A.[Reserved] 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 in this section, which is intended to disclose the risks that we consider material based on the information currently available to us, 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 may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in this section and elsewhere in this Annual Report. See “Forward-Looking Statements.” Risks Related to Our Business Environment Because a large portion of our assets as well as our business operations are in Japan, we may incur losses if economic conditions in Japan worsen. Our performance is particularly affected by the general economic conditions of Japan where we are headquartered and conduct a significant amount of our business. As of March 31, 2026, 59.9% of our total assets were related to Japanese domestic assets, including Japanese national government and Japanese government agency bonds, which accounted for 56.7% of our total investment securities portfolio and 7.2% of our total assets, respectively. Interest and non-interest income in Japan represented 37.1% of our total interest and non-interest income for the fiscal year ended March 31, 2026. Furthermore, as of March 31, 2026, our loans in Japan accounted for 53.6% of our total loans outstanding. There is significant uncertainty surrounding Japan’s economy. For example, Japan’s fiscal health and sovereign creditworthiness may deteriorate if the Japanese government’s economic measures and the Bank of Japan’s monetary policies prove ineffective or result in negative consequences. If the prices of Japanese government bonds decline rapidly, resulting in an unexpectedly sudden increase in interest rates, our investment securities portfolio as well as our lending, borrowing, deposit-taking, trading and other operations may be negatively impacted. In addition, interest rates may suddenly increase if the Bank of Japan decides to further tighten its monetary policy, or if there is a change in market expectations relating to any such decision. Instability in the Japanese stock market and foreign currency exchange rates, particularly between the Japanese yen and other major currencies, may also have an adverse impact on our asset and liability management as well as our results of operations. Various other factors, including international geopolitical conflicts, significant or prolonged inflationary or deflationary price trends, the decreasing and aging demographics in Japan, stagnation or deterioration of economic and market conditions in other countries, economic policies adopted by other countries potentially affecting exports from and imports into Japan, growing global competition 5 Table of Contents and trade conflicts, may also have a material negative impact on the Japanese economy. For a detailed discussion on the business environment in Japan and abroad, see “Item 5. Operating and Financial Review and Prospects—Business Environment.” Since our domestic loans in Japan accounted for a significant portion of our loan portfolio, deteriorating or stagnant economic conditions in Japan may cause adverse effects on our financial results, such as increases in credit costs, as the credit quality of our borrowers could deteriorate. Borrowers in particular industries may be adversely affected by disruptions in commodity supply chains, changes in economic behavior, trade restrictions and other consequences of geopolitical and geoeconomic conflicts, and other events that are beyond the control of those that are affected. Our domestic loan portfolio may also be adversely affected by interest rate fluctuations in Japan. For example, the Bank of Japan has been gradually raising its policy interest rate since March 2024, and interest rates in Japan may continue to rise in the future. Unexpected increases in interest rates may negatively affect our borrowers’ debt service capacity, and our credit costs may significantly increase. On the other hand, if the Bank of Japan continues or increases its purchase of Japanese government bonds in the market, the yield on many financial instruments and other market interest rates in Japan are likely to remain at current low levels or decline. In such case, and particularly if the Bank of Japan’s policy rate is lowered from the current level, market interest rates may decline, and our interest rate spread on our domestic loan portfolio may narrow, reducing our net interest income. Our results of operations may be materially affected by instability in, uncertainty over and deterioration of, economic conditions in Japan and around the world. Economic conditions in Japan and around the world may become unstable or deteriorate due to various factors such as changes in the monetary and fiscal policies in major jurisdictions and the fiscal condition of major countries, industrial and trade policies adopted in major markets, rapid and significant fluctuations in foreign exchange rates, global inflation, deflation or stagflation, changes in real estate market trends, and concerns and developments affecting financial institutions, including banks, non-bank lending and credit institutions, securities companies, insurance companies, and investment funds and other financial intermediaries. Uncertainty over the Japanese and global economies still remains because of such other factors as geopolitical instabilities or conflicts, interruptions or changes in international supply chains or trade, and rapid and significant changes in the market, regulatory or business environment. As of March 31, 2026, based principally on the domicile of the obligors, assets related to the United States accounted for approximately 18.8% of our total assets, assets related to Asia and Oceania excluding Japan accounted for approximately 10.1% of our total assets, and assets related to Europe accounted for approximately 6.7% of our total assets. Worsening economic conditions in Japan and around the world may result in, among other things, impairment or valuation losses on securities and other assets that we hold due to declines in the market value of such assets, an increase in our non-performing loans and credit costs due to deterioration in borrowers’ business performance, a decrease in our profits due to deterioration in the creditworthiness of counterparties in market transactions, a reduction in foreign currency funding liquidity, an increase in our foreign currency funding costs, and an increase in the level of risk in the risk assets that we hold. Our profitability may be adversely affected by various other factors, including a decline in our net interest income caused by such factors as changes in the monetary policies of central banks in various jurisdictions. In addition, an economic downturn may result in a decline in new investments and business transactions by customers due to stagnation in economic activity, weak consumer spending, diminished investor appetite for making investments in uncertain financial markets, and a decrease in our assets under custody or management. Our business operations are exposed to risks of natural disasters, terrorism, geopolitical conflicts and other disruptions caused by external events. As a major financial institution incorporated in Japan and operating in major international financial markets, our business operations, ATMs and other information technology systems, personnel, and facilities and other physical assets are subject to the risks of earthquakes including any ensuing tsunami, typhoons, floods and other natural disasters, terrorism, geopolitical, political and social conflicts, health pandemics or epidemics, and other disruptions caused by external events, which are beyond our control. Such external events may result in loss of facility and human and other resources, suspension or delay in all or part of our operations, inability to implement business strategic measures or respond to changes in the market or regulatory environment as planned, and other disruptions to our operations. We may also be required to incur significant costs and expenses, including those incurred for preventive or remedial measures, to deal with such external events. In addition, such external events may negatively impact the economic conditions in the markets we or our customers operate. As a result, our business, operating results and financial condition may be materially and adversely affected. For example, geopolitical conflicts often lead to the imposition of economic and financial sanctions against certain banks, companies and individuals by the governments of Japan, the United States, the European Union and other jurisdictions, resulting in increased complexity in our compliance and control environment. Geopolitical tensions also often lead to increased risk of cyber-attacks or other threats to the global financial systems. Geopolitical conflicts and tensions may hamper our ability to manage such complexity or risk and may result in significant financial, reputational and other losses. 