# MUFG Securities EMEA plc X-17A-5 (2026-04-24) — Broker-dealer annual report - Company: MUFG Securities EMEA plc - Form: X-17A-5 - Filed: 2026-04-24 - Period: 2025-12-31 - Accession: 0001597694-26-000010 - CIK: 1597694 - Material weakness: No - Auditor: Deloitte LLP - Auditor location: London, X0 - Contact: Gareth Evans - Phone: 02075774839 - Email: hnaylor@deloitte.co.uk - Website: co.uk Original filing: https://www.sec.gov/Archives/edgar/data/1597694/000159769426000010/MUSE_FS_Dec_25.pdf --- {0}------------------------------------------------ # **Annual report and financial statements 31 December 2025** COMPANY NUMBER: 1698498 **MUFG Securities EMEA plc** A member of MUFG, a global financial group 2025 Mitsubishi UFJ Financial Group ![](_page_0_Picture_3.jpeg) {1}------------------------------------------------ # **Table of Contents** | Strategic Report 3 | | |----------------------------------------------------------------------------|--| | Directors' Report 20 | | | Business and Risk Management Policies 25 | | | Independent auditor's report to the members of MUFG Securities EMEA plc 36 | | | Company income statement 39 | | | Company statement of comprehensive income 40 | | | Company statement of financial position 41 | | | Company statement of changes in equity 42 | | | Notes on Financial Statements 44 | | ![](_page_1_Picture_3.jpeg) {2}------------------------------------------------ # **Strategic Report** The Strategic Report is prepared in accordance with The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2014. ## **Principal activities** MUFG Securities EMEA plc ('MUS(EMEA)' or 'the Company') is the international capital markets subsidiary of Mitsubishi UFJ Securities Holdings Co., Ltd. ('MUSHD'). MUSHD's parent, and MUS(EMEA)'s ultimate holding company, is Mitsubishi UFJ Financial Group, Inc. ('MUFG'). MUS(EMEA) actively trades in fixed income, equity and structured finance products, providing client solutions across primary and secondary markets. The client group includes financial institutions, corporations, supranationals and central banks. The Company primarily supports this client group from its base in London, as well as a wholly owned subsidiary, MUFG Securities (Europe) N.V. ('MUS(EU)'), based in the Netherlands and a Paris branch of that entity. The Company additionally operates a branch in the Dubai International Financial Centre. The principal activities of the Company remain largely consistent with those disclosed in the previous year financial statements. ## **Results** The results for the year are set out on page 39 and the profit for the year, after tax, amounted to £46.6 million (2024: £30.3 million). The financial statements of the Company are prepared in accordance with United Kingdom adopted international accounting standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). #### **Business review and future development** The Company reported operating income of £441.6 million (2024: £402.4 million). 2025 reflected a challenging business environment, marked by heightened geopolitical and trade uncertainty. Shifts in U.S. tariff policy contributed to recurring periods of market volatility and increased concerns regarding the broader macroeconomic outlook. Interest rates remained elevated for longer than anticipated as inflation proved more persistent, delaying the expected easing cycle. Despite these challenges, the Company delivered a year-on-year increase in operating income. Growth in Trading income and higher net fees and commissions more than offset the reduced contribution from net interest income. Trading income was £148.9 million higher than 2024 at £337.8 million. Higher than expected inflation increased pressure on the entity's cost base with a direct impact on current year results. The entity is a meaningful contributor to the MUFG Group and additionally plays a key role in supporting a diversified product range across multiple currencies, catering to a global client base for the Group. Management is focused on the challenges required to operate in an environment where inflation has a direct impact on the cost base and level of client activity. The entity ended the year marginally above revenue expectations. Treasury continued to be a key contributor to revenues as a result of high capital returns with contribution of £84.5 million compared to £87.6 million in the prior year. The annual contribution to net interest income from capital on deposit with the Bank of England reduced to £46.3 million, in line with the reduction of the Bank of England base rate to 3.75% at year end. Capital Markets contributed revenues of £16.0 million compared to £14.4 million in 2024, supported by a pipeline of new primary issuance activity, driven by US dollar and Euro denominated deals. The Rates business was a principal contributor to the entity's performance, benefiting from client-driven activity across interest rate, inflation and cross-currency products as well as several significant structured and derivative transactions, contributing £110 million to revenues compared to £94.8 million in 2024. The Structured Solution business ended the year having contributed revenues of £89.2 million (compared to £75.0 million in 2024), earned primarily through secured funding deals, financing client positions and fee and revenue share agreements with MUFG Bank, Ltd. ('MUFG Bank'). Securities Financing activity had a strong finish to the year with revenues driven by US and European new client activity. Underlying inflationary pressures are a general driver of increases across the expense base. Costs remain tightly controlled as we continue to see upward pressure on business as usual costs driven by inflation, and a number of one-off costs impacting compensation and legal fees expenses. Total operating costs closed at £386.3 million (2024: £380.7 million). The Company remains focused on cost control, with appropriate management tracking of spend, the right-sizing and repositioning of our resource base as well as strong remuneration governance. Collaboration and integration with other entities across the MUFG network, mainly the London branch of another MUFG subsidiary, MUFG Bank represent the platform which enables our ability to deliver comprehensive client solutions by accessing the wider resource base. These solutions include a focus on origination, structuring and distribution across our core corporate banking as well as securities products thereby presenting MUFG as a key financial partner to our clients. On 1st October 2025, the ordinary share holding as well as Additional Tier 1 ('AT1') securities of the Company, were transferred from MUSHD to MUFG Bank, under Project Olympus. ![](_page_2_Picture_22.jpeg) {3}------------------------------------------------ #### **Business review and future development (continued)** On 8 January 2026, MUFG announced its intention to establish a universal bank within the European Union through the merger of MUFG Bank (Europe) N.V. and MUFG Securities (Europe) N.V. Subject to obtaining the necessary approvals, the merger is planned for the 2026/27 fiscal year. This does not affect the financial position as of 31 December 2025. The Company manages and monitors its capital base to ensure that sufficient capital is available to support future business plans, its risk appetite, and to meet regulatory requirements. Revenue results have been achieved whilst maintaining internal Value at Risk ('VaR') metrics within a similar range to the previous year and within limits set by the Board of Directors ('the Board'). These metrics reflect management's focus on client-led revenues and targeted risk taking, with capital deployment and associated risk management applied where appropriate (refer to page 28). The regulatory agenda continues to evolve and the Company continues to respond to change whilst maintaining a strong culture of client service. In this regard, the Company continues to track relevant regulatory announcements. In line with key regulations, specifically Basel III Leverage Ratio requirements, management maintains a framework of leverage-based constraints reflective of both industry norms and the Company's largely high quality, and liquid, balance sheet. The related profitability impact is mitigated through a selective approach to deployment of available capacity. The December 2025 closing Leverage Ratio is 4.1% (December 2024: 4.1%). Management retains a positive outlook, as the Company continues to make progress against its strategic objectives. Management continue to identify opportunities to leverage MUFG's global franchise strength whilst efficiently utilising the Company's capital, infrastructure and staff resources within defined parameters. Deepening relationships with our core clients and a focus on expanding the client coverage across the MUFG network sets firm foundations for the ongoing growth and sustainability of the business model. The year ahead will see the continued focus on servicing of client requirements within controlled limit frameworks, tight control over expenditure as well as continued focus on our people agenda (refer to pages 17 to 19). Additionally, the Company remains committed to the MUFG-wide Environmental and Social Policy Framework with ongoing integration and definition of this policy likely to influence our business in the future (refer to Stakeholder Engagement on page 5 and Climate related financial disclosures from page 8). The Board monitors the results of the Company by reference to various performance and risk based key metrics including: - Revenue metrics: total operating income of £441.6 million (2024: £402.4 million) with a focus on quality of earnings and tracking against revenue plans. - Efficiency metrics: total operating expenses as a percentage of total operating income of 87% (2024: 95%) with a focus on efficient cost deployment. - Profitability metrics: return on equity ('ROE') calculated as profit attributable to owners of the company (refer to page 40), divided by the average of opening and closing total equity excluding Additional Tier 1 ('AT1'), of 2.06% (2024: 1.34%). - Capital metrics: total capital requirements based on Pillar 1 requirements of £745.4 million (2024: £526.0 million) with a focus on optimising capital allocation and drivers of capital requirements. - Risk metrics: total Value at Risk ('VaR'), as defined in the Business and Risk Management section, of £2.94 million (2024: £1.38 million) with a focus on tracking VaR. - Leverage metrics: leverage ratio maintenance above regulatory expectations, as defined in the Business and Risk Management section, of 4.1% (2024: 4.1%) - Headcount metrics: number of employees at December 2025 was 643 (2024: 630) tracked against budgeted levels. #### **Challenges and uncertainties** The Company faces a number of challenges and uncertainties in the normal course of its business. Operational risks are inherent in the Company's business activities and are covered in more detail under Business and Risk Management Policies on pages 25 to 35. Other uncertainties faced by the Company in the course of its business include: liquidity, funding, credit and market risks; the valuation of financial assets and liabilities in volatile markets; exposure to macro-economic and geopolitical uncertainty; changes to regulatory rules and regulatory capital requirements. Volatility in Pound Sterling versus major trading currencies will impact the financial position of the Company due to the predominantly Sterling denominated capital base; this has been embedded in scenario planning as appropriate. Results for the year to 31 December 2025 do not evidence a specific, material, adverse impact on the performance of the Company due to the continued conflict between Russia and Ukraine or that between Israel and Hamas. Whilst certain entities within the MUFG Group are directly exposed to potential losses on strategic investments or client exposures within these countries, MUS(EMEA) does not have any exposure and has suspended country limits. Management has considered and continues to consider the impact of trading with EU counterparties through the company's wholly owned subsidiary. Future considerations to optimise business and trading activity across the EU, with appropriate risk management are considered within the business planning cycle and managed accordingly. MUS(EU) is central to the Group's strategy of continuing to service European Economic Area domiciled clients. MUS(EU) reported a profit for the year ended 31 December 2025 of £3.5 million (December 2024 profit: £8.3 million - refer to 'Share of profit in subsidiary' on page 39). ![](_page_3_Picture_22.jpeg) {4}------------------------------------------------ #### **Going concern** Taking the above into consideration and expected future profitability as evidenced in business plans; capital adequacy and funding availability, including projections which confirm expectations of continued regulatory compliance; the potential for stress scenarios and stress testing results, the Board believes that the Company will have adequate resources in place to continue trading for the foreseeable future. As such, the financial statements have been prepared on the going concern basis. #### **Stakeholder Engagement** MUFG is a global financial services group with a local presence. We are proud to be part of a global network which spans across EMEA, Asia Pacific, and the Americas. MUFG's aim is to create stability and wealth for its clients, and by extension, we support people and communities that rely on those businesses for the jobs and opportunities they provide, and the taxes contributed into the wider economy. Well-functioning societies and economies require well-functioning and trusted financial systems. MUFG seeks to play an active, sustainable and socially responsible role within this so there is an obligation on us to be a responsible business, a business with a purpose beyond what we do as a company, contributing more than profit to society. We believe that regular, proactive and constructive engagement with our stakeholders is central to our sustainable and responsible business model. #### **Our values** Our values are defined by integrity and responsibility, professionalism and teamwork, and challenging ourselves to grow. We will always strive to be fair, transparent, and honest, acting responsibly in the best interest of clients and society as a whole. In this way we will build long term stakeholder relationships and ensure we give back to our communities. Within the organisation, we will respect and promote the diversity of our fellow workers and foster a strong spirit of teamwork, while, at the same time, expecting the highest levels of professionalism. As we challenge ourselves to grow our world-wide business, we adopt a global perspective that allows us to anticipate trends and opportunities for growth. We support this through a responsive and dynamic workplace where everyone can focus on providing outstanding client service and embrace new challenges. # **Section 172 of the Companies Act 2006** Below we set out the section 172(1) factors and supplementary text which specifically addresses these factors. These factors do not exist in isolation and need to be read together. - **The longer term:** As described below, our Directors' decisions are based on long term considerations. We see this as key to our vision to be the world's most trusted financial group. The Group participates in a wide range of initiatives and engagements for which long term considerations are inherent, such as the Principles for Responsible Investment and the Principles for Responsible Banking. - **Our employees:** Please see 'Culture and Workforce Engagement'. • **Our relationships with suppliers, customers and others:** Please see 'Our clients' and 'Suppliers and supplier finance'. - **Our impact on the community and the environment:** Please see 'Our community' and 'Environment (MUFG Taskforce for - Climate-related Financial Disclosure Compliant Statement)'. • **Safeguarding our reputation:** Please see 'Culture and Workforce Engagement'. - **Acting fairly to our shareholders:** We are a wholly owned subsidiary and work closely with our immediate parent and other Group companies to align our interests as a group of companies. The Board takes decisions which are in the long term interests of the Company, its shareholder and its stakeholders. Each Director is personally committed to ensuring that the requirements of section 172 of the Companies Act 2006 are satisfied, and that the interests of our stakeholders are promoted by the Board. Examples of how the Board achieves this include: - Standing agenda items at each Board meeting. For example, the regular CRO's report helps the Board to identify key risks which might impact the business and its stakeholders. - Our annual Board agenda matrix includes certain items which the Board must consider at regular intervals, such as the Company's approach to health and safety. - The Board receives bespoke training on its duties under the Companies Act 2006. - Checking that the business and our people achieve high standards of conduct. The Board is responsible for approving the Company's Risk Appetite Statement annually, which defines and assesses the degree of risk (including conduct risk) the Company is prepared to tolerate to achieve its objectives. Information on the issues and factors which the Directors consider relevant under section 172 is contained in 'Challenges and Uncertainties'. ![](_page_4_Picture_24.jpeg) {5}------------------------------------------------ The Board has identified these categories of key stakeholders of our business: ![](_page_5_Figure_3.jpeg) The following sections of this report detail how we engage with our clients, community and suppliers and our responsibilities towards the environment. A separate report on pages 11 to 13 details our engagement with our workforce. # **Our clients** MUFG's vision is to be the world's most trusted financial group; providing the highest quality service for clients while building sustainable trust with the communities in which we operate. This corporate vision serves as the underlying policy in conducting all of our activities and provides guidelines for all group activities as we grow our business. To achieve this vision, our highest priority is protecting the individual needs of our clients while maintaining a robust organisation that is extremely professional, flexible and responsive. In order to bring