Pre-merger structure KOKUSAI Securities Tokyo-Mitsubishi Securities Tokyo-Mitsubishi Personal Securities Issei Securities MTFG MTBC BTM MTFG MTBC BTM Post-merger structure Mitsubishi Securities
vide customized trust banking services to MTFG’s extensive client base.
This merger has created a solid platform for delivering best-of-class trust banking capabilities that meet the market’s evolving needs. The new MTBC is already working closely with BTM to deliver products to the latter’s massive customer base.
Securities integration
During fiscal 2001, notable progress was made toward the planned September 2002 merger and integration of KOKUSAI Securities, Tokyo-Mitsubishi Securities, Tokyo-Mitsubishi Personal Securities, and Issei Securities. MTFG is working closely with the four institutions to effect their seamless transition to become Mitsubishi Securities Co., Ltd., a com-prehensive and leading provider of securities and invest-ment banking services in Japan.
S
ince its establishment in April 2001, MTFG and its subsidiaries have implemented various initiatives fo-cused on raising the Group’s overall competitiveness and on enhancing its long-term profit growth.There is much to report concerning the Group’s progress in streamlining its operational structure, in expanding its innovative and successful range of products and services, and in maximizing synergies through the integration of its member entities.
Strengthening MTFG’s operational
structure
Trust banking
In October 2001, MTFG smoothly completed the merger of its trust banking entities—MTBC, Nippon Trust Bank, and Tokyo Trust Bank—to form a renewed MTBC. The resulting institu-tion combines the individual strengths of its predecessors to offer leading-edge products and services to corporations and individuals. MTBC is focused on maximizing synergies among its operations and has created a dedicated division to achieve these aims. The division’s responsibilities include the supervi-sion of 11 new MTBC sales units in 16 locations, which
opened in Nagoya, followed by a second six months later in Okayama. BTM and MTBC plan to open a third branch, in Kawasaki, in September 2002.
Private banking
Private banking is a rapidly growing sector in Japan because of the evolving investment needs of the nation’s high net worth individuals. In February 2002, MTFG member banks BTM and MTBC, together with KOKUSAI Securities, announced their plan to establish Mitsubishi Tokyo Wealth Management (Switzerland), Ltd., in Geneva. This company was subsequently established in July 2002. The new company’s subsidiary in Japan, Mitsubishi Tokyo Wealth Management Securities, Ltd., will make its debut in August 2002 and will specialize in services for high net worth individuals. These new companies draw on the know-how in private banking services amassed by BTM in Switzerland, on KOKUSAI’s experience in providing family office services to high net worth individuals, and on MTBC’s capabilities in trust asset management services. In so doing, they offer wealthy clients sophisticated asset management and adminis-trative solutions. They also offer the advantages and expertise of Swiss-style private banking.
Mitsubishi Securities will form a cornerstone of MTFG’s growth and profitability strategy. The new firm will harness the finest capabilities of its predecessor firms—securities brokerage, na-tionwide distribution, underwriting, and financial solutions structuring and advisory—to provide a full range of innovative financial solutions from a single source. Three policies form its foundation: to provide a wide range of high-quality services; to emphasize trust and contribute to building the financial assets of individuals; and to have strong, effective, and trans-parent management.
Trust agency agreement and joint
banking branches
During the period under review, MTBC received regulatory approval to appoint BTM as its trust agency. This enabled BTM to begin offering trust agency services to its large corporate and individual client base. In April 2002, BTM began providing seven types of services for corporate clients through its nation-wide offices. These services encompass pension trusts, se-curities trusts, special-purpose trusts for treasury stock, retirement benefits trusts, monetary claims trusts, real estate management/disposal trusts, and stock transfer agency services.
MTBC was furthermore granted regulatory approval to offer trust agency services to individual customers through BTM, its trust agency. In May 2002, MTBC and its trust agency, BTM, began marketing Package Trust, a performance-based and jointly operated designated money trust. Package Trust enables individuals to invest in Japanese government bonds and, through the use of derivatives, in leading corporations. It was introduced at BTM’s head office and 31 of its domestic branches and simultaneously marketed by MTBC.