6 Table of Contents As with other Japanese companies, we are exposed to heightened risks of large-scale natural disasters, particularly earthquakes, including any ensuing tsunami. If a large-scale earthquake occurs in areas where our business function is concentrated, such as the Tokyo metropolitan area, or where the facilities, systems, networks and other infrastructure critical to our operations are located, our financial position and business results could be adversely affected. Our risk management policies and procedures may be insufficient to address the consequences of these external events, resulting in our inability to continue to operate a part or the whole of our business. In addition, our redundancy and backup measures and other measures to strengthen our operational resilience may not be sufficient to avoid a material disruption in our operations, and our business continuity framework and contingency plans may not address all eventualities that may occur in the event of a material disruption caused by a large-scale natural disaster. Climate-related risks could have a material adverse impact on us and our clients. We are exposed to climate-related physical risks and risks arising from the process of transitioning to a less carbon-dependent economy. Climate-related physical risks include increased severity and frequency of adverse weather events, such as extreme storms and flooding, and longer-term shifts in climate patterns, such as rising temperatures and sea levels and changes in precipitation amount and distribution. Such physical risks may have adverse impacts on us, both directly on our business operations and as a result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other assets, disruptions in business operations and economic activity, including supply chains, changes in prices of raw materials, commodities and energy, and market volatility. Transition risks include changes in regulations, market preferences and technologies relating to carbon emissions. The possible adverse impacts of transition risks include asset devaluations, increased operational and compliance costs, and an inability to meet regulatory or market expectations. For example, various jurisdictions in which we operate have adopted or are considering adoption of disclosure and financial reporting requirements, which vary in scope and other respects. Such regulatory requirements and stakeholder expectations may result in increased regulatory compliance and litigation risks and costs. We and our borrowers and counterparties may also be unable to adapt product and service offerings, loan and investment portfolio management approaches, governance frameworks and practices, or other ways in which we conduct our business and manage our capital and risk profile to changes in regulatory and market expectations relating to carbon emissions. These adverse impacts or perceptions or expectations of such impacts may result in deterioration in the profitability, financial health, creditworthiness or capital adequacy of affected businesses, including us. Because the timing and nature of climate-related events and regulatory and market changes in reaction to them may be difficult or impossible to predict, our risk management strategies may not be effective in mitigating climate-related risk exposure. Regulatory and market expectations regarding climate change may shift rapidly and generate conflicting views and approaches and may further develop in ways that diverge from our expectations or vary from market to market. The methodologies and data used to monitor and manage climate-related risks also continue to evolve and currently utilize information and estimates derived from information or factors which are currently available but which may be revised or replaced. We have defined and disclosed our aspirational climate-related goals and other relevant information based on the standards that have been adopted by us or are applicable to us. Such goals may prove to be considerably more costly or difficult than currently expected, or even impossible, to achieve, particularly given the high degree of uncertainties surrounding climate-related developments. Uncertainties may further increase depending on the nature and extent of the involvement, cooperation or reaction of our borrowers, counterparties and business partners as well as industry groups, governmental organizations and other stakeholders in or to our efforts to achieve such goals. In addition, if our climate-related risk assessment and disclosure that we make and plan to enhance with the intent to be aligned with relevant recommendations and market, regulatory and other standards are deemed insufficient or inappropriate, if our climate-related measures, including those designed to facilitate the transition to a less carbon-dependent economy, do not proceed as planned or become subject to criticism, if our climate-related risk management proves not to be as effective as expected, if we fail, or are deemed to have failed, to meet evolving market expectations or comply with increasingly complex regulatory requirements relating to climate change, including risk management, capital adequacy and disclosure requirements and standards, or if, as a result of any of the foregoing, we are considered to be failing to fulfill our responsibility to society, then our corporate value may be impaired and our business, financial condition and results of operations may be adversely affected. Risks Related to Our Strategies and Our Major Investees Our business may be adversely affected by competitive pressures, which have partly increased due to regulatory changes and recent market changes in the financial industry domestically and globally. Competition in the financial services industry may further intensify due to the increase in the number of non-financial institutions entering the financial services industry with alternative services, such as electronic settlement services, as a result of development of new technologies as well as significant changes in regulatory barriers. Competition may also further increase as other 7 Table of Contents global financial institutions enhance their competitive strength through development or adoption of new technologies as well as mergers, acquisitions, strategic alliances, and profit enhancement and other measures. Under such circumstances, although we have been implementing various business strategies on a global basis designed to strengthen our competitive position and profitability, our business, financial condition and results of operations may be adversely affected if these strategies fail to produce the results we expect or if we are required to delay or otherwise change these strategies. Our competitiveness may decline because of various factors, including where: •the balance of customer deposits cannot be maintained or does not grow as anticipated; •the volume of loans made to borrowers cannot be maintained or does not increase as anticipated; •our income from interest spreads on loans does not improve as anticipated; •the fair value of our financial assets fluctuate to a larger extent than anticipated; •our fee income cannot be maintained or does not increase as much or quickly as we aim to do; •our strategy to build a business infrastructure for new services and products through digital transformation, use of new technologies or otherwise does not proceed as planned; •customer or market demands for alternative products or services increase at a more rapid pace than expected thereby negatively affecting the demand for our financial products or services; •our strategies to improve financial or operational efficiency is not achieved as expected; •clients and business opportunities are lost, or costs and expenses significantly exceed our expectations, as a result of the ongoing or planned strategies to streamline our business portfolio, to integrate our systems, or to improve financial and operational efficiency not being achieved as expected; •we are unable to hire or retain sufficient human resources; •our foreign currency funding becomes limited or unavailable; •we are restricted in agility or flexibility in investing in non-financial institutions under applicable laws and regulations in and outside of Japan; and •rapid and significant deposit outflows caused by deteriorated customer confidence in our financial health or market confidence in the financial industry result in a lack of liquidity. Our strategy to expand the range of our financial products and services and the geographic scope of our business globally may fail if we are unable to anticipate or manage new or expanded risks that entail such global expansion. As we expand our business operations and operate our business as a global financial institution, we may become exposed to new and increasingly complex risks associated with such expansion. We may not be able to establish appropriate internal controls or risk management systems for the entire MUFG Group, including subsidiaries, or to hire or retain necessary human resources to effectively deal with compliance, regulatory, market and other risks entailing the expanded scope of our operations, products