the full power of MUFG to our clients, MUFG's corporate banking and securities activities in EMEA have been integrated enabling the product expertise and corporate loan deal flow of MUFG Bank to be combined with the structuring and distribution capabilities of the MUFG Securities international platform. This means we are able to optimise the outcomes for both our corporate and institutional investor client bases by leveraging an integrated end-to-end origination to distribution model. Activity across these integrated businesses is overseen by our Regional CEO for EMEA, CEO of MUSE and the integrated EMEA Management Committee. The Board of Directors plays a key role in shaping and overseeing the delivery of this strategy. Our performance and success on behalf of our clients have been recognised in a variety of industry titles over the past year. # **Highlights from 2025 include:** - MUFG was named Lender of the Year at the Tamarindo Wind Investment Awards 2025 for leading financings including Inch Cape and Revolution Wind. - MUFG was awarded Best Dynamic Discounting Solution by Global Finance in 2025, recognising MUFGs innovative approach to supply chain finance. - MUFG received Bank of the Year 2024 at the Proximo Industry Choice Awards, reinforcing its global leadership in structured finance. - MUFG received the Innovation & Excellence Award at the Treasury Management International (TMI) Technology Innovation Awards 2025, for its cloud-based Accounts Receivable Platform. A solution that accelerates cash flow, unlocks liquidity, and helps clients optimize working capital through innovative receivables management. - MUFG was recognised in multiple successes at the Global Banking & Markets Saudi Arabia Awards. In total, MUFG earned recognition across 9 categories, underscoring our strong capabilities and deep expertise in the Middle East region. - MUFG received the Best Dynamic Discounting Award globally, showcasing innovation in working capital solutions. - MUFG was ranked as number one global infrastructure and global project finance mandated lead arranger (MLA) by both value and deal count in IJGlobal's Infrastructure and Project Finance League Table Report for 2024. - MUFG was named Global Debt House at the PFI Awards, recognising its strength and consistency in delivering complex financing solutions. - MUFG was named Best Institutional Provider of Fund Finance in the EMEA region at the Global Capital Syndicated Loan Awards 2024. - MUFG was a silver winner in the Volunteering Excellence category at OnHand 2025 Impact Awards. This recognition reflects MUFG's active employee volunteering programme which sees over 2000 employees take part in initiatives every year. # **Community** # **Our community** Our Corporate Social Responsibility (CSR) strategy supports MUFG's vision to become the world's most trusted financial group. Our CSR programme enables us to actively and flexibly respond to the needs of the communities in which we operate and deliver positive and sustainable impact. Building sustainable relationships with our local communities across EMEA is pivotal to our long term success. Four key objectives shape the investments and activities we undertake through our CSR programme in EMEA: - Fulfil our strategic CSR commitments by optimising our efforts to best respond to the changing needs in communities across EMEA - Engage MUFG employees across the region in volunteering and fundraising activities that utilise their time and expertise to maximise impact - Increase the impact of our CSR programme through partnerships with charities, community groups and other companies - Deliver measurable and sustainable impact and create a legacy that will outlast our CSR activities and funding ![](_page_5_Picture_27.jpeg) {6}------------------------------------------------ Our Strategy focuses on three key areas: Young people, Local causes and Environment, which support the Company's Sustainability and Culture goals. Throughout 2025, MUFG has continued with its community initiatives and engagement, and supported people, charities and the natural environment via these three pillars. ## **1. Young people** We focus on delivering employability, financial literacy and other life skills that help the next generation strive for a brighter future through gaining and sustaining employment. - In 2025, we expanded our mentoring programme beyond secondary school students to include university students from London Metropolitan University, broadening our reach to a new age group. Around 65 MUFG mentors were matched with students from both London Met and City of London Academy Highgate Hill (COLA HH), providing tailored guidance and support. - Our "Young Minds, Brighter Futures" social mobility programme, delivered in partnership with BIG Alliance, remained central to our efforts. It helps students from underprivileged backgrounds gain insights and experiences that prepare them for further education and the world of work. This year, every Year 9 and 10 students at COLA HH attended at least one **Career** Insight Visit (CIV) at MUFG office, giving them exposure to workplace environments during a critical stage in their education. These sessions helped students understand career pathways, workplace expectations, and essential skills for success. Additionally, we also supported the school in building cultural capital by funding a trip to Madrid, which was an opportunity for some students to obtain their first passport and learn about the Spanish culture. • In Paris, we partnered with Energie Jeunes, a national charity tackling educational inequality and improving retention in Priority Education (REP+) areas. MUFG supports this initiative by training volunteers to deliver two days of workshops annually in local schools across the city. # **2. Local causes** As a responsible organisation with a wide-reaching footprint, we support a range of local causes through funding and enabling employees to share their skills. MUFG colleagues and champions can identify issues in their local communities and directly support impacted people at a local level. - In 2025, we maintained the diversity of our projects while introducing new collaborations to broaden our reach in EMEA. Key highlights include: • Amsterdam continued engagement through initiatives such as the Hand Project, building prosthetic arms for individuals in vulnerable - conditions worldwide to restore mobility and independence. • Paris strengthened our partnership with Les Petites Cantine, making volunteering more regular and impactful. Funds raised through Fitprints for Good 2025 campaign helped reopen the canteen during the festive season to provide meals for isolated and vulnerable - individuals in the community. • We launched targeted initiatives with employee networks to support charities aligned with their focus areas, such as partnering with Pride Alliance to assist LGBTQ+ organisations in London. - Introduced a new, employee-driven approach to fundraising for global disaster relief, to empower colleagues in EMEA to support causes even those outside the region. # **3. Environment** In alignment with MUFG's broader ESG focus, we continue to support our employees to create and maintain a more sustainable natural environment at MUFG and beyond. During Environment and sustainability fortnight, MUFG's annual campaign in celebration of Earth Day, there were multiple opportunities to contribute to a cleaner, greener future. The campaign is also a great opportunity to highlight MUFG's progress on the 2030 Net Zero commitment in our own operations. - We participated in the cross-regional Environment and Sustainability (E&S) Fortnight (2025 theme: Our Power, Our Planet). The campaign featured a guest speaker who shared insights on energy transition and its challenges, as well as a hand-in session across EMEA where employees assembling solar lamps for children living in energy poverty. - Throughout the year, over 60 environmental team challenges were organised to help maintain the limited green areas and parks across the region. - In Dubai we partnered with a local nature restoration organisation to launch a mangrove plating initiative aimed at restoring vital ecosystem and supporting biodiversity. # **Flagship Events and Activities** The CSR team facilitates frequent and varied events and activities and are championed by 100+ employees across EMEA (our CSR 'champions and Green Team members'). Our flagship 'Fitprints for Good' campaign ran throughout June, engaging colleagues from 14 offices and raising over £130,000 for our charity partners across the EMEA region. This also included an MUFG-sponsored 5km run in the City of London and a 300+ Km from London to Paris cycle involving 34 colleagues. We also celebrated the MUFG Global Season of Giving, aligned with our three strategic pillars. This campaign amplified our volunteering efforts as all EMEA employees were encouraged to help make a difference by supporting company organised CSR initiatives; volunteers took part across 83 activities in 14 offices. ![](_page_6_Picture_24.jpeg) {7}------------------------------------------------ # **Strategic Report (continued)** Building trusted relationships with our local communities across EMEA is pivotal to our long term success. Our CSR programme underpins that trust and enables us to actively and flexibly respond to the needs of the communities in which we operate and deliver positive and sustainable impact. # **Environment** # **Climate-related financial disclosures** # **Non-Financial and Sustainability Information Statement** With effect from the financial year beginning 1 January 2023, the Company is required to report its climate disclosures in line with the requirements of The Companies (Strategic Report) (Climate-Related Financial Disclosure) Regulations 2022. The Directors recognise the importance of climate change. We have prepared the required climate-related financial disclosures, which are also based on the Task Force on Climate-Related Financial Disclosures (TCFD) framework and recommended disclosures. The table below details the statutory requirements. | Pillar | Climate Related Financial Disclosure
Requirement | TCFD Recommended Disclosure | Location | |----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------| | Governance | a description of the governance arrangements of the | Describe the Board's oversight of climate-related risks and
opportunities | Pages 8-9 | | | Company or LLP in relation to assessing and managing
climate-related risks and opportunities | Describe management's role in assessing and managing
climate-related risks and opportunities | Pages 8-9 | | Strategy | a description of—
(i) the principal climate-related risks and opportunities arising
in connection with the operations of the Company or LLP,
and;
(ii) the time periods by reference to which those risks and
opportunities are assessed | Describe the climate-related risks and opportunities the
organization has identified over the short, medium, and long
term | Pages 9-12 | | | a description of the actual and potential impacts of the
principal climate-related risks and opportunities on the
business model and strategy of the Company or LLP | Describe the impact of climate-related risks and
opportunities on the organization's businesses, strategy, and
financial planning | Pages 9-12 | | | an analysis of the resilience of the business model and
strategy of the Company or LLP, taking into consideration of
different climate-related scenarios | Describe the resilience of the organization's strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario | Pages 9-12 | | Risk
Management | a description of how the Company or LLP identifies, | Describe the organization's processes for identifying and
assessing climate-related risks | Pages 12-13 | | | assesses, and manages climate-related risks and
opportunities | Describe the organization's processes for managing climate
related risks | Pages 12-13 | | | a description of how processes for identifying, assessing,
and managing climate-related risks are integrated into the
overall risk management process in the Company or LLP | Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organization's overall risk management | Pages 12-13 | | Metrics &
Targets | the key performance indicators used to assess progress
against targets used to manage climate-related risks and
realise climate-related opportunities and a description of the | Disclose the metrics used by the organization to assess
climate-related risks and opportunities in line with its strategy
and risk management process | Pages 13-19 | | | calculations on which those key performance indicators are
based | Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks | Pages 13-19 | | | a description of the targets used by the Company or LLPs to
manage climate-related risks and to realise climate-related
opportunities and of performance against those targets | Describe the targets used by the organization to manage
climate-related risks and opportunities and performance
against targets | Pages 13-19 | # **GOVERNANCE** # **Climate Governance** The Board of Directors holds ultimate oversight of climate-related risks and opportunities, with support from the Board Risk Committee (BRC) and the Company Executive Committee (ExCo) / the Company Management Committee (MC). The Board has formally delegated to the BRC the responsibility of understanding and assessing risks from environmental, social and governance factors including those arising from climate change. The BRC oversees these risks through the Company's Risk Appetite Statement and Risk Management Framework. Within the Company's governance structure, the primary management body responsible for risks arising from climate change is the Company Risk Management Committee (ERMC), reporting to the ExCo/MC and the BRC. The ExCo/MC provides executive oversight, coordination, and direction for the Company's executive team, with their actions aligning with the strategy and established business plans for EMEA. As the most senior Executive decision-making body within EMEA, the ExCo/MC also holds general management responsibilities, which include addressing climate and ESG matters. Both the BRC and ERMC receive a climate change risk update semi-annually. Climate risk updates are reported to the Board of Directors through the summarised reports provided by the BRC following each of their meetings. Additionally, climate matters may also be included in the standing reports provided to the Board by the Executives, chiefly the Chief Executive Officer (CEO), Chief Finance Officer (CFO), and Chief Risk Officer (CRO), thereby ensuring a comprehensive climate risk review at the Board level. However, all levels of governance have responsibilities for risks arising from climate change with the ERMC's core sub-committees responsible for managing risks across the core risk types from a second line perspective (credit, market, strategic, operational, and reputational risk). In April 2025, MUS(EMEA) (henceforth the Company) appointed a Chief Sustainability Officer (CSuO) and Deputy Chief Sustainability Officer. The CSuO chairs the EMEA Sustainability Committee which oversees the development and execution of the Company's sustainability strategy. The Sustainability Committee, which reports into the ExCo, is held quarterly and reviews progress against plans, emerging regulations and considers risks and escalations. The CEO is delegated the responsibility of implementing the Board's strategy, including its sustainability strategy. ![](_page_7_Picture_16.jpeg) {8}------------------------------------------------ The CRO is the SMF 4 (Chief Risk – Senior Management Function (SMF) under the UK's Senior Managers and Certification Regime (SM&CR)), responsible for managing the risks arising from climate change, specifically through the design and implementation of the risk management framework. Given the breadth of climate change and the potential impact across the business all senior managers are responsible for managing risks arising from climate change pertinent to their part of business. # **Our Governance Structure** The Company's governance structure is outlined in the Business and Risk Management Policies. See page 32. # **Section 172 of the Companies Act 2006** Where factors relating to Section 172(1) are not specifically addressed by Climate-related Financial Disclosures (CFD), these are addressed under the section specifically covering the 5 key pillars of Section 172. See page 6. # **STRATEGY** # **Sustainability Strategy** In EMEA, the Company has developed a five-pillar framework to enable the Company to drive its sustainability strategy: i) promotion of sustainable finance, ii) risk management, iii) advocacy and communications, iv) ESG disclosures and v) corporate sustainability. # **Our Strategic & Industry Alliances** The Company works with MUFG and recognises the importance of collective and coordinated global efforts in realising the objectives of the Paris Agreement. In addition, MUFG continues to support and participate in a number of environment-related international agreements and initiatives: - Glasgow Financial Alliance for Net Zero (GFANZ) - Task Force on Climate-related Financial Disclosures (TCFD) - United Nations Environment Programme Finance Initiative (UNEP FI) - Principles of Responsible Banking (UN PRB) - Principles for Responsible Investment (UN PRI) - CDP (Former Carbon Disclosure Project) - Climate Action 100+ - Adopter of Equator Principles - 30by30 Alliance for Biodiversity - Principles for Financial Action for the 21st Century - Integrity Council for Voluntary Carbon Markets (IC-VCM) - Partnership for Carbon Accounting Financials (PCAF) - The Sustainable Markets Initiative (SMI) - UN Global Compact - Energy Transition Initiative Center for Global Commons (ETI-CGC) - Net Zero Asset Managers Initiative (NZAM) - Asia Transition Finance Study Group (ATFSG) - The Poseidon Principles - Keidanren Challenge Zero - Climate Change Initiative - Japan Climate Leaders Partnership (JCLP) - Declaration of Biodiversity by Keidanren - Japan Partnership for Circular Economy - Operating Principles for Impact Management - Task Force on Nature-related Financial Disclosures (TNFD) Forum - Equator Principles # **Climate-related Risks and Opportunities** The Company trades in fixed income, equity, and structured finance products, offering tailored client solutions across both primary and secondary markets. Given the short term nature of the products traded, the Company has assessed that not all climate related risks pose a material risk to its operations. The following sections outline the current evaluation of climate-related risks and opportunities, recognising that risks arising from climate change is an evolving area of risk management that requires ongoing reassessment. The Company remains committed to refining its approach to understanding the materiality and impact of climate related risks on the business model and strategy. Refer to page 3 of this report for further information on the principal activities of the Company. The Company has identified physical and transition risks as climate related risks, and climate opportunities that impact its business strategy and operations. For the identification of climate related risks and opportunities, the Company defines short term, medium term, and long term by the following time horizons, as aligned with MUFG. ![](_page_8_Picture_41.jpeg) {9}------------------------------------------------ - Short term (ST): up to 1 year - Medium term (MT): 1 to 5 years - Long term (LT): greater than 5 years # **The Company's Transition and Physical Risks** The table below presents the climate-related risks and opportunities identified at the entity level in relation to the Company's operations. Climate change presents both risks and opportunities for the Company across its customers, business operations, and wider stakeholders. Climate Change has been determined as a driver of risk and therefore permeates across all risk types. The Company recognises climate change risk results in both physical risks (i.e. the impact of acute weather events and chronic changes to the climate) and transition risks (i.e. the impact of shifts to a low-carbon economy). | Risk or Opportunity | Risk Types | Potential Impacts | Time