Another joint initiative of BTM and MTBC was the launching of
In June 2002, after the close of fiscal 2001, BTM and MTBC joined Meiji Life Insurance Company, The Tokio Marine and Fire Insurance Co., Ltd., and Mitsubishi Estate Company, Limited, in founding Diamond Private Office Co., Ltd. This new financial consulting firm leverages the expertise and know-how of its
advisory services, including services related to asset inheritance and the efficient utilization of real estate.
Consumer credit
BTM and MTBC teamed in fiscal 2001 with leading consumer credit companies Acom Co., Ltd., DC Card Co., Ltd., and JACCS Co., Ltd., to establish Tokyo-Mitsubishi Cash One Ltd. The new company launched operations in March 2002 and offers unsecured card loans to individual borrowers who access its services through the Internet, telephone, and facsimile. As of the end of May 2002, it dispensed cash through a nation-wide network of more than 9,000 ATMs and cash dispensers operated by BTM, MTBC, Acom, DC Card, and others.
A new Polish office extends the BTM Group‘s reach.
Striving for global growth
BTM in Poland
In April 2002, BTM launched an office in Warsaw, Poland, through its subsidiary Bank of Tokyo-Mitsubishi (Holland) N.V. Bank of Tokyo-Mitsubishi (Polska) Spolka Akcyjna operates under a full banking license and offers a broad array of financial services. These include deposits and loans, cash management services, and foreign exchange transactions between the Polish zloty and the Japanese yen, the Euro, and the U.S. dollar. BTM sees significant growth potential in Poland’s large population and the bolstered financial opportu-nities arising from the nation’s impending entry into the Euro-pean Union. BTM is the only Japanese bank with a presence in central and eastern Europe.
UNBC
BTM owns 67.5% of UnionBanCal Corporation (UNBC), a pub-licly traded commercial bank holding company listed on the New York Stock Exchange. As of June 30, 2002, Union Bank of California, N.A., UNBC’s bank subsidiary, was the third largest commercial bank in California based on total assets and total deposits.
Defined contribution consulting
Defined contribution (DC) plans were introduced in Japan in October 2001, and strong growth is anticipated in this sector. In preparation for DC plan activity, MTBC and BTM partici-pated in the launch of Defined Contribution Plan Consulting of Japan Co., Ltd., in March 2001. The new entity, founded in cooperation with Meiji Life Insurance Company and The Tokio Marine and Fire Insurance Co., Ltd., promotes DC plans so that MTBC and BTM may be able to capitalize on the strong growth potential of these plans.
UNBC has extended its retail product line to include insur-ance services and refined its retail branch network. With its November 2001 acquisition of Armstrong/Robitaille Busi-ness and Insurance Services, one of the top 100 insurance brokers in the United States, UNBC offers an extensive ar-ray of cost-effective risk management services and insur-ance products to corporate and retail customers. In late 2001, UNBC reached a definitive agreement to acquire First Western Bank, which operates a network of seven branches in southern California.
Investment banking
Derivatives
BTM’s derivative operations continue to be highly rated in league tables. BTM was selected Derivatives House of the Year in the Japanese derivatives market for 2001 by Asia Risk magazine, the second consecutive year it has won the prestigious annual award. BTM is highly regarded for its leadership in sophisticated instruments, such as weather and credit derivatives.
Securitization
Securitization remains another key area of strength for MTFG and its subsidiaries. In fiscal 2001, BTM held ¥2.5 trillion of outstanding asset-backed commercial paper, making it one of the world’s largest sponsors of commercial paper. BTM also arranged one of Japan’s largest mortgage securitizations, val-ued at ¥186 billion, and its subsidiary in London, Tokyo Mitsubishi International plc, was the first Japanese financial institution to participate in the U.K. residential mortgage mar-ket, undertaking a £390 million securitization transaction. In addition, fiscal 2001 saw MTBC team with a leading U.S. investment bank to successfully structure and place Japan’s
first nonperforming loan securitization to feature a trust banking scheme.