and services, including adoption or integration of new technologies as well as new local market and regulatory environments, in all cases and, as a consequence, our financial condition and results of operations may be adversely affected. As a strategic measure implemented in an effort to become the world’s most trusted financial group, we have acquired businesses, made investments and entered into capital alliances on a global basis, particularly in the United States and Europe as well as the Asia-Pacific region, including India. Our major overseas subsidiaries include Krungsri, a subsidiary in Thailand, and Bank Danamon, a subsidiary in Indonesia, and our recent acquisitions and investments include acquisitions of asset management and investor services companies and investments in non-bank financial institutions mostly in the Asia-Pacific region. We currently plan to continue to pursue opportunities to acquire businesses, make investments and enter into capital alliances globally. Our acquisition, investments and capital alliances, however, may not proceed as planned or may be changed or dissolved, we may not achieve the synergies or other results that we expected, or we may incur impairment or valuation losses on securities acquired or intangible assets, including goodwill, recorded in connection with such business acquisitions, investments or business alliances, because of, among other things, political, geopolitical and social instability and conflicts, stagnation of the economy, fluctuations of the financial market, inability to obtain regulatory approvals, changes in the laws, regulations or accounting standards, changes in the strategies or financial condition of our acquirees, investees or alliance partners that are inconsistent with our interests, and unanticipated changes in the local market, industry or business environment affecting our acquirees, investees or alliance partners. These and other similar circumstances may adversely affect our business strategies, financial condition and results of operations. In addition, we may be unable to achieve the benefits expected from our efforts to expand business operations if our expansion strategy does not proceed as planned. If the goodwill recorded in connection with our acquisitions becomes impaired, we may be required to record impairment losses, which may adversely affect our financial results. We record the excess of the purchase price over the fair value of the assets and 8 Table of Contents liabilities of the acquired companies as goodwill. As of March 31, 2026, the total balance of goodwill was ¥566.5 billion. U.S. 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. For further information, see Note 6 to our consolidated financial statements. Our efforts to offer new products and services or penetrate new markets may not succeed due to any of the foregoing reasons or other reasons, including if product or market opportunities develop more slowly than expected, if our new products and services are not well accepted among customers, if the profitability of opportunities is undermined by competitive pressures, regulatory limitations or changes in our business environment, if our planned acquisitions, investments or capital alliances are not approved by regulators or do not proceed as planned, or if our acquisitions, investments or capital alliances fail to achieve the synergies or other results that we expect. If our strategic alliance with Morgan Stanley fails, we could suffer financial or reputational loss. We have a global strategic alliance with Morgan Stanley, under which we operate two joint venture securities companies in Japan, engage in joint corporate finance operations in the United States and pursue other cooperative opportunities. We hold approximately 23.9% of the voting rights in Morgan Stanley as of March 31, 2026 and continue to hold approximately $521.4 million of perpetual non-cumulative non-convertible preferred stock with a 10% dividend. In addition, we currently have two representatives on Morgan Stanley’s board of directors. We maintain this strategic alliance with a view towards long-term cooperation with Morgan Stanley, and plan to deepen the strategic alliance. However, due to any unexpected changes in social, economic, market or financial conditions, changes in the regulatory environment, or any failure to integrate or share staff, products or services, or to operate, manage or implement the business strategy of the joint venture securities companies or other cooperative opportunities as planned, we may be unable to achieve the expected synergies from this alliance. If our strategic alliance with Morgan Stanley is terminated, it could have a material negative impact on our business strategy, financial condition and results of operations. For example, because we conduct our securities operations in Japan through the joint venture companies we have with Morgan Stanley, such termination may result in our inability to attain the planned growth in this line of business. In addition, with our current investment in Morgan Stanley, we have neither a controlling interest in, nor control over the business operations of, Morgan Stanley. If Morgan Stanley makes any business decisions that are inconsistent with our interests, we may be unable to achieve the goals set out for the strategic alliance. Furthermore, although we do not control Morgan Stanley, given the magnitude of our investment, if Morgan Stanley encounters financial or other business difficulties due to adverse changes in the economy, regulatory environment or other factors, we may suffer a financial loss on our investment or damage to our reputation. We apply equity method accounting to our investment in Morgan Stanley in our consolidated financial statements. As a result, Morgan Stanley’s performance affects our results of operations, and Morgan Stanley has contributed to a significant portion of our net income and revenue in recent periods. Rule 3-09 of Regulation S-X requires Morgan Stanley’s financial statements to be included in this Annual Report. In addition, fluctuations in Morgan Stanley’s stock price or in our equity ownership interest in Morgan Stanley may cause us to recognize losses on our investment in Morgan Stanley. Risks Related to Our Ability to Meet Regulatory Capital Requirements We may not be able to maintain our capital ratios and other regulatory ratios above minimum required levels, which could result in various regulatory actions, including the suspension of some or all of our operations. We, as a holding company, and our Japanese banking subsidiaries are required to maintain risk-weighted capital ratios and leverage ratios above the levels specified in the guidelines adopted by the FSA to implement the Basel III framework. As of March 31, 2026, our total risk-adjusted capital ratio was 16.85% compared to the minimum risk-adjusted capital ratio required of 12.18%, our Tier 1 capital ratio was 14.95% compared to the minimum Tier 1 capital ratio required of 10.18%, and our Common Equity Tier 1 capital ratio was 12.47% compared to the minimum Common Equity Tier 1 capital ratio required of 8.68%, each including a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.18%. As of the same date, our leverage ratio was 4.94% compared to the minimum leverage ratio required at 3.95%, which consisted of the minimum requirement at 3.15% and the applicable G-SIB leverage ratio buffer requirement set at 50% of a G-SIB surcharge plus an additional 0.05%. Our capital and leverage ratios are calculated in accordance with Japanese banking regulations based on information derived from our financial statements prepared in accordance with Japanese GAAP. The Financial Stability Board has identified us as one of G-SIBs. The banks that are included in the list of G-SIBs are subject to a capital surcharge to varying degrees depending on the bucket to which each bank is allocated. As the list of G-SIBs is expected to be updated annually, we may be required to meet stricter capital ratio requirements. If our or our Japanese banking subsidiaries’ capital ratios or leverage ratios fall below the required levels, including various capital buffers or a leverage buffer, the FSA may require us to take a variety of corrective actions, including abstention from making 9 Table of Contents capital distributions, such as dividends, share buybacks, interest payments on, and redemption and repurchase of, Additional Tier 1 capital instruments and bonus payments, and suspension of our business operations. In addition, some of our banking subsidiaries are subject to the local capital adequacy ratio and other regulatory ratio requirements of various foreign countries, and if their ratios fall below the required levels, the local regulators will require them to take a variety of corrective actions. Factors that will affect our and our bank subsidiaries’ capital ratios or leverage ratios include: •fluctuations in our or our banking subsidiaries’ portfolios due to deterioration in the creditworthiness of borrowers and the issuers of equity and debt