Horizon | |---------------------|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------| | | Policy | Increased compliance costs driven by regulatory
requirements and/or changes, and exposure to potential
litigation or penalties for non-compliance. | MT - LT | | Transition Risks | Market | Potential for reduced revenues due to higher credit risk in our
customers driven by market uncertainty. Disrupted national or
global supply chains. | LT | | | Legal &
Reputation | Adverse public perception of the Company due to, for
example, climate-related litigation, failure to identify,
understand, or adequately manage regulatory obligations,
negative press via greenwashing risk, leading to reduced
revenues and fee income. | MT - LT | | | Technology | Increased capital investment in technological capabilities, for
example to enhance existing systems to accommodate
increased data for climate reporting requirements. | MT - LT | | | Chronic | Increased operating costs driven by long term temperature
and climate changes. | LT | | Physical Risks | Acute | Increased severity of extreme weather events leading to
physical asset damage to data centres or offices, impact on
insurance liabilities. | MT - LT | | Opportunities | Product offering | Increased revenue and fee income driven by green, social,
sustainable, and sustainability-linked transaction
opportunities. | MT - LT | | | Operating costs | Potential operating cost savings driven through energy and
resource efficiency in our operations. | MT - LT | The Company conducts an annual materiality assessment of climate-related risks by considering Network for Greening the Financial System ('NGFS') scenarios, namely high physical scenario – Hot House (current Policy) and high transition scenario – Delayed Transition, as noted in the table above. This approach evaluates the potential impacts of these climate-related risks across different risk categories. By continuously refining this assessment, the Company aims to enhance resilience and align with evolving regulatory expectations. The Company has established processes to assess and manage climate related risks to monitor and mitigate their potential impact. Further information on the risk management framework which supports the approach to climate-related financial risks is provided in the Business and Risk Management Policies section of the financial statements. These processes are continuously evolving as the Company works to enhance its capabilities and implement additional measures including Business input to address identified climate related risks. In response to the above risks and opportunities presented by climate change, we are actively enhancing energy efficiency across our operations to reduce emissions and providing sustainable financing solutions to support the transition to a low-carbon economy and create value for our stakeholders. # **Energy Efficiency in our Own Operations** As part of MUFG's commitment to achieving Carbon Neutrality in our Scope 1 and 2 emissions by 2030, we have implemented a number of initiatives within the Company's operations which have reduced our energy consumption and enhanced energy efficiency. Refer to MUFG's 2025 Climate Report for further information on the Group's emissions reduction targets. # Existing initiatives Since November 2021, the Company has sourced renewable electricity backed by quality renewable energy certificates for a portion of our purchased electricity (2025: 100%; 2024: 100%) for the two London offices and the data centres that support the Company. The Company continues to monitor its material environmental impacts and areas of significant energy use in its operations through a cross functional energy and environment working group supported by the wider Corporate Sustainability Working Group. In September 2025, the Company received ISO5001 and ISO14001 certification for its energy and environment management system. The management system is intended to support the Company in identifying and implementing strategies to reduce environmental impacts and improve energy efficiency. ![](_page_9_Picture_15.jpeg) {10}------------------------------------------------ The Company continues to work to optimise energy efficiency in the office, installing energy efficient LED lighting in areas in scope of ongoing renovations. Timing rules for heating and lighting have been reviewed to reduce energy consumption during out of hours periods. The Company monitors its travel and travel emissions and promotes mindful travel, including raising awareness of emissions intensity of travel options and continues to promote the use of video conferencing facilities and agile working practices when appropriate The Internal Green Team, composed of volunteers from across the Company, raises awareness of sustainable initiatives for all staff. These examples demonstrate the Company's commitment to supporting environmental initiatives as a core pillar of the Corporate Social Responsibility (CSR) strategy. Throughout 2025, the Company continued to observe high recycling rates, with an average annual recycling rate of 96% in 2025, compared to 89% in 2024. To support continued improvements in waste management, in November 2025 the Company replaced disposable containers used in catering facilities with reusable alternatives. ## Planned initiatives for 2026 and beyond As part of the sustainability strategy, planned initiatives include, continuing to improve energy performance through installation of energy efficient LED light fittings and optimising the energy use within the Company's office space and data centres. # **Climate Opportunities & Client Engagement** The Company maintains its focus on client relationships and continues to engage with clients across industries and geographies in the EMEA region to deliver sustainable finance solutions. MUFG has proactively engaged with clients on sustainability topics to gain a comprehensive understanding of a client's individual sustainability goals and financing needs. This is particularly relevant for clients in transitioning sectors. In 2023 the Sustainable Finance Escalation Forum (hereinafter the "Forum") was established, formed by MUFG Bank, Ltd., EMEA Branches and Subsidiaries and MUFG Securities EMEA plc and its subsidiaries, collectively known as "EMEA Entities". The Forum seeks to provide guidance on sustainability-related considerations for deals/ transactions labelled as 'Green', 'Social,'',' 'Sustainable' or 'Sustainability-linked,'',' and additional guidance to product owners and relationship managers when required. MUFG is committed to being a financial institution that empowers a brighter future by supporting customers' decarbonisation. # **Supporting MUFG through Sustainable Financing** Sustainability commitments are supported through the promotion of products and services that align with environmental objectives, particularly addressing climate change and other pressing environmental concerns. By offering tailored solutions to clients who share a commitment to sustainability, the Company contributes to a collective effort in mitigating the impacts of climate change. Through the provision of sustainable finance products and services, businesses play a pivotal role in shaping a sustainable future while meeting the evolving needs of a conscientious consumer base. The Company, in conjunction with MUFG Bank, continues to offer an array of sustainable financing solutions, providing green, social, sustainability, and sustainability-linked bonds across public and private markets. The Company has been positioned as a leading underwriter in the sustainable finance bond market since its inception. In 2019, MUFG set a target to provide a cumulative total of 35 trillion yen in sustainable finance (including loans, equity investment in funds, arrangement of project finance and syndicated loans, underwriting of equities and bonds, and financial advisory services) by 2030. Cumulative contribution by the Company to the Group target is tracked internally and reported on a quarterly basis to Group. As of April 2024, to align with the Group's release of its new Medium Term Business Plan, the sustainable finance goal was raised to 100 trillion yen, with 50 trillion yen earmarked for the environment, by 2030. Refer to the MUFG 2024 Sustainability Report for further information. As of fiscal year 2024, cumulative Group progress towards this target amounted to 43.5 trillion yen. Refer to the MUFG 2025 Sustainability Report for further information. In July 2021, MUFG established the Sustainable Business Division with the aim of advancing initiatives that address environmental and social challenges on a broader scale, fostering businesses that contribute to the larger economy and global well-being. MUFG established a global structure to gather intelligence and capture business opportunities through assigning ESG heads in each region – EMEA, Americas and APAC – who are responsible for promoting the provision of sustainable financing solution and customer engagement and having active discussions through global forums such as the Global ESG Conference. In addition, by collecting information from various perspectives through international initiatives, we are promoting rulemaking, commercialisation, and market creation globally to capture future business opportunities. Alongside its sustainable financing activities, MUFG and its affiliates invest in, and finance projects associated with a wide range of industries, businesses and jurisdictions including in, but not limited to, high-emitting and hard to abate sectors such as the energy sector. MUFG commits to achieve net zero emissions in its finance portfolio by 2050 and its own operations by 2030. MUFG's Carbon Neutrality Declaration Roadmap can be found here. The above present opportunities and enable us to manage risks. Our scenario analysis provides a broader lens to evaluate the resilience of our business strategies, ensuring we remain adaptive and prepared for a range of potential climate-related challenges. ![](_page_10_Picture_17.jpeg) {11}------------------------------------------------ # **Scenario Analysis and Assumptions** A range of stress testing is carried out to identify risks and potential losses that may not be sufficiently identified through other risk measures, or under extreme conditions. This includes a programme of scenario analysis to test the Company's financial resilience on a quarterly basis by identifying vulnerabilities from the joint implications for market, credit, liquidity, and operational risks. The Company's stress testing framework is reviewed on an annual basis by the BRC, refer to page 26 in the core Risk Management disclosures of this report. Scenario analysis has been used to inform risk identification and assessment/measurement; with an internal fossil fuel transition risk scenario developed, based on the Company's previously developed Carbon Tax Scenario, to understand the impact to the business and identify potential mitigating actions. A transition risk scenario was developed as most applicable to test financial resilience based on the Company's business model. The scenario reflects the Company's operating model by capturing market risk and credit risk, including from structured transactions, and is run on a quarterly basis with the results presented to the ERMC. This scenario assumes a more rapid transition than originally planned by the corporate clients such as increased capital investment in greener technology. This causes a negative impact on their net profit and performance in the short term. Additionally, market demand for crude oil remains strong due to the colder winters and hot summer weather expected in the UK and European countries under the scenario, resulting in substantially higher oil prices across the projection window. Two multi-decade scenarios are used, in line with the industry approach, which are based around the core NGFS scenarios. The two scenarios were selected in order to assess the two extremes of High Physical Risk (HPR) and High Transition Risk (HTR) for the Climate and Environmental materiality assessment process, with the former assuming some climate policies are implemented within some jurisdictions, but global efforts are insufficient to halt global warming whilst the latter assumes climate policies are delayed or divergent across countries and sectors. These have been applied to the Company portfolio and the results reported annually to the ERMC to review potential strategic actions based on the results. The primary focus of the work has been on the corporate derivative counterparty credit risk. Operational risk considerations for climate change were captured through scenario analysis as part of the annual Internal Capital Adequacy Assessment Process (ICAAP process). Market and liquidity risk profiles have been analysed for the trading book using shorter term stress scenarios that are aligned to the liquidity horizon of the portfolios. Utilising scenario analysis/stress testing described above, and the risk management tools/process described below, the Company's exposure and financial resilience to risks arising from climate change is currently assessed as low risk, reflective of the nature of the securities business. The Company expects the risk management approaches to evolve in line with the industry. Consistent with the wider industry, challenges around data management remain with tactical solutions utilised whilst longer term strategic solutions are explored and further collaboration with the Group continues. # **RISK MANAGEMENT** # **Risk Framework & Policies** The Company has developed processes and tools to identify and assess physical and transition climate related risks. The Company's approach and framework focus on governance, risk management, scenario analysis, and disclosure to manage and report on financial risks arising from climate change. The Company is committed to developing a tailored approach to manage risks arising from climate change, including specific strategies to assess and mitigate climate-related risks across the enterprise. The tools, systems, and processes outlined below ensure the integration of climate related risks into the Company's risk management framework. The Company remains focused on embedding such strategies within the EMEA risk management framework while collaborating with the Group and other EMEA entities to identify effective long term solutions. # **Risk Management Tools and Processes** Climate change presents both risks and opportunities for the Company across its customers, business operations, and wider stakeholders. The Company has developed its approach and framework to identify measures, manage and report on financial risks and opportunities arising from climate change with particular focus on governance, risk management, scenario analysis, and disclosure. Climate Change has been determined as a driver of risk and therefore permeates across all risk types. This consideration is documented in the Company's Risk Management Framework. This Framework, which is approved by the BRC, undergoes a review and approval process at least every two years, or more frequently as required. The Framework was most recently updated in April 2025. Qualitative statements and Key Risk Indicators reflecting this understanding are also captured within the Company's Risk Appetite Statement, demonstrating the integration of climate change considerations in our risk management framework. Bottom-up risk identification has been completed through the inclusion of climate change as a risk driver within the Company's Risk Register and is reviewed on an annual basis. Climate change considerations have been embedded within the credit assessment through the development of the Climate Change Risk Heat-map. The heat-map supports identification of the key climate change risks that the credit portfolio is exposed to (transmission channels) and provides a risk based approach to targeting further analysis. The heat-map includes a physical and transition risk assessment for clients, industries, and countries. The outputs from the heat-map are reported to the EMEA Credit Risk Committee monthly. The most high-risk customers, identified as most vulnerable to transition risk, are monitored on a quarterly basis with all new transactions reported to the Sustainable Finance Escalation Forum (SFEF). ![](_page_11_Picture_14.jpeg) {12}------------------------------------------------ From a legal and litigation risk perspective, the Legal department provides advisory, awareness, and engagement with relevant Front Office departments in relation to legal risks arising in transactions, disclosures, and due diligence. To