. Further increases in competition among financial institutions are expected in these new areas of permissible activities.

In terms of new market entrants, other financial institutions, such as Orix Corporation, and non-financial companies, such as Sony Corporation and Ito-Yokado Co., Ltd., have also begun to offer various banking services, often through non-traditional distribution channels. Also, in recent years, various large foreign financial institutions have significantly expanded their presence in the Japanese domestic market. Citigroup, for example, has expanded its banking activities and moved aggressively to provide investment banking and other financial services, including retail services, and, through its recent acquisition of Nikko Cordial Corporation, securities brokerage services . The planned privatization of Japan Post, a government-run public services corporation established on April 1, 2003 that is the world’s largest holder of deposits, and the expected establishment of a Postal Saving Bank on October 1, 2007, as well as the planned privatization of other governmental financial institutions, could also substantially increase competition within the financial services industry.

In the corporate banking sector, the principal effect of these reforms has been the increase in competition as two structural features of Japan’s highly specialized and segmented financial system have eroded:

• the separation of banking and securities businesses in Japan; and

• the distinctions among the permissible activities of Japan’s three principal types of private banking institutions. For a discussion of the two principal types of private banking institutions, see “—The Japanese Financial System.”

In addition, in recent years, Japanese corporations are increasingly raising funds by accessing the capital markets, both within Japan and overseas, resulting in a decline in demand for loan financing. Furthermore, as foreign exchange controls have been generally eliminated, customers can now have direct access to foreign financial institutions, with which we must also compete.

In the consumer banking sector, deregulation has enabled banks to offer customers an increasingly attractive and diversified range of products. For example, banks may now sell investment trusts and some types of insurance products, with the possibility of expanding to additional types of insurance products in the future. We will face competition in this sector from other private financial institutions as well as from Japan Post. Recently, competition has also increased due to the development of new products and distribution channels. For example, Japanese banks have started competing with one another by developing innovative proprietary computer technologies that allow them to deliver basic banking services in a more efficient manner and to create sophisticated new products in response to customer demand.

The trust assets business is a promising growth area that is competitive and becoming more so because of changes in the industry. In addition, there is growing corporate demand for change in the trust regulatory environment, such as reform of the pension system and related accounting regulations under Japanese GAAP. However, competition may increase in the future as regulatory barriers to entry are lowered. A new trust business law came into effect on December 30, 2004. Among other things, the new trust business law expands the types of property that can be entrusted and allows non-financial companies to conduct trust business upon approval. The new law also adopts a new type of registration for companies that wish to conduct only the administration type trust business. These regulatory developments are expected to facilitate the expansion of the trust business, but competition in this area is also expected to intensify.

Integration.    Another major reason for heightened competition in Japan is the integration and reorganization of Japanese financial institutions. In 1998, amendments were made to the Banking Law to allow the establishment of bank holding companies, and this development together with various factors, such as the decline of institutional strength caused by the bad loan crisis and intensifying global competition, resulted in a

29

number of integrations involving major banks in recent years. In September 2000, The Dai-Ichi Kangyo Bank, Limited, The Fuji Bank, Limited and The Industrial Bank of Japan, Limited jointly established a holding company, Mizuho Holdings, Inc., to own the three banks. In April 2002, these three banks were reorganized into two banks—Mizuho Bank, Ltd. and Mizuho Corporate Bank, Ltd. In April 2001, The Sumitomo Bank, Limited and The Sakura Bank, Limited were merged into Sumitomo Mitsui Banking Corporation. In December 2001, The Daiwa Bank, Ltd. and two regional banks established Daiwa Bank Holdings Inc., which in March 2002 consolidated with Asahi Bank, Ltd. and changed its corporate name to Resona Holdings, Inc. in October 2002.

Foreign

In the United States, we face substantial competition in all aspects of our business. We face competition from other large U.S. and foreign-owned money-center banks, as well as from similar institutions that provide financial services. Through Union Bank of California, we currently compete principally with U.S. and foreign-owned money-center and regional banks, thrift institutions, insurance companies, asset management companies, investment advisory companies, consumer finance companies, credit unions and other financial institutions.

In other international markets, we face competition from commercial banks and similar financial institutions, particularly major international banks and the leading domestic banks in the local financial markets in which we conduct business.

The Japanese Financial System

Japanese financial institutions may be categorized into three types:

• the central bank, namely the Bank of Japan;

• private banking institutions; and

• government financial institutions.

The Bank of Japan

The Bank of Japan’s role is to maintain price stability and the stability of the financial system to ensure a solid foundation for sound economic development.

Private Banking Institutions

Private banking institutions in Japan are commonly classified into two categories (the following numbers are based on available information published by the Financial Services Agency as of July 1, 2007):

• ordinary banks (126 ordinary banks and 64 foreign commercial banks with ordinary banking operations); and

• trust banks (21 trust banks, including 4 Japanese subsidiaries of foreign financial institutions).

Ordinary banks in turn are classified as city banks, of which there are five, including us, and regional banks, of which there are 110 and other banks, of which there are 11. In general, the operations of ordinary banks correspond to commercial banking operations in the United States. City banks and regional banks are distinguished based on head office location as well as the size and scope of their operations.

The city banks are generally considered to constitute the largest and most influential group of banks in Japan. Generally, these banks are based in large cities, such as Tokyo, Osaka and Nagoya, and operate nationally through networks of branch offices. City banks have traditionally emphasized their business with large corporate clients, including the major industrial companies in Japan. However, in light of deregulation and other

30

competitive factors, many of these banks, including us, in recent years have increased their emphasis on other markets, such as small and medium-sized companies and retail banking.

With some exceptions, the regional banks tend to be much smaller in terms of total assets than the city banks. Each of the regional banks is based in one of the Japanese prefectures and extends its operations into neighboring prefectures. Their clients are mostly regional enterprises and local public utilities, although the regional banks also lend to large corporations. In line with the recent trend among financial institutions toward mergers or business tie-ups, various regional banks have announced or are currently negotiating or pursuing integration transactions, in many cases in order to be able to undertake the large investments required in information technology.

Trust banks provide various trust services relating to money trusts, pension trusts and investment trusts and offer other services relating to real estate, stock transfer agency and testamentary services as well as banking services.

In recent years, almost all of the city banks have consolidated with other city banks and also, in some cases, with trust banks. Integration among these banks was achieved, in most cases, through the use of a bank holding company.

In addition to ordinary banks and trust banks, other private financial institutions in Japan, including shinkin banks or credit associations, and credit cooperatives, are engaged primarily in making loans to small businesses and individuals.

Government Financial Institutions

Since World War II, a number of government financial institutions have been established. These corporations are wholly owned by the government and operate under its supervision. Their funds are provided mainly from government sources. Certain types of operations currently undertaken by these institutions are planned to be assumed by, or integrated with the operations of, private corporations through measures such as the privatization of Japan Post and other institutions.

Among them are the following:

• The Development Bank of Japan, whose purpose is to contribute to the economic development of Japan by extending long-term loans, mainly to primary and secondary sector industries;

• Japan Bank for International Cooperation, whose purpose is to supplement and encourage the private financing of exports, imports, overseas investments and overseas economic cooperation;

• Japan Finance Corporation for Small and Medium Enterprise, Japan Housing Finance Agency, and The Agriculture, Forestry and Fisheries Finance Corporation, the purpose of each of which is to supplement private financing in its relevant field of activity; and

• The Postal Service Agency, which was reorganized in April 2003 into Japan Post, a government-run public services corporation which is scheduled to be privatized on October 1, 2007.

Supervision and Regulation

Japan

Supervision.    As a result of the deregulation and structural reforms in the Japanese financial industry, Japanese financial institutions gained the opportunity to provide a wider range of financial products and options to their clients, while at the same time becoming subject to stricter control and supervision.

31

After several reorganizations of Japanese governmental agencies, the Financial Services Agency was established as an agency of the Cabinet Office in 1998. It is responsible for supervising and inspecting financial institutions, making policy for the overall Japanese financial system and conducting insolvency proceedings with respect to financial institutions. The Bank of Japan, as the central bank for financial institutions, conducts “on-site inspections,” in which its staff visits financial institutions and inspects the assets and risk management systems of those institutions.

The Banking Law.    Among the various laws that regulate financial institutions, the Banking Law and its subordinated orders and ordinances are regarded as the fundamental law for ordinary banks and other private financial institutions. The Banking Law addresses bank holding companies, capital adequacy, inspections and reporting, as well as the scope of business activities, disclosure, accounting, limitation on granting credit and standards for arm’s length transactions. In addition, the amendment to the Banking Law which came into effect in April 2006 relaxed the standards relating to bank-agent eligibility, which encourages to encourage banks to expand their operations through the use of bank agents.

Bank holding company regulations.    A bank holding company is prohibited from carrying on any business other than the management of its subsidiaries and other incidental businesses. A bank holding company may have any of the following as a subsidiary: a bank, a securities company, an insurance company and a foreign subsidiary that is engaged in the banking, securities or insurance business. In addition, a bank holding company may have as a subsidiary any company that is engaged in a business relating or incidental to the businesses of the companies mentioned above, such as a credit card company, a leasing company or an investment advisory company. Certain companies that are designated by a ministerial ordinance at those that cultivate new business fields may also become the subsidiary of a bank holding company.

Capital adequacy.    The capital adequacy guidelines adopted by the Financial Services Agency that are applicable to Japanese bank holding companies and banks with international operations had closely followed the risk-weighted approach introduced by the Basel Committee on Banking Supervision of the Bank for International Settlements, or BIS. In June 2004, the Basel Committee released revised standards called “International Convergence of Capital Measurement and Capital Standards: A Revised Framework,” or Basel II, which has become applicable to Japanese banks since the end of March 2007. Basel II has three core elements, or “pillars”: requiring minimum regulatory capital, the self-regulation of financial institutions based on supervisory review, and market discipline through the disclosure of information. Basel II is based on the belief that these three “pillars” will collectively ensure the stability and soundness of financial systems, and also reflect the nature of risks at each bank more closely. These amendments do not change the minimum capital requirements applicable to internationally active banks.

The revised Framework provides more risk-sensitive approaches and a range of options for measuring risks and determining the capital requirements. As a result, Basel II also reflects the nature of risks at each bank more closely. Under Basel II, MUFG and its subsidiary banks adopted the Foundation Internal Ratings-Based Approach, or IRB approach, to calculate capital requirements for credit risk. The Standardised Approach is used for some subsidiaries that are considered to be immaterial to the overall MUFG capital requirements and a few subsidiaries adopted a phased rollout of the IRB approach. MUFG and its subsidiary banks adopted the Standardised Approach to calculate capital requirements for operational risk. As for market risk, MUFG and its subsidiary banks adopted the Internal Models Approach mainly to calculate general market risk and adopted the Standardised Methodology to calculate specific risk.

The capital adequacy guidelines are in accordance with the standards of the Bank for International Settlement for a target minimum standard ratio of capital to modified risk-weighted assets of 8.0% on both consolidated and non-consolidated bases for banks with international operations, including us and MUTB or on a consolidated basis for bank holding companies with international operations, such as MUFG. Modified risk-weighted assets is the sum of risk-weighted assets compiled for credit risk purposes, market risks and operational risks multiplied by

32

12.5. The capital adequacy guidelines place considerable emphasis on tangible common stockholders’ equity as the core element of the capital base, with appropriate recognition of other components of capital.

Capital is classified into three tiers, referred to as Tier I, Tier II and Tier III. Tier I capital generally consists of stockholders’ equity items, including common stock, preferred stock, capital surplus, retained earnings (which includes deferred tax assets) and minority interests, but recorded goodwill and other items, such as treasury stock, are deducted from Tier I capital. Tier II capital generally consists of:

• The amount that eligible reserves for credit losses exceeds expected losses in the IRB approach, and general reserves for credit losses, subject to a limit of 1.25% of modified risk-weighted assets in the partial use of the Standardised Approach (including a phased rollout of the IRB approach);

• 45% of the unrealized gains on investment securities classified as “other securities” under Japanese accounting rules;

• 45% of the land revaluation excess;

• the balance of perpetual subordinated debt; and

• the balance of subordinated term debt with an original maturity of over five years and preferred stock with a maturity up to 50% of Tier I capital.

Tier III capital generally consists of short-term subordinated debt with an original maturity of at least two years and which is subject to a “lock-in” provision, which stipulates that neither interest nor principal may be paid if such payment would cause the bank’s overall capital amount to be less than its minimum capital requirement. At least 50% of the minimum total capital requirements must be maintained in the form of Tier I capital.

Amendments to the capital adequacy guidelines limiting the portion of Tier I capital consisting of deferred tax assets became effective on March 31, 2006. The restrictions are targeted at major Japanese banks and their holding companies, which include Mitsubishi UFJ Financial Group, Inc. and its subsidiary banks. The cap was initially set at 40% for the fiscal year ended March 31, 2006 and 30% for the fiscal year ended March 31, 2007. It will then be lowered to 20% for the fiscal year ending March 31, 2008. The banks subject to the restrictions will not be able to reflect any deferred tax assets that exceed the relevant limit in their capital adequacy ratios.

Inspection and reporting.    By evaluating banks’ systems of self-assessment, auditing their accounts and reviewing their compliance with laws and regulations, the Financial Services Agency monitors the financial soundness of banks, including the status and performance of their control systems for business activities. The Financial Services Agency implemented the Financial Inspection Rating System (“FIRST”) for deposit-taking financial institutions which has become applicable to major banks from April 1, 2007. By providing inspection results in the form of graded evaluations (i.e., ratings), the Financial Services Agency expects this rating system to motivate financial institutions to voluntarily improve their management and operations.

The Financial Services Agency, if necessary to secure the sound and appropriate operation of a bank’s business, may request the submission of reports or materials from, or conduct an on-site inspection of, the bank or the bank holding company. If a bank’s capital adequacy ratio falls below a specified level, the Financial Services Agency may request the bank to submit an improvement plan and may restrict or suspend the bank’s operations when it determines that action is necessary.

The Bank of Japan also conducts inspections of banks similar to those undertaken by the Financial Services Agency. The Bank of Japan Law provides that the Bank of Japan and financial institutions may agree as to the form of inspection to be conducted by the Bank of Japan.

Laws limiting shareholdings of banks.    The provisions of the Anti-Monopoly Law that prohibit a bank from holding more than 5% of another company’s voting rights do not apply to a bank holding company.

33

However, the Banking Law prohibits a bank holding company and its subsidiaries from holding, on an aggregated basis, more than 15% of the voting rights of companies other than those which can legally become subsidiaries of bank holding companies.

In November 2001, a law which imposes a limitation on a bank’s shareholding of up to the amount equivalent to its Tier I capital was enacted. This limitation took effect in September 30, 2006.

Securities and Exchange Law.    Article 65 of the Securities and Exchange Law of Japan generally prohibits a bank from engaging in the securities business except for certain limited activities. Despite the general prohibition under Article 65, the Financial System Reform Act allows banks, trust banks and securities companies to engage in the businesses of other financial sectors through their subsidiaries in Japan.

The deregulation of the securities business has made clear that banks may engage in market-inducting businesses. The amendment to the Securities and Exchange Law enacted as of June 2, 2004 lifted the ban on banks engaging in securities intermediation. As a result of the amendment, from December 1, 2004 banks are allowed to provide securities intermediary services with appropriate firewalls.

Implementation of Financial Instruments and Exchange Law.    The Financial Instruments and Exchange Law amending the Securities and Exchange Law was promulgated in June 2006 and is scheduled to become effective on September 30, 2007. The new law not only preserves the basic concepts of the Securities and Exchange Law, but is also intended to further protect investors. The new law also regulates sales of a wide range of financial instruments and services, requiring financial institutions to revise their sales rules and strengthen compliance frameworks accordingly. Among the instruments that the Japanese banks deal with, derivatives, foreign currency denominated deposits, and variable insurance and annuity products are expected to be subject to regulations that are applicable to securities covered by sales-related rules of conduct.

Article 33 of the Financial Instruments and Exchange Law generally prohibits banks from engaging in the securities business, as it was provided in Article 65 of the Securities and Exchange Law. Under certain circumstances, banks are allowed to provide securities intermediation services if appropriate firewalls are in place.

Anti-money laundering laws.    Under the Law for Punishment of Organized Crimes and Regulation of Criminal Profits, banks and other financial institutions are required to report to the competent minister, in the case of banks, the Commissioner of the Financial Services Agency, any assets which they receive while conducting their businesses that are suspected of being illicit profits from criminal activity.

Law concerning trust business conducted by financial institutions.    Under the Trust Business Law, joint stock companies that are licensed by the Prime Minister as trust companies are allowed to conduct trust business. In addition, under the Law Concerning Concurrent Operation for Trust Business by Financial Institutions, banks and other financial institutions, as permitted by the Prime Minister, are able to conduct trust business. The Trust Business Law was amended in December 2004 to expand the types of property that can be entrusted, to allow non-financial companies to conduct trust business and to allow a new type of registration for trustees who conduct only administration type trust business. In December 2006, the Trust Law was amended so that we could offer several new types of trust services, including purpose trusts and declarations of trust.

Deposit insurance system and government investment in financial institutions.    The Deposit Insurance Law is intended to protect depositors if a financial institution fails to meet its obligations. The Deposit Insurance Corporation was established in accordance with that law.

City banks, regional banks, trust banks, and various other credit institutions participate in the deposit insurance system on a compulsory basis.

34

Under the Deposit Insurance Law, the maximum amount of protection is ¥10 million per customer within one bank. Since April 1, 2005, all deposits are subject to the ¥10 million maximum, except non-interest bearing deposits that are redeemable on demand and used by the depositor primarily for payment and settlement functions, which are fully protected without a maximum amount limitation. Currently, the Deposit Insurance Corporation charges insurance premiums equal to 0.110% on the deposits in current accounts, ordinary accounts and other similar accounts, which are fully protected as mentioned above, and premiums equal to 0.080% on the deposits in other accounts.

Since 1998, the failure of a number of large-scale financial institutions has led to the introduction of various measures with a view to stabilizing Japan’s financial system, including financial support from the national budget.

The Law Concerning Emergency Measures for Early Strengthening of Financial Function, or the Financial Function Early Strengthening Law, enacted in October 1998, provided for government funds to be made available to financial institutions “prior to failure” as well as to financial institutions with “sound” management, to increase the capital ratio of such financial institutions and to strengthen their function as financial market intermediaries. The availability of new funds for this purpose ended in March 2001.

Banks and bank holding companies that have received investments from the Resolution and Collection Corporation under the framework that previously existed under the Financial Function Early Strengthening Law are required to submit and, if necessary, update their restructuring plans relating to their management, finances and other activities. If a bank or bank holding company materially fails to meet the operating targets set in its restructuring plan, the Financial Services Agency can require it to report on alternative measures to achieve the targets, and also issue a business improvement order requiring it to submit a business improvement plan that indicates concrete measures to achieve the targets. The preferred shares that were previously issued by UFJ Holdings to the Resolution and Collection Corporation were exchanged for Mitsubishi UFJ Financial Group’s newly issued preferred shares in the merger with UFJ Holdings and, as a result, we were required to submit restructuring plans until those preferred shares were redeemed. As Mitsubishi UFJ Financial Group completed the repayment of the public funds that UFJ Holdings received from the Resolution and Collection Corporation on June 9, 2006, we are no longer required to submit such restructuring plans.

Starting in April 2001, amendments to the Deposit Insurance Law established a new framework which enables the Deposit Insurance Corporation to inject capital into a bank if the Commissioner of the Financial Services Agency recognizes that it must do so to guard against financial systemic risk.

On June 14, 2004, the Strengthening Financial Functions Law was enacted to establish a new framework for injecting public funds into financial institutions. The Strengthening Financial Functions Law broadens the range of financial institutions eligible to receive public funds and facilitates the preventive injection of public funds into troubled or potentially troubled financial institutions in order to avert financial crises. Applications for public-funds injection under the Strengthening Financial Functions Law must be made by March 31, 2008.

Personal Information Protection Law.    With regards to protection of personal information, the new Personal Information Protection Law became fully effective on April 1, 2005. Among other matters, the law requires Japanese banking institutions to limit the use of personal information to the stated purpose and to properly manage the personal information in their possession, and forbids them from providing personal information to third parties without consent. If a bank violates certain provisions of the law, the Financial Services Agency may advise or order the bank to take proper action. The Financial Services Agency announced related guidelines for the financial services sector in December 2004.

Law concerning Protection of Depositors from Illegal Withdrawals Made by Counterfeit or Stolen Cards.    This law, which became effective in February 2006, requires financial institutions to establish internal systems to prevent illegal withdrawals of deposits made using counterfeit or stolen bank cards. The law also

35

requires financial institutions to compensate depositors for any amount illegally withdrawn using counterfeit bank cards, unless the financial institution can verify that it acted in good faith without negligence, and there is gross negligence on the part of the relevant account holder.

Recent Regulatory Actions.    In February 2007, BTMU received an administrative order from the Financial Services Agency of Japan in respect of compliance management at certain of its operations regarding the occurrence of certain inappropriate transactions. The administrative order required, among other things, temporary suspensions of credit extensions to new corporate customers, training of all staff and directors regarding compliance, temporary suspension of the establishment of new domestic corporate business locations, strengthening of the management and internal control framework, presentation and implementation of a business improvement plan, and reports on the progress of such business improvement plan. Further, in June 2007, BTMU received separate administrative orders from the Financial Services Agency of Japan in respect of its overseas business and its investment trust sales and related business. The administrative orders require BTMU to make improvements of its compliance structure and related internal control functions in its overseas business and its domestic investment trust sales and related business, presentation and implementation of a business improvement plan, and reports on the progress of such business improvement plan.

Proposed government reforms to restrict maximum interest rates on consumer lending business.    The Japanese government is implementing regulatory reforms affecting the consumer lending industry. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Law Concerning Acceptance of Investment, Cash Deposit and Interest Rate etc., which is currently 29.2% per annum, to 20% per annum. The reduction in the maximum permissible interest rate will be gradually implemented in phases from 2007 through 2010, at the latest. Under the reforms, all interest rates will be subject to the lower limits (15-20% per annum) imposed by the Interest Rate Restriction Law, which will compel lending institutions to lower the interest rates they charge borrowers.

Currently, consumer finance companies that satisfy certain conditions are able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law. Accordingly, our consumer finance subsidiaries offer loans at interest rates above the Interest Rate Restriction Law. During the past year, the Supreme Court of Japan passed decisions concerning interest exceeding the limits stipulated by the Interest Rate Restriction Law, and the business environment for consumer finance companies in Japan has been altered in favor of borrowers. Due to such environmental changes, borrowers’ demands for reimbursement of such excess interest that they have once paid to the consumer finance companies have significantly increased in the past 12 months. Furthermore, new regulations that are scheduled to be enacted before mid-2010 are expected to require, among other things, consumer finance companies to review the repayment capability of borrowers before lending, thereby limiting the amount of borrowing available to individual borrowers.

United States

As a result of our operations in the United States, we are subject to extensive U.S. federal and state supervision and regulation.

Overall supervision and regulation.    We are subject to supervision, regulation and examination with respect to our U.S. operations by the Board of Governors of the Federal Reserve System, or the Federal Reserve Board, pursuant to the U.S. Bank Holding Company Act of 1956, as amended, or the BHCA, and the International Banking Act of 1978, as amended, or the IBA, because we are a bank holding company and a foreign banking organization, respectively, as defined pursuant to those statutes.

The Federal Reserve Board functions as our “umbrella” supervisor under amendments to the BHCA effected by the Gramm-Leach-Bliley Act of 1999, which among other things:

• prohibited further expansion of the types of activities in which bank holding companies, acting directly or through nonbank subsidiaries, may engage;

36

• authorized qualifying bank holding companies to opt to become “financial holding companies,” and thereby acquire the authority to engage in an expanded list of activities, including merchant banking, insurance underwriting and a full range of securities activities; and

• modified the role of the Federal Reserve Board by specifying new relationships between the Federal Reserve Board and the functional regulators of nonbank subsidiaries of both bank holding companies and financial holding companies.

We have not elected to become a financial holding company.

The BHCA generally prohibits each of a bank holding company and a foreign banking organization that maintains branches or agencies in the United States from, directly or indirectly, acquiring more than 5% of the voting shares of any company engaged in nonbanking activities in the United States unless the bank holding company or foreign banking organization has elected to become a financial holding company, as discussed above, or the Federal Reserve Board has determined, by order or regulation, that such activities are so closely related to banking as to be a proper incident thereto and has granted its approval to the bank holding company or foreign banking organization for such an acquisition. The BHCA also requires a bank holding company or foreign banking organization that maintains branches or agencies in the United States to obtain the prior approval of an appropriate federal banking authority before acquiring, directly or indirectly, the ownership of more than 5% of the voting shares or control of any U.S. bank or bank holding company. In addition, under the BHCA, a U.S. bank or a U.S. branch or agency of a foreign bank is prohibited from engaging in various tying arrangements involving it or its affiliates in connection with any extension of credit, sale or lease of any property or provision of any services.

U.S. branches and agencies of subsidiary Japanese banks.    Under the authority of the IBA, we operate six branches, two agencies and five representative offices in the United States. We operate branches in Los Angeles and San Francisco, California; Chicago, Illinois; New York, New York; Portland, Oregon; and Seattle, Washington; agencies in Atlanta, Georgia and Houston, Texas; and representative offices in Washington, D.C; Minneapolis, Minnesota; Dallas, Texas; Jersey City, New Jersey; and Florence, Kentucky.

The IBA provides, among other things, that the Federal Reserve Board may examine U.S. branches and agencies of foreign banks, and that each such branch and agency shall be subject to on-site examination by the appropriate federal or state bank supervisor as frequently as would a U.S. bank. The IBA also provides that if the Federal Reserve Board determines that a foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, or if there is reasonable cause to believe that the foreign bank or its affiliate has committed a violation of law or engaged in an unsafe or unsound banking practice in the United States, the Federal Reserve Board may order the foreign bank to terminate activities conducted at a branch or agency in the United States.

U.S. branches and agencies of foreign banks must be licensed, and are also supervised and regulated, by a state or by the Office of the Comptroller of the Currency, or the OCC, the federal regulator of national banks. All of our branches and agencies in the United States are state-licensed. Under U.S. federal banking laws, state-licensed branches and agencies of foreign banks may engage only in activities that would be permissible for their federally-licensed counterparts, unless the Federal Reserve Board determines that the additional activity is consistent with sound practices. U.S. federal banking laws also subject state-licensed branches and agencies to the single-borrower lending limits that apply to federal branches and agencies, which generally are the same as the lending limits applicable to national banks, but are based on the capital of the entire foreign bank.

As an example of state supervision, our branches in New York are licensed by the New York State Superintendent of Banks, or the Superintendent, pursuant to the New York Banking Law. Under the New York Banking Law and the Superintendent’s Regulations, we must maintain with banks in the State of New York eligible assets as defined and in amounts determined by the Superintendent. These New York branches must also

37

submit written reports concerning their assets and liabilities and other matters, to the extent required by the Superintendent, and are examined at periodic intervals by the New York State Banking Department. In addition, the Superintendent is authorized to take possession of our business and property located in New York whenever events specified in the New York Banking Law occur.

U.S. subsidiary banks.    We own and control two U.S. banks:

• Bank of Tokyo-Mitsubishi UFJ Trust Company, New York, New York, and

• Union Bank of California, N.A., or UBOC, (through our subsidiary, UnionBanCal Corporation, a registered bank holding company).

Bank of Tokyo-Mitsubishi UFJ Trust Company is chartered by the State of New York and is subject to the supervision, examination and regulatory authority of the Superintendent pursuant to the New York Banking Law. Union Bank of California, N.A., is a national bank subject to the supervision, examination and regulatory authority of the OCC pursuant to the National Bank Act.

The Federal Deposit Insurance Corporation, or the FDIC, is the primary federal agency responsible for the supervision, examination and regulation of the New York-chartered bank referred to above. The FDIC may take enforcement action, including the issuance of prohibitive and affirmative orders, if it determines that a financial institution under its supervision has engaged in unsafe or unsound banking practices, or has committed violations of applicable laws and regulations. The FDIC insures the deposits of both U.S. subsidiary banks. In the event of the failure of an FDIC-insured bank, the FDIC is virtually certain to be appointed as receiver, and would resolve the failure under provisions of the Federal Deposit Insurance Act. An FDIC-insured institution that is affiliated with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. In the liquidation or other resolution of a failed FDIC-insured depository institution, deposits in its U.S. offices and other claims for administrative expenses and employee compensation are afforded priority over other general unsecured claims, including deposits in offices outside the United States, non-deposit claims in all offices and claims of a parent company. Moreover, under longstanding Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength for its subsidiary banks and to commit resources to support such banks.

Bank capital requirements and capital distributions.    Our U.S. subsidiary banks and UnionBanCal Corporation, our U.S. subsidiary bank holding company, are subject to applicable risk-based and leverage capital guidelines issued by U.S. regulators for banks and bank holding companies. All of our U.S. subsidiary banks are “well capitalized” under those guidelines as they apply to banks, and our U.S. subsidiary bank holding company exceeds all minimum regulatory capital requirements applicable to domestic bank holding companies. The Federal Deposit Insurance Corporation Improvement Act of 1991, or FDICIA, provides, among other things, for expanded regulation of insured depository institutions, including banks, and their parent holding companies. As required by FDICIA, the federal banking agencies have established five capital tiers ranging from “well capitalized” to “critically undercapitalized” for insured depository institutions. As an institution’s capital position deteriorates, the federal banking regulators may take progressively stronger actions, such as further restricting affiliate transactions, activities, asset growth or interest payments. In addition, FDICIA generally prohibits an insured depository institution from making capital distributions, including the payment of dividends, or the payment of any management fee to its holding company, if the insured depository institution would subsequently become undercapitalized.

The availability of dividends from insured depository institutions in the United States is limited by various other statutes and regulations. The National Bank Act and other federal laws prohibit the payment of dividends by a national bank under various circumstances and limit the amount a national bank can pay without the prior approval of the OCC. In addition, state-chartered banking institutions are subject to dividend limitations imposed by applicable federal and state laws.

38

Other regulated U.S. subsidiaries.    Our nonbank subsidiaries that engage in securities-related activities in the United States are regulated by appropriate functional regulators, such as the SEC, any self-regulatory organizations of which they are members, and the appropriate state regulatory agencies. These nonbank subsidiaries are required to meet separate minimum capital standards as imposed by those regulatory authorities.

The Gramm-Leach-Bliley Act removed almost all of the pre-existing statutory barriers to affiliations between commercial banks and securities firms by repealing Sections 20 and 32 of the Glass-Steagall Act. At the same time, however, the so-called “push-out” provisions of the Gramm-Leach-Bliley Act narrowed the exclusion of banks, including the U.S. branches of foreign banks, from the definitions of “broker” and “dealer” under the Securities Exchange Act of 1934, potentially requiring all such banks to transfer some activities to affiliated broker-dealers. The SEC has issued rules regarding the push-out of “dealer” functions that became effective on September 30, 2003. The SEC has also proposed rules that would govern the push-out requirements for “broker” functions but exempted banks from the definition of “broker” until September 28, 2007. The final form of these rules, their applicability to banks and the date of their effectiveness are still subject to change. At this time, we do not believe that these push-out rules as adopted or as currently proposed will have a significant impact on our business as currently conducted in the United States.

Anti-Money Laundering Initiatives and the USA PATRIOT Act.    A major focus of U.S. governmental policy relating to financial institutions in recent years has been aimed at preventing money laundering and terrorist financing. The USA PATRIOT Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Department of the Treasury has issued a number of implementing regulations that impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, and to verify the identity of their customers. In addition, the bank regulatory agencies carefully scrutinize the adequacy of an institution’s policies, procedures and controls. As a result, there has been an increased number of regulatory sanctions and law enforcement authorities have been taking a more active role. Failure of a financial institution to maintain and implement adequate policies, procedures and controls to prevent money laundering and terrorist financing could in some cases have serious legal and reputational consequences for the institution, including the incurring of expenses to enhance the relevant programs, the imposition of limitations on the scope of their operations and the imposition of fines and other monetary penalties.

Recent Regulatory Actions.    In December 2006, MUFG and BTMU entered into a written agreement with the Federal Reserve Banks of San Francisco and New York and the New York State Banking Department, and Bank of Tokyo-Mitsubishi UFJ Trust Company, or BTMUT, a subsidiary of BTMU, consented to an Order to Cease and Desist issued by the Federal Deposit Insurance Corporation and the New York State Banking Department, to strengthen the compliance framework of BTMU, its New York Branch and BTMUT, respectively, for preventing anti-money laundering. As a result of the written agreement and the consent to the Order to Cease and Desist, we are required, among other things, to implement corrective measures, submit periodic progress reports to the authorities and take other actions.

Separately, on September 14, 2007, Union Bank of California, N.A. agreed to a consent order and payment of a civil money penalty of $10.0 million assessed concurrently by the U.S. Office of the Comptroller of the Currency (OCC) and the U.S. Financial Crimes Enforcement Network (FinCEN) relating to the Bank Secrecy Act / Anti-Money Laundering compliance controls and processes of Union Bank of California. On September 17, 2007, Union Bank of California also entered into a deferred prosecution agreement with the U.S. Department of Justice under which Union Bank of California agreed to a payment of $21.6 million and the government agreed to defer prosecution of a Bank Secrecy Act Program violation primarily related to the discontinued international banking business of Union Bank of California and dismiss prosecution if Union Bank of California meets the conditions of the deferred prosecution agreement, including complying with the OCC consent order for one year.

39

In October 2004, Union Bank of California International, or UBOCI, a subsidiary of UNBC, entered into a written agreement with the Federal Reserve Bank of New York relating to its anti-money laundering controls and processes. With the liquidation of UBOCI in March 2007, the written agreement is no longer effective.

The SEC is also currently conducting an inquiry regarding marketing and distribution practices of mutual funds managed by a subsidiary of Union Bank of California. Neither we nor UNBC can be certain at this time as to the final results of that inquiry.

C.    Organizational Structure

MUFG is a holding company for BTMU, MUTB, MUS and other subsidiaries. Through its subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including commercial banking, investment management, trust banking and asset management services, and securities business and provide related services to individual and corporate customers.

BTMU is a consolidated subsidiary of MUFG and, together with MUTB and MUS, is one of the core companies of the MUFG Group. Together with its subsidiaries and affiliated companies, BTMU engages in a broad range of financial operations, including commercial banking, credit card-related services and provides other financial services, including securities businesses and leasing services.

Set forth below is a list of our significant subsidiaries at March 31, 2007:

Name	Country of incorporation	Proportion of ownership interest (%)	Proportion of voting interest (%)
UFJ NICOS Co., Ltd.	Japan	68.94	69.01
The Senshu Bank, Ltd.	Japan	67.96	68.13
NBL Co., Ltd.	Japan	89.74	89.74
DC Card Co., Ltd.	Japan	41.14	41.14
BOT Lease Co., Ltd.	Japan	16.06	16.31
Mitsubishi UFJ Factors Limited	Japan	62.58	62.58
Mitsubishi UFJ Research and Consulting Ltd.	Japan	49.56	49.56
MU Frontier Servicer Co., Ltd.	Japan	79.68	79.68
Mitsubishi UFJ Wealth Management Securities, Ltd.	Japan	100.00	100.00
Diamond Business Engineering Corporation	Japan	15.00	15.00
Tokyo Credit Services, Ltd.	Japan	51.00	51.00
UnionBanCal Corporation	USA	65.31	65.31
Bank of Tokyo-Mitsubishi UFJ Trust Company	USA	100.00	100.00
BTMU Capital Corporation	USA	100.00	100.00
BTMU Leasing & Finance, Inc.	USA	100.00	100.00
Bank of Tokyo-Mitsubishi UFJ (Mexico) S.A.	Mexico	100.00	100.00
Bank of Tokyo-Mitsubishi UFJ (Canada)	Canada	100.00	100.00
Banco de Tokyo-Mitsubishi UFJ Brasil S/A	Brazil	98.97	98.97
Bank of Tokyo-Mitsubishi UFJ (Holland) N.V.	Netherlands	100.00	100.00
BTMU Lease (Deutschland) GmbH.	Germany	100.00	100.00
Mitsubishi UFJ Wealth Management Bank (Switzerland), Ltd.	Switzerland	60.00	60.00
Bank of Tokyo-Mitsubishi UFJ (Luxembourg) S.A.	Luxembourg	99.99	99.99
Bank of Tokyo-Mitsubishi UFJ (Polska) S.A.	Poland	100.00	100.00
ZAO Bank of Tokyo-Mitsubishi UFJ (Eurasia)	Russia	100.00	100.00
BTMU Participation (Thailand) Co., Ltd.	Thailand	24.49	24.49
Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad	Malaysia	100.00	100.00
PT U Finance Indonesia	Indonesia	95.00	95.00
PT UFJ-BRI Finance	Indonesia	55.00	55.00

40

D.    Property, Plants and Equipment

The following table presents our premises and equipment at cost as of March 31, 2006 and 2007:

	At March 31
	2006		2007
	(in millions)
Land	¥	327,782	312,708
Buildings		440,713	418,571
Equipment and furniture		491,353	542,939
Leasehold improvements		268,875	304,918
Construction in progress		6,640	12,204
Total		1,535,363	1,591,340
Less accumulated depreciation		632,116	695,460
Premises and equipment—net	¥	903,247	895,880

Our head office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo, and comprises 1,308,675 square feet of office space. At March 31, 2007, we conducted our banking operations either in our owned premises or in leased properties.

The following table presents the areas and book values of our material office and other properties at March 31, 2007:

	Area	Book value
	(in thousands of square feet)	(in millions)
Owned land	18,297	¥	312,708
Leased land	1,984		—
Owned buildings	24,957		212,004
Leased buildings	13,490		—

Our owned buildings and land are primarily used by our branches. Most of the buildings and land owned by us are free from material encumbrances, except as described below.

In March 1999, we sold to Mitsubishi Estate, Co., Ltd., or Mitsubishi Estate, a 50% undivided interest in the buildings and land comprising our head office and Nihonbashi office and at the same time, entered into an agreement to lease back from the buyer the 50% undivided interests of the buildings sold for a period of seven years. We accounted for these transactions as financing arrangements. On August 31, 2005, we bought back the aforementioned buildings and land from Mitsubishi Estate. For further information, see note 9 to our consolidated financial statements.

During the fiscal year ended March 31, 2007, we invested approximately ¥88.6 billion primarily for office renovations and purchases of furniture and equipment.

Item 4A. Unresolved Staff Comments.

None.

41

Item 5. Operating and Financial Review and Prospects.

The following discussion and analysis should be read in conjunction with “Item 3.A. Key Information—Selected Financial Data,” “Selected Statistical Data” and our consolidated financial statements and related notes included elsewhere in this Annual Report.

		Page
Roadmap to Reading the Discussion of Our Operating and Financial Review and Prospects
A.	Operating Results	43
	Introduction	43
	Recent Developments	44
	Business Environment	48
	Critical Accounting Estimates	51
	Accounting Changes	55
	Recently Issued Accounting Pronouncements	59
	Results of Operations	61
	Business Segment Analysis	71
	Geographic Segment Analysis	75
	Effect of the Change in Exchange Rates on Foreign Currency Translation	76
B.	Liquidity and Capital Resources	77
	Financial Condition	77
	Capital Adequacy	89
	Off-balance-sheet Arrangements	91
	Contractual Cash Obligations	94
	Non-exchange Traded Contracts Accounted for at Fair Value	95
C.	Research and Development, Patents and Licenses, etc.	95
D.	Trend Information	95
E.	Off-balance-sheet Arrangements	95
F.	Tabular Disclosure of Contractual Obligations	95
G.	Safe Harbor	95

42

A.    Operating Results

Introduction

We are a subsidiary of Mitsubishi UFJ Financial Group, Inc., or MUFG. We engage in a broad range of financial operations, including commercial banking, investment banking and asset management services, and provide related services to individual and corporate customers.

Key Financial Figures

The following are some key figures prepared in accordance with US GAAP relating to our business.

On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc., or MTFG, the parent company of The Bank of Tokyo-Mitsubishi, Ltd., or BTM, merged with UFJ Holdings, Inc., or UFJ Holdings, the parent company of UFJ Bank Ltd., or UFJ Bank, with MTFG being the surviving entity. Upon the consummation of the merger, MTFG changed its name to MUFG. Although the merger of BTM with UFJ Bank occurred on January 1, 2006, the results of operations of UFJ Bank and its subsidiaries, or the UFJ Bank Group, have been included in the accompanying consolidated financial statements since October 1, 2005.

The merger of BTM with UFJ Bank was the major factor in the changes in many of the items in our consolidated statements of income over the three fiscal years ended March 31, 2007. The results for the fiscal year ended March 31, 2005 reflect the results of BTM and its subsidiaries, or the BTM Group, only. The results for the fiscal year ended March 31, 2006 reflect the pre-merger results of the BTM Group for the six months ended September 30, 2005 and the post-merger results of The Bank of Tokyo-Mitsubishi UFJ, Ltd. and its subsidiaries, or the BTMU Group, for the six months ended March 31, 2006. The results for the fiscal year ended March 31, 2007 reflect the post-merger results of the BTMU Group for the full twelve-month period.

	Fiscal years ended March 31,
	2005		2006		2007
	(in billions)
Net interest income	¥	806.4	¥	1,520.5	¥	2,165.1
Provision for credit losses		123.9		163.4		341.6
Non-interest income		795.7		556.8		1,220.5
Non-interest expense		954.3		1,616.8		2,172.0
Net income		287.1		228.8		460.9
Total assets (at end of period)		92,050.3		158,825.7		153,605.2

Our revenues consist of net interest income and non-interest income.

Net interest income is a function of:

• the amount of interest-earning assets,

• the general level of interest rates,

• the so-called “spread,” or the difference between the rate of interest earned on interest-earning assets and the rate of interest paid on interest-bearing liabilities, and

• the proportion of interest-earning assets financed by non-interest-bearing liabilities and equity.

Non-interest income consists of:

• fees and commissions, including

• trust fees,

• fees on funds transfer and service charges for collections,

• fees and commissions on international business,

• fees and commissions on credit card business,

• service charges on deposits,

• fees and commissions on securities business,

43

• insurance commissions,

• guarantee fees, and

• other fees and commissions;

• foreign exchange gains (losses)—net, which primarily include net gains (losses) on currency derivative instruments entered into for trading purposes and transaction gains (losses) on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies;

• trading account profits (losses)—net, which primarily include net profits (losses) on trading account securities and interest rate derivative contracts entered into for trading purposes;

• investment securities gains—net, which primarily include net gains on sales of marketable securities, particularly marketable equity securities;

• equity in earnings of equity method investees;

• gains on sales of loans; and

• other non-interest income.

Provision for credit losses are charged to operations to maintain the allowance for credit losses at a level deemed appropriate by management.

Merger of BTM with UFJ Bank to Form BTMU

On October 1, 2005, MTFG merged with UFJ Holdings to form MUFG. At the same time, their respective trust banking and securities companies merged to form Mitsubishi UFJ Trust and Banking Corp., or MUTB, and Mitsubishi UFJ Securities Co., Ltd., or MUS. Subsequently, BTM and UFJ Bank merged to form The Bank of Tokyo-Mitsubishi UFJ, Ltd., or BTMU, on January 1, 2006.

Because BTM and UFJ Bank became subject to common control under MUFG as of October 1, 2005, the two banks were accounted for as having completed their merger as of that date. The merger of BTM with UFJ Bank was accounted for under the purchase method of accounting, and the assets and liabilities of the UFJ Bank Group were recorded at fair value as of October 1, 2005. The purchase price of the UFJ Bank Group amounted to ¥4,628.0 billion, of which ¥4,626.0 billion was recorded in capital surplus relating to the merger with UFJ Bank and the direct acquisition costs of ¥2.0 billion were included in the purchase price. Shareholder’s equity of the UFJ Bank Group was ¥2,738.9 billion and the goodwill relating to the merger with UFJ Bank was ¥1,701.0 billion. For further information, see note 2 to our consolidated financial statements.

Recent Developments

Completion of Public Fund Repayment and Repurchase of Common Stock by MUFG

UFJ Holdings was a recipient of public funds from the Resolution and Collection Corporation, or RCC, a Japanese government entity. The public funds were injected in the form of a convertible preferred stock investment in UFJ Holdings. This convertible preferred stock was exchanged in the merger with UFJ Holdings for newly issued convertible preferred stock of MUFG.

Between October 2005 and June 2006, RCC sold in the market 666,962 shares of MUFG’s common stock which were issued upon the conversion (or acquisition claim after the Company Law took effect) of the preferred stock of MUFG held by RCC. Along with these sales, MUFG repurchased 681,690 shares of its common stock.

In June 2006, 277,245 shares of the common stock of MUFG issued upon an acquisition claim for the preferred stock were sold by RCC in a secondary offering of shares. In connection with this secondary offering, MUFG sold 41,000 treasury shares of its common stock by way of overallotment.

The remaining preferred stock of MUFG held by RCC were sold to non-governmental institutions.

As a result of the above transactions, there are currently no securities held by RCC in the capital base of MUFG.

44

Written Agreement with Regulatory Authorities in the United States

On December 18, 2006, we and MUFG entered into a written agreement with the Federal Reserve Banks of San Francisco and New York and the New York State Banking Department, and Bank of Tokyo-Mitsubishi UFJ Trust Company, or BTMUT, our subsidiary, consented to an Order to Cease and Desist issued by the Federal Deposit Insurance Corporation and the New York State Banking Department, to strengthen the compliance framework and operations of us, our New York Branch and BTMUT, respectively, for preventing money laundering.

As a result of the written agreement and the consent to the Order to Cease and Desist, we are required, among other things, to implement corrective measures, submit periodic progress reports to the authorities and take other actions. We expect to incur some expenses relating to such efforts including consulting fees, personnel costs and IT related investments.

Separately, on September 14, 2007, Union Bank of California, N.A. agreed to a consent order and payment of a civil money penalty of $10.0 million assessed concurrently by the U.S. Office of the Comptroller of the Currency, or OCC, and the U.S. Financial Crimes Enforcement Network, or FinCEN, relating to the Bank Secrecy Act / Anti-Money Laundering compliance controls and processes of Union Bank of California. On September 17, 2007, Union Bank of California also entered into a deferred prosecution agreement with the U.S. Department of Justice under which Union Bank of California agreed to a payment of $21.6 million and the government agreed to defer prosecution of a Bank Secrecy Act Program violation primarily related to the discontinued international banking business of Union Bank of California and dismiss prosecution if Union Bank of California meets the conditions of the deferred prosecution agreement, including complying with the OCC consent order for one year.

Administrative Orders from the Financial Services Agency

On February 15, 2007, we received from the Financial Services Agency, or the FSA, an administrative order based on Article 26-1 of the Banking Law of Japan (business improvement order with partial business suspension order) in respect of compliance management at certain of our operations regarding the occurrence of certain inappropriate transactions.

The administrative order requires temporary suspension of extending credit to new corporate customers, training of all directors and staff regarding compliance, temporary suspension of the establishment of new domestic corporate business locations, establishment of a stronger management and internal control framework, submission and implementation of a business improvement plan, and a series of periodical progress reports of such business improvement plan.

In response to the administrative order described above, on March 16, 2007, we presented and announced a business improvement plan including the formulation and improvement of internal policies, rules and manuals. However, we currently do not expect that this event will have a material adverse impact on our financial position or results of operations.

On June 11, 2007, we received from the FSA administrative orders based on Article 26-1 of the Banking Law of Japan (business improvement orders) in respect of our overseas business and our investment trust sales and related business in Japan. We are required by the administrative orders, among other things, to make improvements in respect of our compliance structure and related internal control functions in our overseas business and certain business practices in our domestic investment trust sales and related business.

In response to the administrative orders described above, on July 5, 2007, we presented and announced a business improvement plan. However, we currently do not expect that this event will have a material adverse impact on our financial position or results of operations.

Change in Business Environment for Consumer Finance Companies in Japan

The Japanese government is implementing regulatory reforms affecting the consumer lending industry. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the

45

Investment Deposit and Interest Rate Law, which is currently 29.2% per annum, to 20% per annum. The reduction in interest rate will be gradually implemented in phases from 2007 through 2010, at the latest. Under the reforms, all interest rates will be subject to the lower limits (15-20% per annum) imposed by the Interest Rate Restriction Law, which will compel lending institutions to lower the interest rates they charge borrowers.

Currently, consumer finance companies that satisfy certain conditions are able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law. Accordingly, our consumer finance subsidiaries have been offering loans at interest rate above the Interest Rate Restriction Law. During the past year, the Supreme Court of Japan rendered decisions concerning interest rates exceeding the limits stipulated by the Interest Rate Restriction Law in favor of borrowers. Due to such changes, borrowers’ claims for reimbursement of excess interest have significantly increased in the fiscal year ended March 31, 2007.

As a result, our consumer finance subsidiaries have increased the allowance for repayment of excess interest from ¥9.7 billion as of March 31, 2006 to ¥102.5 billion as of March 31, 2007.

In addition, ¥184.0 billion of impairment of intangible assets was recognized for the fiscal year ended March 31, 2007 as a result of the downward revision of expected future cash flows at our consumer finance subsidiary primarily due to these developments. As a result of the negative change in forecasted operating results and estimated future taxable income of our consumer finance subsidiary, we recorded a valuation allowance for deferred tax assets in the fiscal year ended March 31, 2007. See note 11 to our consolidated financial statements for more information.

Merger of Leasing Affiliates

On April 1, 2007, Diamond Lease Company Limited and UFJ Central Leasing Co., Ltd., both of which were our equity method investees, merged to become Mitsubishi UFJ Lease & Finance Company Limited. The objective of the merger is to improve their competitiveness and presence in the domestic leasing market. The new company continues to be our equity method investee.

Sale of UnionBanCal’s International Correspondent Banking Business

In September 2005, UnionBanCal Corporation, or UNBC, our U.S. subsidiary, signed a definitive agreement to sell its international correspondent banking operations to Wachovia Bank, N.A. effective October 6, 2005, and the principal legal closing of the transaction took place on the same day. As of June 30, 2006, all of UNBC’s offices designated for disposal were closed. The remaining assets include deposits with banks awaiting approval for repatriation of capital and unremitted profits and loans that are maturing in 2008. The remaining liabilities primarily consist of accrued expenses, which will be settled when due.

We accounted for this transaction as discontinued operations in accordance with Statement of Financial Accounting Standards, or SFAS, No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” and presented the results of discontinued operations as a separate line item in our consolidated statements of income. In addition, assets to be disposed or sold, accounted for at the lower of cost or fair value, and liabilities to be extinguished or assumed in connection with discontinued operations, were presented as separate assets and liabilities, respectively, in our consolidated balance sheets. See note 3 to our consolidated financial statements for more information.

On September 14, 2007, Union Bank of California agreed to a consent order and payment of a civil money penalty of $10.0 million assessed concurrently by OCC and FinCEN relating to the Bank Secrecy Act / Anti-Money Laundering compliance controls and processes of Union Bank of California. On September 17, 2007, Union Bank of California also entered into a deferred prosecution agreement with the U.S. Department of Justice under which Union Bank of California agreed to a payment of $21.6 million and the government agreed to defer prosecution of a Bank Secrecy Act Program violation primarily related to the discontinued international banking business of Union Bank of California and dismiss prosecution if Union Bank of California meets the conditions of the deferred prosecution agreement, including complying with the OCC consent order for one year.

46

Establishment of Mitsubishi UFJ Merrill Lynch PB Securities

In May 2006, we established a joint-venture private banking firm named Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd., with Merrill Lynch & Co., Inc. and Merrill Lynch Japan Securities Co., Ltd. The joint venture firm offers high-net-worth Japanese individuals and small and medium-sized organizations a full range of innovative financial products and services. We and MUS own 40% and 10%, respectively, of the voting common shares of the joint venture company, and Merrill Lynch Japan Securities owns the remaining 50%. Merrill Lynch Japan Securities contributed its private client business, comprising approximately 8,000 client accounts and more than ¥1 trillion in assets under administration, into the joint venture firm. We, in turn, are introducing the capabilities and services of the joint venture firm to our high-net-worth client base.

Merger of UFJ NICOS and DC Card

On April 1, 2007, UFJ NICOS Co., Ltd., or UFJ NICOS, and DC Card Co., Ltd., or DC Card, our credit card subsidiaries, merged to become Mitsubishi UFJ NICOS Co., Ltd., or Mitsubishi UFJ NICOS. The objective of the merger is to combine UFJ NICOS’ large and extensive network, reputation and product development capability with DC Card’s co-branding relationships and acceptance of regional cards.

Adoption of Stock-Based Compensation Plan

MUFG, MUTB and we elected to adopt a stock-based compensation plan for directors, corporate auditors and executive officers and obtained the necessary shareholder approval at their respective ordinary general meetings held on June 28, 2007 at MUFG and on June 27, 2007 at MUTB and us, while abolishing the practice of paying them retirement allowances. Under the stock-based compensation plan, our directors, corporate auditors and executive officers will be offered stock options to acquire shares of MUFG common stock. The exercise price is expected to be set at ¥1 per share. For more information on the stock-based compensation plan, see “Item 6.B. Compensation” and “Item 7.B. Major Shareholders and Related Party Transactions—Related Party Transactions.”

Rationalization of Corporate Outlets of MUTB

On August 29, 2007, MUFG, MUTB and we resolved to transfer a part of MUTB’s corporate lending business conducted at nine of MUTB’s outlets to us on November 12, 2007, subject to approval by relevant authorities. In consideration, we plan to issue 1,000,000 shares of non-voting preferred stock to MUTB.

Such transfer is a part of the rationalization of MUTB’s business, which will also entail the reorganization of MUTB’s other corporate business outlets into four core outlets in Tokyo, Nagoya, Osaka and Kyushu. The rationalization of MUTB’s business is intended to improve the business efficiency of MUFG as a whole and aims to maximize customer satisfaction in the trust business field. This rationalization process is scheduled to be completed in early December 2007.

Business and Capital Alliance in Consumer Finance Business

On September 20, 2007, we entered into a basic agreement with MUFG, Mitsubishi UFJ NICOS and JACCS Co., Ltd., or JACCS, with respect to a business and capital alliance. As part of the basic agreement, Mitsubishi UFJ NICOS is expected to transfer its installment credit sales business, automobile loan business and automobile leasing business to JACCS on April 1, 2008. In addition to transferring installment credit sale contracts, Mitsubishi UFJ NICOS is expected to transfer approximately 340 personnel and five business offices. At the same time, we, together with MUFG and Mitsubishi UFJ NICOS, plan to form a business alliance with JACCS with respect to credit card related operations, installment credit sales business, settlement operations and housing loan related operations. In addition, we are expected to acquire newly issued common shares of JACCS by March 31, 2008, subject to regulatory approval. Following the acquisition of the additional JACCS shares, we will own approximately 20% of the voting rights in JACCS, and accordingly, JACCS is expected to become our equity method investee.

On the same day, MUFG also announced that MUFG is expected to acquire ¥120 billion of newly issued Mitsubishi UFJ NICOS shares on November 6, 2007, thereby increasing the MUFG Group’s holdings to

47

approximately 75% of Mitsubishi UFJ NICOS’ total issued shares. In addition, MUFG announced that MUFG plans to make Mitsubishi UFJ NICOS a wholly-owned subsidiary of MUFG through a share exchange expected to go into effect on August 1, 2008. The objective of the investment and share exchange is to strengthen Mitsubishi UFJ NICOS’ financial base to enable Mitsubishi UFJ NICOS to implement its restructuring measures, including a new credit card business strategy to respond to the changing business environment for consumer finance companies in Japan.

As part of its new medium term business plan, Mitsubishi UFJ NICOS will implement measures to reform its business structure, including the following measures:

• Concentrate resources on the credit card business and transfer Mitsubishi UFJ NICOS’ installment credit sales business to JACCS as discussed above.

• Reduce personnel by 2,890 over a three-year period, including seeking the voluntary early retirement of approximately 2,300 persons in the fiscal year ending March 31, 2008.

• Merge six regional credit finance subsidiaries of Mitsubishi UFJ NICOS into Mitsubishi UFJ NICOS in January 2008.

MUFG will also hold discussions with The Norinchukin Bank to expand the business and capital alliance between The Norinchukin Bank and Mitsubishi UFJ NICOS. As part of these discussions, MUFG will consider the possibility of having Mitsubishi UFJ NICOS become an equity method investee of The Norinchukin Bank after Mitsubishi UFJ NICOS becomes a wholly-owned subsidiary of MUFG.

Business Environment

We engage in a wide range of financial operations, including commercial banking, investment banking, asset management and securities-related businesses, and provide related services to individuals primarily in Japan and the United States and corporate customers around the world. Our results of operations and financial condition are exposed to changes in various external economic factors, including:

• General economic conditions;

• Interest rates;

• Currency exchange rates; and

• Stock and real estate prices.

Economic Environment in Japan

In Japan, while the overall growth momentum slightly weakened toward the end of the fiscal year ended March 31, 2007, export and capital investments continued to rise along with solid corporate earnings and moderate improvement in personal consumption.

48

With respect to interest rates, the Bank of Japan raised the uncollateralized overnight call rate to 0.5% in February 2007, following the termination of its zero-interest rate policy in July 2006. This has led to slightly increased upward pressure on Japan’s short-term market interest rates. In the long-term interest rate market, the yield on ten-year Japanese government bonds rose temporarily before the zero-interest rate policy was lifted in July 2006, but has since declined and fluctuated within a range until May 2007. As of mid-September 2007, the uncollateralized overnight call rate target was around 0.5% and the yield on ten-year Japanese government bonds was around 1.5%. The following chart shows the interest rate trends in Japan since April 2005:

Regarding the Japanese stock market, the Nikkei Stock Average, which is an average of 225 blue chip stocks listed on the Tokyo Stock Exchange, rose from ¥17,059.66 at March 31, 2006 to ¥17,287.65 at March 30, 2007. As for the Tokyo Stock Price Index, or TOPIX, a composite index of all stocks listed on the First Section of the Tokyo Stock Exchange, the index slightly declined from 1,728.16 at March 31, 2006 to 1,713.61 at March 30, 2007. From late July 2007, stock markets in Japan declined along with other international markets, primarily as a result of the possible negative impact of heightened concerns with increased defaults of high-risk mortgages to lower-income households, generally known as “sub-prime” mortgages, on the U.S. economy in general and on financial institutions in particular. As of mid-September 2007, the Nikkei Stock Average was around ¥16,000, and TOPIX was around 1,500.

49

In the foreign exchange markets, the Japanese yen was at similar levels at the end of March 2007 against the US dollar as compared to the beginning of the fiscal year. The Japanese yen/US Dollar foreign exchange rate was around ¥118 to $1 at the beginning of April 2006. After appreciating against the US dollar to around ¥110 in mid-May 2006, the Japanese yen depreciated to around ¥118 at the end of March 2007. As of mid-September 2007, the Japanese yen/US dollar foreign exchange rate was around ¥115 to $1. Against the Euro, the Japanese yen weakened during the fiscal year from around ¥143 to €1 at the beginning of April 2006 to around ¥157 at the end of March 2007. As of the mid-September 2007, the Japanese yen/Euro foreign exchange rate was around ¥159 to €1. The Japanese yen has been fluctuating significantly in recent weeks against the US dollar, Euro and other foreign currencies as a result of instability in the global financial markets and its impact on so-called “yen carry trades.” The following chart shows the foreign exchange rates expressed in Japanese yen per $1.00 since April 2005:

Based on the average official land prices set by the government, average land prices in Japan as of January 1, 2007 increased for the first time in 16 years. Nationwide residential land prices and land prices for commercial properties as of January 1, 2007 rose by 0.1% and 2.3%, respectively, compared to January 1, 2006. In the three major metropolitan areas, Tokyo, Osaka and Nagoya, residential land prices on average rose by 2.8%, and commercial properties rose by 8.9%, compared to the previous year. On the other hand, in the local regions of Japan, which consist of regions other than the major metropolitan areas, residential land prices on average declined by 2.7%, and commercial properties declined by 2.8%, compared to the previous year.

According to Teikoku Databank, a Japanese research institution, the number of companies who filed for legal bankruptcy in Japan between April 2006 and March 2007 was approximately 9,600, an increase of approximately 9% from the previous fiscal year, mainly due to an increase in legal bankruptcies of small sized companies. On the other hand, the aggregate amount of liabilities subject to bankruptcy filings for the fiscal year was approximately ¥5.3 trillion, a decrease of approximately 9% from the previous year, owing to a decrease in large-scale bankruptcies.

International Financial Markets

With respect to the international financial and economic environment for the fiscal year ended March 31, 2007, overseas economies generally remained firm as seen in China’s continued strong growth led by exports,

50

despite the slowdown of the United States economy. Since late July 2007, the credit markets in the United States have been negatively affected by heightened concerns with increased defaults of sub-prime mortgages.

In the United States, the target for the federal funds rate was raised to 5.25% in June 2006. Subsequently, on September 18, 2007, the target rate for the federal funds was lowered by 50 basis points to 4.75%. Since mid-August 2007, the Federal Reserve Board has twice lowered the primary credit rate to improve market liquidity in the financial markets. As of September 20, 2007, the federal funds rate was 4.75%, and the primary credit rate was 5.25%.

In the EU, the European Central Bank’s policy rate was raised to 3.75% in March 2007, and was further raised to 4.0% in June 2007.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with US GAAP. Many of the accounting policies require management to make difficult, complex or subjective judgments regarding the valuation of assets and liabilities. The accounting policies are fundamental to understanding our operating and financial review and prospects. The notes to our consolidated financial statements provide a summary of our significant accounting policies. The following is a summary of the critical accounting estimates:

Allowance for Credit Losses

The allowance for credit losses represents management’s estimate of probable losses in our loan portfolio. The evaluation process, including credit-ratings and self-assessments, involves a number of estimates and judgments. The allowance is based on two principles of accounting: (1) SFAS No. 5, “Accounting for Contingencies,” which requires that losses be accrued when they are probable of occurring and can be estimated; and (2) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures,” which require that losses be accrued based on the difference between the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of collateral or the loan’s observable market value and the loan balance.

Our allowance for credit losses consists of an allocated allowance and an unallocated allowance. The allocated allowance comprises (a) the allowance for specifically identified problem loans, (b) the allowance for large groups of smaller balance homogeneous loans, (c) the allowance for loans exposed to specific country risk and (d) the formula allowance. Both the allowance for loans exposed to specific country risk and the formula allowance are provided for performing loans that are not subject to either the allowance for specifically identified problem loans or the allowance for large groups of smaller balance homogeneous loans. The allowance for loans exposed to specific country risk covers transfer risk which is not specifically covered by other types of allowance. Each of these components is determined based upon estimates that can and do change when actual events occur.

The allowance for specifically identified problem loans, which represent large-balance, non-homogeneous loans that have been individually determined to be impaired, uses various techniques to arrive at an estimate of loss. Historical loss information, discounted cash flows, fair value of collateral and secondary market information are all used to estimate those losses.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment, and the allowance for such loans is established through a process that begins with estimates of probable losses inherent in the portfolio. These estimates are based upon various analyses, including historical delinquency and credit loss experience.

The allowance for loans exposed to specific country risk is based on an estimate of probable losses relating to our exposure to countries that we identify as having a high degree of transfer risk. We use a country risk grading system that assigns risk ratings to individual countries. To determine the risk rating, we consider the instability of foreign currency and difficulties regarding our borrowers’ ability to service their debt.

51

The formula allowance uses a model based on historical losses as an indicator of future probable losses. However, the use of historical losses is inherently uncertain and as a result could differ from losses incurred in the future. However, since this history is updated with the most recent loss information, the differences that might otherwise occur are mitigated.

Our actual losses could be more or less than the estimates. The unallocated allowance captures losses that are attributable to various economic events, industry or geographic sectors whose impact on the portfolio have occurred but have yet to be recognized in the allocated allowance. For further information regarding our allowance for credit losses, see “Item 5.B. Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

In addition to the allowance for credit losses on our loan portfolio, we maintain an allowance for credit losses on off-balance-sheet credit instruments, including commitments to extend credit, a variety of guarantees and standby letters of credit. Such allowance is included in Other liabilities. With regard to the allocated allowance for specifically identified credit exposure and the allocated formula allowance, we apply the same methodology that we use in determining the allowance for loan credit losses.

Determining the adequacy of the allowance for credit losses requires the exercise of considerable judgment and the use of estimates, such as those discussed above. To the extent that actual losses differ from management’s estimates, additional provisions for credit losses may be required that would adversely impact our operating results and financial condition in future periods.

Impairment of Investment Securities

US GAAP requires the recognition in earnings of an impairment loss on investment securities for a decline in fair value that is other than temporary. Determinations of whether a decline is other than temporary often involves estimating the outcome of future events. Management judgment is required in determining whether factors exist that indicate that an impairment loss has been incurred at the balance sheet date. These judgments are based on subjective as well as objective factors. We conduct a review semi-annually to identify and evaluate investment securities that have indications of possible impairment. The assessment of other than temporary impairment requires judgment and therefore can have an impact on the results of operations. Impairment is evaluated considering various factors, and their significance varies from case to case.

Debt and marketable equity securities.    In determining whether a decline in fair value below cost is other than temporary for a particular security, indicators of an other than temporary decline for both debt and marketable equity securities include, but are not limited to, the extent of decline in fair value below cost and the length of time that the decline in fair value below cost has continued. If a decline in fair value below cost is 20% or more or has continued for six months or more, we generally deem such decline as an indicator of an other than temporary decline. We also consider the current financial condition and near-term prospects of issuers primarily based on the credit standing of the issuers as determined by our credit rating system.

Certain securities held by us and our certain other subsidiaries, which primarily consist of debt securities issued by the Japanese national government and generally considered to be of minimal credit risk, were determined not to be impaired in some cases, on the basis of the respective entity’s ability and positive intent to hold such securities to maturity.

The determination of other than temporary impairment for certain securities held by UNBC, our U.S. subsidiary, which primarily consist of securities backed by the full faith and credit of the U.S. government and corporate asset-backed and debt securities, are made on the basis of a cash flow analysis of securities and/or the ability of UNBC to hold such securities to maturity.

The aggregate amount of unrealized losses at March 31, 2007 that we determined to be temporary was ¥48.6 billion.

52

Nonmarketable equity securities.    Nonmarketable equity securities are equity securities of companies that are not publicly traded or are thinly traded. Such securities are primarily held at cost less other than temporary impairment if applicable. For the securities carried at cost, we consider factors such as the credit standing of issuers and the extent of decline in net assets of issuers to determine whether the decline is other than temporary. When we determine that the decline is other than temporary, nonmarketable equity securities are written down to the estimated fair value, determined based on such factors as the ratio of our investment in the issuer to the issuer’s net assets and the latest transaction price if applicable. When the decline is other than temporary, certain nonmarketable equity securities issued by public companies, such as preferred stock convertible to marketable common stock in the future, are written down to fair value estimated by commonly accepted valuation models, such as option pricing models based on a number of factors, including the quoted market price of the underlying marketable common stock, volatility and dividend payments as appropriate.

The markets for equity securities and debt securities are inherently volatile, and the values of both types of securities have fluctuated significantly in recent years. Accordingly, our assessment of potential impairment involves risks and uncertainties depending on market conditions that are global or regional in nature and the condition of specific issuers or industries, as well as management’s subjective assessment of the estimated future performance of investments. If we later conclude that a decline is other than temporary, the impairment loss may significantly affect our operating results and financial condition in future periods.

Valuation of Deferred Tax Assets

A valuation allowance for deferred tax assets is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefit of existing deductible temporary differences or carryforwards ultimately depends on the existence of sufficient taxable income in future periods.

In determining a valuation allowance, we perform a review of future taxable income (exclusive of reversing temporary differences and carryforwards) and future reversals of existing taxable temporary differences. Future taxable income is developed from forecasted operating results, based on recent historical trends and approved business plans, the eligible carryforward periods and other relevant factors. For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in recent years, a valuation allowance is recognized against the deferred tax assets to the extent that it is more likely than not that they will not be realized.

Among other factors, forecasted operating results, which serve as the basis of our estimation of future taxable income, have a significant effect on the amount of the valuation allowance. In developing forecasted operating results, we assume that our operating performance is stable for certain entities where strong positive evidence exists, including core earnings based on past performance over a certain period of time. The actual results may be adversely affected by unexpected or sudden changes in interest rates as well as an increase in credit-related expenses due to the deterioration of economic conditions in Japan and material declines in the Japanese stock market to the extent that such impacts exceed our original forecast. In addition, near-term taxable income is also influential on the amount of the expiration of unused operating loss carryforwards since the Japanese corporate tax law permits operating losses to be deducted for a predetermined period generally no longer than seven years. At March 31, 2007, we had operating loss carryforwards of ¥2,903.2 billion, the majority of which will expire by March 31, 2012.

Because the establishment of the valuation allowance is an inherently uncertain process involving estimates as discussed above, the currently established allowance may not be sufficient. If the estimated allowance is not sufficient, we will incur additional deferred tax expenses, which could materially affect our operating results and financial condition in future periods.

53

Accounting for Goodwill and Intangible Assets

US GAAP requires us to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired, using a two-step process that begins with an estimation of the fair value of a reporting unit of our business, which is to be compared with the carrying amount of the unit, to identify potential impairment of goodwill. A reporting unit is an operating segment or component of an operating segment that constitutes a business for which discrete financial information is available and is regularly reviewed by management. The fair value of a reporting unit is defined as the amount at which the unit as a whole could be bought or sold in a current transaction between willing parties. Since an observable quoted market price for a reporting unit is not always available, the fair value of the reporting units are determined using a combination of valuation techniques consistent with the income approach and market approach. In the income approach, discounted cash flows were calculated by taking the net present value based on each reporting unit’s internal forecasts. Cash flows were discounted using a discount rate approximating the weighted average cost of capital after making adjustments for risks inherent in the cash flows. In the market approach, analysis using market-based trading and transaction multiples was used. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss recorded in income. This test requires comparison of the implied fair value of the unit’s goodwill with the carrying amount of that goodwill. The estimate of the implied fair value of the reporting unit’s goodwill requires us to allocate the fair value of a reporting unit to all of the assets and liabilities of that reporting unit, including unrecognized intangible assets, if any, since the implied fair value is determined as the excess of the fair value of a reporting unit over the net amounts assigned to its assets and liabilities in the allocation. Accordingly, the second step of the impairment test also requires an estimate of the fair value of individual assets and liabilities, including any unrecognized intangible assets that belong to that unit.

In connection with the merger of BTM with UFJ Bank, we recorded goodwill of ¥1,701.0 billion, and goodwill was not impaired as of March 31, 2006 and 2007, nor was any goodwill written off during the fiscal years ended March 31, 2006 and 2007. See note 2 to our consolidated financial statements for more information on the goodwill acquired in connection with the merger with UFJ Bank, and note 10 to our consolidated financial statements for more information on goodwill by major business segments.

Intangible assets are amortized over their estimated useful lives unless they have indefinite useful lives. Amortization for intangible assets is computed in a manner that best reflects the economic benefits of the intangible assets. Intangible assets having indefinite useful lives are subject to annual impairment tests. An impairment exists if the carrying value of an indefinite-lived asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount exceeds the fair value of the intangible asset.

Accrued Severance Indemnities and Pension Liabilities

We have defined benefit retirement plans, including lump-sum severance indemnities and pension plans, which cover substantially all of our employees. Severance indemnities and pension costs are calculated based upon a number of actuarial assumptions, including discount rates, expected long-term rates of return on our plan assets and rates of increase in future compensation levels. In accordance with US GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods, and affect our recognized net periodic pension costs and accrued severance indemnities and pension obligations in future periods. Differences in actual experience or changes in assumptions may affect our financial condition and operating results in future periods.

The discount rates for the domestic plans are set to reflect the interest rates of high-quality fixed-rate instruments with maturities that correspond to the timing of future benefit payments.

In developing our assumptions for expected long-term rates of return, we refer to the historical average returns earned by the plan assets and the rates of return expected to be available for reinvestment of existing plan

54

assets, which reflect recent changes in trends and economic conditions, including market price. We also evaluate input from our actuaries, including their reviews of asset class return expectations.

We adopted the recognition provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” as of March 31, 2007. See “Accounting Changes—Defined Benefit Pension and Other Postretirement Plans” and note 17 to our consolidated financial statements for further information.

Valuation of Financial Instruments with No Available Market Prices

Fair values for the substantial majority of our portfolio of financial instruments, including available-for-sale and held-to-maturity securities, trading accounts and derivatives, with no available market prices are determined based upon externally verifiable model inputs and quoted prices. All financial models, which are used for independent risk monitoring, must be validated and periodically reviewed by qualified personnel independent of the area that created the model. The fair value of derivatives is determined based upon liquid market prices evidenced by exchange-traded prices, broker-dealer quotations or prices of other transactions with similarly rated counterparties. If available, quoted market prices provide the best indication of value. If quoted market prices are not available for fixed maturity securities and derivatives, we discount expected cash flows using market interest rates commensurate with the credit quality and maturity of the investment. Alternatively, we may use matrix or model pricing to determine an appropriate fair value. In determining fair values, we consider various factors, including time value, volatility factors and underlying options, warrants and derivatives.

The estimated fair values of financial instruments without quoted market prices were as follows:

	At March 31,
	2006		2007
	(in billions)
Financial assets:
Trading account assets, excluding derivatives	¥	2,858	¥	1,720
Investment securities		35,678		35,046
Derivative financial instruments, net		—		41
Financial liabilities:
Trading account liabilities, excluding derivatives		57		6
Obligations to return securities received as collateral		1,015		809
Derivative financial instruments, net		136		—

A significant portion of trading account assets and liabilities, excluding derivatives, investment securities and obligations to return securities received as collateral consists of Japanese national government and agency bonds, and foreign government and official institutions bonds, for which prices are actively quoted among brokers and are readily available but are not publicly reported and therefore are not considered quoted market prices. Additionally, a substantial portion of derivative financial instruments are comprised of over-the-counter interest rate and currency swaps and options. Estimates of fair value of these derivative transactions are determined using quantitative models with multiple market inputs, which can be validated through external sources, including brokers and market transactions with third parties.

Accounting Changes

Variable Interest Entities—In January 2003, the Financial Accounting Standards Board, or the FASB, issued FASB Interpretation, or FIN, No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” FIN No. 46 addresses consolidation by business enterprises of variable interest entities, or VIEs. The consolidation requirements of FIN No. 46 applied immediately to VIEs created after January 31, 2003. We have applied, as required, FIN No. 46 to all VIEs created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003, which has been amended by the FASB as described below.

55

In December 2003, the FASB issued FIN No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,” or FIN No. 46R. FIN No. 46R modified FIN No. 46 in certain respects, including the scope exception, the definition of VIEs, and other factors that effect the determination of VIEs and primary beneficiaries that must consolidate VIEs. FIN No. 46R, as written, applies to VIEs created before February 1, 2003 no later than the end of the first reporting period that ends after March 15, 2004, and to all special purpose entities no later than the first reporting period that ends after December 15, 2003. Subsequent to the issuance of FIN No. 46R, the Chief Accountant of the U.S. Securities and Exchange Commission, or SEC, stated the SEC staff’s position in a letter to the American Institute of Certified Public Accountants, or AICPA, dated March 3, 2004, that the SEC staff did not object to the conclusion that FIN No. 46R should not be required to be applied at a date earlier than the original FIN No. 46 and that foreign private issuers would be required to apply FIN No. 46R at various dates depending on the entity’s year-end and the frequency of interim reporting. In accordance with the letter, we adopted FIN No. 46R on April 1, 2004, except for certain investment companies, for which the effective date of FIN No. 46R was deferred. Under FIN No. 46R, any difference between the net amount added to the balance sheet and the amount of any previously recognized interest in the VIE is recognized as a cumulative effect of a change in accounting principle. The cumulative effect of the change in accounting principle was to decrease net income by ¥977 million for the fiscal year ended March 31, 2005. See note 26 to our consolidated financial statements for further discussion of VIEs in which we hold variable interests.