Syndicated loans
In fiscal 2001, BTM arranged ¥2.3 trillion of syndicated loans in the Japanese market, including a ¥64.5 billion deal jointly arranged with MTBC for a major nonferrous metals company. BTM was also mandated lead arranger of core syndicated loans for National Grid and for France Telecom in Europe, and in the United States it joint lead managed an M&A-related syndicated loan for Weyerhaeuser. BTM is one of the world’s leading syndication houses, with operations based in Tokyo, New York, London, Hong Kong, and Singapore, and intends to further strengthen its global business. International Financing
Review magazine ranked BTM 12th in its global syndicated
loans league table for 2001.
Structured finance
BTM’s structured finance business also received strong recogni-tion during the year. BTM won the Bank of the Year award from Project Finance International magazine in recognition of its business achievements in Europe, the Middle East, and Af-rica. The bank took a lead role in numerous major projects during the period, among them an A$900 million financing for the acquisition of coal mine interests in Australia.
Corporate advisory services
In fiscal 2001, BTM’s M&A teams in Tokyo, New York, and Singapore continued to work closely with their strategic partners in the United States and the United Kingdom to offer top-of-the-line advisory services to MTFG’s Japanese and non-Japanese clients. Leveraging its domestic and its cross-border capabilities, BTM worked on several notable transactions during the period. These included the
companies and a Japan-based management buyout conducted in cooperation with a private equity fund.
Domestic bond offerings and placements
During the period under review, BTM acted as either chief com-missioned company for bondholders or as fiscal agent in 377 public offerings and private placements totaling ¥1.59 trillion. It also played an active role in the rapidly growing public utility bond sector, handling 37 issues valued at ¥2.75 trillion—a year-on-year increase of 40% and a jump in BTM’s market share to approximately half of the domestic public utility bond market. Tokyo Mitsubishi Securities (TMS), meanwhile, lead managed 12.2% of domestic corporate bond issues in fiscal 2001, ranking it fourth among securities companies. Dow Chemical’s five-year Samurai bond issue, which TMS joint lead managed, was named Nikkei Bonds & Financial Weekly magazine’s deal of the year.
Treasury and commercial banking
Foreign exchange trading
Foreign exchange related products and services are a com-petitive advantage of MTFG. BTM is a pioneer in the Tokyo foreign exchange market and continues to be recognized for its high level of efficiency and reliability in treasury-related products and services. It was ranked number one in that regard in the 2001 Euromoney Tokyo FX poll—the second consecutive year it has won the award.
MTBC’s Web Site for Fund Forex Trading Total Support Service (WFTS) is a comprehensive Web-based forex service for speci-fied money trust and investment trust funds. That makes it possible for corporate clients, such as investment advisors, to automatically execute trade orders and foreign exchange
con-tracts on-line. Launched in March 2001, WFTS saw its client base expand rapidly during the period under review.
BTM-GCMS
BTM’s Global Cash Management Service (BTM-GCMS) is de-signed to serve as an efficient and reliable electronic banking system for customers with global cash management needs. Leveraging the latest Web technology, BTM-GCMS enables customers to gain easy access to their account information worldwide and to send instructions for money transfers from their overseas accounts using their own PCs. BTM started offering the service outside Japan in May 2000. In fiscal 2001, BTM further introduced the service to its customers in Shanghai, Ho Chi Minh City, Hanoi, and Beijing. The sus-tained success of BTM-GCMS is reflected in its growing cor-porate clientele, which numbered in excess of 1,200 as of March 31, 2002.