manage reputational risk, the Company has a Reputational Risk Management Policy as part of its governance framework. the Company considers the risks arising from providing sustainable finance solutions to its clients which include the associated risks from 'greenwashing' accusations, being reputational risk, conduct risk and litigation risk. The Company has established, and embedded into its risk management framework, risk management controls and governance oversight as part of the New Activity process which captures sustainable finance labelled products and services, and related transactions, it provides to its clients; as well as communications and disclosures that contain information related to sustainable finance activities. The Company recognises that the challenge to respond to climate change will require review, refinement, and enhancement over the coming years. # **Environmental Due Diligence** As part of the Environmental and Social Policy Framework (ES Framework), a due diligence process has been incorporated to identify and assess the environmental and social risks or impacts associated with transactions. Standard due diligence is implemented by the relevant business division on all transactions. In 2018 MUFG established the MUFG Environmental Policy Statement as its fundamental approach to addressing environmental issues and underscores our commitment to working towards a sustainable society and is aligned to the MUFG reputational risk management framework. This policy statement is supported by the 'MUFG Environmental and Social Policy Framework' ('the ES Framework') also established in 2018. This framework serves as a tool for MUFG to understand and manage the environmental and social risks within the Group's operations and conduct financing with consideration of our environmental and social responsibilities, thereby reinforcing the business's commitment to corporate social responsibility and sustainable development. Since 2022, the ES Framework has undergone a series of annual updates to strengthen its environmental and social safeguards across sectors. These updates include: - Introduction of stricter policies targeting sectors contributing to climate change, including coal-fired power generation, coal mining, and oil & gas. - Expansion of scope to address social sustainability risks, adding sectoral restrictions related to child labour, forced labour, human trafficking, conflict-affected areas, and forestry. - Restrictions on thermal coal power generation were also tightened, in addition to new restrictions applied to mining and biomass power generation. In 2025, the framework was further refined to include sectoral restrictions for fisheries and aquaculture, along with additional guidance specific to forestry practices and mountain top mining. # **Climate Risk Training** Mandatory all staff training on climate change risk management, developed internally by the Risk function, is run annually to support the embedding of the framework for managing the risks arising from climate change across the Company. The training is designed to guide employees, including Board members, on what climate change is, why it is important for MUFG, different types of climate change related risk, employee's role in managing climate change related risks and the regulatory requirements to manage those risks. the Company's commitment to continuous learning and addressing climate related risk is reflected in its plans to refine and expand this programme over time, incorporating emerging trends, regulatory changes, and industry best practices. # **METRICS AND TARGETS** # **Targets & Commitments** In the Company's efforts to manage climate-related risks and opportunities, the Company monitors progress through a set of key performance indicators (KPIs). These metrics, outlined in the following section, are based on specific calculations designed to assess our efficient management of climate risks and realisation of climate-related opportunities. The Company will provide insight into its chosen KPIs, elaborating on how they are calculated and, where relevant, how these KPIs are connected to its targets. Under the "MUFG Carbon Neutrality Declaration", MUFG has committed to achieve net zero emissions in its own Scope 1 and 2 operations by 2030. The Company contributes to this target through its own decarbonisation efforts which are reported internally on an annual basis into the Group to track progress. Monitoring of the metrics and progress against our Group-led targets help to mitigate the risks and realise the opportunities identified on page 10 earlier in this report. # **Operational Emissions** The Company monitors and reports its operational greenhouse gas emissions to track performance against Group-led targets. The Company continues to make efforts to improve the measurement and tracking of the Company's operational emissions performance. A summary of operational emissions is provided below. Scope 1 emissions refer to direct emissions from owned or controlled sources, Scope 2 emissions refer to indirect emissions from the generation of purchased electricity, and Scope 3 refers to other indirect emissions that occur in our upstream and downstream value chain. Scope 3 Category 6 covers indirect emissions from business travel, including emissions from business journeys via planes, trains, and hotel stays. The Company calculates operational emissions using both the location-based and market-based methodologies as recommended by GHG Protocol guidance. ![](_page_12_Picture_21.jpeg) {13}------------------------------------------------ The calculation of our emissions is in line with industry best practice through the use of the Greenhouse Gas Protocol (GHG Protocol), including both the location-based and market-based methodologies as recommended by the GHG Protocol guidance. We continue to use Department for Energy Security and Net Zero (DESNZ) to use localised travel-based emission factors to calculate our Scope 3 – Category 6 emissions and have used the International Energy Agency (IEA) emission factors to calculate Scope 1 and 2 emissions. The Company also supports these commitments through the provision of data on own operations consistent with local disclosures as part of the Streamlined Energy Carbon Reporting requirements. For a detailed breakdown of the Company's operational emissions, refer to our Streamlined Energy & Carbon Reporting section on page 10 of this report which includes additional mandatory reporting requirements relating to energy consumption and intensity ratios. Operational emissions for the reporting period 1 January – 31 December. | | | FY2025 | FY2024 | |----------------------------------------------|-------|--------|--------| | Scope 1 emissions | tCO2e | 35 | 52 | | Scope 2 (location-based) emissions | tCO2e | 615 | 723 | | Scope 2 (market-based) emissions | tCO2e | - | - | | Scope 3 emissions† | tCO2e | 1,548 | 1,850 | | Total operational emissions (location-based) | tCO2e | 2,198 | 2,624 | | Total operational emissions (market-based) | tCO2e | 1,583 | 1,902 | † Scope 3 operational value chain emissions only. Business mileage and taxi emissions account for less than 3tCO2e total footprint. This remains significantly below 5% of total emissions for 2025 the same threshold as outlined by the SECR and is therefore excluded from the total footprint on this basis. We will continue to monitor and assess this in future periods and if levels exceed the stated materiality thresholds the Company will begin to incorporate this data prospectively. The decrease in scope 1 emissions is driven by a decrease in gas consumption in FY2025 following an internal review of the recharge strategy for Out-of-hours cooling in 2024. The reduction in scope 2 emissions is driven by the decrease in the UK's 2024 IEA electricity emissions factor to 150.7 gCO2/kWh from 176 gCO2/kWh (2023 estimated used in FY2024). Electricity consumption in FY2025 saw a decrease in the Company's Ropemaker Office due to reductions in Out-of-hours electrical charges following an internal review of the Level 1 air conditioning run times. This is partially offset against an increase in electricity demand by the Company's UK 1 Colt and SL2 Data Centres following an increase in storage bandwidth, security hardware and new servers and network devices. Scope 3, consisting of category 6 business travel only, decreased in FY2025 driven mainly by the decrease in DESNZ 2025 emissions factors for business Air travel. FY2025 has seen an increase in demand for business Air travel however the Company continues to prioritise reducing the impact of travel such as introducing "Emissions Missions" which challenges the Company's Leaders to prioritise meaningful travel and asking travellers to take CO2 emissions into consideration when booking trips. The Company continues to track its progress by regularly measuring energy usage in the London offices and data centres against Group level targets and compare emissions data with previous years. The Company continually works to improve performance against established KPIs and targets, which guide management of climate risks and opportunities. The Company calculates emissions using actual energy consumption data collected from the offices, data centres, and travel management company where available. # **Use of estimation** For some of the Company's energy consumption, it is necessary to estimate data to use as a proxy where actual data is unavailable. Energy consumption data at the Company's Ropemaker Street and Westferry office reflects 10 months of actual 2025 data provided by our landlords and 2 months estimated data. The Company's data centres reflect 11 months of actual data and one month estimated data. The use of estimated data is due to a time lag which is based on historic consumption of the previous months. 12% of the total energy consumption has been estimated for 2025. For data centres that serve both The Company and MUFG Bank EMEA, we have assumed a fifty percent split in electricity consumption as it is not possible to disaggregate the consumption per entity. # **Sustainable Financing Target** Further information on MUFG's sustainable finance target and the Company's contribution is provided in the 'Supporting MUFG through Sustainable Financing' section above. ![](_page_13_Picture_15.jpeg) {14}------------------------------------------------ # **Streamlined Energy & Carbon Reporting** The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 implement the UK Government's policy on SECR. The Company is required to comply with mandatory greenhouse gas reporting requirements under the SECR policy, ensuring that reporting is consistent with the relevant requirements. Based on the guidance provided by the Greenhouse Gas Protocol (GHG Protocol), we have calculated emissions for the Company UK operations only and have applied the IEA (International Energy Agency) for Scope 1 and 2 reporting to align with the Group. Scope 3 emissions have been calculated using UK government conversion factors obtained from the UK Government Department for Energy Security and Net Zero (DESNZ) (previously DEFRA) to use localised travel-based emission factors. The data in this report covers the period 1 January 2025 – 31 December 2025. | | Units | Current reporting year
December 2025 | Comparison reporting year
December 2024 | |-----------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-----------------------------------------|--------------------------------------------| | Consumption of electricity used to calculate
emissions 1 | kWh | 4,078,495 | 4,106,659 | | Consumption of gas used to calculate
emissions2 | kWh | 95,492 | 138,809 | | Consumption of gas from business travel | kWh | 0 | 0 | | Total energy consumption used to calculate
emissions | kWh | 4,173,987 | 4,245,468 | | Emissions from combustion of gas (Scope 1) | tCO2e | 35 | 52 | | Emissions from combustion of fuel for
transport purposes (Scope 1)3 | tCO2e | - | - | | Emissions from purchased electricity (Scope
2, location-based) | tCO2e | 615 | 723 | | Emissions from purchased electricity (Scope
2, market-based) | tCO2e | 0 | 0 | | Emissions from business travel in rental cars
or employee-owned vehicles where The
Company is responsible for purchasing the
fuel (Scope 3)4 | tCO2e | - | - | | Emissions from employee business travel
which the Company does not own or control
and where not responsible for purchasing the
fuel (Scope 3)5 6 | tCO2e | 1,548 | 1,850 | | Total gross CO2e based on above | tCO2e | 2,198 | 2,624 | | Intensity ratio: | | | | | Gross tCO2e/FTE7 | | 3.41 | 4.01 | Refer to the Operational Emissions section on page 13 and14 for the drivers on the Company's year-on-year movements. # **Suppliers and supplier finance** We work closely and collaboratively with all our suppliers to ensure that they supply services to the Company efficiently, responsibly and sustainably. The Board oversees a framework of supplier engagement and oversight supported by appropriate policies, processes and risk management processes that are kept under constant review to ensure that the best practice standards are always maintained. MUFG has implemented a supplier management programme which is designed to ensure that all third-party supplier arrangements are subject to industry best practice principles, processes, templates, and tools. This will help MUFG maximise relationship value and minimise risk during the entire supplier relationship lifecycle. 2 Includes gas consumption at offices, which has been apportioned to the Company on a cost allocation basis. **15** 7 Average MUS(EMEA) FTE for FY 2024 includes employees, contingent workers and other authorised persons providing services. ![](_page_14_Picture_17.jpeg) 1 Includes electricity consumption at offices and data centres which has been apportioned to the Company on a cost allocation basis. 3 MUS(EMEA) does not own or control vehicles therefore not applicable. 4 MUS(EMEA) does not have any arrangements where it is responsible for purchasing fuel for rental or employee-owned vehicles hence, this disclosure is not applicable. 5 This includes emissions from rail travel, air travel, and hotels stays, which has been calculated using the distance-based method. We have applied the relevant DESNZ (previously DEFRA) emission factors. For hotel stays; where emissions factors weren't available from the DESNZ, we have applied emission factors derived from the Hotel Footprinting Tool which serves as the underlying data for the DESNZ emission factors. 6 Business mileage and taxi emissions account for less than 2tCO2e total footprint. This remains significantly below 2% of total emissions for 2025, the same threshold as outlined by the SECR, and is therefore excluded from the total footprint on this basis. We will continue to monitor and assess this in future periods and if levels exceed the stated materiality thresholds the Company will begin to incorporate this data into the total footprint prospectively. {15}------------------------------------------------ # **Supplier and supplier finance** The foundation for effective management of our suppliers is based on the following elements: - Relationship management and development Working collaboratively with suppliers to build trust and maximise the mutual value of supplier relationships. - Cost management An integral part of supplier selection, management and ongoing planning. Effective cost management is not a one-off approach at MUFG to reduce its costs, but an ongoing expectation that is built into supplier relationships. - Risk management Effective assessment and oversight of the risks a supplier brings into the supply chain, which can open opportunities to drive continuous improvement and create value. - Contract management A structured approach to good contract governance ensures all engagements are covered by valid contracts, and all key contract terms and obligations are fully understood and acted upon. - Performance management An approach to ensure that business requirements are met by managing service levels. - Transactional efficiency Identifying inefficiencies and waste in the transactional processes used by both parties to make the process of working together easier. To oversee our suppliers effectively, we use multiple approaches, including: - We expect all of our suppliers to comply with our supplier code of conduct covering key areas, such as those relating to modern slavery, data protection, human rights and ethics. - Having key policies in place designed to ensure that all third-party supplier arrangements are subject to industry 'best practice' in terms of competitive bidding, risk evaluation, contract negotiation, contract drafting, contract approval, contract sign-off and subsequent oversight of supplier performance throughout the entire contract lifecycle. - Key controls are in place throughout the entire supplier lifecycle including the oversight of the end-to-end procurement process which encompasses supplier engagement, tenders, on-boarding, contract negotiations and reviews. - Supplier due diligence, including modern slavery assessments, is undertaken on a risk based approach prior to onboarding and at regular intervals thereafter. - We seek to ensure compliance to the highest standards with all applicable outsourcing requirements as our customers, counterparties and our regulators need the utmost confidence in the reliability and complete integrity of core systems and platforms used in our financial services business and activities. - To enable ongoing compliance with our regulatory obligations and our own corporate governance requirements, the Company's supplier management framework outlines the clear roles and responsibilities for managing supplier risk in order to ensure the expectations of the Board are met. Pursuant to the Modern Slavery Act 2015, MUS(EMEA) publishes its Modern Slavery Statement on an annual basis on its website – all past statements can be found here: Modern Slavery Statements # **Culture and Workforce Engagement** # **Introduction** Culture is a key pillar in our EMEA and Global strategy; the Company places considerable value on how we engage and enable our employees and the importance of keeping them well informed and involved in matters affecting them as employees. Employees are given the opportunity to share feedback on a wide range of matters affecting their current and future interests. This connectivity and open dialogue is driven through a variety of avenues, including formal and informal