Accounting for Conditional Asset Retirement Obligations—In March 2005, the FASB issued FIN No. 47, “Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143.” FIN No. 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. SFAS No. 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. FIN No. 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005. Effective March 31, 2006, we adopted FIN No. 47 to existing asset retirement obligations associated with commitments to return property subject to operating leases to its original condition upon lease termination. The cumulative effect of the change in accounting principle was to decrease net income by ¥8,425 million. This adjustment represents the cumulative depreciation and accretion that would have been recognized through the date of adoption of FIN No. 47 had the statement applied to our existing asset retirement obligations at the time they were initially incurred.

Had the asset retirement obligations been accounted for under FIN No. 47 at the inception of operating leases requiring restoration, our net income and net income per share would have been the pro forma amounts indicated in the following table:

	Fiscal years ended March 31,
	2005		2006
	(in millions)
Reported net income	¥	287,108	¥	228,779
Cumulative effect of a change in accounting principle related to adoption of FIN No. 47, net of taxes:
Reported		—		8,425
Pro forma		570		410
Pro forma net income, after cumulative effect of a change in accounting principle related to adoption of FIN No. 47, net of taxes	¥	286,538	¥	236,794

56

	Fiscal years ended March 31,
	2005		2006
	(in Yen)
Basic earnings per common share—net income available to a common shareholder:
Reported	¥	55.87	¥	30.72
Pro forma		55.75		31.83
Diluted earnings per common share—net income available to a common shareholder:
Reported		55.61		27.07
Pro forma		55.49		28.06

Share-Based Payment—In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” or SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board Opinions, or APB, No. 25, “Accounting for Stock Issued to Employees.” In March 2005, the SEC issued Staff Accounting Bulletin, or SAB, No. 107, which provides interpretive guidance on SFAS No. 123R. SFAS No. 123 preferred a fair-value-based method of accounting for share-based payment transactions with employees, but it permitted the option of continuing to apply the intrinsic-value-based measurement method in APB No. 25, as long as the footnotes to the financial statements disclosed what net income would have been had the preferable fair-value-based method been used. SFAS No. 123R eliminates the alternative to use the intrinsic value method of accounting and requires entities to recognize the costs of share-based payment transactions with employees based on the grant-date fair value of those awards over the period during which an employee is required to provide service in exchange for the award. SFAS No. 123R is effective as of the beginning of the fiscal year or interim period beginning after June 15, 2005. We adopted SFAS No. 123R on April 1, 2006 under the modified prospective method, which resulted in a decrease in income from continuing operations before income tax expense of ¥1,969 million and a decrease in income from continuing operations, net of taxes, of ¥1,026 million for the fiscal year ended March 31, 2007, which includes estimated forfeitures for restricted stock and the amortization of compensation costs related to unvested stock options. The corresponding impact to both basic and diluted earnings per share was a reduction of ¥0.10 per share for the fiscal year ended March 31, 2007. The adoption of SFAS No. 123R did not have a material impact on our cash flows. See note 32 to our consolidated financial statements for a further discussion of the adoption of SFAS No. 123R and stock-based compensation plans.

Exchanges of Nonmonetary Assets—In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29.” The guidance in APB No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in APB No. 29, however, included certain exceptions to that principle. SFAS No. 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier adoption permitted. We adopted SFAS No. 153 on April 1, 2006, which did not have a material impact on our financial position and results of operations.

Accounting Changes and Error Corrections—In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 replaces APB No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principles. SFAS No. 154 also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and corrections

57

of errors made in fiscal years beginning after December 15, 2005, with earlier adoption permitted. We adopted SFAS No. 154 on April 1, 2006, which did not have a material impact on our financial position and results of operations.

The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments—In November 2005, the FASB staff issued an FASB Staff Position, or FSP, on SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and SFAS No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations.” This FSP addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than temporary impairments. The guidance in this FSP is applicable for certain investments such as debt and equity securities that are within the scope of SFAS No. 115 and equity securities that are not subject to the scope of SFAS No. 115 and No. 124 and not accounted for under the equity method pursuant to APB No. 18, “The Equity Method of Accounting for Investments in Common Stock,” and related interpretations. This FSP nullifies the requirements of paragraphs 10-18 of the FASB Emerging Issues Task Force, or the EITF, Issue 03-1 and supersedes EITF Topic No. D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value.” This FSP carries forward the requirements of paragraphs 8 and 9 of EITF Issue 03-1 with respect to cost-method investments, and carries forward the disclosure requirements included in paragraphs 21 and 22 of EITF Issue 03-1. Also, the guidance in this FSP amends SFAS No. 115, SFAS No. 124 and APB No. 18. The guidance in this FSP shall be applied to reporting periods beginning after December 15, 2005, with earlier application permitted. We adopted the FSP on April 1, 2006, which did not have a material impact on our financial position and results of operations.

Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities—In January 2003, the EITF reached a consensus on Issue No. 03-2, “Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities,” or EITF 03-2, which was ratified by the FASB in February 2003. EITF 03-2 addresses accounting for a transfer to the Japanese government of a substitutional portion of an employee pension fund and requires employers to account for the entire separation process of the substitutional portion from an entire plan upon completion of the transfer to the government of the substitutional portion of the benefit obligation and related plan assets as the culmination of a series of steps in a single settlement transaction. It also requires that the difference between the fair value of the obligation and the assets required to be transferred to the government, if any, should be accounted for as a subsidy from the government, separately from gain or loss on settlement of the substitutional portion of the obligation, upon completion of the transfer.

In June 2003, we submitted to the government an application to transfer the obligation to pay benefits for future employee service related to the substitutional portion and the application was approved in August 2003. In August 2004, we made another application for transfer to the government of the remaining substitutional portion and the application was approved in November 2004. The substitutional obligation and related plan assets were transferred to a government agency in March 2005 and we were released from paying the substitutional portion of the benefits to our employees. The completion of the transfer to the Japanese Government of the substitutional portion of the employee pension plan constituted a settlement of such plan. However, since there remains a defined benefit plan and the settlement occurred subsequent to December 31, 2004 (the measurement date of such plan), we recognized net gains of ¥34,965 million as a result of the transfer / settlement for the fiscal year ended March 31, 2006. See note 17 to our consolidated financial statements for further discussion.

Effects of Prior Year Misstatements on Current Year Financial Statements—In September 2006, the SEC staff issued SAB No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 provides guidance on quantifying and evaluating the materiality of unrecorded misstatements. It requires the use of both the “iron curtain” and “rollover” approaches in quantifying and evaluating the materiality of a misstatement. Under the iron curtain approach, the error is quantified as the

58

cumulative amount by which the current year balance sheet is misstated. The rollover approach quantifies the error as the amount by which the current year income statement is misstated. If either approach results in a material misstatement, financial statement adjustments are required. SAB No. 108 is effective for financial statements issued for fiscal years ending after November 15, 2006. Early adoption is encouraged in interim periods which are part of a fiscal year ending after November 15, 2006. We adopted SAB No. 108 as of March 31, 2007, which did not have a material impact on our financial position and results of operations.

Defined Benefit Pension and Other Postretirement Plans—In September 2006, the FASB issued SFAS No. 158. SFAS No. 158 requires entities to recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement plans in its consolidated statement of financial position and recognize changes in the funded status of defined benefit pension and other postretirement plans in the year in which the changes occur in comprehensive income. SFAS No. 158 clarifies that defined benefit assets and obligations should be measured as of the date of the entity’s fiscal year-end statement of financial positions. SFAS No. 158 also requires additional disclosure information related to certain effects on the net periodic benefit costs and credits, and transition assets or obligations. The requirement to recognize the funded status as of the date of the statement of financial position is effective for fiscal years ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the statement of financial position is effective for fiscal years ending after December 15, 2008. We adopted the recognition provisions of SFAS No. 158 as of March 31, 2007. The adoption of SFAS No. 158, which had no impact on how we determine our net periodic benefit costs, did have the effect of increasing shareholder’s equity by ¥99,748 million, net of taxes, which was recorded in accumulated other changes in equity from nonowner sources.

Recently Issued Accounting Pronouncements

Accounting for Certain Hybrid Financial Instruments—In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments.” SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” and resolves issues addressed in SFAS No. 133 Implementation Issue D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation and clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133. SFAS No. 155 establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. SFAS No. 155 also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We have not completed the study of what effect SFAS No. 155 will have on our financial position and results of operations.

Accounting for Servicing of Financial Assets—In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets.” SFAS No. 156 amends SFAS No. 140 with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract, and requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. SFAS No. 156 permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS No. 156 is effective for the fiscal year

59

beginning after September 15, 2006. Earlier adoption is permitted. We have not completed the study of what effect SFAS No. 156 will have on our financial position and results of operations.

Determining the Variability to Be Considered in Applying FIN No. 46R—In April 2006, the FASB staff issued an FSP on FIN No. 46R-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).” This FSP states that the variability to be considered in applying FIN No. 46R shall be based on an analysis of the design of the entity as outlined in the following two steps: (a) analyze the nature of the risks in the entity, (b) determine the purpose for which the entity was created and determine the variability (created by the risks identified in step (a)) the entity is designed to create and pass along to its interest holders. For the purposes of this FSP, interest holders include all potential variable interest holders (including contractual, ownership, or other pecuniary interests in the entity). After determining the variability to be considered, the reporting enterprise can determine which interests are designed to absorb that variability. The FSP should be applied prospectively to all entities (including newly created entities) with which an enterprise first becomes involved, and to all entities previously required to be analyzed under FIN No. 46R when a reconsideration event has occurred beginning the first day of the first reporting period beginning after June 15, 2006. Early application is permitted for periods for which financial statements have not yet been issued. Retrospective application to the date of the initial application of FIN No. 46R is permitted but not required. If retrospective application is elected, it must be completed no later than the end of the first annual reporting period ending after July 15, 2006. We have not completed the study of what effect the FSP will have on our financial position and results of operations.

Uncertainty in Income Taxes—In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes.” FIN No. 48 requires recognition of a tax benefit to the extent of management’s best estimate of the impact of a tax position, provided it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. We will adopt the provisions of FIN No. 48 on April 1, 2007. The impact of adopting FIN No. 48 is not expected to be significant on our financial position and results of operations.

Leveraged Leases—In July, 2006, the FASB issued an FSP on SFAS No. 13, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” This FSP requires if, during the lease term, the projected timing of the income tax cash flows generated by a leveraged lease is revised, the rate of return and the allocation of income shall be recalculated from the inception of the lease. At adoption, the cumulative effect of applying the provisions of this FSP shall be reported as an adjustment to the beginning balance of retained earnings as of the beginning of the period in which this FSP is adopted. This FSP shall be applied to fiscal years beginning after December 15, 2006. We will adopt the provisions of this FSP on April 1, 2007. We estimate that the cumulative effect of adopting this FSP will be to reduce the beginning balance of retained earnings by approximately ¥6 billion, net of taxes. The reduction to retained earnings at adoption will be recognized in interest income over the remaining terms of the affected leases as tax benefits are realized.

Fair Value Measurements—In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, SFAS No. 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted

60

prices in active markets and the lowest priority to unobservable data, for example, the reporting entity’s own data. Under SFAS No. 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. We have not completed the study of what effect SFAS No. 157 will have on our financial position and results of operations.

Fair Value Option for Financial Assets and Financial Liabilities—In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No 115.” SFAS No. 159 allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities and certain other items at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to certain conditions. We have not completed the study of what effect SFAS No. 159 will have on our financial position and results of operations.

Investment Company Accounting—In June 2007, the AICPA issued Statement of Position, or SOP, 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.” SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies, or the AICPA Guide. The statement also addresses whether the specialized industry accounting principles of the AICPA Guide should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity. SOP 07-1 is effective for fiscal years beginning on or after December 15, 2007, with earlier application encouraged. In addition, in May 2007, the FASB issued an FSP FIN No. 46R-7, “Application of FIN No. 46R to Investment Companies,” which amends FIN No. 46R to make permanent the temporary deferral of the application of FIN No. 46R to entities within the scope of the revised audit guide under SOP 07-1. We have not completed the study of what effect SOP 07-1 and FSP FIN No. 46R-7 will have on our financial position and results of operations.

Results of Operations

The following table sets forth a summary of our results of operations for the fiscal years ended March 31, 2005, 2006 and 2007:

On October 1, 2005, MTFG, the parent company of BTM, merged with UFJ Holdings, the parent company of UFJ Bank, with MTFG being the surviving entity. Upon the consummation of the merger, MTFG changed its name to MUFG. Although the merger of BTM with UFJ Bank occurred on January 1, 2006, the results of operations of the UFJ Bank Group have been included in the accompanying consolidated financial statements since October 1, 2005, because BTM and UFJ Bank became subject to common control under MUFG as of that date.

The merger of BTM with UFJ Bank was the major factor in the changes in many of the items in our consolidated statements of income over the three fiscal years ended March 31, 2007. The results for the fiscal year ended March 31, 2005 reflect the results of the BTM Group only. The results for the fiscal year ended March 31, 2006 reflect the pre-merger results of the BTM Group for the six months ended September 30, 2005 and the post-merger results of the BTMU Group for the six months ended March 31, 2006. The results for the fiscal year ended March 31, 2007 reflect the post-merger results of the BTMU Group for the full twelve-month period.

61

	Fiscal years ended March 31,
	2005			2006			2007
	(in billions)
Interest income	¥	1,194.5		¥	2,249.3		¥	3,444.3
Interest expense		388.1			728.8			1,279.2
Net interest income		806.4			1,520.5			2,165.1
Provision for credit losses		123.9			163.4			341.6
Non-interest income		795.7			556.8			1,220.5
Non-interest expense		954.3			1,616.8			2,172.0
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		523.9			297.1			872.0
Income tax expense		237.3			68.9			410.3
Income from continuing operations before cumulative effect of a change in accounting principle		286.6			228.2			461.7
Income (loss) from discontinued operations—net		1.5			9.0			(0.8	)
Cumulative effect of a change in accounting principle, net of tax		(1.0	)		(8.4	)		—
Net income	¥	287.1		¥	228.8		¥	460.9

We reported ¥460.9 billion of net income for the fiscal year ended March 31, 2007, compared to ¥228.8 billion of net income for the fiscal year ended March 31, 2006. Our basic earnings per common share (net income available to a common shareholder) for the fiscal year ended March 31, 2007 was ¥44.81 compared with an earnings per share of ¥30.72 for the fiscal year ended March 31, 2006. Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle for the fiscal year ended March 31, 2007 was ¥872.0 billion, compared with ¥297.1 billion for the fiscal year ended March 31, 2006.

Net Interest Income

The following is a summary of the interest rate spread for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005				2006				2007
	Average balance		Average rate		Average balance		Average rate		Average balance		Average rate
	(in billions, except percentages)
Interest-earning assets:
Domestic	¥	63,580.9	0.97	%	¥	86,668.5	1.39	%	¥	108,531.2	1.73	%
Foreign		18,639.6	3.09			25,354.9	4.11			32,200.5	4.86
Total	¥	82,220.5	1.45	%	¥	112,023.4	2.01	%	¥	140,731.7	2.45	%
Financed by:
Interest-bearing funds:
Domestic	¥	62,838.8	0.30	%	¥	82,096.9	0.35	%	¥	99,673.2	0.52	%
Foreign		12,794.2	1.57			15,977.0	2.74			19,404.1	3.92
Total		75,633.0	0.51			98,073.9	0.74			119,077.3	1.07
Non-interest-bearing funds		6,587.5	—			13,949.5	—			21,654.4	—
Total	¥	82,220.5	0.47	%	¥	112,023.4	0.65	%	¥	140,731.7	0.91	%
Spread on:
Interest-bearing funds			0.94	%			1.27	%			1.38	%
Total funds			0.98	%			1.36	%			1.54	%

62

Our net interest income for the fiscal years ended March 31, 2005, 2006 and 2007 were not materially affected by gains or losses resulting from derivative financial instruments used for hedging purposes.

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

Net interest income for the fiscal year ended March 31, 2007 was ¥2,165.1 billion, an increase of ¥644.6 billion, from ¥1,520.5 billion for the fiscal year ended March 31, 2006. This increase was mainly due to the fact that net interest income for the fiscal year ended March 31, 2006 reflected only that of the post-merger BTMU Group for six months (with the first half of the fiscal year reflecting that of the pre-merger BTM Group only), while net interest income for the fiscal year ended March 31, 2007 reflected that of the post-merger BTMU Group for the full twelve-month period. For the fiscal year ended March 31, 2007, interest rates in Japan, the United States and Europe generally increased. In the rising interest rate environment in Japan during the fiscal year ended March 31, 2007, the increase in average rates on domestic interest-earning assets, such as loans, was larger than the increase in average rates on domestic interest-bearing funds, such as deposits. This increase in interest rate spread contributed to the increase in our net interest income.

The average interest rate spread on interest-bearing funds increased, showing an increase of 11 basis points from 1.27% for the fiscal year ended March 31, 2006 to 1.38% for the fiscal year ended March 31, 2007. The average interest rate spread on total funds also increased, showing an increase of 18 basis points from 1.36% for the fiscal year ended March 31, 2006 to 1.54% for the fiscal year ended March 31, 2007.

Average interest-earning assets for the fiscal year ended March 31, 2007 were ¥140,731.7 billion, an increase of ¥28,708.3 billion, from ¥112,023.4 billion for the fiscal year ended March 31, 2006. The increase was primarily attributable to an increase of ¥17,946.8 billion in domestic loans, and an increase of ¥4,574.2 billion in domestic investment securities. These increases were mainly due to the fact that the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period.

Average interest-bearing funds for the fiscal year ended March 31, 2007 were ¥119,077.3 billion, an increase of ¥21,003.4 billion, from ¥98,073.9 billion for the fiscal year ended March 31, 2006. The increase was primarily attributable to an increase of ¥19,641.7 billion in domestic interest-bearing deposits. The increase in domestic interest-bearing deposits was mainly due to the fact that the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Net interest income for the fiscal year ended March 31, 2006 was ¥1,520.5 billion, an increase of ¥714.1 billion, from ¥806.4 billion for the fiscal year ended March 31, 2005. This increase was mainly due to the merger with UFJ Bank. For the fiscal year ended March 31, 2006, interest rates in the United States and Europe generally increased. The increase in foreign interest rates also contributed to the increase in our net interest income, as the effect of higher foreign interest rates had a larger contributory effect on our interest income compared to our interest expense, partly due to the fact that our foreign interest-earning assets’ average balance of ¥25,354.9 billion is much larger than the average balance of our foreign interest-bearing liabilities of ¥15,977.0 billion.

The average interest rate spread on interest-bearing funds increased 33 basis points from 0.94% for the fiscal year ended March 31, 2005 to 1.27% for the fiscal year ended March 31, 2006. The average interest rate spread on total funds also increased 38 basis points from 0.98% for the fiscal year ended March 31, 2005 to 1.36% for the fiscal year ended March 31, 2006.

63

Average interest-earning assets for the fiscal year ended March 31, 2006 were ¥112,023.4 billion, an increase of ¥29,802.9 billion from ¥82,220.5 billion for the fiscal year ended March 31, 2005. The increase was primarily attributable to an increase of ¥18,460.2 billion in domestic loans, and an increase of ¥7,612.1 billion in domestic investment securities, which were mainly due to the merger with UFJ Bank.

Average interest-bearing funds for the fiscal year ended March 31, 2006 were ¥98,073.9 billion, an increase of ¥22,440.9 billion from ¥75,633.0 billion for the fiscal year ended March 31, 2005. The increase was also primarily attributable to the merger with UFJ Bank, as domestic interest-bearing liabilities increased by ¥19,258.1 billion after we acquired the domestic deposit base of UFJ Bank.

Provision for Credit Losses

Provision for credit losses are charged to operations to maintain the allowance for credit losses at a level deemed appropriate by management. For a description of the approach and methodology used to establish the allowance for credit losses, see “Item 5.B. Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

Provision for credit losses for the fiscal year ended March 31, 2007 was ¥341.6 billion, an increase of ¥178.2 billion from ¥163.4 billion for the fiscal year ended March 31, 2006. The increase in provision for credit losses was mainly due to the downgrade in credit rating of a large borrower in the transportation industry. Additionally, provision for credit losses increased in the consumer finance industry.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Provision for credit losses for the fiscal year ended March 31, 2006 was ¥163.4 billion, an increase of ¥39.5 billion from ¥123.9 billion for the fiscal year ended March 31, 2005. This was a result of the increase in our loan portfolio that was mainly due to the merger with UFJ Bank. Our loan portfolio and allowance for credit losses were favorably affected by the upgrades of many borrowers’ credit ratings resulting from improvements in their business performance mainly attributable to the general recovery in the Japanese economy, as well as upgrades of credit ratings of borrowers to whom we had large exposures and who made progress in their restructuring plans.

However, most of the foregoing favorable impact on the quality of our loan portfolio was not reflected in our provision for credit losses in the fiscal year ended March 31, 2006, because any subsequent increases in the expected cash flows from impaired loans acquired in the merger with UFJ Bank were not accounted for as reversals of the allowance for credit losses but rather as adjustments to accretable yields under Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”, or SOP 03-3. On the other hand, the favorable impact on the quality of these loans was reflected in the increase in the interest income and the gains on sales of loans included in non-interest income.

For a further discussion of the adoption of SOP 03-3, see “Basis of Financial Statements and Summary of Significant Accounting Policies” in note 1 to our consolidated financial statements, and for the allowance for credit losses, see “Item 5.B. Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

64

Non-Interest Income

The following table is a summary of our non-interest income for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005		2006			2007
	(in billions)
Fees and commissions:
Trust fees	¥	18.2	¥	20.3		¥	24.4
Fees on funds transfer and service charges for collections		59.4		103.9			149.0
Fees and commissions on international business		44.5		61.6			69.5
Fees and commissions on credit card business		61.7		109.6			163.8
Service charges on deposits		36.3		35.7			37.2
Fees and commissions on securities business		102.5		31.7			16.8
Insurance commissions		30.5		36.5			40.4
Guarantee fees		18.3		51.6			86.5
Other fees and commissions		102.0		190.6			260.1
Total		473.4		641.5			847.7
Foreign exchange gains (losses)—net		1.0		(281.4	)		(163.6	)
Trading account profits (losses)—net		31.3		(91.2	)		253.4
Investment securities gains—net		190.5		40.8			171.0
Equity in earnings of equity method investees		6.3		28.8			5.4
Government grant for transfer of substitutional portion of Employees’ Pension Fund Plans		—		103.0			—
Gains on sales of loans		0.6		34.6			13.6
Other non-interest income		92.6		80.7			93.0
Total non-interest income	¥	795.7	¥	556.8		¥	1,220.5

Net foreign exchange gains (losses) primarily include net gains (losses) on currency derivative instruments entered into for trading purposes and transaction gains (losses) on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. The transaction gains (losses) on the translation into Japanese yen fluctuate from period to period depending upon the spot rates at the end of each fiscal year. This is primarily because the transaction gains (losses) on translation of securities available for sale, such as bonds denominated in foreign currencies, are not included in current earnings, but are reflected in other changes in equity from nonowner sources, while in principle all transaction gains (losses) on translation of monetary liabilities denominated in foreign currencies are included in current earnings.

Net trading account profits (losses) primarily include net gains (losses) on trading securities and interest rate derivative instruments entered into for trading purposes. Trading account assets or liabilities are carried at fair value and any changes in the value of trading account assets or liabilities, including interest rate derivatives, are recorded in net trading account profits (losses). Derivative instruments for trading purposes also include those used as hedges of net exposures rather than for specifically identified assets or liabilities, which do not meet the specific criteria for hedge accounting.

Net investment securities gains primarily include net gains on sales of marketable securities, particularly marketable equity securities. In addition, impairment losses are recognized as an offset of net investment securities gains when management concludes that declines in fair value of investment securities are other than temporary.

65

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

Non-interest income for the fiscal year ended March 31, 2007 was ¥1,220.5 billion, an increase of ¥663.7 billion, from ¥556.8 billion for the fiscal year ended March 31, 2006. This increase was primarily due to the increases of ¥344.6 billion in net trading account profits, ¥206.2 billion in fees and commissions, ¥130.2 billion in net investment securities gains and an improvement of ¥117.8 billion in net foreign exchange losses. These increases and improvement were partially offset by a decrease of ¥103.0 billion in government grant for transfer of substitutional portion of employees’ pension fund plans, as there were no such transfers for the fiscal year ended March 31, 2007.

Fees and commissions for the fiscal year ended March 31, 2007 were ¥847.7 billion, an increase of ¥206.2 billion, from ¥641.5 billion for the fiscal year ended March 31, 2006. This increase was mainly due to the fact that the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period.

Net foreign exchange losses for the fiscal year ended March 31, 2007 were ¥163.6 billion, compared to net foreign exchange losses of ¥281.4 billion for the fiscal year ended March 31, 2006. The improvement in foreign exchange losses was mainly due to the smaller depreciation of the Japanese yen against foreign currencies in the fiscal year ended March 31, 2007, compared to the fiscal year ended March 31, 2006. For reference, the mid foreign exchange rate expressed in Japanese yen per $1.00 was ¥107.39 at March 31, 2005, ¥117.47 at March 31, 2006, and ¥118.05 at March 30, 2007. The mid foreign exchange rate expressed in Japanese yen per €1.00 was ¥138.87 at March 31, 2005, ¥142.81 at March 31, 2006 and ¥157.33 at March 30, 2007. All transaction gains or losses on translation of monetary liabilities denominated in foreign currencies are included in current earnings. However, the transaction gains or losses on translation of securities available for sale, such as bonds denominated in foreign currencies, are not included in current earnings but are reflected in other changes in equity from nonowner sources. As we maintain monetary liabilities denominated in foreign currencies for our asset liability management, net foreign exchange gains (losses) fluctuate with the appreciation (depreciation) of the Japanese yen.

Net trading account profits of ¥253.4 billion were recorded for the fiscal year ended March 31, 2007, compared to net trading account losses of ¥91.2 billion for the fiscal year ended March 31, 2006. The net trading account profits (losses) for the fiscal years ended March 31, 2006 and 2007 consisted of the following:

	Fiscal years ended March 31,
	2006			2007
	(in billions)
Net profits (losses) on interest rate and other derivative contracts	¥	(212.7	)	¥	171.0
Net profits on trading account securities, excluding derivatives		121.5			82.4
Net trading account profits (losses)	¥	(91.2	)	¥	253.4

Net profits (losses) on interest rate and other derivative contracts were largely affected by the impact of the increase (decrease) in Japanese long-term interest rates on interest rate swaps principally held for risk management purposes. Although such contracts are generally entered into for risk management purposes, the majority of them did not meet the conditions to qualify for hedge accounting under US GAAP and thus are accounted for as trading positions.

Though Japanese yen short-term interest rates generally rose during the fiscal year ended March 31, 2007 compared to the previous fiscal year, long-term interest rates generally declined. This decline in long-term interest rates had a favorable impact on our interest rate swap portfolios, in which we generally maintained net receive-fix and pay-variable positions, for managing interest rate risks on domestic deposits. The increase in net profits on interest rate and other derivative contracts of ¥383.7 billion was partially offset by a decrease in net profits on trading account securities, excluding derivatives of ¥39.1 billion, primarily reflecting the decline in profits from

66

trading in debt and equity securities at our consolidated VIEs primarily due to unfavorable market conditions.

Net investment securities gains for the fiscal year ended March 31, 2007 were ¥171.0 billion, an increase of ¥130.2 billion, from ¥40.8 billion for the fiscal year ended March 31, 2006. Major components of net investment securities gains for the fiscal years ended March 31, 2006 and 2007 are summarized below:

	Fiscal years ended March 31,
	2006			2007
	(in billions)
Net gains on sales of marketable equity securities	¥	158.4		¥	54.0
Impairment losses on marketable equity securities		(4.2	)		(54.6	)
Other (includes impairment losses on and net gains on sales of Japanese government bonds)		(113.4	)		171.6
Net investment securities gains	¥	40.8		¥	171.0

The increase in net investment securities gains for the fiscal year ended March 31, 2007 mainly reflected the fact that net gains on sales of Japanese government bonds increased as the book value of such bonds declined, due to impairment losses recorded during the fiscal year ended March 31, 2006. The increase was partially offset by a decrease in net gains on sales of marketable equity securities and an increase in impairment losses on marketable equity securities. The decrease in net gains on sales of marketable equity securities for the fiscal year ended March 31, 2007 was partly due to a one-time adjustment to the book value of some of our marketable equity securities in connection with the merger with UFJ Bank. The increase in impairment losses on marketable equity securities was due to the fact that a larger number of our marketable equity securities were trading at depressed prices in a stagnant Japanese stock market in the fiscal year 2007, compared to a generally rising stock market in the previous fiscal year. The Nikkei Stock Average, which is an average of 225 blue chip stocks listed on the Tokyo Stock Exchange, was ¥11,668.95 at March 31, 2005, ¥17,059.66 at March 31, 2006 and ¥17,287.65 at March 30, 2007.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Non-interest income for the fiscal year ended March 31, 2006 was ¥556.8 billion, a decrease of ¥238.9 billion, from ¥795.7 billion for the fiscal year ended March 31, 2005. This decrease was primarily due to decreases in net foreign exchange gains of ¥282.4 billion, net trading account profits of ¥122.5 billion and net investment securities gains of ¥149.7 billion. These decreases were partially offset by increases in fees and commissions of ¥168.1 billion and government grant for transfer of substitutional portion of Employees’ Pension Fund Plans of ¥103.0 billion.

Fees and commissions for the fiscal year ended March 31, 2006 were ¥641.5 billion, an increase of ¥168.1 billion, from ¥473.4 billion for the fiscal year ended March 31, 2005. This increase was primarily due to the merger with UFJ Bank, which affected almost every category of total fees and commissions. Additional factors contributing to this income growth were increases in fee incomes for the underwriting of private placement bonds and the investment trust business.

Net foreign exchange losses for the fiscal year ended March 31, 2006 were ¥281.4 billion, compared to net foreign exchange gains of ¥1.0 billion for the fiscal year ended March 31, 2005. The increase in foreign exchange losses was mainly due to the larger depreciation of the Japanese yen against foreign currencies in the fiscal year ended March 31, 2006, compared to the fiscal year ended March 31, 2005. For reference, the noon buying rate expressed in Japanese yen per $1.00 was ¥104.18 at March 31, 2004, ¥107.22 at March 31, 2005, and ¥117.48 at March 31, 2006. This increase in net foreign exchange losses primarily reflected an increase in transaction losses on translation of monetary liabilities denominated in foreign currencies. All transaction gains or losses on translation of monetary liabilities denominated in foreign currencies are included in current earnings. However,

67

the transaction gains or losses on translation of securities available for sale, such as bonds denominated in foreign currencies, are not included in current earnings but are reflected in other changes in equity from nonowner sources. As we maintain monetary liabilities denominated in foreign currencies for our asset liability management, net foreign exchange gains (losses) fluctuate with the appreciation (depreciation) of the Japanese yen.

Net trading account losses of ¥91.2 billion were recorded for the fiscal year ended March 31, 2006, compared to net trading account profits of ¥31.3 billion for the fiscal year ended March 31, 2005. The net trading account profits (losses) for the fiscal years ended March 31, 2005 and 2006 consisted of the following:

	Fiscal years ended March 31,
	2005			2006
	(in billions)
Net losses on interest rate and other derivative contracts	¥	(20.3	)	¥	(212.7	)
Net profits on trading account securities, excluding derivatives		51.6			121.5
Net trading account profits (losses)	¥	31.3		¥	(91.2	)

The net losses on interest rate and other derivative contracts for the fiscal year ended March 31, 2006 mainly reflected losses due to the rise in interest rates. These losses were partially offset by the increase in profits on trading account securities, excluding derivatives, for the fiscal year ended March 31, 2006 caused by an increase in profits from trading of debt and equity securities.

Net investment securities gains for the fiscal year ended March 31, 2006 were ¥40.8 billion, a decrease of ¥149.7 billion, from ¥190.5 billion for the fiscal year ended March 31, 2005. Major components of net investment securities gains for the fiscal years ended March 31, 2005 and 2006 are summarized below:

	Fiscal years ended March 31,
	2005			2006
	(in billions)
Net gains on sales of marketable equity securities	¥	182.1		¥	158.4
Impairment losses on marketable equity securities		(7.9	)		(4.2	)
Other (primarily impairment losses on Japanese government bonds)		16.3			(113.4	)
Net investment securities gains	¥	190.5		¥	40.8

The decrease in net investment securities gains for the fiscal year ended March 31, 2006 mainly reflected an increase in losses on debt securities, primarily Japanese government bonds, compared to the previous fiscal year, as long-term interest rates in Japan, such as the yield on ten-year Japanese government bonds, climbed from approximately 1.3% in April 2005 to approximately 1.8% in March 2006. For reference, impairment losses on Japanese government bonds for the fiscal year ended March 31, 2006 was ¥172.7 billion.

Equity in earnings of equity method investees for the fiscal year ended March 31, 2006 was ¥28.8 billion, an increase of ¥22.5 billion from ¥6.3 billion for the fiscal year ended March 31, 2005. This increase was largely attributable to the merger with UFJ Bank, which expanded our Group of equity method affiliates and partnerships.

Government grant for transfer of substitutional portion of Employees’ Pension Fund Plans amounted to ¥103.0 billion for the fiscal year ended March 31, 2006, as the difference between the accumulated benefit obligations settled and the assets transferred to the Japanese government as a government grant for transfer of the substitutional portion of Employees’ Pension Fund Plans.

68

Non-Interest Expense

The following table shows a summary of our non-interest expense for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005		2006		2007
	(in billions)
Salaries and employee benefits	¥	396.2	¥	585.6	¥	643.2
Occupancy expenses—net		72.7		95.8		123.4
Fees and commission expenses		77.3		179.6		168.1
Outsourcing expenses, including data processing		72.3		118.2		195.8
Depreciation of premises and equipment		39.9		66.4		96.3
Amortization of intangible assets		58.5		125.1		198.0
Impairment of intangible assets		2.1		0.2		184.8
Insurance premiums, including deposit insurance		47.9		78.8		101.3
Minority interest in income (loss) of consolidated subsidiaries		38.1		108.9		(7.8	)
Communications		25.4		33.0		45.3
Taxes and public charges		25.8		47.8		68.3
Provision for repayment of excess interest		0.1		12.9		106.2
Other non-interest expenses		98.0		164.5		249.1
Total non-interest expense	¥	954.3	¥	1,616.8	¥	2,172.0

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

Non-interest expense for the fiscal year ended March 31, 2007 was ¥2,172.0 billion, an increase of ¥555.2 billion from the previous fiscal year. This increase was primarily due to increases in most types of expenses, especially salaries and employee benefits, outsourcing expenses, including data processing, amortization of intangible assets, impairment of intangible assets and provision for repayment of excess interest. These increases were partially offset by the decrease in minority interest income (loss) of consolidated subsidiaries.

Salaries and employee benefits for the fiscal year ended March 31, 2007 were ¥643.2 billion, an increase of ¥57.6 billion, from ¥585.6 billion for the previous fiscal year. Outsourcing expenses, including data processing, for the fiscal year ended March 31, 2007 was ¥195.8 billion, an increase of ¥77.6 billion, from ¥118.2 billion for the previous fiscal year. These increases primarily reflected the fact that the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the non-interest expense of the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period.

Amortization of intangible assets for the fiscal year ended March 31, 2007 was ¥198.0 billion, an increase of ¥72.9 billion, from ¥125.1 billion for the previous fiscal year. This increase was mainly due to the amortization of core deposit intangibles recognized in the merger with UFJ Bank, as well as the amortization of IT systems-related software, which also increased due to the merger.

Impairment of intangible assets for the fiscal year ended March 31, 2007 was ¥184.8 billion, an increase of ¥184.6 billion, from ¥0.2 billion for the previous fiscal year. The increase was mainly due to the impairment of intangible assets related to our subsidiary in the consumer finance business caused by the downward revision of projected earnings of the subsidiary due to adverse changes in the consumer finance business environment.

Minority interest in income (loss) of consolidated subsidiaries for the fiscal year ended March 31, 2007 was a loss of ¥7.8 billion, a decrease of ¥116.7 billion, from an income of ¥108.9 billion for the previous fiscal year.

69

The decrease mainly reflects decrease in income from our consolidated subsidiaries and VIEs, including, in particular, losses recorded at a consumer finance subsidiary.

Provision for repayment of excess interest for the fiscal year ended March 31, 2007 was ¥106.2 billion, an increase of ¥93.3 billion from ¥12.9 billion for the previous fiscal year. The increase was mainly due to an increase in allowance for repayment at our consumer finance subsidiaries which reflected a rise in borrowers’ claims for reimbursement of excess interest payments.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Non-interest expense for the fiscal year ended March 31, 2006 was ¥1,616.8 billion, an increase of ¥662.5 billion from the previous fiscal year. This increase was primarily due to the merger with UFJ Bank, which affected almost every category of non-interest expense, especially salaries and employee benefits and fees and commission expenses. Other factors which contributed to the increase in non-interest expenses include a ¥70.8 billion increase in minority interest in income of consolidated subsidiaries due to an increase in income resulting from the improvement in the Japanese stock market and increased profits at UNBC. The transfer to the Japanese government of the substitutional portion of employees’ pension fund plans also increased salaries and employee benefits by ¥68.0 billion.

Income Tax Expense

The following table presents a summary of our income tax expense:

	Fiscal years ended March 31,
	2005			2006			2007
	(in billions, except percentages)
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle	¥	523.9		¥	297.1		¥	872.0
Income tax expense	¥	237.3		¥	68.9		¥	410.3
Effective income tax rate		45.3	%		23.2	%		47.1	%
Combined normal effective statutory tax rate		40.6	%		40.6	%		40.6	%

Our holding company, MUFG, elected to file consolidated corporate-tax returns starting from the fiscal year ended March 31, 2003, and we were a member of the consolidated group. We, however, had used a separate return method of allocation. Under the separate return method of allocation, current and deferred taxes for the fiscal year ended March 31, 2005 were determined in accordance with SFAS No. 109 as if we were filing a separate tax return.

In February 2005, the Japanese tax authorities approved the application to suspend the consolidated corporate-tax system by MUFG. We filed our tax returns as part of MUFG’s consolidated corporate-tax system for the fiscal year ended March 31, 2005. Due to the suspension of the consolidated corporate-tax system, deferred income taxes had been calculated separately based on temporary differences as of March 31, 2005 and future taxable income at each company.

70

Reconciling items between the combined normal effective statutory tax rates and the effective income tax rates for the fiscal years ended March 31, 2005, 2006 and 2007 are summarized as follows:

	Fiscal years ended March 31,
	2005		2006		2007
Combined normal effective statutory tax rate	40.6	%	40.6	%	40.6	%
Increase (decrease) in taxes resulting from:
Nondeductible expenses	0.5		1.1		0.1
Dividends from foreign subsidiaries	1.5		2.9		1.1
Foreign tax credit and payments	1.1		2.0		0.9
Lower tax rates applicable to income of subsidiaries	(1.1	)	(12.2	)	(0.7	)
Minority interests	2.0		14.5		(0.3	)
Change in valuation allowance	0.5		1.3		8.2
Realization of previously unrecognized tax effects of subsidiaries	0.3		(29.1	)	—
Change in foreign exchange rate	0.9		—		—
Nontaxable dividends received	(1.2	)	(2.1	)	(1.3	)
Tax expense on capital transactions by a subsidiary	—		8.0		—
Other—net	0.2		(3.8	)	(1.5	)
Effective income tax rate	45.3	%	23.2	%	47.1	%

The effective income tax rate of 47.1% for the fiscal year ended March 31, 2007 was 6.5 percentage points higher than the combined normal effective statutory tax rate of 40.6%. This higher tax rate primarily reflected an additional valuation allowance for certain companies, including a subsidiary in the consumer finance business.

The effective income tax rate of 23.2% for the fiscal year ended March 31, 2006 was 17.4 percentage points lower than the combined normal effective statutory tax rate of 40.6%. This lower tax rate primarily reflected realization of previously unrecognized tax effects in conjunction with the liquidation of certain subsidiaries and recognition of tax benefits through the reorganization of business within the BTMU Group, which were partly offset by certain items, including minority interests and tax expense on capital transactions by a subsidiary.

The effective income tax rate of 45.3% for the fiscal year ended March 31, 2005 was 4.7 percentage points higher than the combined normal effective statutory tax rate of 40.6%. This increase resulted from certain reconciliation items, including reconciliation due to minority interests, change in valuation allowance, dividends from foreign subsidiaries and foreign tax credit and payments.

Business Segment Analysis

We measure the performance of each of our business segments primarily in terms of “operating profit.” Operating profit and other segment information are based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information is not consistent with our consolidated financial statements prepared on the basis of US GAAP. For example, operating profit does not reflect items such as a part of provision (credit) for credit losses (primarily an equivalent of formula allowance under US GAAP), foreign exchange gains (losses) and equity investment securities gains (losses).

The following is a brief explanation of our business segments:

• Retail Banking, which provides banking products and services to individual customers in Japan;

• Corporate Banking, which provides banking products and services, investment banking advisory, and other services to large corporations and some small- and medium-sized companies in Japan;

71

• Global Banking, which consists of:

• Global Banking (Other than UNBC), which provides banking products and services, investment banking advisory services, and other services to the overseas operations of both large- and medium-sized Japanese corporations as well as non-Japanese corporations who do business on a global basis, excluding UNBC’s customers;

• UNBC, which includes our subsidiaries in California, UnionBanCal Corporation and Union Bank of California, N.A.;

• Global Markets, which conducts its asset and liability management, liquidity management, and sales and trading of foreign exchange and interest-rate-related derivatives; and

• Other, which consists of:

• systems services, which is responsible for our computer systems;

• trust and asset management business promotion for companies, including defined contribution plans;

• global securities services, which is responsible for the custody business for both Japanese and international institutional investors;

• eBusiness & IT Initiatives, which is responsible for developing information technology business opportunities;

• the corporate center, which retains functions such as strategic planning, overall risk management, internal auditing and compliance; and

• the elimination of duplicated amounts of net revenue among business segments.

The following table shows the business segment information for the fiscal years ended March 31, 2005, 2006 and 2007:

	Retail Banking		Corporate Banking		Global Banking(2)						Global Markets		Other			Total
					Other than UNBC		UNBC		Total
	(in billions)
Fiscal year ended March 31, 2005
Net revenue(1)	¥	347.5	¥	455.5	¥	142.0	¥	274.9	¥	416.9	¥	211.6	¥	(32.3	)	¥	1,399.2
Operating expenses		217.2		152.1		98.7		158.8		257.5		29.7		79.5			736.0
Operating profit (loss)	¥	130.3	¥	303.4	¥	43.3	¥	116.1	¥	159.4	¥	181.9	¥	(111.8	)	¥	663.2
Fiscal year ended March 31, 2006
Net revenue(1)	¥	713.1	¥	768.3	¥	192.5	¥	350.4	¥	561.2	¥	287.2	¥	(87.2	)	¥	2,242.6
Operating expenses		447.9		268.5		123.1		202.4		335.3		38.4		116.6			1,206.7
Operating profit (loss)	¥	265.2	¥	499.8	¥	69.4	¥	148.0	¥	225.9	¥	248.8	¥	(203.8	)	¥	1,035.9
Fiscal year ended March 31, 2007
Net revenue(1)	¥	1,044.3	¥	990.2	¥	271.8	¥	324.3	¥	599.6	¥	289.0	¥	(56.0	)	¥	2,867.1
Operating expenses		666.5		400.4		138.1		200.8		339.2		47.6		149.5			1,603.2
Operating profit (loss)	¥	377.8	¥	589.8	¥	133.7	¥	123.5	¥	260.4	¥	241.4	¥	(205.5	)	¥	1,263.9

Notes:

(1) Net revenue does not include interest income on loans to MUFG.

(2) Within Global Banking, results of certain liquidated subsidiaries for the fiscal years ended March 31, 2006 and 2007 are not included in the “Other than UNBC” column, while they are included in the “Total” column for internal management reporting purpose.

72

Frequently, the business segments work together in connection with providing services to customers. In accordance with our internal management accounting policies, we do not apportion the operating profit (loss) relating to a particular transaction among the participating business segments. Instead, we assign the total amount of operating profit (loss) relating to each of these transactions to each participating business segment. As a result, some items of operating profit (loss) are recorded as part of the operating results of more than one business segment. Any overlapping allocations are eliminated in the “Other” column. The following is a summary of the aggregate amounts of this overlapping allocation of operating profit (loss) for the business segments for the fiscal years ended March 31, 2005, 2006 and 2007:

	Global Markets
	(in billions)
Fiscal year ended March 31, 2005:
Corporate Banking and Global Banking	¥	25.4
Fiscal year ended March 31, 2006:
Corporate Banking and Global Banking	¥	51.0
Fiscal year ended March 31, 2007:
Corporate Banking and Global Banking	¥	57.8

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

The merger of BTM with UFJ Bank was the major factor in the changes in the business segment analysis between the fiscal years ended March 31, 2006 and 2007. As discussed in “Item 5.A. Operating Results—Key Financial Figures”, although the merger of BTM with UFJ Bank occurred on January 1, 2006, the results of operations of the UFJ Bank Group have been included since October 1, 2005. The results for the fiscal year ended March 31, 2006 reflected the pre-merger results of the BTM Group for the six months ended September 30, 2005 and the post-merger results of the BTMU Group for the six months ended March 31,2006. The results for the fiscal year ended March 31, 2007 reflected the post-merger results of the BTMU Group for the full twelve-month period.

Total net revenue increased ¥624.5 billion from ¥2,242.6 billion for the fiscal year ended March 31, 2006 to ¥2,867.1 billion for the fiscal year ended March 31, 2007, and total operating expenses increased ¥396.5 billion from ¥1,206.7 billion for the fiscal year ended March 31, 2006 to ¥1,603.2 billion for the fiscal year ended March 31, 2007. These increases mainly reflected the fact that the results for the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period.

Net revenue of the Retail Banking business segment increased ¥331.2 billion, or 46.4%, from ¥713.1 billion for the fiscal year ended March 31, 2006 to ¥1,044.3 billion for the fiscal year ended March 31, 2007. This increase primarily reflected the fact that the results for the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period. Additional factors contributing to this net revenue growth were increases in income from commercial banking operations, such as interest earned from our domestic Japanese yen deposits as a result of the increase in interest spread. These increases were partially offset by decreases in interest spread from our domestic housing loans.

Net revenue of the Corporate Banking business segment increased ¥221.9 billion, or 28.9%, from ¥768.3 billion for the fiscal year ended March 31, 2006 to ¥990.2 billion for the fiscal year ended March 31, 2007. This increase primarily reflected the fact that the results for the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting those of the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period. As a result, net revenue in most areas, such as net interest income from loans, and fees related to investment banking, increased. A decrease in interest spread from our lending operations to large- and medium-sized Japanese companies, due to the improved credit of many borrowers and increased competition with other financial institutions, partially offset the increase in net revenue.

73

Net revenue of the Global Banking business segment (Other than UNBC) increased ¥79.3 billion, or 41.2%, from ¥192.5 billion for the fiscal year ended March 31, 2006 to ¥271.8 billion for the fiscal year ended March 31, 2007. This increase primarily reflected the fact that the results for the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period. Factors which increased net revenue other than the merger were incomes from commercial banking operations such as deposits and lending operations mainly consisting of loans to Japanese corporate clients situated outside Japan in Asia and Europe.

Net revenue of the Global Banking business segment (UNBC) decreased ¥26.1 billion, or 7.4%, from ¥350.4 billion for the fiscal year ended March 31, 2006 to ¥324.3 billion for the fiscal year ended March 31, 2007. The decrease was principally due to the fact that profits from the sales of international correspondent banking did not occur in the fiscal year ended March 31, 2007. There were also decreases in net interest income, caused by the shift in customer deposits from non-interest bearing deposits or other investments, in response to rising short-term interest rates in the United States.

Net revenue of the Global Markets business segment increased ¥1.8 billion, or 0.6%, from ¥287.2 billion for the fiscal year ended March 31, 2006 to ¥289.0 billion for the fiscal year ended March 31, 2007. This increase was also mainly due to the fact that the results for the fiscal year ended March 31, 2006 reflected only six months of the post-merger BTMU Group (with the first half of the fiscal year reflecting the pre-merger BTM Group only), while the results for the fiscal year ended March 31, 2007 reflected the post-merger BTMU Group for the full twelve-month period. These increases were partially offsets by the decrease in profits on foreign-currency ALM operations due to the increase in interest rates.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

The merger of BTM with UFJ Bank was the major factor in the changes in the business segment analysis between the fiscal years ended March 31, 2005 and 2006. As discussed in “Item 5.A. Operating Results—Key Financial Figures”, although the merger of BTM with UFJ Bank occurred on January 1, 2006, the results of operations of the UFJ Bank Group have been included since October 1, 2005. The results for the fiscal year ended March 31, 2006 reflect the pre-merger BTM Group for the six months ended September 30, 2005 and the post-merger BTMU Group for the six months ended March 31,2006. The results for the fiscal year ended March 31, 2005 reflect the pre-merger BTM Group for the full twelve-month period.

Total net revenue increased ¥843.4 billion from ¥1,399.2 billion for the fiscal year ended March 31, 2005 to ¥2,242.6 billion for the fiscal year ended March 31, 2006, and total operating expenses increased ¥470.7 billion from ¥736.0 billion for the fiscal year ended March 31, 2005 to ¥1,206.7 billion for the fiscal year ended March 31, 2006. These increases were mainly due to the merger with UFJ Bank.

Net revenue of the Retail Banking business segment increased ¥365.6 billion, or 105.2%, from ¥347.5 billion for the fiscal year ended March 31, 2005 to ¥713.1 billion for the fiscal year ended March 31, 2006. This increase was mainly due to the merger with UFJ Bank. Additional factors contributing to this net revenue growth were increases in income from commercial banking operations such as interest earned from deposits.

Net revenue of the Corporate Banking business segment increased ¥312.8 billion, or 68.7%, from ¥455.5 billion for the fiscal year ended March 31, 2005 to ¥768.3 billion for the fiscal year ended March 31, 2006, mainly due to the merger with UFJ Bank. The increase in this net revenue was also driven by gains in other income on currency options sales.

Net revenue of the Global Banking business segment (Other than UNBC) increased ¥50.5 billion, or 35.6%, from ¥142.0 billion for the fiscal year ended March 31, 2005 to ¥192.5 billion for the fiscal year ended March 31, 2006. This increase was mainly due to the merger with UFJ Bank. Factors which increased net revenue other than the merger were incomes from commercial banking operations such as deposits and lending operations in Asia.

74

Net revenue of the Global Banking business segment (UNBC) increased ¥75.5 billion, or 27.4%, from ¥274.9 billion for the fiscal year ended March 31, 2005 to ¥350.4 billion for the fiscal year ended March 31, 2006. The increase in loans and deposits in California, the increase in net interest margins, and profits from the sales of international correspondent banking operations contributed to the increase in net revenue.

Net revenue of the Global Markets business segment increased ¥75.6 billion, or 35.7%, from ¥211.6 billion for the fiscal year ended March 31, 2005 to ¥287.2 billion for the fiscal year ended March 31, 2006. This increase was also mainly due to the merger with UFJ Bank. Contributing to the growth in net revenue was also increased incomes from our foreign exchange currency option sales. These increases were partially offsets by a decrease in profits on foreign-currency ALM operations due to the general rise in interest rates.

Geographic Segment Analysis

The table immediately below sets forth our total revenue, income from continuing operations before income tax expense and cumulative effect of a change in accounting principle and net income on a geographic basis, based principally on the domicile of activities for the fiscal years ended March 31, 2005, 2006 and 2007.

The total revenue, total expense, income (loss) from continuing operations before income tax expense and cumulative effect of a change in accounting principle and net income (loss) for the fiscal year ended March 31, 2006 have been restated. For further information, see note 30 to our consolidated financial statements.

	Fiscal years ended March 31,
	2005		2006 (Restated)			2007
	(in billions)
Total revenue (interest income and non-interest income):
Domestic	¥	1,297.8	¥	1,481.7		¥	2,697.2
Foreign:
United States of America		413.0		861.3			1,089.1
Europe		126.6		190.5			447.5
Asia/Oceania excluding Japan		88.6		174.9			264.2
Other areas*		64.2		97.8			166.8
Total foreign		692.4		1,324.5			1,967.6
Total	¥	1,990.2	¥	2,806.2		¥	4,664.8
Income (loss) from continuing operations before income tax expense and cumulative effect of a change in accounting principle:
Domestic	¥	205.9	¥	(254.5	)	¥	5.1
Foreign:
United States of America		146.4		369.1			457.0
Europe		55.3		59.2			244.6
Asia/Oceania excluding Japan		69.0		63.9			85.0
Other areas*		47.3		59.4			80.3
Total foreign		318.0		551.6			866.9
Total	¥	523.9	¥	297.1		¥	872.0
Net income (loss):
Domestic	¥	91.1	¥	(207.3	)	¥	4.0
Foreign:
United States of America		90.6		288.7			241.2
Europe		30.5		45.8			130.8
Asia/Oceania excluding Japan		46.0		55.6			45.4
Other areas*		28.9		46.0			39.5
Total foreign		196.0		436.1			456.9
Total	¥	287.1	¥	228.8		¥	460.9

* Other areas primarily include Canada, Latin America and the Caribbean.

75

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

Domestic net income for the fiscal year ended March 31, 2007 was ¥4.0 billion, compared to net loss of ¥207.3 billion for the fiscal year ended March 31, 2006. This improvement primarily reflected the increase in non-interest income due to increases in net trading profits and net investment securities gains and a decrease in net foreign exchange losses compared to the previous fiscal year.

Foreign net income for the fiscal year ended March 31, 2007 was ¥456.9 billion, compared to ¥436.1 billion for the fiscal year ended March 31, 2006. This increase primarily reflected the increase in net income in Europe.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Domestic net loss for the fiscal year ended March 31, 2006 was ¥207.3 billion, compared to net income of ¥91.1 billion for the fiscal year ended March 31, 2005. This deterioration primarily reflected the decrease in non-interest income due to an increase in net foreign exchange losses and a decrease in net investment securities gains compared to the previous fiscal year.

Foreign net income for the fiscal year ended March 31, 2006 was ¥436.1 billion, compared to ¥196.0 billion for the fiscal year ended March 31, 2005. This increase primarily reflected the increase in net income in the United States of America.

Effect of the Change in Exchange Rates on Foreign Currency Translation

Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March 31, 2006

The average exchange rate for the fiscal year ended March 31, 2007 was ¥117.02 per $1.00, compared to the prior fiscal year’s average exchange rate of ¥113.31 per $1.00. The average exchange rate for the conversion of the US dollar financial statements of some of our foreign subsidiaries for the fiscal year ended December 31, 2006 was ¥116.38 per $1.00, compared to the average exchange rate for the fiscal year ended December 31, 2005 of ¥110.21 per $1.00.

The change in the average exchange rate of the Japanese yen against the US dollar and other foreign currencies had the effect of increasing total revenue by approximately ¥88 billion, net interest income by approximately ¥35 billion and income before income taxes by approximately ¥15 billion, respectively, for the fiscal year ended March 31, 2007.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

The average exchange rate for the fiscal year ended March 31, 2006 was ¥113.31 per $1.00, compared to the prior fiscal year’s average exchange rate of ¥107.55 per $1.00. The average exchange rate for the conversion of the US dollar financial statements of some of our foreign subsidiaries for the fiscal year ended December 31, 2005 was ¥110.21 per $1.00, compared to the average exchange rate for the fiscal year ended December 31, 2004 of ¥108.24 per $1.00.

The change in the average exchange rate of the Japanese yen against the US dollar and other foreign currencies had the effect of increasing total revenue by approximately ¥47 billion, net interest income by approximately ¥20 billion and income before income taxes by approximately ¥7 billion, respectively, for the fiscal year ended March 31, 2006.

76

B.    Liquidity and Capital Resources

Financial Condition

Total Assets

Our total assets at March 31, 2007 were ¥153.61 trillion, representing a decrease of ¥5.22 trillion, from ¥158.83 trillion at March 31, 2006. The decrease in total assets reflected a decrease of ¥2.96 trillion in cash and due from banks, mainly our deposit balance with the Bank of Japan, due to the effect of the termination of the zero-interest rate policy by the Bank of Japan in July 2006. Additionally, trading account assets decreased by ¥1.80 trillion as a result of our policy to reduce interest rate risk.

We have allocated a substantial portion of our assets to international activities. As a result, reported amounts are affected by changes in the value of the Japanese yen against the US dollar and other foreign currencies. Foreign assets are denominated primarily in US dollars. The following table shows our total assets at March 31, 2006 and 2007 by geographic region based principally on the domicile of the obligors:

	At March 31,
	2006		2007
	(in trillions)
Japan	¥	129.01	¥	119.10
Foreign:
United States of America		15.42		17.58
Europe		7.12		7.43
Asia/Oceania excluding Japan		5.08		6.36
Other areas*		2.20		3.14
Total foreign		29.82		34.51
Total	¥	158.83	¥	153.61

* Other areas primarily include Canada, Latin America and the Caribbean.

At March 30, 2007, the noon buying rate of the Federal Reserve Bank of New York was ¥117.56 per $1.00, as compared with ¥117.48 per $1.00 at March 31, 2006. The Japanese yen amount of foreign currency-denominated assets and liabilities increases as the relevant exchange rates change weakening the value of the Japanese yen for foreign currencies, and vice versa. The depreciation of the Japanese yen against the US dollar and other foreign currencies during the fiscal year ended March 31, 2007 increased the Japanese yen amount of our total assets by approximately ¥1.34 trillion. See “Item 3.A. Key Information—Selected Financial Data—Exchange Rate Information.”

77

Loan Portfolio

The table immediately below sets forth our loans outstanding by domicile and type of industry of borrowers, before deduction of allowance for credit losses, at March 31, 2006 and 2007, based on classification by industry segment as defined by the Bank of Japan for regulatory reporting purposes, which is not necessarily based on use of proceeds.

The classification of loans by industry at March 31, 2006 has been restated. For further information, see “Selected Statistical Data—III. Loan Portfolio.”

	At March 31,
	2006 (Restated)		2007
	(in billions)
Domestic:
Manufacturing	¥	9,353.5	¥	9,586.1
Construction		1,813.7		1,677.5
Real estate		7,094.6		6,308.8
Services		5,760.0		5,915.3
Wholesale and retail		8,916.8		8,519.7
Banks and other financial institutions		4,354.7		3,141.8
Communication and information services		1,029.4		964.6
Other industries		9,946.2		9,313.7
Consumer		22,356.1		23,127.8
Total domestic		70,625.0		68,555.3
Foreign:
Governments and official institutions		329.2		371.6
Banks and other financial institutions		1,037.8		1,532.7
Commercial and industrial		11,602.0		13,285.6
Other		2,228.9		2,426.6
Total foreign		15,197.9		17,616.5
Total		85,822.9		86,171.8
Unearned income, unamortized premiums—net and deferred loan fees—net		13.4		(47.7	)
Total	¥	85,836.3	¥	86,124.1

Domestic loans within the “consumer” category in the above table include loans to individuals who use loan proceeds to finance their proprietor activities and not for their personal financing needs. A precise breakdown of the balance of such consumer loans by the type of proprietor business at March 31, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in billions)
March 31, 2006	¥	17.2	¥	13.9	¥	425.9	¥	160.8	¥	30.9	¥	1.0	¥	3.0	¥	6.3	¥	659.0
March 31, 2007	¥	14.6	¥	12.3	¥	367.3	¥	132.9	¥	26.1	¥	0.7	¥	2.4	¥	5.4	¥	561.7

Loans are our primary use of funds. The average loan balance accounted for 57.2% of total interest-earning assets for the fiscal year ended March 31, 2006 and 61.3% for the fiscal year ended March 31, 2007.

At March 31, 2007, our total loans were ¥86.12 trillion, representing an increase of ¥0.28 trillion, or 0.3%, from ¥85.84 trillion at March 31, 2006. Before the addition of unearned income, unamortized premiums—net and deferred loan fees—net, our loan balance at March 31, 2007 consisted of ¥68.56 trillion of domestic loans and ¥17.62 trillion of foreign loans, while the loan balance at March 31, 2006 consisted of ¥70.63 trillion of domestic loans and ¥15.20 trillion of foreign loans.

78

Domestic loans decreased ¥2.07 trillion and foreign loans increased ¥2.42 trillion compared to the previous fiscal year. Analyzing the change of domestic loans by industry segment, the largest decrease was seen in the banks and other financial institutions segment. Foreign loans increased in all segments, especially in the commercial and industrial segment.

Allowance for Credit Losses, Nonperforming and Past Due Loans

The following table shows a summary of the changes in the allowance for credit losses for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005			2006			2007
	(in billions)
Balance at beginning of fiscal year	¥	649.3		¥	567.7		¥	913.0
Additions resulting from the merger with UFJ Bank(1)		—			279.2			—
Provision for credit losses		123.9			163.4			341.6
Charge-offs:
Domestic		(181.5	)		(116.7	)		(284.4	)
Foreign		(51.8	)		(10.4	)		(13.9	)
Total		(233.3	)		(127.1	)		(298.3	)
Recoveries:
Domestic		14.3			3.2			28.2
Foreign		9.7			16.2			4.8
Total		24.0			19.4			33.0
Net charge-offs		(209.3	)		(107.7	)		(265.3	)
Others(2)		3.8			10.4			4.2
Balance at end of fiscal year	¥	567.7		¥	913.0		¥	993.5

Notes:

(1) Additions resulting from the merger with UFJ Bank represent the valuation allowance for acquired loans outside the scope of SOP 03-3. The allowance for credit losses on loans within the scope of SOP 03-3 was not carried over.

(2) Others principally include foreign exchange translation and discontinued operations adjustments.

Provision for credit losses for the fiscal year ended March 31, 2007 was ¥341.6 billion, an increase of ¥178.2 billion from ¥163.4 billion for the fiscal year ended March 31, 2006. The increase in provision for credit losses was mainly due to the downgrade in credit rating of a large borrower in the transportation industry. Additionally, provision for credit losses increased in the consumer finance industry.

The ratio of the provision for credit losses for the fiscal year ended March 31, 2007 of ¥341.6 billion to the average loan balance of ¥86.23 trillion was 0.40%, and that to the total average interest-earning assets for the same period of 140.73 trillion was 0.24%.

Net charge-offs for the fiscal year ended March 31, 2007 were ¥265.3 billion, an increase of ¥157.6 billion, or 146.2%, from ¥107.7 billion for the fiscal year ended March 31, 2006. Charge-offs of domestic loans increased for the fiscal year ended March 31, 2007 as a result of an increase in the consumer segment.

79

The following table presents comparative data in relation to the principal amount of nonperforming loans sold and reversal of allowance for credit losses:

	Principal amount of loans(1)		Allowance for credit losses(2)		Loans, net of allowance		Reversal of allowance for credit losses
	(in billions)
For the fiscal year ended March 31, 2005	¥	89.9	¥	34.3	¥	55.6	¥	(9.2	)
For the fiscal year ended March 31, 2006	¥	104.6	¥	37.7	¥	66.9	¥	(12.4	)
For the fiscal year ended March 31, 2007	¥	121.4	¥	35.7	¥	85.7	¥	(23.9	)

Notes:

(1) Represents principal amount after the deduction of charge-offs made before the sales of nonperforming loans.

(2) Represents allowance for credit losses at the latest balance-sheet date.

Through the sales of nonperforming loans to third parties, additional provisions or gains may arise from factors such as a change in the credit quality of the borrowers or the value of the underlying collateral subsequent to the prior reporting date, and the risk appetite and investment policy of the purchasers. Along with a reduction in nonperforming loans, conditions surrounding the sales of loans have improved in recent years.

Due to the inherent uncertainty of factors that may affect negotiated prices which reflect the borrowers’ financial condition and the value of underlying collateral, the fact that we recorded no additional cost during the reported periods is not necessarily indicative of the results that we may record in the future.

In connection with the sales of loans, the excess of the proceeds from the sales of loans over their carrying amounts were ¥9.1 billion, ¥45.7 billion and ¥22.7 billion for the fiscal years ended March 31, 2005, 2006 and 2007, respectively. Such excess is reported in our consolidated statements of income as reduction in provision for credit losses to the extent of the existing allowance for credit losses on sold loans and remaining excess as gains on sales of loans.

The following table summarizes the allowance for credit losses by component at March 31, 2005, 2006 and 2007:

	At March 31,
	2005		2006		2007
	(in billions)
Allocated allowance:
Specific—specifically identified problem loans	¥	342.4	¥	397.0	¥	511.9
Large groups of smaller balance homogeneous loans		37.4		152.2		129.5
Loans exposed to specific country risk		0.1		0.1		0.1
Formula—substandard, special mention and other loans		179.2		356.0		345.0
Unallocated allowance		8.6		7.7		7.0
Total allowance	¥	567.7	¥	913.0	¥	993.5

Allowance policy

Our credit rating system is closely linked to the risk grading standards set by the Japanese regulatory authorities for asset evaluation and assessment, and is used as a basis for establishing the allowance for credit losses and charge-offs. The categorization is based on conditions that may affect the ability of borrowers to service their debt, such as current financial condition and results of operations, historical payment experience, credit documentation, other public information and current trends. For a discussion of our credit rating system, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management—Credit Rating System.”

80

Change in total allowance and provision for credit losses

At March 31, 2007, the total allowance for credit losses was ¥993.5 billion, representing 1.15% of our total loan portfolio or 64.86% of our total nonaccrual and restructured loans and accruing loans contractually past due 90 days or more. At March 31, 2006, the total allowance for credit losses was ¥913.0 billion, representing 1.06% of our total loan portfolio or 49.33% of our total nonaccrual and restructured loans and accruing loans contractually past due 90 days or more. The total allowance at March 31, 2007 increased by ¥80.5 billion compared to the previous year-end. The increase in allowance was mainly due to the downgrade in credit rating of a large borrower in the transportation industry, and such increase exceeded the decrease in allowance due to charge-offs.

During the fiscal years ended March 31, 2005, 2006 and 2007, there were no significant additions to the allowance for credit losses resulting from directives, advice or counsel from governmental or regulatory bodies.

Provision for credit losses for the fiscal year ended March 31, 2007 was ¥341.6 billion, an increase of ¥178.2 billion from ¥163.4 billion for the fiscal year ended March 31, 2006. The increase in provision for credit losses was mainly due to the downgrade in credit rating of a large borrower in the transportation industry. Additionally, provision for credit losses increased in the consumer finance industry.

Allocated allowance for specifically identified problem loans

The allocated credit loss allowance for specifically identified problem loans represents the allowance against impaired loans called for in SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” Impaired loans primarily include nonaccrual loans and restructured loans. We generally discontinue accrual of interest income on loans when substantial doubt exists as to the full and timely collection of either principal or interest, or when principal or interest is contractually past due one month or more with respect to loans made by us or by certain domestic subsidiaries, and 90 days or more with respect to loans of certain foreign subsidiaries. Loans are classified as restructured loans when we grant a concession to the borrowers for economic or legal reasons related to the borrowers’ financial difficulties.

Detailed reviews of impaired loans are performed after a borrower’s annual or semi-annual financial statements first become available. In addition, as part of an ongoing credit review process, our credit officers monitor changes in all customers’ creditworthiness, including bankruptcy, past due principal or interest, downgrading of external credit rating, declining stock price, business restructuring and other events, and reassess borrowers’ ratings in response to such events. This credit monitoring process forms an integral part of our overall control process. An impaired loan is evaluated individually based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral at the annual and semi-annual balance-sheet date, if the loan is collateral-dependent at a balance-sheet date.

81

The following table summarizes the distribution of our nonaccrual and restructured loans, and accruing loans that are contractually past due 90 days or more as to principal or interest payments, at March 31, 2005, 2006 and 2007:

	At March 31,
	2005			2006			2007
	(in billions, except percentages)
Nonaccrual loans:
Domestic:
Manufacturing	¥	77.8		¥	104.9		¥	79.7
Construction		38.8			35.4			42.6
Real estate		92.6			149.4			117.1
Services		94.5			51.1			126.7
Wholesale and retail		74.4			124.5			125.5
Banks and other financial institutions		4.3			15.8			10.2
Communication and information services		11.4			12.8			21.9
Other industries		13.3			23.8			120.1
Consumer		115.8			345.3			316.1
Total domestic		522.9			863.0			959.9
Foreign		106.7			62.6			39.0
Total nonaccrual loans		629.6			925.6			998.9
Restructured loans:
Domestic:
Manufacturing		22.4			42.2			80.5
Construction		35.3			27.1			12.9
Real estate		113.0			146.0			85.1
Services		30.3			51.6			47.3
Wholesale and retail		67.3			360.0			107.0
Banks and other financial institutions		0.3			0.1			0.6
Communication and information services		3.6			8.2			2.9
Other industries		26.4			103.9			58.6
Consumer		45.0			90.6			76.4
Total domestic		343.6			829.7			471.3
Foreign		21.7			74.2			40.3
Total restructured loans		365.3			903.9			511.6
Accruing loans contractually past due 90 days or more:
Domestic		9.2			20.3			19.5
Foreign		0.9			1.1			1.8
Total accruing loans contractually past due 90 days or more		10.1			21.4			21.3
Total	¥	1,005.0		¥	1,850.9		¥	1,531.8
Total loans	¥	43,254.0		¥	85,836.3		¥	86,124.1
Nonaccrual and restructured loans, and accruing loans contractually past due 90 days or more as a percentage of total loans		2.32	%		2.16	%		1.78	%

82

Domestic nonaccrual loans and restructured loans within the “consumer” category in the above table include loans to individuals who use loan proceeds to finance their proprietor activities and not for their personal financing needs. A precise breakdown of the balance of such consumer loans by the type of proprietor business at March 31, 2005, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in billions)
March 31, 2005
Nonaccrual loans	¥	1.3	¥	1.0	¥	43.3	¥	13.7	¥	3.2	¥	—	¥	0.2	¥	0.5	¥	63.2
Restructured loans		1.2		0.3		19.2		2.9		1.9		—		—		—		25.5
March 31, 2006
Nonaccrual loans	¥	1.1	¥	0.8	¥	27.9	¥	9.7	¥	1.6	¥	—	¥	0.2	¥	0.3	¥	41.6
Restructured loans		0.3		0.1		14.4		1.3		0.9		—		—		—		17.0
March 31, 2007
Nonaccrual loans	¥	1.2	¥	0.5	¥	21.6	¥	7.3	¥	1.0	¥	—	¥	0.1	¥	0.3	¥	32.0
Restructured loans		0.3		—		11.5		0.9		0.5		—		—		—		13.2

We have been actively making efforts to reduce our nonperforming loans. These efforts have been made to improve the quality of our own loan assets, which conforms to the policy to decrease nonperforming loans under the program for financial revival announced by the Japanese government in October 2002. Nonaccrual and restructured loans, and accruing loans contractually past due 90 days or more decreased ¥319.1 billion from March 31, 2006 to ¥1,531.8 billion at March 31, 2007. Similarly, the percentage of nonperforming loans to the total loans decreased to 1.78% at March 31, 2007 from 2.16% at March 31, 2006.

Total nonaccrual loans were ¥998.9 billion at March 31, 2007, an increase of ¥73.3 billion, or 7.9%, from ¥925.6 billion at March 31, 2006. The increase was mainly caused by downgrade in credit rating to nonaccrual loans of a large borrower in the transportation industry.

Total restructured loans were ¥511.6 billion at March 31, 2007, a decrease of ¥392.3 billion, or 43.4%, from ¥903.9 billion at March 31, 2006. Analyzing by industry segments, restructured loans decreased in most industry segments, particularly in domestic wholesale and retail by ¥253.0 billion due to upgrades of borrowers’ credit ratings in these industries.

The following table summarizes the balances of impaired loans and related impairment allowances at March 31, 2005, 2006 and 2007, excluding smaller-balance homogeneous loans:

	At March 31,
	2005					2006					2007
	Loan balance			Impairment allowance		Loan balance			Impairment allowance		Loan balance			Impairment allowance
	(in billions)
Requiring an impairment allowance	¥	789.3		¥	342.4	¥	1,056.1		¥	397.0	¥	987.2		¥	511.9
Not requiring an impairment allowance		126.3			—		234.1			—		239.3			—
Total	¥	915.6		¥	342.4	¥	1,290.2		¥	397.0	¥	1,226.5		¥	511.9
Percentage of the allocated allowance to total impaired loans		37.4	%				30.8	%				41.7	%

Note: In addition to impaired loans presented in the above table, there were loans held for sale that were impaired in the amount of ¥12.1 billion, nil and ¥0.8 billion at March 31, 2005, 2006 and 2007, respectively.

Impaired loans decreased ¥63.7 billion, or 4.9%, from ¥1,290.2 billion at March 31, 2006 to ¥1,226.5 billion at March 31, 2007.

The percentage of the allocated allowance to total impaired loans at March 31, 2007 was 41.7%, an increase of 10.9 percentage points from 30.8% at March 31, 2006. The increase in the percentage of the allocated allowance was due to a decrease in restructured loans, which had a relatively low level of allowance, compared to nonaccrual loans.

83

Based upon a review of borrowers’ financial status, from time to time we grant various concessions to troubled borrowers at the borrowers’ request, including reductions in the stated interest rates or the principal amount of loans, and extensions of the maturity date. According to our policies, such modifications are made to mitigate the near-term burden of the borrowers and to better match the payment terms with the borrowers’ expected future cash flows or, in cooperation with other creditors, to reduce the overall debt burden of the borrowers so that they may normalize their operations, in each case to improve the likelihood that the loans will be repaid in accordance with the revised terms. The nature and amount of the concessions depend on the particular financial condition of each borrower. In principle, however, we do not modify the terms of loans to borrowers that are considered “Likely to Become Bankrupt,” “Virtually Bankrupt” or “Bankrupt” because in these cases there is little likelihood that the modification of loan terms would enhance recovery of the loans.

Allocated allowance for large groups of smaller-balance homogeneous loans

The allocated allowance for large groups of smaller-balance homogeneous loans is focused on loss experience for the pool rather than on an analysis of individual loans. Large groups of smaller-balance homogeneous loans primarily consist of first mortgage housing loans to individuals. The allowance for groups of performing loans is based on historical loss experience over a period. In determining the level of the allowance for delinquent groups of loans, we classify groups of homogeneous loans based on the risk rating and/or the number of delinquencies. We determine the credit loss allowance for groups of delinquent loans based on the probability of insolvency by the number of actual delinquencies and actual loss experience. The loss experience is usually determined by reviewing the historical loss rate. The allocated credit loss allowance for large groups of smaller-balance homogeneous loans was ¥129.5 billion at March 31, 2007, a decrease of ¥22.7 billion from ¥152.2 billion at March 31, 2006.

Allocated allowance for country risk exposure

The allocated credit loss allowance for country risk exposure is based on an estimate of probable losses relating to the exposure to countries that we identify as having a high degree of transfer risk. The countries applicable to the allowance for country risk exposure are decided based on a country risk grading system used to assess and rate the transfer risk to individual countries. The allowance is generally determined based on a function of default probability and expected recovery ratios, taking external credit ratings into account. The allocated allowance for country risk exposure was approximately ¥0.1 billion at March 31, 2006 and 2007.