SQUET and BizSTATION for domestic
corporate customers
BTM is vigorously growing its Internet-based services for domestic corporate clients. SQUET, a business portal intro-duced in June 2002, provides economic news, market up-dates, and business information to corporate clients. In autumn 2002, BTM will launch BizSTATION, technology that will offer full Web-banking services and state-of-the-art communications security and data encryption facilities. By leveraging advanced technology, BTM seeks to significantly expand its on-line client contact in information dissemination, financial consultation, loan applications, and more.
Shareholder services
Shareholder services are evolving through the use of IT, and MTBC is a leader in this area. The bank ensures that wherever possible it fully leverages technology to enhance service. To
address a recent revision to Japan’s Commercial Code, which authorizes the application of technology for certain share-holder meeting procedures, MTBC developed a system that lets shareholders exercise their voting rights through the Web. The bank plans to offer further technological innovations.
Asset management and custody
operations
Global custody
In October 2001, BTM introduced CASTLE, a Web-based ser-vice that underlines the bank’s leadership in global custody and securities administration. CASTLE, of which BTM (Luxembourg) S.A. is the main custodian, offers clients diversified services, including custody, securities lending, cash management, and securities clearance services. In November 2001, BTM success-fully launched yen custody systems that are in compliance with ISO 15022, the new international standard for securities trading information.
STP systems
In September 2001, MTBC became the first domestic institu-tion to establish a straight-through processing (STP) system for Japanese stocks. The globally operational system boasts en-hanced speed and accuracy in prospective T+1 settlement and improves the overall efficiency of MTBC’s stock management business. In February 2002, MTBC also implemented an STP system for domestic bonds.
BTM, meanwhile, enhanced its system for pre-settlement matching at the Japan Securities Depository Center Inc. in January 2002. This is an efficient matching system that meets an STP infrastructure prerequisite of realizing T+1.
Corporate pensions
MTBC consolidated its leadership in the management of do-mestic corporate pension trusts in fiscal 2001. As of March 31, 2002, MTBC managed ¥5.3 trillion in employees’ pension funds and ¥2.2 trillion in tax-qualified pensions. MTBC is top in the pension industry in Japan, managing 15%, or ¥12.9 tril-lion, of Japan’s ¥81 trillion in corporate pension assets.
Master Trust Bank of Japan
In May 2002, MTBC transferred the sum of its trust assets to Master Trust Bank of Japan Ltd. (MTBJ), which was jointly established in May 2000 by MTBC, Nippon Life Insurance Company, The Toyo Trust & Banking Co., Ltd. (now UFJ Trust Bank Limited), Meiji Life Insurance Company, and Deutsche Bank. Further asset transfers from major institutions are anticipated, including from UFJ Trust Bank Limited, bringing MTBJ’s assets to an expected ¥100 trillion in the near future. MTBC benefits from this entity’s effective pooling of asset ad-ministration resources and large-scale IT investment.
Real estate business
MTBC continues to build on its established strength in real estate related services. Its Real Estate Business Group works closely with its Corporate Finance Business Unit to add to MTBC’s diverse services, which span real estate securitization, development, management, appraisal, brokerage, custody, and advisory. Already the main player in Japan’s real estate industry, MTBC extended its dominance in fiscal 2001, record-ing over ¥1 trillion in real estate related assets in custody at year-end.
Retail banking
Customer access
BTM’s Tokyo-Mitsubishi Direct, a 24-hour banking service, con-tinued to make strong headway during the fiscal year under review. An augmented range of financial services—offered by telephone, Internet, and mobile Internet—has succeeded in attracting more than 1.37 million customers as of the end of June 2002. Another service that improves access to financial services is the nationwide network of E-net ATMs set up by BTM, MTBC, and other banks for the convenience of their customers. Recent aggressive network expansion had increased the number of ATMs in convenience stores to 4,151 as of June 30, 2002. BTM customers were also able to access 2,189 ATMs located in Japan’s Lawson convenience store network as of the same date.