meetings, employee networks and committees, employee representatives, focus groups, surveys, the Company's intranet and regular internal communications. #### **Board engagement** The Company's culture and workforce engagement framework is intended to ensure we measure the Company's performance against a broad range of culture metrics, and the views and concerns of the workforce are taken into account by the Board and other committees, particularly when they are making decisions that could affect the workforce. The framework allows management, the Workforce Engagement Ambassador and the Board to gain greater context on the employee experience, inform decision-making and ensure there is clear communication to employees on issues most important to them. The Board is committed to ensuring that the views and concerns of our employees are considered by the Board and its committees, particularly when they are making decisions that could affect our employees. #### **Our framework** Our people are the key to our success, and how we engage with them on important issues has always been central to our culture and workforce engagement initiatives. Our leaders and managers are primarily accountable and responsible for the engagement of our employees, and we ensure they are equipped with appropriate tools – such as useful people data, employee feedback, guides and training - to manage this alongside expertise and support from our Human Resources ('HR') team. # **Our Culture** Our Code of Conduct describes Culture as the patterns of thinking and behaviour shared by all staff. Our company culture reflects the core values of the MUFG Group as outlined in the **MUFG Way**: - **Purpose** Committed to empowering a brighter future - **Values** Integrity and Responsibility; Professionalism and Teamwork; Challenge and Agility ![](_page_15_Picture_31.jpeg) {16}------------------------------------------------ # **Strategic Report (continued)** - **Vision** Be the world's most trusted financial group - **Culture Principles** Client centric; People Focused; Listen up, Speak up; Innovate and Simplify; Own and Execute. #### **Our strategy** Culture is embedded into our overall **EMEA Strategy** which has four pillars, one of which is Strengthen Culture. The Strengthen Culture pillar sets out to foster a culture of collaboration, belonging and excellence underneath which sits four aims: ![](_page_16_Picture_6.jpeg) This Strategy highlights the priorities for EMEA employees, and brings to life the MUFG Way, which, together with the Code of Conduct, serve as our underlying philosophy in our day-to-day business. #### **2025 Focus on MUFG Culture & Employee Engagement** Further extensive action has been taken on Culture since the 2024 Annual Report. Our focus for 2025 has been centred around the following key activities: *1. Escalation culture:* This has continued to be a focus in 2025 utilising speak up channels such as: **Employee Feedback surveys** – employees have the opportunity to voice their opinion in the annual MUFG Employee Survey (MES) which is reported to the Board along with updates on action plans. and bi-annual Glint surveys which supports managers in understanding the views of their teams. In 2025 the 'speak up' score improved in both the MES and Glint surveys which is an indication that employees feel more comfortable in speaking up. **Executive secondees** continue to be a valuable source of information to our EMEA Management Committee (EMC), Culture Committee bringing a deeper perspective from an employee audience perspective. **Culture Hub-** This group has continued to grow in number to 100+ members across EMEA bringing together our culture influencers who work in partnership with HR and the leadership team to drive culture and engagement activities. This group were awarded with and employee excellence award in 2025 for their work in championing the voice of the employee. **Leadership Focus Groups** – The response from this year's Leadership focus groups has been very positive with employees being open and honest in the feedback directly. Four sessions were held across the region in 2025 with key themes being taken to culture committee. **Nine @ Nine -** offers an opportunity to share ideas and ask questions - on any topic - with our leaders. It is a series of small-group informal gatherings, where colleagues can join a member of the EMEA leadership team in the office and virtually at 9:00am\* for open conversation. **Open Chair -** As part of the Diversity, Equity and Inclusion (DEI) strategy, the Open Chair initiative involves a nominated colleague taking part in the region's Executive Committee (ExCo) meetings to improve the inclusivity of decision making and generate more diversity of thought. It also includes driving initiatives, with the support of the DEI team and the ExCo, that help to make MUFG an even better place to work. They are also visible and accessible to employees should they wish to raise concerns or comments *2. Wellbeing:* At MUFG, we're committed to creating a space where our employees thrive. Our commitment to holistic wellbeing is key to empowering our employees to meet the challenges of today and tomorrow and it's an integral part of our medium term business plan and Human capital Management strategy. To support this, we've introduced a new global approach to wellbeing – which sets out how we support employees to thrive, both personally and professionally – around emotional, physical, financial, social and professional wellbeing. ![](_page_16_Picture_18.jpeg) {17}------------------------------------------------ - *3. Sustaining our Culture Strategy through the EMEA Culture Committee:* The Committee continues to meet on a quarterly basis focusing on key workstreams that fall under the four committee objectives of: - Foster and reward a diverse, inclusive and equitable culture which reflects our One MUFG culture principles - Develop a purpose of belonging where colleagues feel engaged and empowered to succeed - Ensure alignment between individual responsibilities and our four EMEA strategy pillars - Adopt a holistic approach to risk management where we think beyond our own direct responsibilities Membership of the committee has recently been reviewed to ensure it is fit for purpose and to allow for members to roll off and to be replaced by new members. *4. Leadership Accountability and Communication:* Our leaders are held accountable through our leadership objective, a mandatory objective cascaded to all EMEA Management Committee members, encompassing strategy & vision, culture, diversity, equity & inclusion (DEI) and talent & succession planning. Our Manager Objective continues to demonstrate the intention for a consistent employee experience across all regions with specific success criteria setting the expectations of all people managers. We have additionally mandated that managers are required to seek 360 feedback from all direct reports, driving greater manager accountability. # **The role of the Workforce Engagement Ambassador** In 2025, Chris Marks, Independent Non-Executive Director replaced Eileen Taylor, in the role of Workforce Engagement Ambassador, acting as a link between the workforce and the Board. On a bi-annual basis, the Culture Committees chairs, in partnership with HR, formally reports to the Board on key themes arising from engagement with MUFG's people. However, where appropriate or timely, this is done so more regularly. HR also provides updates to the Board on related areas such as engagement and culture, inclusion and diversity and other employee metrics. #### **Diversity, Equity and Inclusion (DEI)** Our DEI vision is for MUFG to continue to build an inclusive, equitable and diverse workplace that reflects our society, where everyone feels they can succeed and be their authentic best. We strive to achieve this by setting clear, transparent and meaningful goals to increase representation at all levels. This is ensured through an unbiased and meritocratic approach to all people decisions, as well as through various programmes that make MUFG an inclusive place to work. # **EMEA DEI Strategy** The EMEA DEI strategy directly supports the Strengthen Culture pillar of our EMEA business strategy and is built upon three key pillars: - 1. **Increase diverse representation**: Foster a culture of equity to improve MUFG's ability to attract, develop and retain diverse talent, ensuring we better reflect the world in which we live. - 2. **Advance DEI Learning, Development and Career Pathing**: Increase career development and learning opportunities to facilitate personal growth, enabling colleagues to achieve career ambitions at MUFG. - 3. **Build an inclusive culture**: Cultivate an environment where all employees feel they can be themselves, contribute fully, and are valued for their unique perspectives. #### **Leadership and Accountability** The Chief Executive Officer and Regional Executive Officer oversee the EMEA Diversity, Equity and Inclusion strategy. They drive senior leadership engagement and hold themselves accountable by defining their own specific responsibilities. These include setting clear goals, expanding diversity data collection, and ensuring accountability for progress. Leadership accountability is further reinforced through the DEI Objective component within the EMEA Leadership Objective. #### **Governance** EMEA Culture and DEI committees are responsible for governing the strategy, monitoring progress, and enabling a framework of clear goals and measures. This is supported by improved data capture and reporting. # **Employee Networks and Support** Our EMEA Employee Networks play a vital role in building an inclusive culture at MUFG. They provide community, connection, voice and a sense of belonging. Alongside seven thriving Networks, there are four gender-specific networking groups that offer active peer support and networking for women at MUFG. In addition, there are a trained Menopause First Aider and 70 accredited EMEA Mental Health First Aiders, providing confidential one-to-one mental wellbeing information and support. #### **Measuring Progress** #### **Board Representation and Leadership Milestones** In 2023, MUFG reached a significant milestone by appointing its first female Chair of MUFG Securities EMEA, demonstrating our commitment to advancing gender diversity at the highest levels of leadership. As a result, the proportion of women on our EMEA Board has doubled from 20% in 2021 to 40% today. #### **Women in Finance Charter Achievements** In 2025, MUFG successfully met its Women in Finance Charter milestone, with women making up 27% of EMEA Director and Managing Director positions. We continue to make progress towards our target of achieving 30% female representation in leadership roles by 2027. ![](_page_17_Picture_30.jpeg) {18}------------------------------------------------ #### **'Count Me In' Self-ID Initiative** In support of our commitment to increasing diverse representation, we launched the 'Count Me In' self-ID campaign. This initiative empowers colleagues to voluntarily and confidentially share their diversity data, covering areas such as social mobility, disability, sexual orientation, gender identity and ethnicity. The insights gained from this data help us better understand our workforce composition, highlight areas for improvement, and inform our strategies for recruitment, retention, development, promotion, performance, and pay equity. In 2025, we achieved 80% disclosure of ethnicity data across our UK workforce, enabling us to monitor representation at every organisational level and pinpoint where further action is needed. #### **Collaborative Inclusion Networks** Our ongoing commitment to fostering an inclusive and equitable culture is reflected in our partnerships and employee networks. In October 2025, MUFG collaborated with peer banks in London to establish 'Danketsu', an intra-Japanese banks network dedicated to celebrating Black History Month and promoting unity. This initiative underscores the value of collaboration in driving inclusion and supports our broader efforts through the Sakura network, which celebrates Pride and LGBTQ+ inclusion within Japanese banks in London. ## **Employee Experience and Workplace Culture** In our 2025 Employee Survey, 80% of EMEA employees responded favourably to the statement, "Employees are treated with respect regardless of their job/title/hierarchy", marking an improvement compared to the 2024 results. #### **Impact on Sustainable Growth** By nurturing an inclusive culture, MUFG continues to build a foundation for sustainable growth within an increasingly diverse, competitive, sophisticated and global business environment. Approved for issue by the Board Nobuho Nanjo Chief Executive Officer 25 Ropemaker Street London EC2Y 9AJ 26th March 2026 ![](_page_18_Picture_13.jpeg) {19}------------------------------------------------ # **Directors' Report** The Directors present their annual report and financial statements for the year ended 31 December 2025. # **Directors** The Directors during the year and up to the date of signing were as follows: | Eileen Taylor | Chair (Independent) | | |-------------------------|-------------------------------------------|-----------------------------| | Beatrice Devillon-Cohen | Senior Independent Non-Executive Director | | | Angela Crawford-Ingle | Independent Non-Executive Director | | | Chris Marks | Independent Non-Executive Director | (appointed on 7 April 2025) | | Hidefumi Yamamura | Group Non-Executive Director | | | Tomoyuki Kamioka | Group Non-Executive Director | (appointed on 5 June 2025) | | Masatoshi Komoriya | Group Non-Executive Director | (appointed on 5 June 2025) | | Masashi Kanematsu | Group Non-Executive Director | (resigned 1 April 2025) | | Masahiro Kuwahara | Group Non-Executive Director | (resigned 1 April 2025) | | Nobuho Nanjo | Chief Executive Officer | (appointed on 1 April 2025) | | Tony Syson | Chief Financial Officer | (resigned 16 January 2026) | | Nicola Wickes | Chief Risk Officer | | | Chris Kyle | Chief Executive Officer | (resigned 31 March 2025) | The Board of Directors currently comprises the Chair, three other Independent Non-Executive Directors, three Group Non-Executive Directors and three Executive Directors. Group Non-Executive Directors are employed by another MUFG Group company and undertake other roles within the Group, in addition to their directorship of the Company. The Board considers all of the Independent Non-Executive Directors to be independent within the criteria set in the UK Corporate Governance Code (the 'Code'). # **Chief Executive Officer** Chris Kyle resigned from his position as Chief Executive Officer on 31 March 2025. Nobuho Nanjo was appointed as Chief Executive Officer with effect from 1 April 2025. # **Chief Financial Officer** Tony Syson resigned from his position as Chief Financial Officer with effect from 16 January 2026. Jennie Oswald was appointed as Interim Chief Financial Officer with effect from the same date while the process to appoint a permanent successor is ongoing. Mrs Oswald's appointment is not a Board appointment. # **Directors' and officers' indemnities** As at the date of this report and during the financial year, the Company has agreed to indemnify each of the Directors of the Company to extent permissible by law and in accordance with the Company's articles of association in respect of any loss or liability which has been or may be incurred in connection with that relevant Director's duties or powers in relation to the Company. The Company maintained insurance against liabilities for all Directors and officers of the Company during the financial year and at the date of this report. # **Dividend and distributions** The Company maintains a Distributable Reserves policy which forms the basis of management information considered ahead of any dividend approval. The policy sets out factors considered relevant to ensuring against any unlawful distribution. The Board ensures that it takes decisions in line with the requirements of section 172 of the Companies Act 2006. The dividend and capital strategy of the Company will evolve with the needs of the business as well as the regulatory environment. In 2025, the Directors approved total coupon payments on Additional Tier 1 capital instruments of £33.5 million (2024: £35.8 million). Refer to Note 24 for terms of issuance. The Directors do not recommend a final dividend to be paid in the financial year. # **Use of financial instruments** The trading and issuance of financial instruments is integral to the business activities of the Company. Information regarding the use of financial instruments as well as an indication of the company's financial risk management objectives and policies is included within the Business and Risk Management Policies on pages 25 to 35. # **Compensation** Certain employees' discretionary remuneration is deferred where the reward exceeds thresholds set by the Joint Remuneration Committee, which meet the guidelines set out by the Prudential Regulatory Authority ('PRA'). Some of these deferrals take the form of Notional Stock Units ('NSU'), which track the performance of MUFG shares (refer to Note 6). ![](_page_19_Picture_22.jpeg) {20}------------------------------------------------ # **Directors' Report (continued)** ## **Subsequent events disclosure** As at the date of signing, the Directors are not aware of other material events which would warrant further disclosure. Refer to Note 28. ## **Political donations** The Company made no political donations during 2025 (2024: Nil). ## **Research and development** During the year the Company invested £4.8 million (2024: £0.1 million) in research and development, primarily relating to technology development in response to regulatory change programmes. #### **Statement on corporate governance arrangements** The Board is committed to applying the highest standards of corporate governance, as it believes that good corporate governance is at the heart of MUFG's vision to be the world's most trusted financial group; providing the highest quality service for clients while building sustainable trust with the communities in which we operate. As a privately-owned subsidiary, the Company is not required to apply the UK Corporate Governance Code, however the Board recognises the importance of good governance. Details of the corporate governance framework adopted by the Company are set out on pages 6 to 12. Where appropriate, recognising that