Formula allowance for substandard, special mention and unclassified loans

The formula allowance is calculated by applying estimated loss factors to outstanding substandard, special mention and unclassified loans. In evaluating the inherent loss for these loans, we rely on a statistical analysis that incorporates a percentage of total loans based on historical loss experience.

We have computed the formula allowance based on estimated credit losses using a methodology defined by the credit rating system. Estimated losses inherent in the loan portfolio at the balance sheet date are calculated by multiplying the default ratio by the nonrecoverable ratio (determined as a complement of the recovery ratio). The default ratio is determined by each credit risk rating, taking into account the historical number of defaults of borrowers within each credit risk rating divided by the total number of borrowers within that credit risk rating existing at the beginning of the three-year observation period. The recovery ratio is mainly determined by the historical experience of collections against loans in default.

UNBC, our largest overseas subsidiary, calculates the formula allowance by applying loss factors to outstanding loans and certain unused commitments, in each case based on the internal risk grade of such loans, leases and commitments. Changes in risk grades affect the amount of the formula allowance. Loss factors are

84

based on our historical loss experience and may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. Loss factors are developed in the following ways:

• loss factors for individually graded credits are derived from a migration model that tracks historical losses over a period, which we believe captures the inherent losses in our loan portfolio; and

• pooled loan loss factors (not individually graded loans) are based on expected net charge-offs. Pooled loans are loans that are homogeneous in nature, such as consumer installment, home equity, residential mortgage loans and certain small commercial and commercial real estate loans.

Though there are a few technical differences in the methodology used for the formula allowance for credit losses as mentioned above, we examine overall sufficiency of the formula allowance periodically by back-test comparison with the actual loss experience subsequent to the balance sheet date.

The formula allowance decreased ¥11.0 billion from ¥356.0 billion at March 31, 2006 to ¥345.0 billion at March 31, 2007.

Unallocated allowance

The unallocated allowance is based on management’s evaluation of conditions that are not directly reflected in the determination of the formula and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they may not be identified with specific problem credits or portfolio segments. The conditions evaluated in connection with the unallocated allowance include the following, which were considered to exist at the balance sheet date:

• general economic and business conditions affecting our key lending areas;

• credit quality trends (including trends in nonperforming loans expected to result from existing conditions);

• collateral values;

• loan volumes and concentrations;

• specific industry conditions within portfolio segments;

• recent loss experience in particular segments of the portfolio;

• duration of the current economic cycle;

• bank regulatory examination results; and

• findings of internal credit examination.

Executive management reviews these conditions quarterly in discussion with our senior credit officers. To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance, applicable to the specific credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the probable loss related to the condition is reflected in the unallocated allowance.

The unallocated allowance decreased ¥0.7 billion from ¥7.7 billion at March 31, 2006 to ¥7.0 billion at March 31, 2007. This decrease resulted mainly from management’s positive outlook of economic and specific industry conditions.

Allowance for Off-balance-sheet Credit Instruments

In addition to the allowance for credit losses on the loan portfolio, we maintain an allowance for credit losses on off-balance-sheet credit instruments, including commitments to extend credit, a variety of guarantees and standby letters of credit. This allowance is included in other liabilities. With regard to the specific allocated

85

allowance for specifically identified credit exposure and the allocated formula allowance, we apply the same methodology that we use in determining the allowance for loan credit losses. The allowance for credit losses on off-balance-sheet credit instruments was ¥76.6 billion at March 31, 2007, a decrease of ¥14.8 billion, from ¥91.4 billion at March 31, 2006.

Investment Portfolio

Our investment securities are primarily comprised of marketable equity securities and Japanese government and Japanese government agency bonds, which are mostly classified as available-for-sale securities. We also hold Japanese government bonds which are classified as securities being held to maturity.

Historically, we have held equity securities of some of our customers for strategic purposes, in particular, to maintain long-term relationships with these customers. However, we have been reducing the aggregate value of our equity securities because we believe that, from a risk management perspective, it is important to reduce the price fluctuation risk in our equity portfolio. As of March 31, 2007, the aggregate value of marketable equity securities under Japanese GAAP satisfies the requirements of the legislation forbidding banks from holding equity securities in excess of their Tier I capital after September 30, 2006.

Investment securities at March 31, 2007 were ¥42.26 trillion, at a similar level from ¥42.53 trillion at March 31, 2006.

The following table shows information as to the amortized costs and estimated fair values of our investment securities available for sale and being held to maturity at March 31, 2006 and 2007:

	At March 31,
	2006							2007
	Amortized cost		Estimated fair value		Net unrealized gains (losses)			Amortized cost		Estimated fair value		Net unrealized gains (losses)
	(in billions)
Securities available for sale:
Debt securities, principally Japanese government bonds and corporate bonds	¥	32,813.5	¥	32,975.6	¥	162.1		¥	32,371.5	¥	32,726.1	¥	354.6
Marketable equity securities		3,794.8		6,709.9		2,915.1			3,683.6		6,864.0		3,180.4
Total securities available for sale	¥	36,608.3	¥	39,685.5	¥	3,077.2		¥	36,055.1	¥	39,590.1	¥	3,535.0
Debt securities being held to maturity, principally Japanese government bonds	¥	2,116.6	¥	2,102.1	¥	(14.5	)	¥	2,106.9	¥	2,100.7	¥	(6.2	)

The amortized cost of securities being held to maturity was almost equal compared to the previous year.

The estimated fair value of available-for-sale securities decreased ¥0.10 trillion from ¥39.69 trillion at March 31, 2006 to ¥39.59 trillion at March 31, 2007, primarily due to the decrease in Japanese government bonds reflecting the view of higher Japanese interest rates in the near future.

Net unrealized gains on available-for-sale securities included in the investment portfolio at March 31, 2006 and 2007 were ¥3.08 trillion and ¥3.54 trillion, respectively. These net unrealized gains related principally to marketable equity securities.

Cash and Due from Banks

Cash and due from banks at March 31, 2007 was ¥2.43 trillion, a decrease of ¥2.96 trillion from ¥5.39 trillion at March 31, 2006. The decrease was primarily due to the lowering of our deposit balance with the Bank of Japan, following the termination of the zero-interest rate policy by the Bank of Japan in July 2006.

Interest-earning Deposits in Other Banks

Interest-earning deposits in other banks fluctuate significantly from day to day depending upon financial market conditions. Interest-earning deposits in other banks at March 31, 2007 were ¥5.52 trillion, a decrease of ¥0.48 trillion from ¥6.00 trillion at March 31, 2006. This decrease primarily reflected a decrease in foreign currency deposits at our overseas offices.

86

Intangible Assets

At March 31, 2007, intangible assets was ¥0.95 trillion, a decrease of ¥0.22 trillion from ¥1.17 trillion at March 31, 2006. The decrease was mainly due to the amortization of intangible assets such as core deposit intangibles and IT systems, as well as impairment related to our subsidiary in the consumer finance business.

Goodwill

Goodwill at March 31, 2007 was ¥1.77 trillion, substantially unchanged from March 31, 2006.

Deferred Tax Assets

Deferred tax assets decreased ¥0.59 trillion, or 53.5%, from ¥1.10 trillion at March 31, 2006 to ¥0.51 trillion at March 31, 2007. This decrease was primarily due to the realization of deferred tax assets for operating loss carryforwards and allowance for credit losses and an increase in deferred tax liabilities related to investment securities. In addition, the valuation allowance increased for certain companies, including a subsidiary in the consumer finance business due to a decline in their forecasted operating results and estimated future taxable income and an increase in their deductible temporary differences.

Total Liabilities

At March 31, 2007, total liabilities were ¥144.92 trillion, a decrease of ¥5.64 trillion from ¥150.56 trillion at March 31, 2006. This decrease primarily reflected decreases of ¥5.28 trillion in other short term borrowings and of ¥3.77 trillion in non-interest-bearing deposits.

The depreciation of the Japanese yen against the US dollar and other foreign currencies during the fiscal year ended March 31, 2007 increased the Japanese yen amount of foreign currency-denominated liabilities by approximately ¥1.32 trillion.

Deposits

Deposits are our primary source of funds. Total average balance of deposits increased ¥24.29 trillion from ¥86.42 trillion for the fiscal year ended March 31, 2006 to ¥110.71 trillion for the fiscal year ended March 31, 2007. This increase primarily reflected a ¥19.64 trillion increase in average domestic interest-bearing deposits primarily resulting from the merger with UFJ Bank.

Domestic deposits decreased ¥1.47 trillion from ¥98.04 trillion at March 31, 2006 to ¥96.57 trillion at March 31, 2007, while foreign deposits increased ¥0.79 trillion from ¥16.02 trillion at March 31, 2006 to ¥16.81 trillion at March 31, 2007. As for both domestic and foreign deposits, the balance of non-interest bearing deposits decreased while interest-bearing deposits increased, partially in response to the rising short-term interest rates in Japan and the United States.

Short-term Borrowings

We use short-term borrowings as a funding source and in our management of interest rate risk. For management of interest rate risk, short-term borrowings are used in asset-liability management operations to match interest rate risk exposure resulting from loans and other interest-earning assets and to manage funding costs of various financial instruments at an appropriate level, based on our forecast of future interest rate levels. Short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities lending transactions and other short-term borrowings.

Short-term borrowings decreased ¥4.42 trillion from ¥17.47 trillion at March 31, 2006 to ¥13.05 trillion at March 31, 2007. This decrease was primarily attributable to a decrease of ¥5.28 trillion in other short-term borrowings being proportionate to the lowering of our deposit balance with the Bank of Japan.

87

Long-term Debt

Long-term debt at March 31, 2007 was ¥12.26 trillion, an increase of ¥0.33 trillion from ¥11.93 trillion at March 31, 2006. This increase was partly due to an increase of approximately ¥1 trillion in obligations under loan securitization transaction accounted for as secured borrowings. The increase was partially offset by a decrease of ¥0.61 trillion in the balance of certain straight bonds issued by us.

Sources of Funding and Liquidity

Our primary source of liquidity is from a large balance of deposits, mainly ordinary deposits, certificates of deposit and time deposits. Time deposits have shown a historically high rollover rate among our corporate customers and individual depositors. As of March 31, 2007, our deposits of ¥113.39 trillion exceeded our loans, net of allowance for credit losses of ¥85.13 trillion, by ¥28.26 trillion. These deposits provide us with a sizable source of stable and low-cost funds. While approximately 49.7% of certificates of deposit and time deposits mature within three months, we continuously monitor relevant interest rate characteristics of these funds and utilize asset and liability management techniques to manage the possible impact of the rollovers on our net interest margin and liquidity. Our average deposits, combined with average shareholders’ equity, funded 77.3% of our average total assets of ¥154.21 trillion during the fiscal year ended March 31, 2007.

Most of the remaining funding was provided by short-term borrowings and long-term senior and subordinated debt. Short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities lending transactions and other short-term borrowings. From time to time, we have issued long-term instruments such as straight bonds with mainly three to five years’ maturity. Liquidity may also be provided by the sale of financial assets, including securities available for sale, trading account securities and loans. Additional liquidity may be provided by the maturity of loans.

Total Shareholder’s Equity

The following table presents a summary of our total shareholder’s equity at March 31, 2006 and 2007:

	At March 31,
	2006			2007
	(in billions, except percentages)
Preferred stock	¥	125.0		¥	125.0
Common stock		872.0			872.0
Capital surplus		5,844.3			5,851.1
Retained earnings		205.9			216.3
Accumulated other changes in equity from nonowner sources, net of taxes		1,452.1			1,850.4
Loan receivable for constructive capital contribution from parent company		(228.5	)		(228.5	)
Parent company’s stock, at cost		(1.3	)		(0.2	)
Total shareholder’s equity	¥	8,269.5		¥	8,686.1
Ratio of total shareholder’s equity to total assets		5.21	%		5.65	%

Total shareholder’s equity increased ¥416.6 billion, from ¥8,269.5 billion at March 31, 2006 to ¥8,686.1 billion at March 31, 2007. The ratio of total shareholder’s equity to total assets also showed an increase of 0.44 percentage points from 5.21% at March 31, 2006 to 5.65% at March 31, 2007. The increase in total shareholder’s equity at March 31, 2007, and the resulting increase in the ratio to total assets, were principally attributable to an increase of ¥398.3 billion in accumulated other changes in equity from nonowner sources, net of taxes, mainly due to a favorite affect of the improvement in the Japanese stock market to unrealized gain on investment securities available for sale.

Due to our holdings of a large amount of marketable Japanese equity securities and the volatility of the equity markets in Japan, changes in the fair value of marketable equity securities have significantly affected our shareholder’s equity. The following table presents information relating to the accumulated net unrealized gains

88

before tax effect in respect of marketable equity securities classified as available for sale at March 31, 2006 and 2007:

	At March 31,
	2006			2007
	(in billions, except percentages)
Accumulated net unrealized gains	¥	2,915.1		¥	3,180.4
Accumulated net unrealized gains to total assets		1.84	%		2.07	%

Capital Adequacy

We are subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in which we operate. Failure to meet minimum capital requirements can initiate mandatory actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements.

We continually monitor our risk-adjusted capital ratio closely and manage our operations in consideration of the capital ratio requirements. These ratios are affected not only by fluctuations in the value of our assets, including our credit risk assets such as loans and equity securities, the risk weights of which depend on the borrowers’ or issuers’ internal ratings, marketable securities and deferred tax assets, but also by fluctuations in the value of the Japanese yen against the US dollar and other foreign currencies and by general price levels of Japanese equity securities.

Capital Requirements for Banking Institutions in Japan

A Japanese banking institution is subject to the minimum capital adequacy requirements both on a consolidated basis and a stand-alone basis, and is required to maintain the minimum capital irrespective of whether it operates independently or as a subsidiary under the control of another company. Under the FSA’s guidelines, capital is classified into three tiers, referred to as Tier I, Tier II and Tier III capital. Our Tier I capital generally consists of shareholder’s equity items, including common stock, non-cumulative preferred stock, capital surplus, minority interests and retained earnings (which includes deferred tax assets), but recorded goodwill and other items, such as treasury stock, are deducted from Tier I capital. Our Tier II capital generally consists of the amount by which eligible reserves for credit losses exceeds expected losses in the Internal Ratings Based approach, or the IRB approach, and general reserves for credit losses up to 1.25% of modified risk-weighted assets determined by the partial use of the Standardized Approach (including a phased rollout of the IRB approach), 45% of the unrealized gains on investment securities available for sale, 45% of the land revaluation excess, the balance of perpetual subordinated debt and the balance of subordinated term debt with an original maturity of over five years subject to certain limitations, up to 50% of Tier I capital. Our Tier III capital consists of short-term subordinated debt with an original maturity of at least two years, subject to certain limitations. At least 50% of the minimum capital requirements must be maintained in the form of Tier I capital.

The eligible regulatory capital set forth in the FSA guidelines discussed above were modified as of March 31, 2007 to reflect the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework,” often referred to as “Basel II.”

As of March 31, 2007, we have calculated our risk-weighted assets in accordance with Basel II. In determining capital ratios under Basel II, most of our major subsidiaries adopted the Foundation Internal Ratings Based approach, or the FIRB approach, to reflect the credit risk in the risk-weighted assets. Under the FIRB approach, we generally take into account probability of default, or PD, applicable to borrower rating and PD, loss given default and exposure at default applicable to pool assignment. Market risk is reflected in the risk-weighted assets by applying the Internal Models Approach to calculate general market risk and the Standardized Methodology to calculate specific risk. Under the Internal Models Approach, we principally use a historical simulation model to calculate value-at-risk amounts by estimating the profit and loss on our portfolio by applying actual fluctuations in the market rates and prices over a fixed period in the past. Under Basel II, we newly reflected operational risk in the risk-weighted assets by applying the Standardized Approach. Specifically, operational risk capital charge is determined based on the amount of gross

89

profit allocated to business lines multiplied by a factor ranging from 12% to 18%.

For additional discussion of the calculation of our capital ratios under Basel II, see note 22 to our consolidated financial statements.

Under the Japanese regulatory capital requirements, our consolidated capital components, including Tier I, Tier II and Tier III capital, and risk-weighted assets, are calculated from our consolidated financial statements prepared under Japanese GAAP. Also, each of the consolidated and stand-alone capital components in Japan is calculated from consolidated and non-consolidated financial statements prepared under Japanese GAAP.

For a detailed discussion of the capital adequacy guidelines adopted by the FSA and proposed amendments, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Capital Adequacy.”

Capital Requirements for Banking Institutions in the United States

In the United States, UnionBanCal Corporation and its banking subsidiary, Union Bank of California, N.A., our largest subsidiaries operating outside Japan, are subject to various regulatory capital requirements administered by U.S. Federal banking agencies, including minimum capital requirements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, they must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under U.S. regulatory accounting practices. Their capital amounts and prompt corrective action classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

For a detailed discussion of the capital adequacy guidelines applicable to our U.S. banking subsidiaries, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—United States—Bank Capital Requirements and Capital Distributions.”

Our Capital Ratios

The table below presents our consolidated risk-based capital, risk-adjusted assets and risk-based capital ratios at March 31, 2006 and 2007 (underlying figures are calculated in accordance with Japanese banking regulations based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA).

The March 31, 2006 data are calculated according to Basel I since Basel II became effective in Japan at March 31, 2007.

	At March 31,						Minimum capital ratios required
	2006			2007
	(in billions, except percentages)
Capital components:
Tier I capital	¥	6,735.3		¥	6,975.6
Tier II capital includable as qualifying capital		5,332.8			4,940.8
Tier III capital includable as qualifying capital		—			—
Deductions from total qualifying capital		146.7			309.8
Total risk-based capital	¥	11,921.4		¥	11,606.6
Risk-weighted assets	¥	95,520.7		¥	90,456.8
Capital ratios:
Tier I capital		7.05	%		7.71	%	4.00	%
Total risk-based capital		12.48			12.83		8.00

The implementation of Basel II at March 31, 2007 had the effect of decreasing our risk-weighted assets due to a decrease in credit risk assets, while at the same time decreasing our total risk-based capital. Our Tier I capital ratio and total risk-based capital ratio at March 31, 2007 were 7.71% and 12.83%, respectively.

90

Capital Ratios of Our Banking Subsidiaries in the United States

The table below presents the risk-based capital ratios of UnionBanCal Corporation and Union Bank of California at December 31, 2005 and 2006:

	At December 31,				Minimum capital ratios required		Ratios OCC requires to be “well-capitalized”
	2005		2006
UnionBanCal Corporation:
Tier I capital (to risk-weighted assets)	9.17	%	8.68	%	4.00	%	—
Tier I capital (to quarterly average assets)*	8.39		8.44		4.00		—
Total capital (to risk-weighted assets)	11.10		11.71		8.00		—
Union Bank of California:
Tier I capital (to risk-weighted assets)	9.62	%	8.46	%	4.00	%	6.00	%
Tier I capital (to quarterly average assets)*	8.78		8.25		4.00		5.00
Total capital (to risk-weighted assets)	10.59		10.69		8.00		10.00

* Excludes certain intangible assets.

Management believes that, as of December 31, 2006 and June 30, 2007, UnionBanCal Corporation and Union Bank of California met all capital adequacy requirements to which they are subject.

As of December 31, 2006, OCC categorized Union Bank of California as “well-capitalized.” To be categorized as “well capitalized,” Union Bank of California must maintain minimum total risk-based, Tier I risk-based and Tier I leverage capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed Union Bank of California’s category.

Off-balance-sheet Arrangements

In the normal course of our business, we engage in several types of off-balance-sheet arrangements to meet the financing needs of our customers, including various types of guarantees, commitments to extend credit and commercial letters of credit. The following table summarizes these commitments at March 31, 2007:

	Amount of commitment by expiration period
	Less than 1 year		1-5 years		Over 5 years		Total
	(in billions)
Guarantees:
Standby letters of credit and financial guarantees	¥	2,293	¥	1,649	¥	1,590	¥	5,532
Performance guarantees		1,365		668		75		2,108
Derivative instruments		22,242		17,719		3,122		43,083
Other		814		1		5		820
Total guarantees		26,714		20,037		4,792		51,543
Other off-balance-sheet instruments:
Commitments to extend credit		43,631		11,027		1,565		56,223
Commercial letters of credit		834		8		—		842
Other		3		6		2		11
Total other off-balance-sheet instruments		44,468		11,041		1,567		57,076
Total	¥	71,182	¥	31,078	¥	6,359	¥	108,619

See note 25 to our consolidated financial statements for a description of the nature of our guarantees and other off-balance-sheet instruments.

91

The contractual amounts of these guarantees and other off-balance-sheet instruments represent the amounts at risk should the contracts be fully drawn upon with a subsequent default by our customer and a decline in the value of the underlying collateral. Because many of these commitments expire without being drawn upon, the total contractual or notional amounts of these commitments do not necessarily represent our future cash requirements. At March 31, 2007, approximately 65% of these commitments will expire within one year, 29% from one year to five years and 6% after five years. Such risks are monitored and managed as a part of our risk management system as set forth in “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.” In addition, in accordance with SFAS No. 5, we evaluate off-balance-sheet arrangement in the manner described in note 1 to our consolidated financial statements.

In the aggregate, the income generated from fees and commissions is one of our most important sources of revenue. Such income amounted to ¥847.7 billion during the fiscal year ended March 31, 2007, accounting for approximately 69% of our non-interest income which amounted to ¥1,220.5 billion for the fiscal year. However, the fees generated specifically from off-balance-sheet arrangements are not a dominant source of our fees and commissions.

Some of our off-balance-sheet arrangements are related to activities of special purpose entities, most of which are VIEs.

The table immediately below presents, by type of VIE, the total assets of non-consolidated VIEs and the maximum exposures to non-consolidated VIEs at March 31, 2006 and 2007.

The total assets of non-consolidated VIEs and the maximum exposure to non-consolidated VIEs at March 31, 2006 have been restated. For further information, see note 26 to our consolidated financial statements.

	2006				2007
Non-Consolidated VIEs	Assets (Restated)		Maximum exposure (Restated)		Assets		Maximum exposure
	(in billions)
Asset-backed commercial paper conduits	¥	20,716.5	¥	1,822.7	¥	38,435.6	¥	2,399.4
Securitization conduits of client properties		1,617.1		479.4		2,049.3		518.0
Investment funds		52,708.3		1,207.8		57,870.7		1,401.4
Special purpose entities created for structured financing		22,183.8		1,434.4		24,883.4		1,694.8
Repackaged instruments		66,140.8		979.6		88,634.7		2,168.9
Others		9,029.4		1,180.6		11,238.9		1,280.4
Total	¥	172,395.9	¥	7,104.5	¥	223,112.6	¥	9,462.9

Off-balance-sheet arrangements include the following types of special purpose entities:

Asset-backed Commercial Paper Conduits

We administer several multi-seller finance entities (primarily commercial paper conduits) that purchase financial assets, primarily pools of receivables, from third-party customers. The assets purchased by these conduits are generally funded by issuing commercial paper to and/or by borrowings from us or third parties. While customers basically continue to provide servicing for the transferred trade receivables, we underwrite, distribute, make a market in commercial paper issued by the conduits, and also provide liquidity and credit support facilities to the entities.

Securitization Conduits of Client Properties

We administer several conduits that acquire client assets, primarily real estate, from third-party customers (“property sellers”) with the property sellers continuing to use the acquired real estate through lease-back

92

agreements. The equity of the conduits is provided by the property sellers but such equity holders have no ability to make decisions about the activities of the conduits. Thus, we consider those conduits to be VIEs. The assets acquired by these conduits are generally funded by borrowings from us or third parties.

Investment Funds

We hold investments and loans in various investment funds that collectively invest in equity and debt securities including listed Japanese securities and investment grade bonds and, to a limited extent, securities and other interests issued by companies, including those in a start-up or restructuring stage. Such investment funds are managed by investment advisory companies or fund management companies that make investment decisions and administer the funds.

We occasionally sell assets such as nonperforming loans to these funds, in particular the Corporate Recovery Fund, when we believe that such sale may improve our asset quality.

Corporate Recovery Fund.    We have non-controlling equity interests in corporate recovery funds whose principal business purpose is to generate profits by investing in companies in the process of restructuring and then, typically, to sell these investments after the companies complete their restructurings. Such funds purchase nonperforming loans from us or others and in some cases acquire majority ownership in the borrower companies by means of a debt-for-equity swap. Our non-voting interests in these funds amounted to ¥31.4 billion at March 31, 2006 and ¥20.3 billion at March 31, 2007, respectively. In addition, at March 31, 2007, we had commitments to make additional contributions of up to ¥11.8 billion to these funds.

We sold to corporate recovery funds nonperforming loans with an aggregate net book value of ¥4.1 billion for ¥1.3 billion during the fiscal year ended March 31, 2006 and an aggregate net book value of ¥1.7 billion for ¥0.3 billion during the fiscal year ended March 31, 2007. For a detailed discussion on additional provisions for credit losses associated with the sale of such loans, see “Item 5.B. Liquidity and Capital Resources—Financial Condition—Allowance for Credit Losses, Nonperforming and Past Due Loans.”

Venture Capital Fund.    We own non-controlling equity interests in investment funds managed by fund management companies who have discretionary investment powers. These funds seek to invest in start-up companies or companies that are rapidly developing. We made contributions to these funds amounting to ¥644.2 billion at March 31, 2007. At March 31, 2007, in accordance with the applicable limited partnership agreements, we had commitments to make additional contributions of up to ¥177.8 billion when required by the fund management companies.

Investment Trust.    We purchase the share units of investment trusts as mid-to long-term investments. These investment trusts are managed by investment advisory companies with the objective of investing in a diversified portfolio consisting of equity and debt securities, primarily shares of Japanese public companies.

Generally, we are not obligated to invest in or extend funds by purchasing additional share units and our off-balance-sheet exposures or commitments relating to this type of special purpose entity were not material.

Special Purpose Entities Created for Structured Financing

We extend non-recourse asset-backed loans to special purpose entities, which hold beneficial interests in real properties, to provide financing for special purpose projects including real estate development and natural resource development managed by third parties.

We generally act as a member of a lending group and do not have any equity investment in the entities, which is typically provided by project owners. For most of these financings, the equity provided by the project owners is of sufficient level to absorb expected losses, while expected returns to the owners are arranged to be

93

the most significant among all returns. Accordingly, we determined that we are not the primary beneficiary of most of these entities. However, in transactions with entities whose investments at risk are exceptionally thin, where we provide most of the financing, we are ultimately required to consolidate this type of entity.

Repackaged Instruments

We have two types of relationships with special purpose entities that repackage financial instruments to create new financial instruments.

We provide repackaged instruments with features that meet customers’ needs and preferences through special purpose entities. We purchase financial instruments such as bonds and transfer them to special purpose entities which then issue new instruments. The special purpose entities may enter into derivative transactions including interest rate and currency swaps with us or other financial institutions to modify the cash flows of the underlying financial instruments. We underwrite and market the new instruments issued by the special purpose entities to our customers.

We also invest in repackaged instruments arranged and issued by third parties.

Other Type of VIEs

We are also a party to other types of VIEs including special purpose entities created to hold assets on our behalf as an intermediary.

We identified borrowers that were determined to be VIEs due to an insufficient level of equity. We determined that we are not the primary beneficiary of most of these borrowers because of our limited exposure as a lender to such borrowers. Such borrowers engage in diverse business activities of various sizes in industries such as manufacturing, distribution, construction and real estate development, independently from us.

Contractual Cash Obligations

In the normal course of our business, we enter into contractual agreements whereby we commit to future purchases of products or services from unaffiliated parties. The following table shows a summary of our contractual cash obligations at March 31, 2007:

	Payments due by period
	Less than 1 year		1-3 years		3-5 years		Over 5 years		Total
	(in billions)
Contractual cash obligations:
Time deposits	¥	38,574	¥	5,283	¥	989	¥	122	¥	44,968
Long-term debt		1,765		2,942		2,691		4,695		12,093
Capital lease obligations		48		94		23		5		170
Operating leases		32		50		25		37		144
Purchase obligations		5		5		12		97		119
Total*	¥	40,424	¥	8,374	¥	3,740	¥	4,956	¥	57,494

* The total amount of expected future pension payments is not included in the above table or the total amount of commitments outstanding at March 31, 2007 as such amount is not currently determinable. We expect to contribute approximately ¥52.6 billion to the plan assets for the pension benefits and other benefits for our employees for the fiscal year ending March 31, 2008.

Purchase obligations include any legally binding contractual obligations that require us to spend more than ¥100 million annually under the contract. Purchase obligations in the table primarily include commitments to make investments into corporate recovery or private equity investment funds.

94

Non-exchange Traded Contracts Accounted for at Fair Value

The use of non-exchange traded or over-the-counter contracts provides us with the ability to adapt to the varied requirements of a wide customer base while mitigating market risks. Non-exchange traded contracts are accounted for at fair value, which is generally based on pricing models or quoted market prices for instruments with similar characteristics. Gains or losses on non-exchange traded contracts are included in “Trading account profits—net” in our consolidated statements of income. The following table summarizes the changes in fair value of non-exchange traded contracts for the fiscal years ended March 31, 2006 and 2007:

	Fiscal years ended March 31,
	2006			2007
	(in millions)
Net fair value of contracts outstanding at beginning of fiscal year	¥	29,823		¥	980
Changes attributable to contracts realized or otherwise settled during the fiscal year		(3,389	)		2
Fair value of new contracts when entered into during the fiscal year		983			2,694
Deconsolidation of Mitsubishi Securities		(26,472	)		—
Other changes in fair value, principally revaluation at end of fiscal year		35			(317	)
Net fair value of contracts outstanding at end of fiscal year	¥	980		¥	3,359

During the fiscal year ended March 31, 2007, the fair value of non-exchange traded contracts increased primarily due to an increase in the fair value of new credit default swap contracts for the purpose of hedging our credit risks of the loan portfolio.

The following table summarizes the maturities of non-exchange traded contracts at March 31, 2007:

	Net fair value of contracts—unrealized gains
	Prices actively quoted		Prices based on models and other valuation methods
	(in millions)
Maturity less than 5 years	¥	—	¥	3,359
Total fair value	¥	—	¥	3,359

C. Research and Development, Patents and Licenses, etc.

Not applicable.

D. Trend Information

See the discussions under Items 5.A. and 5.B. of this Annual Report.

E. Off-balance-sheet Arrangements

See the discussion under “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

F. Tabular Disclosure of Contractual Obligations

See the discussion under “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

G. Safe Harbor

See the discussion under “Forward-Looking Statements.”

95

Item 6. Directors, Senior Management and Employees

A.    Directors and Senior Management

The following table sets forth the members of our board of directors as of July 31, 2007, together with their respective dates of birth and positions. The terms of office of all directors will expire at the close of the ordinary general meeting of shareholders to be held in 2008.

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
Shigemitsu Miki	April 4, 1935	Mr. Miki has served as a Director and Chairman of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as Chairman of Bank of Tokyo-Mitsubishi from June 2004 to December 2005 and as President of Bank of Tokyo-Mitsubishi from June 2000 to June 2004. He served as a board member of Bank of Tokyo-Mitsubishi from April 1996 to December 2005. He has also served as a Director of UnionBanCal Corporation since October 2004, as a Corporate Auditor of Nippon Steel Corporation since June 2005, as a Corporate Auditor of Mitsubishi Motors Corporation and Mitsubishi Corporation since June 2004, and as a Corporate Auditor of Millea Holdings, Inc. since April 2002.
Ryosuke Tamakoshi	July 10, 1947	Mr. Tamakoshi has served as Deputy Chairman and a Director in charge of the Internal Audit & Credit Examination Division of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as Chairman of UFJ Bank from May 2004 to December 2005, as a Deputy President and Senior Executive Officer of UFJ Bank from May 2002 to May 2004 and as a Senior Executive Officer of UFJ Bank from January 2002 to June 2002. He served as a board member of UFJ Bank from June 2002 to December 2005. He has also served as a Director and Chairman of Mitsubishi UFJ Financial Group, Inc. since October 2005 and as a Director of The Kansai Electric Power Company, Incorporated since June 2006.
Nobuo Kuroyanagi	December 18, 1941	Mr. Kuroyanagi has served as a Director and President of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as President of Bank of Tokyo-Mitsubishi from June 2004 to December 2005, as a Deputy President of Bank of Tokyo-Mitsubishi from June 2002 to June 2004 and as a Managing Executive Officer of Bank of Tokyo-Mitsubishi from June 2001 to June 2002. He served as a board member of Bank of Tokyo-Mitsubishi from April 1996 to June 2001 and from June 2002 to December 2005. He has also served as a Director, President and Chief Executive Officer of Mitsubishi UFJ Financial Group, Inc. since October 2005.
Norimichi Kanari	December 4, 1946	Mr. Kanari has served as a Director, a Deputy President and Chief Executive of the Global Business Unit of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a Deputy President of Bank of Tokyo-Mitsubishi May 2005 to December 2005, as a Senior Managing Director from January 2005 to May 2005 and as a Managing Director from June 2001 to December 2004. Mr. Kanari served as a board member of Bank of Tokyo-Mitsubishi from June 1997 to

96

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
		December 2005. He has also served as a Managing Officer and Deputy Group Head of the Integrated Corporate Banking Business Group of Mitsubishi UFJ Financial Group, Inc. since October 2005, as a Director of UnionBanCal Corporation since July 2000 and as Chairman of UnionBanCal Corporation since February 2007.
Katsunori Nagayasu	April 6, 1947	Mr. Nagayasu has served as a Director and a Deputy President in charge of the Business & Systems Integration Division of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a Deputy President of Bank of Tokyo-Mitsubishi from May 2005 to December 2005, as a Senior Managing Director from January 2005 to May 2005, as a Managing Director from June 2002 to December 2004, Managing Director of Mitsubishi Trust Bank from October 2001 to June 2002 and as a Managing Director of Nippon Trust Bank Limited from June 2000 to September 2001. He served as a board member of Bank of Tokyo-Mitsubishi from June 1997 to June 2000 and from June 2002 to December 2005. He has also served as a Director and Deputy President of Mitsubishi UFJ Financial Group, Inc. since June 2006 and as Chief Compliance Officer of Mitsubishi UFJ Financial Group, Inc. since April 2007 and as a Director of Acom Co., Ltd. since June 2006.
Takamune Okihara	July 11, 1951	Mr. Okihara has served as a Director, a Deputy President and Chief Executive of the Corporate Banking Business Unit of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as President and CEO of UFJ Bank from May 2004 to December 2005. He served as a Senior Executive Officer of UFJ Bank from May 2003 to May 2004 and as an Executive Officer of UFJ Bank from January 2002 to May 2003. He has also served as a Managing Officer and Group Head of the Integrated Corporate Banking Business Group of Mitsubishi UFJ Financial Group, Inc. since October 2005.
Ryuichi Murata	April 12, 1948	Mr. Murata has served as a Deputy President of Bank of Tokyo-Mitsubishi UFJ since May 2006, as a board member of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has been in charge of Western Region of Japan since May 2007. He served as a Senior Managing Director of Bank of Tokyo-Mitsubishi UFJ from January 2006 to May 2006. He served as a Managing Director of Bank of Tokyo-Mitsubishi from June 2003 to December 2005, as a Managing Executive Officer of Bank of Tokyo-Mitsubishi from May 2002 to June 2003 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2001 to May 2002. Mr. Murata served as a board member of Bank of Tokyo-Mitsubishi from June 1998 to June 2001 and from June 2003 to December 2005.
Kazuo Sassa	April 7, 1947	Mr. Sassa has served as a Deputy President of Bank of Tokyo-Mitsubishi UFJ since May 2007 and as a board member in charge of Central Region of Japan since January 2006. He served as a Senior Managing Director of Bank of Tokyo-

97

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
		Mitsubishi UFJ from 2006 to May 2007. He served as a Director and Senior Executive Officer of UFJ Bank from May 2004 to December 2005, as a Senior Executive Officer of UFJ Bank from January 2002 to May 2004 and as a Senior Executive Officer of UFJ Holdings, Limited from April 2001 to January 2002. He served as a board member of UFJ Bank from May 2004 to December 2005. He has also served as a Corporate Auditor of Central Finance Co., Ltd. since June 2004.
Takao Kawanishi	November 23, 1948	Mr. Kawanishi has served as a Managing Director of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has been in charge of the Human Resources Division, the Corporate Risk Management Division, the Information Security Management Division and the Credit Policy & Planning Division since April 2007. He served as a Director and Senior Executive Officer of UFJ Bank and as a board member of UFJ Bank from May 2004 to December 2005, as a Senior Executive Officer of UFJ Bank from January 2002 to May 2004 and as an Executive Officer of UFJ Holdings from April 2001 to January 2002.
Sohei Sasaki	February 11, 1950	Mr. Sasaki has served as a Managing Director and Chief Executive of the Global Markets Unit of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a Senior Executive Officer of UFJ Bank from May 2004 to December 2005 and as an Executive Officer of UFJ Bank from May 2003 to May 2004.
Ryusaburo Harasawa	January 30, 1951	Mr. Harasawa has served as a Managing Director and Chief Executive of the Operations and Systems Unit of Bank of Tokyo-Mitsubishi UFJ, and has been in charge of the eBusiness and IT Initiatives Division of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a Managing Director of Bank of Tokyo-Mitsubishi from June 2005 to December 2005, as a Managing Executive Officer of Bank of Tokyo-Mitsubishi from May 2005 to June 2005 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2001 to May 2005. He served as a board member of Bank of Tokyo-Mitsubishi from June 2005 to December 2005. He has also served as a Managing Officer in charge of the Operations & Systems Planning Division of Mitsubishi UFJ Financial Group, Inc. since April 2006.
Nobuyuki Hirano	October 23, 1951	Mr. Hirano has served as a Managing Director in charge of the Corporate Administration Division, the Corporate Planning Division, the Public Relations Division and the Customer Satisfaction Planning Division of Bank of Tokyo-Mitsubishi UFJ since April 2007. He served as a Managing Director of Bank of Tokyo-Mitsubishi from June 2005 to December 2005, as a Managing Executive Officer of Bank of Tokyo-Mitsubishi from May 2005 to June 2005 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2001 to May 2005. He served as a board member of Bank of

98

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
		Tokyo-Mitsubishi from June 2005 to December 2005. He has also served as a Director of Mitsubishi UFJ Financial Group, Inc. since October 2005.
Junichi Itoh	November 26, 1950	Mr. Itoh has served as a Managing Director of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has served as Chief Compliance Officer of Bank of Tokyo-Mitsubishi UFJ since April 2007. He served as a Managing Director of Bank of Tokyo-Mitsubishi from June 2005 to December 2005 and as a board member of Bank of Tokyo-Mitsubishi from June 2005 to December 2005. He served as a Managing Executive Officer from May 2005 to June 2005 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2002 to May 2005. He has also served as a Managing Officer and a Deputy Chief Compliance Officer of Mitsubishi UFJ Financial Group, Inc. since May 2007.
Tetsuya Wada	March 1, 1954	Mr. Wada has served as a Managing Director of Bank of Tokyo-Mitsubishi UFJ since June 2006 and as Chief Executive of the Retail Banking Business Unit of Bank of Tokyo-Mitsubishi UFJ since May 2006. He served as a Managing Executive Officer of Bank of Tokyo-Mitsubishi UFJ from May 2006 to June 2006, as an Executive Officer of Bank of Tokyo-Mitsubishi UFJ from January 2006 to May 2006 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2003 to December 2005. He has also served as a Managing Officer and Group Head of the Integrated Retail Banking Business Group of Mitsubishi UFJ Financial Group, Inc. since May 2006.
Hiroshi Saito	July 13, 1951	Mr. Saito has served as a Director of Bank of Tokyo-Mitsubishi UFJ since June 2007. He served as a Managing Director of Mitsubishi UFJ Trust and Banking from June 2006 to June 2007, as an Executive officer of Mitsubishi UFJ Trust and Banking from October 2005 to June 2006 and as an Executive officer of Mitsubishi Trust Bank from June 2002 to September 2005. He has also served as a Senior Managing Director and Chief Financial Officer of Mitsubishi UFJ Financial Group, Inc. since June 2007.
Kunio Ishihara	October 17, 1943	Mr. Ishihara has served as a Director of Bank of Tokyo-Mitsubishi UFJ since January 2006. He has also served as Chairman of the Board of Millea Holdings, Inc. since June 2007.
Teruo Ozaki	December 29, 1944	Mr. Ozaki has served as a Director of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has practiced as a certified public accountant since November 1974. He served as a Director of UFJ Bank from October 2004 to December 2005, as a Deputy Managing Partner of Asahi & Co. from January 2002 to May 2003, as an Executive Partner of Asahi & Co. from July 1999 to December 2001. He has also served as a Director of Orix Corporation since June 2006, as a Director of Daikyo Incorporated since June 2005, as a

99

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
		Corporate Auditor of Kirin Holdings Company, Limited since March 2004 and as a Corporate Auditor of Tokai Rubber Industries, Ltd. since June 2004.

The following table sets forth our corporate auditors as of July 31, 2007, together with their respective dates of birth and positions.

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
Tatsunori Imagawa	October 15, 1943	Mr. Imagawa has served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since June 2006. He served as Deputy President of Mitsubishi UFJ Financial Group, Inc. from October 2005 to June 2006, as Deputy President of Mitsubishi Tokyo Financial Group from April 2004 to September 2005, as a Senior Managing Director of Mitsubishi Tokyo Financial Group, Inc. from May 2003 to April 2004, as a Director of Mitsubishi Tokyo Financial Group, Inc. from April 2001 to May 2003, as a Senior Managing Director of Bank of Tokyo-Mitsubishi June 2002 to May 2003 and as a Managing Director of Bank of Tokyo-Mitsubishi from May 1997 to June 2002. He has also served as a Corporate Auditor of Mitsubishi UFJ Lease & Finance Company Limited since April 2007.
† Tadashi Yanagisawa	June 10, 1946	Mr. Yanagisawa has served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a Managing Executive Officer of Bank of Tokyo-Mitsubishi from May 2003 to December 2005 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2001 to May 2003.
† Kazuhiko Hasegawa	June 5, 1952	Mr. Hasegawa has served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi from June 2005 to December 2005 and as an Executive Officer of Bank of Tokyo-Mitsubishi from June 2002 to June 2005.
Akira Enomoto	June 1, 1953	Mr. Enomoto has served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since June 2006. He served as an Executive Officer of Bank of Tokyo-Mitsubishi UFJ from January 2006 to June 2006. He served as an Executive Officer of UFJ Bank from September 2004 to December 2005.
‡ Tsutomu Takasuka	February 11, 1942	Mr. Takasuka has served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has practiced as a certified public accountant since April 1967. He served as a full-time Corporate Auditor of Bank of Tokyo-Mitsubishi from October 2004 to December 2005, as a partner at Tohmatsu & Co. from February 1990 to September 2002, and as a partner at Mita Audit Corporation from June 1985 to February 1990. He has also served as a Corporate Auditor of Mitsubishi UFJ Financial Group, Inc. since October 2005 and has been a professor at Bunkyo Gakuin University since April 2004.

100

Name	Date of Birth	Business activities performed inside and outside Bank of Tokyo-Mitsubishi UFJ
† Kotaro Muneoka	October 30, 1940	Mr. Muneoka has served as a Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006. He served as a board member of Hitachi, Ltd. from June 2003 to June 2006 and from June 1997 to June 2001, and as a Corporate Auditor of Hitachi, Ltd. from June 2001 to June 2003. He has also served as Chairman of Hitachi Software Engineering Co., Ltd. since June 2007, as a Director of Hitachi High-Technologies Corporation since June 2005 and as a Director of Hitachi Plant Technologies, Ltd. since April 2006.
† Yoshiharu Hayakawa	February 23, 1948	Mr. Hayakawa has served as a Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has practiced as a certified public accountant since August 1973. He served as a Corporate Auditor of UFJ Bank from September 2005 to December 2005. He has also served as a Director of Mitsui Fudosan Co., Ltd. since June 2007, as a Director of Fancl Corporation since June 2004, as a Corporate Auditor of Komori Corporation since June 2004, as a Corporate Auditor of Pasona Inc. since August 2002, and as a Corporate Auditor of Key Coffee Inc. since June 2000.
‡ Tetsuya Nakagawa	September 24, 1951	Mr. Nakagawa has served as a Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ since January 2006 and has practiced as an attorney-at-law since April 1977. He served as a Corporate Auditor of Bank of Tokyo-Mitsubishi from June 2004 to December 2005. He has also served as a Corporate Auditor of Moritex Corporation since June 1997 and as a Professor at the Law School of Kokugakuin University since April 2004.

‡ Term expires at the close of the ordinary general meeting of shareholders to be held in 2008.

† Term expires at the close of the ordinary general meeting of shareholders to be held in 2009.

Term expires at the close of the ordinary general meeting of shareholders to be held in 2010.

The following table sets forth our managing executive officers as of July 31, 2007, together with their respective dates of birth and positions. The terms of office of all managing executive officers will expire at the close of the ordinary general meeting of shareholders to be held in 2008.

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Kyota Omori	March 14, 1948	Managing Executive Officer, Chief Executive Officer for the Americas	Resident Managing Officer for the Americas of Mitsubishi UFJ Financial Group, Inc. Director of UnionBanCal Corporation.
Yoshiaki Kawamata	May 30, 1950	Managing Executive Officer, Deputy Chief Executive, Global Business Unit
Saburo Sano	May 24, 1949	Managing Executive Officer, Group Head, Nagoya Corporate Banking Group

101

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Tatsuo Tanaka	September 19, 1949	Managing Executive Officer, Deputy Chief Executive, Global Business Unit Chief Executive Officer for Asia and Oceania Executive Officer for China	Director of Dah Sing Financial Holdings Ltd.
Toshiro Toyoizumi	October 26, 1949	Managing Executive Officer, Head, Corporate and Investment Banking Group Head, Corporate Banking Group No.1 Strategic Credit Portfolio Management	Managing Officer of Mitsubishi UFJ Financial Group, Inc. Deputy Group Head of Integrated Corporate Banking Business Group
Tamotsu Kokado	November 8, 1950	Managing Executive Officer, Corporate Banking, Central Region of Japan
Takashi Hara	August 24, 1951	Managing Executive Officer, Corporate Banking, Western Region of Japan
Nobushige Kamei	November 20, 1952	Managing Executive Officer, Group Head, Corporate Banking Group No.2
Takashi Morimura	June 5, 1952	Managing Executive Officer, Chief Executive Officer for Europe, Middle East & Africa
Tadashi Shiraishi	February 17, 1953	Managing Executive Officer, Corporate Banking Credit, International Credit, Investment Banking Credit
Takashi Nagaoka	March 3, 1954	Managing Executive Officer, Public & Institutional Business, Financial Institutions
Kiyoshi Sono	April 18, 1953	Managing Executive Officer, Group Head, Osaka Corporate Banking Group
Jun Sato	October 26, 1951	Managing Executive Officer, Deputy Chief Executive Officer for the Americas	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Corporate Governance Division for the United States
Akihiko Minato	October 16, 1953	Managing Executive Officer, Corporate Banking Credit, International Credit, Investment Banking Credit

102

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Takashi Kimura	September 1, 1954	Managing Executive Officer, Corporate Banking, Eastern Region of Japan Head, Transaction Banking Corporate Banking Business Promotion, Small & Medium Enterprise Banking
Takeshi Ogasawara	August 1, 1953	Managing Executive Officer, Deputy Head, Corporate and Investment Banking Trust Business
Masaaki Tanaka	April 1, 1953	Managing Executive Officer	Director, President and Chief Executive Officer of UnionBanCal Corporation
Yoshitsugu Yokogoshi	November 16, 1953	Managing Executive Officer, Deputy Chief Executive, Retail Banking Business Unit

The following table sets forth our executive officers as of July 31, 2007, together with their respective dates of birth and positions. The terms of office of all executive officers will expire at the close of the ordinary general meeting of shareholders to be held in 2008.

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Takehiko Nemoto	August 20, 1953	Executive Officer, General Manager of Systems Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Operations & Systems Planning Division
Toshiaki Arai	February 1, 1954	Executive Officer, General Manager of Nihonbashi Commercial Banking Office
Akira Kamiya	September 16, 1953	Executive Officer, General Manager of Global Planning Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Global Planning Division of Integrated Corporate Banking Business Group
Takeo Sato	February 26, 1954	Executive Officer, General Manager of Osaka Corporate Banking Division No.4
Minoru Shimada	February 22, 1955	Executive Officer, General Manager of New York Branch General Manager of Cayman Branch	President & Chief Executive Officer of Bank of Tokyo-Mitsubishi UFJ Trust Company

103

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Hitoshi Suzuki	January 8, 1954	Executive Officer, General Manager of Strategic Credit Portfolio Management Division
Hidekazu Fukumoto	November 6, 1955	Executive Officer, General Manager of Corporate Business Planning Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Corporate Business Planning Division of Integrated Corporate Banking Business Group
Ichiro Hamakawa	February 6, 1956	Executive Officer, General Manager, Business & Systems Integration Division
Muneo Kurauchi	July 17, 1954	Executive Officer, General Manager of Internal Audit & Credit Examination Division
Yoshiaki Masuda	December 6, 1954	Executive Officer, Retail Banking, Central Region of Japan	Executive Officer of branches of Central Japan, Integrated Retail Banking Business Group of Mitsubishi UFJ Financial Group, Inc.
Takashi Morisaki	January 1, 1955	Executive Officer, General Manager of Corporate & Investment Banking Business Development Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Corporate & Investment Banking Planning Division of Integrated Corporate Banking Business Group
Takashi Muraoka	January 31, 1954	Executive Officer, General Manager of Jakarta Branch
Shigenobu Tokuoka	September 17, 1955	Executive Officer, Retail Banking, Western Region of Japan	Executive Officer of branches of Western Japan, Integrated Retail Banking Business Group of Mitsubishi UFJ Financial Group, Inc.
Hiroshi Akiyama	August 3, 1956	Executive Officer, General Manager of Corporate Banking Division No.2
Yoshihiro Hashimoto	December 19, 1956	Executive Officer, General Manager of Retail Branch Management Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Retail Branch Management Division of Integrated Retail Banking Business Group

104

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Shigeyasu Kobayashid	August 16, 1954	Executive Officer, General Manager of International Treasury and Investment Division
Kanetsugu Mike	November 4, 1956	Executive Officer, General Manager of Business & Systems Integration Division
Masashi Oka	July 11, 1955	Executive Officer	Director and Vice Chairman of UnionBanCal Corporation
Takashi Oyamada	November 2, 1955	Executive Officer, General Manager of Corporate Planning Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. Co-General Manager of Corporate Planning Division
Hidenobu Fujii	November 29, 1955	Executive Officer, General Manager of Retail Operations Planning Division
Haruo Hayashi	April 17, 1956	Executive Officer, General Manager of Nihonbashi-Chuo Commercial Banking Office
Mikiyasu Hiroi	September 21, 1955	Executive Officer, Retail Banking, Eastern Region of Japan	Executive Officer of branches of Eastern Japan, Integrated Retail Banking Business Group of Mitsubishi UFJ Financial Group, Inc.
Yoshihiko Kasuya	October 16, 1955	Executive Officer, General Manager of Kyoto Commercial Banking Office
Makoto Motooka	April 19, 1956	Executive Officer	Deputy President of Bank of Tokyo-Mitsubishi UFJ (China), Ltd. General Manager of Shanghai Branch of Bank of Tokyo-Mitsubishi UFJ (China), Ltd.
Akihiko Sasaki	October 16, 1956	Executive Officer, General Manager of Shinjuku Corporate Banking Division
Akihiko Kagawa	October 6, 1955	Executive Officer, General Manager of Global Markets Sales & Trading Division
Yasuhiro Maeda	August 8, 1957	Executive Officer, General Manager of Corporate Banking Division No.6

105

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Takami Onodera	April 4, 1957	Executive Officer, General Manager of Credit Policy & Planning Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Credit & Investment Management Division
Tadachiyo Osada	October 26, 1956	Executive Officer, General Manager of Retail Banking Planning Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Retail Business Planning Division of Integrated Retail Banking Business Group
Fumio Sato	November 22, 1953	Executive Officer, General Manager of Corporate Banking Business Promotion Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Corporate Business Development Division of Integrated Corporate Banking Business Group
Hirokazu Yanaoka	November 5, 1953	Executive Officer	President of Bank of Tokyo-Mitsubishi UFJ (China), Ltd.
Masaaki Yoshida	May 26, 1954	Executive Officer for Kyusyu	Executive Officer for Kyusyu of Mitsubishi UFJ Financial Group, Inc.
Takeshi Ashizaki	February 9, 1958	Executive Officer, General Manager of IT & Payment Solution Division
Hideaki Fujizuka	September 1, 1955	Executive Officer, General Manager of Corporate Administration Division
Hiroshi Iizumi	March 6, 1958	Executive Officer, General Manager of Market Business Development Division
Shoji Nakano	November 1, 1957	Executive Officer, General Manager of Corporate Banking Division No.5
Hiroshi Sato	January 2, 1958	Executive Officer, General Manager of Credit Division
Takehiko Yamana	January 26, 1956	Executive Officer, General Manager of Nagoya Corporate Banking Division No.2

106

Name	Date of birth	Positions at Bank of Tokyo-Mitsubishi UFJ	Positions outside Bank of Tokyo-Mitsubishi UFJ
Saburo Araki	August 6, 1957	Executive Officer, General Manager of Human Resources Division
Katsumi Hatao	September 12, 1957	Executive Officer, General Manager of Corporate Risk Management Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. General Manager of Corporate Risk Management Division
Satoshi Murabayashi	November 8, 1958	Executive Officer, General Manager, Systems Division	Executive Officer of Mitsubishi UFJ Financial Group, Inc. Co-General Manager of Operations & Systems Planning Division President of UFJ & Hitachi Systems Co., Ltd.
Eiichi Yoshikawa	July 14, 1956	Executive Officer, Regional Head for Hong Kong, General Manager of Hong Kong Branch

B.    Compensation

The aggregate amount of remuneration, including bonuses but excluding retirement allowances, paid by BTMU and our subsidiaries during the fiscal year ended March 31, 2007 to our directors and corporate auditors was ¥576 million.

Prior to June 27, 2007, in accordance with customary Japanese practice, when a director or corporate auditor retired, a proposal to pay a retirement allowance was submitted at the general meeting of shareholders for approval. The retirement allowance consisted of a one-time payment of a portion of the allowance paid at the time of retirement and period in payments of the remaining amount for a prescribed number of years. After the shareholders’ approval was obtained, the retirement allowance for a director or corporate auditor was fixed by the board of directors or by consultation among the corporate auditors in accordance with our internal regulations and practice and generally reflected the position of the director or corporate auditor until the time of retirement, the length of his service as a director or corporate auditor and his contribution to our performance. We did not set aside reserves for any retirement payments for directors and corporate auditors. During the fiscal year ended March 31, 2007, we paid an aggregate of ¥542 million as a retirement allowance to our directors and corporate auditors who have retired from their respective positions held at BTMU, or, if such directors and corporate auditors concurrently held positions at BTMU’s subsidiaries, who have retired from such positions.

BTMU has elected to discontinue its practice of paying its directors and corporate auditors retirement allowances as of June 27, 2007. BTMU, however, obtained a one-time shareholders’ approval on June 27, 2007 for retirement allowances for the current directors and corporate auditors other than those elected at the most recent shareholders’ meeting. The current directors and corporate auditors other than those elected at the most recent shareholder meeting will be paid up to an aggregate amount of ¥2.5 billion in the future at the time of their retirement, of which we recognized ¥2.4 billion as an expense for the fiscal year ended March 31, 2007.

In collaboration with MUFG, BTMU has established a stock-based compensation plan under which its directors and corporate auditors will be offered stock options to acquire shares of MUFG common stock. The

107

plan was approved by MUFG’s general meeting of shareholders’ held on June 28, 2007. The exercise price will be set at ¥1 per share. The options are expected to be sold at a price determined based on the fair value of the stock options to be offered. The purchase price of the stock option will be offset against the remuneration to be paid to the purchasing director and corporate auditor. The duly authorized officer of MUFG will determine the exercise period not exceeding 30 years from the date on which the stock option is issued as well as other terms of the stock options.

C.    Board Practices

Our Articles of Incorporation provide that the number of directors shall not exceed 20 and that the number of corporate auditors shall not exceed eight. Our shareholders elect directors usually at our ordinary general meeting of shareholders for one-year terms. Our shareholders also elect corporate auditors usually at our ordinary general meeting of shareholders for four-year terms.

We currently have 17 directors, including three outside directors. Our board of directors has ultimate responsibility for the administration of our affairs. Our board of directors is empowered to appoint by resolution representative directors from among the directors who may represent us severally. Our board of directors may also appoint from their members by resolution a chairman, a deputy chairman, a president, deputy presidents, senior managing directors and managing directors. Deputy presidents assist the president. Senior managing directors and the managing directors assist the president and deputy presidents, if any, in the management of our day-to-day business.

There are no contracts between any of our directors and us providing for benefits upon termination of their employment.

Under the Company Law, directors must refrain from engaging in any business that is in competition with us unless approved by a board resolution, and no director may vote on a proposal, arrangement or contract in which that director is deemed to be materially interested.

Neither the Company Law nor our Articles of Incorporation contain special provisions as to the borrowing power exercisable by a director, to the retirement age of our directors and corporate auditors or to a requirement of our directors and corporate auditors to hold any shares of our capital stock.

The Company Law requires a resolution of the board of directors for a company to determine the execution of important businesses, to acquire or dispose of material assets, to borrow substantial amounts of money, to employ or discharge executive officers and other important employees, to float bonds, to establish internal control systems and to establish, change or abolish material corporate organizations, such as a branch office.

Under the Company Law, the total amount of compensation, bonus, etc. for directors must be resolved at the shareholder’s meetings, though a director may vote on the actual amount of compensation for him or herself or for any other member of the board of directors.

We currently have eight corporate auditors, including four outside corporate auditors. Our corporate auditors, who are not required to be certified public accountants, have various statutory duties, including principally:

• the examination of the financial statements, business reports, proposals and other documents which our board of directors prepares and submits to a general meeting of shareholders;

• the examination of our directors’ administration of our affairs; and

• the preparation and submission of a report on their examination to a general meeting of shareholders.

The Company Law permits two types of governance systems for large companies. The first system is for companies with audit, nomination and compensation committees and the other is for companies with corporate auditors. In accordance with the Company Law, we have elected to adopt a corporation governance system based

108

on corporate auditors. If a company has corporate auditors, it is not obliged to have any audit, nomination and compensation committees. In addition, a foreign private issuer that has a board of auditors similar to our board of corporate auditors is not required to have an audit committee pursuant to Rule 10A-3 under the Exchange Act. In an effort to further enhance our corporate governance, however, we have voluntarily established our internal audit and compliance committee. Likewise, a company is not obliged to have any outside directors if it has corporate auditors. Although we have adopted a board of corporate auditors, we have three outside directors as a part of our efforts to further enhance our corporate governance.

Our corporate auditors are obliged to attend meetings of our board of directors, and to make statements at the meetings if they deem necessary, although they are not entitled to vote at the meetings. Our corporate auditors comprise the board of corporate auditors, which determines matters relating to the performance of audits. The Company Law provides that a company that has or is required to have a board of corporate auditors must have three or more corporate auditors, and at least half of the corporate auditors must be outside corporate auditors. An outside auditor is defined as a person who has not served as a director, account assistant, corporate executive officer (shikkoyakuin), manager or any other type of employee of the company or any of its subsidiaries prior to his or her appointment. In a company that has or is required to have a board of corporate auditors, one or more of the corporate auditors must be designated by the board of corporate auditors to serve on a full-time basis.

In order to encourage various “outsider’s viewpoints”, enhance corporate governance, and ensure sufficient independence of internal audit activities from our business operations, our Internal Audit and Compliance Committee deliberates important matters relating to internal audit and compliance, and reports its activities to the board of directors monthly. The committee is comprised mainly of outside directors and external specialists. The Internal Audit & Credit Examination Division is the secretariat for this committee.

For additional information on our board practices, see “Item 6.A. Directors, Senior Management and Employees—Directors and Senior Management.”

D.    Employees

As of March 31, 2007, we had approximately 60,100 employees, compared to approximately 60,400 as of March 31, 2006 and 36,500 as of March 31, 2005. In addition, as of March 31, 2007, we had approximately 36,100 part-time and temporary employees. The following tables show the percentages of our employees in our different business units and geographically, as of March 31, 2007. Most of our employees are members of our employee’s union, which negotiates on behalf of employees in relation to remuneration and working conditions.

Business unit
Retail Banking Business Unit	35	%
Corporate Banking Business Unit	17
Global Business Unit	30
Global Markets Unit	1
Operations and Systems Unit	11
Corporate Center/Independent Divisions	6
	100	%
Location
Japan	68	%
United States of America	21
Europe	2
Asia/Oceania excluding Japan	8
Other areas	1
	100	%

E.    Share Ownership

All of our outstanding shares of common stock and preferred stock are directly or indirectly owned by Mitsubishi UFJ Financial Group, Inc.

109

Item 7. Major Shareholders and Related Party Transactions.

A.    Major Shareholders

Common Stock

All of our issued shares of common stock are directly or indirectly owned by Mitsubishi UFJ Financial Group, Inc. The holders of our common stock appearing on the register of shareholders as of March 31, 2007, and the number and the percentage of such shares held by them, were as follows:

Name	Number of shares held	Percentage of total shares in issue
Mitsubishi UFJ Financial Group, Inc.(1)	10,251,161,942	99.93	%
Mitsubishi UFJ Trust and Banking(1)(2)	6,800,000	0.07
Total	10,257,961,942	100.00

Notes:

(1) Japanese resident

(2) A wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.

Preferred Shares

All of our issued preferred shares have no voting rights except as otherwise provided by law or by other provisions of our Articles of Incorporation. The holders of our preferred shares appearing on the register of shareholders as of March 31, 2007, and the number and the percentage of such shares held by them, were as follows:

First series class 2 preferred shares

Name	Number of shares held	Percentage of total shares in issue
Mitsubishi UFJ Financial Group, Inc.	100,000,000	100.00	%
Total	100,000,000	100.00

First series class 3 preferred shares

Name	Number of shares held	Percentage of total shares in issue
Mitsubishi UFJ Financial Group, Inc.	17,700,000	65.56	%
Bank of Tokyo-Mitsubishi UFJ (treasury stocks)	9,300,000	34.44
Total	27,000,000	100.00

First series class 4 preferred shares

Name	Number of shares held	Percentage of total shares in issue
Bank of Tokyo-Mitsubishi UFJ (treasury stocks)	79,700,000	100.00	%
Total	79,700,000	100.00

First series class 5 preferred shares

Name	Number of shares held	Percentage of total shares in issue
Bank of Tokyo-Mitsubishi UFJ (treasury stocks)	150,000,000	100.00	%
Total	150,000,000	100.00

110

B.    Related Party Transactions

We had, and expect to have in the future, banking transactions and other transactions in the ordinary course of business with our related parties. Although for the fiscal year ended March 31, 2007, such transactions included, but were not limited to, call money, loans, electronic data processing, leases and management of properties, those transactions were immaterial, and were made at prevailing market rates, terms and conditions and do not involve more than the normal risk of collectibility or present other unfavorable features. In addition, we enter into various arrangements with Mitsubishi UFJ Trust and Banking, our affiliate, which, like us, is a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, Inc.

None of our directors, executive officers or corporate auditors, and none of the close members of their respective families, has had any transactions or has any presently proposed transactions that are material or any transactions that are unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were, are or will be, a party.

No loans have been made to our directors or corporate auditors other than in the normal course of business, on normal commercial terms and conditions. In addition, since July 2002, no loans have been made to our directors or corporate auditors other than as permitted under Section 13(k) of the U.S. Securities Exchange Act and Rule 13k-1 promulgated thereunder.

No family relationship exists among any of our directors or corporate auditors. No arrangement or understanding exists between any of our directors or corporate auditors and any other person pursuant to which any director or corporate auditor was elected to their position with us.

We adopted a stock-based compensation plan for our directors, corporate auditors and executive officers pursuant to the approval of our shareholders effective as of June 27, 2007. We have also elected to discontinue the practice of paying our directors, corporate auditors and executive officers retirement allowances as of June 27, 2007. See “Item 6.B. Compensation” for additional information on the stock-based compensation plan and retirement allowances for directors and corporate auditors.

Under the stock-based compensation plan, our directors, corporate auditors and executive officers will be offered stock options to acquire shares of MUFG common stock. We will purchase the stock options from MUFG at the fair value of the stock options up to an amount to be determined by our board of directors in the future. As a result of the 1,000-to-one stock split of MUFG common stock to take effect on September 30, 2007, the number of shares to be acquired upon the exercise of a stock option will be adjusted. The options are expected to be sold at a price determined based on the fair value of the stock options to be offered. The purchase price of the option will be offset against the remuneration to be paid to the purchasing director, corporate auditor or executive officer. The exercise price is expected to be set at ¥1 per share. The duly authorized officer of MUFG will determine the exercise period not exceeding 30 years from the date on which the stock option is issued as well as other terms of the stock options.

C.    Interests of Experts and Counsel

Not applicable

Item 8. Financial Information.

A.    Consolidated Statements and Other Financial Information

The information required by this item is set forth in our consolidated financial statements starting on page F-1 of this Annual Report and in “Selected Statistical Data” starting on page A-1 of this Annual Report.

111

Legal Proceedings

From time to time, we are involved in various litigation matters. Based on our current knowledge and consultation with legal counsel, we believe the current litigation matters, when ultimately determined, will not have a material adverse effect on our results of operations and financial position.

Distributions

Our board of directors submits a recommendation for an annual dividend for our shareholders’ approval at the ordinary general meeting of shareholders customarily held in June of each year. The annual dividend is usually distributed immediately following shareholders’ approval to holders of record at the end of the preceding fiscal year. In addition to annual dividends, we may make cash distributions by way of interim dividends to shareholders of record as of September 30 of each year from our retained earnings as of the end of the preceding fiscal year by resolution of our board of directors. For the fiscal year ended March 31, 2007, we declared an annual dividend of ¥46.32 per share of common stock, composed of a year-end dividend of ¥15.36 per share and an interim dividend of ¥30.96 per share. We also declared an annual dividend of ¥75.90 per share of preferred stock for the fiscal year ended March 31, 2007, composed of a year-end dividend of ¥37.95 per share and an interim dividend of ¥37.95 per share.

See “Item 10.B. Memorandum and Articles of Association” for additional information on our dividend policy.

B.    Significant Changes

Other than as described in this Annual Report, no significant changes have occurred since the date of our consolidated financial statements included in this Annual Report.

Item 9. The Offer and Listing.

A.    Offer and Listing Details

All of our outstanding shares of common stock are owned by Mitsubishi UFJ Financial Group, Inc.

B.    Plan of Distribution

Not applicable.

C.    Markets

Not Applicable.

D.    Selling Shareholders

Not applicable.

E.    Dilution

Not applicable.

F.    Expenses of the Issue

Not applicable.

112

Item 10. Additional Information.

A.    Share Capital

Not applicable.

B.    Memorandum and Articles of Association

Our Corporate Purpose

Article 2 of our Articles of Incorporation provides that our corporate purpose is to carry on the following businesses:

(1) To accept deposits and installment savings, to extend loans, to discount bills and notes and to engage in exchange transactions;

(2) To guarantee obligations of others, to accept bills and notes and to engage in any other business incidental to the banking purposes listed in the preceding clause (1);

(3) To underwrite, to conduct offerings for the subscription and sale of, to buy and sell, and to engage in any other business with respect to, government bonds, municipal bonds, government-guaranteed bonds and any other securities;

(4) To engage in, in addition to the business enumerated in any of the preceding clauses, all business that a bank is permitted to engage in under the Banking Law, the Secured Bonds Trust Law, the Law on Recording of Bonds or any other applicable law; and

(5) To engage in any other matters incidental to, or in connection with the businesses mentioned in any of the preceding clauses.

Board of Directors

For discussion of the provisions of our Articles of Incorporation as they apply to our directors, see “Item 6.C. Directors, Senior Management and Employees—Board Practices.”

Common Stock

We summarize below the material provisions of our Articles of Incorporation, our share handling regulations and the Company Law as they relate to a type of joint stock companies, within which we fall. Because it is a summary, this discussion should be read together with our Articles of Incorporation and share handling regulations, which have been filed as exhibits to this Annual Report.

General

A joint stock company is a legal entity incorporated under the Company Law. The investment and rights of the shareholders of a joint stock company are represented by shares of stock in the company and shareholders’ liability is limited to the amount of the subscription for the shares.

As of July 31, 2007, our authorized common share capital was 15,000,000,000 shares of common stock with no par value, and a total of 10,257,961,942 shares of common stock were issued. Each of the shares issued and outstanding is fully paid and non-assessable.

We may issue shares from our authorized but unissued share capital following a resolution to that effect by our board of directors. An increase in our authorized share capital is only possible by amending of our Articles of Incorporation, which generally requires shareholders’ special approval.

113

In order to assert shareholders’ rights against us or to transfer our shares, a shareholder must have its name and address registered on our register of shareholders, in accordance with the Company Law and our share handling regulations.

We do not issue share certificates.

Dividends

Dividends are distributed in proportion to the number of shares owned by each shareholder on the record date for the dividend. Dividends for each financial period may be distributed following shareholders’ approval at a general meeting of shareholders.

Payment of dividends on common stock is subject to the preferential dividend rights of holders of preferred stock.

Under the Banking Law and our Articles of Incorporation, our financial accounts are closed on March 31 of each year, and dividends, if any, are paid to shareholders of record as of March 31 following shareholders’ approval at a general meeting of shareholders. In addition to year-end dividends, our board of directors may by resolution declare an interim cash dividend to shareholders of record as of September 30 of each year. Under the Company Law, distribution of dividends will take the form of distribution of surplus (as defined below). We will be permitted to make distributions of surplus to our shareholders any number of times per fiscal year pursuant to resolutions of our general meetings of shareholders, subject to certain limitations described below. Distributions of surplus are in principle required to be authorized by a resolution of a general meeting of shareholders. We would, however, be permitted to make distributions of surplus in cash to our shareholders by resolutions of the board of directors once per fiscal year as mentioned above concerning interim cash dividend.

Under the Company Law, distributions of surplus may be made in cash or in kind in proportion to the number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders or our board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general meeting of shareholders or (as the case may be) our board of directors, grant to our shareholders the right to require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders (see the description of a “special resolution” in “—Voting Rights”).

Under the Company Law, we may make distribution of surplus to the extent that the aggregate book value of the assets to be distributed to shareholders does not exceed the distributable amount (as defined below) as of the effective date of such distribution of surplus. The amount of surplus (the “surplus”) at any given time shall be the amount of our assets and the book value of our treasury stock after subtracting the amounts of items (1) through (5) below as they appear on our non-consolidated balance sheet as of the end of our last fiscal year, and after reflecting the changes in our surplus after the end of our last fiscal year, by adding the amounts of items (6), (7) and (8) below and/or subtracting the amounts of items (9), (10) and (11) below:

(1) our liabilities;

(2) our stated capital;

(3) our additional paid-in capital;

(4) our accumulated legal reserve;

(5) other amounts as are set out in an Ordinance of the Ministry of Justice;

(6) (if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our treasury stock after subtracting the book value thereof;

114

(7) (if we decreased our stated capital after the end of the last fiscal year) the amount of decrease in our stated capital (excluding the amount transferred to additional paid-in capital or legal reserve);

(8) (if we decreased our additional paid-in capital or legal reserve after the end of the last fiscal year) the amount of decrease in our additional paid-in capital or legal reserve (excluding the amount transferred to stated capital);

(9) (if we cancelled our treasury stock after the end of the last fiscal year) the book value of the cancelled treasury stock;

(10) (if we distributed surplus to shareholders after the end of the last fiscal year) the amount of the assets distributed to shareholders by way of such distribution of surplus; and

(11) other amounts as are set out in an ordinance of the Ministry of Justice.

A distributable amount (the “distributable amount”) at any given time shall be the aggregate amount of (a) the surplus, (b) the amount of profit as recorded for the period after the end of our last fiscal year until the date of an extraordinary settlement of account (if any) as is set out in an ordinance of the Ministry of Justice and (c) the transfer price of our treasury stock in the same period, after subtracting the amounts of the following items:

(1) the book value of our treasury stock;

(2) (if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our treasury stock;

(3) the losses recorded for the period after the end of our last fiscal year until the date of an extraordinary settlement of account (if any) as set out in an ordinance of the Ministry of Justice; and

(4) other amounts as set out in an ordinance of the Ministry of Justice.

In Japan, the “ex-dividend” date and the record date for any dividends precede the date of determination of the amount of the dividend to be paid.

Under our Articles of Incorporation, we are not obliged to pay any dividends or interim dividends that are left unclaimed for a period of five years after the date on which they first became payable.

Capital and Reserves

Under the Company Law, we may reduce our additional paid-in capital or legal reserve (without limitation as to the amount of such reduction) as mentioned previously, generally by resolution of a general meeting of shareholders and, if so resolved in the same resolution, may account for the whole or any part of the amount of such reduction as stated capital. We may also reduce our stated capital generally by special resolution of a general meeting of shareholders and, if so resolved in the same resolution, such reduction may account for the whole or any part of the amount of such reduction as additional paid-in capital or legal reserve. In addition, we may reduce our surplus and increase either (i) stated capital or (ii) additional paid-in capital and/or legal reserve by the same amount, in either case by resolution of a general meeting of shareholders.

Stock Splits

Stock splits of our outstanding stock may be effected at any time by resolution of the board of directors. When a stock split is to be effected, we may increase the authorized share capital to cover the number of shares to be increased by the stock split by amending our Articles of Incorporation by resolution of the board of directors without approval by special resolution of the general meeting of shareholders, unless more than one class of stock is issued and outstanding. We must give public notice of the stock split, specifying a record date at least two weeks prior to the record date.

115

Share Unit (tan-gen kabu) System

Our Articles of Incorporation provide that 1,000 shares constitute one unit of shares regardless of whether the shares are shares of common stock or shares of preferred stock. Our board of directors is permitted to reduce the number of shares constituting a unit or to abolish the share unit system with respect to the shares in its entirety by amending our Articles of Incorporation without approval by shareholders. The number of shares constituting a unit is not permitted to exceed 1,000 shares. A holder of shares constituting less than one unit may require us to purchase such shares at a price mutually agreed upon. Under this system, a shareholder will have one vote for each unit of shares held by it (holders of preferred shares are entitled to voting rights under certain limited circumstances, as described below). Shares not constituting a full unit will carry no voting rights. For calculation of the quorum for various voting purposes, we will exclude the aggregate number of shares representing less than one unit from the number of voting rights. A holder of shares representing one or more whole units will have one vote for each one unit of shares, except as stated in “—Voting Rights.” Except as otherwise described above and so far as there are no restrictions stated in the issuing company’s articles of incorporation, holders of shares constituting less than one unit will have all the rights granted to shareholders under the Company Law.

General Meeting of Shareholders

The ordinary general meeting of our shareholders is usually held in June of each year in Tokyo. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks’ advance notice to shareholders who are entitled to vote at the relevant general meeting of shareholders.

Voting Rights

A holder of shares of common stock is generally entitled to one voting right for each unit of common shares held. The common shares identified below are not entitled to voting rights even when such shares constitute a whole unit, and such common shares are not considered when determining whether a quorum exists for a shareholders’ meeting:

• treasury shares;

• shares held by a company in which we, we and our subsidiaries or our subsidiaries own 25% or more of the total voting rights; and

• shares issued after the record date as a result of exercise of stock acquisition rights, fractional shareholders becoming a shareholder of a whole unit share, and in exchange for acquisition of our preferred shares.