Life Plan Consulting
In July 2001, BTM introduced Life Plan Consulting desks in 38 of its domestic branches. The desks are designed to provide advice on borrowing and asset management plans geared to individuals’ life stages. Life Plan Consulting desks are now available in 111 BTM branches, or approximately half of BTM’s domestic branch network. Customers benefit from a range of financial planning simulations that includes analyses of lifetime projected cash flow, savings needs, and other critical data.
Main Bank sogo service
BTM’s comprehensive Main Bank sogo service, introduced in January 2001, has recorded sustained success since its launch. Main Bank focuses on the diverse needs of retail customers. It aims to serve as a banking platform that provides lifetime
sup-port for customers’ financial needs. As such, it offers a range of benefits. These encompass waived charges for ATM ser-vices, including those provided at convenience stores, and lower charges on loans, depending on the individual’s transac-tion status with the bank. The service has strong appeal among retail customers despite BTM’s introduction of account-ing fees for balances under ¥100,000, a first for a Japanese bank. Main Bank was awarded the Nikkei Award for Superior Products and Services by Nihon Keizai Shimbun, Inc., and boasted over one million account holders as of early May 2002.
Excellent Club
MTBC’s Excellent Club also continues to meet with the ap-proval of retail banking customers. The membership-only service targets high net worth households with attractive financial benefits—such as reduced ATM charges, better interest rates, and real estate transaction and inheritance support—and with nonfinancial benefits, including consul-tations on medical and nursing care and travel arrangements. As of the end of fiscal 2001, Excellent Club boasted over 230,000 household memberships and MTBC is continuing to seek ways to enhance the attraction of this service.
Excellent Club offers high net worth individuals a range of targeted services.
Testamentary and inheritance services
MTBC is likewise enhancing its testamentary trust and inherit-ance-related consulting capabilities. To its established consult-ing expertise in will custody and execution and in inheritance advice, MTBC has added an estate administration service that analyzes and simulates possible estate management models and that offers solutions tailored to the needs of individual customers.
Operational improvements
Broadband network
As part of an initiative to bolster its overall IT infrastructure, BTM has begun implementing a broadband network that is scheduled to link its domestic branch operations by March 2003. The network, which employs fiber-optic technology, will represent the first wide-area Ethernet network used by a Japanese city bank and an increase in network speed of up to 24 times. It is expected to revolutionize BTM’s business processes, markedly reducing network operat-ing costs and increasoperat-ing client service efficiencies.
ognition of the growing threat that improper waste disposal poses to the environment. Furthermore, MTBC is aggressively implementing initiatives to significantly reduce the amount of pa-per used at its various opa-perations.
And following earlier initiatives, BTM began working closely with Japan’s En-ergy Service Company (ESCO) to imple-ment energy-saving measures at BTM’s head office and another facility in April 2002. BTM believes that it is the first financial institution in Japan to work with ESCO.
MTFG will continue to contribute in every way possible to activities that benefit the lives of people and commu-nities around the world.
foreign students through its scholarship foundation, which has been in existence for almost 50 years.
BTM and MTBC also make annual financial donations to Japanese public institutions and charities, such as wel-fare institutions for children. Overseas, BTM runs a Matching Gift Program whereby employees’ eligible private con-tributions are matched yen for yen with funds from the bank. Financial support from both banks in fiscal 2001 included volunteer funds assisting those most affected by the tragic events of September 11 in the United States.
Environmental programs, too, are of concern to MTFG. MTBC has long insti-tuted recycling in its operations in
rec-Contributing to Society
MTFG and its employees participate in diverse charitable and volunteer activi-ties that serve the needs of the global regions in which the Group operates. In fiscal 2001, an increasing number of our employees, both in Japan and abroad, took part in volunteer activities, reflecting MTFG’s strong commitment to working closely with the communi-ties with which it coexists. These activi-ties focus on financial and nonfinancial contributions.
Scholarships are important in pro-moting educational and cultural ex-change between Japan and its neighboring countries. BTM offers scholarships to Asian students, while MTBC actively supports Japanese and