the Company is a wholly-owned subsidiary, the Company applies the provisions and principles of the Code. #### **Matters dealt with in the Strategic Report** An indication of the likely future developments of the Company, together with information relating to principal risks, culture and workforce matters, section 172 of the Companies Act 2006, environment and energy are further discussed in the Company's Strategic Report. #### **Disclosure of information to the auditor** The Directors who hold office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of the same information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Deloitte LLP has expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. #### **Role of the Board** The objective of the Board is to define, oversee and be accountable for the implementation of governance arrangements that ensure the effective and prudent management for the long term success of the Company. Such oversight is within a framework of effective controls which enables risk to be assessed and managed. The Board's responsibilities are clearly defined in its terms of reference. The Board's key responsibilities include (amongst other responsibilities): - Determining and approving the Company's strategy and overseeing its implementation. - Approving the Company's business plans and monitoring their implementation. - Monitoring the Company's capital adequacy and liquidity position. - Ensuring that the Company's business is conducted in a prudent manner. - Ensuring that the necessary resources are in place for the Company to meet its objectives. - Determining and approving the development, implementation and maintenance of the Company's emerging and principal risks, overall risk appetite and monitoring their management. - Approving the Company's annual budget and monitoring the Company's performance against budget. - Approving material changes in the organisational or business structure of the Company. - Ensuring effective engagement with, and encouraging participation from, the shareholder and the Company's other key stakeholders. - Ensuring that the Company's activities comply with all applicable regulatory rules and requirements. - Ensuring adequate succession planning for the Board and senior management (in conjunction with the Nomination Committee) so as to maintain an appropriate balance of skills, experience and knowledge within the Company and on the Board. - Ensuring maintenance of sound systems of internal control and risk management. - Approving and monitoring any material projects within the Company. - Ensuring that policies and practices are consistent with the Company's values and support its long term sustainable success. - In conjunction with the Joint Remuneration Committee, determining the Company's remuneration policy for staff, including Directors and other senior executives. - Oversight of the Company's overall corporate governance arrangements. - Establishing formal and transparent policies and procedures to ensure the independence and effectiveness of Internal Audit and external auditors. ![](_page_20_Picture_36.jpeg) {21}------------------------------------------------ # **Director's Report (continued)** The Board has established four committees to support it with specific areas within the Board's remit of responsibilities: - Board Risk Committee. - Audit Committee. - Nomination Committee. - Joint Remuneration Committee. # **Separation of responsibilities** The Board has established a clear division of responsibilities between Executive Directors and Non-Executive Directors. In particular, the Board is committed to maintaining a clear separation of responsibilities of the Chair and the CEO to reflect the unique role that each has within the Company. The Chair's key responsibilities are: - The effective running of the Board. - Ensuring that the Board as a whole plays a full and constructive part in the development and determination of the Company's strategy and overall commercial objectives. The CEO's key responsibilities are: - Running the Company's business. - Proposing and developing the Company's strategy and overall commercial objectives, which he does in close consultation with the Chair and the Board. The Board has also appointed a Senior Independent Non-Executive Director, with certain additional responsibilities, including: - Providing a sounding board for the Chair and serving as an intermediary for the other Directors when necessary. - Being available to the shareholder if it has concerns which contact through the normal channels of Chair, CEO or other executive has failed to resolve or for which such contact is inappropriate. - Providing confidential feedback to the Chair on his performance following any assessment exercise. No one individual has unfettered powers of decision-making. All Directors have access to the advice and services of the Company Secretary, who is responsible for advising the Board on all governance matters. Both the appointment and removal of the Company Secretary is a matter for the Board as a whole. # **Composition** The Board comprises the Chair, three other independent Non-Executive Directors, three Group Non-Executive Directors appointed to represent the shareholder's interests and three Executive Directors. As a wholly owned subsidiary company, the Board recognises the importance of ensuring that there is appropriate representation of the Company's shareholder on the Board and maintaining a majority of Non-Executive Directors on the Board. This also supports the Company in meeting the Code provisions on regular engagement by the Chair and independent Non-Executive Directors (in particular the chairs of subcommittees of the Board) with shareholder representatives. The Board is committed to diversity at all levels of the organisation, including on the Board itself. The Board recognises and embraces the benefits of having a diverse Board and sees increasing diversity at Board level as an essential element of good corporate governance. A truly diverse Board will include and make good use of differences in, amongst other things, the skills, social and cultural background, race, gender and other distinctions between Directors. These differences will be considered in determining the optimum composition of the Board and when possible, should be balanced appropriately. All Board appointments are made on merit, in the context of the skills, experience, independence and knowledge which the Board as a whole requires to be effective. The Nomination Committee reviews and assesses the Board's composition and recommends the appointment of new Directors. In reviewing Board composition, the Nomination Committee will consider the benefits of all aspects of diversity including, but not limited to, those described above, in order to enable it to discharge its duties and responsibilities effectively in identifying suitable candidates for appointment to the Board. ![](_page_21_Picture_25.jpeg) {22}------------------------------------------------ # **Director's Report (continued)** The table below sets out the diversity of the Board as at 31 December 2025. | Name | Gender | Nationality | |------------------------------------------------------------------------|--------|-------------------| | Eileen Taylor (Chair) | Female | British, American | | Beatrice Devillon-Cohen (Senior Independent Non-Executive
Director) | Female | British, French | | Angela Crawford-Ingle (Independent Non-Executive Director) | Female | British | | Chris Marks (Independent Non-Executive Director) | Male | British | | Tomoyuki Kamioka (Group Non-Executive Director) | Male | Japanese | | Masatoshi Komoriya (Group Non-Executive Director) | Male | Japanese | | Hidefumi Yamamura (Group Non-Executive Director) | Male | Japanese | | Nobuho Nanjo (CEO) | Male | Japanese | | Tony Syson (CFO) | Male | British | | Nicola Wickes (CRO) | Female | British, Irish | The Board's policy is to appoint and retain Non-Executive Directors who can apply their wider knowledge and experience, and to review and refresh regularly the skills and experience the Board requires. The Board is satisfied that each Non-Executive Director is able to devote sufficient time to the role in order to discharge their duties effectively. # **Board and committee effectiveness** The Board conducts an annual evaluation of its effectiveness and seeks an external evaluation every three years, which is deemed to be best practice, based on the requirements set out in the Code. An external evaluation was conducted in 2023 by Independent Audit to review and assess, among other things, the quantity and quality of discussions, the management of meetings and the decision-making process. An external evaluation will be conducted in 2026. Approved by order of the Board of Directors at a meeting on 26th March 2026 and signed on their behalf by: By order of the Board Nobuho Nanjo Chief Executive Officer 25 Ropemaker Street London EC2Y 9AJ 26th March 2026 ![](_page_22_Picture_11.jpeg) {23}------------------------------------------------ # **Statement of Directors' Responsibilities in Respect of the Strategic Report, Directors' Report and the Financial Statements** The Directors are responsible for preparing the Annual report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom adopted International Financial Reporting Standards. The financial statements also comply with the International Financial Reporting Standards (IFRSs) as issued by the IASB. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors: - properly select and apply accounting policies - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information - provide additional disclosures when compliance with the specific requirements in the financial reporting framework are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance, and - make an assessment of the Company's ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Approved by order of the Board of Directors at a meeting on 26th March 2026 and signed on their behalf by: By order of the Board Nobuho Nanjo Chief Executive Officer 25 Ropemaker Street London EC2Y 9AJ 26th March 2026 ![](_page_23_Picture_15.jpeg) {24}------------------------------------------------ # **Business and Risk Management Policies** ## **Risk Management Framework** The Company maintains positions in financial instruments as an integral part of daily market activities. These positions are held as part of portfolios that are maintained and monitored by instrument or risk type. The risk appetite is set by the Board and individual trading areas are allocated risk limits based on a wide range of market factors and are required to maintain portfolios within those limits. As such they are responsible for maintaining hedges in the portfolios. A more detailed explanation of risk management framework and oversight is given below. ## **Committees and Corporate Structure** 1. Board Responsibility for the oversight of risk management resides with the Board, with support from the Board Risk Committee ('BRC'). In this context the Board is responsible for reviewing internal controls and the process for managing risks. As part of the Company's business strategy, the Board considers the risks to which the Company is exposed and specifies an appetite and management strategy for each of these risks. The primary financial, operational and reputational risks are defined and discussed in further detail in the following sections. The Board is accountable for approving the risk management framework for the Company but has delegated responsibility to the BRC to approve this framework on their behalf. #### 2. Board Risk Committee The objective of the BRC is to exercise oversight on behalf of the Board of the key risks of the Company and review and make recommendations to the Board on the Company's risk appetite and risk strategy. The BRC is also responsible for the Company's risk management framework which describes the holistic approach to the Company's risk management systems of control over the business. It describes the risk management responsibilities and delegated authority of the Board to its underlying committees, departments and significant individuals. As at 31 December 2025, the BRC was comprised of the Independent Non-Executive Directors, including the Chair of the Board. The BRC is supported by the regular attendance of the Chief Executive Officer ('CEO''), Chief Risk Officer ('CRO'), and Chief Finance Officer ('CFO'), who is the primary contributor of capital and liquidity metrics. #### 3. Risk structure and other committees Day-to-day risk management is the responsibility of all employees of the Company. Accountability for second line risk management, with the exception of compliance and conduct risk, resides with the CRO, who reports directly to the CEO and the BRC. Market, credit, operational, reputational, strategic and model risk are overseen by the EMEA Risk Management Committee ('ERMC') supported by its underlying sub-committees. Valuation risk is overseen by the Valuation Committee ('ValCo'), which is chaired by the CFO. Liquidity and capital risk are overseen by the Asset and Liability Committee ('ALCO'), which is chaired by the CFO. Compliance, conduct and legal risk are overseen by the Regional Compliance Committee ('RCC'). Second line risk management of compliance risk and conduct risk resides with the Chief Compliance Officer ('CCO'), who reports directly to the CEO. Each of these sub-committees report to the EMEA Executive Committee and MUS(EMEA) Management Committee, which report directly to the Board. In addition, the ERMC reports to the BRC, via the CRO. The Company's risk committee structure as at 31 December 2025 is illustrated below: ![](_page_24_Figure_17.jpeg) (1) \*Covers MUS(EMEA) and MUFG Bank London Branch ![](_page_24_Picture_19.jpeg) {25}------------------------------------------------ ## **Three Lines of Defence** To create a robust control environment to manage risks, the Company uses an activity based three lines of defence model to assign roles and responsibilities relating to one of the three lines, depending on the activities they are conducting. This model assigns responsibility and accountability for risk management and the control environment. The three lines of defence are summarised below: - The first line of defence ('1LoD') owns the risks and controls it is responsible for identifying, assessing, and managing (including remediation) risks and controls in line with risk appetite; adhering to policies and standards set by the second line of defence ('2LoD') and meeting requirements of all in scope processes and procedures including reporting and governance; communicating changes that may impact the Company's risk profile to the 2LoD - The second line of defence is responsible and accountable for developing and maintaining the risk management framework and its associated policies, procedures and guidance; developing and maintaining other risk related policies, procedures and guidance that guide and affect the management of risks; acting as trusted advisor to the business and senior management on matters related to regulatory compliance; providing advice oversight and challenge on the effectiveness of risk controls owned by the 1LoD. - The third line of defence ('3LOD') is responsible and accountable for providing independent and objective assurance of the effectiveness of governance, risk management and internal control practices in the 1LoD and 2LoD; challenging Management to improve the governance, risk management and system of internal controls; acting as a trusted advisor to the Board of Directors, Senior Management and other key stakeholders over the control environment; informing and reporting to Company's Boards of Directors and Senior Management on the adequacy, design, and effectiveness of the Company's risk governance framework and critical issues as they arise. # Risk Appetite Central to the Company's risk management is a clear risk appetite, consistent with its business profile and plans, as well as a strong and independent review and challenge structure. This facilitates optimisation of risk/return and assists Senior Management to effectively control and coordinate risk taking across the business. The Company's risk appetite is specified by the Board through a number of metrics including capital, liquidity, earnings volatility, market, credit and non-financial risks. It is reviewed at regular meetings of the Board and recalibrated annually as part of the Company's budget and planning process. The risk appetite is cascaded through the Company via the allocation of risk limits to front office departments and individual traders. Risk limits impose an upper constraint on the level of exposure to a particular factor or a combination of factors. Risk limits are imposed to express the Board and Senior Management's appetite for certain risk types and to facilitate prudent allocation of such risk appetite to individual risk takers or group of risk takers, taking client needs and revenue targets into consideration. These are set at the Company, business unit, department, and trader level and risk limits are monitored daily. Other risk appetite metrics and Key Risk Indicators ('KRIs') are calculated less frequently than daily – either monthly or quarterly. The establishment of the risk appetite is largely a top-down process and is supplemented and reinforced by a bottom-up approach to risk identification, the results of which are maintained in the Company's risk register. The Company establishes and is subject to risk management policies. These policies formalise the behaviours and standards expected in support of the risk culture. Policies are established across each primary risk type to formalise the processes by which business activities should fall within the appetite for each risk. Additionally, risk policies are established to ensure quality of risk measurement, risk monitoring, and appropriate avenues for escalation to occur. The Company has established formal processes governing new activities (i.e. new business, complex transactions and new product mandates), which support the identification of any additional risk to the Company and ensure that the risks related to the proposal are within the risk appetite of the Company and has the support of the Company's risk management and control functions. #### Capital Adequacy The Company monitors its capital adequacy on an ongoing basis and conducts a formal annual Internal Capital Adequacy Assessment Process ('ICAAP') in