On the other hand, holders of certain class of preferred shares (under certain circumstances as described below) shall be entitled to a voting right for each unit of preferred shares held; for example, when a proposal to pay the full amount of preferential dividends on any class of preferred shares in compliance with the terms of such preferred shares is not included in the agenda of the ordinary general meeting of shareholders. See “—Preferred Stock.”

Under our Articles of Incorporation, except as otherwise provided by law or by other provisions of our Articles of Incorporation, a resolution can be adopted at a shareholders’ meeting by the holders of a majority of the voting rights represented at the meeting. The Company Law and our Articles of Incorporation require a quorum of not less than one third of the total number of voting rights for election of our directors and corporate auditors.

The Company Law and our Articles of Incorporation provide that a quorum of not less than one third of outstanding voting rights must be present at a shareholders’ meeting to approve specified corporate actions, such as:

• the amendment of our Articles of Incorporation, except in some limited cases;

116

• the repurchase of our own stock from a specific shareholder other than our subsidiary;

• the consolidation of shares;

• the offering to persons other than shareholders of stock at a specially favorable price, or of stock acquisition rights or bonds or notes with stock acquisition rights with specially favorable conditions;

• the removal of a director who was elected by cumulative voting or a corporate auditor;

• the exemption from liability of a director or corporate auditor, with certain exceptions;

• a reduction in stated capital with certain exceptions in which a shareholders’ resolution is not required;

• a distribution of in-kind dividends which meets certain requirements, except in some limited circumstances;

• the transfer of the whole or an important part of our business;

• the acquisition of the whole business of another company, except in some limited circumstances;

• a dissolution;

• merger or consolidation, except in some limited circumstances;

• a stock-for-stock exchange (kabushiki kokan) or stock-for-stock transfer (kabushiki iten), except in some limited circumstances; and

• a corporate split, except in some limited circumstances.

A special resolution representing at least two-thirds of the voting rights represented at the meeting is required to approve these actions.

Our Articles of Incorporation do not include any provision that grant shareholders cumulative voting rights at elections of directors or corporate auditors. For a discussion of voting rights with respect to our directors, see “Item 6.C. Directors, Senior Management and Employees—Board Practices.”

Subscription Rights

Holders of shares have no preemptive rights under our Articles of Incorporation. Under the Company Law, however, our board of directors may determine that shareholders be given subscription rights in connection with a particular issue of new shares. In this case, these subscription rights must be given on uniform terms to all shareholders, and if a specified record date is set, it must be announced in a public notice at least two weeks prior to the record date. A notification to each individual shareholder must also be given at least two weeks prior to the date of expiration of the subscription rights.

Under the Company Law, rights to subscribe for new shares may not be transferred, however, we may allot stock acquisition rights to shareholders without consideration, and such rights will be transferable.

Stock Acquisition Rights

We may issue stock acquisition rights (shinkabu yoyakuken), which in the U.S. are often in the form of warrants, or bonds with stock acquisition rights that cannot be detached (shinkabu yoyakuken-tsuki shasai), which in the U.S. are often in the form of convertible bonds or bonds with non-detachable warrants. Except where the issuance would be on “specially favorable” conditions, the issuance of stock acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of our board of directors. Upon exercise of the stock acquisition rights, the holder of such rights may acquire shares by paying the applicable exercise price or, if so determined by a resolution of our board of directors, by making a substitute payment, such as having the convertible bonds redeemed for no cash in lieu of the exercise price.

117

Liquidation Rights

Upon our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and preferred distributions to holders of shares of our preferred stock will be distributed among the holders of our common stock in proportion to the number of shares they own.

Reports to Shareholders

We furnish to our shareholders notices, in Japanese, of shareholders’ meetings and annual business reports, including our financial statements.

Record Dates

As stated above, March 31 is the record date for the payment of annual dividends, if any, and September 30 is the record date for the payment of interim dividends, if any. In addition, by a resolution of our board of directors and after giving at least two weeks’ prior public notice, we may at any time set a record date in order to determine the shareholders who are entitled to the rights pertaining to our shares.

Repurchase of Our Shares of Common Stock

We may repurchase our own shares:

• from a specific party, if authorized by a special resolution of general meeting of shareholders and we give notice thereof to shareholders prior to such general meeting, in general;

• from a specific party, if authorized by our board of directors and we give a public notice or notice thereof to all of the shareholders (if we repurchase any class of the preferred shares, a notice thereof to all of the shareholders of the class of the preferred shares); or

• from our subsidiaries, if authorized by a resolution of the board of directors.

When the repurchase is made by us from a specific party, as authorized by a special resolution of a general meeting of shareholders, any shareholder may make a demand to a director, five days or more prior to the relevant shareholders’ meeting, that we also repurchase the shares held by that shareholder.

Repurchase of our own shares described above must satisfy various specified requirements. In general, the same restrictions on the distributable amount as described in the sixth paragraph under “—Common Stock—Dividends.” are applicable to the repurchase of our own shares, so the total amount of the repurchase price may not exceed the distributable amount.

We may hold our own shares so repurchased without restrictions. In addition, we may cancel or dispose of our own shares that we hold by a resolution of our board of directors.

For additional information on our treasury stocks as of March 31, 2007, see “Item 7. Major Shareholders and Related Party Transactions”

Preferred Stock

The following is a summary of information concerning the shares of our preferred stock, including brief summaries of the relevant provisions of our Articles of Incorporation, the share handling regulations and the Company Law as currently in effect. The detailed rights of our preferred shares are set out in our Articles of Incorporation and the resolutions of our board of directors relating to the issuance of the relevant stock.

118

General

Under our Articles of Incorporation, we are authorized to issue four classes of preferred stock totaling 356,700,000 shares of preferred stock, including 100,000,000 class 2 preferred shares, 27,000,000 class 3 preferred shares, 79,700,000 class 4 preferred shares and 150,000,000 class 5 preferred shares. Our preferred shares have equal preference over shares of our common stock in respect of dividend entitlements and distribution upon our liquidation, but holders of our preferred shares are not entitled to vote at general meetings of shareholders, subject to the exceptions provided under our Articles of Incorporation. As of July 31, 2007, 100,000,000 shares of class 2 preferred shares, 27,000,000 shares of class 3 preferred shares, 79,700,000 shares of class 4 preferred shares and 150,000,000 shares of class 5 preferred shares were outstanding.

We may acquire shares of class 2 preferred shares at ¥2,500 per share, in whole or in part, on or after February 22, 2010. The holder of class 3 preferred shares through class 5 preferred shares may request acquisition of the relevant preferred shares in exchange for our common stock during the period as provided for in Attachments 1 through 3 of our Articles of Incorporation. Any of class 3 preferred shares through class 5 preferred shares for which no request for acquisition in exchange for common stock is made during such period may be mandatorily acquired on the day immediately following the last day of such period (the “Mandatory Acquisition Date”) in the number obtained by dividing an amount equivalent to the subscription price per each relevant preferred share by the average of 1/1000 of the daily closing price of Mitsubishi UFJ Financial Group, Inc’s common stock as reported by the Tokyo Stock Exchange for the 30 trading days commencing on the 45th trading day prior to the Mandatory Acquisition Date.

Preferred Dividends

In priority to the payment of dividends to holders of our common stock, the expected amount of preferred dividends payable each fiscal year for each class of our preferred stock is set forth below.

• class 2 preferred shares: ¥60.00 per share

• class 3 preferred shares: ¥15.90 per share

• class 4 preferred shares: ¥18.60 per share

• class 5 preferred shares: ¥19.40 per share

In the event that our board of directors decides to pay an interim dividend to holders of record of our common stock as of September 30 of any year, we will, in priority to the payment of that interim dividend, pay a preferred interim dividend in the amount specified in our Articles of Incorporation to holders of record of our preferred shares as of September 30 of any year of the same time. The amount of any preferred interim dividend will be deducted from the preferred dividend payable on preferred shares in respect of the same fiscal year.

No payment of dividends on our preferred shares or any other shares can be made unless we have a sufficient distributable amount and a resolution to distribute such distributable amount is obtained at the relevant ordinary general meeting of shareholders, in the case of annual preferred dividends or at the board of directors, in the case of preferred interim dividends.

Dividends on our preferred shares are non-cumulative. If the full amount of any dividend is not declared on our preferred shares in respect of any fiscal year, holders of our preferred shares do not have any right to receive dividends in respect of the deficiency in any subsequent fiscal year, and we will have no obligation to pay the deficiency or to pay any interest regardless of whether or not dividends are paid in respect of any subsequent fiscal year. The holders of our preferred shares are not entitled to any further dividends or other participation in or distribution of our profits, except for distribution under certain corporate split proceedings as stated in our Articles of Incorporation.

119

Liquidation Rights

In the event of our voluntary or involuntary liquidation, record holders of our preferred shares will be entitled to receive out of our residual assets upon liquidation a distribution as set forth below.

• class 2 preferred shares: ¥2,500 per share

• class 3 preferred shares: ¥3,000 per share

• class 4 preferred shares: ¥2,000 per share

• class 5 preferred shares: ¥2,000 per share

The holders of our preferred shares are not entitled to any further dividends or other participation in or distribution of our residual assets upon our liquidation.

Voting Rights

No holder of our preferred shares has the right to receive notice of, or to vote at, a general meeting of shareholders, except as otherwise specifically provided under our Articles of Incorporation or other applicable law. Under our Articles of Incorporation, holders of a unit of our preferred shares will be entitled to receive notice of, and have one voting right per unit of preferred shares at, our general meetings of shareholders:

• from the commencement of any ordinary general meeting of shareholders if an agenda for approval to declare a preferred dividend is not submitted to such meeting or

• from the close of any ordinary general meeting of shareholders if a proposed resolution to declare a preferred dividend is not approved at such meeting.

In each case, holders of our preferred shares will be entitled to receive notice of and vote at the relevant general meetings of shareholders unless and until such time as a resolution of an ordinary general meeting of shareholders declaring a preferred dividend is passed.

C.    Material Contracts

Other than as described in this Annual Report, all contracts entered into by us in the past two years were entered into in the ordinary course of business.

D.    Exchange Controls

There are no exchange controls applicable to payments on our debt securities.

E.    Taxation

Japanese Taxation

The following sets forth the material Japanese tax consequences to owners of our debt securities who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan to which the relevant income is attributable, which we refer to as “non-resident holders” in this section. The statements regarding Japanese tax laws below are based on the laws in force and as interpreted by the Japanese taxation authorities as at the date of this Annual Report and are subject to changes in the applicable Japanese laws, double taxation treaties, conventions or agreements or interpretations thereof occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of our debt securities, including specifically the tax consequences under Japanese law, the laws of the jurisdiction of which they are resident and any tax treaty between Japan and their country of residence, by consulting their own tax advisers.

120

Payment of interest on our debt securities issued from April 1, 1998 to March 31, 2008 outside Japan by us or our paying agents to non-resident holders of debt securities will be exempt from Japanese withholding tax. In order to be exempt from Japanese withholding tax, each non-resident holder must comply with the procedures for establishing its status in accordance with the requirements of Japanese law. If the exemption is not extended by future legislation, or if similar exemption is not available after March 31, 2008, interest on our debt securities issued after that date would be subject to Japanese withholding tax.

Under current Japanese practice, we and our paying agents may determine our withholding obligations in respect of our debt securities held through a qualified clearing organization in reliance on certifications we received from the qualified clearing organization. In this case, we do not need to obtain certificates directly from the ultimate beneficial owners of the debt securities. As part of the procedures under which these certifications are given, a beneficial owner may be required to establish that it is a non-resident holder to the person or entity through which it holds our debt securities. If a non-resident holder is required to establish its identity and residence, such holder will be required to deliver to our paying agents a claim for exemption from Japanese withholding tax and documentation concerning its identity and residence in order to receive an interest payment on our debt securities free of Japanese withholding tax. We or our paying agents may adopt modified or supplemental certification procedures to the extent necessary to comply with changes in Japanese law or administrative practice.

Gains derived from the sale of our debt securities within or outside Japan by a non-resident holder are, in general, not subject to Japanese income or corporation taxes or other Japanese taxes.

Japanese inheritance and gift taxes at progressive rates may be payable by an individual, regardless of his or her place or residence, who has acquired debt securities as a legatee, heir or donee, even if neither the individual nor the decedent nor the donor is a Japanese resident. No stamp, issue, registration or similar taxes or duties, will, under present Japanese law, be payable by holders of our debt securities in connection with the issue of the debt securities.

U.S. Taxation

The following sets forth the material United States federal income tax consequences of the ownership of our debt securities by a U.S. holder, as defined below. This summary is based on United States federal income tax laws, including the United States Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions, and on the Convention between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, or the Tax Convention, all of which are subject to change, possibly with retroactive effect.

The following summary is not a complete analysis or description of all potential United States federal income tax consequences to a particular U.S. holder. It does not address all United States federal income tax considerations that may be relevant to all categories of potential purchasers, certain of which (such as banks or other financial institutions, insurance companies, dealers in securities, tax exempt entities, non U.S. persons, persons holding a debt security as part of a “straddle,” “hedge,” conversion or integrated transaction, holders whose “functional currency” is not the US dollar, persons holding debt securities through a partnership or other pass through entity, U.S. expatriates, holders liable for alternative minimum tax and holders of 10% or more of our voting shares) are subject to special tax treatment. This summary also does not address any foreign, state, local or other tax consequences of an investment in our debt securities. This summary assumes that investors will hold our debt securities as capital assets within the meaning of Section 1221 of the Code.

As used herein, a “U.S. holder” of a debt security means a holder that is for U.S. federal income tax purposes:

• a citizen or resident of the United States,

121

• a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any political subdivision thereof,

• an estate, the income of which is subject to U.S. federal income tax regardless of its source, or

• a trust (1) the administration of which is subject to the primary supervision of a court within the United States and one or more United States persons has the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

A Non-U.S. holder is a holder, other than an entity treated as a partnership, that is not a U.S. holder. The following summary does not address the tax consequences to a Non-U.S. holder. U.S. holders should consult their own tax advisors concerning the application of the following rules to their particular situations, as well as the tax consequences to them under the laws of any other taxing jurisdiction.

Interest.    Interest paid on our debt securities will generally be taxable to a U.S. holder as ordinary interest income at the time it is received or accrues, in accordance with such U.S. holder’s regular method of accounting for U.S. federal income tax purposes. In addition to interest on our debt securities, a U.S. holder will be required to include in income any additional amounts and any tax withheld from interest payments notwithstanding that such withheld tax is not in fact received by such U.S. holder. With respect to any tax withheld under Japanese law, a U.S. holder may be entitled to deduct or credit tax withheld at the rate under the Tax Convention, subject to applicable limitations in the Code, including that the election to deduct foreign taxes must apply to all of the U.S. holder’s foreign taxes for a particular year. For foreign tax credit limitation purposes, interest income, including Japanese taxes withheld therefrom, if any, and additional amounts, paid on our debt securities will be income from sources outside the United States and will, with certain limitations, be treated as “passive income” or, in the case of certain U.S. holders, “financial service income.” The rules governing the foreign tax credit are complex. U.S. holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Market Discount.    A debt security purchased by an investor other than an initial holder may be subject to the market discount provisions of the Code. Market discount is the excess, if any, of the adjusted issue price of a debt security over its basis in the purchaser’s hands immediately after the purchase. However, a debt security will not be treated as having market discount if, at the time of purchase, the discount is less than 1/4 of 1% of the adjusted issue price of the debt security, multiplied by the number of complete years remaining to maturity.

If a U.S. holder purchases a debt security with market discount, such U.S. holder may elect to include such market discount in income as the discount accrues. This election, once made, applies to all market discount obligations acquired by such U.S. holder during or after the taxable year in which the election is made and may not be revoked without the consent of the Internal Revenue Service. Accrued market discount may be calculated in either of two ways. Under the ratable method, accrued market discount at the time of disposition or maturity is the total market discount multiplied by a fraction, the numerator of which is the number of days the U.S holder has held the debt security and the denominator of which is the number of days from the date such U.S. holder acquired the debt security until its maturity date. Alternatively a U.S. holder may elect to use the constant yield method. Such an election applies only to the debt security for which the election is made and is irrevocable.

If a U.S. holder acquires a debt security with market discount and does not elect (and is not deemed to have elected) to include such market discount in income currently, such U.S. holder will recognize as ordinary income the lesser of the amount of gain or the accrued market discount realized by such U.S. holder when the debt security matures or is disposed of by such U.S. holder. A market discount debt security given as a gift or redeemed by us will be treated as having been sold for its fair market value. If a U.S. holder incurs or maintains indebtedness to purchase or carry a market discount debt security to which a current inclusion election does not apply, such U.S. holder must defer a portion of any interest expense on such indebtedness until the earlier of the maturity of the debt security or the disposition of the debt security in a taxable transaction.

122

Sales or other dispositions.    A U.S. holder will generally recognize gain or loss on the sale, retirement or other taxable disposition of our debt securities in an amount equal to the difference between the amount realized from such sale, retirement or other taxable disposition, other than amounts attributable to accrued but unpaid interest, which will be taxed as interest, and the U.S. holder’s adjusted tax basis in our debt securities. Subject to the rules governing the treatment of market discount, such gain or loss will be long term capital gain or loss if the holding period for our debt securities exceeds one year at the time of disposition. The ability to deduct capital losses may be limited. For purposes of determining a U.S. holder’s allowable foreign tax credit, gain realized by a U.S. holder that is a U.S. resident, as defined in Section 865 of the Code, will generally be U.S. source income. However, disposition losses attributable to a foreign office or recognized by a U.S. citizen or resident alien with a foreign tax home will generally be treated as foreign source if the highest marginal rate in such foreign country is at least 10%. Special rules apply in determining the source of other types of loss such as loss attributable to accrued but unpaid interest, and U.S. holders should consult their tax advisors regarding the treatment of such items in their particular situations.

Information reporting and backup withholding.    Proceeds from the sale, retirement or other disposition of our debt securities, or payments of principal and interest on our debt securities, may be subject to information reporting requirements. Those proceeds or interest payments may also be subject to backup withholding unless the U.S. holder:

• is a corporation or comes within other categories of exempt recipients, and, when required, demonstrates this fact or

• provides a correct taxpayer identification number on a properly completed Internal Revenue Service Form W 9 or substitute form, certifies that the U.S. holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules.

Any amount withheld under these rules will be creditable against the U.S. holder’s United States federal income tax liability or refundable to the extent that it exceeds such liability if the U.S. holder provides the required information to the Internal Revenue Service. If a U.S. holder is required to and does not provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the Internal Revenue Service. All U.S. holders should consult their tax advisors as to their qualification for the exemption from back-up withholding and the procedure for obtaining an exemption.

We urge U.S. holders to consult their own tax advisors concerning the United States federal, state and local and other tax consequences to them of the purchase, ownership and disposition of our debt securities.

F.    Dividends and Paying Agents

Not applicable.

G.    Statement by Experts

Not applicable.

H.    Documents on Display

We file periodic reports and other information with the SEC. You may read and copy any document that we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the operation of its public reference rooms. The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC (http://www.sec.gov).

123

I.    Subsidiary Information

Please refer to discussion under “Item 4.C. Information on the Company—Organizational Structure.”

Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.

Our business is subject to a variety of risks, including credit risks, market risks, liquidity risks, settlement risks, legal/regulation risks, operations risks, information security risks and operational risks. The importance of managing these risks has increased dramatically with financial deregulation and globalization, and with advances made in information technology. Our organizational structure has been designed to provide enhanced risk management with the awareness that risk management is one of our critical functions and our success depends upon the proper control and administration of risk.

Firm-Wide Risk Management

Our holding company, Mitsubishi UFJ Financial Group, Inc., determines our group-wide risk management policy at the holding company level, and we implement the policy accordingly. Our holding company seeks to raise group-wide risk awareness, integrate and improve the group’s risk management framework, allocate risk capital appropriately and eliminate specific concentrations of risk.

Our policy for the control and administration of risk is based on the concept of “Firm-Wide Risk Management.” Our objective is to identify, quantify, monitor and control risks, and to audit and inspect those activities. This in turn helps us stabilize earnings in line with the risks of our business and properly allocate management resources.

The Corporate Risk Management Division has overall responsibility for managing and controlling all the risks on a firm-wide basis. Specific supervisory divisions are responsible for each type of risk. Specifically, the Credit Policy & Planning Division is responsible for credit risk. The Corporate Risk Management Division is responsible for market risk and funding liquidity risk. The Operations Services Planning Division is responsible for operations risk. The Information Security Management Division is responsible for information asset risk and the Public Relations Division is responsible for reputational risk. These divisions all work together to provide overall control and management of all of our risks on a firm-wide basis.

The Corporate Risk Management Division controls and manages the risks arising from various activities across product, operational and organizational lines. The Risk Management Committee has overall responsibility for identifying and controlling our risks. This committee meets semi-annually and on an extraordinary basis if necessary. It formulates action plans and monitors implementation in line with our basic risk management policies.

Capital Allocation System

MUFG has introduced a system to monitor and allocate capital across subsidiary banks, divisions and segments, and between different categories of risk. Based on quantitative measurement of the various risks faced by MUFG using internal risk management methods, the system guides the risk-weighted allocation of capital (economic capital) with the aim of improving the overall risk-return profile for MUFG and ensuring that the proper allocation of economic resources delivers returns that are commensurate with risk. Under this system, our holding company formulates a capital allocation plan for each six-month period based on discussions with subsidiary banks. In addition, MUFG has introduced two internal performance indicators (cost of capital-adjusted return and consolidated operating ROE) to help assess and manage risk-weighted profitability and capital productivity.

124

Overview of Internal Capital Adequacy Assessment Process

The holding company assesses its internal capital adequacy from two perspectives, namely regulatory capital based on capital adequacy regulations, and its own economic capital based on internal risk assessment.

Internal capital adequacy assessment based on regulatory capital is carried out by using capital adequacy ratio and Tier 1 ratio calculated from risk-weighted assets and capital which are stipulated in the capital adequacy requirements. The holding company compares these figures with its target figures—a capital ratio of 12% and Tier 1 ratio of 8%—when formulating its internal risk-weighted assets plan and capital plan. In addition, capital adequacy and Tier 1 ratios are regularly calculated and reported to management during the fiscal year in order to monitor internal capital adequacy.

Internal capital adequacy assessment based on economic capital is carried out within the framework of the capital allocation system, which allocates capital in accordance with credit risk, strategic equity portfolio risk, market risk, and operational risk. Included within these risks are credit concentration risk and interest rate risk in the banking book as stipulated by the Second Pillar of Basel II. Each risk is calculated using the basic assumptions of a confidence interval of 99% and a holding period of one year. The total risk amount, taking into account the effect of diversification and net unrealized gains on other marketable securities, is compared with Tier 1 capital to assess internal capital adequacy, and the capital allocation plan is then formulated. Thereafter, the use of allocated capital is regularly checked against the plan during the fiscal year, including risk assessment with a 99.9% confidence interval, and compared with Tier 1 capital to provide ongoing monitoring of internal capital adequacy.

When drawing up the regulatory capital plan and the economic capital plan, both methods undergo stress testing. The plans for regulatory and economic capital are formulated following a detailed analysis of the impact of the stress testing on capital and risk, and an assessment of internal capital adequacy.

We utilize a similar framework to assess our internal capital adequacy.

Implementation of Basel II

The Basel Committee on Banking Supervision of the Bank for International Settlements, or BIS, sets capital adequacy standards for all internationally active banks to ensure minimum level of capital.

The Basel Committee worked over recent years to revise the 1988 Accord and, in June 2004, the Committee related “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”. This new framework, called Basel II, has been applied to Japanese banks since March 31, 2007.

Basel II is based on “three pillars”: (1) minimum capital requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market discipline through the disclosure of information. The goal of Basel II is to have these three pillars mutually reinforce each other to ensure the effectiveness of regulations. Basel II is thus a more comprehensive regulatory framework for ensuring the soundness and stability of the international banking system. In addition, with respect to credit risk and operational risk, Basel II provides more risk-sensitive approaches and a range of options for measuring risks and determining the capital requirements. As a result, Basel II also reflects the nature of risks at each bank more closely.

Based on the principle of Basel II, MUFG adopted the Foundation Internal Ratings-Based Approach to calculate its capital requirements for credit risk. The Standardised Approach is used for some subsidiaries that are considered to be immaterial to the overall MUFG capital requirements and a few subsidiaries have adopted a phased rollout of the IRB approach.

MUFG adopted the Standardised Approach to calculate its capital requirements for operational risk. As for market risk, MUFG adopted the Internal Models Approach mainly to calculate general market risk and adopted the Standardised Methodology to calculate specific risk.

125

Credit Risk Management

Credit risk is the risk that we will be unable to collect the amount due to us on the due date of a particular obligation as a result of the deterioration of the borrower’s financial condition. Credit risk is realized when a credit instrument previously extended to a borrower loses part or all of its value. This in turn exposes us to financial loss. We have established an internal framework to maintain our asset quality, manage credit risk exposure and achieve earnings commensurate with the risks undertaken by us.

We perform a detailed review of all borrowers’ creditworthiness on a daily basis timely after a borrower’s annual or semi-annual financial statements first become available. In addition, as part of an ongoing credit review process, our credit officers monitor changes in all customers’ creditworthiness including bankruptcy, past due principal or interest, downgrading of external credit rating, declining stock price, business restructuring and other events and reassess borrowers’ ratings in response to such events. Our credit officers are also required to regularly report changes in the value of collateral or guarantees of all borrowers.

Quantitative Analysis of Credit Risk

Using a highly complex model, we analyze our credit risk quantitatively. This model measures credit risk based on historical data relating to credit amounts, default rates and recovery rates and takes into account the correlation among borrowers’ default probabilities.

Portfolio Management

We work to achieve earnings commensurate with the risk levels undertaken by us. Our strategy is to price our products based upon expected losses, as determined in accordance with our internal credit rating system. At the same time, by monitoring loan amounts and credit exposure by credit rating, corporate group, type of business and region, we seek to avoid a concentration of our credit risks in specific categories. We have a specialized unit that sets credit ceilings by country to address and manage country risk. We regularly review these credit ceilings and adjust them when credit conditions change materially in any countries.

Credit Risk Management System

We closely monitor and supervise our credit portfolio and manage credit risk on a global consolidated basis. We seek to identify problem credits at an early stage. We have in place a system of checks and balances in which a credit administration section that is independent of the business promotion sections screens individual transactions and manages the extension of credit. Additionally, our management regularly holds credit and investment management committee meetings and credit committee meetings to review important matters related to credit risk management.

Credit Rating System

We use a credit rating system with a scale of 1 to 10 to evaluate credit risk, as set out in the table below. Based on this system, we conduct a self-assessment of our assets and a quantitative risk measurement of credit risk, manage our loan portfolio and determine our pricing strategy. The credit rating system, which is based on the concept of probabilities of default, is consistent with both the method of evaluating credit risk under the new Basel Capital Accord and those of third-party credit rating agencies. Our credit rating system is also designed to conform to the regulatory authorities’ risk grading standards for classified loans. We constantly monitor changes in all of our customers’ creditworthiness and change ratings if necessary, so that we perform accurate assessment of our own assets. With respect to country risk, we assess each country using ten alphanumeric grades and determine the risk rating for each country.

126

	Credit rating
	“1”- “7”	“8”	“9”	“10”
Borrower grade	Normal (divided into 9 ranks)	Close Watch(1) (divided into 3 ranks)	Likely to Become Bankrupt(2)	Legally or Virtually Bankrupt(3) (divided into 2 ranks)

(1) Borrowers classified as “Close Watch” require close scrutiny because their business performance is unstable or their financial condition is unfavorable. Borrowers ranked “8” correspond with “Needs Attention,” of which some borrowers correspond with “Special Attention,” a subcategory of “Needs Attention,” under the Financial Services Agency’s classification.

(2) Borrowers classified as “Likely to Become Bankrupt” are not yet bankrupt, but are in financial difficulty with poor progress in achieving their business restructuring plans or are likely to become bankrupt in the future. Borrowers ranked “9” correspond with “In Danger of Bankruptcy” under the Financial Service Agency’s classification.

(3) Borrowers classified as “Legally or Virtually Bankrupt” are considered to be legally bankrupt or are virtually bankrupt. Borrowers ranked “10” correspond with “De Facto Bankrupt” or “Bankrupt” under the Financial Services Agency’s classification.

Market Risk Management

Market risk is the risk of sustaining a loss due to a change in the price of assets or liabilities held that results from changes in risk-related factors such as interest rates, foreign exchange rates, equity prices and commodity prices.

Market Risk Management System

We use a three-tiered market risk management system to manage our market risk. It divides authority and responsibility among the senior management level, the line management level at trading divisions and offices and the trader level. This system clearly establishes the authority and responsibility of each level. The Corporate Risk Management Division has overall responsibility for our market risk management, and is located in the Corporate Center, independent from our individual business units. This division manages our market risk on a consolidated basis, and also integrates middle office functions to ensure the integrity, accuracy and transparency of market risk information.

Market Risk Management Process

On a semi-annual basis, the Executive Committee decides our overall market risk limit and sets the limits for each business while considering various factors including our capital, earnings capacity and trading capability. Authority for implementing the market risk limit is given to each business unit’s chief executive, who in turn delegates this authority to the general managers in charge of each business line. In order to keep losses within a predetermined limit, we have established a stop-loss rule, which limits the amount of losses allowed from market activities.

We have a bank-wide Asset and Liability Management Committee that includes Deputy Presidents, directors and general managers responsible for strategic planning, market operations and domestic and overseas customer relations. This committee meets once a month to review and discuss our overall market risk profiles and asset and liability management policies from a management perspective, and conveys its conclusions to our business line managers for use in their daily operations. Our directors, business unit chief executives and the general managers responsible for market operations also hold weekly market-risk meetings to review and discuss our market risk profile and worldwide risk-taking activities.

The Corporate Risk Management Division uses a Market Risk Information System to perform market risk management. Under this system, the Corporate Risk Management Division reports daily to our senior management on our overall market risk profile as well as by risk factors, by business unit and by region. It also monitors compliance with the risk limits set by the Executive Committee and our stop-loss rules.

127

With respect to the operation of each business unit, we manage the risks relating to those of our assets and liabilities that expose us to risks such as interest rate risk and exchange rate risk by entering into various hedging transactions using marketable securities and derivatives, including futures, options and swaps. For a detailed discussion of the financial instruments employed as part of our risk management strategy, see note 24 to our consolidated financial statements.

Market Risk Measurement

We use our Market Risk Information System to measure our market risk, which consists of general market risk and specific risk. General market risk, or VaR, is the risk arising from changes in overall market price movement, while specific risk refers to the risk of changes in the prices of individual financial instruments owing to factors other than the general market risk. Specific risk is further divided into Idiosyncratic Risk (VaI: the risk that the price of a particular financial instrument moves idiosyncratically from the overall market movement due to supply and demand or liquidity factors when no particular credit event or event of default has occurred) and Event-default Risk (VaE: the risk of price movement when a particular credit event or event of default has occurred). Based on VaR and VaI, we delegate authority to manage market risk to our business units. VaR, VaI and VaE are taken into account in allocating capital to each business unit.

In order to measure VaR, our Market Risk Information System primarily employs a historical simulation methodology with statistical data of 701 days’ observation period. This methodology has the advantage of reflecting the direct movements of risk factors, and enables us to capture market movements accurately. This in turn enables us to estimate non-linear option risks using historical scenario matrixes.

Due to some limitations inherent in the use of the historical simulation approach, including the possibility that the market may move more intensively than during the past 701 days, we recognize the importance of appropriate stress tests and profit/loss simulations. Our Market Risk Information System also supplements our VaR based risk measurements by allowing us to analyze our market risk profile using backtesting, stress tests and profit/loss simulations based on hypothetical portfolios. These additional tests and simulations allow us to address some of the limitations of our VaR calculation methodologies.

The Market Risk Information System is located not only in the Tokyo Head Office but also in our major overseas offices, enabling them to conduct comprehensive risk management on a stand-alone basis and manage their market risks more effectively.

Capital Charges for Market Risk

The market risk regulations stipulated in the Basel Capital Accord, which were implemented in Japan by guidelines adopted by the Financial Services Agency, require us to include the effects of market risk in calculating capital adequacy ratios. We apply the “Internal Model Approach” to calculate our general market risks and the “Standardized Approach” to calculate our specific risks. In applying the Internal Model Approach, we are required to meet strict qualitative and quantitative requirements, which our Market Risk Information System has met as demonstrated by both internal and external examinations.

As defined in the market risk regulations, market risk is composed of interest rate and equity price risks held in trading activities, foreign exchange risk and commodity price risk. All references to VaR in the following illustrations and explanations are based on a model using the historical simulation methodology, unless otherwise noted.

Illustrations of Market Risks for the Fiscal Year Ended March 31, 2007

Trading activities.    For the fiscal year ended March 31, 2007, the average daily VaR (holding period: ten days; confidence level: 99%) for our trading activities on a consolidated basis was ¥2.71 billion. It was mainly

128

comprised of an interest rate risk of ¥1.80 billion followed by a foreign exchange rate risk of ¥1.57 billion. A simple summation of VaR by risk factor does not equate with the overall VaR, due to the diversification effect within the portfolio.

The VaR at the end of the fiscal year ended March 31, 2007 was ¥7.34 billion which represents a ¥6.46 billion increase from the previous fiscal year ended VaR of ¥0.88 billion mainly because of the increase of foreign exchange rate risk. During the fiscal year ended March 31,2007, the maximum VaR was ¥7.34 billion and the minimum was ¥1.58 billion. Average daily VaI (holding period: ten days, confidence level: 99%) on a consolidated basis was ¥0.17 billion with a maximum of ¥0.48 billion and minimum of ¥0.04 billion.

VaR for Trading Activities (10 day—99%)

(April 2006—Mar 2007)

Risk category	Daily average			High		Low		March 31, 2007
	(in billions yen)
Interest rate	¥	1.80		¥	3.93	¥	0.88	¥	2.14
Japanese yen		1.25			2.49		0.62		1.48
US dollars		0.81			2.91		0.22		0.65
Foreign exchange rate		1.57			6.50		0.53		6.50
Equity		—			—		—		—
Commodity		—			—		—		—
Less Diversification effect		(0.66	)		—		—		(1.30	)
Overall Portfolio	¥	2.71		¥	7.34	¥	1.58	¥	7.34

Note: The high and low figure for each risk category occurred on different days.

The daily average VaR by quarter in the fiscal year ended March 31, 2007 was as follows:

Quarter	Daily average VaR
April—June 2006	¥	2.44 billion
July—September 2006	¥	2.35 billion
October—December 2006	¥	2.60 billion
January—March 2007	¥	3.44 billion

Non-trading activities.    For the fiscal year ended March 31, 2007, the average daily VaR (holding period: ten days; confidence level: 99%) for our non-trading activities, excluding market risks related to strategic equity investments, measured using the same standard used for our trading activities, was ¥169.1 billion. It was mainly comprised of an interest rate risk of ¥152.5 billion followed by an equity risk of ¥61.7 billion. A simple summation of VaR by risk factor does not equate with the overall VaR, due to the diversification effect within the portfolio.

The VaR at the end of the fiscal year ended March 31, 2007, was ¥169.8 billion, and approximately 72% of total VaR for Non-Trading Activities (without diversification effect) consists of interest rate change. The maximum VaR was ¥186.5 billion and the minimum VaR was ¥145.1 billion. Average daily VaI (holding period: ten days; confidence level: 99%) on a consolidated basis was ¥18.4 billion with a maximum of ¥27.8 billion and a minimum of ¥9.0 billion.

129

VaR for Non-Trading Activities (10 day—99%)

(April 2006—Mar 2007)

Risk category	Daily average		High		Low		March 31, 2007
	(in billions yen)
Interest rate	¥	152.5	¥	168.9	¥	123.9	¥	150.4
Japanese yen		87.9		103.3		59.7		87.8
US dollars		93.2		104.5		76.6		85.9
Euro		15.5		19.1		12.0		14.1
Equity		61.7		73.5		44.6		58.7
Overall Portfolio	¥	169.1	¥	186.5	¥	145.1	¥	169.8

Note: The high and low figure for each risk category occurred on different days.

For our non-trading activities, most of the market risk stems from interest rate risk. (We do not include our strategic investments in equity in our non-trading activities. Risks related to these strategic investments are discussed below.) Interest rate average daily VaR by quarter in the fiscal year ended March 31, 2007 was as follows:

Quarter	Daily average VaR
April—June 2006	¥	163.0 billion
July—September 2006	¥	164.0 billion
October—December 2006	¥	174.6 billion
January—March 2007	¥	174.7 billion

Backtesting.    We conduct backtesting to verify the reasonableness of VaR calculated through our internal models, comparing daily reported VaR with actual daily gains or losses (realized gains/losses plus increase/decrease in unrealized gains).

In the fiscal year ended March 31, 2007, actual gains/losses did not exceed VaR on any trading day. This means that our VaR model provided reasonably accurate measurements during the fiscal year ended March 31, 2007.

Stress testing.    Market risk measures, including VaR and VaI, reflect risk amounts measured, assuming “normal conditions,” based on empirical market fluctuations. While VaR and VaI estimate the possible maximum potential risk of loss on normal market movements, market movements could deviate from historical patterns. Since it is important to be prepared for unusual market movements, we also use our Market Risk Information System to perform stress testing based on various market scenarios. We use this process to analyze and understand where risks exist for us and what effect they could have on our earnings.

In addition, the Corporate Risk Management Division conducts stress testing by incorporating individual scenarios based on market conditions. It is possible to analyze our overall position from a variety of angles by incorporating scenarios for our front offices that actually conduct transactions into the Market Risk Information System. The adoption of this approach has further strengthened communication between our front offices and the Corporate Risk Management Division.

Risk Management of Strategic Equity Portfolio

We hold shares of various corporate clients for strategic purposes, in particular to maintain long-term relationships with these clients. These investments have the potential to increase business revenue and appreciate in value. At the same time, we are exposed to the risk of price fluctuation in the Japanese stock market.

130

In recent years, it has been a high priority for us to reduce our equity portfolio to limit the risks associated with holding a large equity portfolio, but also to comply with a regulatory framework that prohibits Japanese banks from holding an amount of shares in excess of their adjusted Tier I capital after September 2006. As of March 2004, we had reduced and have continued to maintain the amount of our equity holdings below our adjusted Tier I capital, enabling us to comply with the regulatory framework in advance of the deadline.

As part of our risk management activities, we analyze the price fluctuation risk of our equity portfolio using a simulation that estimates market risk by monitoring changes in the Tokyo Stock Price Index, or TOPIX. The TOPIX is a composite index of all common stocks listed on the First Section of the Tokyo Stock Exchange.

Our simulations indicated that each one point change in the TOPIX would have had an impact on the value of our equity portfolio of approximately ¥3.4 billion as of March 31, 2007 and approximately ¥3.2 billion as of March 31, 2006. These simulations analyze data for our entire equity portfolio. Therefore, it is important to note that the actual results may differ from our expectations because of the price fluctuations of individual holdings.

In addition, we monitor our equity portfolio closely and regularly evaluate the profitability of these strategic holdings based on our capital and overall returns from these investments.

Other Risk Management

Funding Liquidity Risk Management

Our financing capabilities are supported by a funding network based on the expansion of our domestic and overseas branches and customer base. We benefit from having one of the highest credit ratings among major Japanese banks. While we have established strong liquidity, we maintain liquidity risk countermeasures at all levels of our organization. These countermeasures include the oversight of yen and foreign currency risk, covering everything from daily management to emergency measures, as well as monthly reports to and deliberations within the Asset and Liability Management Committee. We manage all aspects of the daily funding mechanism. We also manage our funding sources using liquidity risk indices, such as liquidity gap, liquidity supplying products, such as commitment lines, and buffer assets.

In preparation for funding liquidity risk exposure, we have implemented contingency plans for each liquidity stage, such as “normal”, “concern”, and “crisis”, for yen and foreign currencies, to ensure that we can respond swiftly to sudden changes in the market, political or economic environments. To maintain proper checks and balances, the Corporate Risk Management Division also monitors liquidity risk and reports it independently to senior management.

Settlement Risk Management

Although risk is inherent in the fundamental banking function of settlement, banks generally have not been as aware of settlement risk as they have of other forms of risk because settlements have been the source of relatively few problems. By its nature, settlement risk is identical with credit risk, liquidity risk and operations risk, and corporate level control is necessary for these risks. We view our settlement business as a strategic area that highlights our creditworthiness, funding capabilities and networking strengths, and we are working on reinforcing the settlement risk management systems on which these depend.

Foreign exchange settlement risk arises primarily from the different time zones in which each part of an exchange is settled. The ongoing globalization and liberalization of the world’s financial markets have resulted in a dramatic increase in the volume of foreign exchange. We are strengthening our management of foreign exchange settlement risk by establishing a framework that encompasses such risks as credit risk. In September 2002, a special purpose bank, the Continuous Linked Settlement Bank, or CLS Bank, was launched. We have been one of the core financial institutions who have been deeply involved in the development of continuous linked settlement. Our participation in CLS Bank settlement has reduced our foreign exchange settlement risk.

131

Legal/Regulatory Risk Management

To control legal risks, our internal procedures explicitly state important laws and regulations to be observed in our operations. We also have a system to obtain the opinions of legal specialists as needed. The Legal Office manages our legal risk by studying and researching legal issues, formulating internal guidance, dealing with intellectual property-related issues, handling lawsuits and controlling and managing external lawyers.

Operations Risk Management

Operations risk is defined as the risk of incurring losses that might be caused by negligence of proper operational processing, or by incidents or misconduct by either officers or staffs. Operations Services Planning Division manages operations risk by having any operational incidents reported, analyzing causes, formulating and implementing proper preventive measures. We also maintain an operational incidents database which enables us to better evaluate and control operations risk through statistical analysis. Furthermore, we secure the accuracy of our operations by strengthening operations procedures, reducing manual operations by introducing straight-through processing and enhancing the skills and expertise of our staffs through continuous in-house training.

Information Security Risk Management

Information security risk is the risk of incurring tangible or intangible losses as a result of:

• computer systems failure or malfunction impairing a bank’s ability to carry out its business and to provide customer services;

• business operations being interrupted, or information being stolen, falsified or otherwise corrupted following unauthorized entry into a bank’s computer systems; or

• information leakage due to any reason such as mishandling and malicious conduct.

To try to ensure that our systems operate reliably at all times, when developing information systems, we perform tests designed to prevent problems and have also implemented programs to rectify problems before they become more serious. In addition, we have established disaster response systems, prepared backups for all our infrastructural systems and run damage-limitation drills. The rapid development of information and communications technologies has brought a growing need for information protection. We attempt to prevent unauthorized entry to our systems and reduce information security risk by making our information management and security procedures more rigorous. The Information Security Management Committee meets semi-annually to discuss the management of information security risk.

Operational Risk Management

We define operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. This definition includes legal, strategic and reputational risk.

During fiscal year 1999, we introduced a framework of self-assessment to enable each business unit to identify and measure its own operational risk, and to plan and implement its own risk management measures. The Corporate Risk Management Division formulates the policy and standards for the framework. Under the framework, we define several operational risk categories and explore scenarios for each risk category, which would seriously affect our business and operations. Each business unit estimates the likely size and frequency of losses related to defined scenarios and scores its risk exposure for each risk category, based on the effectiveness of its risk management measures. The corporate center division that has overall responsibility for a risk category verifies the assessment conducted by each business unit, including risk scores for such risk category. The Internal Audit & Credit Examination Division also inspects the assessment conducted by each business unit and verified by the applicable corporate center offices. Our overall operational risk is quantified by multiplying the risk scores by the applicable yen amount.

132

Compliance

We consider compliance to be one of the most important considerations in conducting our business. As such, we regularly review our compliance systems and seek enhancements throughout our organization.

In February 1998, we established a compliance system to ensure that the importance given to compliance issues by our management is thoroughly propagated. Important compliance issues are discussed by the Compliance Committee, which undertakes hearings and deliberations once every two months concerning various issues, including those relating to our compliance system and its status worldwide. In the event of a significant violation of law, the Compliance Committee takes steps to rectify the matter and issues recommendations.

The Compliance & Legal Division acts as the secretariat for the Compliance Committee and administers compliance issues on a company-wide basis. It is responsible for maintaining and updating our compliance manual and other codes or rules determined by our corporate principles, our internal regulations and all applicable laws and regulations. All of our employees are made familiar with the manual through internal training programs.

We also consult with external experts, such as lawyers and accountants, on the comprehensiveness and effectiveness of our compliance system.

Effective January 1, 2006, we adopted the Ethical Framework and Code of Conduct of Mitsubishi UFJ Financial Group, Inc., as the guiding principles for our basic corporate and ethical values.

Compliance Systems at Divisions, Offices and Branches

We have appointed compliance officers/liaison officers to enhance compliance in every division, office and branch in and outside of Japan. These officers hold training sessions in their own branches, implement quarterly checks on compliance using compliance checklists, and submit their reports to the Head Office compliance offices, including the Compliance & Legal Division. Implementation is ensured by later assessments conducted by the Internal Audit & Credit Examination Division. Each officer also draws up a practical compliance program to investigate compliance requirements, assess compliance risk and oversee compliance performance. The compliance program is also submitted to the Head Office compliance offices, including the Compliance & Legal Division for monitoring. The compliance officers are also in charge of reporting individual compliance issues to and seeking advice from the Head Office compliance offices, including the Compliance & Legal Division.

Each division monitors changes in laws that affect its work, and checks documents to ensure that there are no conflicts with our role as a public institution or with our role in society. The Compliance & Legal Division seeks to ensure rigorous bank-wide compliance by responding to requests for legality checks of important matters affecting our management and by maintaining an ongoing dialogue with the divisions on individual issues.

All of our affiliates within Japan have their own compliance systems designed for their particular lines of business. For our overseas affiliates, except for those with the UnionBanCal Corporation, compliance is managed within our own compliance system.

Anti-Money Laundering and Terrorist Financing

We recognize that one of our important missions is to prevent the use of our operations for criminal purposes, including money laundering or terrorist financing in violation of relevant sanctions. To prevent these and other illegal activities, we have implemented written policies and procedures containing internal controls and an operational process for identifying customers, preparing suspicious activity reports, and related employee training. These policies and procedures are implemented by an internal control system based upon our compliance system.

133

Internal Audit

The Internal Audit & Credit Examination Division engages in internal audits that contribute to maintaining the soundness of our business operations. It provides advice and recommendations on issues by independently examining and evaluating the appropriateness and effectiveness of our organization’s internal control systems, as well as our operational policies and procedures. Internal audits are performed in all business units, head offices and subsidiaries. The Internal Audit & Credit Examination Division is an independent group, and no limitation is placed upon it by other divisions or units.

After consideration of the types and degree of risks in the organization, as well as its management of such risks, the Internal Audit & Credit Examination Division formulates medium-term and fiscal year audit plans, which are approved by our board of directors on an annual basis.

Item 12. Description of Securities Other than Equity Securities.

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14. Material Modifications of the Rights of Security Holders and Use of Proceeds.

None.

Item 15. Controls and Procedures.

An evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures, as defined in Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as of the end of the period covered by this Annual Report.

Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2007.

For the fiscal year ended March 31, 2006, our management recognized that there were material weaknesses in our internal control over financial reporting, as defined in Rule 15d-15(f), with respect to the processes of the conversion from Japanese GAAP to US GAAP. During the fiscal year ended March 31, 2007, we adopted and implemented significant remedial measures designed to strengthen our internal control over financial reporting by allocating additional resources to, conducting further risk assessments for and increasing the level of review and oversight over, our US GAAP financial reporting. As a result of these measures the material weaknesses described above were remediated as of March 31, 2007.

During the period covered by this Annual Report, the above mentioned changes were the changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

Since our merger with UFJ Bank, we have been integrating some of our operations with UFJ Bank’s operations and set the objective of commencing the transfer to our new IT system from the first half of 2008.

134

Item 16A. Audit Committee Financial Expert.

Our board of corporate auditors has determined that Mr. Tatsunori Imagawa, Mr. Tsutomu Takasuka and Mr. Yoshiharu Hayakawa are “audit committee financial experts” as defined in Item 16A of Form 20-F. See “Item 6. C. Directors, Senior Management and Employees—Board Practices” for a discussion of our board of corporate auditors.

Mr. Imagawa has served as General Manager of the New York Branch of the Mitsubishi Bank and General Manager of the Corporate Planning Division of the Bank of Tokyo-Mitsubishi, Ltd. He has also served as Deputy President of Mitsubishi UFJ Financial Group, Inc. In those roles, he supervised and coordinated the preparation of financial statements and various financial reports filed with U.S. governmental authorities.

Mr. Takasuka has served as Corporate Auditor of the Bank of Tokyo-Mitsubishi, Ltd. since October 2004 and continued in that capacity after the merger that created Bank of Tokyo-Mitsubishi UFJ. He has spent most of his business career auditing Japanese corporations as a certified public accountant and has been a professor at Bunkyo Gakuin University since April 2004.

Mr. Hayakawa served as Corporate Auditor of UFJ Holdings, Inc. from June 2002 and continued in that capacity after the merger that created Bank of Tokyo-Mitsubishi UFJ. He has spent most of his business career advising Japanese corporations as a certified public accountant.

Mr. Takasuka and Mr. Hayakawa are each an “outside corporate auditor” under Japanese law, while Mr. Imagawa is not.

Item 16B. Code of Ethics.

The guiding principles for our basic corporate and ethical values are established by the Ethical Framework and Code of Conduct of our holding company, Mitsubishi UFJ Financial Group, Inc. In addition, we have adopted compliance rules, a compliance manual and employee work rules. The Ethical Framework and Code of Conduct, as well as our compliance rules, compliance manual and employee work rules, applies to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions.

Our compliance rules set forth the necessity of adherence to the Ethical Framework and Code of Conduct by our directors, executive officers and employees. These rules also set forth the roles and responsibilities of our employees, compliance officers, Compliance & Legal Division and others in the event of a breach of the compliance rules.

Our compliance manual was created to identify, and to promote compliance by our directors, executive officers and employees with, the relevant laws and regulations in conjunction with the Ethical Framework and Code of Conduct, our compliance rules and our employee work rules. This manual also sets forth the procedures regarding the handling of conflicts of interest for our directors and the promotion of conduct that meets the Ethical Framework and Code of Conduct and our compliance rules for employees.

Our employee work rules set forth, among other things, the consequences of our employees’ noncompliance with the relevant laws and regulations.

A copy of the sections of the Ethical Framework and Code of Conduct, our compliance rules, our compliance manual and our employee work rules relating to the “code of ethics” (as defined in paragraph (b) of Item 16B. of Form 20-F) is attached as Exhibit 11 to this Annual Report. No amendments to those sections of the Ethical Framework and Code of Conduct, our compliance rules and our compliance manual have been made, and no waivers of the code of ethics, compliance rules and compliance manual have been granted to our principal executive officer, principal financial officer, principal accounting officer, directors and corporate auditors, during the fiscal year ended March 31, 2007.

135

Item 16C. Principal Accountant Fees and Services.

Fees and Services of Deloitte Touche Tohmatsu

The aggregate fees billed by Deloitte Touche Tohmatsu, our independent auditor, for the fiscal years ended March 31, 2006 and 2007 are presented in the following table:

	2006		2007
	(in millions)
Audit fees	¥	2,461	¥	3,488
Audit-related fees		346		416
Tax fees		158		194
All other fees		312		161
Total	¥	3,277	¥	4,259

The description of our fees billed for each categories listed above is as follows:

Audit fees—Audit fees are primarily for annual audit of our financial statements, review of our semi-annual condensed financial statements, statutory audit of our financial statements, audits of our subsidiary financial statements and attestation services related to MUFG’s management assessment on the effectiveness of BTMU’s financial reporting controls as required for MUFG by Section 404 of the Sarbanes-Oxley Act.

Audit-related fees—Audit-related fees primarily include due diligence services, accounting consultations, agreed upon procedures on internal controls, employee benefit plan audits and advisory services relating to the implementation of Section 404 of the Sarbanes-Oxley Act.

Tax fees—Tax fees relate primarily to tax compliance, including assistance with preparation of tax return filings, tax advisory and tax planning services.

All other fees—All other fees primarily include agreed upon procedures related to advice on operational risk management, and to operational audits of our overseas branches.

Pre-Approval Policies and Procedures for Services by Deloitte Touche Tohmatsu

The board of corporate auditors of our holding company, Mitsubishi UFJ Financial Group, Inc., performs the pre-approval function required by applicable SEC rules and regulations. Effective May 1, 2003, the board of corporate auditors of Mitsubishi Tokyo Financial Group, Inc. established pre-approval policies and procedures that we and our subsidiaries must follow before engaging Deloitte Touche Tohmatsu to perform audit and permitted non-audit services.

When we or any of our subsidiaries intend to engage Deloitte Touche Tohmatsu to perform audit and permitted non-audit services, the relevant company must make an application for pre-approval on either a periodic or case-by-case basis.

• Periodic application is an application for pre-approval made each fiscal year for services that are expected to be provided by Deloitte Touche Tohmatsu during the next fiscal year.

• Case-by-case application is an application for pre-approval made on a case-by-case basis for services to be provided by Deloitte Touche Tohmatsu that are not otherwise covered by the periodic application.

Pre-approval is resolved in principle by the board of corporate auditors prior to engagement, although if necessary any full-time corporate auditor of Mitsubishi UFJ Financial Group, Inc. may consider any case-by-case application for pre-approval on behalf of his respective board of corporate auditors prior to the next scheduled meeting of the board of corporate auditors. Such decisions made individually by a full-time corporate auditor are reported to and ratified by the board of corporate auditors as appropriate at the next scheduled meeting.

136

For the fiscal year ended March 31, 2006, approximately 0.5% of total tax fees and 0.6% of total all other fees were approved by the board of corporate auditors of our holding company, Mitsubishi UFJ Financial Group, Inc., pursuant to Regulation S-X 2-01(c)(7)(i)(C).

Item 16D. Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The issuer has not made any purchases of shares registered pursuant to section 12 of the Securities Exchange Act of 1934, during the fiscal year ended March 31, 2007.

PART III

Item 17. Financial Statements.

In lieu of responding to this item, we have responded to Item 18 of this Annual Report.

Item 18. Financial Statements.

The information required by this item is set forth in our consolidated financial statements starting on page F-1 of this Annual Report.

Item 19. Exhibits.

Exhibit		Description
1	(a)	Articles of Incorporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended and restated on June 28, 2006. (English Translation)(4)
1	(b)	Regulations of the Board of Directors of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended on April 1, 2007. (English Translation)(1)
1	(c)	Regulations on Corporate Meetings of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended on January 12, 2007. (English Translation)(1)
1	(d)	Regulations on the Handling of Shares of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended and restated on April 1, 2007. (English Translation)(1)
2		Indenture dated as of February 25, 2000 between The Bank of Tokyo-Mitsubishi, Ltd. and The Chase Manhattan Bank.(2)
4	(a)	Integration Agreement, dated February 18, 2005, and the amendment thereto, dated April 20, 2005, among Mitsubishi Tokyo Financial Group, Inc., The Bank of Tokyo-Mitsubishi, Ltd., The Mitsubishi Trust and Banking Corporation, Mitsubishi Securities Co., Ltd., UFJ Holdings, Inc., UFJ Bank Limited, UFJ Trust Bank Limited and UFJ Tsubasa Securities Co., Ltd. (English Translation)(3)
4	(b)	Merger Agreement, dated April 20, 2005 (English Translation), and the amendment thereto, dated August 12, 2005 (English Summary), between The Bank of Tokyo-Mitsubishi, Ltd. and UFJ Bank Limited(3)
8		Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational Structure.”

137

Exhibit	Description
11	Code of ethics of Mitsubishi UFJ Financial Group, Inc. and compliance rules, compliance manual and employee work rules of The Bank of Tokyo-Mitsubishi UFJ, Ltd. applicable to its directors and managing officers, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (English translation of relevant sections)(4)
12	Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).(1)
13	Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).(1)

(1) Filed herewith.

(2) Incorporated by reference from our Annual Report on Form 20-F filed on August 17, 2001.

(3) Incorporated by reference from our Annual Report on Form 20-F filed on August 25, 2005.

(4) Incorporated by reference from our Annual Report on Form 20-F filed on September 28, 2006.

138

SELECTED STATISTICAL DATA

Due to close integration of our foreign and domestic activities, it is difficult to make a precise determination of the assets, liabilities, income and expenses of our foreign operations. The foreign operations as presented include the business conducted by overseas subsidiaries and branches, and the international business conducted by the several international banking related divisions headquartered in Japan. Our management believes that the results appropriately represent our domestic and foreign activities.

On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc., or MTFG, the parent company of The Bank of Tokyo-Mitsubishi, Ltd., or BTM, merged with UFJ Holdings, Inc., or UFJ Holdings, the parent company of UFJ Bank Limited, or UFJ Bank, with MTFG being the surviving entity. Upon consummation of the merger, MTFG changed its name to Mitsubishi UFJ Financial Group, Inc., or MUFG. The merger was accounted for under the purchase method of accounting, and the assets and liabilities of UFJ Holdings and its subsidiaries were recorded at fair value as of October 1, 2005. Therefore, although the merger of BTM with UFJ Bank occurred and BTM changed its name to The Bank of Tokyo-Mitsubishi UFJ, Ltd., or BTMU, on January 1, 2006, the results of operations of UFJ Bank and its subsidiaries have been included in our consolidated financial statements since October 1, 2005. Numbers as of and for the fiscal years ended March 31, 2003, 2004 and 2005 reflect the financial position and results of BTM and its subsidiaries, or the BTM Group, only. Numbers as of March 31, 2006 reflect the financial position of BTMU and its subsidiaries, or the BTMU Group, while numbers for the fiscal year ended March 31, 2006 comprised the results of the BTM Group for the six months ended September 30, 2005 and the results of the BTMU Group from October 1, 2005 to March 31, 2006. Numbers as of March 31, 2007 and for the fiscal year ended March 31, 2007 reflect the financial position and results of the BTMU Group. See note 2 to our consolidated financial statements for more information.

A-1

I.    Distribution of Assets, Liabilities and Shareholder’s Equity; Interest Rates and Interest Differential

Average Balance Sheets, Interest and Average Rates

The following table shows our average balances, interest and average interest rates for the fiscal years ended March 31, 2005, 2006 and 2007. Average balances are generally based on a daily average while a month-end average is used for certain average balances when it is not practicable to obtain applicable daily averages. The average balances determined by such methods are considered to be representative of our operations.

	Fiscal years ended March 31,
	2005							2006							2007
	Average balance			Interest income		Average rate		Average balance			Interest income		Average rate		Average balance			Interest income		Average rate
	(in millions, except percentages)
Assets:
Interest-earning assets:
Interest-earning deposits in other banks:
Domestic	¥	310,461		¥	5,863	1.89	%	¥	401,012		¥	5,802	1.45	%	¥	604,285		¥	17,331	2.87	%
Foreign		2,547,024			53,404	2.10			3,761,273			127,631	3.39			5,049,452			214,196	4.24
Total		2,857,485			59,267	2.07			4,162,285			133,433	3.21			5,653,737			231,527	4.10
Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions:
Domestic		3,267,947			3,948	0.12			2,502,530			10,120	0.40			2,396,206			13,469	0.56
Foreign		1,560,507			32,126	2.06			1,043,562			39,598	3.79			725,304			35,470	4.89
Total		4,828,454			36,074	0.75			3,546,092			49,718	1.40			3,121,510			48,939	1.57
Trading account assets:
Domestic		4,916,675			25,632	0.52			2,606,875			13,621	0.52			1,851,649			6,150	0.33
Foreign		666,692			5,043	0.76			1,363,448			8,706	0.64			887,993			11,697	1.32
Total		5,583,367			30,675	0.55			3,970,323			22,327	0.56			2,739,642			17,847	0.65
Investment securities(1):
Domestic		21,584,704			95,533	0.44			29,196,811			147,427	0.50			33,771,033			249,303	0.74
Foreign		4,905,831			157,414	3.21			7,024,077			270,808	3.86			9,212,441			396,028	4.30
Total		26,490,535			252,947	0.95			36,220,888			418,235	1.15			42,983,474			645,331	1.50
Loans(2):
Domestic		33,501,096			488,275	1.46			51,961,255			1,030,720	1.98			69,908,055			1,591,928	2.28
Foreign		8,959,546			327,269	3.65			12,162,516			594,876	4.89			16,325,304			908,788	5.57
Total		42,460,642			815,544	1.92			64,123,771			1,625,596	2.54			86,233,359			2,500,716	2.90
Total interest-earning assets:
Domestic		63,580,883			619,251	0.97			86,668,483			1,207,690	1.39			108,531,228			1,878,181	1.73
Foreign		18,639,600			575,256	3.09			25,354,876			1,041,619	4.11			32,200,494			1,566,179	4.86
Total		82,220,483			1,194,507	1.45			112,023,359			2,249,309	2.01			140,731,722			3,444,360	2.45
Non-interest-earning assets:
Cash and due from banks		4,427,110							7,314,265							2,895,889
Other non-interest-earning assets		6,329,606							14,310,978							11,503,436
Allowance for credit losses		(616,129	)						(1,022,606	)						(944,825	)
Total non-interest-earning assets		10,140,587							20,602,637							13,454,500
Total assets from discontinued operations		223,797							209,137							22,040
Total assets	¥	92,584,867						¥	132,835,133						¥	154,208,262

Notes:

(1) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such calculation would not be material.

(2) Average balances on loans outstanding include all nonaccrual and restructured loans. See “III. Loan Portfolio.” The amortized portion of net loan origination fees (costs) is included in interest income on loans, representing an adjustment to the yields with insignificant impact.

A-2

	Fiscal years ended March 31,
	2005						2006						2007
	Average balance		Interest expense		Average rate		Average balance		Interest expense		Average rate		Average balance		Interest expense		Average rate
	(in millions, except percentages)
Liabilities and shareholder’s equity:
Interest-bearing liabilities:
Deposits:
Domestic	¥	42,666,880	¥	50,353	0.12	%	¥	59,247,290	¥	94,636	0.16	%	¥	78,889,013	¥	246,646	0.31	%
Foreign		8,953,227		132,424	1.48			11,277,280		299,355	2.65			13,639,770		509,757	3.74
Total		51,620,107		182,777	0.35			70,524,570		393,991	0.56			92,528,783		756,403	0.82
Debentures—Domestic		68,296		351	0.51			—		—	—			—		—	—
Call money, funds purchased, and payables under repurchase agreements and securities lending transactions:
Domestic		6,911,932		26,424	0.38			6,546,589		87,197	1.33			7,723,369		117,131	1.52
Foreign		1,714,918		27,615	1.61			1,265,637		36,166	2.86			771,547		39,025	5.06
Total		8,626,850		54,039	0.63			7,812,226		123,363	1.58			8,494,916		156,156	1.84
Other short-term borrowings and trading account liabilities:
Domestic		9,116,401		29,158	0.32			10,203,590		11,733	0.11			4,484,224		17,466	0.39
Foreign		1,304,601		24,006	1.84			1,674,562		53,740	3.21			1,770,833		91,798	5.18
Total		10,421,002		53,164	0.51			11,878,152		65,473	0.55			6,255,057		109,264	1.75
Long-term debt:
Domestic		4,075,327		81,228	1.99			6,099,464		96,815	1.59			8,576,612		137,914	1.61
Foreign		821,413		16,539	2.01			1,759,528		49,120	2.79			3,221,938		119,475	3.71
Total		4,896,740		97,767	2.00			7,858,992		145,935	1.86			11,798,550		257,389	2.18
Total interest-bearing liabilities:
Domestic		62,838,836		187,514	0.30			82,096,933		290,381	0.35			99,673,218		519,157	0.52
Foreign		12,794,159		200,584	1.57			15,977,007		438,381	2.74			19,404,088		760,055	3.92
Total		75,632,995		388,098	0.51			98,073,940		728,762	0.74			119,077,306		1,279,212	1.07
Non-interest-bearing liabilities		13,970,553						29,122,962						26,631,421
Total liabilities from discontinued operations		212,059						153,217						17,644
Total shareholder’s equity		2,769,260						5,485,014						8,481,891
Total liabilities and shareholder’s equity	¥	92,584,867					¥	132,835,133					¥	154,208,262
Net interest income and interest rate spread			¥	806,409	0.94	%			¥	1,520,547	1.27	%			¥	2,165,148	1.38	%
Net interest income as a percentage of total interest-earning assets					0.98	%					1.36	%					1.54	%

The percentage of total average assets attributable to foreign activities was 23.7%, 21.9% and 23.2%, respectively, for the fiscal years ended March 31, 2005, 2006 and 2007.

The percentage of total average liabilities attributable to foreign activities was 24.5%, 22.4% and 23.8%, respectively, for the fiscal years ended March 31, 2005, 2006 and 2007.

A-3

Analysis of Net Interest Income

The following table shows changes in our net interest income between changes in volume and changes in rate for the fiscal year ended March 31, 2006 compared to the fiscal year ended March 31, 2005 and the fiscal year ended March 31, 2007 compared to the fiscal year ended March 31, 2006.

	Fiscal year ended March 31, 2005 versus fiscal year ended March 31, 2006									Fiscal year ended March 31, 2006 versus fiscal year ended March 31, 2007
	Increase (decrease) due to changes in									Increase (decrease) due to changes in
	Volume(1)			Rate(1)			Net change			Volume(1)			Rate(1)			Net change
	(in millions)
Interest income:
Interest-earning deposits in other banks:
Domestic	¥	1,310		¥	(1,371	)	¥	(61	)	¥	3,924		¥	7,605		¥	11,529
Foreign		32,313			41,914			74,227			50,030			36,535			86,565
Total		33,623			40,543			74,166			53,954			44,140			98,094
Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions:
Domestic		(925	)		7,097			6,172			(430	)		3,779			3,349
Foreign		(10,642	)		18,114			7,472			(12,076	)		7,948			(4,128	)
Total		(11,567	)		25,211			13,644			(12,506	)		11,727			(779	)
Trading account assets:
Domestic		(12,042	)		31			(12,011	)		(3,106	)		(4,365	)		(7,471	)
Foreign		4,449			(786	)		3,663			(3,036	)		6,027			2,991
Total		(7,593	)		(755	)		(8,348	)		(6,142	)		1,662			(4,480	)
Investment securities(2):
Domestic		37,082			14,812			51,894			25,799			76,077			101,876
Foreign		77,308			36,086			113,394			91,458			33,762			125,220
Total		114,390			50,898			165,288			117,257			109,839			227,096
Loans:
Domestic		327,737			214,708			542,445			392,879			168,329			561,208
Foreign		137,354			130,253			267,607			223,643			90,269			313,912
Total		465,091			344,961			810,052			616,522			258,598			875,120
Total interest income:
Domestic		353,162			235,277			588,439			419,066			251,425			670,491
Foreign		240,782			225,581			466,363			350,019			174,541			524,560
Total	¥	593,944		¥	460,858		¥	1,054,802		¥	769,085		¥	425,966		¥	1,195,051

Notes:

(1) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net change.”

(2) Tax-exempt income of tax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such calculation would not be material.

A-4

	Fiscal year ended March 31, 2005 versus fiscal year ended March 31, 2006									Fiscal year ended March 31, 2006 versus fiscal year ended March 31, 2007
	Increase (decrease) due to changes in									Increase (decrease) due to changes in
	Volume(1)			Rate(1)			Net change			Volume(1)			Rate(1)			Net change
	(in millions)
Interest expense:
Deposits:
Domestic	¥	23,189		¥	21,094		¥	44,283		¥	39,100		¥	112,910		¥	152,010
Foreign		41,100			125,831			166,931			71,392			139,010			210,402
Total		64,289			146,925			211,214			110,492			251,920			362,412
Debentures—Domestic		(351	)		—			(351	)		—			—			—
Call money, funds purchased, and payables under repurchase agreements and securities lending transactions:
Domestic		(1,397	)		62,170			60,773			16,901			13,033			29,934
Foreign		(7,235	)		15,786			8,551			(14,119	)		16,978			2,859
Total		(8,632	)		77,956			69,324			2,782			30,011			32,793
Other short-term borrowings and trading account liabilities:
Domestic		1,250			(18,675	)		(17,425	)		(6,577	)		12,310			5,733
Foreign		8,205			21,529			29,734			3,252			34,806			38,058
Total		9,455			2,854			12,309			(3,325	)		47,116			43,791
Long-term debt:
Domestic		32,129			(16,542	)		15,587			39,817			1,282			41,099
Foreign		24,343			8,238			32,581			50,433			19,922			70,355
Total		56,472			(8,304	)		48,168			90,250			21,204			111,454
Total interest expense:
Domestic		54,820			48,047			102,867			89,241			139,535			228,776
Foreign		66,413			171,384			237,797			110,958			210,716			321,674
Total	¥	121,233		¥	219,431		¥	340,664		¥	200,199		¥	350,251		¥	550,450
Net interest income:
Domestic	¥	298,342		¥	187,230		¥	485,572		¥	329,825		¥	111,890		¥	441,715
Foreign		174,369			54,197			228,566			239,061			(36,175	)		202,886
Total	¥	472,711		¥	241,427		¥	714,138		¥	568,886		¥	75,715		¥	644,601

Note:

(1) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net change.”

A-5

II.    Investment Portfolio

The following table shows information as to the value of our investment securities available for sale and being held to maturity at March 31, 2005, 2006 and 2007:

	At March 31,
	2005							2006							2007
	Amortized cost		Estimated fair value		Net unrealized gains (losses)			Amortized cost		Estimated fair value		Net unrealized gains (losses)			Amortized cost		Estimated fair value		Net unrealized gains (losses)
	(in millions)
Securities available for sale:
Domestic:
Japanese national government and Japanese government agency bonds	¥	11,936,826	¥	11,970,301	¥	33,475		¥	21,922,264	¥	21,922,541	¥	277		¥	18,583,336	¥	18,615,441	¥	32,105
Corporate bonds		1,362,737		1,368,002		5,265			4,230,272		4,259,825		29,553			4,408,436		4,489,588		81,152
Marketable equity securities		1,694,345		2,971,151		1,276,806			3,528,185		6,377,443		2,849,258			3,419,713		6,500,329		3,080,616
Other securities		196,257		198,183		1,926			291,950		292,219		269			275,062		276,925		1,863
Total domestic		15,190,165		16,507,637		1,317,472			29,972,671		32,852,028		2,879,357			26,686,547		29,882,283		3,195,736
Foreign:
U.S. Treasury and other U.S. government agencies bonds		767,042		755,285		(11,757	)		933,613		937,624		4,011			2,009,740		2,024,465		14,725
Other governments and official institutions bonds		736,919		742,612		5,693			815,152		826,940		11,788			1,115,086		1,168,044		52,958
Mortgage-backed securities		2,098,254		2,103,205		4,951			2,539,850		2,604,677		64,827			2,614,577		2,677,096		62,519
Other securities		1,345,967		1,382,831		36,864			2,346,977		2,464,182		117,205			3,629,185		3,838,248		209,063
Total foreign		4,948,182		4,983,933		35,751			6,635,592		6,833,423		197,831			9,368,588		9,707,853		339,265
Total	¥	20,138,347	¥	21,491,570	¥	1,353,223		¥	36,608,263	¥	39,685,451	¥	3,077,188		¥	36,055,135	¥	39,590,136	¥	3,535,001
Securities being held to maturity:
Domestic:
Japanese national government and Japanese government agency bonds	¥	1,997,336	¥	2,013,677	¥	16,341		¥	2,052,541	¥	2,037,805	¥	(14,736	)	¥	2,053,629	¥	2,046,521	¥	(7,108	)
Other securities		997		997		—			1,260		1,257		(3	)		1,027		1,027		—
Total domestic		1,998,333		2,014,674		16,341			2,053,801		2,039,062		(14,739	)		2,054,656		2,047,548		(7,108	)
Foreign:
U.S. Treasury and other U.S. government agencies bonds		5,254		5,417		163			5,160		5,482		322			4,404		4,745		341
Other governments and official institutions bonds		9,846		9,957		111			5,079		4,992		(87	)		6,691		6,663		(28	)
Other securities		34,508		34,584		76			52,606		52,602		(4	)		41,203		41,779		576
Total foreign		49,608		49,958		350			62,845		63,076		231			52,298		53,187		889
Total	¥	2,047,941	¥	2,064,632	¥	16,691		¥	2,116,646	¥	2,102,138	¥	(14,508	)	¥	2,106,954	¥	2,100,735	¥	(6,219	)

Nonmarketable equity securities presented in Other investment securities in the consolidated financial statements were primarily carried at costs of ¥275,316 million, ¥721,237 million and ¥552,775 million, at March 31, 2005, 2006 and 2007, respectively. The corresponding estimated fair values at those dates were not readily determinable. Investment securities held by certain subsidiaries subject to specialized industry accounting principles in the “AICPA Audit and Accounting Guide Investment Companies” presented in Other investment securities were carried at fair value of ¥6,248 million and ¥6,872 million at March 31, 2006 and 2007, respectively.

A-6

The following table presents the book values, maturities and weighted average yields of investment securities available for sale and being held to maturity, excluding equity securities, at March 31, 2007. Weighted average yields are calculated based on amortized cost. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material:

	Maturities within one year				Maturities after one year but within five years				Maturities after five years but within ten years				Maturities after ten years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(in millions, except percentages)
Securities available for sale:
Domestic:
Japanese national government and Japanese government agency bonds	¥	9,263,070	0.16	%	¥	5,853,893	0.84	%	¥	1,124,904	1.33	%	¥	2,373,574	1.41	%	¥	18,615,441	0.60	%
Corporate bonds		550,381	0.70			3,053,789	0.88			851,900	1.07			33,518	1.26			4,489,588	0.90
Other securities		55,732	1.24			131,468	1.31			75,701	1.54			14,024	1.52			276,925	1.37
Total domestic		9,869,183	0.19			9,039,150	0.86			2,052,505	1.23			2,421,116	1.41			23,381,954	0.67
Foreign:
U.S. Treasury and other U.S. government agencies bonds		329,043	5.07			1,427,084	4.72			266,495	4.50			1,843	9.08			2,024,465	4.75
Other governments and official institutions bonds		353,557	3.16			461,076	3.41			302,936	3.98			50,475	4.29			1,168,044	3.52
Mortgage-backed securities		64	4.76			1,366	4.56			233,336	4.71			2,442,330	5.42			2,677,096	5.36
Other securities		68,228	2.31			755,316	3.21			678,672	4.69			1,972,313	5.37			3,474,529	4.71
Total foreign		750,892	3.92			2,644,842	4.06			1,481,439	4.51			4,466,961	5.39			9,344,134	4.75
Total	¥	10,620,075	0.46	%	¥	11,683,992	1.59	%	¥	3,533,944	2.62	%	¥	6,888,077	3.99	%	¥	32,726,088	1.84	%
Securities being held to maturity:
Domestic:
Japanese national government and Japanese government agency bonds	¥	478,776	0.25	%	¥	1,520,616	0.59	%	¥	9,851	1.27	%	¥	44,386	1.28	%	¥	2,053,629	0.53	%
Other securities		—	—			30	—			—	—			997	2.21			1,027	2.14
Total domestic		478,776	0.25			1,520,646	0.59			9,851	1.27			45,383	1.30			2,054,656	0.53
Foreign:
U.S. Treasury and other U.S. government agencies bonds		—	—			—	—			—	—			4,404	6.74			4,404	6.74
Other governments and official institutions bonds		788	6.60			5,903	5.86			—	—			—	—			6,691	5.95
Other securities		9,704	4.12			11,573	4.89			19,926	1.75			—	—			41,203	3.19
Total foreign		10,492	4.31			17,476	5.22			19,926	1.75			4,404	6.74			52,298	3.84
Total	¥	489,268	0.34	%	¥	1,538,122	0.64	%	¥	29,777	1.59	%	¥	49,787	1.78	%	¥	2,106,954	0.61	%

Excluding U.S. Treasury and other U.S. government agencies bonds and Japanese national government bonds, the following table sets forth the securities of individual issuers held in our investment securities portfolio which exceeded 10% of our consolidated total shareholder’s equity at March 31, 2007.