securities; •difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to raise capital under terms and conditions similar to prior financings or issuances; •declines in the value of our or our banking subsidiaries’ securities portfolios; •adverse changes in foreign currency exchange rates; •adverse revisions to the capital ratio and other regulatory ratio requirements; •reductions in the value of our or our banking subsidiaries’ deferred tax assets; and •other adverse developments. We are also subject to the FSA’s regulations requiring G-SIBs in Japan to maintain certain minimum levels of capital and liabilities that are deemed to have loss-absorbing and recapitalization capacity, or External TLAC, and allocate a certain minimum level of External TLAC to any material subsidiary within their respective groups of companies, or Internal TLAC. As of March 31, 2026, we maintained 23.25% of External TLAC on a risk-weighted assets basis compared to the required minimum ratio of 18.00% and 9.06% of External TLAC on a total exposure basis compared to the required minimum ratio of 7.10%. Within the MUFG Group, MUFG Bank, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. are designated as our material subsidiaries. We may become subject to various regulatory actions, including restrictions on capital distributions, if we are unable to maintain our External TLAC ratios or the amount of Internal TLAC allocated to any of our material subsidiaries in Japan above the minimum levels required by the standards imposed by the FSA, or if the capital buffers are used and reduced below the required level to make up for our required External TLAC ratio on a risk-weighted assets basis. Our External TLAC ratios and the amount of our Internal TLAC are affected by various factors that affect our capital ratios and leverage ratios described above. Although we plan to issue TLAC-qualified debt in an effort to meet the minimum required levels of External TLAC ratios and Internal TLAC amounts, we may fail to do so if we are unable to issue or refinance TLAC-qualified debt as planned. For a discussion of the applicable regulatory guidelines and our capital ratios, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation” and “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy.” Fluctuations in foreign currency exchange rates may result in transaction losses on translation of monetary assets and liabilities denominated in foreign currencies as well as foreign currency translation losses with respect to our foreign subsidiaries and equity method investees. Fluctuations in foreign currency exchange rates against the Japanese yen create transaction gains or losses on the translation into Japanese yen of monetary assets and liabilities 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, we could incur losses due to future foreign exchange rate fluctuations. During the fiscal year ended March 31, 2026, the average balance of our foreign interest-earning assets was ¥133,949.4 billion and the average balance of our foreign interest-bearing liabilities was ¥90,054.7 billion, representing 38.7% of our average total interest-earning assets and 29.3% of our average total interest-bearing liabilities during the same period. Due to foreign currency exchange rate fluctuations, we may incur losses attributable to net transaction losses on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies, net losses on currency derivative instruments entered into for trading purposes, and net losses on translation into Japanese yen of securities accounted for under the fair value option. In addition, we may incur foreign currency translation losses with respect to our foreign subsidiaries and equity method investees due to fluctuations in foreign currency exchange rates. For a discussion on foreign currency translation impacts on our financial statements, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results—Effect of Change in Exchange Rates on Foreign Currency Translation.” Credit Risk We may suffer additional credit-related losses in the future if our borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers’ deteriorating repayment abilities prove inappropriate or insufficient. 10 Table of Contents If the economic conditions in Japan or other parts of the world, including emerging countries, or in particular industries, including the real estate industry and the financial industry, to which we have significant credit risk exposure, worsen, or if industrial and trade policies adopted in major markets, climate change, geopolitical conflicts, fluctuations in commodity prices, including those arising from changes in geopolitical conditions, real estate or stock prices or in interest or foreign exchange rates, changes in the competitive environment or other developments adversely affect global or local economic conditions or particular industries or borrowers, our problem loans and credit-related expenses and losses may increase. An increase in problem loans and credit-related expenses and losses would adversely affect our results of operations, weaken our financial condition and erode our capital base. 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 also 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 restructurings. We may take these steps even when such steps might not be warranted from the perspective of our short-term or narrow economic interests or a technical analysis of our legal rights against those borrowers, in light of other factors such as our longer-term economic interests and our commitment to supporting the Japanese or broader economy. These practices may substantially increase our exposure to troubled borrowers and increase our losses. Credit losses may also increase if we elect, or are forced by 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 loan losses could prove to be materially different from our estimates and could materially exceed our current allowance for credit losses, in which case we may need to provide for additional allowance for credit losses and may also record credit losses beyond our allowance. Our allowance for credit losses in our loan portfolio is based on evaluations of customers’ creditworthiness and the value of collateral we hold as well as macroeconomic trends. While we closely observe conditions of our individual borrowers and industry and macroeconomic trends, if we need to provide for additional allowance for credit losses, or the value or liquidity of collateral declines, due to deterioration in domestic or global economic conditions, commodity price fluctuations, financial market deterioration or other conditions specific to certain borrowers, we may incur significant credit losses. Also, the regulatory standards or guidance on establishing allowances may also change, causing us to change some of the evaluations used in determining the allowances. As a result, we may need to provide for additional allowance for credit losses. Our efforts to diversify our portfolio to avoid any concentration of credit risk exposures to particular industries or counterparties may prove insufficient. For example, our credit exposures to the real estate and financial industries are relatively high in comparison to other industries. The credit quality of borrowers in such industries does not necessarily correspond to general economic conditions in Japan or other parts of the world, and adverse developments in the real estate or financial market may disproportionately increase our credit losses. We may incur further losses as a result of financial difficulties relating to other financial institutions, both directly and through the effect they may have on the overall banking environment and on their borrowers. Declining asset quality and other financial problems may exist, arise or worsen at some domestic and foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies, insurance companies, and investment funds and other financial intermediaries. Financial difficulties relating to financial institutions may not only lead to liquidity and insolvency problems for such financial institutions but also result in systemic problems adversely affecting the financial market and the wider economy. Financial difficulties relating to financial institutions could adversely affect us because we have extended loans, some of which may need to be classified as impaired loans, to financial institutions that are not our consolidated subsidiaries. Our loans to banks and other financial institutions have been around 20% of our total loans as of each year-end in the three fiscal years ended March 31, 2026, with the percentage being 22.3% as of March 31, 2026. We may also be adversely affected because we enter into transactions, such as derivative transactions, in the ordinary course of business, with other banks and financial institutions as counterparties. For example, we enter into credit derivatives with banks, broker-dealers, insurance companies and other financial institutions for managing credit risk exposures, for facilitating client transactions, and for proprietary trading purposes. In