which it assesses its risks, controls and capital. The Board is involved in all the key elements of the ICAAP and approves the business and capital plans, Risk Appetite Statement and oversees the preparation of the ICAAP document. The ICAAP process is closely aligned with the strategy setting and business planning process as well as the process for identification, measurement and control of those risks. Stress testing is used to assess the impact of severe but plausible financial stresses on either individual or multiple risk factors and to determine appropriate capital buffers. The Company manages its risk and capital resources with the objective of maintaining a regulatory ratio comfortably in excess of the minimum capital resources required by the regulators. #### Stress Testing The Company has a stress testing framework, which is reviewed by the BRC on an annual basis, that includes scenario stress testing (comprising macroeconomic and event stress testing based upon forward looking, historical and reverse stress testing), as well as single risk factor stress tests (which are designed to identify and quantify risk concentrations to particular risk factors). Results of stress testing are calculated at the Company level and also by department and business line and reported regularly to Senior Management. ![](_page_25_Picture_20.jpeg) {26}------------------------------------------------ # **Risk Management by Risk Type** # **Market Risk** Market risk is the risk of losses from movements in market prices in the trading portfolio. The Company uses a variety of risk measures to quantify and control this risk, with the overall objective of ensuring that potential losses arising from market risk remain within the appetite set by the Board: • Value at Risk ('VaR'), Stressed Value at Risk ('SVaR'), and Incremental Risk Charge ('IRC') measures provide aggregate indicators of potential losses, subject to stated confidence levels and holding periods # **Risk Management by Risk Type** - Risk factor sensitivities measure the impact of moves in each risk factor, allowing concentrations of risk to be identified and controlled • Stress testing is used to monitor and control the exposure of the portfolio to extreme moves in market rates and prices. A range of - stress tests is run, covering exposures to relevant market factors and scenarios in various market conditions • Stop loss and drawdown limits monitor actual losses at the Company, business unit, department, and trader level. - Interest Rated Risk in the banking book (IRRBB) is measured with the prescribed PRA Stress scenarios. Day–to-day responsibility for the management of market risk resides with the front office departments and responsibility for second line review, challenge and oversight is with the Market Risk Management department. The Risk Analytics Group is responsible for the design of new market risk management models. Daily market risk reports are prepared for senior management and front office departments using the Company's in house and vendor systems. The Company makes use of a range of internal models for the quantification of market risk. #### VaR Modelling The VaR of a trading book is an estimate of the potential loss on risk positions as a result of movements in market rates and prices over a specific time horizon and to a given confidence level. The Company uses VaR methodologies to monitor the price risks arising from different trading books across portfolios. This is measured based on a 1 day holding period using confidence levels of 99% and 95% for regulatory and internal VaR respectively. Actual profit and loss outcomes are also monitored to test the validity of the assumptions made in the calculation of VaR. The VaR outputs are based on a full revaluation historical simulation model and a 2 year and 1 year data window for regulatory and internal VaR respectively. The Company additionally calculates SVaR using an appropriately stressed 1 year lookback period as required by regulatory rules. #### VaR Backtesting The Company carries out a daily comparison of end of day VaR measures to the 1 day change of the portfolio's value on the day the profit and loss figures are produced. In 2025 the number of occasions on which actual trading book outcomes exceeded the previous day's VaR was within the acceptable tolerances of the model. In addition to the VaR back testing at the aggregate Company level, the Company conducts back testing on a number of sub-portfolios across the different business units. # Stressed VaR ('SVaR') The Company calculates SVaR based on inputs calibrated to historical data from a continuous 1-year period of significant financial stress relevant to the Company's portfolio. # Risks Not In VaR The Company calculates additional capital under its Risks Not in VaR framework for certain risk factors that are not fully captured in VaR. #### Incremental Risk Charge ('IRC') The Company calculates IRC which captures risk from the default and rating migration of non-securitised credit exposures in the trading book. The IRC is calculated daily and is included in regulatory capital calculations. IRC is calculated using a Monte Carlo model of portfolio rating migration and default. Risk is measured over a 1-year horizon to a confidence level of 99.9% and is calculated on current positions assuming that risk will be at similar levels throughout the year. VaR considered in isolation has limitations which are listed below in further detail. The Company also uses a wide range of other risk limits, for example stop-loss limits, risk factor sensitivity limits or stress limits, to manage its exposures. ![](_page_26_Picture_26.jpeg) {27}------------------------------------------------ The Company's VaR has the following limitations: - Calculations are based on historical data which may not be the best estimate of risk factor changes that occur in future - In transforming historical data into future scenarios, the Company makes assumptions that may not be the best estimate of how changes will occur in the future - Focusing on the maximum loss that is expected to be incurred 99% (or 95%) of the time says little about the smaller losses that are expected to be incurred more frequently, or the larger losses in excess of VaR that are expected to be incurred 1% (or 5%) of the time - VaR is generally based on calculations performed at the end of each business day. The end-of-day figure may not be representative of the figure at other times of the day. The following table shows internal VaR figures for 2025. The breakdown in terms of different risk factors is as described below. The 'Close' column shows the VaR at the year-end date. The 'Average' column shows the average VaR measurement from each trading day in the year and the 'Maximum' and 'Minimum' columns show the highest and lowest VaR value in the year respectively. 'Diversification benefit' is the difference between the simple sum of the VaRs for each risk factor, and the Company's overall VaR, which is based on the simultaneous modelling of all risk factors. | | Close | Average | Maximum | Minimum | |--------------------------|-------|---------|---------|---------| | 95% VaR 2025 | £'m | £'m | £'m | £'m | | | | | | | | Interest Rate Curve Risk | 2.57 | 1.35 | 2.96 | 0.25 | | Interest Rate Vega Risk | 0.26 | 0.39 | 0.72 | 0.19 | | Asset Spread Risk | 0.38 | 0.55 | 0.98 | 0.25 | | Currency Risk | 0.17 | 0.19 | 0.29 | 0.06 | | Equity Price Risk | 0.08 | 0.06 | 0.13 | 0.01 | | Equity Vega Risk | 0.11 | 0.10 | 0.31 | 0.04 | | Inflation Risk | 0.07 | 0.12 | 0.65 | 0.06 | | Basis Risk | 0.38 | 0.91 | 1.77 | 0.22 | | Diversification Benefit | -1.09 | n/a | n/a | n/a | | Total VaR | 2.93 | 1.58 | 3.57 | 0.52 | | | Close
Average | | Maximum | Minimum | |--------------------------|------------------|------|---------|---------| | 95% VaR 2024 | £'m | £'m | £'m | £'m | | | | | | | | Interest Rate Curve Risk | 1.56 | 0.89 | 1.77 | 0.30 | | Interest Rate Vega Risk | 0.46 | 0.65 | 1.08 | 0.35 | | Asset Spread Risk | 0.29 | 0.42 | 0.72 | 0.26 | | Currency Risk | 0.17 | 0.10 | 0.26 | 0.01 | | Equity Price Risk | 0.07 | 0.05 | 1.03 | 0.00 | | Equity Vega Risk | 0.07 | 0.10 | 0.42 | 0.02 | | Inflation Risk | 0.06 | 0.15 | 0.44 | 0.06 | | Basis Risk | 1.57 | 0.56 | 1.62 | 0.27 | | Diversification Benefit | -2.87 | n/a | n/a | n/a | | Total VaR | 1.38 | 1.26 | 1.98 | 0.69 | #### Interest Rate Curve Risk The risk of losses arising from changes in market interest rates. #### Interest Rate Vega Risk The risk of losses arising from change in implied interest rate volatility. # Asset Spread Risk The risk of losses due to the market price of bonds and credit derivatives attributable to changes in such factors as perceived credit quality or liquidity, as distinct from price changes attributable solely to market interest rates. #### Currency Risk The risk of losses arising from changes in market FX rates and changes in implied FX volatility. ![](_page_27_Picture_18.jpeg) {28}------------------------------------------------ # **Business and Risk Management (continued)** ## Equity Price Risk The risk of losses due to price movements in the equity market. #### Equity Vega Risk The risk of losses arising from change in implied equity volatility. #### Inflation Risk The risk of losses arising from the changes in the market prices of inflation derivatives, or from price changes in inflation-linked securities attributable to inflation. #### Basis Risk The risk of losses arising from changes in market prices for cross currency basis, tenor basis, and other basis swaps in the interest rate market. ## **Credit Risk** Credit risk is the risk of loss resulting from client, issuer or counterparty default and arises on credit exposure in all forms, including settlement risk. The Company manages its credit risk in accordance with policies originated and approved within the Company and endorsed by its parent company. Counterparty exposure is managed through a process of credit risk assessment, limit setting, exposure monitoring and exception reporting. The Company assesses the default probabilities of individual counterparties by using a rating methodology incorporating external ratings, the market price of credit risk and internal fundamental analysis. Day–to-day responsibility for the management of credit risk resides with the front office departments and responsibility for second line review, challenge and oversight is with the Credit Risk Management department, which is within the Risk department supported by the Risk Analytics Group which is responsible for the design of credit risk management models. Daily credit risk reports are prepared for Senior Management and front office departments using the Company's in house and vendor systems with on-going deliveries of enhancements to prevailing risk methodologies/reporting to ensure that the Company adheres to the changing general regulatory guidelines/recommendations. The objective of Credit Risk Management is to: - Identify, quantify, monitor and control credit risk exposure - Provide sufficient, timely and relevant data of credit risk exposure by counterparty across all product classes and against each respective approved credit limit - Maintain static data for all counterparties - Produce timely credit risk reports as appropriate - Mitigate credit risk by mandating collateral requirements and or credit mitigants in the contractual terms in accordance with the Company's Collateral Policy. The Company's collateral management framework includes daily reporting of collateral balances, collateral disputes or differences (if any) and escalation procedures. - Provide credit portfolio monitoring and analysis. Credit Risk is monitored constantly, and Credit exposure is reported daily. On a monthly basis, Credit Risk Management reports the Company's total credit risk exposure to the EMEA Credit Risk Committee ('ECRC'), which is a sub-committee of the ERMC. Monthly reporting includes a review of large exposures, exposures to lower rated issuers and counterparties, and exposure to higher risk industry and country sectors. The ECRC escalates material matters to the ERMC. The ERMC is also the forum where credit policies are reviewed and finally approved. In addition to the ERMC, a summary of the Company's credit risk exposure is also reported to each EMEA Executive Committee and BRC meeting. Credit exposure is normally measured on a net basis i.e. by taking account of received collateral and aggregating trades with both positive and negative values provided that a legally enforceable master netting agreement has been executed that permits close-out netting. To mitigate derivative counterparty credit risk, the Company has Credit Support Annexes and Uncleared Margin Rules ('UMR') as required in place with the majority of its counterparties (this includes the exchange of initial margin with certain non-centrally cleared, over-the-counter derivatives counterparties for in-scope products) and guarantee arrangements in place with members of the MUFG Group. Appropriate settlement limits have been established with counterparties which are recorded in the Company's risk limit/exposure systems, are readily available to the front office and are monitored on a daily basis for limit adherence. As part of the credit review process, each counterparty is normally assessed and measured for wrong way risk. If material wrong way risk is identified the collateral/underlying asset is deemed ineligible for regulatory risk calculations and risk is measured on an uncollateralised basis. The Company undertakes daily and monthly monitoring of the Company's wrong way risk positions. An analysis of the Company's credit exposures is included in Note 33. #### **Credit Concentration Risk** Credit concentration risk is the risk arising from an uneven distribution of exposures, through single name, sector or geographical concentration. The Company continues to augment its concentration risk analysis and reporting with periodic delivery of enhancements to existing processes to strengthen the identification and reporting to ensure that the Company remains in line with changing general regulatory guidelines/recommendations. The Company analyses the credit concentrations through its daily credit exposure reports. The Company's exposures are concentrated on Government bonds, the financial sector and exposures to Japanese markets and counterparties. ![](_page_28_Picture_27.jpeg) {29}------------------------------------------------ # **Liquidity Risk** Liquidity risk is the risk that the firm's financial condition or overall safety and soundness is adversely affected by an inability or perceived inability to meet its contractual or contingent obligations without incurring significant expense. # Oversight The ultimate responsibility for liquidity risk management sits with the Board who sets the Company's liquidity risk appetite, which expresses the level of risk the Company chooses to take in pursuit of its strategic objectives. The Board mandate to the Executive Committee in respect of liquidity risk includes specification of liquidity stress testing, approval of business line unsecured funding limits, transfer pricing rates/policy and the contingency funding plan. The Executive Committee has determined the powers and discretions delegated to the ALCO which meets monthly or on an ad-hoc basis (as appropriate) to: - Review and define the funding and liquidity risk policy - Monitor the Company's liquidity risk profile and review compliance with the Board approved liquidity risk appetite - Oversee and review stress testing - Measure, monitor and mitigate liquidity risk exposures for the Company - Ensure that appropriate business incentives are maintained that reflect the cost and availability of liquidity through the Company's Fund Transfer Pricing ('FTP') process and unsecured funding limit allocation process - Review critical liquidity risk factors and prioritise issues arising - Determine the Company's funding plans and funding diversification strategy in light of business projections and objectives. The Company uses a variety of quantitative and qualitative measures to monitor the adequacy of the Company's liquidity resources and to ensure an integrated approach to liquidity risk management. This framework incorporates a range of tools described below: #### Internal Stress Testing The Company's primary liquidity stress testing tool is the Maximum Cumulative Outflow ('MCO') model, which is designed to capture all material drivers of liquidity risk (both on and off-balance sheet) under separately defined stress scenarios, and to determine the size of liquidity resources needed to navigate the particular stress event. The model has been developed as a synthesis of market practice, regulatory requirements and past experience in stressed market conditions. The scenarios modelled are categorised as baseline (reflective of normal business conditions), systemic (refers to a market-wide liquidity event) and combined (analogous of a combined market and Company specific stress event). Stress testing is conducted daily on both an aggregated currency basis and by material individual currency. #### Funds Transfer Pricing The Company seeks to align its liquidity risk appetite with the strategic objectives of the business through regulating the demand for liquidity and allocating the cost of liquidity on the basis of unsecured funding usage and underlying liquidity requirements. The ALCO is responsible for the FTP framework, and Treasury is responsible for the day-to-day application of the framework. The cost of funding is allocated to businesses on the basis of the funding requirements to finance current inventory positions and ongoing business activities. The cost of liquidity reserved to cover contingent liquidity outflows is also allocated to the business on the basis of those activities driving the Liquid Asset Buffer requirement – this includes liquidity reserved to cover regulatory liquidity requirements. # Funding Plan The balance sheet projection process balances aggregate business line requests for unsecured funding against Treasury's assessment of the projected balance sheet, funding requirements and capacity for the Company to raise unsecured financing. The ALCO will review and approve funding plans including allocation of funding limits to business lines. This ensures that business activities do not impose an uncertain strain on the Company's ability to source adequate liquidity in normal business