	Amortized cost		Estimated fair value
	(in millions)
Mortgage-backed securities issued by U.S. Federal National Mortgage Association	¥	1,692,511	¥	1,739,277

A-7

III.    Loan Portfolio

The following table shows our loans outstanding, before deduction of allowance for credit losses, by domicile and type of industry of borrower at March 31 of each of the five fiscal years ended March 31, 2007. Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of Japan for regulatory reporting purposes and is not necessarily based on use of proceeds:

	At March 31,
	2003(4)			2004(4)			2005(4)			2006(5)			2007
	(in millions)
Domestic:
Manufacturing	¥	4,714,708		¥	4,692,433		¥	5,280,555		¥	9,353,453		¥	9,586,045
Construction		995,918			832,758			815,051			1,813,724			1,677,536
Real estate		3,245,721			3,515,717			4,156,975			7,094,570			6,308,813
Services		4,249,086			3,661,758			2,965,772			5,759,969			5,915,282
Wholesale and retail		4,723,010			4,311,980			4,527,379			8,916,789			8,519,678
Banks and other financial institutions(1)		1,705,185			1,676,785			2,364,504			4,354,708			3,141,839
Communication and information services		1,264,713			650,983			605,910			1,029,441			964,544
Other industries		2,644,977			4,750,575			5,344,587			9,946,179			9,313,724
Consumer		7,089,429			7,562,590	(3)		7,662,809	(3)		22,356,140	(3)		23,127,798	(3)
Total domestic		30,632,747			31,655,579			33,723,542			70,624,973			68,555,259
Foreign:
Governments and official institutions		227,685			178,402			209,060			329,227			371,585
Banks and other financial institutions(1)		777,697			904,841			780,666			1,037,765			1,532,750
Commercial and industrial		7,191,202			6,096,893			7,394,212			11,602,004			13,285,579
Other		1,026,797			954,285			1,163,369			2,228,878			2,426,587
Total foreign		9,223,381			8,134,421			9,547,307			15,197,874			17,616,501
Total		39,856,128			39,790,000			43,270,849			85,822,847			86,171,760
Unearned income, unamortized premiums—net and deferred loan fees—net		(40,324	)		(27,096	)		(16,893	)		13,426			(47,694	)
Total(2)	¥	39,815,804		¥	39,762,904		¥	43,253,956		¥	85,836,273		¥	86,124,066

Notes:

(1) Loans to the so-called non-bank finance companies are generally included in the “Banks and other financial institutions” category. Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.

(2) The above table includes loans held for sale of ¥3,360 million, ¥9,960 million, ¥33,246 million, ¥41,682 million and ¥87,086 million at March 31, 2003, 2004, 2005, 2006 and 2007, respectively.

(3) Domestic loans within the “consumer” category in the above table include loans to individuals who utilize loan proceeds to finance their proprietor activities and not for their personal financing needs. During the fiscal year ended March 31, 2004, BTM’s credit administration system was upgraded and became able to present a precise breakdown of the balance of such consumer loans by the type of proprietor business. This breakdown at March 31, 2004, 2005, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in millions)
March 31, 2004	¥	28,229	¥	19,283	¥	738,377	¥	230,730	¥	52,253	¥	1,200	¥	4,121	¥	10,620	¥	1,084,813
March 31, 2005	¥	23,023	¥	16,157	¥	542,969	¥	193,417	¥	39,806	¥	1,126	¥	3,681	¥	7,782	¥	827,961
March 31, 2006	¥	17,212	¥	13,925	¥	425,929	¥	160,805	¥	30,937	¥	947	¥	2,968	¥	6,257	¥	658,980
March 31, 2007	¥	14,662	¥	12,281	¥	367,290	¥	132,893	¥	26,104	¥	677	¥	2,407	¥	5,411	¥	561,725

A-8

Since the system upgrade was effective during the fiscal year ended March 31, 2004, no equivalent information is obtainable at March 31, 2003.

(4) Classification of loans by industry at March 31, 2003, 2004 and 2005 have been restated as follows:

	At March 31,
	2003				2004				2005
	As previously reported		As restated		As previously reported		As restated		As previously reported		As restated
	(in millions)
Foreign:
Commercial and industrial	¥	7,954,366	¥	7,191,202	¥	6,896,511	¥	6,096,893	¥	8,388,167	¥	7,394,212
Other		263,633		1,026,797		154,667		954,285		169,414		1,163,369

(5) Classification of loans by industry at March 31, 2006 has been restated as follows:

	At March 31, 2006
	As previously reported		As restated
	( in millions)
Domestic :
Manufacturing	¥	9,400,652	¥	9,353,453
Construction		1,801,855		1,813,724
Real estate		7,086,430		7,094,570
Services		5,314,968		5,759,969
Wholesale and retail		8,688,851		8,916,789
Banks and other financial institutions		4,597,245		4,354,708
Communication and information services		1,026,113		1,029,441
Other industries		10,352,719		9,946,179
Consumer		22,356,140		22,356,140
Total domestic		70,624,973		70,624,973
Foreign :
Governments and official institutions		322,051		329,227
Banks and other financial institutions		1,089,209		1,037,765
Commercial and industrial		13,228,252		11,602,004
Other		558,362		2,228,878
Total foreign		15,197,874		15,197,874
Total		85,822,847		85,822,847
Unearned income, unamortized premiums-net and deferred loan fees-net		13,426		13,426
Total	¥	85,836,273	¥	85,836,273

A-9

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table shows the maturities of our loan portfolio at March 31, 2007:

	Maturity
	One year or less		One to five years		Over five years		Total
	(in millions)
Domestic:
Manufacturing	¥	6,698,473	¥	2,497,429	¥	390,143	¥	9,586,045
Construction		1,040,233		548,395		88,908		1,677,536
Real estate		2,139,773		2,401,656		1,767,384		6,308,813
Services		2,704,407		2,316,640		894,235		5,915,282
Wholesale and retail		6,028,835		2,153,470		337,373		8,519,678
Banks and other financial institutions		1,508,022		1,389,888		243,929		3,141,839
Communication and information services		567,140		359,647		37,757		964,544
Other industries		6,893,065		1,611,287		809,372		9,313,724
Consumer		2,988,987		4,302,022		15,836,789		23,127,798
Total domestic		30,568,935		17,580,434		20,405,890		68,555,259
Foreign		8,522,026		5,367,588		3,726,887		17,616,501
Total	¥	39,090,961	¥	22,948,022	¥	24,132,777	¥	86,171,760

The above loans due after one year which had predetermined interest rates and floating or adjustable interest rates at March 31, 2007 are shown below.

	Domestic		Foreign		Total
	(in millions)
Predetermined rate	¥	17,444,959	¥	1,575,106	¥	19,020,065
Floating or adjustable rate		20,541,365		7,519,369		28,060,734
Total	¥	37,986,324	¥	9,094,475	¥	47,080,799

Nonaccrual, Past Due and Restructured Loans

We generally discontinue the accrual of interest income on loans when substantial doubt exists as to the full and timely collection of either principal or interest, or when principal or interest is contractually past due one month or more with respect to loans of us and certain domestic subsidiaries, and 90 days or more with respect to loans of certain foreign subsidiaries.

A-10

The following table shows the distribution of our nonaccrual loans, restructured loans and accruing loans which are contractually past due 90 days or more as to principal or interest payments at March 31 of each of the five fiscal years ended March 31, 2007, based on the domicile and type of industry of the borrowers:

	At March 31,
	2003		2004			2005			2006			2007
	(in millions)
Nonaccrual loans:
Domestic:
Manufacturing	¥	73,635	¥	98,856		¥	77,768		¥	104,892		¥	79,742
Construction		62,951		42,619			38,755			35,367			42,637
Real estate		198,792		125,405			92,623			149,423			117,075
Services		65,506		39,514			94,517			51,136			126,666
Wholesale and retail		195,423		84,095			74,435			124,534			125,518
Banks and other financial institutions		15,016		15,789			4,346			15,777			10,170
Communication and information services		13,863		5,128			11,379			12,788			21,902
Other industries		30,938		14,505			13,279			23,801			120,150
Consumer		147,110		137,690	(1)		115,811	(1)		345,339	(1)		316,052	(1)
Total domestic		803,234		563,601			522,913			863,057			959,912
Foreign:
Governments and official institutions		1,734		877			455			38			32
Banks and other financial institutions		7,694		84,623			45,091			33,214			3,233
Commercial and industrial		251,110		127,333			52,942			29,217			34,330
Other		5,350		13,942			8,252			96			1,388
Total foreign		265,888		226,775			106,740			62,565			38,983
Total	¥	1,069,122	¥	790,376		¥	629,653		¥	925,622		¥	998,895
Restructured loans:
Domestic	¥	945,261	¥	381,063		¥	343,557		¥	829,747		¥	471,310
Foreign		83,193		45,739			21,729			74,142			40,239
Total	¥	1,028,454	¥	426,802		¥	365,286		¥	903,889		¥	511,549
Accruing loans contractually past due 90 days or more:
Domestic	¥	15,212	¥	11,092		¥	9,232		¥	20,269		¥	19,488
Foreign		2,866		887			878			1,112			1,821
Total	¥	18,078	¥	11,979		¥	10,110		¥	21,381		¥	21,309
Total	¥	2,115,654	¥	1,229,157		¥	1,005,049		¥	1,850,892		¥	1,531,753

Note:

(1) Domestic nonaccrual loans within the “consumer” category in the above table include loans to individuals who utilize loan proceeds to finance their proprietor activities and not for their personal financing needs. During the fiscal year ended March 31, 2004, BTM’s credit administration system was upgraded and became able to present a precise breakdown of the balance of such consumer loans by the type of proprietor business. This breakdown at March 31, 2004, 2005, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in millions)
March 31, 2004	¥	1,566	¥	877	¥	52,271	¥	14,203	¥	5,765	¥	21	¥	264	¥	—	¥	74,967
March 31, 2005	¥	1,345	¥	986	¥	43,334	¥	13,692	¥	3,185	¥	18	¥	219	¥	378	¥	63,157
March 31, 2006	¥	1,132	¥	771	¥	27,870	¥	9,654	¥	1,614	¥	16	¥	240	¥	304	¥	41,601
March 31, 2007	¥	1,152	¥	533	¥	21,610	¥	7,293	¥	1,036	¥	14	¥	130	¥	256	¥	32,024

Since the system upgrade was effective during the fiscal year ended March 31, 2004, no equivalent information is obtainable at March 31, 2003.

A-11

Gross interest income which would have been accrued at the original terms on domestic nonaccrual and restructured loans outstanding during the fiscal year ended March 31, 2007 was approximately ¥83.8 billion, of which ¥60.4 billion was included in the results of operations for the fiscal year. Gross interest income which would have been accrued at the original terms on foreign nonaccrual and restructured loans outstanding for the fiscal year ended March 31, 2007 was approximately ¥4.1 billion, of which ¥3.6 billion was included in the results of operations for the fiscal year.

Foreign Loans Outstanding

We had no cross-border outstandings to borrowers in any foreign country in which total exceeded 0.75% of consolidated total assets at March 31, 2005, 2006 and 2007. Cross-border outstandings are defined, for this purpose, as loans (including accrued interest), acceptances, interest-earning deposits with other banks, other interest-earning investments and any other monetary assets denominated in Japanese yen or other non-local currencies. Material local currency loans outstanding which are neither hedged nor funded by local currency borrowings are included in cross-border outstandings.

Guarantees of outstandings of borrowers of other countries are considered to be outstandings of the guarantor. Loans made to, or deposits placed with, a branch of a foreign bank located outside the foreign bank’s home country are considered to be loans to, or deposits with, the foreign bank. Outstandings of a country do not include principal or interest amounts of which are supported by written, legally enforceable guarantees by guarantors of other countries or the amounts of outstandings to the extent that they are secured by tangible, liquid collateral held and realizable by us and our subsidiaries outside the country in which they operate.

In addition to credit risk, cross-border outstandings are subject to country risk that as a result of political or economic conditions in a country, borrowers may be unable or unwilling to pay principal and interest according to contractual terms. Other risks related to cross-border outstandings include the possibility of insufficient foreign exchange and restrictions on its availability.

In order to manage country risk, we establish various risk management measures internally. Among other things, we first regularly monitor economic conditions and other factors globally and assess country risk in each country where we have cross-border exposure. For purposes of monitoring and controlling the amount of credit exposed to country risk, we set a country limit, the maximum amount of credit exposure for an individual country, in consideration of the level of country risk and our ability to bear such potential risk. We also determine our credit policy for each country in accordance with our country risk level and our business plan with regard to the country. Assessment of country risk, establishment of country limits, and determination of country credit policies are subject to review and approval by our senior management and are updated periodically.

Loan Concentrations

At March 31, 2007, there were no concentrations of loans to a single industry group of borrowers, as defined by the Bank of Japan industry segment loan classifications, which exceeded 10% of our consolidated total loans, except for loans in a category disclosed in the table of loans outstanding above.

Credit Risk Management

We have a credit rating system, under which borrowers and transactions are graded on a worldwide basis. We calculate probability of default by statistical means and manage our credit portfolio based on this credit rating system. For a detailed description of this system and other elements of our risk management structure, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management.”

A-12

IV.    Summary of Loan Loss Experience

The following table shows an analysis of our loan loss experience by type of borrowers’ business for each of the five fiscal years ended March 31, 2007:

	Fiscal years ended March 31,
	2003			2004			2005			2006			2007
	(in millions, except percentages)
Allowance for credit losses at beginning of fiscal year	¥	1,341,608		¥	1,058,633		¥	649,339		¥	567,651		¥	912,997
Additions resulting from the merger with UFJ Bank(1)		—			—			—			279,158			—
Provision (credit) for credit losses		287,282			(142,617	)		123,945			163,416			341,570
Charge-offs:
Domestic:
Manufacturing		65,671			17,142			67,917			6,953			26,983
Construction		48,559			31,226			6,729			5,999			18,879
Real estate		181,203			46,975			33,322			13,461			11,933
Services		45,946			14,274			7,646			18,823			24,504
Wholesale and retail		98,106			39,387			25,185			14,446			43,100
Banks and other financial institutions		18,945			1,123			8,920			701			1,789
Communication and information services		4,865			2,256			1,265			2,621			16,322
Other industries		22,567			5,904			4,505			2,643			4,439
Consumer		38,042			48,620	(3)		26,044	(3)		51,076	(3)		136,468	(3)
Total domestic		523,904			206,907			181,533			116,723			284,417
Total foreign		116,218			70,558			51,772			10,402			13,840
Total		640,122			277,465			233,305			127,125			298,257
Recoveries:
Domestic		49,074			11,337			14,284			3,179			28,171
Foreign		17,574			18,699			9,575			16,190			4,840
Total		66,648			30,036			23,859			19,369			33,011
Net charge-offs		573,474			247,429			209,446			107,756			265,246
Others(2)		3,217			(19,248	)		3,813			10,528			4,206
Allowance for credit losses at end of fiscal year	¥	1,058,633		¥	649,339		¥	567,651		¥	912,997		¥	993,527
Allowance for credit losses applicable to foreign activities:
Balance at beginning of fiscal year	¥	224,830		¥	226,612		¥	194,707		¥	86,481		¥	117,984
Balance at end of fiscal year	¥	226,612		¥	194,707		¥	86,481		¥	117,984		¥	100,234
Provision (credit) for credit losses	¥	112,761		¥	32,049		¥	(68,853	)	¥	607		¥	(12,896	)
Ratio of net charge-offs during the fiscal year to average loans outstanding during the fiscal year		1.42	%		0.61	%		0.49	%		0.17	%		0.31	%

Notes:

(1) Additions resulting from the merger with UFJ Bank represent the valuation allowance for acquired loans outside the scope of SOP 03-3. The allowance for credit losses on loans within the scope of SOP 03-3 was not carried over.

(2) Others primarily include foreign exchange translation and discontinued operations adjustments.

A-13

(3) Charge-offs of domestic loans within the “consumer” category in the above table include charge-offs of loans to individuals who utilize loan proceeds to finance their proprietor activities and not for their personal financing needs. During the fiscal year ended March 31, 2004, BTM’s credit administration system was upgraded and became able to present a precise breakdown of charge-offs of such consumer loans by the type of proprietor business. This breakdown for the fiscal years ended March 31, 2004, 2005, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in millions)
March 31, 2004	¥	39	¥	—	¥	9,481	¥	2,270	¥	486	¥	—	¥	—	¥	108	¥	12,384
March 31, 2005	¥	—	¥	—	¥	450	¥	137	¥	—	¥	—	¥	—	¥	64	¥	651
March 31, 2006	¥	19	¥	—	¥	1,835	¥	295	¥	388	¥	—	¥	—	¥	—	¥	2,537
March 31, 2007	¥	3	¥	1	¥	67	¥	—	¥	11	¥	—	¥	—	¥	—	¥	82

Since the system upgrade was effective during the fiscal year ended March 31, 2004, no equivalent information is obtainable for the fiscal year ended March 31, 2003.

The following table shows an allocation of our allowance for credit losses at March 31 of each of the five fiscal years ended March 31, 2007:

	At March 31,
	2003(2)					2004(2)					2005(2)					2006(3)					2007
	Amount			% of loans in each category to total loans		Amount			% of loans in each category to total loans		Amount			% of loans in each category to total loans		Amount			% of loans in each category to total loans		Amount			% of loans in each category to total loans
	(in millions, except percentages)
Domestic:
Manufacturing	¥	111,089		11.83	%	¥	72,552		11.79	%	¥	63,417		12.20	%	¥	111,560		10.90	%	¥	96,537		11.12	%
Construction		54,497		2.50			15,174		2.09			35,179		1.88			24,451		2.11			38,881		1.94
Real estate		181,780		8.14			90,667		8.84			74,019		9.61			89,133		8.27			77,856		7.32
Services		100,968		10.66			44,737		9.20			85,939		6.85			64,438		6.71			116,879		6.86
Wholesale and retail		163,546		11.85			75,961		10.84			74,710		10.46			113,889		10.39			121,992		9.89
Banks and other financial institutions		37,648		4.28			19,301		4.21			16,473		5.46			47,095		5.07			46,867		3.65
Communication and information services		18,331		3.17			5,927		1.64			12,348		1.40			14,939		1.20			21,731		1.12
Other industries		46,293		6.64			30,218		11.94			34,205		12.36			97,107		11.59			150,683		10.81
Consumer		94,559		17.79			81,567	(1)	19.01			76,263	(1)	17.71			224,723	(1)	26.05			214,830	(1)	26.84
Foreign:
Governments and official institutions		2,227		0.57			1,122		0.45			170		0.48			1,204		0.38			397		0.43
Banks and other financial institutions		5,275		1.95			58,198		2.27			8,502		1.80			11,975		1.21			2,968		1.78
Commercial and industrial		202,642		18.04			128,997		15.32			69,212		17.10			101,497		13.52			94,791		15.42
Other		16,468		2.58			6,390		2.40			8,597		2.69			3,308		2.60			2,078		2.82
Unallocated		23,310		—			18,528		—			8,617		—			7,678		—			7,037		—
Total	¥	1,058,633		100.00	%	¥	649,339		100.00	%	¥	567,651		100.00	%	¥	912,997		100.00	%	¥	993,527		100.00	%
Allowance as a percentage of loans		2.66	%				1.63	%				1.31	%				1.06	%				1.15	%
Allowance as a percentage of nonaccrual and restructured loans and accruing loans contractually past due 90 days or more		50.04	%				52.83	%				56.48	%				49.33	%				64.86	%

A-14

Note:

(1) The credit loss allowance for domestic loans within the “consumer” category in the above table include the credit loss allowance for loans to individuals who utilize loan proceeds to finance their proprietor activities and not for their personal financing needs. During the fiscal year ended March 31, 2004, BTM’s credit administration system was upgraded and became able to present a precise breakdown of the balance of the credit loss allowance for such consumer loans by the type of proprietor business. This breakdown at March 31, 2004, 2005, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in millions)
March 31, 2004	¥	292	¥	196	¥	7,671	¥	2,371	¥	554	¥	13	¥	42	¥	104	¥	11,243
March 31, 2005	¥	211	¥	146	¥	4,962	¥	1,769	¥	363	¥	12	¥	35	¥	70	¥	7,568
March 31, 2006	¥	79	¥	60	¥	1,893	¥	715	¥	139	¥	7	¥	13	¥	26	¥	2,932
March 31, 2007	¥	87	¥	73	¥	2,174	¥	787	¥	155	¥	4	¥	14	¥	32	¥	3,326

Since the system upgrade was effective during the fiscal year ended March 31, 2004, no equivalent information is obtainable at March 31, 2003.

(2) Percentage of loans in each category to total loans at March 31, 2003, 2004 and 2005 have been restated as follows:

	At March 31,
	2003				2004				2005
	As previously reported		As restated		As previously reported		As restated		As previously reported		As restated
Foreign :
Commercial and industrial	19.96	%	18.04	%	17.33	%	15.32	%	19.39	%	17.10	%
Other	0.66		2.58		0.39		2.40		0.40		2.69

(3) Percentage of loans in each category to total loans at March 31, 2006 has been restated as follows:

	At March 31,
	2006
	As previously reported		As restated
Domestic :
Manufacturing	10.95	%	10.90	%
Construction	2.10		2.11
Real estate	8.26		8.27
Services	6.19		6.71
Wholesale and retail	10.12		10.39
Banks and other financial institutions	5.36		5.07
Communication and information services	1.20		1.20
Other industries	12.06		11.59
Consumer	26.05		26.05
Foreign :
Governments and official institutions	0.38		0.38
Banks and other financial institutions	1.27		1.21
Commercial and industrial	15.41		13.52
Other	0.65		2.60
Unallocated	—		—
Total	100.00	%	100.00	%

While the allowance for credit losses contains amounts allocated to components of specifically identified loans as well as a group on portfolio of loans, the allowance for credit losses is available for credit losses in the entire loan portfolio and the allocations shown above are not intended to be restricted to the specific loan category. Accordingly, as the evaluation of credit risks changes, allocations of the allowance will be changed to reflect current conditions and various other factors.

A-15

V.    Deposits

The following table shows the average amount of, and the average rate paid on, the following deposit categories for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005				2006				2007
	Average amount		Average rate		Average amount		Average rate		Average amount		Average rate
	(in millions, except percentages)
Domestic offices:
Non-interest-bearing demand deposits	¥	4,764,551	—	%	¥	13,055,227	—	%	¥	15,677,264	—	%
Interest-bearing demand deposits		23,745,558	0.02			31,264,971	0.04			42,100,919	0.13
Deposits at notice		1,251,744	0.78			1,488,552	1.39			2,221,623	2.61
Time deposits		16,127,396	0.22			23,776,597	0.26			30,727,056	0.40
Certificates of deposit		1,542,182	0.02			2,717,170	0.02			3,839,415	0.26
Foreign offices, principally from banks located in foreign countries:
Non-interest-bearing demand deposits		2,610,129	—			2,844,727	—			2,507,393	—
Interest-bearing deposits, principally time deposits and certificates of deposit		8,953,227	1.48			11,277,280	2.65			13,639,770	3.74
Total	¥	58,994,787			¥	86,424,524			¥	110,713,440

Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or more days notice in advance of withdrawal.

The average amounts of total deposits by foreign depositors included in domestic offices for the fiscal years ended March 31, 2005, 2006 and 2007 were ¥703,742 million, ¥633,482 million and ¥522,947 million, respectively.

At March 31, 2007, the balance and remaining maturities of time deposits and certificates of deposit issued by domestic offices in amounts of ¥10 million (approximately US$85 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 30, 2007) or more and total foreign deposits issued in amounts of US$100,000 or more are shown in the following table.

	Time deposits		Certificates of deposit		Total
	(in millions)
Domestic offices:
Three months or less	¥	6,517,648	¥	2,975,402	¥	9,493,050
Over three months through six months		3,649,118		400,871		4,049,989
Over six months through twelve months		3,115,506		29,488		3,144,994
Over twelve months		2,367,144		48,646		2,415,790
Total	¥	15,649,416	¥	3,454,407	¥	19,103,823
Foreign offices					¥	9,739,609

Note:

The balance of foreign deposits issued in amounts of US$100,000 or more at March 31, 2006 has been restated from ¥7,723,655 million to ¥8,678,459 million.

A-16

VI.    Short-Term Borrowings

The following table shows certain additional information with respect to our short-term borrowings for the fiscal years ended March 31, 2005, 2006 and 2007:

	Fiscal years ended March 31,
	2005			2006			2007
	(in millions, except percentages)
Call money, funds purchased, and payables under repurchase agreements and securities lending transactions:
Average balance outstanding during the fiscal year	¥	8,626,850		¥	7,812,226		¥	8,494,916
Maximum balance outstanding at any month-end during the fiscal year		9,955,766			9,816,826			9,977,225
Balance at end of fiscal year		6,231,125			7,777,101			8,641,605
Weighted average interest rate during the fiscal year		0.63	%		1.58	%		1.84	%
Weighted average interest rate on balance at end of fiscal year		0.97	%		1.52	%		2.46	%
Other short-term borrowings:
Average balance outstanding during the fiscal year	¥	8,105,687		¥	10,745,124		¥	5,990,159
Maximum balance outstanding at any month-end during the fiscal year		11,227,440			15,614,428			7,883,422
Balance at end of fiscal year		9,631,568			9,689,393			4,411,644
Weighted average interest rate during the fiscal year		0.27	%		0.61	%		1.75	%
Weighted average interest rate on balance at end of fiscal year		0.30	%		0.73	%		2.64	%

A-17

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of March 31, 2006 and 2007	F-3
Consolidated Statements of Income for the Fiscal Years ended March 31, 2005, 2006 and 2007	F-4
Consolidated Statements of Changes in Equity from Nonowner Sources for the Fiscal Years ended March 31, 2005, 2006 and 2007	F-5
Consolidated Statements of Shareholder’s Equity for the Fiscal Years ended March 31, 2005, 2006 and 2007	F-6
Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2005, 2006 and 2007	F-8
Notes to Consolidated Financial Statements	F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

(Kabushiki Kaisha Mitsubishi Tokyo UFJ Ginko):

We have audited the accompanying consolidated balance sheets of The Bank of Tokyo-Mitsubishi UFJ, Ltd. (Kabushiki Kaisha Mitsubishi Tokyo UFJ Ginko) (“BTMU”) (a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc. (“MUFG”)) and subsidiaries (together, the “BTMU Group”) as of March 31, 2006 and 2007, and the related consolidated statements of income, changes in equity from nonowner sources, shareholder’s equity, and cash flows for each of the three years in the period ended March 31, 2007 (all expressed in Japanese Yen). These financial statements are the responsibility of BTMU’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. BTMU is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the BTMU Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the BTMU Group as of March 31, 2006 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, on January 1, 2006, The Bank of Tokyo-Mitsubishi, Ltd. merged with UFJ Bank Limited and was renamed BTMU.

As discussed in Note 4 to the consolidated financial statements, BTMU transferred substantially all common shares of Mitsubishi UFJ Securities Co., Ltd. to MUFG on July 1, 2005.

As discussed in the respective footnotes to the consolidated financial statements, certain disclosures in Notes 7, 12, 13, 25, 26, 30 and 31 have been restated.

As discussed in Note 1 to the consolidated financial statements, BTMU changed its method of accounting for variable interest entities in the fiscal year ended March 31, 2005, its method of accounting for conditional asset retirement obligations in the fiscal year ended March 31, 2006, and its methods of accounting for pension and other postretirement plans and stock-based compensation in the fiscal year ended March 31, 2007.

/s/ DELOITTE TOUCHE TOHMATSU

DELOITTE TOUCHE TOHMATSU

Tokyo, Japan

September 20, 2007

F-2

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2006 AND 2007

	2006			2007
	(in millions)
ASSETS
Cash and due from banks (Note 12)	¥	5,393,776		¥	2,427,548
Interest-earning deposits in other banks (Note 12)		6,004,780			5,524,777
Call loans and funds sold (Note 15)		2,213,288			2,017,749
Receivables under resale agreements		266,341			292,643
Receivables under securities borrowing transactions		2,756,861			3,590,753
Trading account assets (including assets pledged that secured parties are permitted to sell or repledge of ¥1,541,420 million in 2006 and ¥771,230 million in 2007) (Notes 5 and 12)		5,879,628			4,077,277
Investment securities (Notes 6 and 12):
Securities available for sale—carried at estimated fair value (including assets pledged that secured parties are permitted to sell or repledge of ¥4,134,755 million in 2006 and ¥5,663,151 million in 2007)		39,685,451			39,590,136
Securities being held to maturity—carried at amortized cost (including assets pledged that secured parties are permitted to sell or repledge of ¥186,464 million in 2006 and ¥797,631 million in 2007) (estimated fair value of ¥2,102,138 million in 2006 and ¥2,100,735 million in 2007)		2,116,646			2,106,954
Other investment securities		727,485			559,647
Total investment securities		42,529,582			42,256,737
Loans, net of unearned income, unamortized premiums and deferred loan fees (including assets pledged that secured parties are permitted to sell or repledge of ¥2,989,924 million in 2006 and ¥3,667,821 million in 2007) (Notes 7 and 12)		85,836,273			86,124,066
Allowance for credit losses (Notes 7 and 8)		(912,997	)		(993,527	)
Net loans		84,923,276			85,130,539
Premises and equipment—net (Note 9)		903,247			895,880
Accrued interest		197,793			305,241
Customers’ acceptance liability		94,719			68,754
Intangible assets—net (Notes 2, 10 and 17)		1,168,372			953,679
Goodwill (Notes 2 and 10)		1,777,983			1,771,130
Deferred tax assets (Notes 11 and 17)		1,099,360			510,999
Other assets (including assets pledged that secured parties are permitted to sell or repledge of ¥5,904 million in 2006) (Notes 7, 12, 17 and 18)		3,492,187			3,779,101
Assets of discontinued operations to be disposed or sold (Note 3)		124,513			2,435
Total assets	¥	158,825,706		¥	153,605,242
LIABILITIES AND SHAREHOLDER’S EQUITY
Deposits (Notes 12 and 13):
Domestic offices:
Non-interest-bearing	¥	19,816,732		¥	16,777,704
Interest-bearing		78,228,258			79,796,774
Overseas offices:
Non-interest-bearing		3,259,840			2,530,492
Interest-bearing		12,757,451			14,281,133
Total deposits		114,062,281			113,386,103
Call money and funds purchased (Notes 12 and 15)		1,838,076			2,050,910
Payables under repurchase agreements (Note 12)		3,898,529			3,232,610
Payables under securities lending transactions (Note 12)		2,040,496			3,358,085
Other short-term borrowings (Notes 12 and 16)		9,689,393			4,411,644
Trading account liabilities (Note 5)		2,259,547			1,210,403
Obligations to return securities received as collateral		1,014,520			808,620
Bank acceptances outstanding		94,719			68,754
Accrued interest		136,089			198,152
Long-term debt (Notes 12 and 16)		11,925,838			12,263,205
Other liabilities (Notes 11, 17 and 18)		3,477,973			3,930,079
Liabilities of discontinued operations to be extinguished or assumed (Note 3)		118,762			546
Total liabilities		150,556,223			144,919,111
Commitments and contingent liabilities (Notes 25 and 27)
Shareholder’s equity (Note 22):
Capital stock (Notes 19 and 20):
Preferred stock—aggregate liquidation preference of ¥790,400 million in 2006 and ¥303,100 million in 2007, with no stated value		125,000			125,000
Common stock—authorized, 15,000,000,000 shares; issued, 9,822,054,986 shares in 2006 and 10,257,961,942 shares in 2007, with no stated value		871,973			871,973
Capital surplus (Note 20)		5,844,289			5,851,061
Retained earnings (Notes 21 and 34):
Appropriated for legal reserve		190,045			190,045
Unappropriated		15,845			26,287
Accumulated other changes in equity from nonowner sources, net of taxes		1,452,125			1,850,421
Loan receivable for constructive capital contribution from parent company		(228,498	)		(228,498	)
Parent company’s stock, at cost—2,235 common shares in 2006 and 164 common shares in 2007		(1,296	)		(158	)
Total shareholder’s equity		8,269,483			8,686,131
Total liabilities and shareholder’s equity	¥	158,825,706		¥	153,605,242

See the accompanying notes to Consolidated Financial Statements.

F-3

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE FISCAL YEARS ENDED MARCH 31, 2005, 2006 AND 2007

	2005			2006			2007
	(in millions)
Interest income:
Loans, including fees (Note 7)	¥	815,544		¥	1,625,596		¥	2,500,716
Deposits in other banks		59,267			133,433			231,527
Investment securities:
Interest		222,538			381,482			554,746
Dividends		30,409			36,753			90,585
Trading account assets		30,675			22,327			17,847
Call loans and funds sold		6,958			18,955			25,952
Receivables under resale agreements and securities borrowing transactions		29,116			30,763			22,987
Total		1,194,507			2,249,309			3,444,360
Interest expense:
Deposits		182,777			393,991			756,403
Debentures (Note 14)		351			—			—
Call money and funds purchased		4,976			4,788			22,009
Payables under repurchase agreements and securities lending transactions		49,063			118,575			134,147
Other short-term borrowings and trading account liabilities		53,164			65,473			109,264
Long-term debt		97,767			145,935			257,389
Total		388,098			728,762			1,279,212
Net interest income		806,409			1,520,547			2,165,148
Provision for credit losses (Notes 7 and 8)		123,945			163,416			341,570
Net interest income after provision for credit losses		682,464			1,357,131			1,823,578
Non-interest income:
Fees and commissions (Note 28)		473,445			641,537			847,688
Foreign exchange gains (losses)—net (Note 5)		1,018			(281,447	)		(163,651	)
Trading account profits (losses)—net (Note 5)		31,316			(91,171	)		253,433
Investment securities gains—net (Note 6)		190,454			40,789			170,974
Equity in earnings of equity method investees		6,249			28,799			5,412
Government grant for transfer of substitutional portion of Employees’ Pension Fund Plans (Note 17)		—			103,001			—
Gains on sales of loans (Note 7)		608			34,605			13,585
Other non-interest income		92,592			80,736			93,012
Total		795,682			556,849			1,220,453
Non-interest expense:
Salaries and employee benefits (Note 17)		396,166			585,550			643,244
Occupancy expenses—net (Notes 9 and 27)		72,740			95,791			123,431
Fees and commission expenses		77,327			179,608			168,100
Outsourcing expenses, including data processing		72,288			118,205			195,759
Depreciation of premises and equipment (Note 9)		39,902			66,402			96,326
Amortization of intangible assets (Note 10)		58,455			125,081			198,034
Impairment of intangible assets (Note 10)		2,134			207			184,754
Insurance premiums, including deposit insurance		47,893			78,841			101,266
Minority interest in income (loss) of consolidated subsidiaries		38,105			108,935			(7,843	)
Communications		25,361			32,962			45,329
Taxes and public charges		25,788			47,824			68,287
Provision for repayment of excess interest (Note 27)		62			12,898			106,242
Other non-interest expenses		98,037			164,524			249,098
Total		954,258			1,616,828			2,172,027
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		523,888			297,152			872,004
Income tax expense (Note 11)		237,296			68,921			410,299
Income from continuing operations before cumulative effect of a change in accounting principle		286,592			228,231			461,705
Income (loss) from discontinued operations—net (Note 3)		1,493			8,973			(817	)
Cumulative effect of a change in accounting principle, net of tax (Note 1)		(977	)		(8,425	)		—
Net income	¥	287,108		¥	228,779		¥	460,888
Income allocable to a preferred shareholder	¥	6,716		¥	6,999		¥	10,963
Net income available to a common shareholder	¥	280,392		¥	221,780		¥	449,925
	(in Yen)
Earnings per share (Notes 21 and 23):
Basic earnings per common share—income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle	¥	55.76		¥	30.64		¥	44.89
Basic earnings per common share—net income available to a common shareholder		55.87			30.72			44.81
Diluted earnings per common share—income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle		55.50			27.01			44.21
Diluted earnings per common share—net income available to a common shareholder		55.61			27.07			44.13

See the accompanying notes to Consolidated Financial Statements.

F-4

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FROM NONOWNER SOURCES

FOR THE FISCAL YEARS ENDED MARCH 31, 2005, 2006 AND 2007

	Gains (Losses) before income tax expense (benefit)			Income tax (expense) benefit			Gains (Losses) net of income tax expense (benefit)
	(in millions)
Fiscal year ended March 31, 2005:
Net income							¥	287,108
Other changes in equity from nonowner sources:
Net unrealized holding gains on investment securities available for sale	¥	250,417		¥	(101,838	)		148,579
Reclassification adjustment for gains included in net income		(241,953	)		98,535			(143,418	)
Total		8,464			(3,303	)		5,161
Net unrealized gains on derivatives qualifying for cash flow hedges		328			(126	)		202
Reclassification adjustment for gains included in net income		(847	)		324			(523	)
Total		(519	)		198			(321	)
Minimum pension liability adjustments		18,501			(7,613	)		10,888
Foreign currency translation adjustments		(6,448	)		(7,760	)		(14,208	)
Reclassification adjustment for losses included in net income		8,872			—			8,872
Total		2,424			(7,760	)		(5,336	)
Total changes in equity from nonowner sources							¥	297,500
Fiscal year ended March 31, 2006:
Net income							¥	228,779
Other changes in equity from nonowner sources:
Net unrealized holding gains on investment securities available for sale	¥	1,761,589		¥	(716,434	)		1,045,155
Reclassification adjustment for gains included in net income		(28,290	)		10,591			(17,699	)
Total		1,733,299			(705,843	)		1,027,456
Net unrealized losses on derivatives qualifying for cash flow hedges		(2,342	)		896			(1,446	)
Reclassification adjustment for gains included in net income		(441	)		169			(272	)
Total		(2,783	)		1,065			(1,718	)
Minimum pension liability adjustments		218,691			(90,358	)		128,333
Foreign currency translation adjustments		86,325			(3,066	)		83,259
Constructive dividend-in-kind of shares of Mitsubishi UFJ Securities Co., Ltd. to parent company (Note 4)		12,902			—			12,902
Reclassification adjustment for gains included in net income		(5,697	)		(2,072	)		(7,769	)
Total		93,530			(5,138	)		88,392
Total changes in equity from nonowner sources							¥	1,471,242
Fiscal year ended March 31, 2007:
Net income							¥	460,888
Other changes in equity from nonowner sources:
Net unrealized holding gains on investment securities available for sale	¥	664,741		¥	(267,443	)		397,298
Reclassification adjustment for gains included in net income		(190,008	)		77,178			(112,830	)
Total		474,733			(190,265	)		284,468
Net unrealized losses on derivatives qualifying for cash flow hedges		(3,161	)		1,214			(1,947	)
Reclassification adjustment for losses included in net income		2,762			(1,056	)		1,706
Total		(399	)		158			(241	)
Minimum pension liability adjustments		(2,542	)		1,011			(1,531	)
Foreign currency translation adjustments		22,015			(438	)		21,577
Reclassification adjustment for gains included in net income		(5,725	)		—			(5,725	)
Total		16,290			(438	)		15,852
Total changes in equity from nonowner sources							¥	759,436

See the accompanying notes to Consolidated Financial Statements.

F-5

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

FOR THE FISCAL YEARS ENDED MARCH 31, 2005, 2006 AND 2007

	2005			2006			2007
	(in millions)
Preferred stock (Note 19):
Balance at beginning of fiscal year	¥	122,100		¥	247,100		¥	125,000
Issuance of new shares of Class 2 preferred stock		125,000			—			—
Conversion of Class 1 preferred stock to common stock		—			(122,100	)		—
Balance at end of fiscal year	¥	247,100		¥	125,000		¥	125,000
Common stock (Note 20):
Balance at beginning of fiscal year	¥	749,873		¥	749,873		¥	871,973
Issuance of new shares of common stock by conversion of Class 1 preferred stock		—			122,100			—
Balance at end of fiscal year	¥	749,873		¥	871,973		¥	871,973
Capital surplus (Note 20):
Balance at beginning of fiscal year	¥	814,583		¥	983,264		¥	5,844,289
Issuance of new shares of Class 2 preferred stock (Note 19)		124,479			—			—
Recognition of tax benefit arising from the suspension of the consolidated corporate-tax system (Note 11)		44,641			—			—
Loss on sale of shares of Mitsubishi UFJ Asset Management Co., Ltd. to parent company (Note 4)		(207	)		—			—
Merger with UFJ Bank Limited (Note 2)		—			4,625,939			—
Constructive capital contribution from parent company in connection with transfer of shares of Mitsubishi UFJ Securities Co., Ltd. (Note 4)		—			228,498			4,626
Changes in ownership of an affiliated company due to transactions within the MUFG Group		—			3,065			—
Stock-based compensation expense of UnionBanCal Corporation (Note 32)		—			—			3,257
Impact of SFAS No. 123R implementation of UnionBanCal Corporation (Note 32)		—			—			(1,468	)
Gains (losses) on sales of shares of parent company’s stock, net of taxes		(256	)		937			329
Other—net		24			2,586			28
Balance at end of fiscal year	¥	983,264		¥	5,844,289		¥	5,851,061
Retained earnings appropriated for legal reserve (Note 21):
Balance at beginning of fiscal year	¥	190,045		¥	190,045		¥	190,045
Balance at end of fiscal year	¥	190,045		¥	190,045		¥	190,045
Unappropriated retained earnings (Note 21):
Balance at beginning of fiscal year	¥	696,985		¥	788,835		¥	15,845
Net income		287,108			228,779			460,888
Cash dividends:
Common share—¥34.71 in 2005, ¥157.21 in 2006 and ¥43.52 in 2007 per share		(174,225	)		(799,277	)		(440,951	)
Preferred share (Class 1)—¥82.50 in 2005 and ¥41.25 in 2006 per share		(6,716	)		(3,357	)		—
Preferred share (Class 2)—¥36.42 in 2006 and ¥60.00 in 2007 per share		—			(3,642	)		(6,000	)
Preferred share (Class 3)—¥23.85 in 2007 per share		—			—			(570	)
Preferred share (Class 4)—¥18.60 in 2007 per share		—			—			(1,483	)
Preferred share (Class 5)—¥19.40 in 2007 per share		—			—			(2,910	)
Impact of SFAS No.123R implementation of UnionBanCal Corporation (Note 32)		—			—			1,468
Hypothetical dividends under the separate return method (Note 11)		(14,317	)		—			—
Constructive dividend-in-kind of shares of Mitsubishi UFJ Securities Co., Ltd. to parent company (Note 4)		—			(194,246	)		—
Deferred compensation-restricted stock awards of UnionBanCal Corporation (Note 32)		—			(1,247	)		—
Balance at end of fiscal year (Note 34)	¥	788,835		¥	15,845		¥	26,287

F-6

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY—(Continued)

FOR THE FISCAL YEARS ENDED MARCH 31, 2005, 2006 AND 2007

	2005			2006			2007
	(in millions)
Accumulated other changes in equity from nonowner sources, net of taxes:
Net unrealized gains on investment securities available for sale (Note 6):
Balance at beginning of fiscal year	¥	544,266		¥	549,427		¥	1,576,883
Net change during the fiscal year		5,161			1,027,456			284,468
Balance at end of fiscal year	¥	549,427		¥	1,576,883		¥	1,861,351
Net unrealized gains (losses) on derivatives qualifying for cash flow hedges (Note 24):
Balance at beginning of fiscal year	¥	1,371		¥	1,050		¥	(668	)
Net change during the fiscal year		(321	)		(1,718	)		(241	)
Balance at end of fiscal year	¥	1,050		¥	(668	)	¥	(909	)
Minimum pension liability adjustments (Note 17):
Balance at beginning of fiscal year	¥	(153,629	)	¥	(142,741	)	¥	(14,408	)
Net change during the fiscal year		10,888			128,333			(1,531	)
Adjustments to initially apply SFAS No. 158		—			—			15,939
Balance at end of fiscal year	¥	(142,741	)	¥	(14,408	)	¥	—
Pension liability adjustments (Note 17):
Adjustments to initially apply SFAS No. 158	¥	—		¥	—		¥	83,809
Balance at end of fiscal year	¥	—		¥	—		¥	83,809
Foreign currency translation adjustments:
Balance at beginning of fiscal year	¥	(192,738	)	¥	(198,074	)	¥	(109,682	)
Net change during the fiscal year		(5,336	)		88,392			15,852
Balance at end of fiscal year	¥	(198,074	)	¥	(109,682	)	¥	(93,830	)
Balance at end of fiscal year	¥	209,662		¥	1,452,125		¥	1,850,421
Loan receivable for constructive capital contribution from parent company:
Balance at beginning of fiscal year	¥	—		¥	—		¥	(228,498	)
Increase in connection with transfer of shares of Mitsubishi UFJ Securities Co., Ltd. to parent company (Note 4)		—			(228,498	)		—
Balance at end of fiscal year	¥	—		¥	(228,498	)	¥	(228,498	)
Parent company’s stock:
Balance at beginning of fiscal year	¥	(723	)	¥	(2,194	)	¥	(1,296	)
Purchase of shares of parent company’s stock		—			—			(18	)
Sales of shares of parent company’s stock		708			1,459			1,158
Increase resulting from merger with UFJ Bank Limited		—			(868	)		—
Net decrease (increase) resulting from changes in voting interests in its consolidated subsidiaries and affiliated companies		(2,179	)		307			(2	)
Balance at end of fiscal year	¥	(2,194	)	¥	(1,296	)	¥	(158	)
Total shareholder’s equity	¥	3,166,585		¥	8,269,483		¥	8,686,131

See the accompanying notes to Consolidated Financial Statements.

F-7

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED MARCH 31, 2005, 2006 AND 2007

	2005			2006			2007
	(in millions)
Cash flows from operating activities:
Net income	¥	287,108		¥	228,779		¥	460,888
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations—net (Note 3)		(1,493	)		(8,973	)		817
Depreciation and amortization		98,357			191,483			294,360
Impairment of intangible assets (Note 10)		2,134			207			184,754
Provision for credit losses		123,945			163,416			341,570
Government grant for transfer of substitutional portion of Employees’ Pension Fund plans (Note 17)		—			(103,001	)		—
Investment securities gains—net		(190,454	)		(40,789	)		(170,974	)
Foreign exchange losses (gains)—net		39,826			193,774			(2,159	)
Provision for deferred income tax expense		179,466			4,491			343,340
Decrease (increase) in trading account assets, excluding foreign exchange contracts		(592,927	)		363,099			969,071
Increase (decrease) in trading account liabilities, excluding foreign exchange contracts		120,688			(930,066	)		(636,051	)
Decrease (increase) in accrued interest receivable and other receivables		(20,115	)		12,752			(111,144	)
Increase (decrease) in accrued interest payable and other payables		14,782			(20,425	)		91,530
Increase in allowance for repayment of excess interest (Note 27)		—			9,733			92,738
Other—net		24,227			(49,527	)		(41,974	)
Net cash provided by operating activities		85,544			14,953			1,816,766
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		28,333,369			38,852,587			29,078,211
Proceeds from maturities of investment securities available for sale		31,662,009			33,248,881			25,434,493
Purchases of investment securities available for sale		(61,433,605	)		(70,455,741	)		(53,125,538	)
Proceeds from maturities of investment securities being held to maturity		7,006			17,510			8,440
Purchases of investment securities being held to maturity		(1,004,347	)		(4,698	)		(2,657	)
Proceeds from sales of other investment securities		18,039			123,615			227,141
Purchases of other investment securities		(185,615	)		(26,826	)		(106,972	)
Net decrease (increase) in loans		(1,075,363	)		(1,693,576	)		23,827
Net decrease (increase) in interest-earning deposits in other banks		(582,361	)		(1,048,401	)		735,635
Net decrease (increase) in call loans, funds sold, and receivables under resale agreements and securities borrowing transactions		548,177			1,090,320			(667,032	)
Proceeds from sales of premises and equipment		15,524			12,139			23,446
Capital expenditures for premises and equipment		(38,737	)		(72,178	)		(88,623	)
Purchases of intangible assets		(63,837	)		(77,504	)		(139,583	)
Cash acquired by the merger with UFJ Bank Limited—net (Note 2)		—			5,389,544			—
Other—net		(55,879	)		116,784			(12,824	)
Net cash provided by (used in) investing activities		(3,855,620	)		5,472,456			1,387,964
Cash flows from financing activities:
Net increase (decrease) in deposits		1,597,861			1,972,225			(1,457,104	)
Decrease in debentures (Note 14)		(265,957	)		—			—
Net increase (decrease) in call money, funds purchased, and payables under repurchase agreements and securities lending transactions		(658,412	)		(89,528	)		789,711
Net increase (decrease) in other short-term borrowings		4,005,183			(6,067,919	)		(5,327,949	)
Proceeds from issuance of long-term debt		1,130,420			2,808,828			2,778,338
Repayment of long-term debt		(793,904	)		(1,897,145	)		(2,379,025	)
Proceeds from issuance of new shares of preferred stock, net of stock issue expenses		249,479			—			—
Proceeds from sales of preferred stock issued by a subsidiary		—			108,250			—
Proceeds from sales of parent company’s stock		1,074			2,899			829
Dividends paid		(180,941	)		(806,276	)		(451,914	)
Dividends paid to minority interests		(11,643	)		(62,264	)		(16,640	)
Payments for the allocated amount under the consolidated corporate-tax system (Note 11)		(36,257	)		(10,916	)		—
Net cash received from parent company for the transfer of Mitsubishi UFJ Securities Co., Ltd. (Note 4)		—			197,569			—
Loan provided to parent company for the transfer of Mitsubishi UFJ Securities Co., Ltd. (Note 4)		—			(228,498	)		—
Payments for redemption of preferred stock issued by a subsidiary		—			—			(120,000	)
Other—net		3,783			(58,044	)		(24,760	)
Net cash provided by (used in) financing activities		5,040,686			(4,130,819	)		(6,208,514	)
Effect of exchange rate changes on cash and cash equivalents		(6,810	)		23,273			25,681
Net increase (decrease) in cash and cash equivalents		1,263,800			1,379,863			(2,978,103	)
Cash and cash equivalents at beginning of fiscal year (including cash and cash equivalents identified as discontinued operations of ¥10,752 million in 2005, ¥13,939 million in 2006 and ¥14,069 million in 2007)		2,764,182			4,027,982			5,407,845
Cash and cash equivalents at end of fiscal year (including cash and cash equivalents identified as discontinued operations of ¥13,939 million in 2005, ¥14,069 million in 2006 and ¥2,194 million in 2007)	¥	4,027,982		¥	5,407,845		¥	2,429,742
Supplemental disclosure of cash flow information:
Cash paid during the fiscal year for:
Interest	¥	370,193		¥	783,653		¥	1,263,579
Income taxes, net of refunds		51,718			81,636			55,040
Non-cash investing activities:
Increase of parent company’s stock in exchange for the shares of Diamond Computer Service Co., Ltd. (Note 4)		2,047			—			—
Obtaining assets by entering into capital lease		7,905			26,736			33,905
Merger with UFJ Bank Limited by stock-for-stock exchanges (Note 2):
Noncash assets acquired at fair value		—			71,644,091			—
Liabilities assumed at fair value		—			72,409,416			—
Net		—			(765,325	)		—
Non-cash financing activities:
Stocks issued in connection with the merger with UFJ Bank Limited (Note 2)		—			4,625,939			—

See the accompanying notes to Consolidated Financial Statements.

F-8

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”) is a major commercial banking institution, providing a broad range of financial services to consumers and corporations through commercial banking, investment banking and other activities. As one of the principal subsidiaries of Mitsubishi UFJ Financial Group, Inc. (“MUFG”), BTMU and its subsidiaries (the “BTMU Group”) conduct domestic and international financial business through domestic and international networks of branches, offices and subsidiaries in Japan and around the world. The BTMU Group’s activities also encompass transactions with other subsidiaries of MUFG. See Note 29 for more information by business segment.

On October 1, 2005, Mitsubishi Tokyo Financial Group, Inc. (“MTFG”), the parent company of The Bank of Tokyo-Mitsubishi, Ltd. (“BTM”), merged with UFJ Holdings, Inc. (“UFJ Holdings”), the parent company of UFJ Bank Limited (“UFJ Bank”), with MTFG being the surviving entity and MTFG renamed MUFG. The merger was accounted for under the purchase method of accounting, and the assets and liabilities of UFJ Holdings and its subsidiaries were recorded at fair value as of October 1, 2005. Therefore, although the merger of BTM with UFJ Bank occurred and BTM renamed BTMU on January 1, 2006, the results of operations of UFJ Bank and its subsidiaries (the “UFJ Bank Group”) have been included in the accompanying consolidated financial statements since October 1, 2005. Unless otherwise mentioned, numbers for the fiscal years ended March 31, 2005 reflect the results of BTM and its subsidiaries (the “BTM Group”) only. Numbers as of March 31, 2006 reflect the financial position of the BTMU Group while numbers for the fiscal year ended March 31, 2006 comprised the results of the BTM Group for the six months ended September 30, 2005 and the results of the BTMU Group from October 1, 2005 to March 31, 2006. Numbers as of March 31, 2007 and for the fiscal year ended March 31, 2007 reflect the financial position and results of the BTMU Group. See Note 2 for further discussion of the merger.

Basis of Financial Statements

The accompanying consolidated financial statements are stated in Japanese yen, the currency of the country in which BTMU is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“US GAAP”). In certain respects, the accompanying consolidated financial statements reflect adjustments which are not included in the consolidated financial statements issued by BTMU and certain of its subsidiaries in accordance with applicable statutory requirements and accounting practices in their respective countries of incorporation. The major adjustments include those relating to (1) investment securities, (2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation, (6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension liabilities, (9) goodwill and other intangible assets, and (10) lease transactions.

Fiscal periods of certain subsidiaries, which end on or after December 31, and BTMU’s fiscal year, which ends on March 31, have been treated as coterminous. For the fiscal years ended March 31, 2005, 2006 and 2007, the effect of recording intervening events for the three-month periods ended March 31 on BTMU’s proportionate equity in net income of subsidiaries with fiscal periods ended on December 31, would have resulted in a decrease of ¥0.66 billion, an increase of ¥7.68 billion and a decrease of ¥2.43 billion, respectively, to net income. No intervening events occurred during each of the three-month periods ended March 31, 2005, 2006 and 2007 which, if recorded, would have had effects of more than 1% of consolidated total assets, loans, total liabilities, deposits or total shareholder’s equity as of March 31, 2005, 2006 and 2007.

F-9

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term primarily relate to the allowance for credit losses on loans and off-balance-sheet credit instruments, deferred tax assets, financial instruments with no available market prices, goodwill, investment securities and accrued severance indemnities and pension liabilities.

Summary of Significant Accounting Policies

Significant accounting policies applied in the accompanying consolidated financial statements are summarized below:

Consolidation—The consolidated financial statements include the accounts of BTMU and its subsidiaries over which control is exercised through either majority ownership of voting stock and/or other means, including, but not limited to, the possession of the power to direct or cause the direction of the management and policies of entities. In situations in which the BTMU Group has less than 100% but greater than 50% of ownership in entities, such entities are consolidated and minority interests are also recorded in Other liabilities. Intercompany items have been eliminated. Investments in affiliated companies (companies over which the BTMU Group has the ability to exercise significant influence) are accounted for by the equity method of accounting and are reported in Other assets. The BTMU Group’s equity interests in the earnings of these equity investees and gains or losses realized on disposition of such investments are reported in Equity in earnings of equity method investees.

Variable interest entities are consolidated when the BTMU Group has a variable interest that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected returns, or both. See Accounting Changes—Variable Interest Entities and Note 26.

Assets that the BTMU Group holds in an agency, fiduciary or trust capacity are not assets of the BTMU Group and, accordingly, are not included in the accompanying consolidated balance sheets.

Cash Flows—For the purposes of reporting cash flows, cash and cash equivalents are defined as those amounts included in the consolidated balance sheets under the caption Cash and due from banks with original maturities of 90 days or less. Cash flows from qualified hedging activities are classified in the same category as the items being hedged.

Translation of Foreign Currency Financial Statements and Foreign Currency Transactions—Financial statements of overseas entities are translated into Japanese yen using the respective fiscal year-end exchange rates for assets and liabilities. Income and expense items are translated at average rates of exchange for the respective fiscal periods.

Except for overseas entities located in highly inflationary economies, foreign currency translation gains and losses related to the financial statements of overseas entities of the BTMU Group, net of related income tax effects, are credited or charged directly to Foreign currency translation adjustments, a component of accumulated other changes in equity from nonowner sources. Tax effects of gains and losses on foreign currency translation of financial statements of overseas entities are not recognized unless it is apparent that the temporary differences

F-10

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

will reverse in the foreseeable future. If applicable, foreign exchange translation gains and losses pertaining to entities located in highly inflationary economies are recorded in Foreign exchange gains (losses)—net, as appropriate. For these entities, premises and equipment and the related depreciation and amortization thereof are translated at exchange rates prevailing at dates of acquisition.

Foreign currency denominated assets and liabilities are translated into the functional currencies of the individual entities included in consolidation at the respective fiscal year-end foreign exchange rates. Foreign currency denominated income and expenses are translated using average rates of exchange for the respective fiscal periods. Gains and losses from such translation are included in Foreign exchange gains (losses)—net, as appropriate.

Repurchase Agreements, Securities Lending and Other Secured Financing Transactions—Securities sold with agreements to repurchase (“repurchase agreements”), securities purchased with agreements to resell (“resale agreements”) and securities lending and borrowing transactions are accounted for as sales of securities with related off-balance-sheet forward repurchase commitments or purchases of securities with related off-balance-sheet forward resale commitments, if they meet the relevant conditions for the surrender of control as provided by Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125.” If the conditions are not met, the transactions are treated as secured financing or lending.

Collateral—For secured lending transactions, including resale agreements, securities borrowing transactions, commercial lending and derivative transactions, the BTMU Group, as a secured party, generally has the right to require the counterparties to provide collateral, including letters of credit, cash, securities and other financial assets. For most securities lending transactions, the BTMU Group maintains strict levels of collateralization governed by daily mark-to-market analysis. Financial assets pledged as collateral are generally negotiable financial instruments and are permitted to be sold or repledged by secured parties. If the BTMU Group sells these financial assets received as collateral, it recognizes the proceeds from the sale and its obligation to return the collateral. For secured borrowing transactions, principally repurchase agreements and securities lending transactions and derivative transactions, where the secured party has the right to sell or repledge financial assets pledged as collateral, the BTMU Group separately discloses those financial assets pledged as collateral in the consolidated balance sheets.

Trading Account Securities—Securities and money market instruments held in anticipation of short-term market movements and for resale to customers are included in Trading account assets, and short trading positions of these instruments are included in Trading account liabilities. Trading positions are carried at fair value on the consolidated balance sheets and recorded on a trade date basis. Changes in the fair value of trading positions are recognized currently in Trading account profits (losses)—net, as appropriate.

Investment Securities—Debt securities for which the BTMU Group has both the positive intent and ability to hold to maturity are classified as Securities being held to maturity and carried at amortized cost. Debt securities that the BTMU Group may not hold to maturity and marketable equity securities, other than those classified as Trading account securities, are classified as Securities available for sale, and are carried at their fair values, with unrealized gains and losses reported on a net-of-tax basis within accumulated other changes in equity from nonowner sources, which is a component of shareholder’s equity. Other investment securities include nonmarketable equity securities carried at their acquisition costs, and also securities held by subsidiaries that are investment companies. Such securities held by those subsidiaries are not within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and are subject to the specialized industry accounting principles in the “AICPA Audit and Accounting Guide Investment Companies” (the “AICPA Guide”) applicable for those subsidiaries. Securities of those subsidiaries are carried at their fair values.

F-11

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Individual debt and equity securities are written down to fair value with the resulting losses charged to operations when, in the opinion of management, a decline in estimated fair value below the cost of such securities is other than temporary. Such impairment loss is included in Investment securities gains—net in the consolidated statements of income. In determining other than temporary declines in fair value to be recognized as an impairment loss on investment securities, the BTMU Group generally considers factors such as the financial condition of the issuer, the extent of decline in fair value, and the length of time that the decline in fair value below cost has existed. See Note 6 for a further discussion of other than temporary impairment. Interest and dividends on investment securities are reported in Interest income. Dividends are recognized when the shareholders’ right to receive the dividend is established. Gains and losses on disposition of investment securities are computed using the average cost method and are recognized on the trade date.

Derivative Financial Instruments—The BTMU Group engages in derivative activities involving swaps, forwards, futures, options, and other types of derivative contracts. Derivatives are used in trading activities to generate trading revenues and fee income for its own account and to respond to the customers’ financial needs. Derivatives are also used to manage its market risk exposures to fluctuations in interest and foreign exchange rates, equity and commodity prices, and counterparty credit risk.

Derivatives entered into for trading purposes are carried at fair value and are reported as Trading account assets or Trading account liabilities. Fair values are based on market or broker-dealer quotes when available. Valuation models such as present value and pricing models are applied to current market information to estimate fair values when such quotes are not available. The BTMU Group defers trade date gains or losses on derivatives where the fair values of those derivatives are not obtained from a quoted market price, supported by comparison to other observable market transactions, or based upon a valuation technique incorporating observable market data. The fair values of derivative contracts executed with the same counterparty under legally enforceable master netting agreements are presented on a net basis. Changes in the fair value of such contracts are recognized currently in Foreign exchange gains (losses)—net with respect to foreign exchange contracts and in Trading account profits (losses)—net with respect to interest rate contracts and other types of contracts.

Embedded features that are not clearly and closely related to the host contracts and meet the definition of derivatives are separated from the host contracts and measured at fair value unless the contracts embedding the derivatives are measured at fair value in their entirety.

Derivatives are also used to manage exposures to fluctuations in interest and foreign exchange rates arising from mismatches of asset and liability positions. Certain of those derivatives are designated by the BTMU Group and qualify for hedge accounting. A derivative is designated as a hedging instrument at the inception of each such hedge relationship and the BTMU Group documents, for such individual hedging relationships, the risk management objective and strategy, including identifying the item being hedged, identifying the specific risk being hedged and the method used to assess the hedge’s effectiveness. In order for a hedging relationship to qualify for hedge accounting, the changes in the fair value of the derivative instruments must be highly effective in achieving offsetting changes in fair values or variable cash flows of the hedged items attributable to the risk being hedged. Any ineffectiveness, which arises during the hedging relationship, is recognized in Non-interest income or expense in the period in which it arises. All qualifying hedging derivatives are valued at fair value and included in Other assets or Other liabilities. For fair value hedges of interest-bearing assets or liabilities, the change in the fair value of the hedged item and the hedging instruments is recognized in net interest income to the extent that it is effective. For all other fair value hedges, the change in the fair value of the hedged item and change in fair value of the derivative are recognized in non-interest income or expense. For cash flow hedges, the unrealized changes in fair value to the extent effective are recognized in accumulated other changes in equity from nonowner sources. Amounts realized on cash flow hedges related to variable rate loans are recognized in net interest income in the period when the cash flow from the hedged item is realized. The fair value of cash flow

F-12

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

hedges related to forecasted transactions, if any, is recognized in non-interest income or expense in the period when the forecasted transaction occurs. Any difference that arises from gains or losses on hedging derivatives offsetting corresponding gains or losses on the hedged items, and gains and losses on derivatives attributable to the risks excluded from the assessment of hedge effectiveness are currently recognized in non-interest income or expense. Derivatives that do not qualify for hedge accounting are considered trading positions and are accounted for as such.

Loans—Loans originated by the BTMU Group (“originated loans”) are carried at the principal amount outstanding, adjusted for unearned income and deferred net nonrefundable loan fees and costs. Originated loans held and intended for dispositions or sales in secondary markets are transferred to the held-for-sale classification and carried at the lower of cost or estimated fair value generally on an individual loan basis. Loan origination fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the loan as an adjustment of yield using the method that approximates the interest method. Interest income on loans that are not impaired is accrued and credited to interest income as it is earned. Unearned income and discounts or premiums on purchased loans are deferred and recognized over the contractual lives of the loans using a method that approximates the interest method when such purchased loans are outside the scope of Statement of Position (“SOP”) 03-3 issued by the American Institute of Certified Public Accountants (“AICPA”), “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” as described below.

Originated loans are considered impaired when, based on current information and events, it is probable that the BTMU Group will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Originated loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and timely collection of either principal or interest, or when principal or interest is contractually past due one month or more with respect to loans of BTMU and certain domestic subsidiaries, and 90 days or more with respect to loans of certain foreign banking subsidiaries. A nonaccrual loan may be restored to an accrual status when interest and principal payments become current and management expects that the borrower will make future contractual payments as scheduled. When a loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income. Cash receipts on nonaccrual loans, for which the ultimate collectibility of principal is uncertain, are applied as principal reductions; otherwise, such collections are credited to income. The BTMU Group does not capitalize any accrued interest in the principal balances of impaired loans at each balance sheet date.

In accordance with SOP 03-3 adopted by the BTMU Group on April 1, 2005, impaired loans acquired for which it is probable that the BTMU Group will be unable to collect all contractual receivables are initially recorded at the present value of amounts expected to be received, and the related valuation allowances are not carried over or created initially. Accretable yield is limited to the excess of the investor’s estimate of undiscounted cash flows over the investor’s initial investment in the loan, and subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of the loan’s yield over its remaining life after reduction of any remaining allowance for credit losses for the loan established after its acquisition, if

F-13

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

any, while any decrease in such cash flows below than those initially expected at acquisition plus additional cash flows expected to be collected arising from changes in estimate after acquisition are recognized as impairments.

Loan Securitization—The BTMU Group securitizes and services commercial and industrial loans in the normal course of business. The BTMU Group accounts for a transfer of loans in a securitization transaction as a sale if it meets relevant conditions for the surrender of control in accordance with SFAS No. 140. Otherwise, the transfer is accounted for as a collateralized borrowing transaction. Interests in loans sold through a securitization accounted for as a sale may be retained in the form of subordinated tranches or beneficial interests. These retained interests are primarily recorded in Securities available for sale. The previous carrying amount of the loans involved in the transfer is allocated between the loans sold and the retained interests based on their relative fair values at the date of the securitization. Since quoted market prices are generally not available, the BTMU Group usually estimates fair value of these retained interests based on the present value of future expected cash flows by using modeling techniques that involve management’s best estimates of key assumptions, which may include default rates, recovery rates, and discount rates. Retained interests that can contractually be prepaid or otherwise settled in such a way that the BTMU Group would not recover substantially all of its investment are accounted for as investment securities available for sale.

Allowance for Credit Losses—The BTMU Group maintains an allowance for credit losses to absorb probable losses inherent in the loan portfolio. Actual credit losses (amounts deemed uncollectible, in whole or in part), net of recoveries, are deducted from the allowance for credit losses, as net charge-offs, generally based on detailed loan reviews and a credit assessment by management at each balance sheet date. The BTMU Group generally applies its charge-off policy to all loans in its portfolio regardless of the type of borrower. A provision for credit losses, which is a charge against earnings, is added to bring the allowance to a level which, in management’s opinion, is adequate to absorb probable losses inherent in the credit portfolio.

A key element relating to the policies and discipline used in determining the allowance for credit losses is the credit classification and the related borrower categorization process. The categorization is based on conditions that may affect the ability of borrowers to service their debt, taking into consideration current financial information, historical payment experience, credit documentation, public information, analyses of relevant industry segments and current trends. In determining the appropriate level of the allowance, the BTMU Group evaluates the probable loss by category of loan based on its type and characteristics.

The allowance for credit losses for non-homogeneous loans consists of an allocated allowance for specifically identified problem loans, an allocated allowance for country risk exposure, a formula allowance and an unallocated allowance. An allocated allowance is also established for large groups of smaller-balance homogeneous loans. Non-homogeneous loans such as commercial loans are evaluated individually and the allowance for such loans is comprised of specific, country risk, formula and unallocated allowances.

The credit loss allowance for individual customers represents the impairment allowance determined in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” The BTMU Group measures the impairment of a loan, with the exception of large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or on the loan’s observable market price, or based on the fair value of the collateral if the loan is collateral dependent, when it is probable that the BTMU Group will be unable to collect all amounts due according to the contractual terms of the loan agreement. For certain subsidiaries, some impaired loans are aggregated for the purpose of measuring impairment using historical loss factors. Generally, the BTMU Group’s impaired loans include nonaccrual loans, restructured loans and other loans specifically identified as impaired.

F-14

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The credit loss allowance for country risk exposure is a country-specific allowance for substandard, special mention and unclassified loans. The allowance is established to supplement the formula allowance for these loans, based on an estimate of probable losses relating to the exposure to countries that are identified by management to have a high degree of transfer risk. The measure is generally based on a function of default probability and the recovery ratio with reference to external credit ratings. For the allowance for specifically identified cross-border problem loans, the BTMU Group incorporates transfer risk in its determination of related allowance for credit losses.

The formula allowance is calculated for group of loans collectively evaluated for impairments that cannot be attributed to specific loans by applying loss factors to outstanding substandard, special mention and unclassified loans. The evaluation of inherent loss for these loans involves a high degree of uncertainty, subjectivity and judgment. In determining the formula allowance, the BTMU Group, therefore, relies on a statistical analysis that incorporates historical loss factor percentages of total loans outstanding. Corresponding to the periodic impairment identification and self-assessment process, the estimation of the formula allowance is back-tested by comparing the allowance with the actual results subsequent to the balance sheet date. The results of such back-testing are evaluated by management to determine whether the manner and level of formula allowance need to be changed in subsequent years.

The unallocated allowance represents an estimate of additional losses inherent in the loan portfolio and is composed of attribution factors, which are based upon management’s evaluation of various conditions that are not directly or indirectly measured in the determination of the allocated allowance. The conditions evaluated in connection with the unallocated allowance may include existing general economic and business conditions affecting the key lending areas of the BTMU Group, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, specific industry conditions within portfolio segments, recent loss experience in particular segments of the portfolio, duration of the current business cycle, bank regulatory examination results and findings of the BTMU Group’s internal credit examiners.

The credit loss allowance for large groups of smaller-balance homogeneous loans is focused on loss experience for the pool rather than on a detailed analysis of individual loans. The allowance is determined primarily based on probable net charge-offs and the probability of insolvency based on the number of delinquencies.

Allowance for Off-Balance-Sheet Credit Instruments—The BTMU Group maintains an allowance for credit losses on off-balance-sheet credit instruments, including commitments to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is recorded as a liability in Other liabilities and includes the specific allowance for specifically identified credit exposure and the allocated formula allowance. With regard to the specific allowance for specifically identified credit exposure and the allocated formula allowance, the BTMU Group adopts the same methodology used in determining the allowance for loan credit losses. Potential credit losses related to derivatives are considered in the fair valuation of the derivatives.

Net changes in the allowance for off-balance-sheet credit instruments are accounted for as Other non-interest expenses.

Premises and Equipment—Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is charged to operations over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Depreciation of premises and equipment is computed under the declining-balance method with respect to premises and equipment of BTMU and certain subsidiaries, and under

F-15

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the straight-line method with respect to premises and equipment of other subsidiaries, at rates principally based on the following estimated useful lives:

	Years
Buildings	15 to 50
Equipment and furniture	2 to 20
Leasehold improvements	7 to 18

Maintenance, repairs and minor improvements are charged to operations as incurred. Major improvements are capitalized. Net gains or losses on dispositions of premises and equipment are included in Other non-interest income or expense, as appropriate.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount to future undiscounted net cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value. For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level with independent and identifiable cash flows. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less estimated cost to sell.

Asset retirement obligations related to restoration of certain leased properties upon lease termination are recorded in Other liabilities with a corresponding increase in leasehold improvements. The amounts represent the present value of expected future cash flows associated with returning such leased properties to their original condition. The difference between the gross and present value of expected future cash flows is accreted over the life of the related leases as a non-interest expense.

Goodwill—The BTMU Group reports the excess of the cost of investments in subsidiaries over its share of the fair value of net assets at the date of acquisition as Goodwill. Goodwill related to investments in equity method investees is included in Other assets as a part of the carrying amount of investments in equity method investees.

Goodwill arising from a business combination is not amortized but is subject to an annual impairment test. Goodwill is recorded at a designated reporting unit level for the purpose of assessing impairment. A reporting unit is an operating segment, or an identified business unit one level below an operating segment. An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.

Intangible assets—Intangible assets consist of software, core deposit intangibles, customer relationships, trade names and other intangible assets. These are amortized over their estimated useful lives unless they have indefinite useful lives. Amortization of intangible assets is computed in a manner that best reflects the economic benefits of the intangible assets as follows:

	Useful lives (years)	Amortization method
Software	2 to 10	Straight-line
Core deposit intangibles	4 to 18	Declining-balance
Customer relationships	7 to 30	Declining-balance
Trade names	12 to 20	Straight-line

F-16

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible assets having indefinite useful lives, primarily certain trade names, are not amortized but are subject to annual impairment tests. An impairment exists if the carrying value of an indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible asset.

The BTMU Group capitalizes certain costs associated with the acquisition or development of internal-use software. Costs subject to capitalization are salaries and employee benefits for employees who are directly associated with and who devote time to the internal-use computer software project, to the extent of time spent directly on the project. Once the software is ready for its intended use, the BTMU Group begins to amortize capitalized costs on a straight-line basis.

Accrued Severance and Pension Liabilities—The BTMU Group has defined benefit pension plans and other postretirement benefit plans, including severance indemnities plans. The liabilities related to these plans are computed and recognized based on actuarial computations. Unrecognized net actuarial gains and losses that arise from differences between actual experiences and assumptions are generally amortized over the average remaining service period of participating employees if it exceeds the corridor, which is defined as the greater of 10% of plan assets or the projected benefit obligation. Prior to the adoption of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R),” an excess of the accumulated benefit obligation over the plan assets was recognized in the consolidated balance sheets as the minimum liability, and a corresponding intangible assets was recognized up to the amount equal to the total of unrecognized prior service cost and unrecognized net obligation at transition. To the extent that the minimum liability exceeds the intangible asset, it was recognized in accumulated other changes in equity from nonowner sources. The costs of the plans, based on actuarial computations of current and future employee benefits, were charged to Salaries and employee benefits.

The BTMU Group adopted the recognition provisions of SFAS No. 158 as of March 31, 2007. See Accounting Changes—Defined Benefit Pension and Other Postretirement Plans and Note 17 for further information.

Long-Term Debt—Premiums, discounts and issuance costs of long-term debt are amortized based on the method that approximates the interest method over the terms of the long-term debt.

Obligations under Guarantees—The BTMU Group provides customers with a variety of guarantees and similar arrangements, including standby letters of credit, financial and performance guarantees, credit protections, and liquidity facilities. The BTMU Group recognizes guarantee fee income over the guarantee period based on the contractual terms of the guarantee contracts. It is the BTMU Group’s dominant business practice to receive a guarantee fee at the inception of the guarantee, which approximates market value of the guarantee and is initially recorded as a liability, which is then recognized as guarantee fee income ratably over the guarantee period.

Allowance for repayment of excess interest—The BTMU Group maintains an allowance for repayment of excess interest, under SFAS No. 5, “Accounting for Contingencies,” based on an analysis of past experience of reimbursement of excess interest, borrowers’ profile and recent trend of borrowers’ demand for reimbursement. The allowance is recorded as a liability in Other liabilities.

Fees and Commissions—Revenue recognition of major components of fees and commissions is as follows:

Ÿ Fees on funds transfer and collection services and fees from investment banking services are generally recognized as revenue when the related services are performed.

Ÿ Fees from trade-related financing services are recognized over the period of the financing.