addition, we may be adversely affected because: •we are shareholders of financial institutions; •financial institutions that face difficulties may terminate or reduce financial support to borrowers, putting such borrowers under financial stress and causing our loans to such borrowers to be impaired; •we may be requested to participate in providing support to distressed financial institutions; •the government may elect to provide regulatory, tax, funding or other benefits to financial institutions under its supervision or control to strengthen their capital or increase their profitability or for other purposes, causing our competitiveness against such financial institutions to weaken; •our deposit insurance premiums may rise if deposit insurance funds prove to be inadequate; 11 Table of Contents •bankruptcies or government control or other intervention of financial institutions may generally undermine the confidence of depositors and investors in, or adversely affect the overall business environment for, financial institutions; and •negative media coverage of the financial industry or system, regardless of its accuracy and applicability to us, may harm our reputation as well as market confidence in the financial industry and system. Risk Relating to Our Strategic Equity Portfolio If the Japanese stock market or other global markets decline in the future, we may incur losses on our securities portfolio and our capital ratios will be adversely affected. Our strategic equity investments in Japan, which account for a vast majority of our total domestic marketable equity securities, were approximately ¥3.7 trillion as of March 31, 2026. A decline in stock prices adversely affects the value of our equity portfolio and may also reduce our regulatory capital ratios because unrealized gains and losses on the equity securities we hold are reflected in the calculation of such ratios. Weakening or stagnant economic conditions in Japan, the United States, China, the Eurozone and Asian countries may have a significant negative impact on Japanese companies, which in turn will cause their stock prices to decline. Japanese stock prices may fluctuate significantly and negatively in future periods, as the global economy remains volatile and investors continue to observe the changes in economic, monetary and trade policies mainly in these countries and regions. Concerns over the impact of geopolitical tensions and conflicts in various parts of the world on Japanese companies may also adversely affect stock prices in Japan. In addition, the global trend towards further reduction in risk assets could result in lower stock prices. Market Risk Fluctuations in interest rates, foreign currency exchange rates and stock prices could adversely affect the value or the yield of our portfolio. We undertake extensive financial market operations involving a variety of financial instruments, including derivatives, and hold large volumes of such financial instruments. As a result, our financial condition and results of operations are subject to the risks relating to these operations and holdings. The primary risks are fluctuations in interest rates, foreign currency exchange rates and stock prices in and outside of Japan. As of March 31, 2026, approximately 27.1% of our total assets were financial instruments which we measure at fair value. The aggregate carrying amount of the Japanese government and corporate bonds and foreign bonds, including U.S. Treasury bonds, that we held as of March 31, 2026 was 8.5% of our total assets. In particular, the Japanese national government and Japanese government agency bonds accounted for 7.2% of our total assets as of March 31, 2026. If market interest rates decline due to such factors as changes in the monetary policies of central banks in various jurisdictions, the yield on the Japanese government bonds and foreign government bonds that we hold may also decline. If market interest rates rise, on the other hand, we may incur significant losses on sales of, and valuation losses on, our bond portfolio, and our debt funding costs may also increase significantly. Furthermore, if short-term interest rates rise to a larger extent than long-term interest rates, our net interest income may be adversely affected as banks, including us, generally pay interest on deposits based on short-term interest rates and earn income on loans based on long-term interest rates. Appreciation of the Japanese yen against the U.S. dollar and other major currencies causes the yen-converted value of our foreign currency-denominated investments to decline and may cause us to recognize significant losses on sales of, or valuation losses on, such investments in our financial statements. Furthermore, if stock prices decline, and the value of marketable equity securities and trading account securities that we hold also declines, we may incur significant losses on sales of, and valuation losses on, our equity securities and trading account securities portfolios. In addition, the derivative financial instruments in our trading portfolio may cause us to record significant gains or losses, when sold or marked to market, and may fluctuate from period to period due to numerous factors that are beyond our control, including interest rate levels, foreign currency exchange rates, stock price fluctuations, the credit risk of our counterparties, and general market volatility. Our assessment and management of market risks, including those related to fluctuations in interest rates, foreign currency exchange rates and securities prices, may prove insufficient and, as a result, our actual losses in the future may exceed our estimated market risk exposure. Funding Liquidity Risk Deterioration in market liquidity or other external circumstances or an actual or perceived decline in our creditworthiness could negatively affect our ability to access and maintain liquidity. Our liquidity may be impaired by factors such as an inability to raise funding in financial markets, an increase in our funding costs, unexpected increases in cash or collateral requirements, an inability to sell assets or enter into or settle other transactions as planned or needed, and an inability to attract or retain deposits. These situations may arise due to circumstances which we may be unable to control but which have occurred in the past, including market or economic disruptions, financial system instability, and a downgrade in our credit ratings, or circumstances specific to us, including an actual or perceived decline in our creditworthiness. Insufficient liquidity may have a material adverse impact on our business, operating results and financial condition. 12 Table of Contents Assuming the relevant credit rating agencies downgraded the credit ratings of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings as of March 31, 2026 by one-notch on the same date, we estimate that MUFG and its three main subsidiaries would have been required to provide approximately ¥23.8 billion of additional collateral postings under their derivative contracts. Assuming a two-notch downgrade by the credit rating agencies occurring on the same date, we estimate that the additional collateral postings for the same MUFG group companies under their derivative contracts would have been approximately ¥149.4 billion. Rating agencies regularly evaluate us and our major subsidiaries as well as our and their respective debt securities. Their ratings are based on a number of factors, including their assessment of the relative financial strength of MUFG or of the relevant subsidiary, as well as conditions generally affecting the financial services industry in Japan or on a global basis, some of which are not entirely within our control. As a result of changes in their evaluation of these factors or in their rating methodologies, rating agencies may downgrade our ratings or our subsidiaries’ ratings. Operational Risk We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation. We conduct our business subject to ongoing regulation and associated regulatory and legal risks. Global financial institutions, including us, currently face heightened regulatory scrutiny as a result of the concerns developing in the global financial sector, and growing public pressure to demand even greater regulatory surveillance following several high-profile scandals and risk management failures in the financial industry. In the current regulatory environment, we are subject to various regulatory inquiries or investigations from time to time in connection with various aspects of our business and operations. In addition, multiple government authorities with overlapping jurisdiction more frequently conduct investigations and take other regulatory actions in coordination with one another or separately on the same or related matters. Our controls may be found insufficient in addressing regulatory or public concerns relating to money laundering, economic sanctions, bribery, corruption, financial crimes, or unfair or inappropriate business practices, or in meeting market or industry rules or