F-17

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Ÿ Trust fees are recognized on an accrual basis, generally based on the volume of trust assets under management and/or the operating performance for the accounting period of each trust account.

Ÿ Annual fees and royalty and other service charges related to credit card business are recorded on a straight-line basis as services are provided.

Ÿ Interchange income from credit card business is recognized as billed.

Ÿ Fees on guarantees are generally recognized over the contractual periods of the respective guarantees. Amounts initially recorded as a liability corresponding to the obligations at fair value are generally recognized as revenue over the terms of the guarantees as the BTMU Group is deemed to be released from the risk under guarantees.

Ÿ Service charges on deposit accounts, and fees and commissions from other services are generally recognized over the period that the service is provided.

Income Taxes—The provision for income taxes is determined using the asset and liability method of accounting for income taxes. Under this method, deferred income taxes reflect the net tax effects of (1) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (2) operating loss and tax credit carryforwards. A valuation allowance is recognized for any portion of the deferred tax assets where it is considered more likely than not that it will not be realized. The provision for deferred taxes is based on the change in the net deferred tax asset or liability during the fiscal year.

Free Distributions of Common Shares—As permitted by the Commercial Code of Japan (the “Code”) and as revised under the Company Law, Japanese companies, upon approval by the Board of Directors, may make a free distribution of shares, in the form of a “stock split” as defined, to shareholders. In accordance with generally accepted accounting practice in Japan, such distribution does not give rise to any change in capital stock or capital surplus accounts. Common shares distributed are recorded as shares issued on the distribution date. See Note 20.

Earnings per Common Share—Basic earnings per share (“EPS”) excludes dilutive effects of potential common shares and is computed by dividing income available to a common stock shareholder by the weighted average number of common shares outstanding for the period, while diluted EPS gives effect to all dilutive potential common shares that were outstanding during the period. See Note 23 for the computation of basic and diluted EPS.

Parent Company’s Stock—The BTMU Group presents its parent company’s stock as a reduction of shareholder’s equity on the consolidated balance sheets at cost and accounts for parent company’s stock transactions under the average cost method. Gains (losses) on sales of the parent company’s stock are charged to capital surplus.

Comprehensive Income (Loss)—The BTMU Group’s comprehensive income (loss) includes net income and other changes in equity from nonowner sources. All changes in unrealized gains and losses on investment securities available for sale, unrealized gains and losses on derivatives qualifying for cash flow hedges, minimum pension liability adjustments and foreign currency translation adjustments constitute the BTMU Group’s changes in equity from nonowner sources and are presented, with related income tax effects, in the consolidated statements of changes in equity from nonowner sources.

F-18

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock-Based Compensation—Certain subsidiaries of BTMU have stock-based compensation plans, which are described more fully in Note 32. For the fiscal years ended March 31, 2005 and 2006, as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation,” compensation expense was recognized using the intrinsic value-based method of valuing stock options prescribed in Accounting Principles Board Opinions (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under the intrinsic value-based method, compensation expense was measured as the amount by which the quoted market price of these subsidiaries’ stock at the date of grant exceeded the stock option exercise price. On April 1, 2006, the BTMU Group adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No.123R”). See Accounting Changes —Share-Based Payment and Note 32 for further information.

Had the employee stock-based compensation plans been accounted for under the fair value method of SFAS No. 123, the BTMU Group’s compensation expense, net income, and net income per share would have been the pro forma amounts indicated in the following table:

	For the fiscal years ended March 31,
	2005			2006
	(in millions)
Reported net income	¥	287,108		¥	228,779
Add: Stock-based employee compensation expense (included in reported net income, net of tax)		16			322
Less: Stock-based employee compensation expense (determined under fair value based method for all awards, net of tax)		(1,677	)		(1,688	)
Pro forma net income, after stock-based employee compensation expense	¥	285,447		¥	227,413
Basic earnings per common share—net income available to a common shareholder:	(in Yen)
Reported	¥	55.87		¥	30.72
Pro forma		55.53			30.53
Diluted earnings per common share—net income available to a common shareholder:
Reported		55.61			27.07
Pro forma		55.27			26.91

Reclassifications

Certain reclassifications and format changes have been made to the consolidated financial statements for the fiscal years ended March 31, 2005 and 2006 to conform to the presentation for the fiscal year ended March 31, 2007.

These reclassifications and format changes include 1) the presentation of “Outsourcing expenses, including data processing,” “Depreciation of premises and equipment,” “Impairment of intangible assets,” “Taxes and public charges” and “Provision for repayment of excess interest” as separate line items in the consolidated statements of income, and 2) the presentation of “Impairment of intangible assets,” “Increase in allowance for repayment of excess interest” and “Purchases of intangible assets” as separate line items in the consolidated statements of cash flows.

These reclassifications and format changes did not result in a change in previously reported net income, shareholder’s equity or total assets.

F-19

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Changes

Variable Interest Entities—In January 2003, the Financial Accounting Standards Board (the “FASB”) issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” FIN No. 46 addresses consolidation by business enterprises of variable interest entities (“VIEs”). The consolidation requirements of FIN No. 46 applied immediately to VIEs created after January 31, 2003. The BTMU Group has applied, as required, FIN No. 46 to all VIEs created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003, which has been amended by the FASB as described below.

In December 2003, the FASB issued FIN No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN No. 46R”). FIN No. 46R modified FIN No. 46 in certain respects, including the scope exception, the definition of VIEs, and other factors that effect the determination of VIEs and primary beneficiaries that must consolidate VIEs. FIN No. 46R, as written, applies to VIEs created before February 1, 2003 no later than the end of the first reporting period that ends after March 15, 2004, and to all special purpose entities no later than the first reporting period that ends after December 15, 2003. Subsequent to the issuance of FIN No. 46R, the Chief Accountant of the U.S. Securities and Exchange Commission (“SEC”) stated the SEC staff’s position in a letter to the AICPA dated March 3, 2004, that the SEC staff did not object to the conclusion that FIN No. 46R should not be required to be applied at a date earlier than the original FIN No. 46 and that foreign private issuers would be required to apply FIN No. 46R at various dates depending on the entity’s year-end and the frequency of interim reporting. In accordance with the letter, the BTMU Group adopted FIN No. 46R on April 1, 2004, except for certain investment companies, for which the effective date of FIN No. 46R was deferred. Under FIN No. 46R, any difference between the net amount added to the balance sheet and the amount of any previously recognized interest in the VIE is recognized as a cumulative effect of a change in accounting principle. The cumulative effect of the change in accounting principle was to decrease net income by ¥977 million for the fiscal year ended March 31, 2005. See Note 26 for further discussion of VIEs in which the BTMU Group holds variable interests.

Accounting for Conditional Asset Retirement Obligations—In March 2005, the FASB issued FIN No. 47, “Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143.” FIN No. 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. SFAS No. 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. FIN No. 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005. Effective March 31, 2006, the BTMU Group adopted FIN No. 47 to existing asset retirement obligations associated with commitments to return property subject to operating leases to its original condition upon lease termination. The cumulative effect of the change in accounting principle was to decrease net income by ¥8,425 million. This adjustment represents the cumulative depreciation and accretion that would have been recognized through the date of adoption of FIN No. 47 had the statement applied to the BTMU Group’s existing asset retirement obligations at the time they were initially incurred.

F-20

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Had the asset retirement obligations been accounted for under FIN No. 47 at the inception of operating leases requiring restoration, the BTMU Group’s net income and net income per share would have been the pro forma amounts indicated in the following table:

	For the fiscal years ended March 31,
	2005		2006
	(in millions)
Reported net income	¥	287,108	¥	228,779
Cumulative effect of a change in accounting principle related to adoption of FIN No. 47, net of taxes:
Reported		—		8,425
Pro forma		570		410
Pro forma net income, after cumulative effect of a change in accounting principle related to adoption of FIN No. 47, net of taxes	¥	286,538	¥	236,794
Basic earnings per common share—net income available to a common shareholder:	(in Yen)
Reported	¥	55.87	¥	30.72
Pro forma		55.75		31.83
Diluted earnings per common share—net income available to a common shareholder:
Reported		55.61		27.07
Pro forma		55.49		28.06

Share-Based Payment—In December 2004, the FASB issued SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123, and supersedes APB No. 25. In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, which provides interpretive guidance on SFAS No. 123R. SFAS No. 123 preferred a fair-value-based method of accounting for share-based payment transactions with employees, but it permitted the option of continuing to apply the intrinsic-value-based measurement method in APB No. 25, as long as the footnotes to the financial statements disclosed what net income would have been had the preferable fair-value-based method been used. SFAS No. 123R eliminates the alternative to use the intrinsic value method of accounting and requires entities to recognize the costs of share-based payment transactions with employees based on the grant-date fair value of those awards over the period during which an employee is required to provide service in exchange for the award. SFAS No. 123R is effective as of the beginning of the fiscal year or interim period beginning after June 15, 2005. The BTMU Group adopted SFAS No. 123R on April 1, 2006 under the modified prospective method, which resulted in a decrease in income from continuing operations before income tax expense of ¥1,969 million and a decrease in income from continuing operations, net of taxes, of ¥1,026 million for the fiscal year ended March 31, 2007, which includes estimated forfeitures for restricted stock and the amortization of compensation costs related to unvested stock options. The corresponding impact to both basic and diluted earnings per share was a reduction of ¥0.10 per share for the fiscal year ended March 31, 2007. The adoption of SFAS No. 123R did not have a material impact on the BTMU Group’s cash flows. See Note 32 for a further discussion of the adoption of SFAS No. 123R and stock-based compensation plans.

Exchanges of Nonmonetary Assets—In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29.” The guidance in APB No. 29, “Accounting for Nonmonetary Transactions,” is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in APB No. 29, however, included certain exceptions to that principle. SFAS No. 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future

F-21

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier adoption permitted. The BTMU Group adopted SFAS No. 153 on April 1, 2006, which did not have a material impact on its financial position and results of operations.

Accounting Changes and Error Corrections—In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 replaces APB No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principles. SFAS No. 154 also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, with earlier adoption permitted. The BTMU Group adopted SFAS No. 154 on April 1, 2006, which did not have a material impact on its financial position and results of operations.

The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments—In November 2005, the FASB staff issued an FASB Staff Position (“FSP”) on SFAS No. 115 and SFAS No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations.” This FSP addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than temporary impairments. The guidance in this FSP is applicable for certain investments such as debt and equity securities that are within the scope of SFAS No. 115 and equity securities that are not subject to the scope of SFAS No. 115 and No. 124 and not accounted for under the equity method pursuant to APB No. 18, “The Equity Method of Accounting for Investments in Common Stock,” and related interpretations. This FSP nullifies the requirements of paragraphs 10-18 of the FASB Emerging Issues Task Force (the “EITF”) Issue 03-1 and supersedes EITF Topic No. D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value.” This FSP carries forward the requirements of paragraphs 8 and 9 of EITF Issue 03-1 with respect to cost-method investments, and carries forward the disclosure requirements included in paragraphs 21 and 22 of EITF Issue 03-1. Also, the guidance in this FSP amends SFAS No. 115, SFAS No. 124 and APB No. 18. The guidance in this FSP shall be applied to reporting periods beginning after December 15, 2005, with earlier application permitted. The BTMU Group adopted the FSP on April 1, 2006, which did not have a material impact on its financial position and results of operations.

Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities—In January 2003, the EITF reached a consensus on Issue No. 03-2, “Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities” (“EITF 03-2”), which was ratified by the FASB in February 2003. EITF 03-2 addresses accounting for a transfer to the Japanese government of a substitutional portion of an employee pension fund and requires employers to account for the entire separation process of the substitutional portion from an entire plan upon completion of the transfer to the government of the substitutional portion of the benefit obligation and related plan assets as the culmination of a series of steps in a single settlement transaction. It also requires that the difference between the fair value of the obligation and the assets required to be transferred to the government, if any, should be accounted for as a subsidy from the government, separately from gain or loss on settlement of the substitutional portion of the obligation, upon completion of the transfer.

F-22

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In June 2003, BTMU submitted to the government an application to transfer the obligation to pay benefits for future employee service related to the substitutional portion and the application was approved in August 2003. In August 2004, BTMU made another application for transfer to the government of the remaining substitutional portion and the application was approved in November 2004. The substitutional obligation and related plan assets were transferred to a government agency in March 2005 and BTMU was released from paying the substitutional portion of the benefits to its employees. The completion of the transfer to the Japanese Government of the substitutional portion of the employee pension plan constituted a settlement of such plan. However, since there remains a defined benefit plan and the settlement occurred subsequent to December 31, 2004 (the measurement date of such plan), the BTMU Group recognized net gains of ¥34,965 million as a result of the transfer / settlement for the fiscal year ended March 31, 2006. See Note 17 for further discussion.

Effects of Prior Year Misstatements on Current Year Financial Statements—In September 2006, the SEC staff issued SAB No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 provides guidance on quantifying and evaluating the materiality of unrecorded misstatements. It requires the use of both the “iron curtain” and “rollover” approaches in quantifying and evaluating the materiality of a misstatement. Under the iron curtain approach, the error is quantified as the cumulative amount by which the current year balance sheet is misstated. The rollover approach quantifies the error as the amount by which the current year income statement is misstated. If either approach results in a material misstatement, financial statement adjustments are required. SAB No. 108 is effective for financial statements issued for fiscal years ending after November 15, 2006. Early adoption is encouraged in interim periods which are part of a fiscal year ending after November 15, 2006. The BTMU Group adopted SAB No. 108 as of March 31, 2007, which did not have a material impact on its financial position and results of operations.

Defined Benefit Pension and Other Postretirement Plans—In September 2006, the FASB issued SFAS No. 158. SFAS No. 158 requires entities to recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement plans in its consolidated statement of financial position and recognize changes in the funded status of defined benefit pension and other postretirement plans in the year in which the changes occur in comprehensive income. SFAS No. 158 clarifies that defined benefit assets and obligations should be measured as of the date of the entity’s fiscal year-end statement of financial positions. SFAS No. 158 also requires additional disclosure information related to certain effects on the net periodic benefit costs and credits, and transition assets or obligations. The requirement to recognize the funded status as of the date of the statement of financial position is effective for fiscal years ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the statement of financial position is effective for fiscal years ending after December 15, 2008. The BTMU Group adopted the recognition provisions of SFAS No. 158 as of March 31, 2007. The adoption of SFAS No. 158, which had no impact on how the BTMU Group determines its net periodic benefit costs, did have the effect of increasing shareholder’s equity by ¥99,748 million, net of taxes, which was recorded in accumulated other changes in equity from nonowner sources.

Recently Issued Accounting Pronouncements

Accounting for Certain Hybrid Financial Instruments—In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments.” SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140 and resolves issues addressed in SFAS No. 133 Implementation Issue D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation and clarifies which interest-only strips and

F-23

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

principal-only strips are not subject to the requirements of SFAS No. 133. SFAS No. 155 establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. SFAS No. 155 also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The BTMU Group has not completed the study of what effect SFAS No. 155 will have on its financial position and results of operations.

Accounting for Servicing of Financial Assets—In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets.” SFAS No. 156 amends SFAS No. 140 with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract, and requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. SFAS No. 156 permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. SFAS No. 156 is effective for the fiscal year beginning after September 15, 2006. Earlier adoption is permitted. The BTMU Group has not completed the study of what effect SFAS No. 156 will have on its financial position and results of operations.

Determining the Variability to Be Considered in Applying FIN No. 46R—In April 2006, the FASB staff issued an FSP on FIN No. 46R-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).” This FSP states that the variability to be considered in applying FIN No. 46R shall be based on an analysis of the design of the entity as outlined in the following two steps: (a) analyze the nature of the risks in the entity, (b) determine the purpose for which the entity was created and determine the variability (created by the risks identified in step (a)) the entity is designed to create and pass along to its interest holders. For the purposes of this FSP, interest holders include all potential variable interest holders (including contractual, ownership, or other pecuniary interests in the entity). After determining the variability to be considered, the reporting enterprise can determine which interests are designed to absorb that variability. The FSP should be applied prospectively to all entities (including newly created entities) with which an enterprise first becomes involved, and to all entities previously required to be analyzed under FIN No. 46R when a reconsideration event has occurred beginning the first day of the first reporting period beginning after June 15, 2006. Early application is permitted for periods for which financial statements have not yet been issued. Retrospective application to the date of the initial application of FIN No. 46R is permitted but not required. If retrospective application is elected, it must be completed no later than the end of the first annual reporting period ending after July 15, 2006. The BTMU Group has not completed the study of what effect the FSP will have on its financial position and results of operations.

Uncertainty in Income Taxes—In June 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes.” FIN No. 48 requires recognition of a tax benefit to the extent of management’s best estimate of the impact of a tax position, provided it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The BTMU Group will adopt the provisons of FIN No. 48 on April 1, 2007. The impact of adopting FIN No.48 is not expected to be significant on its financial position and results of operations.

F-24

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Leveraged Leases—In July, 2006, the FASB issued an FSP on SFAS No. 13, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” This FSP requires if, during the lease term, the projected timing of the income tax cash flows generated by a leveraged lease is revised, the rate of return and the allocation of income shall be recalculated from the inception of the lease. At adoption, the cumulative effect of applying the provisions of this FSP shall be reported as an adjustment to the beginning balance of retained earnings as of the beginning of the period in which this FSP is adopted. This FSP shall be applied to fiscal years beginning after December 15, 2006. The BTMU Group will adopt the provisions of this FSP on April 1, 2007. The BTMU Group estimates that the cumulative effect of adopting this FSP will be to reduce the beginning balance of retained earnings by approximately ¥6 billion, net of taxes. The reduction to retained earnings at adoption will be recognized in interest income over the remaining terms of the affected leases as tax benefits are realized.

Fair Value Measurements—In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, SFAS No. 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity’s own data. Under SFAS No. 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The BTMU Group has not completed the study of what effect SFAS No. 157 will have on its financial position and results of operations.

Fair Value Option for Financial Assets and Financial Liabilities—In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No 115.” SFAS No. 159 allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities and certain other items at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to certain conditions. The BTMU Group has not completed the study of what effect SFAS No. 159 will have on its financial position and results of operations.

Investment Company Accounting—In June 2007, the AICPA issued SOP 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.” SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Guide. The statement also addresses whether the specialized industry accounting principles of the AICPA Guide should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity. SOP 07-1 is effective for fiscal years beginning on or after December 15, 2007, with earlier application encouraged. In addition, in May 2007, the FASB issued an FSP

F-25

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FIN No. 46R-7, “Application of FIN No. 46R to Investment Companies,” which amends FIN No. 46R to make permanent the temporary deferral of the application of FIN No. 46R to entities within the scope of the revised audit guide under SOP 07-1. The BTMU Group has not completed the study of what effect SOP 07-1 and FSP FIN No. 46R-7 will have on its financial position and results of operations.

2.    BUSINESS COMBINATION

Merger with UFJ Bank

Pursuant to the merger agreement dated April 20, 2005 between MTFG and UFJ Holdings and their respective subsidiaries, BTM merged with UFJ Bank on January 1, 2006 and was renamed BTMU. MTFG, the parent company of BTM completed its merger with UFJ Holdings on October 1, 2005 and therefore the results of the UFJ Bank Group’s operations have been included in the consolidated financial statements subsequent to October 1, 2005.

The UFJ Bank Group was one of Japan’s leading providers of financial services with a competitive domestic position in the Nagoya and Osaka areas, as well as a client base of small and medium-sized enterprises and retail customers which complements BTM’s subsidiaries. These anticipated synergies contributed to a purchase price that resulted in the recognition of goodwill.

As a result of the merger, BTMU is expected to be a leading comprehensive financial group that is competitive on both a domestic and global basis, providing a broad range of financial products and services to customers with increasingly diverse and sophisticated needs.

As provided for by the merger agreement, BTM remained as the surviving entity of the merger. Each outstanding share of common stock of UFJ Bank was converted into 0.62 shares of common stock of BTMU. Each outstanding share of Preferred Stock (Series 1 Class A, D and Series 2 Class D) of UFJ Bank was converted into one share of Preferred Stock (Series 1 Class 3, 4, 5 respectively) of BTMU. Each outstanding share of Series 1 Class E, G, Series 2 Class G and Series 1 Class H Preferred Stock was converted into 0.34, 0.34, 0.34 and 3.44 shares of common stock of BTMU, respectively. As a result, BTMU newly issued 4,286,351 thousand shares of common stock and 500,000 thousand shares of preferred stock to MUFG upon the statutory merger.

Purchase Price Allocation

The merger was accounted for under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations” and the accounting was based on the push-down concept because BTM was a wholly-owned subsidiary of MTFG. Thus, the assigned value to the equity interests issued was based on the relative fair value of the UFJ Bank Group to the total purchase price of the UFJ Holdings Group of ¥4,406,146 million determined by MTFG. The purchase price of the UFJ Bank Group amounted to ¥4,627,995 million, of which ¥4,625,939 million was recorded in capital surplus relating to merger with UFJ Bank, and direct acquisition costs of ¥2,056 million were included in the purchase price.

F-26

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The purchase price of the UFJ Bank Group was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2005, as summarized below:

	(in millions)
Total purchase price	¥	4,627,995
Less (add):
Shareholder’s equity of the UFJ Bank Group		2,738,866
The UFJ Bank Group’s goodwill and other intangible assets		(2,496,906	)
Estimated adjustments to reflect assets acquired at fair value:
Investment securities		311,414
Net loans		464,660
Premises and equipment		25,655
Intangible assets		997,822
Deferred tax assets		1,294,922
Others		(21,379	)
Estimated adjustments to reflect liabilities assumed at fair value:
Long-term debt		(602,742	)
Deferred tax liabilities		9,778
Others		204,866
Total fair value of net assets acquired		2,926,956
Goodwill	¥	1,701,039

See Note 10 for the amount of goodwill by reportable segment.

F-27

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed statement of net assets acquired

The following condensed statement of net assets acquired reflects the fair value of the assets and liabilities of the UFJ Bank Group as of October 1, 2005:

	(in millions)
Assets:
Cash and due from banks	¥	5,393,320
Interest-earning deposits in other banks		862,505
Call loans and funds sold		303,386
Receivables under resale agreements		1,732,212
Receivables under securities borrowing transactions		939,841
Trading account assets		3,290,634
Investment securities		19,287,760
Net loans		39,309,937
Premises and equipment		465,318
Customers’ acceptance liability		42,752
Intangible assets		997,822
Goodwill		1,701,039
Deferred tax assets		1,320,636
Others		1,390,249
Total assets	¥	77,037,411
Liabilities:
Deposits	¥	50,477,200
Call money and funds purchased		1,296,824
Payables under repurchase agreements		3,401,945
Payables under securities lending transactions		264,000
Due to trust account and other short-term borrowings		6,394,972
Trading account liabilities		2,260,130
Bank acceptances outstanding		42,752
Long-term debt		6,047,515
Deferred tax liabilities		32,353
Others		2,191,725
Total liabilities		72,409,416
Net assets acquired including goodwill	¥	4,627,995

F-28

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible assets acquired

The estimated useful lives of the intangible assets at October 1, 2005 were as follows:

	Fair value		Weighted average life
	(in millions)		(in years)
Intangible assets subject to amortization:
Core deposit intangibles	¥	569,700	18
Customer relationships		163,263	18
Software		122,498	5
Trade names		29,668	19
Other		270	18
Sub-total		885,399	16
Intangible assets not subject to amortization:
Indefinite-lived customer relationships		87,027
Indefinite-lived trade names		17,682
Other		7,714
Sub-total		112,423
Total	¥	997,822

Unaudited pro forma combined condensed statements of income

The following unaudited pro forma combined condensed statements of income present the results of operations had the merger taken place at the beginning of each period:

	For the fiscal years ended March 31,
	2005			2006
	(in millions, except per share data and number of shares)
Statements of income data:
Net interest income	¥	1,736,686		¥	1,974,478
Provision for credit losses		225,723			238,928
Non-interest income		1,746,168			882,697
Non-interest expense		2,048,087			2,148,236
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		1,209,044			470,011
Income from discontinued operations—net		1,493			8,973
Cumulative effect of a change in accounting principles, net of tax		(977	)		(8,425	)
Income tax expense		304,421			90,335
Net income	¥	905,139		¥	380,224
Amounts per share:
Basic earnings per common share—net income available to a common shareholder	¥	114.58		¥	37.04
Diluted earnings per common share—net income available to a common shareholder		100.80			30.94
Weighted average common share outstanding (in thousands)		7,841,092			10,076,473
Weighted average diluted common share outstanding (in thousands)		8,900,305			12,000,281

F-29

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3.    DISCONTINUED OPERATIONS

During the fiscal year ended March 31, 2006, UnionBanCal Corporation (“UNBC”), a U.S. subsidiary of BTMU whose results were reported as a separate business segment, signed a definitive agreement to sell its international correspondent banking operations to Wachovia Bank, N.A., effective October 6, 2005, and the principal legal closing of the transaction took place on the same day with UNBC receiving ¥25,220 million in cash from Wachovia Bank, N.A. At the principal closing, no loans or other assets were acquired by Wachovia Bank, N.A., and no liabilities were assumed. UNBC continued to operate the international business over a transition period of several months. All of UNBC’s offices designated for disposal were closed as of June 30, 2006. The remaining assets included deposits with banks awaiting approval for repatriation of capital and unremitted profits and loans that are maturing in 2008. During the fiscal year ended March 31, 2007, UNBC received an additional ¥466 million as a contingent purchase price payment. The remaining liabilities primarily consisted of accrued expenses, which will be settled when due.

The BTMU Group accounted for these transactions as discontinued operations in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets” and presented the results of discontinued operations as a separate line item in the consolidated statements of income. In addition, assets to be disposed or sold, accounted for at the lower of cost or fair value, and liabilities to be extinguished or assumed in connection with discontinued operations were presented as separate assets and liabilities, respectively, in the consolidated balance sheets.

Interest expense was attributed to discontinued operations based on average net assets. The amount of interest expense allocated to discontinued operations for the fiscal years ended March 31, 2005, 2006 and 2007 was ¥87 million, ¥1,708 million and ¥209 million, respectively.

The severance reserve balances at March 31, 2006 and 2007 were ¥2,562 million and ¥238 million, respectively. The decrease of ¥2,324 million from March 31, 2006 primarily related to cash payments to employees.

At March 31, 2006 and 2007, the assets and liabilities identified as discontinued operations were comprised of the following:

	2006		2007
	(in millions)
Assets:
Cash and due from banks	¥	14,069	¥	2,194
Interest-earning deposits in other banks		16,384		—
Loans, net of allowance for credit losses		85,492		159
Customers’ acceptance liability		5,031		45
Other		3,537		37
Assets of discontinued operations to be disposed or sold	¥	124,513	¥	2,435
Liabilities:
Deposits—Overseas offices:
Non-interest bearing	¥	52,772	¥	—
Interest-bearing		54,515		—
Total deposits		107,287		—
Bank acceptances outstanding		5,031		45
Other		6,444		501
Liabilities of discontinued operations to be extinguished or assumed	¥	118,762	¥	546

F-30

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of income from discontinued operations for the fiscal years ended March 31, 2005, 2006 and 2007 were as follows:

	2005		2006			2007
	(in millions)
Total revenue	¥	12,202	¥	14,141		¥	1,604
Income (loss) from discontinued operations	¥	3,936	¥	(2,563	)	¥	(2,451	)
Gains on disposal		—		25,220			466
Minority interest in income (loss) of consolidated subsidiaries		941		5,607			(434	)
Income tax expense (benefit)		1,502		8,077			(734	)
Income (loss) from discontinued operations—net	¥	1,493	¥	8,973		¥	(817	)

4.    OTHER RESTRUCTURING OF THE GROUP COMPANIES

Diamond Computer Service Co., Ltd.

In December 2004, MUFG acquired 100% of Diamond Computer Service Co., Ltd. (“DCS”), a former equity method investee, which provides data processing and IT development services, through a share exchange. 26,205 shares of MUFG common stock were issued in exchange for all of the outstanding shares of DCS’s common stock based on the exchange ratio of 0.00135 shares of MUFG common stock for each share of DCS’s common stock. Such MUFG’s common stock held by the BTMU Group and affiliated companies is presented as parent company’s stock in the consolidated balance sheets.

Mitsubishi UFJ Asset Management Co., Ltd.

In October 2004, Mitsubishi Asset Management Co., Ltd. (“MAM”) was formed by the merger of Tokyo-Mitsubishi Asset Management Ltd., a subsidiary of BTM, and Mitsubishi Trust Asset Management Co., Ltd., a subsidiary of Mitsubishi Trust. Following the merger, in December 2004, BTM sold certain shares of MAM to MTFG, resulting in MAM becoming an equity method investee. Loss on the sale was charged to capital surplus, with related income tax effects, in the consolidated statements of shareholder’s equity. On October 1, 2005, MAM merged with UFJ Partners Asset Management Co., Ltd. and was renamed to Mitsubishi UFJ Asset Management Co., Ltd.

Mitsubishi UFJ Securities Co., Ltd.

On July 1, 2005, BTMU transferred substantially all common shares of Mitsubishi UFJ Securities Co., Ltd. (“MUS”), a former securities subsidiary of BTMU, to MUFG for ¥228,498 million. At the same time, BTMU provided a loan of ¥228,498 million to MUFG for the purchase of MUS shares. As a result of the transfer, MUS became a directly-owned subsidiary of MUFG. The BTMU Group accounted for the transfer of shares as a constructive dividend-in-kind of MUS shares to MUFG by the carrying amount of shares, and the BTMU’s loan receivable from MUFG as a constructive capital contribution with the loan receivable reflected as a deduction of the shareholder’s equity. The loan receivable from MUFG will decrease on repayment of the loan by MUFG and, accordingly, the constructive capital contribution will be recognized as an increase in shareholder’s equity upon collection of the loan receivable. As a result, no gain or loss has been recognized on the transfer of common shares of MUS.

Also, the results of operations of MUS prior to the date of transfer were not reported as discontinued operations due to the BTMU Group’s significant continuing involvement in the operations of MUS after the transfer transaction.

F-31

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    TRADING ACCOUNT ASSETS AND LIABILITIES

The following table shows trading account assets and liabilities, carried at estimated fair value, at March 31, 2006 and 2007. For trading derivative contracts executed under legally enforceable master netting agreements, related assets and liabilities are bilaterally offset and reported net by each counterparty.

	2006			2007
	(in millions)
Trading account assets:
Trading securities:
Japanese government, prefectural and municipal bonds	¥	1,102,044		¥	222,551
Commercial paper		1,588,558			1,449,500
Equity securities, foreign governments bonds and other securities		1,127,892			1,166,161
Total		3,818,494			2,838,212
Trading derivative assets:
Interest rate contracts:
Forwards and futures		10,844			12,213
Swaps and swap-related products		4,396,584			3,279,781
Options purchased		178,667			143,489
Total		4,586,095			3,435,483
Foreign exchange contracts:
Forwards and futures		596,349			779,172
Swaps		382,408			441,526
Options purchased		290,812			368,142
Total		1,269,569			1,588,840
Other contracts, mainly equity and credit-related contracts		247,005			196,502
Offsetting of derivatives with the same counterparty under master netting agreements		(4,041,535	)		(3,981,760	)
Total	¥	5,879,628		¥	4,077,277
Trading account liabilities:
Trading securities sold, not yet purchased	¥	62,525		¥	11,382
Trading derivative liabilities:
Interest rate contracts:
Forwards and futures		11,266			12,579
Swaps and swap-related products		4,522,797			3,206,910
Options written		174,381			137,272
Total		4,708,444			3,356,761
Foreign exchange contracts:
Forwards and futures		461,639			627,240
Swaps		381,114			436,916
Options written		441,169			561,207
Total		1,283,922			1,625,363
Other contracts, mainly equity and credit-related contracts		246,191			198,657
Offsetting of derivatives with the same counterparty under master netting agreements		(4,041,535	)		(3,981,760	)
Total	¥	2,259,547		¥	1,210,403

See Note 31 for the methodologies and assumptions used to estimate fair values.

F-32

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The BTMU Group performs trading activities through market-making, sales and arbitrage, while maintaining risk levels within appropriate limits in accordance with its risk management policy. Net trading gains (losses) for the fiscal years ended March 31, 2005, 2006 and 2007 were comprised of the following:

	2005			2006			2007
	(in millions)
Interest rate and other derivative contracts	¥	(20,271	)	¥	(212,679	)	¥	171,040
Trading account securities, excluding derivatives		51,587			121,508			82,393
Trading account profits (losses)—net		31,316			(91,171	)		253,433
Foreign exchange derivative contracts		(2,602	)		19,407			(9,210	)
Net trading gains (losses)	¥	28,714		¥	(71,764	)	¥	244,223

6.    INVESTMENT SECURITIES

The amortized costs and estimated fair values of investment securities available for sale and being held to maturity at March 31, 2006 and 2007 were as follows:

	2006								2007
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(in millions)
Securities available for sale:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	21,922,264	¥	2,326	¥	2,049	¥	21,922,541	¥	18,583,336	¥	40,060	¥	7,955	¥	18,615,441
Japanese prefectural and municipal bonds		235,623		334		121		235,836		228,907		1,728		172		230,463
Foreign governments and official institutions bonds		1,748,765		23,561		7,762		1,764,564		3,124,826		74,585		6,902		3,192,509
Corporate bonds		5,802,433		78,913		7,988		5,873,358		5,305,168		136,343		2,839		5,438,672
Mortgage-backed securities		2,539,850		82,931		18,104		2,604,677		2,614,577		76,725		14,206		2,677,096
Other debt securities		564,537		11,087		1,028		574,596		2,514,692		60,533		3,318		2,571,907
Marketable equity securities		3,794,791		2,919,455		4,367		6,709,879		3,683,629		3,186,477		6,058		6,864,048
Total	¥	36,608,263	¥	3,118,607	¥	41,419	¥	39,685,451	¥	36,055,135	¥	3,576,451	¥	41,450	¥	39,590,136
Securities being held to maturity:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	2,052,541	¥	42	¥	14,778	¥	2,037,805	¥	2,053,629	¥	28	¥	7,136	¥	2,046,521
Foreign governments and official institutions bonds		10,239		322		87		10,474		11,095		352		39		11,408
Corporate bonds		45,710		—		18		45,692		40,233		576		—		40,809
Other debt securities		8,156		14		3		8,167		1,997		—		—		1,997
Total	¥	2,116,646	¥	378	¥	14,886	¥	2,102,138	¥	2,106,954	¥	956	¥	7,175	¥	2,100,735

F-33

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investment securities other than securities available for sale or being held to maturity (i.e., nonmarketable equity securities presented in Other investment securities) were primarily carried at cost of ¥721,237 million and ¥552,775 million, at March 31, 2006 and 2007, respectively, because their fair values were not readily determinable. The BTMU Group periodically monitors the status of each investee including the credit ratings and changes in the BTMU Group’s share of net assets in the investees as compared with its shares at the time of investment, or utilizes commonly accepted valuation models for certain nonmarketable equity securities issued by public companies which are convertible to marketable common stock in the future, to determine if impairment losses, if any, are to be recognized on these nonmarketable securities. The impairment of cost-method investments is not estimated when valuation models are not applicable if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. Investment securities held by certain subsidiaries subject to specialized industry accounting principles in the AICPA Guide presented in Other investment securities were carried at fair value of ¥6,248 million and ¥6,872 million at March 31, 2006 and 2007, respectively

See Note 31 for the methodologies and assumptions used to estimate the fair values.

The amortized cost and estimated fair values of debt securities being held to maturity and the estimated fair values of debt securities available for sale at March 31, 2007 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities not due at a single maturity date and securities embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below based on their original final maturities.

	Held-to-maturity				Available-for-sale
	Amortized cost		Estimated fair value		Estimated fair value
	(in millions)
Due in one year or less	¥	489,268	¥	488,942	¥	10,620,075
Due from one year to five years		1,538,122		1,532,663		11,683,992
Due from five years to ten years		29,777		30,250		3,533,944
Due after ten years		49,787		48,880		6,888,077
Total	¥	2,106,954	¥	2,100,735	¥	32,726,088

For the fiscal years ended March 31, 2005, 2006 and 2007, gross realized gains on sales of investment securities available for sale were ¥293,865 million, ¥331,568 million and ¥235,624 million, respectively, and gross realized losses on sales of investment securities available for sale were ¥29,151 million, ¥50,732 million and ¥18,151 million, respectively.

For the fiscal years ended March 31, 2005, 2006 and 2007, losses resulting from write-downs of investment securities to reflect the decline in value considered to be other than temporary were ¥83,144 million, ¥310,022 million and ¥142,817 million, respectively, which were included in Investment securities gains—net in the consolidated statements of income. The losses of ¥310,022 million for the fiscal year ended March 31, 2006 included losses of ¥172,685 million from Japanese national government bonds classified as available for sale.

F-34

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows the unrealized gross losses and estimated fair values of investment securities available for sale and being held to maturity at March 31, 2006 and 2007 by length of time that individual securities in each category have been in a continuous loss position:

	Less than 12 months				12 months or more				Total
At March 31, 2006:	Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Number of securities
	(in millions)
Securities available for sale:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	128,858	¥	2,049	¥	—	¥	—	¥	128,858	¥	2,049	11
Japanese prefectural and municipal bonds		3,432		121		—		—		3,432		121	1
Foreign governments and official institutions bonds		547,366		6,718		46,502		1,044		593,868		7,762	178
Corporate bonds		436,928		7,988		—		—		436,928		7,988	44
Mortgage-backed securities		470,672		6,242		321,353		11,862		792,025		18,104	305
Other debt securities		75,157		436		19,144		592		94,301		1,028	90
Marketable equity securities		68,499		4,305		100		62		68,599		4,367	47
Total	¥	1,730,912	¥	27,859	¥	387,099	¥	13,560	¥	2,118,011	¥	41,419	676
Securities being held to maturity:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	1,948,454	¥	14,778	¥	—	¥	—	¥	1,948,454	¥	14,778	17
Foreign governments and official institutions bonds		4,669		87		—		—		4,669		87	16
Corporate bonds		1,195		18		—		—		1,195		18	4
Other debt securities		231		3		—		—		231		3	1
Total	¥	1,954,549	¥	14,886	¥	—	¥	—	¥	1,954,549	¥	14,886	38
	Less than 12 months				12 months or more				Total
At March 31, 2007:	Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Number of securities
	(in millions)
Securities available for sale:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	7,290,850	¥	7,955	¥	—	¥	—	¥	7,290,850	¥	7,955	36
Japanese prefectural and municipal bonds		18,510		172		—		—		18,510		172	2
Foreign governments and official institutions bonds		825,321		6,022		74,270		880		899,591		6,902	204
Corporate bonds		397,612		2,839		—		—		397,612		2,839	2,353
Mortgage-backed securities		277,424		1,352		436,003		12,854		713,427		14,206	333
Other debt securities		240,893		2,964		28,579		354		269,472		3,318	60
Marketable equity securities		47,874		6,058		—		—		47,874		6,058	18
Total	¥	9,098,484	¥	27,362	¥	538,852	¥	14,088	¥	9,637,336	¥	41,450	3,006
Securities being held to maturity:
Debt securities:
Japanese national government and Japanese government agency bonds	¥	602,905	¥	747	¥	1,234,033	¥	6,389	¥	1,836,938	¥	7,136	19
Foreign governments and official institutions bonds		—		—		749		39		749		39	1
Total	¥	602,905	¥	747	¥	1,234,782	¥	6,428	¥	1,837,687	¥	7,175	20

F-35

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The BTMU Group has determined that unrealized losses on investments at March 31, 2006 and 2007 are temporary based on its ability and positive intent to hold the investments for a period of time sufficient to allow for any anticipated recovery and the results of its review conducted to identify and evaluate investments that have indications of possible impairments. Impairment is evaluated considering various factors, and their relative significance varies from case to case. The BTMU Group’s review includes, but is not limited to, consideration of the following factors:

The length of time that fair value of the investment has been below cost—The BTMU Group generally deems a continued decline of fair value below cost for six months or more to be other than temporary. Certain securities held by BTMU and certain subsidiaries, which primarily consist of debt securities issued by the Japanese national government and generally considered to be of minimal credit risk, were determined not to be impaired in some cases, on the basis of the respective entity’s ability and positive intent to hold such securities to maturity. Certain securities held by UNBC, which primarily consist of debt securities backed by the full faith and credit of the U.S. government and corporate asset-backed and debt securities, were determined not to be impaired in some cases, on the basis of a cash flow analysis of such securities and/or UNBC’s ability to hold such securities to maturity.

As shown in the table above, there were no material unrealized losses that have been in a continuous loss position for 12 months or more, except for unrealized losses on certain foreign governments and official institutions bonds, mortgage-backed securities and other debt securities held by UNBC at March 31, 2007. Foreign governments and official institutions bonds in an unrealized loss position for 12 months or more were issued by one of the several Government-Sponsored Enterprises (“GSEs”). These securities were issued with a stated interest rate and mature in less than five years. All of the unrealized losses on these securities resulted from rising interest rates subsequent to purchase. Unrealized losses will decline as interest rates fall below the purchased yield and as the securities approach maturity. Since UNBC has the ability and positive intent to hold the securities until recovery of the carrying value, which could be maturity, the unrealized loss is considered temporary. Mortgage-backed securities in an unrealized loss position for 12 months or more are primarily securities guaranteed by a GSE. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. All of the unrealized losses on the mortgage-backed securities resulted from rising interest rates subsequent to purchase. Because the likelihood of credit loss is remote, the securities are excluded from the periodic evaluation of other-than-temporary impairment. Other debt securities in an unrealized loss position for 12 months or more primarily consisted of collateralized loan obligations held by UNBC. Unrealized losses on such securities arise from rising interest rates, widening credit spreads, credit quality of the underlying collateral, and the market’s opinion of the performance of the fund managers. Based on the cash flow analysis set out above, such unrealized losses are determined to be temporary in nature.

The extent to which the fair value of investments has been below cost as of the end of the reporting period—The BTMU Group’s investment portfolio is exposed to volatile equity prices affected by many factors including investors’ perspectives as to future economic factors and the issuers’ performance, as well as cyclical market price fluctuation due to changes in market interest rates, foreign exchange rates, and changes in credit spreads etc. In view of the diversity and volume of equity investments as well as the fact that the majority of investments in debt securities are in high-grade fixed-rate bonds, including sovereign bonds, the BTMU Group generally deems the decline in fair value below cost of 20% or more as an indicator of an other than temporary decline in fair value.

The financial condition and near-term prospects of the issuer—The BTMU Group considers the financial condition and near-term prospects of the issuer primarily based on the credit standing of the issuers as determined by its credit rating system.

F-36

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Banks’ Shareholdings Purchase Corporation

Under a Japanese law forbidding banks from holding marketable equity securities in excess of their Tier I capital after September 30, 2006, the Banks’ Shareholdings Purchase Corporation (“BSPC”) was established in January 2002 in order to soften the impact on the stock market of sales of cross-shareholdings. BSPC began accepting share offers from financial institutions on February 15, 2002. It has been funded by financial institutions, including BTMU, which made initial contributions of ¥1,400 million (“preferred contributions”). BSPC will be disbanded when it sells all shares that it purchased from financial institutions, or by March 31, 2017, at the latest.

BSPC has two accounts to purchase stock from financial institutions; the General Account and the Special Account. In the General Account, each selling financial institution funds the amount of purchase by BSPC without guarantees by the Japanese government, and the financial institution will assume any gains or losses on sales by BSPC of the stocks. In the Special Account, each selling financial institution was required to make contributions of 8% of the selling prices to BSPC for purchases made prior to the effective date of the amendment to the above-mentioned law to fund any future losses (“subordinated contributions”). Effective in August 2003, the requirement for subordinated contributions was eliminated under the amendment to the legislation. The purchase amount in the Special Account is funded by borrowings guaranteed by the Japanese government with a limit of ¥2.0 trillion. The cumulative net loss on sales of stocks in the Special Account, which will not be determined and finalized before the liquidation of BSPC, will be compensated first by the subordinated contributions, and then by the preferred contributions. If there is a remaining loss, the government, as a guarantor, will be liable for the loss. On the other hand, if there is a cumulative net asset at the time of the liquidation, the asset is first used to repay the preferred contributions and then to repay the subordinated contributions. If any net assets remain after repayment of subordinated contributions, such net assets will be paid out and the amounts will be determined based on the amounts of both contributions. Any remaining net assets in excess of double the amount of the contributions will belong to the Japanese government.

At the establishment of BSPC in January 2002, BTMU paid ¥1,400 million to BSPC as preferred contributions. At the time of the sales, BTMU made subordinated contributions to the Special Account of ¥1,164 million for the fiscal year ended March 31, 2002. For the fiscal year ended March 31,2003, BTMU evaluated its preferred contributions of ¥1,400 million and subordinated contributions of ¥1,164 million for impairment, and the recognized an impairment loss of ¥2,564 million. On October 1, 2005, the BTMU Group acquired, at fair value, the preferred and subordinated contributions of UFJ Bank to BSPC for ¥3,200 million and ¥8,595 million, respectively.

BTMU sold marketable equity securities to BSPC with aggregate market values of ¥59,120 million, ¥3,537 million and nil, respectively, during the fiscal years ended March 31, 2005, 2006 and 2007. Also, BTMU made loans to BSPC to fund its purchases of marketable equity securities. Such loans to BSPC, which are guaranteed by the Japanese government, amounted to ¥141,727 million, ¥2,200 million and ¥193,100 million at March 31, 2005, 2006 and 2007, respectively.

The BTMU Group accounts for the transfers of marketable equity securities to the General Account, if any, as secured borrowings. With respect to the transfers of marketable equity securities to the Special Account with the requirement of subordinated contributions, if the fair value of the securities sold to the Special Account is greater than 10% of the fair value of all securities held by the Special Account, the BTMU Group accounts for the subordinated contributions as a partial retained interest in the sale. For all periods presented, the BTMU Group had no sales of securities whose fair value was greater than 10% of the fair value of all securities held by the Special Account. For the fiscal years ended March 31, 2005, 2006 and 2007, the BTMU Group recognized gains of ¥35,434 million, ¥769 million and nil, respectively, on the sales of marketable equity securities to the Special Account. In September 2006, BSPC ceased purchasing marketable equity securities from banks.

F-37

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Debt-for-equity Swap

The BTMU Group restructured certain debt by entering into debt-for-equity swap transactions. As a result of these debt-for-equity swap transactions, the BTMU Group’s loans to some borrowers, under standard terms available to similarly situated corporate borrowers, were effectively converted into equity interests in the borrowers, often in the form of preferred shares. The aggregate carrying amounts of debt swapped for equity, net of allowance, for the fiscal years ended March 31, 2005, 2006 and 2007 were ¥58,425 million, ¥240 million and nil, respectively. Such loans were often identified as impaired and, accordingly, the debt-for-equity swap transactions did not materially affect the BTMU Group’s results of operations for the fiscal years ended March 31, 2005, 2006 and 2007.

Equity interests acquired through a debt-for-equity swap transaction were accounted for as other investments and carried at cost on the consolidated balance sheets, and reviewed for impairment periodically. Due to regulatory and legal reasons, cash often changes hands between the parties to the debt-for-equity swap transactions. In such cases, the debt-for-equity swap is classified as a cash transaction in the consolidated statements of cash flows as a repayment of loans and purchases of other investment securities.

7.    LOANS

Loans at March 31, 2006 and 2007, by domicile and type of industry of borrowers are summarized below:

Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of Japan.

	2006(3)		2007
	(in millions)
Domestic:
Manufacturing	¥	9,353,453	¥	9,586,045
Construction		1,813,724		1,677,536
Real estate		7,094,570		6,308,813
Services		5,759,969		5,915,282
Wholesale and retail		8,916,789		8,519,678
Banks and other financial institutions		4,354,708		3,141,839
Communication and information services		1,029,441		964,544
Other industries		9,946,179		9,313,724
Consumer(2)		22,356,140		23,127,798
Total domestic		70,624,973		68,555,259
Foreign:
Governments and official institutions		329,227		371,585
Banks and other financial institutions		1,037,765		1,532,750
Commercial and industrial		11,602,004		13,285,579
Other		2,228,878		2,426,587
Total foreign		15,197,874		17,616,501
Unearned income, unamortized premiums—net and deferred loan fees—net		13,426		(47,694	)
Total(1)	¥	85,836,273	¥	86,124,066

Notes:

(1) The above table includes loans held for sale of ¥41,682 million and ¥87,086 million at March 31, 2006 and 2007, respectively.

F-38

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(2) Domestic loans within the “consumer” category in the above table include loans to individuals who utilize loan proceeds to finance their proprietor activities and not for their personal financing needs. During the fiscal year ended March 31, 2004, BTM’s credit administration system was upgraded and became able to present a precise breakdown of the balance of such consumer loans by the type of proprietor business. This breakdown at March 31, 2006 and 2007 is presented below:

	Manufacturing		Construction		Real estate		Services		Wholesale and retail		Banks and other financial institutions		Communication and information services		Other industries		Total included in Consumer
	(in millions)
March 31, 2006	¥	17,212	¥	13,925	¥	425,929	¥	160,805	¥	30,937	¥	947	¥	2,968	¥	6,257	¥	658,980
March 31, 2007	¥	14,662	¥	12,281	¥	367,290	¥	132,893	¥	26,104	¥	677	¥	2,407	¥	5,411	¥	561,725

(3) Classification of loans by industry at March 31, 2006 has been restated as follows:

	As previously reported		As restated
	(in millions)
Domestic :
Manufacturing	¥	9,400,652	¥	9,353,453
Construction		1,801,855		1,813,724
Real estate		7,086,430		7,094,570
Services		5,314,968		5,759,969
Wholesale and retail		8,688,851		8,916,789
Banks and other financial institutions		4,597,245		4,354,708
Communication and information services		1,026,113		1,029,441
Other industries		10,352,719		9,946,179
Consumer		22,356,140		22,356,140
Total domestic		70,624,973		70,624,973
Foreign :
Governments and official institutions		322,051		329,227
Banks and other financial institutions		1,089,209		1,037,765
Commercial and industrial		13,228,252		11,602,004
Other		558,362		2,228,878
Total foreign		15,197,874		15,197,874
Unearned income, unamortized premiums—net and deferred loan fees—net		13,426		13,426
Total	¥	85,836,273	¥	85,836,273

Substantially all domestic loans are made under agreements which, as is customary in Japan, provide that a bank may, under certain conditions, require the borrower to provide collateral (or additional collateral) or guarantees with respect to the loans, and that the bank may treat any collateral, whether furnished as security for loans or otherwise, as collateral for all indebtedness to the bank. At March 31, 2006 and 2007, such collateralized loans originated by the BTMU Group, which were principally collateralized by real estate, marketable securities and accounts receivable, amounted to ¥24,600,352 million and ¥24,373,598 million, respectively, which represented 35% and 36%, respectively, of the total domestic loans at March 31, 2006 and 2007.

Note:

The amount of collateralized loans and its percentage to the total domestic loans at March 31, 2006 have been restated from ¥8,304,009 million and 12% to ¥24,600,352 million and 35%, respectively.

Nonaccrual and restructured loans were ¥1,829,511 million and ¥1,510,444 million at March 31, 2006 and 2007, respectively. Had interest on these loans been accrued pursuant to the original terms, gross interest income on such loans for the fiscal years ended March 31, 2006 and 2007 would have been approximately ¥65.4 billion and ¥87.9 billion, respectively, of which approximately ¥43.0 billion and ¥64.0 billion, respectively, were

F-39

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

included in interest income on loans in the accompanying consolidated statements of income. Accruing loans contractually past due 90 days or more were ¥21,381 million and ¥21,309 million at March 31, 2006 and 2007, respectively.

The BTMU Group provided commitments to extend credit to customers with restructured loans. The amounts of such commitments were ¥3,962 million and ¥19,232 million at March 31, 2006 and 2007, respectively. See Note 25 for further discussion of commitments to extend credit.

Impaired Loans

The BTMU Group’s impaired loans primarily include nonaccrual loans and restructured loans. A summary of the recorded balances of impaired loans and related impairment allowance at March 31, 2006 and 2007 is shown below:

	2006				2007
	Recorded loan balance		Impairment allowance		Recorded loan balance		Impairment allowance
	(in millions)
Requiring an impairment allowance	¥	1,056,108	¥	396,963	¥	987,178	¥	511,916
Not requiring an impairment allowance(1)		234,069		—		239,314		—
Total(2)	¥	1,290,177	¥	396,963	¥	1,226,492	¥	511,916

Notes:

(1) These loans do not require an allowance for credit losses under SFAS No. 114 since the fair values of the impaired loans equal or exceed the recorded investments in the loans.

(2) In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of nil and ¥755 million at March 31, 2006 and 2007, respectively.

The average recorded investments in impaired loans were approximately ¥1,095 billion, ¥1,014 billion and ¥1,238 billion, respectively, for the fiscal years ended March 31, 2005, 2006 and 2007.

For the fiscal years ended March 31, 2005, 2006 and 2007, the BTMU Group recognized interest income of approximately ¥22.7 billion, ¥21.1 billion and ¥32.2 billion, respectively, on impaired loans. Interest income on nonaccrual loans was recognized on a cash basis when ultimate collectibility of principal was certain; otherwise, cash receipts were applied as principal reductions. Interest income on accruing impaired loans, including restructured loans, was recognized on an accrual basis to the extent that the collectibility of interest income was reasonably certain based on management’s assessment.

F-40

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Loans Acquired in a Transfer

In accordance with SOP 03-3, the following table sets forth information primarily about loans of the UFJ Bank Group acquired in connection with the merger, for which it is probable, at acquisition, that the BTMU Group will be unable to collect all contractually required payments receivable.

	2006(1)			2007
	(in millions)
Loans acquired during the fiscal year:
Contractually required payments receivable at acquisitions	¥	3,459,082		¥	17,337
Cash flows expected to be collected at acquisitions		1,460,171			786
Fair value of loans at acquisitions		1,353,381			786
Accretable yield for loans within the scope of SOP 03-3:
Balance at beginning of fiscal year	¥	—		¥	244,005
Additions		106,790			—
Accretion		(31,567	)		(98,755	)
Disposals		(43	)		(789	)
Reclassifications from nonaccretable difference		168,825			26,440
Balance at end of fiscal year	¥	244,005		¥	170,901
Loans within the scope of SOP 03-3:
Outstanding balance, beginning of fiscal year	¥	—		¥	2,030,474
Outstanding balance, end of fiscal year		2,030,474			1,141,783
Carrying amount, beginning of fiscal year		—			867,714
Carrying amount, end of fiscal year		867,714			433,091
Nonaccruing loans within the scope of SOP 03-3:
Carrying amount at acquisition date during fiscal year	¥	470,405		¥	786
Carrying amount at end of fiscal year		297,499			147,804
Provisions within the scope of SOP 03-3:
Balance of allowance for loan losses at beginning of fiscal year	¥	—		¥	24,782
Additional provisions during fiscal year		31,135			48,592
Reductions of allowance during fiscal year		—			18,743
Balance of allowance for loan losses at end of fiscal year		24,782			10,724

The BTMU Group considered prepayments in the determination of contractual cash flows and cash flows expected to be collected based on historical results.

F-41

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note:

(1) The balances and components of loans acquired in a transfer for the fiscal year ended March 31, 2006 have been restated as follows:

	As previously reported			As restated
	(in millions)
Loans acquired during the fiscal year:
Contractually required payments receivable at acquisitions	¥	3,348,173		¥	3,459,082
Cash flows expected to be collected at acquisitions		1,458,726			1,460,171
Fair value of loans at acquisitions		1,351,936			1,353,381
Accretable yield for loans within the scope of SOP 03-3:
Balance at beginning of fiscal year	¥	—		¥	—
Additions		106,790			106,790
Accretion		(200,617	)		(31,567	)
Disposals		(34,538	)		(43	)
Reclassifications from nonaccretable difference		238,540			168,825
Balance at ending of fiscal year	¥	110,175		¥	244,005
Loans within the scope of SOP 03-3:
Outstanding balance, beginning of fiscal year	¥	—		¥	—
Outstanding balance, end of fiscal year		1,920,622			2,030,474
Carrying amount, beginning of fiscal year		—			—
Carrying amount, end of fiscal year		866,608			867,714
Nonaccruing loans within the scope of SOP 03-3:
Carrying amount at acquisition date during fiscal year	¥	468,960		¥	470,405
Carrying amount at end of fiscal year		296,393			297,499
Provisions within the scope of SOP 03-3:
Balance of allowance for loan losses at beginning of fiscal year	¥	—		¥	—
Additional provisions during fiscal year		24,617			31,135
Reductions of allowance during fiscal year		—			—
Balance of allowance for loan losses at end of fiscal year		24,617			24,782

Lease Receivable

As part of its financing activities, the BTMU Group enters into leasing arrangements with customers. The BTMU Group’s leasing operations are performed through leasing subsidiaries and consist principally of direct financing leases involving various types of data processing equipment, office equipment and transportation equipment.

As of March 31, 2006 and 2007, the components of the investment in direct financing leases were as follows:

	2006(1)			2007
	(in millions)
Minimum lease payment receivable	¥	903,407		¥	952,498
Estimated residual values of leased property		42,415			41,949
Less—unearned income		(70,973	)		(72,831	)
Net investment in direct financing leases	¥	874,849		¥	921,616

Note:

(1) The balances and components of the investment in direct financing leases at March 31, 2006 have been restated as follows:

	As previously reported			As restated
	(in millions)
Minimum lease payment receivable	¥	1,041,285		¥	903,407
Estimated residual values of leased property		42,183			42,415
Less—unearned income		(70,978	)		(70,973	)
Net investment in direct financing leases	¥	1,012,490		¥	874,849

F-42

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Future minimum lease payment receivables under noncancelable leasing agreements as of March 31, 2007 were as follows:

	Direct financing leases
	(in millions)
Fiscal year ending March 31:
2008	¥	290,885
2009		233,227
2010		179,157
2011		113,626
2012		69,076
2013 and thereafter		66,527
Total minimum lease payment receivables	¥	952,498

Government-led Loan Restructuring Program

Under the legislation enacted by the Japanese Diet in June 1996, which incorporates the restructuring program for the loans of seven failed housing-loan companies (the “Jusen”), the Deposit Insurance Corporation (“DIC”) established a Housing Loan Administration Corporation (“HLAC”) to collect and dispose of the loans of the liquidated Jusen. In 1999, HLAC merged with the Resolution and Collection Bank Limited to create the Resolution and Collection Corporation (“RCC”), which is wholly owned by the DIC.

Financial institutions, including the BTMU Group, waived the repayment of substantial amounts of the loans to the Jusen and transferred the remaining balances to HLAC. Financial institutions were requested to make loans to HLAC to finance its collection activities, and in the fiscal year ended March 31, 1997, the BTMU Group made loans of ¥184,197 million with an original maturity term of 15 years. The 15-year term loans to HLAC, which are guaranteed by the DIC under the legislation and the loan agreements, mature in 2011 and earn interest at TIBOR (Tokyo Interbank Offered Rate) plus 0.125%. During the fiscal years ended March 31, 2006 and 2007, certain of these loans were repaid before maturity. At March 31, 2006 and 2007, outstanding loans to HLAC were ¥140,085 million and ¥122,634 million, respectively.

Under this restructuring program, a Financial Stabilization Fund (the “Special Fund”) was established within the DIC, and the Bank of Japan and other financial institutions established another fund (the “New Fund”). These funds are principally invested in Japanese government bonds. The BTMU Group made non-interest-earning deposits of ¥111,124 million with the Special Fund and the New Fund in the fiscal year ended March 31, 1997. On October 1, 2005, the BTMU Group acquired, at fair value, non-interest-earning deposits of the UFJ Bank Group with the Special Fund and the New Fund. The deposit balances as of March 31, 2006 and 2007, which are included in Other Assets, were ¥252,541 million and ¥ 257,093 million, respectively, reflecting a present value discount and subsequent amortization of the discount during the period until the expected maturity date. The non-interest-earning deposits with these funds are expected to mature in 15 years from the deposit dates, which coincides with the planned operational lifespan of HLAC.

It is uncertain what losses (so-called “stage two loss”), if any, may ultimately be incurred by the RCC through the collection of the Jusen loans during the 15-year term. If any such losses ultimately occur, the Japanese government will be liable for half of such losses, and the investment income to be earned by the Special Fund during the 15 years is to be used to cover the remaining half of the losses. The investment income to be earned by the New Fund during the 15 years is to be used to compensate for a portion of the public funds used for the Jusen restructuring.

F-43

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At this time management believes all loans and deposits will be collectible according to their respective terms.

Sales of Loans

The BTMU Group originates various types of loans to corporate and individual customers in Japan and overseas in the normal course of its business. The Financial Services Agency of Japan (the “FSA”) announced in October 2002 that it will strive to reduce the aggregate ratio of nonperforming loans to total loans of major Japanese banks, including the BTMU Group, by approximately half by March 31, 2005. Pursuant to the FSA’s policy and in order to improve its loan quality, the BTMU Group actively disposed of nonperforming loans. Most of such nonperforming loans were disposed of by sales to third party purchasers without any continuing involvement. Management of the BTMU Group generally decides on approvals for disposals after significant sales terms, including prices, are negotiated. As such, loans are disposed of by sales shortly after the loans are transferred to held-for-sale classification. The excess of the proceeds from the sales of loans over their carrying amounts were ¥9,052 million, ¥45,689 million and ¥22,727 million for the fiscal years ended March 31, 2005, 2006 and 2007, respectively. Such excess is reported in the consolidated statements of income as reduction in Provision for credit losses to the extent of the existing Allowance for credit losses on sold loans and remaining excess as Gains on sales of loans.

Loan Securitization

The BTMU Group had no significant transfers of loans in securitization transactions accounted for as sales for the fiscal years ended March 31, 2006 and 2007, and did not retain any significant interests associated with loans transferred in securitizations at March 31, 2007. The BTMU Group securitized mortgage loans in the fiscal year ended March 31, 2005. After securitizations of mortgage loans, the BTMU Group provides servicing and advancing lines for the loans transferred to the trust. As a result of the securitization, the BTMU Group received proceeds of ¥8,620 million and recognized gains of ¥154 million for the fiscal year ended March 31, 2005. The BTMU Group did not possess any retained interests associated with the securitizations at March 31, 2005.

Related Party Loans

In some cases, BTMU and its banking subsidiaries make loans to related parties, including their directors and executive officers, in the course of their normal commercial banking business. At March 31, 2006 and 2007, outstanding loans to such related parties were not significant.

In the opinion of management, these related party loans were made on substantially the same terms, including interest rates and collateral requirements, as those terms prevailing at the date these loans were made. For the fiscal years ended March 31, 2005, 2006 and 2007, there were no loans to related parties that were charged-off. Additionally, at March 31, 2006 and 2007, there were no loans to related parties that were impaired.

F-44

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8.    ALLOWANCE FOR CREDIT LOSSES

Changes in the allowance for credit losses for the fiscal years ended March 31, 2005, 2006 and 2007 are shown below:

	2005		2006		2007
	(in millions)
Balance at beginning of fiscal year	¥	649,339	¥	567,651	¥	912,997
Additions resulting from the merger with UFJ Bank(1)		—		279,158		—
Provision for credit losses		123,945		163,416		341,570
Charge-offs		233,305		127,125		298,257
Less—Recoveries		23,859		19,369		33,011
Net charge-offs		209,446		107,756		265,246
Others(2)		3,813		10,528		4,206
Balance at end of fiscal year	¥	567,651	¥	912,997	¥	993,527

Notes:

(1) Additions resulting from the merger with UFJ Bank represent the allowance for credit losses for acquired loans outside the scope of SOP 03-3. The allowance for credit losses on loans within the scope of SOP 03-3 was not carried over.

(2) Others principally include foreign exchange translation and discontinued operations adjustments.

As explained in Note 7, nonperforming loans were actively disposed of by sales during recent years. The allocated allowance for credit losses for such loans was removed from the allowance for credit losses and transferred to the valuation allowance for loans held for sale upon a decision to sell. Net charge-offs in the above table include the decrease in the allowance for credit losses due to loan disposal activity amounting to ¥25.3 billion, ¥26.1 billion and ¥13.0 billion for the fiscal years ended March 31, 2005, 2006 and 2007, respectively.

9.    PREMISES AND EQUIPMENT

Premises and equipment at March 31, 2006 and 2007 consisted of the following:

	2006		2007
	(in millions)
Land	¥	327,782	¥	312,708
Buildings		440,713		418,571
Equipment and furniture		491,353		542,939
Leasehold improvements		268,875		304,918
Construction in progress		6,640		12,204
Total		1,535,363		1,591,340
Less accumulated depreciation		632,116		695,460
Premises and equipment—net	¥	903,247	¥	895,880

Premises and equipment include capitalized leases, principally related to data processing equipment, which amounted to ¥105,506 million and ¥120,873 million at March 31, 2006 and 2007, respectively. Accumulated depreciation on such capitalized leases at March 31, 2006 and 2007 amounted to ¥40,062 million and ¥55,897 million, respectively.

F-45

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In March 1999, BTMU sold a 50% undivided interest in its head office building and land (including structure and equipment) for ¥91,500 million and a 50% undivided interest in its main office building and land (including structure and equipment) for ¥9,100 million to a real estate company. At the same time, BTMU entered an agreement to lease back the 50% undivided interest in the buildings sold from the buyer over a period of 7 years. BTMU has accounted for these transactions as financing arrangements, and recorded the total proceeds of ¥100,600 million as a financing obligation.

In August 2005, BTMU bought back a 50% undivided interest in these office buildings and land for ¥111,597 million. The buy back resulted in an extinguishment of debt of ¥103,731 million, which included the finance obligation for the 50% of any improvements that was paid by the real estate company, and loss on extinguishment of liabilities of ¥7,866 million. The repurchase was undertaken to increase the stability and flexibility of the property as the office buildings and land are expected to function as a significant piece of the infrastructure for BTMU.

Before the merger, UFJ Bank entered into sales agreements to sell its buildings and land and, under separate agreements, leased those properties back for their business operations, including bank branches. UFJ Bank either provided nonrecourse financings to the buyers for the sales proceeds or invested in the equities of the buyers. As a result, UFJ Bank was considered to have continuing involvement with the properties. For accounting and reporting purposes, these transactions were accounted for under the financing method with the sales proceeds recognized as a financing obligation. The properties were reported on the consolidated balance sheets and depreciated. Upon the merger with UFJ Holdings at October 1, 2005, the BTMU Group recorded the properties at fair value. The financing obligation at March 31, 2006 and 2007 were ¥81,003 million and ¥46,270 million, respectively.

For the fiscal years ended March 31, 2005, 2006 and 2007, the BTMU Group recognized ¥1,183 million, ¥5,919 million and ¥12,056 million, respectively, of impairment losses for long-lived assets, primarily real estate which was either formerly used for its banking operations and is no longer used or real estate that is being used where recovery of the carrying amount is doubtful. In addition, ¥947 million, ¥195 million and ¥208 million of impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2005, 2006 and 2007, respectively. These losses are included in Other non-interest expenses. In computing the amount of impairment losses, fair value was determined primarily based on market prices, if available, or the estimated price based on an appraisal.

10.    GOODWILL AND OTHER INTANGIBLE ASSETS

The BTMU Group applied SFAS No. 142 which requires that goodwill be tested for impairment at least annually. Further, SFAS No. 142 requires that intangible assets with finite useful lives continue to be amortized over their useful lives while intangible assets with indefinite lives are subject to impairment testing at least annually.

F-46

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill

The table below presents the changes in the carrying amount of goodwill by business segment during the fiscal years ended March 31, 2006 and 2007:

	Retail Banking			Corporate Banking			Global Banking								Global Markets		MUS			Total
							Other than UNBC			UNBC		Total
	(in millions)
Fiscal year ended March 31, 2006:
Balance at March 31, 2005	¥	—		¥	—		¥	—		¥	56,021	¥	56,021		¥	—	¥	103		¥	56,124
Goodwill acquired during the fiscal year		738,267			811,859			148,613			14,313		162,926			2,300		—			1,715,352
Goodwill disposed during the fiscal year		—			—			—			—		—			—		(103	)		(103	)
Foreign currency translation adjustments and other		—			—			—			6,610		6,610			—		—			6,610
Balance at March 31, 2006	¥	738,267		¥	811,859		¥	148,613		¥	76,944	¥	225,557		¥	2,300	¥	—		¥	1,777,983
Fiscal year ended March 31, 2007:
Balance at March 31, 2006	¥	738,267		¥	811,859		¥	148,613		¥	76,944	¥	225,557		¥	2,300	¥	—		¥	1,777,983
Goodwill acquired during the fiscal year		—			—			—			12,021		12,021			—		—			12,021
Reduction due to elimination of valuation allowance for deferred tax assets		(9,010	)		(2,458	)		(548	)		—		(548	)		—		—			(12,016	)
Foreign currency translation adjustments and other		(8,393	)		(786	)		—			2,321		2,321			—		—			(6,858	)
Balance at March 31, 2007	¥	720,864		¥	808,615		¥	148,065		¥	91,286	¥	239,351		¥	2,300	¥	—		¥	1,771,130

Notes:

(1) See Note 29 for the business segment information of the BTMU Group.

(2) See Note 2 for the goodwill acquired in connection with the merger with UFJ Bank.

Other Intangible Assets

The table below presents the gross carrying amount, accumulated amortization and net carrying amount, in total and by major class of intangible assets at March 31, 2006 and 2007:

	2006						2007
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
	(in millions)
Intangible assets subject to amortization:
Software	¥	585,717	¥	248,996	¥	336,721	¥	645,971	¥	247,623	¥	398,348
Core deposit intangibles		582,635		48,892		533,743		593,507		132,643		460,864
Customer relationships		163,263		12,944		150,319		60,163		11,981		48,182
Trade names		29,668		780		28,888		28,660		2,213		26,447
Other		11,606		7,898		3,708		5,459		2,065		3,394
Total	¥	1,372,889	¥	319,510		1,053,379	¥	1,333,760	¥	396,525		937,235
Intangible assets recorded in connection with the additional minimum pension liabilities under SFAS No. 87 (See Note 17)						225						—
Intangible assets not subject to amortization:
Indefinite-lived customer relationships						87,027						—
Indefinite-lived trade names						17,682						6,400
Other						10,059						10,044
Total						114,768						16,444
Total					¥	1,168,372					¥	953,679

F-47

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2007 amounted to ¥172,913 million, which primarily consisted of ¥161,219 million of software and ¥10,759 million of core deposit intangibles. The weighted average amortization periods for these assets are 5 years, and 6 years, respectively. There is no significant residual value estimated for these assets. Intangible assets not subject to amortization acquired during the fiscal year ended March 31, 2007 amounted to ¥91 million.

For the fiscal years ended March 31, 2005, 2006 and 2007, the BTMU Group recognized ¥2,134 million, ¥207 million and ¥184,754 million, respectively, of impairment losses for intangible assets whose carrying amount exceeded their fair value. In computing the amount of impairment losses, fair value was determined primarily based on market prices, if available, the estimated value based on appraisal, or the discounted expected future cash flows.

The losses for the fiscal years ended March 31, 2005 and 2006 primarily consisted of leasehold and telephone subscription rights not subject to amortization. The losses for the fiscal year ended March 31, 2007 included losses of ¥183,959 million from customer relationships and trade names, which were both subject to and not subject to amortization, under the Retail Banking business segment. These intangible assets were initially valued based on discounted expected future cash flows. The future cash flows were negatively revised due to the adverse change in the business environment for consumer finance companies attributable to an ensuing action toward legal revisions of consumer lending law to lower the interest rate permissible on consumer loans and, accordingly, the BTMU Group reevaluated these intangible assets and recognized impairment losses.

The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as follows:

	(in millions)
Fiscal year ending March 31:
2008	¥	185,205
2009		170,477
2010		126,174
2011		105,341
2012		84,819

F-48

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.    INCOME TAXES

The detail of current and deferred income tax expense (benefit) for the fiscal years ended March 31, 2005, 2006 and 2007 was as follows:

	2005			2006			2007
	(in millions)
Current:
Domestic	¥	8,484		¥	10,142		¥	17,699
Foreign		49,346			54,288			49,260
Total		57,830			64,430			66,959
Deferred:
Domestic		170,860			6,516			338,948
Foreign		8,606			(2,025	)		4,392
Total		179,466			4,491			343,340
Income tax expense from continuing operations		237,296			68,921			410,299
Income tax expense (benefit) from discontinued operations		1,502			8,077			(734	)
Income tax benefit from cumulative effect of a change in accounting principle		—			(5,759	)		—
Income tax expense (benefit) reported in shareholder’s equity relating to:
Investment securities available for sale		3,303			705,843			190,265
Derivatives qualifying for cash flow hedges		(198	)		(1,065	)		(158	)
Minimum pension liability adjustments		7,613			90,358			(1,011	)
Foreign currency translation adjustments		7,760			5,138			438
Total		18,478			800,274			189,534
Total	¥	257,276		¥	871,513		¥	599,099

Income taxes in Japan applicable to the BTMU Group are imposed by the national, prefectural and municipal governments, and in the aggregate resulted in a normal effective statutory rate of approximately 40.6% for the fiscal years ended March 31, 2005, 2006 and 2007. Foreign subsidiaries are subject to income taxes of the countries in which they operate.

Consolidated Corporate Tax

In March 2003, MUFG’s application to file its tax returns under the consolidated corporate-tax system was approved by the Japanese tax authorities, and the consolidated corporate-tax system became effective for the fiscal year ended March 31, 2003. The BTMU Group, however, used the separate return method of allocation. Under the separate return method of allocation, current and deferred taxes for the fiscal year ended March 31, 2005 were determined in accordance with SFAS No. 109 as if the BTMU Group was filing a separate tax return. The difference between the cash flows that were to be paid or received under the Japanese tax law and the separate return method of tax allocation used for financial reporting purposes was reported in the consolidated financial statements as a charge to retained earnings.

In February 2005, MUFG’s application to suspend the consolidated corporate-tax system was approved by the Japanese tax authorities. For the fiscal year ended March 31, 2005, the MUFG Group filed its tax returns under the consolidated corporate-tax system. Due to the suspension of the consolidated corporate-tax system,

F-49

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

deferred income taxes had been calculated separately based on temporary differences as of March 31, 2005 and future taxable income at each company. In connection with the suspension, the Japanese tax law required MUFG to return the remaining net operating loss carryforwards (“NOLs”) to each subsidiary in which they originated. The balance of BTMU’s NOLs under Japanese tax law after the allocation, which occurred on April 1, 2005, was greater than that for financial accounting purposes at the same date. This is because more NOLs were reported as being utilized for financial reporting purposes under the separate return basis than were actually used under the consolidated corporate-tax system. Based on the fact that the application to suspend the consolidated corporate-tax system was approved in February 2005, BTMU recognized an increase in deferred tax assets for this difference during the fiscal year ended March 31, 2005, which was credited to capital surplus.

Merger

Under the Japanese corporate tax law, the merger between BTM and UFJ Bank was treated as a tax qualified merger, and the tax bases of assets and liabilities and the operating loss carryforwards of UFJ Bank were carried forward in BTMU’s income tax returns. As a result, the tax items comprising BTMU’s deferred tax assets and liabilities significantly increased at March 31, 2006 compared to March 31, 2005.