standards, customer protection requirements, or corporate behavior expectations. For example, we have received requests and subpoenas for information from government agencies in some jurisdictions in connection with their investigations into past submissions made by panel members, including us, to the bodies that set various interbank benchmark rates as well as investigations into foreign exchange related practices of global financial institutions. Some of the investigations into foreign exchange related practices resulted in our payment of monetary penalties to the relevant government agencies. We are cooperating with those investigations. In connection with these matters, we and other financial institutions are involved as defendants in a number of civil lawsuits. These developments or other similar matters may result in additional regulatory actions against us or agreements to make significant additional settlement payments. These developments or other matters to which we are subject from time to time may also expose us to substantial monetary damages, legal defense costs, criminal and civil liability, and restrictions on our business operations as well as damage to our reputation. Our ability to obtain regulatory approvals for future strategic initiatives may also be adversely affected. The outcome of such matters, including the extent of the potential impact of any unfavorable outcome on our financial results, however, is inherently uncertain and difficult to predict. The extent of financial, human and other resources required to conduct any investigations or to implement any corrective or preventive measures is similarly uncertain and could be significant. Such resources may also be difficult for us to secure in a timely manner. Additionally, on June 14, 2024, the Securities and Exchange Surveillance Commission of Japan (“SESC”) issued and announced a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (“FSA”) take administrative action against our subsidiaries MUFG Bank and Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate. The recommendation was based on the SESC’s findings of, among other things, inappropriate sharing of customer information as well as improper solicitation of business in contravention of the prohibition on engagement by Registered Financial Institutions in securities-related business activities. The SESC’s findings concerned, among other things, the business collaboration among the bank and securities companies and the management of non-public corporate information by the bank and securities companies. In response to the SESC’s recommendation, on June 24, 2024, the FSA issued business improvement orders to MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate under Articles 51-2 and 51 of the Financial Instruments and Exchange Act of Japan. Additionally, the FSA has required MUFG and MUFG Bank to submit reports under Articles 52-31 and 24 of the Banking Act of Japan. In response, on July 19, 2024, MUFG, MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate submitted documents including business improvement plans to the FSA. MUFG, MUFG Bank, Mitsubishi UFJ Morgan Stanley Securities and our securities affiliate are continuing to take actions based on these orders and requirements. On December 16, 2024, MUFG Bank was required by the FSA to submit a report under Article 24 of the Banking Act of Japan with regard to the incident in which a former employee stole customers’ assets from safe deposit boxes. In response, MUFG Bank submitted a report including measures designed to prevent recurrence to the FSA on January 16, 2025. MUFG Bank is continuing to implement the measures and take other actions. 13 Table of Contents Failure to safeguard personal and other confidential information may result in liability, reputational damage or financial losses. As our operations expand in volume, complexity and geographic scope, we are exposed to increased risk of confidential information in our possession being lost, leaked, altered or falsified as a result of human or system error, misconduct, unlawful behavior or scheme, unauthorized access or natural or human-caused disasters. Our information systems and information management policies and procedures may not be sufficient to safeguard confidential information against such risks. As a financial institution in possession of customer information, we are obligated to treat personal and other confidential information as required by the Act on the Protection of Personal Information, the Act on the Use of Personal Identification Numbers in the Administration of Government Affairs, the Banking Act and the Financial Instruments and Exchange Act of Japan, as well as other similar laws and regulations of other jurisdictions in which we operate. 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. We may have to provide compensation for economic loss and emotional distress arising out of a failure to protect such information. 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. Moreover, any loss, leakage, alteration or falsification of confidential information, or any malfunction or failure of our information systems, may result in significant disruptions to our business operations or plans or may require us to incur significant financial, human and other resources to implement corrective measures or enhance our information systems and information management policies and procedures. Our operations are highly dependent on our information, communications and transaction management systems and are subject to an increasing risk of cyber-attacks and other information security threats and to changes in the business and regulatory environment. Our information, communications and transaction management systems, which include not only our own proprietary systems but also those third-party systems that are provided for our use or to which our systems are connected, constitute a core infrastructure for our operations. The proper functioning of our information, communications and transaction management systems is critical to our ability to efficiently and accurately process a large volume of transactions, ensure adequate internal controls, appropriately manage various risks, and otherwise service our clients and customers, particularly in the current business environment with increasing dependence on remote or online networks and our strategy to promote digitization. Cyber-attacks, unauthorized access and computer viruses are becoming increasingly more sophisticated and more difficult to predict, detect and prevent. For instance, our bank internal financial transaction systems or automatic teller machines may become the target of cyber-attacks for monetary gain and other purposes, and our bank internal information systems have in the past, and may in the future, become the target of confidential information theft. In addition, our websites or customer internet banking systems have in the past, and may in the future, become the target of cyber-attacks for political, geopolitical and other purposes. These cyber threats, including through use of artificial intelligence, or AI, quantum technology, and other emerging or new technologies, as well as our failure to appropriately and timely anticipate and deal with such threats, system and human errors, inability of third-party telecommunications, cloud and other service providers and vendors to maintain required services, vulnerabilities and other issues associated with open-source software, external library and other software supply chains, and changes associated with emerging or new technologies such as AI and quantum technology, or in response to industry, regulatory and other developments, could cause disruptions to, and malfunctions of, information, communications and transaction management systems and result in fraud, including identity theft and bypassing of verification controls, or other misconduct, unauthorized transactions, unintended releases of confidential and proprietary information stored in or transmitted through the systems, interruptions in the operations of our clients, customers, counterparties and service providers, and deterioration in our ability to service our clients and customers. In addition, our banking and other transaction management systems may not meet all applicable business and regulatory requirements in an environment where such requirements are becoming increasingly sophisticated and complicated. Furthermore, our system development or improvement projects, many of which are critical to our ability to operate in accordance with market and regulatory standards and some of which we are required to implement in conjunction with upgrades made to interbank or other third-party systems to which our systems are connected, may not be completed as planned due to the complexity and other difficulty relating to such projects or uncertainty and unpredictability surrounding governmental policy-making and regulatory developments relating to AI, quantum technology, digital assets, and other products and services using blockchain and other emerging or new technologies. Moreover, our cybersecurity risk management framework and practices may be found inadequate, particularly in light of expanding regulatory requirements and growing market expectations, including those relating to incident reporting and risks associated with our use of third-party services and systems. These consequences could result in financial losses, including costs and expenses incurred in connection with countermeasures and improvements as well as compensation to affected parties, lead to regulatory actions, diminish our clients’ and customers’ satisfaction with and confidence in us, and harm our reputation in the market, which could in turn adversely affect our business, financial condition and results of operations. Moreover, significant financial, human and other resources may be required to design, implement and enhance measures to manage cyber and information security risks and comply with regulatory requirements. 14 Table of Contents 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 United States and other countries to avoid doing business with us or investing in our securities. We, through our subsidiaries, engage in limited business activities with entities in or affiliated with Iran, including transactions with counterparties owned or controlled by the Iranian government, and our commercial banking subsidiary has a representative office in Iran for information gathering purposes only. The U.S. Department of State has designated Iran and other countries as “state sponsors of terrorism,” and U.S. law generally prohibits U.S. persons from doing business with such countries. We currently have limited business activities conducted with entities in or affiliated with such countries. Such business activities are conducted in accordance with our policies and procedures designed to ensure compliance with regulations applicable in the jurisdictions in which we operate and with exemptions and general licenses available under U.S. law. We have transactions with counterparties in or affiliated with countries designated as state sponsors of terrorism which consist of receiving deposits or holding assets on behalf of individuals residing in Japan who are citizens of countries designated as state sponsors of terrorism and processing payments to or from entities in or affiliated with these countries on behalf of our customers. These transactions do not have a material impact on our business or financial condition. For a further discussion of transactions required to be disclosed under the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—United States—Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934.” We are aware of initiatives by U.S. governmental entities and non-government entities, including 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, counter-parties or investors in our securities. In addition, depending on socio-political developments, our reputation may suffer due to our transactions with counterparties in or affiliated with these countries. The above circumstances could have an adverse effect on our business and financial condition. Global financial institutions, including us, have become subject to an increasingly complex set of sanctions laws and regulations in recent years, and this regulatory environment is expected to continue. Moreover, the measures proposed or adopted vary across the major jurisdictions, increasing the cost and resources necessary to design and implement an appropriate global compliance program. The U.S. federal government and some state governments in the United States have enacted legislation designed to limit economic and financial transactions with Iran by limiting the ability of financial institutions that may have engaged in any one of a broad range of activities related to Iran to conduct various transactions in the relevant jurisdictions. In addition, in May 2018, the United States withdrew from participation in the Joint Comprehensive Plan of Action. Under subsequently issued executive orders, the United States may impose secondary sanctions against non-U.S. persons who engage in or facilitate a broad range of transactions and activities involving Iran. The Japanese government has also implemented a series of measures under the Foreign Exchange and Foreign Trade Act, such as freezing the assets of persons involved in Iran’s sensitive nuclear activities and development of nuclear weapon delivery systems, and our most recently modified policies and procedures take into account the current Japanese regulatory requirements. We continue to implement measures to enhance our policies and procedures to comply with such legislative and regulatory requirements. There remains a risk of potential regulatory action against us, however, if regulators perceive the modified policies and procedures not to be in compliance with applicable legislation and regulations. Legal and regulatory changes could have a negative impact on our business, financial condition and results of operations. As a global financial services provider, our business is subject to ongoing changes in laws, regulations, rules, policies, accounting standards or methods, voluntary codes of practice and interpretations in Japan and other markets where we operate. Major global financial institutions currently face an increasingly stricter set of laws, regulations and standards as a result of emerging or new technologies, political and geopolitical developments, environmental, social and governance concerns, efforts to combat increasingly sophisticated criminal activity, the increasing importance of ensuring system security, and other concerns enveloping the global financial sector. There is also growing political pressure to demand even greater capital and liquidity requirements and internal compliance and risk management systems following several high-profile scandals and risk management failures in the financial industry. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.” The laws, regulations and standards that apply to us are often complex and, in many cases, we must make interpretive decisions regarding the application of such laws, regulations and standards to our business activities. Future developments or changes in laws, regulations, rules, policies, accounting standards or methods, voluntary codes of practice, interpretations and their effects are expected to require greater capital, human and technological resources as well as significant management attention, and may require us to modify our business strategies and plans. We may be unable to enhance our compliance management programs and systems, which, in some cases, are supported by third-party service providers, as required or planned. Our failure or inability to comply fully with applicable laws and regulations may lead to penalties, fines, public reprimands, damage to our reputation, issuance of business improvement and other administrative orders, enforced suspension of operations, our inability to obtain regulatory approvals for future strategic initiatives or, in extreme cases, withdrawal of authorization to operate, adversely affecting our business and results of operations. 15 Table of Contents Because of our loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan may further adversely affect our financial results. We have a large loan portfolio in the consumer lending industry as well as large shareholdings in subsidiaries and equity method investees in the consumer finance industry. Our domestic loans to consumers amount to approximately one-tenth of our total outstanding loans. Of this amount, the consumer loans provided by Mitsubishi UFJ NICOS, Co., Ltd., which is our primary consumer financing subsidiary, were ¥557.5 billion as of March 31, 2026, compared to ¥498.7 billion as of March 31, 2025. Mitsubishi UFJ NICOS’s consumer loan portfolio has been adversely affected by a series of legislative reforms and judicial decisions that were put in place in Japan through 2010, which have negatively affected the domestic consumer lending industry. These legal developments effectively reduced the maximum rate of interest that may be charged on consumer loans from 29.2% per annum to 15 to 20% per annum depending on the amount of loan principal, while leaving interest payments previously made in excess of the reduced maximum permissible interest rate, which is commonly referred to as “gray-zone interest,” generally recoverable. Following these legal developments and other industry developments, Mitsubishi UFJ NICOS revises its estimate of allowance for repayment of excess interest by updating management’s future forecast semi-annually to reflect updated reimbursement claims information and other data. As of March 31, 2024, 2025 and 2026, we had ¥7.1 billion, ¥5.4 billion and ¥11.4 billion of allowance for repayment of excess interest, respectively. These developments have adversely affected, and these and any future developments may further adversely affect, the operations and financial condition of our subsidiaries, equity method investees and borrowers which