A reconciliation of the effective income tax rate reflected in the accompanying consolidated statements of income to the combined normal effective statutory tax rate for the fiscal years ended March 31, 2005, 2006 and 2007 is as follows:

	2005		2006		2007
Combined normal effective statutory tax rate	40.6	%	40.6	%	40.6	%
Increase (decrease) in taxes resulting from:
Nondeductible expenses	0.5		1.1		0.1
Dividends from foreign subsidiaries	1.5		2.9		1.1
Foreign tax credit and payments	1.1		2.0		0.9
Lower tax rates applicable to income of subsidiaries	(1.1	)	(12.2	)	(0.7	)
Minority interests	2.0		14.5		(0.3	)
Change in valuation allowance	0.5		1.3		8.2
Realization of previously unrecognised tax effects of subsidiaries	0.3		(29.1	)	—
Change in foreign exchange rate	0.9		—		—
Nontaxable dividends received	(1.2	)	(2.1	)	(1.3	)
Tax expense on capital transactions by a subsidiary	—		8.0		—
Other—net	0.2		(3.8	)	(1.5	)
Effective income tax rate	45.3	%	23.2	%	47.1	%

F-50

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred tax assets and liabilities are computed for each tax jurisdiction using currently enacted tax rates applicable to periods when the temporary differences are expected to reverse. The tax effects of the items comprising the BTMU Group’s net deferred tax assets at March 31, 2006 and 2007 were as follows:

	2006			2007
	(in millions)
Deferred tax assets:
Allowance for credit losses	¥	634,202		¥	599,132
Operating loss carryforwards		1,418,708			1,171,150
Loans		116,518			63,008
Accrued severance indemnities and pension plans		38,466			—
Accrued liabilities and other		266,384			299,172
Sale-and-leaseback transactions		49,253			48,018
Derivative financial instruments		165,080			106,079
Valuation allowance(1)		(380,715	)		(444,108	)
Total deferred tax assets		2,307,896			1,842,451
Deferred tax liabilities:
Investment securities		858,045			1,051,493
Intangible assets		342,356			217,848
Lease transactions		67,896			63,675
Accrued severance indemnities and pension plans		—			45,852
Other		27,812			27,247
Total deferred tax liabilities		1,296,109			1,406,115
Net deferred tax assets	¥	1,011,787		¥	436,336

Note:

(1) At March 31, 2006 and 2007, ¥327 billion and ¥310 billion, respectively, of the valuation allowance related to gross deferred tax assets was attributable to the merger with UFJ Bank. Future recognition of the tax attributes associated with these gross deferred tax assets would result in BTMU’s share of tax benefits being allocated first to reduce goodwill, second to reduce other noncurrent intangible assets acquired, and then to reduce income tax expenses. For the fiscal year ended March 31, 2007, the tax benefit of ¥12 billion attributed to the merger was recognized by eliminating the valuation allowance and was applied to reduce goodwill.

The valuation allowance was provided primarily against deferred tax assets recorded at the BTMU Group’s domestic subsidiaries with operating loss carryforwards. The amount of the valuation allowance is determined based on a review of future taxable income (exclusive of reversing temporary differences and carryforwards) and future reversals of existing taxable temporary differences. Future taxable income is developed from forecasted operating results, based on recent historical trends and approved business plans, the eligible carryforward periods and other relevant factors. For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in recent years, a valuation allowance was recognized against the deferred tax assets as of March 31, 2006 and 2007 to the extent that it is more likely than not that they will not be realized. The net changes in the valuation allowance for deferred tax assets were increases of ¥271,743 million and ¥63,393 million for the fiscal years ended March 31, 2006 and 2007, respectively. The increase for the fiscal year ended March 31, 2006 primarily reflected an increase in the number of subsidiaries for which a valuation allowance was recognized against the deferred tax assets as a result of the merger with UFJ Bank. The increase for the fiscal year ended March 31, 2007 primarily reflected the addition of valuation allowances for certain companies including a subsidiary in the consumer finance business due to the decline of their forecasted operating results and estimated future taxable income, and an increase in their deductible temporary differences.

F-51

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At March 31, 2007, the BTMU Group had operating loss carryforwards of ¥2,903,248 million and tax credit carryforwards of ¥1,216 million for tax purposes. Such carryforwards, if not utilized, are scheduled to expire as follows:

	Operating loss carryforwards		Tax credit carryforwards
	(in millions)
Fiscal year ending March 31:
2008	¥	785	¥	—
2009		54,159		—
2010		1,363,981		—
2011		101,453		—
2012		1,036,228		—
2013		294,864		—
2014 and thereafter		46,341		549
No definite expiration date		5,437		667
Total	¥	2,903,248	¥	1,216

Income taxes are not provided on undistributed earnings of foreign subsidiaries, which are considered to be indefinitely reinvested in the operations of such subsidiaries. At March 31, 2007, such undistributed earnings of foreign subsidiaries amounted to approximately ¥349 billion. Determination of the amount of unrecognized deferred tax liabilities with respect to these undistributed earnings is not practicable because of the complexity associated with its hypothetical calculation including foreign withholding taxes and foreign tax credits. BTMU has neither plans nor the intention to dispose of investments in foreign subsidiaries and, accordingly, does not expect to record capital gains or losses, or otherwise monetize its foreign subsidiaries’ undistributed earnings.

Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle for the fiscal years ended March 31, 2005, 2006 and 2007 was as follows:

	2005		2006		2007
	(in millions)
Domestic income	¥	375,116	¥	117,111	¥	668,986
Foreign income		148,772		180,041		203,018
Total	¥	523,888	¥	297,152	¥	872,004

12.    PLEDGED ASSETS AND COLLATERAL

Pledged Assets

At March 31, 2007, assets mortgaged, pledged, or otherwise subject to lien were as follows:

	(in millions)
Trading account securities	¥	793,830
Investment securities		6,798,538
Loans		4,472,532
Other		128,781
Total	¥	12,193,681

F-52

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The above pledged assets were classified by type of liabilities to which they relate as follows:

	(in millions)
Deposits	¥	325,993
Call money and funds purchased		595,326
Payables under repurchase agreements and securities lending transactions		6,597,074
Other short-term borrowings and long-term debt		4,675,288
Total	¥	12,193,681

In addition, at March 31, 2007, certain investment securities, principally Japanese national government and Japanese government agency bonds, and other assets aggregating ¥8,466,530 million were pledged as collateral for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and Tokyo Bankers Association, for derivative transactions and for certain other purposes.

Under a Japanese law, Japanese banks are required to maintain certain minimum reserves on deposit with the Bank of Japan based on the amount of deposit balances and certain other factors. There are similar reserve deposit requirements for foreign offices engaged in banking businesses in foreign countries. At March 31, 2006 and 2007, the reserve funds maintained by the BTMU Group, which are included in Cash and due from banks and Interest-earning deposits in other banks, were ¥3,571,007 million and ¥741,959 million, respectively. Average reserves during the fiscal years ended March 31, 2006 and 2007 were ¥4,961,327 million and ¥1,500,421 million, respectively.

Collateral

The BTMU Group accepts and provides financial assets as collateral for transactions, principally commercial loans, repurchase agreements and securities lending transactions, call money, and derivatives. Financial assets eligible for such collateral include, among others, marketable equity securities, trade and notes receivable and certificates of deposit.

Secured parties, including creditors and counterparties to certain transactions with the BTMU Group, may sell or repledge financial assets provided as collateral. Certain contracts, however, may not be specific about the secured party’s right to sell or repledge collateral under the applicable statutes and, therefore, whether or not the secured party is permitted to sell or repledge collateral would differ depending on the interpretations of specific provisions of the existing statutes, contract or certain market practices. If the BTMU Group determines, based on available information, that a financial asset provided as collateral might not be sold or repledged by the secured parties, such collateral is not separately reported in the consolidated balance sheets. If a secured party is permitted to sell or repledge financial assets provided as collateral by contract or custom under the existing statutes, the BTMU Group reports such pledged financial assets separately on the face of the consolidated balance sheets. At March 31, 2007, the BTMU Group pledged ¥9,635 billion of assets that may not be sold or repledged by the secured parties.

The BTMU Group accepts collateral for commercial loans and certain banking transactions under a standardized agreement with customers, which provides that the BTMU Group may require the customers to provide collateral or guarantees with respect to the loans and other banking transactions. Financial assets pledged as collateral are generally negotiable and transferable instruments, and such negotiability and transferability is authorized by applicable legislation. In principle, Japanese legislation permits the BTMU Group to repledge financial assets accepted as collateral unless otherwise prohibited by contract or relevant statutes. Nevertheless, the BTMU Group did not sell or repledge nor does it plan to sell or repledge such collateral accepted in connection with commercial loans before a debtor’s default or other credit events specified in the agreements as

F-53

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

it is not customary within the banking industry in Japan to dispose of collateral before a debtor’s default and other specified credit events. Derivative agreements commonly used in the marketplace do not prohibit a secured party’s disposition of financial assets received as collateral, and in resale agreements and securities borrowing transactions, securities accepted as collateral may be sold or repledged by the secured parties. At March 31, 2006 and 2007, the fair value of the collateral accepted by the BTMU Group that is permitted to be sold or repledged was approximately ¥8,484 billion and ¥11,831 billion, respectively, of which approximately ¥1,524 billion and ¥1,217 billion, respectively, was sold or repledged. The amount includes the collateral that may be repledged under the current Japanese legislation but the BTMU Group does not dispose of before the counterparties’ default in accordance with the customary practice within the Japanese banking industry.

Note:

The fair value of the collateral accepted by the BTMU Group that is permitted to be sold or repledged at March 31, 2006 has been restated from the amounts previously reported as follows:

	2006
	As previously reported		As restated
	(in billions)
Fair value of the accepted collateral that is permitted to be sold or repledged	¥	9,564	¥	8,484
of which, sold or repledged	¥	2,455	¥	1,524

13.    DEPOSITS

The balances of time deposits, including certificates of deposit (“CDs”), issued in amounts of ¥10 million (approximately US$85 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 30, 2007) or more with respect to domestic deposits and issued in amounts of US$100,000 or more with respect to foreign deposits were ¥18,027,545 million and ¥8,678,459 million, respectively, at March 31, 2006, and ¥19,103,823 million and ¥9,739,609 million, respectively, at March 31, 2007.

The maturity information at March 31, 2007 for domestic and foreign time deposits, including CDs, is summarized as follows:

	Domestic		Foreign
	(in millions)
Due in one year or less	¥	28,495,221	¥	10,078,624
Due after one year through two years		2,687,905		54,183
Due after two years through three years		2,440,922		99,842
Due after three years through four years		430,271		10,094
Due after four years through five years		445,260		103,055
Due after five years		103,783		18,449
Total	¥	34,603,362	¥	10,364,247

Note:

The balance of foreign deposits issued in amounts of US$100,000 or more at March 31, 2006 has been restated from ¥7,723,655 million to ¥8,678,459 million.

14.    DEBENTURES

In Japan, certain banks, including BTM, were authorized to issue discount and coupon debentures in the domestic market under applicable banking laws. The Bank of Tokyo, Ltd., which merged with The Mitsubishi Bank, Limited to create BTM, was authorized to issue such debentures and, after the merger in 1996, BTM was also permitted to issue discount and coupon debentures in the domestic market through March 2002 under the Law concerning the Merger and Conversion of Financial Institutions of Japan.

All of the remaining debentures of ¥265,957 million at March 31, 2004 matured in the fiscal year ended March 31, 2005.

F-54

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.    CALL LOANS AND FUNDS SOLD, AND CALL MONEY AND FUNDS PURCHASED

A summary of funds transactions for the fiscal years ended March 31, 2005, 2006 and 2007 is as follows:

	2005			2006			2007
	(in millions, except percentages)
Average balance during the fiscal year:
Call money and funds purchased	¥	2,088,810		¥	2,169,761		¥	2,106,590
Call loans and funds sold		753,685			976,376			1,072,561
Net funds purchased position	¥	1,335,125		¥	1,193,385		¥	1,034,029
Call money and funds purchased:
Outstanding at end of fiscal year:
Amount	¥	1,552,687		¥	1,838,076		¥	2,050,910
Principal range of maturities		1 day to 30 days			1 day to 30 days			1 day to 30 days
Weighted average interest rate		0.29	%		0.53	%		2.60	%
Maximum balance at any month-end during the fiscal year	¥	2,793,311		¥	3,115,273		¥	2,639,999
Weighted average interest rate paid during the fiscal year		0.24	%		0.22	%		1.04	%

Average balances are generally based on a daily average while a month-end average is used for certain average balances when it is not practicable to obtain applicable daily averages.

16.    SHORT-TERM BORROWINGS AND LONG-TERM DEBT

At March 31, 2006 and 2007, the BTMU Group had unused lines of credit for short-term financing amounting to ¥10,096,726 million and ¥7,196,828 million, respectively. The amounts principally consist of the lines of collateralized intraday overdrafts without interest charges and collateralized overnight loans on bills at the official discount rate granted by the Bank of Japan, which are used to cover shortages in the Bank of Japan account and to meet liquidity needs. The BTMU Group may borrow from the Bank of Japan on demand up to the total amount of collateral eligible for credit extension.

Other short-term borrowings at March 31, 2006 and 2007 were comprised of the following:

	2006			2007
	(in millions, except percentages)
Domestic offices:
Loans on notes and acceptances transferred with recourse (rediscount) (1)	¥	6,559,779		¥	—
Commercial paper		1,150,731			1,334,348
Borrowings from financial institutions		263,225			260,940
Other (1)		157,887			833,817
Total domestic offices		8,131,622			2,429,105
Foreign offices:
Commercial paper		1,234,649			1,591,090
Other		323,122			391,449
Total foreign offices		1,557,771			1,982,539
Total	¥	9,689,393		¥	4,411,644
Weighted average interest rate on outstanding balance at end of fiscal year		0.73	%		2.64	%

Note:

(1) During the fiscal year ended March 31, 2007, the form of transaction with Bank of Japan was changed to electronic lending arrangement from purchase of bills. Such electronic lending arrangement with the Bank of Japan is included in “Other” in the amount of ¥815,100 million at March 31, 2007.

F-55

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of other short-term borrowing transactions for the fiscal years ended March 31, 2005, 2006 and 2007 is as follows:

	2005			2006			2007
	(in millions, except percentages)
Average balance outstanding during the fiscal year	¥	8,105,687		¥	10,745,124		¥	5,990,159
Maximum balance at any month-end during the fiscal year		11,227,440			15,614,428			7,883,422
Weighted average interest rate during the fiscal year		0.27	%		0.61	%		1.75	%

Long-term debt (with original maturities of more than one year) at March 31, 2006 and 2007 was comprised of the following:

	2006		2007
	(in millions)
BTMU:
Obligations under capital leases	¥	175,107	¥	154,004
Obligation under sale-and-leaseback transactions		81,003		46,270
Unsubordinated debt:
Insurance companies and other institutions, maturing serially through 2008- 2012, principally 3.13% - 3.67%		36,048		38,000
Fixed rate bonds, payable in Great Britain pound, due 2006, principally 3.15%		2,002		—
Fixed rate bonds, payable in Japanese yen, due 2007 - 2022, principally 0.15% - 2.69%		2,707,792		2,093,978
Fixed rate borrowings, payable in Japanese yen, due 2007 - 2031, principally 0.00% - 7.30%		36,842		28,841
Fixed rate borrowings, payable in Philippine peso, due 2009 , principally 8.82%		580		591
Fixed rate borrowings, payable in Thai baht, due 2007 - 2013, principally 4.10% - 5.65%		3,684		6,056
Fixed rate borrowings, payable in United States dollars, due 2009 - 2018, principally 0.64% - 7.49%		18,856		13,813
Adjustable rate borrowings, payable in United States dollars, due 2007 - 2011, principally 4.24% - 4.72%		2,057		1,023
Floating rate borrowings, payable in Thai baht, due 2007 - 2009, principally 4.49% - 4.88%		—		420
Floating rate borrowings, payable in United States dollars, due 2007 - 2008, principally 5.33%		84,570		82,635
Subordinated debt:
Insurance companies and other institutions, due 2010, principally 1.08%		5,000		3,000
Fixed rate bonds, payable in United States dollars, due 2010 - 2011, principally 7.40% - 8.40%		495,290		490,165
Fixed rate borrowings, payable in United States dollars, due 2008 - 2013, principally 6.76% - 8.98%		580,304		434,057
Fixed rate bonds, payable in Japanese yen, due 2010 - 2020, principally 1.13% - 7.74%		529,122		630,032
Fixed rate borrowings, payable in Japanese yen, due 2007 - 2035, principally 0.14% - 6.20%		585,285		571,576
Adjustable rate borrowings, payable in United States dollars, due 2006 , principally 2.90%		293		—
Adjustable rate bonds, payable in Japanese yen, due 2012, principally 1.46%		33,000		1,000
Adjustable rate borrowings, payable in Japanese yen, due 2007 - 2021, principally 0.69% - 2.02%		206,500		198,000
Floating rate bonds, payable in Euro, due 2015, principally 3.50%		142,810		157,330
Floating rate bonds, payable in Japanese yen, due 2013, principally 1.32%		81,000		11,000
Floating rate borrowings, payable in Japanese yen, due 2007 - 2028, principally 0.51% - 4.03%		1,619,369		1,368,512
Floating rate borrowings, payable in United States dollars, due 2008 - 2017, principally 5.80% - 8.98%		376,844		647,858
Floating rate borrowings, payable in Euro, due 2015 - 2017, principally 4.08% - 5.17%		227,068		332,753
Floating rate borrowings, payable in Great Britain pound, due 2017, principally 6.13% - 6.20%		—		194,653
Obligations under loan securitization transaction accounted for as secured borrowings, due 2007 - 2043, principally 0.53% - 5.66%		2,045,116		3,142,384
Total		10,075,542		10,647,951

F-56

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	2006		2007
	(in millions)
Subsidiaries:
Unsubordinated debt:
Insurance companies and other institutions, due 2007 - 2013, principally 0.62% - 11.62%		437,371		269,394
Fixed rate bonds and notes, payable in United States dollars, due 2007 - 2023, principally 3.40% - 8.22%		34,557		15,138
Fixed rate bonds and notes, payable in Japanese yen, due 2007 - 2024, principally 0.25% - 4.60%		481,618		483,477
Fixed rate bonds and notes, payable in Euro, due 2010 - 2012, principally 5.15% - 6.25%		250		248
Fixed rate bonds and notes, payable in Indonesian rupiah, due 2007, principally 19.00%		576		665
Fixed rate bonds and notes, payable in Thai baht, due 2007 - 2010, principally 0.75% - 1.36%		—		769
Adjustable rate bonds and notes, payable in United States dollars, due 2011 - 2012, principally 4.78% - 6.37%		3,294		4,430
Floating rate bonds and notes, payable in United States dollars, due 2007 - 2009, principally 5.67% - 9.87%		59,270		457
Floating rate bonds and notes, payable in Japanese yen, due 2007 - 2024, principally 0.59% - 8.75%		423,174		417,078
Floating rate bonds and notes, payable in Thai baht, due 2006 - 2010, principally 0.09% - 1.36%		964		—
Floating rate bonds and notes, payable in Hong Kong dollars, due 2007 - 2010, principally 0.75% - 5.83%		2,225		4,415
Floating rate bonds and notes, payable in Brazil real, due 2009 - 2010, principally 5.37%		—		442
Floating rate bonds and notes, payable in Indonesian rupiah, due 2007 - 2008, principally 5.33% - 11.67%		—		3,240
Floating rate bonds and notes, payable in Chinese yuen, due 2011, principally 8.00%		—		1,158
Obligations under capital leases and other miscellaneous debt		13,117		16,050
Total		1,456,416		1,216,961
Subordinated debt:
Insurance companies and other institutions, due 2014, principally 2.50%-2.70%		10,000		10,000
Fixed rate bonds and notes, payable in United States dollars, due 2012 - 2016, principally 5.25% - 10.30%		48,947		135,430
Fixed rate bonds and notes, payable in Japanese yen, due 2015 - 2017, principally 1.45% - 1.97%		10,000		20,000
Floating rate bonds and notes, payable in United States dollars, due 2016, principally 5.55%		3,837		—
Total		72,784		165,430
Obligations under loan securitization transaction accounted for as secured borrowings, due 2009, principally 2.44%		321,096		232,863
Total		1,850,296		1,615,254
Total	¥	11,925,838	¥	12,263,205

Note: Adjustable rate debts are debts where interest rates are reset in accordance with the terms of the debt agreements, and floating rate debts are debts where interest rates are repriced in accordance with movements of market indices.

BTMU and certain subsidiaries entered into interest rate and currency swaps for certain debt in order to manage exposure to interest rate and currency exchange rate movements. As a result of these swap arrangements, the effective interest rates may differ from the coupon rates reflected in the above table. The interest rates for the adjustable and floating rate debt shown in the above table are those in effect at March 31, 2006 and 2007. Certain interest rates are determined by formulas and may be subject to certain minimum and maximum rates. Floating and adjustable rate debt agreements may provide for interest rate floors to prevent negative interest payments (i.e., receipts).

Certain debt agreements permit BTMU and some of its subsidiaries to redeem the related debt, in whole or in part, prior to maturity at the option of the issuer on terms specified in the respective agreements.

F-57

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following is a summary of maturities of long-term debt subsequent to March 31, 2007:

	BTMU		Other subsidiaries		Total
	(in millions)
Fiscal year ending March 31:
2008	¥	1,393,069	¥	420,421	¥	1,813,490
2009		1,408,571		352,219		1,760,790
2010		978,491		296,679		1,275,170
2011		1,316,243		257,787		1,574,030
2012		1,058,932		81,382		1,140,314
2013 and thereafter		4,492,645		206,766		4,699,411
Total	¥	10,647,951	¥	1,615,254	¥	12,263,205

17.    SEVERANCE INDEMNITIES AND PENSION PLANS

Defined Benefit Pension Plans

The BTMU Group has funded non-contributory defined benefit pension plans (“pension benefits”), which cover substantially all of their employees and provide for lifetime annuity payments commencing at age 65 based on eligible compensation at the time of severance, rank, years of service and other factors.

On January 1, 2006, BTMU integrated BTM’s contributory Corporate Defined Benefit Pension plan (“CDBP”) and UFJ Bank’s non-contributory CDBP plan and established a new non-contributory CDBP plan. The integration resulted in the change of the amounts of benefits earned based on employees’ services rendered in prior fiscal periods. The plan amendment did not have a significant impact on the BTMU Group’s results of operations and financial position.

Until January 1, 2006, BTM’s contributory CDBP was referred to as Employees’ Pension Fund plans (“EPF”s), which were contributory defined benefit pension plans established under the Japanese Welfare Pension Insurance Law (“JWPIL”). These plans were composed of (a) substitutional portion based on the pay-related part of the old-age pension benefits prescribed by JWPIL (similar to social security benefits in the United States) and (b) a corporate portion based on a contributory defined benefit pension arrangement established on a discretionary basis. BTMU and its domestic subsidiaries with EPF plans and their employees were exempted from contributions to Japanese Pension Insurance (“JPI”) that would otherwise be required if they had not elected to fund the substitutional portion of the benefit through an EPF arrangement. The EPF plans, in turn, had paid both the corporate and substitutional pension benefits to retired beneficiaries out of their plan assets. Benefits of the substitutional portion were based on a standard remuneration schedule as determined by the JWPIL, but the benefits of the corporate portion were based on a formula determined by each employer/EPF plan. Pension benefits and plan assets applicable to the substitutional portion were included in the corporate portion in the determination of net periodic costs and funded status.

In June 2001, JWPIL was amended to permit each employer/EPF plan to separate the substitutional portion from the EPF plan and transfer the obligation and related assets to the government. The separation process occurred in several phases.

In June 2003, BTMU submitted to the government an application to transfer the obligation to pay benefits for future employee service related to the substitutional portion and the application was approved in August 2003. In August 2004, BTMU made another application for transfer to the government of the remaining

F-58

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

substitutional portion and the application was approved in November 2004. To complete the separation process, the substitutional obligation and related plan assets were transferred to a government agency on March 28, 2005.

In accordance with EITF 03-2, the details of which are discussed in Note 1—Accounting Changes, BTMU recognized (1) the difference of ¥103,001 million between the accumulated benefit obligations settled and the assets transferred to the Japanese Government as a government grant for transfer of the substitutional portion of the EPF plan, (2) the proportionate amount of the net unrealized loss of ¥69,257 million for the substitutional portion as settlement loss, and (3) the difference of ¥1,221 million between the projected benefit obligations and the accumulated benefit obligations related to the substitutional portion, as gain on derecognition of previously accrued salary progression for the fiscal year ended March 31, 2006.

The remaining portion of the EPF plan (that is, the corporate portion) was transferred to the BTM’s contributory CDBP plan after the separation process was completed.

In addition to the CDBP, BTMU has closed Tax-Qualified Pension Plans (“closed TQPPs”), which are non-contributory defined benefit pension plans that provide benefits to certain retired employees, excluding directors in Japan, based on eligible compensation at the time of severance, years of service and other factors.

The BTMU Group also offers qualified and nonqualified defined benefit pension plans in foreign offices and subsidiaries for their employees. The qualified plans are non-contributory defined benefit pension plans, which provide benefits upon retirement based on years of service and average compensation and cover substantially all of the employees of such foreign offices and subsidiaries. With respect to the offices and subsidiaries in the United States of America, the qualified plans are funded on a current basis in compliance with the requirement of the Employee Retirement Income Security Act of the United States of America. The nonqualified plans are non-contributory defined benefit pension plans, under which certain employees earn pay and interest credits on compensation amounts above the maximum stipulated by applicable laws under the qualified plans.

Severance Indemnities Plans

The BTMU Group has severance indemnities plans (“SIP”s) under which their employees in Japan, other than those who are directors, are entitled, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of employment, to lump-sum severance indemnities based on eligible compensation at the time of severance, rank, years of service and other factors. Under SIPs, benefit payments in the form of a lump-sum cash payment with no option to receive annuity payments, upon mandatory retirement at normal retirement age or earlier termination of employment, are provided. When a benefit is paid in a single payment to a benefit payee under the plans, the payment represents final relief of the obligation.

Other Postretirement Plans

The BTMU Group’s foreign offices and subsidiaries, primarily in the United States of America, provide their employees with certain postretirement medical and life insurance benefits (“other benefits”). Plan assets are generally invested in government securities, corporate bonds and mutual funds.

Defined Contribution Plans

The BTMU Group maintains several qualified defined contribution plans in its domestic and foreign offices and subsidiaries, all of which are administered in accordance with applicable local laws and regulations. Each office and subsidiary matches eligible employee contributions up to a certain percentage of benefits-eligible

F-59

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

compensation per pay period, subject to plan and legal limits. Terms of the plan, including matching percentage and vesting periods, are individually determined by each office and subsidiary.

The cost of these defined contribution plans charged to operations for fiscal years ended March 31, 2005, 2006, and 2007 were ¥3,265 million, ¥3,673 million and ¥3,182 million, respectively.

Adopting SFAS No. 158

The BTMU Group adopted the recognition provision of SFAS No. 158 at March 31, 2007. The BTMU Group recognized the overfunded status or underfunded status of all plans as prepaid benefit cost or accrued benefit cost on the consolidated balance sheet at March 31, 2007 with an adjustment to accumulated other changes in equity from nonowner sources, net of taxes. SFAS No. 158 did not change how net periodic benefit costs are determined.

The following table presents the incremental effect of applying SFAS No. 158 on individual line items on the consolidated balance sheet at March 31, 2007:

	Before application of SFAS No. 158		Effect of adjustment Increase/(Decrease)			After application of SFAS No. 158
	(in millions)
Intangible assets—net	¥	954,111	¥	(432	)	¥	953,679
Deferred tax assets	¥	588,976	¥	(77,977	)	¥	510,999
Other assets	¥	3,624,959	¥	154,142		¥	3,779,101
Total assets	¥	153,529,509	¥	75,733		¥	153,605,242
Other liabilities	¥	3,954,094	¥	(24,015	)	¥	3,930,079
Total liabilities	¥	144,943,126	¥	(24,015	)	¥	144,919,111
Accumulated other changes in equity from nonower sources, net of taxes	¥	1,750,673	¥	99,748		¥	1,850,421
Total shareholder’s equity	¥	8,586,383	¥	99,748		¥	8,686,131

The following table presents recognized amounts in accumulated other changes in equity from nonowner sources of the BTMU Group at March 31, 2007:

	BTMU and domestic subsidiaries			Foreign offices and subsidiaries					Total
	Pension benefits and SIP			Pension       benefits		Other       benefits
	(in millions)
Net actuarial loss (gain)	¥	(143,201	)	¥	31,124	¥	5,858		¥	(106,219	)
Prior service cost		(49,565	)		161		(686	)		(50,090	)
Net obligation at transition		369			—		1,455			1,824
Pension liability adjustments	¥	(192,397	)	¥	31,285	¥	6,627		¥	(154,485	)(1)

Note:

(1) Amount recognized in accumulated other changes in equity from nonowner sources, net of taxes, is ¥90,894 million.

F-60

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the expected amounts that will be amortized from accumulated other changes in equity from nonowner sources as components of net periodic benefit cost, before taxes, for the fiscal year ending March 31, 2008:

	BTMU and domestic subsidiaries			Foreign offices and subsidiaries					Total
	Pension benefits and SIP			Pension benefits		Other benefits
	(in millions)
Net actuarial loss (gain)	¥	(2,218	)	¥	2,707	¥	367		¥	856
Prior service cost		(3,373	)		130		(24	)		(3,267	)
Net obligation at transition		311			—		243			554
Total	¥	(5,280	)	¥	2,837	¥	586		¥	(1,857	)

BTMU and Domestic Subsidiaries

Net periodic cost of pension benefits and SIPs for the fiscal years ended March 31, 2005, 2006 and 2007 included the following components:

	2005			2006			2007
	(in millions)
Service cost—benefits earned during the fiscal year	¥	14,845		¥	18,229		¥	28,517
Interest costs on projected benefit obligation		15,999			17,443			26,515
Expected return on plan assets		(14,934	)		(18,543	)		(40,704	)
Amortization of net obligation at transition		548			206			274
Amortization of prior service cost		(795	)		(624	)		(3,417	)
Amortization of net actuarial loss (gain)		19,861			13,561			(417	)
Loss (Gain) on settlements		3,019			70,550			(2,122	)
Gain on derecognition of previously accrued salary progression		—			(1,221	)		—
Net periodic benefit cost	¥	38,543		¥	99,601		¥	8,646

The following table summarizes the assumptions used in computing the present value of the projected benefit obligations and the net periodic benefit cost:

	2005		2006		2007
Weighted-average assumptions used:
Discount rates in determining expense	2.07	%	2.18	%(1)	2.12	%
Discount rates in determining benefit obligation	2.18		2.12		2.30
Rates of increase in future compensation level for determining expense	2.56		2.68	(1)	2.54
Rates of increase in future compensation level for determining benefit obligation	2.68		2.54		2.67
Expected rates of return on plan assets	2.56		2.53	(1)	2.79

Note:

(1) Weighted-average assumptions used in determining expenses for the fiscal year ended March 31, 2006 in the above table are for the BTM Group only. These assumptions used for the UFJ Bank Group, related to expenses recognized since October 1, 2005, were as follows:

	2006
Discount rates in determining expense	2.15	%
Rates of increase in future compensation level for determining expense	4.97
Expected rates of return on plan assets	2.62

F-61

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the combined funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2006 and 2007 for the plans of BTMU and its domestic subsidiaries. BTMU and some of its domestic subsidiaries have measured plan assets and benefit obligations at December 31 for the purpose of financial statements. Accordingly, funded status and amounts recognized in the table below shows the combined amounts of those presented in the consolidated financial statements of these subsidiaries.

	2006									2007
	Non-contributory pension benefits and SIP			Contributory pension benefits			Total			Pension benefits and SIP
	(in millions)
Change in benefit obligation:
Benefit obligation at beginning of fiscal year	¥	136,799		¥	667,558		¥	804,357		¥	1,283,500
Service cost		10,028			8,201			18,229			28,517
Interest cost		6,204			11,239			17,443			26,515
Plan participants’ contributions		—			828			828			—
Amendment		(7,060	)		—			(7,060	)		(25,104	)
Acquisitions in connection with the merger with UFJ Bank		709,176			—			709,176			—
Divestitures		(32,114	)		—			(32,114	)		—
Actuarial loss (gain)		3,926			3,689			7,615			(7,927	)
Benefits paid		(9,793	)		(15,445	)		(25,238	)		(43,209	)
Separation		—			(198,528	)		(198,528	)		—
Lump-sum payment		(11,208	)		—			(11,208	)		(9,673	)
Benefit obligation at end of fiscal year		805,958			477,542			1,283,500			1,252,619
Change in plan assets:
Fair value of plan assets at beginning of fiscal year		81,822			522,578			604,400			1,449,007
Actual return on plan assets		112,692			99,132			211,824			184,789
Acquisitions in connection with the merger with UFJ Bank		751,638			—			751,638			—
Divestitures		(19,692	)		—			(19,692	)		—
Employer contributions		8,961			10,592			19,553			41,736
Plan participants’ contributions		—			828			828			—
Benefits paid		(9,793	)		(15,445	)		(25,238	)		(43,209	)
Separation		—			(94,306	)		(94,306	)		—
Fair value of plan assets at end of fiscal year		925,628			523,379			1,449,007			1,632,323
Reconciliation of funded status:
Funded status		119,670			45,837			165,507			379,704
Reclassification(1)		45,837			(45,837	)		—			—
Contributions to or benefits paid from plan assets during the three months ended March 31, 2006 and 2007		13,157			—			13,157			13,290
Unrecognized net actuarial loss		6,085			—			6,085			—	(2)
Unrecognized prior service cost		(27,534	)		—			(27,534	)		—	(2)
Unrecognized net obligation at transition		642			—			642			—	(2)
Net amount recognized	¥	157,857		¥	—		¥	157,857		¥	392,994
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost	¥	191,644		¥	—		¥	191,644		¥	422,779
Accrued benefit cost		(33,787	)		—			(33,787	)		(29,785	)
Net amount recognized	¥	157,857		¥	—		¥	157,857		¥	392,994

Notes:

(1) Due to the integration of pension plans of BTM and UFJ Bank on January 1, 2006, BTM’s contributory pension plan was changed into a non-contributory pension plan established by a new bank.

(2) Under SFAS No.158, unrecognized net actuarial loss, unrecognized prior service cost and unrecognized net obligation at transition are now recorded as accumulated other changes in equity from nonowner sources.

F-62

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregated accumulated benefit obligations of these plans were ¥1,242,495 million and ¥1,239,942 million at March 31, 2006 and 2007, respectively.

The projected benefit obligations, accumulated benefit obligations and fair value of plans assets for the plans of BTMU and its domestic subsidiaries with accumulated benefit obligations in excess of plan assets were ¥79,528 million, ¥76,154 million and ¥54,420 million, respectively, at March 31, 2006 and ¥47,399 million, ¥46,725 million and ¥18,669 million, respectively, at March 31, 2007.

In accordance with BTMU’s and its domestic subsidiaries’ employment practices, certain early-terminated employees are entitled to special lump-sum termination benefits. The amounts charged to operations for such early termination benefits for the fiscal years ended March 31, 2005, 2006 and 2007 were ¥6,433 million, ¥8,101 million and ¥6,603 million, respectively.

Asset allocation

The weighted-average asset allocations of BTMU and its domestic subsidiaries’ plan assets for the pension benefits and SIPs were as follows:

	Asset ratio at December 31,
	2005				2006
Asset category	Non-contributory Pension benefits and SIP		Contributory pension benefits		Pension benefits and SIP
Pension fund	63.48	%	80.76	%	66.30	%
Japanese equity securities(1)	22.09		21.36		14.41
Japanese debt securities(2)	19.83		28.29		26.00
Non-Japanese equity securities	13.17		12.65		13.25
Non-Japanese debt securities	6.33		7.12		7.21
General account of life insurance companies(3)	1.17		10.97		5.05
Short-term assets	0.89		0.37		0.35
Real estate	—		—		0.03
Employee retirement benefit trust, primarily Japanese equity securities	36.52		19.24		33.70
Total	100.00	%	100.00	%	100.00	%

Notes:

(1) Japanese equity securities include MUFG and the BTMU Group’s common stock in the amounts of ¥6,208 million (0.92% of plan assets) to the non-contributory pension benefits and SIPs and ¥ 3,481 million (0.67% of plan assets) to the contributory pension benefits at December 31, 2005 and ¥ 6,966 million (0.43% of plan assets) to the pension benefits and SIPs at December 31, 2006.

(2) Japanese debt securities include the BTMU Group’s debt securities in the amounts of ¥635 million (0.09% of plan assets) to the non-contributory pension benefits and SIPs and ¥ 1,644 million (0.31% of plan assets) to the contributory pension benefits at December 31, 2005 and ¥3,494 million (0.21% of plan assets) to the pension benefits and SIPs at December 31, 2006.

(3) “General account of life insurance companies” is a contract with life insurance companies that guarantees a return of approximately 1.22% (from April 2005 to March 2006) and 1.23% (from April 2006 to March 2007), which is mainly invested in assets with low market risk such as Japanese debt securities. In terms of pension plan asset allocation, BTMU regards the general account in the same category as Japanese debt securities, because it is generally believed that there is a high degree of correlation between their performances. BTMU carefully monitors life insurance companies by credit rating and other assessments.

F-63

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investment policies

BTMU’s target asset allocation of plan assets for the pension benefits at December 31, 2006 was as follows:

Asset category	Target asset allocation
Japanese equity securities	21.0	%
Japanese debt securities	51.0
Non-Japanese equity securities	19.0
Non-Japanese debt securities	9.0
Total	100.0	%

BTMU’s investment policy for the plan assets is to achieve assured benefits and stable contributions through proper risk control and return maximization. BTMU attaches a great deal of importance to the long-term performance of the plan assets to achieve assured benefits. BTMU fixes the long-term asset allocation, which will be maintained for approximately five years, for efficient long-term investment return. The long-term asset allocation is based on optimal portfolios, which are estimated by expected return and risk according to each asset category, while considering BTMU’s risk tolerance.

As a general rule, BTMU reviews its investment policies for the plan assets approximately every five years. Additionally, a review is made in the following situations: large fluctuations in pension plan liabilities caused by modifications of pension plans, or changes in the market environment. BTMU carefully examines investment in alternative assets, such as derivatives or hedge funds, while considering BTMU’s investment administration structure. BTMU controls risk on the plan assets by standard deviation analysis. Additionally, BTMU requires and checks that investment companies track errors in each asset category within a designated range.

BTMU believes that the purpose of an employee retirement benefit trust investment is to achieve assured benefits by contribution of assets to the trust. Employee retirement benefit trust assets are invested primarily in Japanese equity securities. This asset allocation will be held for the medium term, but it is undecided whether it will be held in the long term.

BTMU’s SIP consists of an employee retirement benefit trust. The trust’s purpose and basic policy is the same as the employee retirement benefit trust described above. BTMU’s TQPPs have been closed and there are no more new beneficiaries. Therefore, to achieve assured benefits, the plan assets for closed TQPPs are invested in assets with low market risk.

Basis and procedure for estimating long-term return of each asset category

BTMU estimates the expected rate of return on the plan assets using a forward-looking building block approach. In this approach, the rate of return for each category of the plan assets is derived from both long-term historical performance and forward-looking return expectations based on future prospects of the economy and capital markets. The expected rate of return on the plan assets is 3.21%, which is the average of the expected rates of return weighted by assets allocation.

The expected rate of return on the employee retirement benefit trust which consists of SIP part and CDBP part is estimated as 1.01% based on the expected dividend yield on Japanese equity securities. Expected capital return is not taken into account, because the long-term asset allocation has not been determined.

F-64

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash flows

BTMU expects to contribute approximately ¥41.5 billion to the plan assets for the pension benefits for the fiscal year ending March 31, 2008 based upon its current funded status and expected asset return assumptions.

Estimated future benefit payments

The following table presents benefit payments expected to be paid, which include the effect of expected future service for the fiscal years indicated:

	Expected benefits
	(in millions)
Fiscal year ending March 31:
2008	¥	60,866
2009		62,445
2010		63,818
2011		64,648
2012		65,357
Thereafter (2013-2017)		340,587

Foreign Offices and Subsidiaries

The BTMU Group’s foreign offices and subsidiaries maintain pension benefits and /or other benefits. Amounts related to these benefits were retroactively adjusted to include offices and subsidiaries located in other than the United States of America.

Net periodic costs of the pension benefits and other benefits of foreign offices and subsidiaries for the fiscal years ended March 31, 2005, 2006 and 2007 include the following components:

	2005						2006						2007
	Pension benefits			Other benefits			Pension benefits			Other benefits			Pension benefits			Other benefits
	(in millions)
Service cost—benefits earned during the fiscal year	¥	5,738		¥	758		¥	6,770		¥	797		¥	7,829		¥	967
Interest costs on projected benefit obligation		7,478			1,182			8,303			1,079			9,931			1,233
Expected return on plan assets		(10,534	)		(975	)		(12,115	)		(1,146	)		(15,312	)		(1,353	)
Amortization of net obligation at transition		5			284			4			224			5			237
Amortization of prior service cost		121			(68	)		179			(85	)		221			(89	)
Amortization of net actuarial loss		1,902			625			3,342			328			4,530			530
Net periodic benefit cost	¥	4,710		¥	1,806		¥	6,483		¥	1,197		¥	7,204		¥	1,525

F-65

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the assumptions used in computing the present value of the projected benefit obligations and the net periodic benefit cost:

	2005				2006				2007
	Pension benefits		Other benefits		Pension benefits		Other benefits		Pension benefits		Other benefits
Weighted-average assumptions used:
Discount rates in determining expense	6.19	%	6.25	%	5.71	%	5.76	%	5.42	%	5.15	%
Discount rates in determining benefit obligation	5.71		5.76		5.42		5.15		5.87		6.02
Rates of increase in future compensation level for determining expense	4.57		—		4.47		—		4.63		—
Rates of increase in future compensation level for determining benefit obligation	4.47		—		4.63		—		4.64		—
Expected rates of return on plan assets	8.19		8.25		8.19		8.25		8.13		8.25

The following tables present the assumed weighted-average other benefits cost trend rates for foreign offices and subsidiaries, which are used to measure the expected cost of benefits at year-end, and the effect of a one-percentage-point change in the assumed medical benefits cost trend rate:

	UNBC						Other than UNBC
	Years ended December 31,						Years ended December 31,
	2005			2006			2005			2006
Initial trend rate		8.93	%		8.06	%		8.00	%		7.00	%
Ultimate trend rate		5.00	%		5.00	%		5.50	%		5.00	%
Year the rate reaches the ultimate trend rate		2011			2011			2009			2009
	UNBC						Other than UNBC
	One-percentage- point increase			One-percentage- point decrease			One-percentage- point increase			One-percentage- point decrease
	(in millions)
Effect on total of service and interest cost components	¥	305		¥	(250	)	¥	68		¥	(55	)
Effect on postretirement benefit obligation		2,481			(2,096	)		594			(494	)

F-66

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2006 and 2007 for the pension benefits and other benefit of foreign offices and subsidiaries:

	2006						2007
	Pension benefits			Other benefits			Pension benefits			Other benefits
	(in millions)
Change in benefit obligation:
Benefit obligation at beginning of fiscal year	¥	139,194		¥	18,137		¥	183,177		¥	22,381
Service cost		6,770			797			7,829			967
Interest cost		8,303			1,079			9,931			1,233
Plan participants’ contributions		21			288			8			304
Amendments		(92	)		(199	)		33			—
Divestitures		(141	)		(45	)		—			—
Actuarial loss (gain)		15,045			1,259			(7,956	)		788
Benefits paid		(3,984	)		(1,398	)		(5,008	)		(1,533	)
Translation adjustments		18,061			2,463			5,729			447
Benefit obligation at end of fiscal year		183,177			22,381			193,743			24,587
Change in plan assets:
Fair value of plan assets at beginning of fiscal year		134,441			12,776			183,045			16,194
Actual return on plan assets		12,999			756			25,181			2,312
Divestitures		(149	)		—			—			—
Employer contributions		21,500			1,958			14,188			2,136
Plan participants’ contributions		21			288			8			304
Benefits paid		(3,984	)		(1,398	)		(5,008	)		(1,533	)
Translation adjustments		18,217			1,814			5,423			218
Fair value of plan assets at end of fiscal year		183,045			16,194			222,837			19,631
Reconciliation of funded status:
Funded status		(132	)		(6,187	)		29,094			(4,956	)
Unrecognized net actuarial loss		54,271			6,362			—	(1)		—	(1)
Unrecognized prior service cost		244			(769	)		—	(1)		—	(1)
Unrecognized net obligation at transition		5			1,683			—	(1)		—	(1)
Net amount recognized	¥	54,388		¥	1,089		¥	29,094		¥	(4,956	)
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost	¥	64,709		¥	4,055		¥	48,634		¥	—
Accrued benefit cost		(17,700	)		(2,966	)		(19,540	)		(4,956	)
Intangible assets		225			—			—			—
Accumulated other changes in equity from nonowner sources under SFAS No. 87		7,154			—			—			—
Net amount recognized	¥	54,388		¥	1,089		¥	29,094		¥	(4,956	)

Note:

(1) Under SFAS No. 158, unrecognized net actuarial loss, unrecognized prior service cost and unrecognized net obligation at transition are now recorded as accumulated other changes in equity from nonowner sources.

The aggregated accumulated benefit obligations of these plans were ¥165,459 million and ¥175,773 million, respectively, at March 31, 2006 and 2007.

F-67

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the plans of foreign offices and subsidiaries with accumulated benefit obligations in excess of plan assets were ¥38,934 million, ¥38,332 million and ¥20,399 million, respectively at March 31, 2006 and ¥41,060 million, ¥40,224 million and ¥21,721 million, respectively at March 31, 2007.

Asset allocation

The weighted-average asset allocations for plan assets of foreign offices and subsidiaries were as follows:

	Asset ratio at December 31,
	2005				2006
Asset category	Pension benefits		Other benefits		Pension benefits		Other benefits
Equity securities	68.57	%	52.00	%	65.71	%	55.00	%
Debt securities	29.01		22.00		27.26		22.00
Insurance contracts	—		26.00		—		23.00
Real estate	0.28		—		4.57		—
Others	2.14		—		2.46		—
Total	100.00	%	100.00	%	100.00	%	100.00	%

Investment policies

Target weighted-average asset allocation for plan assets of foreign offices and subsidiaries is as follows:

Asset category	Target asset allocation
Equity securities	65.3	%
Debt securities	27.7
Real estate	4.6
Others	2.4
Total	100.0	%

The investment objective for plan assets of foreign offices and subsidiaries is to maximize total return within reasonable and prudent levels of risk. The plan asset allocation strategies are the principal determinant in achieving expected investment returns on the plan assets. Actual asset allocations may fluctuate within acceptable ranges due to market value variability. If market fluctuations cause an asset category to fall outside of its strategic asset allocation range, the portfolio will be rebalanced as appropriate. Performance of each plan asset category is compared against established indices and peer groups to evaluate whether the risk associated with the portfolio is appropriate for the level of return.

Basis and procedure for estimating long-term return of each asset category

Foreign offices and subsidiaries periodically reconsider the expected long-term rate of return for their plan assets. They evaluate the investment return volatility of different asset categories and compare the liability structure of their pension and other benefits to those of other companies, while considering their funding policy to maintain a funded status sufficient to meet participants’ benefit obligations, and reduce long-term funding requirements and pension costs. Based on this information, foreign offices and subsidiaries update the expected long-term rate of return.

F-68

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cash flows

Foreign offices and subsidiaries, in aggregate, expect to contribute approximately ¥8.7 billion to the plan assets for the pension benefits and ¥2.4 billion to the plan assets for the other benefits for the fiscal year ending March 31, 2008 based upon their current funded status and expected asset return assumptions.

Estimated future benefit payments

The following table presents benefit payments, in aggregate, expected to be paid, which include the effect of expected future service for the fiscal years indicated:

	Pension benefits		Other benefits
	(in millions)
Fiscal year ending March 31:
2008	¥	5,424	¥	1,537
2009		5,964		1,648
2010		6,583		1,743
2011		7,177		1,849
2012		7,841		1,951
Thereafter (2013-2017)		51,639		11,052

18.    OTHER ASSETS AND LIABILITIES

Major components of other assets and liabilities at March 31, 2006 and 2007 were as follows:

	2006		2007
	(in millions)
Other assets:
Accounts receivable:
Receivables from brokers, dealers and customers for securities transactions	¥	510,166	¥	584,113
Other		695,812		706,742
Investments in equity method investees		347,758		341,175
Non-interest-earning deposits with the Special Fund and the New Fund (See Note 7)		252,541		257,093
Prepaid benefit cost		260,408		471,413
Other		1,425,502		1,418,565
Total	¥	3,492,187	¥	3,779,101
Other liabilities:
Accounts payable:
Payables to brokers, dealers and customers for securities transactions	¥	504,543	¥	941,769
Other		861,839		883,863
Deferred tax liabilities		87,573		74,663
Allowance for off-balance-sheet credit instruments		91,420		76,564
Accrued benefit cost		54,453		54,281
Minority interests		763,718		552,439
Guarantees and indemnifications		93,945		86,605
Accrued and other liabilities		1,020,482		1,259,895
Total	¥	3,477,973	¥	3,930,079

F-69

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investments in equity method investees include marketable equity securities carried at ¥112,947 million and ¥111,310 million, respectively, at March 31, 2006 and 2007. Corresponding aggregated market values were ¥163,278 million and ¥133,268 million, respectively.

The BTMU Group periodically evaluates whether a loss in value of investments in equity method investees is other than temporary. As a result of evaluations, the BTMU Group did not record impairment losses for the fiscal years ended March 31, 2005 and 2006. The BTMU Group recognized other than temporary declines in the value of an investment and recorded impairment losses related to certain affiliated companies of ¥11,387 million for the fiscal year ended March 31, 2007. The impairment losses are included in Equity in earnings of equity method investees in the consolidated statements of income.

19.    PREFERRED STOCK

Pursuant to the Articles of Incorporation, BTMU was authorized to issue 100,000,000 shares of Class 2 Preferred Stock, 27,000,000 shares of Class 3 Preferred Stock, 79,700,000 shares of Class 4 Preferred Stock and 150,000,000 shares of Class 5 Preferred Stock, without par value.

All classes of preferred stock are non-voting and have preference over common stock for the payment of dividends and the distribution of assets in the event of a liquidation or dissolution of BTMU. They are all non-cumulative and non-participating with respect to dividend payments. Shareholders of Class 2, Class 3 Class 4 and Class 5 Preferred Stock receive a liquidation distribution at ¥2,500, ¥3,000, ¥2,000 and ¥2,000 per share, respectively, and do not have the right to participate in any further liquidation distributions.

The number of preferred stock issued and outstanding at March 31, 2005, 2006 and 2007 was as follows:

	Outstanding at March 31, 2005	Net change		Outstanding at March 31, 2006	Net change		Outstanding at March 31, 2007
	(number of shares)
Preferred stock:
Class 1	81,400,000	(81,400,000	)	—	—		—
Class 2	100,000,000	—		100,000,000	—		100,000,000
Class 3	—	27,000,000		27,000,000	(9,300,000	)	17,700,000
Class 4	—	79,700,000		79,700,000	(79,700,000	)	—
Class 5	—	150,000,000		150,000,000	(150,000,000	)	—
Total	181,400,000	175,300,000		356,700,000	(239,000,000	)	117,700,000

The aggregate liquidation preference of preferred stock issued and outstanding at March 31, 2005, 2006 and 2007 was as follows:

	Aggregate amount at March 31, 2005		Net change			Aggregate amount at March 31, 2006		Net change			Aggregate amount at March 31, 2007
	(in millions)
Preferred stock:
Class 1	¥	244,200	¥	(244,200	)	¥	—	¥	—		¥	—
Class 2		250,000		—			250,000		—			250,000
Class 3		—		81,000			81,000		(27,900	)		53,100
Class 4		—		159,400			159,400		(159,400	)		—
Class 5		—		300,000			300,000		(300,000	)		—
Total	¥	494,200	¥	296,200		¥	790,400	¥	(487,300	)	¥	303,100

F-70

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The portion of proceeds from the sale of shares that is designated as capital stock is determined by resolution of the Board of Directors of BTMU, however, at least 50% of the issue price of newly issued shares is required to be designated as capital stock under the Code and the Company Law. Proceeds in excess of amounts designated as capital stock are designated as capital surplus. Class 3 through 5 Preferred Stock were issued in exchange for UFJ Bank’s preferred stocks and recorded in Capital surplus.

On June 28, 2005, at a shareholders’s meeting, the Articles of Incorporation were amended and all 81,400,000 shares of Class 1 Preferred Stock were changed to 81,400,000 shares of common stock. As a result, no Class 1 Preferred Stock was outstanding at March 31, 2006.

Preferred Stock Issued as of March 31, 2007

Class 2 Preferred Stock

On February 21, 2005, BTMU issued 100,000,000 shares of Class 2 Preferred Stock at ¥2,500 per share, the aggregate amount of the issue price being ¥250 billion. Class 2 Preferred Stock does not have voting rights at any general meetings of shareholders, unless otherwise provided by applicable laws and regulations. Preferred dividends are set to be ¥60.0 per share annually.

Class 3 Preferred Stock

On January 4, 2006, BTMU issued 200,000,000 shares of Class 3 Preferred Stock in exchange for Class A Series 1 preferred stock of UFJ Bank at an exchange ratio of 1 share of BTMU’s Class 3 Preferred Stock for each share of UFJ Bank’s Class A Series 1 preferred stock.

Class 3 preferred stockholders are entitled to receive annual non-cumulative dividends of ¥15.90 per share with priority over common stockholders.

Class 3 Preferred Stock is convertible into fully paid shares of BTMU common stock at the election of holders from and including the issue date of Class 3 Preferred Stock to and including July 31, 2008, except during certain excluded periods, at an initial conversion price of ¥1,693.50 per share of common stock, subject to anti-dilution adjustments. The conversion price is subject to reset annually on August 1 from 2006 to 2007 to a thousandth of the average market price of MUFG’s common stock for the 30 trading day period beginning 45 trading days prior to each reset date, multiplied by 1.025, but not less than ¥1,693.50 per share.

On March 31, 2006, 173,000,000 shares of Class 3 Preferred Stock were converted into 306,465,899 shares of common stock.

On September 29, 2006, 9,300,000 shares of Class 3 Preferred Stock were exchanged for 16,474,756 shares of common stock.

As of March 31, 2007, 9,300,000 shares of Class 3 Preferred Stock were treasury stock.

Class 4 Preferred Stock

On January 4, 2006, BTMU issued 150,000,000 shares of Class 4 Preferred Stock in exchange for Class D Series 1 preferred stock of UFJ Bank at an exchange ratio of 1 share of BTMU’s Class 4 Preferred Stock for each share of UFJ Bank’s Class D Series 1 preferred stock.

F-71

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Class 4 preferred stockholders are entitled to receive annual non-cumulative dividends of ¥18.60 per share with priority over common stockholders.

Class 4 Preferred Stock is convertible into fully paid shares of BTMU common stock at the election of holders from and including the issue date of Class 4 Preferred Stock to and including March 30, 2009, except during certain excluded periods, at an initial conversion ratio of 1.826 shares of common stock per preferred stock, subject to anti-dilution adjustments. The conversion ratio is subject to reset annually on October 5 from 2006 to 2008 to ¥2,000 divided by a thousandth of the average market price of MUFG’s common stock for the 30 trading day period beginning 45 trading days prior to each reset date multiplied by 1.035, but not more than 2.197. As of October 5, 2006, the conversion ratio was 1.211.

On March 31, 2006, 70,300,000 shares of Class 4 Preferred Stock were converted into 128,367,800 shares of common stock.

On September 29, 2006, 79,700,000 shares of Class 4 Preferred Stock were exchanged for 145,532,200 shares of common stock.

As of March 31, 2007, all shares of Class 4 Preferred Stock issued were treasury stock.

Class 5 Preferred Stock

On January 4, 2006, BTMU issued 150,000,000 shares of Class 5 Preferred Stock in exchange for Class D Series 2 Preferred Stock of UFJ Bank at an exchange ratio of 1 share of BTMU’s Class 5 Preferred Stock for each share of UFJ Bank’s Class D Series 2 preferred stock.

Class 5 preferred stockholders are entitled to receive annual non-cumulative dividends of ¥19.40 per share with priority over common stockholders.

Class 5 Preferred Stock is convertible into fully paid shares of BTMU common stock at the election of holders from and including the issue date of Class 5 Preferred Stock to and including March 30, 2009, except during certain excluded periods, at an initial conversion ratio of 1.826 shares of common stock per share of preferred stock, subject to anti-dilution adjustments. The conversion ratio is subject to reset annually on October 5 from 2006 to 2008 to ¥2,000 divided by a thousandth of the average market price of MUFG’s common stock for the 30 trading day period beginning 45 trading days prior to each reset date multiplied by 1.035, but not more than 2.197. As of October 5, 2006, the conversion ratio was 1.211.

On September 29, 2006, 150,000,000 shares of Class 5 Preferred Stock were exchanged for 273,900,000 shares of common stock.

As of March 31, 2007, all shares of Class 5 Preferred Stock issued were treasury stock.

F-72

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

20.    COMMON STOCK AND CAPITAL SURPLUS

The changes in the number of issued shares of common stock during the fiscal years ended March 31, 2005, 2006 and 2007 were as follows:

	2005	2006	2007
	(in thousands of shares)
Balance at beginning of fiscal year	5,019,470	5,019,470	9,822,055
Issuance of new shares of common stock by merger	—	4,286,351	—
Change from Class 1 Preferred Stock	—	81,400	—
Issuance of new shares of common stock by conversion of Class 3 Preferred Stock	—	306,466	—
Issuance of new shares of common stock by conversion of Class 4 Preferred Stock	—	128,368	—
Issuance of new shares of common stock in exchange for acquisitions of Class 3,4,5 Preferred Stock	—	—	435,907
Balance at end of fiscal year	5,019,470	9,822,055	10,257,962

On May 1, 2006, a new company law (the “Company Law”) became effective. The Company Law reformed and replaced the Code with various revisions that, for the most part, are applicable to events or transactions occurring on or after May 1, 2006 and for the fiscal years ending on or after May 1, 2006.

Under the Code and the Company Law, issuances of common stock, including conversions of bonds and notes, are required to be credited to the common stock account for at least 50% of the proceeds and to the legal capital surplus account (“legal capital surplus”) for the remaining amounts.

The Code and the Company Law permit Japanese companies, upon approval by the Board of Directors, to issue shares in the form of a “stock split,” as defined in the Code (see Note 1). Also, the Code prior to April 1, 1991 permitted Japanese companies to issue free share distributions. BTMU from time to time made free share distributions. These free distributions usually ranged from 5% to 10% of outstanding common stock and publicly-owned corporations in the United States issuing shares in similar transactions would be required to account for them as stock dividends as of the shareholders’ record date by reducing retained earnings and increasing the appropriate capital accounts by an amount equal to the fair value of the shares issued. The application of such United States accounting practice to the cumulative free distributions made by BTMU at March 31, 2007, would have increased capital accounts by ¥ 1,748,080 million with a corresponding decrease in unappropriated retained earnings.

The Code permits, upon approval of the Board of Directors, the transfer of amounts from the legal capital surplus to the capital stock account. The Company Law permits that common stock, legal reserve, additional paid-in capital, and other capital surplus and retained earnings can be transferred among these accounts under certain conditions upon the approval of a shareholders’ meeting.

Treasury Stock

The Code, as amended effective on October 1, 2001 (the “Code Amendments”), and the Company Law permit Japanese companies to effect purchases of their own shares pursuant to a resolution by the shareholders at an annual general meeting until the conclusion of the following ordinary general meeting of shareholders, and to hold such shares as its treasury shares indefinitely regardless of purpose. However, the Code and the Company

F-73

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Law require the amount of treasury stock purchased be within the amount of retained earnings available for dividends. Disposition of treasury stock is subject to the approval of the Board of Directors and is to follow the procedures similar to a public offering of shares for subscription. Prior to the amendment, in principle, reacquisition of treasury shares was prohibited with the exception of reacquisition for retirement and certain limited purposes, as specified by the Code. Any treasury shares were required to be disposed of in the near term.

Parent Company Shares Held by the Group and Affiliated Companies

At March 31, 2007, the BTMU Group and affiliated companies owned shares of common stock of MUFG. Such shares are included in parent company’s stock in the consolidated balance sheets and deducted from shareholder’s equity.

21.    RETAINED EARNINGS, LEGAL RESERVE AND DIVIDENDS

In addition to the Code and the Company Law, Japanese banks, including BTMU, are required to comply with the Banking Law of Japan (the “Banking Law”).

Legal Reserve Set Aside as Appropriation of Retained Earnings and Legal Capital Surplus

Under the Code Amendments and the Company Law

The Code Amendments and the Company Law provide that an amount at least equal to 10% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as an appropriation of retained earnings and the legal capital surplus equals 25% of stated capital as defined in the Code.

Prior to the Code Amendments, the Code provided that an amount at least equal to 10% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated and set aside as a legal reserve until such reserve equals 25% of common stock. The retained earnings so appropriated may be used to eliminate or reduce a deficit by resolution of the shareholders or may be transferred to capital stock by resolution of the Board of Directors.

Under the Banking Law

In line with the Code Amendments, on June 29, 2001, amendments to the Banking Law (the “Banking Law Amendments”) were promulgated and became effective on October 1, 2001. The Banking Law Amendments provide that an amount at least equal to 20% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal period shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as appropriation of retained earnings and the legal capital surplus equals 100% of stated capital as defined in the Code.

Prior to the Banking Law Amendments, the Banking Law provided that an amount at least equal to 20% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal period shall be appropriated and set aside as a legal reserve until such reserve equals 100% of stated capital as defined in the Code. The retained earnings so appropriated may be used to eliminate or reduce a deficit by resolution of the shareholders or may be transferred to capital stock by resolution of the Board of Directors.

F-74

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Transfer of Legal Reserve

Under the Code Amendments

Under the Code Amendments, Japanese companies, including BTMU, were permitted, pursuant to a resolution by the shareholders at a general meeting, to make legal reserve set aside as appropriation of retained earnings and legal capital surplus available for dividends until the aggregate amount of the legal reserve and legal capital surplus equals 25% of stated capital as defined in the Code, which were formerly permitted only to reduce deficit and to transfer to stated capital as defined in the Code.

Under the Banking Law Amendments Effective October 1, 2001

Effective October 1, 2001, under the Banking Law Amendments, Japanese banks, including BTMU, were permitted, pursuant to a resolution by the shareholders at a general meeting, to make legal reserve set aside as an appropriation of retained earnings and legal capital surplus available for dividends until the aggregate amount of the legal reserve and legal capital surplus equals 100% of stated capital as defined in the Code.

Enactments of the Company Law and the Amendments of Banking Law Effective May 1, 2006

Effective May 1, 2006, under the Company Law, Japanese companies, including BTMU, are permitted, primarily pursuant to a resolution by the shareholders at a general meeting, to transfer legal capital surplus and legal reserve to stated capital and/or retained earnings without limitations of thresholds, thereby effectively removing the thresholds provided for in the Code and Banking Law Amendments at the company’s discretion.

Unappropriated Retained Earnings and Dividends

Under the Code and the Company Law, the amount available for dividends is based on the amount recorded in BTMU’s general books of account maintained in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”). The adjustments included in the accompanying consolidated financial statements but not recorded in BTMU’s general books of account as explained in Note 1 have no effect on the determination of retained earnings available for dividends under the Code and the Company Law. In addition to the provision that requires an appropriation for legal reserve as described above, the Code, the Company Law and the Banking Law impose certain limitations on the amount available for dividends. Under the Banking Law, BTMU has to meet the minimum capital adequacy requirements and distributions of retained earnings of BTMU, which are otherwise distributable to shareholders, are restricted in order to maintain the minimum 4.0% Tier I capital for capital adequacy purpose.

None of the retained earnings recorded in BTMU’s general books of account, prepared in accordance with Japanese GAAP, as of March 31, 2007 (¥1,437,658 million, exclusive of the amounts to be appropriated for legal reserves and gross unrealized gains on fair valuation of assets, as defined, if any), is restricted by such limitations under the Code and the Company Law, or by the Banking Law as described above.

Annual dividends, including those for preferred stock, are approved by the shareholders at an annual general meeting held subsequent to the fiscal year to which the dividends are applicable. In addition, a semi-annual interim dividend payment may be made by resolution of the Board of Directors, subject to limitations imposed by the Code, the Company Law and the Banking Law.

In the accompanying consolidated statements of shareholder’s equity, dividends and appropriations to legal reserve shown for each fiscal year represent dividends approved and paid during the fiscal year and the related appropriation to legal reserve.

F-75

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22.    REGULATORY CAPITAL REQUIREMENTS

Japan

BTMU is subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in which it operates. Failure to meet minimum capital requirements will initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on BTMU’s consolidated financial statements.

In Japan, BTMU is subject to regulatory capital requirements promulgated by the FSA in accordance with the provisions of the Banking Law and related regulations. A banking institution is subject to the minimum capital requirements both on a consolidated basis and a stand-alone basis, and is required to maintain the minimum capital irrespective of whether it operates independently or as a subsidiary under the control of another company. When a bank holding company manages operations of its banking subsidiaries, it is required to maintain the minimum capital adequacy ratio on a consolidated basis in the same manner as its subsidiary banks. The FSA provides two sets of capital adequacy guidelines. One is a set of guidelines applicable to Japanese banks and bank holding companies with foreign offices conducting international operations, as defined, and the other is applicable to Japanese banks and bank holding companies that are not engaged in international operations.

Under the capital adequacy guidelines applicable to a Japanese banking institution with international operations conducted by foreign offices, a minimum capital ratio of 8.0% is required.

The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) sets capital adequacy standards for all internationally active banks to ensure minimum level of capitals.

The Basel Committee worked over recent years to revise the 1988 Accord, and in June 2004, “International Convergence of Capital Measurement and Capital Standards: A Revised Framework” called Basel II was released. Basel II has been applied to Japanese banks and bank holding companies as of March 31, 2007. BTMU calculated capital ratios as of March 31, 2007 in accordance with Basel II.

Basel II is based on “three pillars”: (1) minimum capital requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market discipline through the disclosure of information. The framework of the 1988 Accord, Basel I, is improved and expanded to be included in “minimum capital requirements” as the first pillar of Basel II.

As for the denominator of the capital ratio, retaining the Basel I Framework, Basel II provides more risk-sensitive approaches and a range of options for determining the risk-weighted assets.

“Credit Risk”

The revised Framework provides options for determining the risk-weighted assets for credit risk to allow banks to select approaches that are most appropriate for their level of risk assessment while the Basel I Framework provided a sole measurement approach. Banks choose one of three approaches: “Standardized Approach”, “Foundation Internal Ratings-Based Approach (FIRB)” or “Advanced Internal Ratings-Based Approach (AIRB)”.

“Market Risk”

In the “Amendment to the Capital Accord to incorporate market risks” of the year 1996, a choice between two methodologies “the Standardized Methodology” and “Internal Models Approach” is permitted. “Combination of Internal Models Approach and the Standardized Methodology” is also allowed under certain conditions. This is unchanged in Basel II.

F-76

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

“Operational Risk”

Operational risk, which is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, is newly added in Basel II. Basel II presents three methods for calculating operational risk capital charges: (i) the Basic Indicator Approach; (ii) the Standardized Approach; or (iii) Advanced Measurement Approaches (AMA). Banks adopt one of the three approaches to determine the risk-weighted assets for operational risk.

Banks need to obtain approval from their supervisors prior to adopting the following approaches to calculate capital requirements for each risk:

Ÿ the Internal Ratings-Based (IRB) Approach for credit risk

Ÿ the Internal Models Approach for market risk

Ÿ the Standardized Approach and AMA for operational risk

On the other hand, as for the numerator of the capital ratio, Basel II takes over in principle the eligible regulatory capital stipulated in Basel I.

Capital is classified into three tiers, referred to as Tier I, Tier II and Tier III capital and deductions from capital.

Tier I capital generally consists of shareholders’ equity items, including common stock, preferred stock, capital surplus, minority interests and retained earnings, less any recorded goodwill and other items such as treasury stock. Tier II capital generally consists of general reserves for credit losses up to 1.25% of risk-weighted assets, 45% of the unrealized gains on investment securities available for sale, 45% of the land revaluation excess, the balance of perpetual subordinated debt and the balance of subordinated term debt with an original maturity of over five years subject to some limitations, up to 50% of Tier I capital. Preferred stock is includable in Tier I capital unless the preferred stock has a fixed maturity, in which case, such preferred stock will be a component of Tier II capital. Tier III capital generally consists of short-term subordinated debt with an original maturity of at least two years, subject to certain limitations. At least 50% of a bank’s capital base must be maintained in the form of Tier I capital.

Deductions include a banks’ holdings of capital issued by other banks, or deposit-taking institutions and investments in subsidiaries engaged in banking and financial activities which are not consolidated in accordance with Japanese GAAP.

Due to a change in credit risk measurement by adopting Basel II, general provisions for credit losses can be included in Tier II capital according to the proportion of credit risk-weighted assets subject to the Standardized Approach only. Under the IRB approach, the capital is adjusted by the amount of the difference between total eligible provisions and total expected losses calculated within the IRB approach. Under certain conditions, banks are also required to deduct from regulatory capital securitization exposure, any increase in equity capital resulting from a securitization transaction and expected losses on equity exposures under the Probability of Default/Loss Given Default approach.

If a banking institution is not engaged in international operations conducted by foreign offices, it is subject to another set of capital adequacy requirements with a minimum capital ratio of 4.0%. Such guidelines incorporate measures of risk under the risk-weighted approach similar to the guidelines applicable to banking institutions with international operations. Qualifying capital is classified into Tier I and Tier II capital.

The Banking Law and related regulations require that one of three categories be assigned to banks and bank holding companies, based on its risk-adjusted capital adequacy ratio if the bank fails to meet the minimum target capital adequacy ratio. These categories indicate capital deterioration, which may be subject to certain prompt corrective action by the FSA.

F-77

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

BTMU has international operations conducted by foreign offices, as defined, and is subject to the 8.0% capital adequacy requirement.

In Basel II, most major subsidiaries of BTMU adopted the FIRB to calculate capital requirements for credit risk. BTMU adopted the Standardized Approach to calculate capital requirements for operational risk. As for market risk, BTMU adopted the Internal Models Approach mainly to calculate general market risk and adopted the Standardized Methodology to calculate specific risk.

Under Basel I, BTMU calculated the risk-weighted assets for credit risk, and adopted the Internal Models Approach mainly to calculate general market risk and the Standardized Methodology to calculate specific risk.

The risk-adjusted capital amounts and ratios of BTMU presented in the following table are based on amounts calculated in accordance with Japanese GAAP as required by the FSA:

	Actual				For capital adequacy purposes
	Amount		Ratio		Amount		Ratio
	(in millions, except percentages)
Consolidated:
At March 31, 2006:
Total capital (to risk-weighted assets):	¥	11,921,426	12.48	%	¥	7,641,656	8.00	%
Tier I capital (to risk-weighted assets):		6,735,315	7.05			3,820,828	4.00
At March 31, 2007:
Total capital (to risk-weighted assets):	¥	11,606,586	12.83	%	¥	7,236,545	8.00	%
Tier I capital (to risk-weighted assets):		6,975,584	7.71			3,618,272	4.00
Stand-alone:
At March 31, 2006:
Total capital (to risk-weighted assets):	¥	11,170,768	13.29	%	¥	6,725,417	8.00	%
Tier I capital (to risk-weighted assets):		6,282,137	7.47			3,362,708	4.00
At March 31, 2007:
Total capital (to risk-weighted assets):	¥	10,682,663	13.22	%	¥	6,466,553	8.00	%
Tier I capital (to risk-weighted assets):		6,428,565	7.95			3,233,277	4.00

Note:

Numbers at March 31, 2006 are calculated according to Basel I since Basel II became effective in Japan at March 31, 2007.

Management believes, as of March 31, 2007, that BTMU met all capital adequacy requirements to which it is subject.

United States of America

In the United States of America, UNBC and its banking subsidiary Union Bank of California, N.A. (“UBOC”), BTMU’s largest subsidiaries operating outside Japan, are subject to various regulatory capital requirements administered by U.S. Federal banking agencies, including minimum capital requirements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, UNBC and UBOC must meet specific capital guidelines that involve quantitative measures of UNBC’s and UBOC’s assets, liabilities, and certain off-balance-sheet items as calculated under U.S. regulatory accounting practices. UNBC’s and UBOC’s capital amounts and UBOC’s prompt corrective action classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

F-78

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Quantitative measures established by regulation to ensure capital adequacy require UNBC and UBOC to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to quarterly average assets (as defined).

Although Basel II is not yet effective in the U.S., the U.S. banking and thrift agencies published in July 2007 an interagency notice regarding the implementation of Basel II in the U.S. The agencies agreed to resolve major outstanding issues and lead to finalization of a rule implementing the advanced approaches for computing large banks’ risk-based capital requirements. The agencies also agreed to proceed promptly to issue a proposed rule that would provide all non-core banks with the option to adopt a standardized approach.

The figures on the tables below are calculated according to Basel I as Basel II is not yet effective in the U.S. UNBC’s and the UBOC’s actual capital amounts and ratios are presented as follows:

	Actual				For capital adequacy purposes
	Amount		Ratio		Amount		Ratio
	(in millions, except percentages)
UNBC:
At December 31, 2005:
Total capital (to risk-weighted assets)	$	5,055	11.10	%	$	3,643	8.00	%
Tier I capital (to risk-weighted assets)		4,178	9.17			1,822	4.00
Tier I capital (to quarterly average assets)(1)		4,178	8.39			1,992	4.00
At December 31, 2006:
Total capital (to risk-weighted assets)	$	5,843	11.71	%	$	3,992	8.00	%
Tier I capital (to risk-weighted assets)		4,334	8.68			1,996	4.00
Tier I capital (to quarterly average assets)(1)		4,334	8.44			2,054	4.00

Note:

(1) Excludes certain intangible assets.

	Actual				For capital adequacy purposes				Ratios OCC requires to be “well capitalized”
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(in millions, except percentages)
UBOC:
At December 31, 2005:
Total capital (to risk-weighted assets)	$	4,749	10.59	%	$	3,588	8.00	%	$	4,485	10.00	%
Tier I capital (to risk-weighted assets)		4,315	9.62			1,794	4.00			2,691	6.00
Tier I capital (to quarterly average assets)(1)		4,315	8.78			1,965	4.00			2,456	5.00
At December 31, 2006:
Total capital (to risk-weighted assets)	$	5,280	10.69	%	$	3,951	8.00	%	$	4,939	10.00	%
Tier I capital (to risk-weighted assets)		4,179	8.46			1,975	4.00			2,963	6.00
Tier I capital (to quarterly average assets)(1)		4,179	8.25			2,027	4.00			2,534	5.00

Note:

(1) Excludes certain intangible assets.

Management believes, as of December 31, 2006, that UNBC and UBOC met all capital adequacy requirements to which they are subject.

F-79

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of December 31, 2005 and 2006, the most recent notification from the U.S. Office of the Comptroller of the Currency (“OCC”) categorized UBOC as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” UBOC must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed UBOC’s category.