are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan portfolio. For further information, See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan.” Damage to our reputation could harm our businesses. We are one of the leading financial institutions in Japan and one of the handful of G-SIBs in the world, and we aim to be the world’s most trusted financial group. Our ability to conduct business is indispensably dependent on the trust and confidence of our customers as well as local and international communities. Our reputation is critical in maintaining our relationships with stakeholders, including customers, investors, regulators, workforce, and the general public. If our reputation is damaged by negative perceptions of us, particularly in the rapidly changing and increasingly diversifying regulatory and market environment in which we operate, it may result in impairment of our corporate brand, loss of our existing or prospective customers or investors, or increased public or regulatory scrutiny, and may adversely affect our business, financial condition, and results of operations. We are exposed to risks arising from our reliance upon third party vendors and service providers. We engage in a wide array of financial and other related operations both domestically and internationally, relying on services and systems of external third-party vendors and service providers for our provision of various financial services, development and maintenance of our various systems, and certain other operations, while outsourcing certain operations to third-party vendors and service providers. We expect to become increasingly reliant on third-party vendors and service providers amid the recent rapid advancement of digitalization. Our measures designed to manage risks associated with such vendors and service providers, including through the implementation of measures designed to assess and monitor third party risks in accordance with internal rules adopted for third party risk management, may not effectively prevent or timely remediate all adverse consequences resulting from such risks. Incidents such as cyber-attacks affecting third parties as well as information leakage, unauthorized use of data, failure to comply with laws and regulations, and other misconduct on the part of a third party may result in a loss of confidence in us, our becoming subject to regulatory sanctions, or our incurring additional costs to deal with the consequences of these incidents. Furthermore, our operations may be adversely affected by a failure of a third party’s system or unavailability of or delay in a third party’s services resulting from a natural disaster or other causes. We are exposed to risks related to the development and use of AI by us and others. We continue to develop, make available to customers, and use AI for customer service improvement, operations optimization, risk management enhancement and other increasingly broader purposes and in increasingly sophisticated and complex manners. Although we have established and implemented, and continue to enhance, a controls framework and other measures designed to ensure appropriate, reliable and secure use of AI, these measures may not be sufficient to fully mitigate all risks associated with AI. For example, such risks include inaccurate, inappropriate or biased outputs generated through the use of AI, as well as unintended or undetected faulty decision-making or processing resulting from improper use or management of, and other causes associated with, AI. Additionally, data exfiltration or leakage, infringement of rights of others, cyber-attacks and other incidents involving improper use or misuse of AI technologies may occur due to issues associated with training data for, input information into or output information from, AI tools we use, or AI models, systems or services provided by third party vendors. Furthermore, we may become increasingly more reliant on a limited number of third party vendors, cloud infrastructures, or models for our AI tools and, as a result, our business and systems operations may become significantly more vulnerable to disruptions and other problems caused by incidents adversely 16 Table of Contents affecting such vendors, infrastructures and models. In addition, laws, regulations, guidelines, and supervisory expectations relating to AI may continue to develop and evolve in ways that vary and can also be inconsistent within and across jurisdictions. Due to such regulatory uncertainty, we may be unable to timely and adequately respond to changes in the regulatory environment. As a result of any of the foregoing factors, we may be exposed to increased risks related to improper decision-making, data loss and information leakage, infringement of rights of others, system failures, cyber-attacks, reliance on third party vendors, including vendor concentration and irreplaceability, and regulatory changes, which may have a material and adverse impact on our business, financial condition, and operating results. Risks Related to Owning Our Shares It may not be possible for investors to effect service of process within the United States upon us or our directors or management members, or to enforce against us or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws. We are a joint stock company incorporated under the laws of Japan. Almost all of our directors or management members reside outside the United States. Many of our assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to enforce, against us or these persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws. We believe there is doubt as to the enforceability in Japan, in original actions or in actions brought in Japanese courts to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state securities laws mainly because the Civil Execution Act of Japan requires Japanese courts to deny requests for the enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the Civil Execution Act, including: •the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions; •proper service of process be made on relevant defendants, or relevant defendants be given appropriate protection if such service is not received; •the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan; and •there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final judgment of a Japanese court. Judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws may not satisfy these requirements. Risks Related to Owning Our American Depositary Shares As a holder of American Depositary Shares, you have fewer rights than a shareholder of record in our shareholder register since you must act through the depositary to exercise these rights. The rights of our shareholders under Japanese law to take actions such as voting, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal rights are available only to shareholders of record. Because the depositary, through its custodian, is the record holder of the shares underlying the American Depositary Shares, or ADSs, only the depositary can exercise shareholder rights relating to the deposited shares. ADS holders, in their capacity, will not be able to directly bring a derivative action, examine our accounting books and records and exercise appraisal rights. We have appointed The Bank of New York Mellon as depositary, and we have the authority to replace the depositary. Pursuant to the deposit agreement among us, the depositary and a holder of ADSs, the depositary will make efforts to exercise voting or any other rights associated with shares underlying ADSs in accordance with the instructions given by ADS holders, and to pay to ADS holders dividends and distributions collected from us. However, the depositary can exercise reasonable discretion in carrying out the instructions or making distributions, and is not liable for failure to do so as long as it has acted in good faith. Therefore, ADS holders may not be able to exercise voting or any other rights in the manner that they had intended, or may lose some or all of the value of the dividends or the distributions. Moreover, the depositary agreement that governs the obligations of the depositary may be amended or terminated by us and the depositary without ADS holders’ consent, notice, or any reason. As a result, ADS holders may be prevented from having the rights in connection with the deposited shares exercised in the way ADS holders had wished or at all. ADS holders are dependent on the depositary to receive our communications. We send to the depositary all of our communications to ADS holders, including annual reports, notices and voting materials, in Japanese. ADS holders may not receive all of our communications with shareholders of record in our shareholder register in the same manner or on an equal basis. In addition, ADS holders may not be able to exercise their rights as ADS holders due to delays in the depositary transmitting our shareholder communications to ADS holders. For a detailed discussion of the rights of ADS holders and the terms of the deposit agreement, see Exhibit 2(c) to this Annual Report. 17 Table of Contents