23.    EARNINGS PER COMMON SHARE

Reconciliations of net income and weighted average number of common shares outstanding used for the computation of basic earnings per common share to the adjusted amounts for the computation of diluted earnings per common share for the fiscal years ended March 31, 2005, 2006 and 2007 are as follows:

	2005			2006			2007
	(in millions)
Income (Numerator):
Income from continuing operations before cumulative effect of a change in accounting principle	¥	286,592		¥	228,231		¥	461,705
Income (loss) from discontinued operations—net		1,493			8,973			(817	)
Cumulative effect of a change in accounting principle, net of tax		(977	)		(8,425	)		—
Net income		287,108			228,779			460,888
Income allocable to a preferred shareholder		(6,716	)		(6,999	)		(10,963	)
Net income available to a common shareholder		280,392			221,780			449,925
Effect of dilutive instruments:
Preferred Stock (Class 3)		—			—			570
Preferred Stock (Class 4)		—			—			1,483
Preferred Stock (Class 5)		—			—			2,910
Convertible debt—MUS		(391	)		—			—
Stock options—MUS		(5	)		—			—
Stock options—UNBC		(894	)		(1,081	)		(835	)
Convertible preferred stock—UFJ NICOS Co., Ltd.		—			(869	)		—
Convertible preferred stock—The Senshu Bank, Ltd.		—			—			(2	)
Net income available to a common shareholder and assumed conversions	¥	279,102		¥	219,830		¥	454,051
	2005			2006			2007
	(thousands of shares)
Shares (Denominator):
Weighted average common shares outstanding		5,019,470			7,219,739			10,041,800
Effect of dilutive instruments:
Convertible preferred stock (Class 3)		—			352,612			39,525
Convertible preferred stock (Class 4)		—			273,195			72,168
Convertible preferred stock (Class 5)		—			273,900			135,824
Weighted average common shares for diluted computation		5,019,470			8,119,446			10,289,317

F-80

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	2005			2006			2007
	(in yen)
Earnings per common share:
Basic earnings per common share:
Income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle	¥	55.76		¥	30.64		¥	44.89
Income (loss) from discontinued operations		0.30			1.24			(0.08	)
Income available to a common shareholder before cumulative effect of a change in accounting principle		56.06			31.88			44.81
Cumulative effect of a change in accounting principle		(0.19	)		(1.16	)		—
Net income available to a common shareholder	¥	55.87		¥	30.72		¥	44.81
Diluted earnings per common share:
Income from continuing operations available to a common shareholder before cumulative effect of a change in accounting principle	¥	55.50		¥	27.01		¥	44.21
Income (loss) from discontinued operations		0.30			1.11			(0.08	)
Income available to a common shareholder before cumulative effect of a change in accounting principle		55.80			28.12			44.13
Cumulative effect of a change in accounting principle		(0.19	)		(1.05	)		—
Net income available to a common shareholder	¥	55.61		¥	27.07		¥	44.13

For the fiscal year ended March 31, 2005, 1/4% Convertible Bonds due 2014 issued by MUS and stock options issued by MUS and UNBC that could potentially dilute earnings per common share in the future were included in the computation of diluted earnings per common share. Certain stock options issued by MUS and UNBC were not included in the computation of diluted earnings per common share due to their antidilutive effects.

For the fiscal year ended March 31, 2006, Class 3, Class 4, and Class 5 Preferred Stock, convertible preferred stock issued by UFJ NICOS Co., Ltd. (“UFJ NICOS”) and stock options issued by UNBC that could potentially dilute earnings per common share in the future were included in the computation of diluted earnings per common share. Convertible preferred stock issued by The Senshu Bank, Ltd. and certain stock options issued by UNBC could potentially dilute earnings per common share but were not included in the computation of diluted earnings per common share due to their antidilutive effects.

For the fiscal year ended March 31, 2007, Class 3, Class 4, and Class 5 Preferred Stock, convertible preferred stock issued by The Senshu Bank., Ltd. and stock options issued by UNBC that could potentially dilute earnings per common share in the future were included in the computation of diluted earnings per common share. Convertible preferred stock issued by UFJ NICOS and certain stock options issued by UNBC could potentially dilute earnings per common share but were not included in the computation of diluted earnings per common share due to their antidilutive effects.

In computing the number of the potentially dilutive common shares for the fiscal years ended March 31, 2006 and 2007, Class 3, Class 4, and Class 5 Preferred Stock has been based on the conversion price at March 31, 2007 (i.e., ¥ 1,693.5, ¥ 1,095.3 and ¥ 1,095.3, respectively).

F-81

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

24.    DERIVATIVE FINANCIAL INSTRUMENTS

The BTMU Group uses various derivative financial instruments both for trading purposes and for purposes other than trading (primarily risk management purposes) in the normal course of business to meet the financial needs of its customers, as a source of revenue and to manage its exposures to a variety of risks. The BTMU Group is a party to derivatives, including swaps, forwards, options and other types of derivatives, dealing primarily with market risk associated with interest rate, foreign currency, equity and commodity prices, and credit risk associated with counterparty’s nonperformance of transactions.

Market risk is the possibility that future changes in market indices make the financial instruments less valuable. Credit risk is the possibility that a loss may result from a counterparty’s failure to perform according to the terms and conditions of the contract, which may exceed the value of underlying collateral. To reduce credit risk, the BTMU Group may require collateral or guaranties based on a case-by-case assessment of creditworthiness of each customer and evaluation of the instrument. The BTMU Group also uses master netting agreements in order to mitigate overall counterparty credit risk.

Trading Activities

The BTMU Group’s trading activities include dealing and other activities measured at fair value with gains and losses recognized currently in earnings. As part of its trading activities, the BTMU Group offers a variety of derivative financial instruments and debt instruments for managing interest rate and foreign exchange risk to its domestic and foreign corporate and financial institution customers. The BTMU Group also enters into other types of derivative transactions, including equity and credit-related contracts, for its own account.

Risk Management Activities

As part of its risk management activities, the BTMU Group uses certain derivative financial instruments to manage its interest rate and currency exposures. The BTMU Group maintains an overall interest rate risk management strategy that incorporates the use of interest rate contracts to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. The BTMU Group’s goal is to manage interest rate sensitivity so that movements in interest rates do not adversely affect net interest income. As a result of interest rate fluctuations, hedged fixed-rate assets and liabilities appreciate or depreciate in market value. Gains or losses on the derivative instruments that are linked to the hedged fixed-rate assets and liabilities are expected to substantially offset this unrealized appreciation or depreciation. Interest income and interest expense on hedged variable-rate assets and liabilities, respectively, increase or decrease as a result of interest rate fluctuations. Gains and losses on the derivative instruments that are linked to these hedged assets and liabilities are expected to substantially offset this variability in earnings.

The BTMU Group enters into interest rate swaps and other contracts as part of its interest rate risk management strategy primarily to alter the interest rate sensitivity of its loans, investment securities and deposit liabilities. The BTMU Group’s principal objectives in risk management include asset and liability management. Asset and liability management is viewed as one of the methods for the BTMU Group to manage its interest rate exposures on interest-bearing assets and liabilities. Interest rate contracts, which are generally non-leveraged generic interest rate and basis swaps, options and futures, allow the BTMU Group to effectively manage its interest rate risk position. Option contracts primarily consist of caps, floors, swaptions and options on index futures. Futures contracts used for asset and liability management activities are primarily index futures providing for cash payments based upon the movement of an underlying rate index. The BTMU Group enters into forward exchange contracts, currency swaps and other contracts in response to currency exposures resulting from on-balance-sheet assets and liabilities denominated in foreign currencies in order to limit the net foreign exchange position by currency to an appropriate level.

F-82

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The risk management activities reduce the BTMU Group’s risk exposures economically, however, derivatives used for risk management activities often fail to meet certain conditions to qualify for hedge accounting and the BTMU Group accounts for such derivatives as trading positions.

For the fiscal years ended March 31, 2006 and 2007, except for derivative transactions conducted by certain foreign subsidiaries, the BTMU Group accounted for derivatives held for risk management purposes as trading positions and measured them at fair value.

Embedded Derivatives

Features embedded in other non-derivative hybrid contracts are separated from the host contracts and measured at fair value when they are not clearly and closely related to the host contracts and meet the definition of a derivative. The change in the fair value of such an embedded derivative is recognized currently in earnings, unless it qualifies as a hedge. The fair value of the embedded derivative is presented in the consolidated balance sheets. The BTMU Group accounts for credit-linked notes as host contracts with embedded derivatives and measures the entire contracts at fair value.

UNBC

Derivative positions are integral components of UNBC’s designated asset and liability management activities. UNBC uses interest rate derivatives to manage the sensitivity of UNBC’s net interest income to changes in interest rates. These instruments are used to manage interest rate risk relating to specified groups of assets and liabilities, primarily LIBOR-based commercial loans, certificates of deposit, medium-term notes and subordinated debt.

Cash Flow Hedges

Hedging Strategies for Variable Rate Loans and Certificates of Deposit and Other Time Deposits

UNBC engages in several types of cash flow hedging strategies for which the hedged transactions are forecasted future loan interest payments, and the hedged risk is the variability in those payments due to changes in the designated benchmark rate, e.g., U.S. dollar LIBOR. In these strategies, the hedging instruments are matched with groups of variable rate loans such that the tenor of the variable rate loans and that of the hedging instrument are identical. Cash flow hedging strategies include the utilization of purchased floor, cap, collar and corridor options and interest rate swaps. At December 31, 2006, the weighted average remaining life of the currently active (excluding any forward positions) cash flow hedges was approximately 1.7 years.

UNBC uses purchased interest rate floors to hedge the variable cash flows associated with 1-month LIBOR or 3-month LIBOR indexed loans. Payments received under the floor contract offset the decline in loan interest income caused by the relevant LIBOR index falling below the floor’s strike rate.

UNBC uses interest rate floor corridors to hedge the variable cash flows associated with 1-month LIBOR or 3-month LIBOR indexed loans. Net payments to be received under the floor corridor contracts offset the decline in loan interest income caused by the relevant LIBOR index falling below the corridor’s upper strike rate, but only to the extent the index falls to the lower strike rate. The corridor will not provide protection from declines in the relevant LIBOR index to the extent it falls below the corridor’s lower strike rate.

UNBC uses interest rate collars to hedge the variable cash flows associated with 1-month LIBOR or 3-month LIBOR indexed loans. Net payments to be received under the collar contract offset the decline in loan

F-83

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

interest income caused by the relevant LIBOR index falling below the collar’s floor strike rate while net payments to be paid will reduce the increase in loan interest income caused by the LIBOR index rising above the collar’s cap strike rate.

UNBC uses interest rate swaps to hedge the variable cash flows associated with 1-month LIBOR or 3-month LIBOR indexed loans. Payments to be received (or paid) under the swap contract will offset the fluctuations in loan interest income caused by changes in the relevant LIBOR index. As such, these instruments hedge all fluctuations in the loans’ interest income caused by changes in the relevant LIBOR index.

UNBC uses purchased interest rate caps to hedge the variable interest cash flows associated with the forecasted issuance and rollover of short-term, fixed rate CDs. In these hedging relationships, UNBC hedges the LIBOR component of the CD rates, which is 3-month LIBOR, based on the CDs’ original term to maturity, which reflects their repricing frequency. Net payments to be received under the cap contract offset the increase in interest expense caused by the relevant LIBOR index rising above the cap’s strike rate.

UNBC uses interest rate cap corridors to hedge the variable cash flows associated with the forecasted issuance and rollover of short-term, fixed rate, CDs. In these hedging relationships, UNBC hedges the LIBOR component of the CD rates, either 1-month LIBOR, 3-month LIBOR, or 6-month LIBOR, based on the original term to maturity of the CDs, which reflects their repricing frequency. Net payments to be received under the cap corridor contract offset the increase in deposit interest expense caused by the relevant LIBOR index rising above the corridor’s lower strike rate, but only to the extent the index rises to the upper strike rate. The corridor will not provide protection from increases in the relevant LIBOR index to the extent it rises above the corridor’s upper strike rate.

Hedging transactions are structured at inception so that the notional amounts of the hedge are matched with an equal principal amount of loans or CDs, the index and repricing frequencies of the hedge match those of the loans or CDs, and the period in which the designated hedged cash flows occurs is equal to the term of the hedge. As such, most of the ineffectiveness in the hedging relationship results from the mismatch between the timing of reset dates on the hedge versus those of the loans or CDs. For the year ended December 31, 2006, UNBC recognized a net gain of ¥12 million due to ineffectiveness, which is recognized in other noninterest expense, compared to a net loss of ¥195 million for the year ended December 31, 2004 and a net loss of ¥11 million for the year ended December 31, 2005.

For cash flow hedges, based upon amounts included in accumulated other changes in equity from nonowner sources at March 31, 2007, the BTMU Group expects to realize approximately ¥3 billion in net interest income for the fiscal year ending March 31 2008. This amount could differ from amounts actually realized due to changes in interest rates and the addition of other hedges subsequent to March 31, 2007.

Fair Value Hedges

Economic Hedging Strategy for “MarketPath” Certificates of Deposit

UNBC engages in an economic hedging strategy in which interest bearing CDs issued to customers, which are tied to the changes in the Standard and Poor’s 500 index, are exchanged for a fixed rate of interest. UNBC accounts for the embedded derivative in the CDs at fair value. A total return swap that encompasses the value of a series of options that had individually hedged each CD is valued at fair value. The change in fair value of the embedded derivative and hedging instrument are recognized as interest expense.

F-84

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Hedging Strategy for Medium-Term Notes

UNBC engages in an interest rate hedging strategy in which an interest rate swap is associated with a specified interest bearing liability, UNBC’s five-year, medium-term debt issuance, in order to convert the liability from a fixed rate to a floating rate instrument. This strategy mitigates the changes in fair value of the hedged liability caused by changes in the designated benchmark interest rate, U.S. dollar LIBOR.

The fair value hedging transaction for the medium-term notes was structured at inception to mirror all of the provisions of the medium-term notes, which allows UNBC to assume that no ineffectiveness exists.

Hedging Strategy for Subordinated Debt

UNBC engages in an interest rate hedging strategy in which an interest rate swap is associated with a specified interest bearing liability, UNBC’s ten-year, subordinated debt issuance, in order to convert the liability from a fixed rate to a floating rate instrument. This strategy mitigates the changes in fair value of the hedged liability caused by changes in the designated benchmark interest rate, U.S. dollar LIBOR.

The fair value hedging transaction for the subordinated debt was structured at inception to mirror all of the provisions of the subordinated debt, which allows UNBC to assume that no ineffectiveness exists.

Other

UNBC uses To-Be-Announced (“TBA”) contracts to fix the price and yield of anticipated purchases or sales of mortgage-backed securities that will be delivered at an agreed upon date. This strategy hedges the risk of variability in the cash flows to be paid or received upon settlement of the TBA contract.

25.    OBLIGATIONS UNDER GUARANTEES AND OTHER OFF-BALANCE-SHEET INSTRUMENTS

Obligations under Guarantees

The BTMU Group provides customers with a variety of guarantees and similar arrangements, including standby letters of credit, financial and performance guarantees, credit protections, liquidity facilities, other off-balance-sheet credit-related supports and similar instruments, in order to meet the customers’ financial and business needs. The table below summarizes the contractual or notional amounts with regard to obligations under guarantees and similar arrangements at March 31, 2006 and 2007. The contractual or notional amounts of these instruments represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held or pledged.

For certain types of derivatives, such as written interest rate options and written currency options, the maximum potential future payments are unlimited. Accordingly, it is impracticable to estimate the maximum potential amount of future payments. As such, the notional amounts of the related contracts, other than the maximum potential payments, are included in the table.

F-85

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The BTMU Group mitigates credit risk exposure resulting from guarantees by utilizing various techniques, including collateralization in the form of cash, securities, and real properties based on management’s credit assessment of the guaranteed parties and the related credit profile. In order to manage the credit risk exposure, the BTMU Group also enters into sub-participation contracts with third parties who will fund a portion of the credit facility and bear its share of the loss to be incurred in the event that the borrower fails to fulfill its obligations. The following table includes unfunded commitments of ¥174.5 billion and ¥184.2 billion at March 31, 2006 and 2007, respectively, which are participated out to third parties. The contractual or notional amounts summarized in the following table do not necessarily bear any direct relationship to the future actual credit exposure, primarily because of those risk management techniques.

	Maximum potential/ Contractual or Notional amount		Amount by expiration period
At March 31, 2006:			Less than 1 year		1-2 years		2-3 years		3-5 years		Over 5 years
	(in billions)
Standby letters of credit and financial guarantees	¥	5,598	¥	2,330	¥	415	¥	373	¥	707	¥	1,773
Performance guarantees		1,853		1,214		238		162		188		51
Derivative instruments		44,330		21,730		6,591		4,182		6,595		5,232
Other(1)		648		637		—		—		—		11
Total	¥	52,429	¥	25,911	¥	7,244	¥	4,717	¥	7,490	¥	7,067

	Maximum potential/ Contractual or Notional amount		Amount by expiration period
At March 31, 2007:			Less than 1 year		1-2 years		2-3 years		3-5 years		Over 5 years
	(in billions)
Standby letters of credit and financial guarantees	¥	5,532	¥	2,293	¥	473	¥	420	¥	756	¥	1,590
Performance guarantees		2,108		1,365		273		220		175		75
Derivative instruments		43,083		22,242		5,792		4,567		7,360		3,122
Other		820		814		—		—		1		5
Total	¥	51,543	¥	26,714	¥	6,538	¥	5,207	¥	8,292	¥	4,792

Note:

(1) The contractual or notional amounts of obligations under guarantees and similar arrangements at March 31, 2006 have been restated as follows:

	Maximum potential/ Contractual or Notional amount				Amount by expiration period
					Less than 1 year
	As previously reported		As restated		As previously reported		As restated
	(in billions)
Other	¥	243	¥	648	¥	232	¥	637

Nature of guarantee contracts

Standby letters of credit and financial guarantees generally include an obligation of an issuer or a designated third party to guarantee the performance of the customer to the beneficiary under the terms of contracts such as lending contracts and other similar financial transactions. The BTMU Group is required to make payments to the

F-86

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

guaranteed parties in the events that the customers fail to fulfill the obligations under the contracts. The guarantees whose contractual maturities are over 5 years are mainly comprised of guarantees of housing loans.

Performance guarantees are the contracts that contingently require the BTMU Group to make payments to the guaranteed party based on another party’s failure to perform under an obligating agreement, except financial obligation. For example, performance guarantees include guarantees of completion of construction projects.

Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in FIN No. 45 include certain written options and credit default swaps. In order for the BTMU Group to determine if those derivative instruments meet the definition of guarantees as prescribed in FIN No. 45, the BTMU Group has to track whether the counterparties are actually exposed to the losses that will result from the adverse change in the underlyings. Accordingly, the BTMU Group has disclosed information on all credit default swaps and certain written options for which there is a possibility of meeting the definition of guarantees as prescribed in FIN No. 45, regardless of whether the counterparties have assets or liabilities related to the underlyings of the derivatives.

Other includes contingent consideration agreements and security lending indemnifications. Contingent consideration agreements provide guarantees on additional payments to acquired insurance agencies’ shareholders based on the agencies’ future performance in excess of established revenue and/or earnings before interest, taxes, depreciation and amortization thresholds. Security lending indemnifications are the indemnifications for institutional customers of securities lending transactions against counterparty default. All lending transactions are collateralized, primarily by cash.

Carrying amount

At March 31, 2006 and 2007, the carrying amounts of the liabilities related to guarantees and similar instruments set forth above were ¥722,161 million and ¥804,957 million, respectively, which are included in Other liabilities and Trading account liabilities. In addition, Other liabilities also include an allowance for off-balance-sheet instruments of ¥63,443 million and ¥46,301 million, respectively, related to these transactions.

Other Off-balance-sheet Instruments

In addition to obligations under guarantees set forth above, the BTMU Group issues other off-balance-sheet instruments for purposes other than trading. Such off-balance-sheet instruments consist of lending-related commitments, including commitments to extend credit and commercial letters of credit that the BTMU Group provides to meet the financing needs of its customers. Once the BTMU Group issues these financial instruments, the BTMU Group is required to extend credit to or make certain payments to the customers or beneficiaries specified pursuant to the underlying contracts unless otherwise provided in the contracts. Since many of these commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At March 31, 2007, approximately 78% of these commitments will expire within one year, 19% from one year to five years and 3% after five years. The table below summarizes the contractual amounts with regard to these commitments at March 31, 2006 and 2007:

	2006		2007
	(in billions)
Commitments to extend credit(1)	¥	53,196	¥	56,223
Commercial letters of credit		819		842
Commitments to make investments		13		11

F-87

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note:

(1) The contractual amounts of commitments to extended credit at March 31, 2006 have been restated from ¥52,549 billion to ¥53,196 billion.

Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are legally binding agreements to lend to customers. Commitments are different from guarantees in that the commitments are generally revocable or have provisions that enable the BTMU Group to avoid payments in the event of violations of any conditions of the contracts and certain deterioration of the potential borrowers’ financial condition. Commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements.

Commercial letters of credit, used for facilitating trade transactions, are generally secured by underlying goods. The BTMU Group continually monitors the type and amount of collateral and other security, and requires counterparties to provide additional collateral or guarantors as necessary.

Commitments to make investments are legally binding contracts to make additional contributions to corporate recovery or private equity investment funds in accordance with limited partnership agreements. Some of these funds, in which the BTMU Group has significant variable interests, are described in Note 26.

Concentration of Credit Risk

Although the BTMU Group’s portfolio of financial instruments, including on-balance-sheet instruments, is widely diversified along industry and geographic lines, a significant portion of the transactions with off-balance-sheet risk are entered into with other financial institutions.

26.    VARIABLE INTEREST ENTITIES

In the normal course of its business, the BTMU Group has financial interests in various entities which may be deemed to be variable interest entities such as asset-backed commercial paper conduits, securitization conduits of client properties, various investment funds and special purpose entities created for structured financing.

The following table presents, by type of VIE, the total assets of consolidated and non-consolidated VIEs and the maximum exposure to non-consolidated VIEs at March 31, 2006 and 2007:

Consolidated VIEs	2006		2007
	(in millions)
Asset-backed commercial paper conduits	¥	4,293,369	¥	5,398,379
Investment funds		1,438,696		1,449,264
Special purpose entities created for structured financing		20,079		24,987
Repackaged instruments		122,808		34,837
Others		341,691		226,423
Total	¥	6,216,643	¥	7,133,890

F-88

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	2006(1)				2007
Non-Consolidated VIEs	Assets		Maximum exposure		Assets		Maximum exposure
	(in millions)
Asset-backed commercial paper conduits	¥	20,716,460	¥	1,822,655	¥	38,435,619	¥	2,399,429
Securitization conduits of client properties		1,617,070		479,454		2,049,272		517,979
Investment funds		52,708,302		1,207,755		57,870,656		1,401,405
Special purpose entities created for structured financing		22,183,836		1,434,418		24,883,387		1,694,806
Repackaged instruments		66,140,799		979,566		88,634,673		2,168,931
Others		9,029,433		1,180,628		11,238,946		1,280,351
Total	¥	172,395,900	¥	7,104,476	¥	223,112,553	¥	9,462,901

Note:

(1) The total assets of non-consolidated VIEs and the maximum exposure to non-consolidated VIEs at March 31, 2006 have been restated as follows:

	As previously reported				As restated
	Assets		Maximum exposure		Assets		Maximum exposure
	(in millions)
Asset-backed commercial paper conduits	¥	20,570,747	¥	1,742,908	¥	20,716,460	¥	1,822,655
Securitization conduits of client properties		1,571,270		466,654		1,617,070		479,454
Investment funds		47,063,693		1,162,167		52,708,302		1,207,755
Special purpose entities created for structured financing		21,752,150		1,395,935		22,183,836		1,434,418
Repackaged instruments		66,140,799		979,566		66,140,799		979,566
Others		5,226,638		725,175		9,029,433		1,180,628
Total	¥	162,325,297	¥	6,472,405	¥	172,395,900	¥	7,104,476

The assets of certain consolidated asset-backed commercial paper conduits include variable interests in the VIEs of which the consolidated asset-backed commercial paper conduits are not the primary beneficiaries. The maximum exposure to these non-consolidated VIEs was ¥1,223,583 million and ¥1,750,961 million and the total assets of these non-consolidated VIEs were ¥12,768,741 million and ¥26,856,249 million at March 31, 2006 and 2007, respectively. The table above includes these amounts.

The following table presents the carrying amount of consolidated assets that corresponds to VIEs’ obligations at March 31, 2006 and 2007:

	2006		2007
	(in millions)
Cash	¥	167,331	¥	156,010
Trading account assets		1,159,314		1,195,732
Investment securities		76,812		42,794
Loans		4,607,197		5,587,953
Others		205,989		151,401
Total	¥	6,216,643	¥	7,133,890

F-89

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, certain transfers of financial assets that did not qualify for sale accounting were made to variable interest entities. The transferred assets, primarily consisting of performing loans, continued to be carried as assets of the BTMU Group. Such assets amounted to ¥2,798,538 million and ¥4,429,589 million at March 31, 2006 and 2007, respectively.

A portion of the assets of consolidated VIEs presented in the table above were derived from transactions between consolidated VIEs and the BTMU Group, the primary beneficiary, and were eliminated as intercompany transactions. The eliminated amounts were ¥122,534 million of Cash, ¥2,143 million of Trading account assets, ¥197,658 million of Loans and ¥6,618 million of other assets at March 31, 2006, and ¥128,456 million of Cash, ¥3,527 million of Trading account assets, ¥239,792 million of Loans and ¥5,122 million of other assets at March 31, 2007.

In general, the creditors or beneficial interest holders of consolidated VIEs have recourse only to the assets of those VIEs and do not have recourse to other assets of the BTMU Group, except where the BTMU Group provides credit support as in the case of certain asset-backed commercial paper conduits.

Asset-backed Commercial Paper Conduits

The BTMU Group administers several multi-seller finance entities (primarily commercial paper conduits) that purchase financial assets, primarily pools of receivables, from third-party customers. The assets purchased by these conduits are generally funded by issuing commercial paper to and/or by borrowings from the BTMU Group or third parties. While customers basically continue to provide servicing for the transferred trade receivables, the BTMU Group underwrites, distributes, makes a market in commercial paper issued by the conduits, and also provides liquidity and credit support facilities to the entities.

Securitization Conduits of Client Properties

The BTMU Group administers several conduits that acquire client assets, primarily real estate, from third-party customers (“property sellers”) with the property sellers continuing to use the acquired real estate through lease-back agreements. The equity of the conduits is provided by the property sellers but such equity holders have no ability to make decisions about the activities of the conduits. Thus, the BTMU Group considers those conduits to be VIEs. The assets acquired by these conduits are generally funded by borrowings from the BTMU Group or third parties. The BTMU Group determined that it is not the primary beneficiary of any of these conduits.

Investment Funds

The BTMU Group holds investments and loans in various investment funds that collectively invest in equity and debt securities including listed Japanese securities and investment grade bonds, and, to a limited extent, securities and other interests issued by companies including in a start-up or restructuring stage. Such investment funds are managed by investment advisory companies or fund management companies that make investment decisions and administer the funds.

Special Purpose Entities Created for Structured Financing

The BTMU Group extends non-recourse asset-backed loans to special purpose entities, which hold beneficial interests in real properties, to provide financing for special purpose projects including real estate development and natural resource development managed by third parties.

F-90

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The BTMU Group generally acts as a member of a lending group and does not have any equity investment in the entities, which is typically provided by project owners. For most of these financings, the equity provided by the project owners is of sufficient level to absorb expected losses, while expected returns to the owners are arranged to be the most significant among all returns. Accordingly, the BTMU Group determined that the BTMU Group is not the primary beneficiary of most of these entities. However, in transactions with entities whose investments at risk are exceptionally thin, where the BTMU Group provides most of the financing, the BTMU Group is ultimately required to consolidate this type of entity.

Repackaged Instruments

The BTMU Group has two types of relationships with special purpose entities that repackage financial instruments to create new financial instruments.

The BTMU Group provides repackaged instruments with features that meet customers’ needs and preferences through special purpose entities. The BTMU Group purchases financial instruments such as bonds and transfers them to special purpose entities which then issue new instruments. The special purpose entities may enter into derivative transactions including interest rate and currency swaps with the BTMU Group or other financial institutions to modify the cash flows of the underlying financial instruments. The BTMU Group underwrites and markets the new instruments issued by the special purpose entities to its customers.

The BTMU Group also invests in repackaged instruments arranged and issued by third parties.

Financing Vehicle

The BTMU Group has established several wholly owned funding vehicles to enhance the flexibility of its capital management. Management has determined that the BTMU Group does not have significant variable interests in these conduits which would require disclosure or consolidation.

Other Type of VIEs

The BTMU Group is also a party to other types of VIEs including special purpose entities created to hold assets on behalf of the BTMU Group as an intermediary.

The BTMU Group identified borrowers that were determined to be VIEs due to an insufficient level of equity. The BTMU Group determined that the BTMU Group is not the primary beneficiary of most of these borrowers because of its limited exposure as a lender to such borrowers. Such borrowers engage in diverse business activities of various sizes in industries such as manufacturing, distribution, construction and real estate development, independently from the BTMU Group.

F-91

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

27.    COMMITMENTS AND CONTINGENT LIABILITIES

Lease Commitments

The BTMU Group leases certain technology systems, office space and equipment under noncancelable agreements expiring through the fiscal year 2046.

Future minimum rental commitments for noncancelable leases at March 31, 2007 were as follows:

	Capitalized leases			Operating leases
	(in millions)
Fiscal year ending March 31:
2008	¥	50,570		¥	32,166
2009		72,554			26,958
2010		24,646			23,117
2011		17,067			13,984
2012		7,232			10,679
2013 and thereafter		5,068			37,366
Total minimum lease payments		177,137		¥	144,270
Amount representing interest		(7,083	)
Present value of minimum lease payments	¥	170,054

Total rental expense for the fiscal years ended March 31, 2005, 2006 and 2007 was ¥35,923 million, ¥58,425 million and ¥77,070 million, respectively.

Civil Suit Brought by The Sumitomo Trust & Banking Co., Ltd.

On May 21, 2004, UFJ Holdings, UFJ Bank, UFJ Trust (collectively, the “UFJ Companies”) and The Sumitomo Trust & Banking Co., Ltd. (“Sumitomo Trust”) entered into a basic agreement to integrate and jointly operate their respective trust and custody businesses. On July 13, 2004, however, the UFJ Companies informed Sumitomo Trust of their decision to terminate this basic agreement.

In response, on July 16, 2004, Sumitomo Trust filed with the Tokyo District Court a motion for a preliminary injunction to restrain the UFJ Companies from entering into discussions with, and providing information to, any third party with regards to a transfer of UFJ Trust Bank’s operations. The Supreme Court of Japan dismissed the motion for provisional relief on August 30, 2004.

On October 28, 2004, Sumitomo Trust filed a lawsuit in the Tokyo District Court against the UFJ Companies claiming that, under the basic agreement, it had exclusive rights to hold good-faith negotiations with the UFJ Companies regarding the integration of their respective trust and custody businesses. Sumitomo Trust made an additional claim against the UFJ Companies for damages in the amount of ¥100 billion on March 8, 2005.

On February 13, 2006, the Tokyo District Court rendered a judgment denying Sumitomo Trust’s claim for damages. On February 24, 2006, Sumitomo Trust appealed the Tokyo District Court’s ruling to the Tokyo High Court, seeking to overturn the dismissal of the damages claim for ¥100 billion and claiming additional damages of ¥10 billion against the UFJ Companies.

On November 21, 2006, MUFG announced that, following the recommendation of the Tokyo High Court, MUFG agreed to pay ¥2.5 billion in settlement money to Sumitomo Trust as the main element of an agreed settlement of the lawsuit. As a result, the lawsuit between the BTMU Group and Sumitomo Trust was conclusively resolved.

F-92

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Repayment of excess interest

In Japan, the maximum interest rates charged by consumer finance companies are set by two laws: a maximum permissible interest rate under the Investment Deposit and Interest Rate Law and a lower limit under the Interest Rate Restriction Law. Under the current system, consumer finance companies that satisfy certain conditions can charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Law. Accordingly, BTMU’s consumer finance subsidiaries have offered loans at interest rates above the Interest Rate Restriction Law.

During the past year, the Supreme Court of Japan passed decisions concerning interest exceeding the limits stipulated by the Interest Rate Restriction Law, and the necessary requirements related to such excess interest were interpreted in a manner more favorable to borrowers and more strictly than previously for consumer finance companies.

Accordingly, the business environment for consumer finance companies in Japan has been altered in favor of borrowers, and borrowers’ demands for reimbursement of excess interest have significantly increased during the fiscal year ended March 31, 2007. As a result, consumer finance subsidiaries have increased their allowance for repayment of excess interest, which were included in Other liabilities, from ¥9,733 million as of March 31, 2006 to ¥102,471 million as of March 31, 2007.

The BTMU Group is involved in various litigation matters. Management, based upon their current knowledge and the results of consultation with counsel, makes appropriate levels of litigation reserve. Management believes that the amounts of the BTMU Group’s liabilities, when ultimately determined, will not have a material adverse effect on the BTMU Group’s results of operations and financial position.

28.    FEES AND COMMISSIONS INCOME

Details of fees and commissions income for the fiscal years ended March 31, 2005, 2006 and 2007 were as follows:

	2005		2006		2007
	(in millions)
Trust fees	¥	18,207	¥	20,348	¥	24,382
Fees on funds transfer and service charges for collections		59,365		103,876		148,961
Fees and commissions on international business		44,499		61,568		69,481
Fees and commissions on credit card business		61,710		109,646		163,760
Service charges on deposits		36,326		35,746		37,254
Fees and commissions on securities business		102,573		31,675		16,846
Insurance commissions		30,491		36,507		40,435
Guarantee fees		18,306		51,598		86,468
Other fees and commissions		101,968		190,573		260,101
Total	¥	473,445	¥	641,537	¥	847,688

Trust fees consist primarily of fees earned by fiduciary asset management and administration services for corporate pension plans, investment funds, etc. Fees on funds transfer and service charges for collection are earned by providing settlement services such as domestic fund remittances and domestic collection services. Fees and commissions on international business primarily consist of fees from international fund transfer and collection services, and trade-related financing services. Fees and commissions on credit card business are composed of interchange income, annual fees, royalty and other service charges from franchisees. Service

F-93

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

charges on deposits are fees charged for deposits such as checking account deposits. Fees and commissions on securities business include underwriting, brokerage and advisory services and arrangement fees on securitizations. Insurance commissions are earned by acting as agent for insurance companies to sell insurance products. Guarantee fees are earned by providing guarantees on residential mortgage loans. Other fees and commissions include various arrangement fees and agent fees excluding the fees mentioned above.

29.    BUSINESS SEGMENTS

The business segment information set forth below, is derived from the internal management reporting system used by management to measure the performance of the BTMU Group’s business segments. Unlike financial accounting, there is no authoritative body of guidance for management accounting. The business segment information, set forth below, is based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information is not consistent with the consolidated financial statements prepared on the basis of US GAAP. A reconciliation is provided for the total amounts of segments’ total operating profit with income from continuing operations before income tax expense and cumulative effect of a change in accounting principle under US GAAP.

See Note 30 for financial information relating to the BTMU Group’s operations by geographic area. The geographic financial information is consistent with the basis of the accompanying consolidated financial statements.

The BTMU Group reorganized business segments due to the merger effective January 1, 2006. The segment information for the fiscal years ended March 31, 2006 and 2007 contains full year operating results in conformity to the new business segments. The business segments during the fiscal year ended March 31, 2007 are as follows:

Ÿ retail banking, which provides banking products and services to individual customers in Japan;

Ÿ corporate banking, which provides banking products and services, investment banking advisory, and other services to large corporations and some small- and medium-sized companies in Japan;

Ÿ global banking, which consists of:

• global banking (other than UNBC), which provides banking products and services, investment banking advisory services, and other services to the overseas operations of both large- and medium-sized Japanese corporations as well as non-Japanese corporations who do business on a global basis, excluding UNBC’s customers;

• UNBC, which includes the subsidiaries in California, UnionBanCal Corporation and Union Bank of California, N.A.;

Ÿ global markets, which conducts its asset and liability management, liquidity management, and sales and trading of foreign exchange and interest-rate-related derivatives; and

Ÿ other, which consists of:

• systems services, which is responsible for computer systems;

• trust and asset management business promotion for companies, including defined contribution plans;

• global securities services, which is responsible for the custody business for both Japanese and international institutional investors;

F-94

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• eBusiness & IT Initiatives, which is responsible for developing information technology business opportunities;

• the corporate center, which retains functions such as strategic planning, overall risk management, internal auditing and compliance; and

• the elimination of duplicated amounts of net revenue among business segments.

The financial performance derived from the internal management reporting system is summarized below. Management does not use information on segments’ total assets to allocate resources and assess performance and accordingly, business segment information on total assets is not presented.

					Global Banking(2)
	Retail Banking		Corporate Banking		Other than UNBC		UNBC		Total		Global Markets			Other			Total
	(in billions)
Fiscal year ended March 31, 2005:
Net revenue(1)	¥	347.5	¥	455.5	¥	142.0	¥	274.9	¥	416.9	¥	211.6		¥	(32.3	)	¥	1,399.2
BTMU:		269.3		445.8		109.0		—		109.0		210.5			(58.8	)		975.8
Net interest income		185.0		248.6		53.4		—		53.4		153.8			(17.4	)		623.4
Net fees		55.8		98.4		36.2		—		36.2		(2.9	)		2.1			189.6
Other		28.5		98.8		19.4		—		19.4		59.6			(43.5	)		162.8
BTMU’s subsidiaries		78.2		9.7		33.0		274.9		307.9		1.1			26.5			423.4
Operating expenses		217.2		152.1		98.7		158.8		257.5		29.7			79.5			736.0
Operating profit (loss)	¥	130.3	¥	303.4	¥	43.3	¥	116.1	¥	159.4	¥	181.9		¥	(111.8	)	¥	663.2
Fiscal year ended March 31, 2006:
Net revenue(1)	¥	713.1	¥	768.3	¥	192.5	¥	350.4	¥	561.2	¥	287.2		¥	(87.2	)	¥	2,242.6
BTMU:		448.9		750.9		161.8		—		161.8		286.0			(147.3	)		1,500.3
Net interest income		303.6		357.7		86.2		—		86.2		181.5			11.9			940.9
Net fees		94.6		205.0		48.1		—		48.1		(5.2	)		(24.6	)		317.9
Other		50.7		188.2		27.5		—		27.5		109.7			(134.6	)		241.5
BTMU’s subsidiaries		264.2		17.4		30.7		350.4		399.4		1.2			60.1			742.3
Operating expenses		447.9		268.5		123.1		202.4		335.3		38.4			116.6			1,206.7
Operating profit (loss)	¥	265.2	¥	499.8	¥	69.4	¥	148.0	¥	225.9	¥	248.8		¥	(203.8	)	¥	1,035.9
Fiscal year ended March 31, 2007:
Net revenue(1)	¥	1,044.3	¥	990.2	¥	271.8	¥	324.3	¥	599.6	¥	289.0		¥	(56.0	)	¥	2,867.1
BTMU:		594.4		955.8		214.4		—		214.4		289.0			(138.5	)		1,915.1
Net interest income		447.8		456.0		130.1		—		130.1		184.2			(72.7	)		1,145.4
Net fees		116.5		276.3		53.2		—		53.2		(2.3	)		(18.2	)		425.5
Other		30.1		223.5		31.1		—		31.1		107.1			(47.6	)		344.2
BTMU’s subsidiaries		449.9		34.4		57.4		324.3		385.2		—			82.5			952.0
Operating expenses		666.5		400.4		138.1		200.8		339.2		47.6			149.5			1,603.2
Operating profit (loss)	¥	377.8	¥	589.8	¥	133.7	¥	123.5	¥	260.4	¥	241.4		¥	(205.5	)	¥	1,263.9

Notes:

(1) Net revenue does not include interest income on loans to MUFG.

(2) Within Global Banking, results of certain liquidated subsidiaries for the fiscal years ended March 31, 2006 and 2007 are not included in the “Other than UNBC” column, while they are included in the “Total” column for internal management reporting purpose.

F-95

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Management measures performance of each business segment by “operating profit,” which includes profits or losses of BTMU’s subsidiaries. Financial information of each of BTMU’s subsidiaries is assigned to only one business segment, based on its major products or services provided and its major type of customers.

“Net revenue” above includes net interest income, net fees (that is, fees and commissions received, net of fees paid and other related expenses), and other gains, such as net trading gains, net foreign exchange gains, and net gains from sales of debt investment securities measured under Japanese GAAP. Interest income and expenses between business segments are determined using an internal transfer pricing system, based on current market rates.

“Operating expenses” include salaries and employee benefits, occupancy and certain other non-interest expenses. In determining operating profit, the BTMU Group does not assign to each business segment certain income and expense items such as specific provisions for loan loss reserve, equity investment securities gains or losses, minority interest in earnings or losses of BTMU’s subsidiaries, equity in earnings or losses of BTMU’s affiliated companies, goodwill amortization and impairment, net gains or losses from disposition of premises and equipment, and other non-interest income and expense items.

Frequently, the business segments work together in connection with providing services to customers. In accordance with the BTMU Group’s internal management accounting policies, the BTMU Group does not apportion the operating profit (loss) relating to a particular transaction among the participating business segments. Instead, the BTMU Group assigns the total amount of operating profit (loss) relating to each of these transactions to each participating business segment. As a result, some items of operating profit (loss) are recorded as part of the operating results of more than one business segment. Any overlapping allocations are eliminated in the “Other” column. The following is a summary of the aggregate amounts of this overlapping allocation of operating profit (loss) for the business segments for the fiscal years ended March 31, 2005, 2006 and 2007:

	Global Markets
	(in billions)
Fiscal year ended March 31, 2005:
Corporate Banking and Global Banking	¥	25.4
Fiscal year ended March 31, 2006:
Corporate Banking and Global Banking		51.0
Fiscal year ended March 31, 2007:
Corporate Banking and Global Banking		57.8

Reconciliation

As set forth above, the measurement bases and the income and expenses items covered are very different between the internal management reporting system and the accompanying consolidated statements of income. Therefore, it is impracticable to present reconciliations of the business segments’ total information, other than operating profit, to corresponding items in the accompanying consolidated statements of income.

F-96

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of the operating profit under the internal management reporting system for the fiscal years ended March 31, 2005, 2006 and 2007 above to income from continuing operations before income tax expense and cumulative effect of a change in accounting principle shown on the consolidated statements of income is as follows:

	2005			2006			2007
	(in billions)
Operating profit:	¥	663		¥	1,036		¥	1,264
Provision for credit losses		(124	)		(163	)		(342	)
Trading account profits (losses)—net		(81	)		(200	)		176
Equity investment securities gains (losses)—net		125			119			(19	)
Debt investment securities gains (losses)—net		39			(19	)		193
Foreign exchange losses—net		(89	)		(449	)		(216	)
Equity in earnings of equity method investees		6			29			5
Impairment of intangible assets		(2	)		—			(185	)
Minority interest in loss (income) of consolidated subsidiaries		(38	)		(109	)		8
Operating profit of MUS		22			—			—
Other—net		3			53			(12	)
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle	¥	524		¥	297		¥	872

30.    FOREIGN ACTIVITIES

Foreign operations include the business conducted by overseas offices, as well as international business conducted from domestic offices, principally several international banking-related divisions of BTMU’s Head Office in Tokyo, and involve various transactions with debtors and customers residing outside Japan. Close integration of the BTMU Group’s foreign and domestic activities makes precise estimates of the amounts of assets, liabilities, income and expenses attributable to foreign operations difficult and necessarily subjective. Assets, income and expenses attributable to foreign operations are allocated to geographical areas based on the domicile of the debtors and customers.

F-97

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Generally, interest rates with respect to funds borrowed and loaned between domestic and foreign operations are based on prevailing money market rates appropriate for the transactions. In general, the BTMU Group has allocated all direct expenses and a proportionate share of general and administrative expenses to income derived from foreign loans and other transactions by the BTMU Group’s foreign operations. The following table sets forth estimated total assets at March 31, 2005, 2006 and 2007, and estimated total revenue, total expense, income from continuing operations before income tax expense and cumulative effect of a change in accounting principle and net income for the respective fiscal years then ended:

	Domestic			Foreign
	Japan			United States of America		Europe		Asia/ Oceania excluding Japan		Other areas(1)		Total
	(in millions)
Fiscal year ended March 31, 2005:
Total revenue(2)	¥	1,297,801		¥	412,992	¥	126,607	¥	88,602	¥	64,187	¥	1,990,189
Total expense(3)		1,091,930			266,574		71,268		19,646		16,883		1,466,301
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		205,871			146,418		55,339		68,956		47,304		523,888
Net income		91,087			90,644		30,545		45,961		28,871		287,108
Total assets at end of fiscal year		70,973,900			11,750,252		4,348,065		3,229,463		1,748,619		92,050,299
Fiscal year ended March 31, 2006(4):
Total revenue(2)	¥	1,481,713		¥	861,286	¥	190,444	¥	174,940	¥	97,775	¥	2,806,158
Total expense(3)		1,736,217			492,170		131,180		111,043		38,396		2,509,006
Income (loss) from continuing operations before income tax expense and cumulative effect of a change in accounting principle		(254,504	)		369,116		59,264		63,897		59,379		297,152
Net income (loss)		(207,326	)		288,690		45,820		55,572		46,023		228,779
Total assets at end of fiscal year		129,003,677			15,422,407		7,120,001		5,080,108		2,199,513		158,825,706
Fiscal year ended March 31, 2007:
Total revenue(2)	¥	2,697,252		¥	1,089,049	¥	447,534	¥	264,166	¥	166,812	¥	4,664,813
Total expense(3)		2,692,150			632,066		202,903		179,196		86,494		3,792,809
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		5,102			456,983		244,631		84,970		80,318		872,004
Net income		3,981			241,205		130,783		45,456		39,463		460,888
Total assets at end of fiscal year		119,102,333			17,582,964		7,424,639		6,355,914		3,139,392		153,605,242

Notes:

(1) Other areas primarily include Canada, Latin America and the Caribbean.

(2) Total revenue is comprised of Interest income and Non-interest income.

(3) Total expense is comprised of Interest expense, Provision for credit losses and Non-interest expense.

F-98

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(4) The estimated total assets at March 31, 2006 and total revenue, total expense, income from continuing operations before income tax expense and cumulative effect of a change in accounting principle and net income for the fiscal year ended March 31, 2006 have been restated as follows:

	Domestic			Foreign
	Japan			United States of America		Europe		Asia/ Oceania excluding Japan		Other areas		Total
	(in millions)
As previously reported
Fiscal year ended March 31, 2006:
Total revenue	¥	1,833,078		¥	548,421	¥	163,650	¥	171,727	¥	89,282	¥	2,806,158
Total expenses		1,736,217			492,170		131,180		111,043		38,396		2,509,006
Income from continuing operations before income tax expense and cumulative effect of a change in accounting principle		96,861			56,251		32,470		60,684		50,886		297,152
Net income		68,476			43,108		24,787		53,049		39,359		228,779
Total assets at end of fiscal year		129,003,677			15,422,407		7,120,001		5,080,108		2,199,513		158,825,706
As restated
Fiscal year ended March 31, 2006:
Total revenue	¥	1,481,713		¥	861,286	¥	190,444	¥	174,940	¥	97,775	¥	2,806,158
Total expenses		1,736,217			492,170		131,180		111,043		38,396		2,509,006
Income (loss) from continuing operations before income tax expense and cumulative effect of a change in accounting principle		(254,504	)		369,116		59,264		63,897		59,379		297,152
Net income (loss)		(207,326	)		288,690		45,820		55,572		46,023		228,779
Total assets at end of fiscal year		129,003,677			15,422,407		7,120,001		5,080,108		2,199,513		158,825,706

F-99

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following is an analysis of certain asset and liability accounts related to foreign activities at March 31, 2006 and 2007:

	2006		2007
	(in millions)
Cash and due from banks	¥	584,134	¥	610,014
Interest-earning deposits in other banks		4,280,192		4,101,076
Total	¥	4,864,326	¥	4,711,090
Trading account assets	¥	1,143,617	¥	813,688
Investment securities	¥	6,903,179	¥	9,899,746
Loans—net of unearned income, unamortized premiums and deferred loan fees	¥	15,174,071	¥	17,552,630
Deposits, principally time deposits and certificates of deposit by foreign banks	¥	15,283,473	¥	16,395,999
Funds borrowed:
Call money, funds purchased, and payables under repurchase agreements and securities lending transactions	¥	591,484	¥	1,290,491
Other short-term borrowings		1,557,771		1,982,539
Long-term debt		3,086,387		3,188,906
Total	¥	5,235,642	¥	6,461,936
Trading account liabilities	¥	610,652	¥	347,109

At March 31, 2006 and 2007, the BTMU Group had no cross-border outstandings, as defined in the Securities Act Industry Guide 3 in any foreign country, which exceeded 0.75% of consolidated total assets.

31.    ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Quoted market prices, when available, are used to estimate fair values of financial instruments. However, quoted market prices are not available for a substantial portion of financial instruments and, therefore, fair values for such financial instruments are estimated using discounted cash flow models or other valuation techniques. Although management uses its best judgment in estimating fair values of financial instruments, estimation methodologies and assumptions used to estimate fair values are inherently subjective. Accordingly, the estimates presented herein are not necessarily indicative of net realizable or liquidation values. The use of different estimation methodologies and/or market assumptions may have a significant effect on the estimated fair values.

F-100

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following is a summary of carrying amounts and estimated fair values of financial instruments at March 31, 2006 and 2007:

	2006				2007
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
	(in billions)
Financial assets:
Cash, due from banks, call loans and funds sold, and receivables under resale agreements and securities borrowing transactions	¥	16,635	¥	16,635	¥	13,853	¥	13,853
Trading account assets, excluding derivatives		3,818		3,818		2,838		2,838
Investment securities		42,349		42,667		42,098		42,337
Loans, net of allowance for credit losses(1)		84,923		85,314		85,131		85,499
Other financial assets		3,381		3,381		3,763		3,763
Derivative financial instruments:
Trading activities		2,061		2,061		1,239		1,239
Activities qualifying for hedges		—		—		3		3
Financial liabilities:
Non-interest-bearing deposits, call money and funds purchased, and payables under repurchase agreements and securities lending transactions	¥	30,854	¥	30,854	¥	27,950	¥	27,950
Interest-bearing deposits		90,986		90,956		94,078		94,043
Trading account liabilities, excluding derivatives		63		63		11		11
Obligations to return securities received as collateral		1,015		1,015		809		809
Other short-term borrowings		9,689		9,689		4,412		4,412
Long-term debt(1)		11,926		11,978		12,263		12,318
Other financial liabilities		2,674		2,674		3,397		3,397
Derivative financial instruments:
Trading activities		2,197		2,197		1,199		1,199
Activities qualifying for hedges		5		5		2		2

Note:

(1) Estimated fair values of loans, net of allowance for credit losses and long-term debt at March 31, 2006 have been restated as follows:

	As previously reported		As restated
Loans, net of allowance for credit losses	¥	85,260	¥	85,314
Long-term debt		11,893		11,978

The methodologies and assumptions used to estimate the fair value of the financial instruments are summarized below:

Cash, due from banks, call loans and funds sold, and receivables under resale agreements and securities borrowing transactions—For cash, due from banks including interest-earning deposits, call loans and funds sold, and receivables under resale agreements and securities borrowing transactions, the carrying amounts are a reasonable estimate of the fair values because of their short-term nature and limited credit risk.

Trading account securities—Trading account securities and short trading positions of securities are carried at fair value, which is principally based on quoted market prices, when available. If the quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

F-101

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Investment securities—The fair values of investment securities, where quoted market prices or secondary market prices are available, are equal to such market prices. For investment securities, when quoted market prices or secondary market prices are not available, the fair values are estimated using quoted market prices for similar securities or based on appraised value as deemed appropriate by management. The fair values of investment securities other than those classified as available for sale or being held to maturity (i.e., nonmarketable equity securities) are not readily determinable as they do not have quoted market prices or secondary market prices available. The fair values of certain nonmarketable equity securities, such as preferred stock convertible to marketable common stock in the future, issued by public companies are determined by utilizing commonly accepted valuation models, such as option pricing models. It is not practicable for the BTMU Group to estimate the fair value of other nonmarketable securities issued by nonpublic companies for which a quoted market price is not available. For these securities, the BTMU Group is unable to estimate fair value without incurring undue cost because they comprise investments in numerous unlisted companies and each investment represents an insignificant percentage relative to each company. Therefore, the above summary does not include the carrying amounts of such investment securities. The amounts not included in the above summary are ¥181 billion and ¥158 billion at March 31, 2006 and 2007, respectively.

Loans—The fair values of loans are estimated for groups with similar characteristics, including type of loan, credit quality and remaining maturity. In incorporating the credit risk factor, management concluded that the allowance for credit losses adequately adjusts the related book values for credit risk. For floating- or adjustable-rate loans, which mature or are repriced within a short period of time, the carrying values are considered to be a reasonable estimate of fair values. For fixed-rate loans, market prices are not generally available and the fair values are estimated by discounting the estimated future cash flows based on the contracted maturity of the loans. The discount rates are based on the current market rates corresponding to the applicable maturity. Where quoted market prices or estimated fair values are available, primarily for loans to refinancing countries, loans held for dispositions or sales and certain other foreign loans, the fair values are based on such market prices and estimated fair values, including secondary market prices. For nonperforming loans, the fair values are generally determined on an individual basis by discounting the estimated future cash flows and may be based on the appraisal value of underlying collateral as appropriate.

Other financial assets—The estimated fair values of other financial assets, which primarily include accrued interest receivable, customers’ acceptance liabilities and accounts receivable, approximate their carrying amounts. The above summary does not include the carrying amounts of investments in equity method investees amounting to ¥348 billion and ¥341 billion at March 31, 2006 and 2007, respectively.

Derivative financial instruments—The estimated fair values of derivative financial instruments are the amounts the BTMU Group would receive or pay to terminate the contracts at the balance-sheet date, taking into account the current unrealized gains or losses on open contracts. They are based on market or dealer quotes when available. Valuation models such as present value and option pricing models are applied to current market information to estimate fair values when such quotes are not available.

Non-interest-bearing deposits, call money and funds purchased, payables under repurchase agreements and securities lending transactions, and obligations to return securities received as collateral—The fair values of non-interest-bearing deposits are equal to the amounts payable on demand. For call money and funds purchased, payables under repurchase agreements and securities lending transactions and obligations to return securities received as collateral, the carrying amounts are a reasonable estimate of the fair values because of their short-term nature and limited credit risk.

Interest–bearing deposits—The fair values of demand deposits, deposits at notice, and certificates of deposit maturing within a short period of time are the amounts payable on demand. Fair values of time deposits

F-102

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and certificates of deposit maturing after a short period of time are estimated by discounting the estimated cash flows using the rates currently offered for deposits of similar remaining maturities or the applicable current market rates.

Other short-term borrowings—For most other short-term borrowings, the carrying amounts are a reasonable estimate of the fair values because of their short-term nature. For certain borrowings, fair values are estimated by discounting the estimated future cash flows using applicable current market interest rates or comparable rates for similar instruments, which represent the BTMU Group’s cost to raise funds with a similar remaining maturity.

Long-term debt—For certain unsubordinated and subordinated debt, the fair values are estimated based on quoted market prices of the instruments. The fair values of other long-term debt are estimated using a discounted cash flow model based on rates applicable to the BTMU Group for debt with similar terms and remaining maturities.

Other financial liabilities—The estimated fair values of other financial liabilities, which primarily include accrued interest payable, bank acceptances, accounts payable and obligations under standby letters of credit and guarantees, approximate their carrying amounts. The fair values of obligations under standby letters of credit and guarantees are based on fees received or receivable by the BTMU Group.

The fair values of certain off-balance-sheet financial instruments held for purposes other than trading, including commitments to extend credit and commercial letters of credit, are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the credit quality. The aggregate fair value of such instruments at March 31, 2006 and 2007 was not material.

The fair value estimates presented herein are based on pertinent information available to management at March 31, 2006 and 2007. These amounts have not been comprehensively revalued since that date and, therefore, current estimates of fair values may have changed significantly from the amounts presented herein.

32.    STOCK-BASED COMPENSATION

The following describes stock-based compensation plans of MUS and UNBC and the impact of the adoption of SFAS No. 123R.

MUS

Under the Code and the Company Law, companies are permitted to purchase their own shares in the market in order to implement a stock option plan when approved by the shareholders.

Pursuant to resolutions approved at the general shareholders’ meetings, MUS offers stock option plans which provide directors, executive officers, eligible employees and certain other persons with options to purchase shares (at the respective exercise prices stipulated in each plan) as follows:

Date of approval at the shareholders’ meeting	Exercise period	Shares
June 29, 2000	July 1, 2002 to June 30, 2005	2,057,000
June 28, 2001	July 1, 2003 to June 30, 2006	2,272,000
June 29, 2005(1)	September 20, 2005 to March 31, 2006	1,992,060
Total		6,321,060

F-103

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note:

(1) In connection with the merger of MTFG with UFJ Holdings, MUS converted all outstanding UFJ Tsubasa Securities employee stock-based awards at the merger date, and those awards became exercisable for or based upon MUS common stock. The number of awards converted and the exercise prices of those awards were adjusted to take into account the merger exchange ratio of 0.42 for the securities companies.

The plans provide for the granting of stock options having an exercise price not less than the market value of MUS’s common stock on the date of grant. The following table presents the stock option transactions for the fiscal years ended March 31, 2005 and 2006:

	2005				2006
	Number of shares		Weighted-average exercise price		Number of shares		Weighted-average exercise price
Options outstanding, beginning of fiscal year	3,153,000		¥	1,260	2,827,000		¥	1,311
Exercised	(326,000	)		812	(17,000	)		812
Forfeited	—			—	(1,923,000	)		1,546
MUS shares transferred from BTMU to MUFG	—			—	(887,000	)		812
Outstanding at end of year	2,827,000		¥	1,311	—		¥	—
Exercisable at end of year	2,827,000		¥	1,311	—		¥	—

UNBC

UNBC has two management stock plans. The Year 2000 UnionBanCal Corporation Management Stock Plan, as amended (the “2000 Stock Plan”), and the UnionBanCal Corporation Management Stock Plan, restated effective June 1, 1997 (the “1997 Stock Plan”), have 20.0 million and 6.6 million shares, respectively, of UNBC’s common stock authorized to be awarded to key employees, outside directors and consultants of UNBC at the discretion of the Executive Compensation and Benefits Committee of the Board of Directors (the “Committee”). Employees on rotational assignment from BTMU are not eligible for stock awards.

The Committee determines the term of each stock option grant, up to a maximum of ten years from the date of grant. The exercise price of the options issued under the stock plans may not be less than the fair market value on the date the option is granted. Beginning in 2006, the value of options is recognized as compensation expense over the vesting period during which the employees are required to provide service. Prior to January 1, 2006, UNBC’s unrecognized compensation expense for nonvested restricted stock reduced retained earnings. The adoption of SFAS No. 123R resulted in an increase of unappropriated retained earnings and a decrease of capital surplus by ¥1,468 million, respectively, in the consolidated financial statements. The value of the restricted stock at the date of grant is recognized as compensation expense over its vesting period with a corresponding credit adjustment to capital surplus. All cancelled or forfeited options and restricted stock become available for future grants. SFAS No. 123R requires the cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized for share-based compensation awards (i.e., excess tax benefits) to be classified as financing cash flows. The ¥1,406 million of the excess tax benefits and ¥6,736 million of the exercise of stock options are classified as other cash inflows from financing activities in the consolidated statement of cash flows for the fiscal year ended March 31, 2007.

Under the 2000 Stock Plan, UNBC grants stock options and restricted stock and issues shares of common stock upon vesting of performance shares and restricted stock units that are settled in common stock. Under the 1997 Stock Plan, UNBC issues shares of common stock upon exercise of outstanding stock options. UNBC issues new shares of common stock for all awards under the stock plans. At December 31, 2004, 2005 and 2006, a total of 2,937,629 shares, 5,445,979 shares and 3,825,635 shares, respectively, were available for future grants

F-104

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

under the 2000 Stock Plan as stock options, restricted stock or shares of common stock issued upon vesting of performance shares and restricted stock units settled in common stock. The remaining shares under the 1997 Stock Plan are not available for future grants.

In the first quarter of 2006, the Committee determined that performance share awards granted in 2006 were to be redeemed in shares.

Stock Options

Under the 2000 Stock Plan, UNBC granted options to various key employees, including policy-making officers, and to non-employee directors for selected years. Under both stock plans, options granted to employees vest pro-rata on each anniversary of the grant date and become fully exercisable three years from the grant date, provided that the employee has completed the specified continuous service requirement. The options vest earlier if the employee dies, is permanently disabled, or retires under certain grant, age, and service conditions or terminates employment under certain conditions. Options granted to non-employee directors are fully vested on the grant date and exercisable 33 ¹/3 percent on each anniversary under the 1997 Stock Plan, and are fully vested and exercisable on the grant date under the 2000 Stock Plan.

The following is a summary of stock option transactions under the stock plans.

	For the year ended December 31, 2006
	Number of shares		Weighted-average exercise price		Weighted-average remaining contractual term	Aggregate intrinsic value (in thousands)
Options outstanding, beginning of the period(1)	8,696,589		$	45.26
Granted	1,106,240			69.85
Exercised	(1,409,727	)		40.24
Forfeited	(66,861	)		62.96
Options outstanding, end of the period(1)	8,326,241		$	49.24	5.44	$	110,012
Options exercisable, end of the period	5,910,252		$	43.72	5.12	$	104,090

(1) Options not expected to vest are included in options outstanding. Amounts are not material.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Because the Black-Scholes option pricing model uses tranches based on expected terms that result in ranges of input assumptions, such ranges are disclosed below. Expected volatilities are based on historical data and implied volatilities from traded options on UNBC’s stock, and other factors. UNBC uses historical data to estimate option exercise and employee terminations within the valuation model. The expected term of an option granted is derived from the output of the option valuation model, which is based on historical data and represents the period of time that the option granted is expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant based on the expected term.

	For the years ended December 31,
	2004			2005			2006
Weighted-average fair value—per share	$	16.55		$	13.38		$	12.31
Risk-free interest rates (a range for 1 to 7 year tenors)		2.8	%		3.4 - 4.3	%		4.3 - 5.05	%
Expected volatility		40.0	%		27.0	%		16.6 - 22.9	%
Weighted-average expected volatility		40.0	%		27.0	%		19.4	%
Expected term (in years)		5.0			4.4			3.4 - 5.4
Expected dividend yield		2.4	%		2.7	%		2.7	%

F-105

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total intrinsic value of options exercised during 2004, 2005 and 2006 was $41.5 million, $50.4 million and $37.9 million, respectively.

UNBC recognized $22.4 million of compensation cost for share-based payment arrangements related to stock option awards with $8.4 million of corresponding tax benefit during the year ended December 31, 2006. As of December 31, 2006, the total unrecognized compensation cost related to nonvested stock option awards was $15.9 million and the weighted-average period over which the cost is expected to be recognized was 0.9 year.

Restricted Stock

In general, restricted shares are granted under the 2000 Stock Plan to key employees, and in 2005, to non-employee directors. The awards of restricted stock granted to employees vest pro-rata on each anniversary of the grant date and become fully vested four years from the grant date, provided that the employee has completed the specified continuous service requirement. They vest earlier if the employee dies, is permanently and totally disabled, retires under certain grant, age, and service conditions or terminates employment under certain conditions. The awards of restricted stock granted to existing non-employee directors in 2005 vested in full in July 2006. Restricted stockholders have the right to vote their restricted shares and receive dividends.

The following is a summary of UNBC’s nonvested restricted stock awards.

	For the year ended December 31, 2006
	Number of shares		Weighted-average grant date fair value
Nonvested restricted awards, beginning of the period	397,957		$	64.06
Granted	594,029			62.07
Vested	(136,669	)		64.23
Forfeited	(15,314	)		66.31
Nonvested restricted awards, end of the period	840,003		$	62.59

The total fair value of the restricted stock awards vested was $0.2 million during 2004, $1.5 million during 2005 and $8.8 million during 2006.

UNBC recognized $14.4 million of compensation cost for share-based payment arrangements related to restricted stock awards with $5.4 million of corresponding tax benefit during the year ended December 31, 2006. At December 31, 2006, the total unrecognized compensation cost related to nonvested restricted awards was $40.5 million, and the weighted-average period over which it is expected to be recognized was 1.8 years.

Restricted Stock Units

In July 2006, UNBC granted 12,150 restricted stock units to non-employee directors with a weighted average grant date fair value of $63.65 per share. These restricted stock units consist of a regular grant, and in the case of new non-employee directors, a regular grant and an initial grant. In general, the regular grant vests in full on the first anniversary of the grant date, and the initial grant vests in three equal installments on each of the first three anniversaries of the grant date. At grant date, it was estimated that 7 percent of the shares would forfeit by the vesting date. During 2006, UNBC recognized $0.3 million of compensation cost with a corresponding $0.1 million in tax benefits related to this year’s grants. The restricted stock unit participants do not have voting or other stockholder rights. However, the participants’ stock unit accounts receive dividend equivalents, reflecting the aggregate dividends earned based on the total number of restricted stock units outstanding, in the form of additional restricted stock units. Participants may elect to defer the delivery of vested shares of common stock at

F-106

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

predetermined dates as defined in the plan agreements. UNBC will issue new shares under the 2000 Stock Plan upon vesting of these grants, which are redeemable only in shares.

Performance Share Plan

Effective January 1, 1997, UNBC established a Performance Share Plan. At the discretion of the Committee, eligible participants may earn performance share awards to be redeemed in cash and/or shares three years after the date of grant. Performance shares are linked to stockholder value in two ways: (1) the market price of UNBC’s common stock; and (2) return on equity, a performance measure closely linked to value creation. Eligible participants generally receive grants of performance shares annually. The plan was amended in 2004 increasing the total number of shares that can be granted under the plan to 2.6 million shares. There were 2,252,183 performance shares, 2,193,383 performance shares, and 2,132,333 performance shares remaining for future awards as of December 31, 2004, 2005 and 2006, respectively. UNBC granted 88,500 shares in 2004, 78,000 shares in 2005 and 62,100 shares in 2006. All performance shares granted prior to 2006 are redeemable in cash and are therefore being accounted for as liabilities. No performance shares were forfeited in 2004, 19,200 performance shares were forfeited in 2005 and 1,050 performance shares were forfeited in 2006. The value of a performance share under the liability method is equal to the average month-end closing price of UNBC’s common stock for the final six months of the performance period. All cancelled or forfeited performance shares become available for future grants. At December 31, 2005 and 2006, UNBC’s liability for the cash settlement of the performance shares was $15.7 million and $11.7 million, respectively.

Under the Performance Share Plan, UNBC granted 62,100 units with a weighted-average grant date fair value of $69.96 per share during the year ended December 31, 2006. These units will be settled in stock at the vesting date of December 31, 2008. At grant date, it was estimated that 6 percent of the shares would forfeit by the vesting date. In 2006, UNBC recognized $2.8 million of compensation cost with a corresponding $1.1 million in tax benefits related to this year’s grants. UNBC will issue new shares under the 2000 Stock Plan upon vesting of these grants that are redeemable in shares.

33.    RELATED PARTY TRANSACTIONS

Transactions with MUFG, MUTB, MUS and their subsidiaries

Since the formation of MUFG, MUTB and its subsidiaries have been related parties which are under common control by MUFG. In addition, subsidiaries of MUFG other than its banking subsidiaries (i.e., BTMU and MUTB), such as MUS, are related parties of BTMU.

BTMU lends and borrows funds from such related parties in the course of its normal banking activities. In addition, BTMU acts as an agency for MUTB to offer trust products to its customers on behalf of MUTB. BTMU frequently works together with MUS in providing various investment banking and securities services such as derivatives, advisory for mergers and acquisitions and securitizations to their customers.

The following table shows the amount of transactions with its related parties under common control by MUFG for the fiscal years ended March 31, 2005, 2006 and 2007:

	2005		2006		2007
	(in billions)
Interest income, primarily resulted from loans and interest earning deposits in other banks:	¥	10	¥	18	¥	24
Interest expense, primarily resulted from payables under securities lending transactions and deposits:		6		11		12
Non-interest income:		2		25		32
Non-interest expense:		7		25		43

F-107

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table shows the amounts due from or to its related parties under common control by MUFG at March 31, 2006 and 2007:

	2006		2007
	(in billions)
Assets, primarily consisting of trading account assets and loans:	¥	3,257	¥	2,790
Liabilities, primarily consisting of trading account liabilities and payables under securities lending transactions:		3,017		2,241

34.    EVENTS SINCE MARCH 31, 2007

Approval of Dividends

On June 27, 2007, the shareholder approved the payment of cash dividends to the shareholder of record on March 31, 2007, of ¥30.00 per share of Class 2 Preferred Stock, of ¥7.95 per share of Class 3 Preferred Stock, totaling ¥3,141 million, and of ¥15.36 per share of Common stock, totaling ¥157,562 million.

Completion of the Merger of UFJ NICOS and DC Card Co., Ltd

On April 1, 2007, the merger between UFJ NICOS and DC Card Co., Ltd. (“DC Card”), two credit card subsidiaries of BTMU, came into effect with UFJ NICOS being the surviving entity. Each share of DC Card’s common stock was exchanged for 30 shares of UFJ NICOS’s common stock. The new company was named Mitsubishi UFJ NICOS Co., Ltd. (“Mitsubishi UFJ NICOS”).

Completion of the Merger of Leasing Affiliates

On April 1, 2007, the merger between Diamond Lease Company Limited (“Diamond Lease”) and UFJ Central Leasing Co., Ltd. (“UFJ Central Leasing”), two equity method investees of BTMU, came into effect with Diamond Lease being the surviving entity. One share of UFJ Central Leasing’s common stock was exchanged for each share of Diamond Lease’s common stock. The new company was named Mitsubishi UFJ Lease & Finance Company Limited and remained as an equity method investee of BTMU.

Administrative Orders from the Financial Services Agency

On June 11, 2007, BTMU received from the FSA administrative orders based on Article 26-1 of the Banking Law (business improvement orders) of Japan, which requires developing and strengthening its compliance structure and related internal control functions in its overseas business and its domestic investment trust sales and related businesses, in order to ensure sound and appropriate business management practices.

In response to the administrative orders, on July 5, 2007, BTMU presented and announced a business improvement plan including developing internal policies, procedures, and manuals. This event is not expected to have a material impact on the BTMU Group’s financial position and results of operations.

Business and Capital Alliance between JACCS, Mitsubishi UFJ NICOS, MUFG and BTMU

On June 21, 2007, Mitsubishi UFJ NICOS, BTMU, and JACCS Co., Ltd. (“JACCS”), one of Japan’s leading companies in the installment credit business, announced that they entered into a discussion on a strategic business and capital alliance to leverage the strengths of each company in the consumer finance business area, enhance financial services and strengthen their business competitiveness.

F-108

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Concluded)

On September 20, 2007, JACCS, Mitsubishi UFJ NICOS, MUFG and BTMU announced that JACCS and Mitsubishi UFJ NICOS signed a basic agreement under which Mitsubishi UFJ NICOS will transfer its installment credit sales business, automobile loan business and automobile leasing business to JACCS on April 1, 2008. At the same time, MUFG, together with BTMU and Mitsubishi UFJ NICOS, have agreed to form a business alliance with JACCS with respect to credit card related operations, settlement operations, installment credit sales and housing loans.

In addition, JACCS and BTMU signed a basic agreement under which BTMU will acquire additional common shares of JACCS by March 31, 2008, in order to strengthen the relationship and to further stabilize its financial base. As a result, it is expected that JACCS will become an equity method investee of BTMU with approximately 20% ownership of JACCS.

Adoption of Stock-Based Compensation Plan

MUFG, BTMU and MUTB elected to introduce a stock-based compensation plan for directors, corporate auditors and executive officers and obtained the necessary shareholder approval at their respective ordinary general meetings held on June 28, 2007 at MUFG and on June 27, 2007 at BTMU and MUTB, while abolishing retirement gratuities program for these officers. Under the stock-based compensation plan, their directors, corporate auditors and executive officers will be offered stock options to acquire common stocks of MUFG. The exercise price will be set at ¥1 per share. In the event of a stock split of MUFG’s common stocks on September 30, 2007, the number of MUFG’s common stocks to be acquired upon the exercise of a stock option will be adjusted.

Rationalization of Corporate Outlets of MUTB

On August 29, 2007, MUFG, MUTB and BTMU resolved to transfer a part of MUTB’s corporate lending business conducted at nine of MUTB’s outlets to BTMU on November 12, 2007, subject to approval by relevant authorities. In consideration, BTMU plans to issue 1,000,000 shares of non-voting preferred stock to MUTB.

Such transfer is a part of the rationalization of MUTB’s business, which will also entail the reorganization of MUTB’s other corporate business outlets into four core outlets in Tokyo, Nagoya, Osaka and Kyushu. The rationalization of MUTB’s business is intended to improve the business efficiency of MUFG as a whole and aims to maximize customer satisfaction in the trust business field. This rationalization process is scheduled to be completed in early December 2007.

Agreement to Make Mitsubishi UFJ NICOS a Wholly-Owned Subsidiary of MUFG

On September 20, 2007, MUFG and Mitsubishi UFJ NICOS entered into a basic agreement under which MUFG will (1) directly invest ¥120 billion in Mitsubishi UFJ NICOS to acquire common shares of Mitsubishi UFJ NICOS on November 6, 2007, with approximately 75% ownership of Mitsubishi UFJ NICOS held by the MUFG Group, and (2) make Mitsubishi UFJ NICOS a wholly-owned subsidiary through a share exchange on August 1, 2008. The objectives of investment and share exchange are to strengthen the financial base of Mitsubishi UFJ NICOS, clarify the status of Mitsubishi UFJ NICOS as a core company in the MUFG Group, utilize its financial resources effectively, and develop a new credit business strategy due to the changing business environment for consumer finance companies in Japan.

F-109

Signature

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
By:	/s/    NOBUO KUROYANAGI
Name:	Nobuo Kuroyanagi
Title:	President

September 21, 2007

EXHIBIT INDEX

Exhibit		Description
1	(a)	Articles of Incorporation of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended and restated on June 28, 2006. (English Translation)(4)
1	(b)	Regulations of the Board of Directors of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended on April 1, 2007. (English Translation)(1)
1	(c)	Regulations on Corporate Meetings of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended on January 12, 2007. (English Translation)(1)
1	(d)	Regulations on the Handling of Shares of The Bank of Tokyo-Mitsubishi UFJ, Ltd., as amended and restated on April 1, 2007. (English Translation)(1)
2		Indenture dated as of February 25, 2000 between The Bank of Tokyo-Mitsubishi, Ltd. and The Chase Manhattan Bank.(2)
4	(a)	Integration Agreement, dated February 18, 2005, and the amendment thereto, dated April 20, 2005, among Mitsubishi Tokyo Financial Group, Inc., The Bank of Tokyo-Mitsubishi, Ltd., The Mitsubishi Trust and Banking Corporation, Mitsubishi Securities Co., Ltd., UFJ Holdings, Inc., UFJ Bank Limited, UFJ Trust Bank Limited and UFJ Tsubasa Securities Co., Ltd. (English Translation)(3)
4	(b)	Merger Agreement, dated April 20, 2005 (English Translation), and the amendment thereto, dated August 12, 2005 (English Summary), between The Bank of Tokyo-Mitsubishi, Ltd. and UFJ Bank Limited(3)
8		Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational Structure.”
11		Code of ethics of Mitsubishi UFJ Financial Group, Inc. and compliance rules, compliance manual and employee work rules of The Bank of Tokyo-Mitsubishi UFJ, Ltd. applicable to its directors and managing officers, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (English translation of relevant sections)(4)
12		Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).(1)
13		Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).(1)

(1) Filed herewith.

(2) Incorporated by reference from our Annual Report on Form 20-F filed on August 17, 2001.

(3) Incorporated by reference from our Annual Report on Form 20-F filed on August 25, 2005.

(4) Incorporated by reference from our Annual Report on Form 20-F filed on September 28, 2006.