conditions and allows Treasury to plan and sustain appropriate levels of liquidity in anticipation of business line funding usage. As part of funding liquidity risk monitoring, Treasury looks at the short and long term currency mismatch horizons in accordance with the Board's guideline. #### Liquid Asset Buffer The Company holds its liquidity portfolio in a stock of high-quality government bonds and bonds issued by multilateral development banks, local government and agency issuers, as well as central bank deposits (where applicable). The size of the liquidity buffer is calibrated using both the Company's internal stress testing framework and applicable regulatory requirements. The liquidity portfolio is held on an unencumbered basis without restrictions on rehypothecation and with full Company legal ownership. The investment criteria for the liquidity portfolio are approved by the ALCO with risk limits imposed and monitored by Market Risk Management. # Contingency Funding Plan The Contingency Funding Plan ('CFP') allows senior management to identify internal and external triggers indicative of a stress event and initiate the most effective response for stabilising and mitigating liquidity risk exposures through clear operational plans, clearly defined decision-making responsibilities and effective communication with both internal and external stakeholders. The CFP also specifies the means through which additional funding should be sourced during a period of heightened liquidity concern, as well as the process by which the Company deactivates the CFP at an appropriate time. The Company also maintains detailed recovery plans which consider actions to facilitate recovery or an orderly resolution from a severe stress. CFP actions form part of the firm's wider recovery actions. ![](_page_29_Picture_26.jpeg) {30}------------------------------------------------ #### Liquidity Stage Assessment The principal assessment framework within the Funding Liquidity Risk Management Policy is the liquidity stage assessment. This is a formal assessment of the external environment affecting the Company and other companies within the MUFG Bank Group. The liquidity stage is determined by an evaluation of the availability of funding and is monitored through a combination of Warning Indicators, the Company's internal stress testing and compliance with regulatory liquidity requirements. Elevation of the liquidity stage is specifically linked to activation of the CFP, which provides a range of mitigating actions to be taken. Such actions are taken following consideration of any relevant market, economic or client impact. In the event the liquidity stage is elevated, formal approval is required from the CEO and CFO in consultation with the CRO, who will in turn escalate and sanction actions as appropriate. Monitoring of the liquidity stage is conducted at Company and MUFG Bank level on an on-going basis. Any elevation of liquidity stage risk at the MUFG Bank level is deemed to represent a worsening of conditions that would impact the Company too. The Funding Liquidity Risk Policy identifies general contingency actions to be taken by departments at each stage. #### Asset Encumbrance Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations. Due to the nature of its business the Company funds a portion of debt securities via repurchase agreements and other similar secured borrowing. Additionally, debt securities and cash are provided to meet initial and variation margin requirements from central clearing counterparts and margin requirements arising from derivative and repurchase agreements. The Company monitors the mix of secured and unsecured funding sources and seeks to efficiently utilise collateral to raise secured funding and meet other collateralised obligations. #### Regulation The Company assesses liquidity adequacy as part of the annual Internal Liquidity Adequacy Assessment Process that it submits to the PRA. The Company's compliance with prevailing regulatory liquidity requirements including the Liquidity Coverage Ratio and the Net Stable Funding Ratio are complemented by the internal stress testing framework. The Company manages its liquidity prudently, holding its Liquid Asset Buffer well in excess of the regulatory requirement. Monitoring of asset encumbrance is carried out in accordance with the Company's Asset Encumbrance Framework. # **Capital Risk** Capital risk is the risk that the Company has insufficient capital resources to meet the capital requirements that are incurred through execution of the business plan. The Company aims to manage and control its exposure to Capital Risk through its policies and procedures with the objectives of: - Holding sufficient capital resources to support the risks in which the Company engages - Identifying an appropriate capital plan to ensure that this objective is maintained over the three-year business plan horizon - Managing the relative proportions of the constituent parts of capital resources such that the Company meets these objectives in an efficient manner. The ALCO has primary responsibility for overseeing the Company's capital management. The Company measures key capital sensitivities and analysis of drivers of change in capital adequacy which are regularly reported in the ALCO. The capital position is also reported to the ERMC regularly. The Company assesses capital risk against minimum regulatory requirements of Risk Weighted Asset ('RWA') and leverage exposure and internal targets at Company level, supported by assessments of capital requirements at business level against internal targets. Capital risk reports are circulated to senior management daily and are discussed at Board and an Executive-level Committees level. The Company determines and maintains a capital planning buffer to reduce the risk of having to raise capital or reduce business at short notice. The Company's objective is to manage capital to withstand severe but plausible stresses without the need to significantly alter the business. This capital planning buffer is determined on the basis of appropriate stresses to the Company's business. # **Leverage Ratio** The Company assesses the leverage ratio to mitigate the risk of excessive leverage. The Company performs regular analysis of the leverage ratio to understand drivers and sensitivities. The Company's leverage ratio exposure measure is mainly driven by securities financing transactions, derivatives and inventory which includes mainly trading securities and available-for-sale securities. In addition, Tier 1 capital resources and any applicable deductions impact on the leverage ratio. Leverage ratio is reported to the ALCO, BRC and Board. Per the PS21/21 "The UK leverage ratio framework" issued by the PRA in October 2021, the Company is subject to the binding regulatory minimum leverage ratio requirement of 3.25% plus a countercyclical leverage ratio buffer rate of 35% of the firm's countercyclical capital buffer ('CCyB') rate. The leverage ratio binding requirement has applied since 1 January 2023. ALCO monitors the leverage ratio to ensure the Company meets the minimum regulatory requirements. In addition, balance sheet limits are in place for key exposure types which mitigate significant increase in leverage ratio exposure measure. ![](_page_30_Picture_23.jpeg) {31}------------------------------------------------ # **Model Risk** Model risk is the potential for loss arising from decisions based on incorrect or misused model outputs and reports. The Company manages the model risk of pricing and risk models by having a segregation of duties between model development and validation of the model. There are governance sub-committees and working groups that oversee the models used by the Company. In the case of risk models, the Model Oversight Committee ('MOC'), which reports to the ERMC, is responsible for reviewing the output of ongoing validation and for model performance. The ValCo oversees the use of pricing models. The independent validation of risk and pricing models is performed by the Model Risk Management function which is part of the Company's Enterprise Risk Management department and has membership on the MOC and the ValCo. # **Operational Risk** Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Company manages and controls its exposure to operational risk through its policies and procedures, which are designed to ensure that it: - Mitigates the risk of exposure to fraud - Processes transactions correctly, accurately and on a timely basis - Protects the integrity and availability of information processing facilities, infrastructure and data - Maintains the confidentiality of its client information - Employs appropriate numbers of skilled staff and complies with relevant employment laws and regulations - Establishes workplace environments that are safe for both employees and visitors - Reduces both the likelihood of an incident occurring and the impact should an incident occur. The Company employs The Standardised Approach ('TSA') for calculating its Pillar 1 Operational Risk Capital Requirement. The Company is committed to adopting leading industry practices for managing and measuring operational risk and has also developed a primarily scenariobased capital model to determine whether it should hold any additional capital for operational risk. In order to facilitate the management of operational risk, the Company breaks down its Risk Taxonomy using the Basel II categories: - 1. Execution, delivery and process management - 2. Clients, products and business practices - 3. Internal fraud risks - 4. External fraud risks - 5. Employment practices and workplace safety - 6. Business disruption and systems failures - 7. Damage to physical assets. # Operational Risk Management Framework The Operational Risk Management Framework is defined within the Company's policies and detailed procedures, and comprises of the following key elements: #### Governance - Governance: The Operational Risk Governance Structure outlines the committees and meetings through which key risk and control concerns and events are escalated, risk management action is driven, and risk management decisions are made. - Risk Appetite: The Company has defined its Operational Risk Appetite in both quantitative and qualitative terms, reflecting both the financial and non-financial impacts that can arise from operational risk. #### Risk Identification - Internal Operational Risk Events: The Company systematically collects details of both operational risk losses (or gains) above a certain threshold and details of events, even if they have not led to losses (or gains) e.g. near misses, and root cause analysis where applicable. - Key Risk & Control Indicators: The Company uses metrics to monitor its operational risk profile and to alert management when risk levels exceed acceptable ranges. - External Operational Risk Events: Business and support departments use information obtained from external events to assess their own risk profile, understand "lessons learned" and evaluate and adapt their current control environment from events which have impacted similar firms' business processes. #### Risk Assessment - Risk and Control Self-Assessments ('RCSA'): Departments within the Company assess the operational risks they face, and the effectiveness of their controls at mitigating those key operational risks, relative to the Company's appetite. - Scenario Analysis: The Company uses scenario analysis to assess the risks of extreme but plausible events. - Key Control Attestations: Managers attest to the adequacy of their control environment twice a year. #### Risk Remediation - Self-Identified Issues ('SII'): Departments identify, record and manage the remediation of deficiencies and/or weaknesses in their risk and control environments. - Remedial Actions: Progress in completing remedial actions is tracked and reported. - Insurance Policies: As part of its risk management approach, the Company uses insurance to mitigate the impact of some operational risks. ![](_page_31_Picture_41.jpeg) {32}------------------------------------------------ #### Risk Review and Reporting - Reporting: The Operational Risk department and management use reports to understand, monitor, manage and control operational risks. - Training: Staff are required to undertake mandatory on-line operational risk, including fraud risk awareness training annually. Day–to-day responsibility and accountability for the identification, assessment and management of operational risk resides with all Business Units and Support Functions; the Operational Risk Management department are responsible and accountable for developing and maintaining the Operational Risk Management Framework ('ORMF'); and providing second line review, challenge and oversight. Issues of significance are escalated to the EMEA Operational Risk and Controls Committee ('EORCC'), which reports to the ERMC and meets on a monthly basis. # Fraud Risk The Fraud Risk team in the Operational Risk Management Department own the EMEA Fraud Risk Policy and the EMEA Fraud Risk Framework and are responsible for second line oversight and challenge to ensure these are complied with by the first line risk and control owners. The policy and framework cover both Internal and External Fraud risk. A new UK "Failure to Prevent Fraud" offence came into effect 1st September 2025. The Fraud Risk team performed a detailed gap analysis against the published Home Office guidance to ensure compliance with the six fraud prevention principles. The team also delivered training and awareness sessions to staff based within EMEA and other strategic global group locations to ensure wide communication of the legislation requirements was achieved. The policy & framework continue to be embedded across the Company. The Fraud Risk team support the first line risk and control owners by overseeing and challenging the fraud risk and control landscape, ensuring that there are adequate anti-fraud controls implemented, Fraud Risk key indicators are defined and monitored and the team deliver fraud training and awareness sessions to both MUFG employees and MUFG clients. The fraud escalation and reporting process along with the trade surveillance controls continue to facilitate timely reporting of incidents and identification of unusual transactions. In addition, there is an ongoing programme of work to maintain fraud risk awareness and control. ## Technology Risk The Company has a dedicated Risk and Control function in the first line with responsibility for Technology Risk. Areas of focus include the top risks of IT Disruption, IT Resilience and Service Management, this includes network stability; access management; data backups; patching; user awareness training; monitoring and reporting of IT Incidents. It also delivers testing and mitigation activities to identify any potential vulnerabilities or improvements in the infrastructure platforms and business applications. The Company has an ongoing programme of work for continuous control improvement, which includes processes that have been uplifted due to DORA requirements with more projects in the pipeline to continue further enhancements. The Technology and Cyber team in the Operational Risk Management Department is responsible for second line oversight and challenge, this covers the creation and management of the SII and Key Indicators review, approving the RCSAs and monitoring the recording of Events against the ORM Framework. Any technology incidents causing business disruption is escalated to the Operational Resilience team who convenes the Crisis Management team, manages communications with key business stakeholders and end users as necessary. The team are also part of the Crisis Incident Response team, providing risk subject matter expert ('SME') expertise. Technology risk management information ('MI') is presented to the EORCC, and any material matters are escalated to the ERMC. #### Cyber Risk The Technology Cyber team within the first line has responsibility for the protection of the Company's environment against external threat and security of the Company's data. Areas of focus include threats related to network security; malware and firewall threats; access management; security patching; user awareness training; monitoring and reporting service and security events. It also delivers testing and mitigation activities to identify any potential security vulnerabilities in the infrastructure platforms and business applications. The Company has an ongoing programme of work that continually invests in improving controls to manage the cyber threat/risk, which includes processes that have been uplifted due to DORA requirements. The Technology and Cyber Risk team in the Operational Risk Management Department is responsible for second line oversight and challenge for Cyber. This includes participation in scenarios and desktop exercises to test the perimeter security. The team also reviews external events to understand threats to the MUFG infrastructure and then follow up, and challenge lessons learnt. Any cyber incidents causing business disruption is escalated to the Operational Resilience team who convenes the Crisis Management team, manages communications with key business stakeholders and end users as necessary. The team are also part of the Cyber Crisis Incident Response team, providing risk SME expertise. MI is presented to the EORCC, and any material matters are escalated to the ERMC. #### Third Party Risk Management ('TPRM') The Company has a control framework for Outsourcing Oversight and TPRM which has been enhanced since 2023 to meet regulatory requirements (including DORA) with the Operational Risk Management department providing second line oversight and challenge. Whilst the new framework has been defined and agreed the TPRM team is now focusing on framework embedment across the different third-party arrangements and implementation of a tool to manage relationships. The key components of the framework enhanced include a revised materiality assessment and a monthly oversight Committee with defined Terms of Reference. The areas of focus for 2025 include remaining legacy remediation work relating to third party suppliers' materiality and contractual review, further awareness/socialisation of Service Manager's responsibilities and full adherence to the deployment of latest regulatory requirements. ![](_page_32_Picture_18.jpeg) {33}------------------------------------------------ ## **Strategic Risk** Strategic risk is the risk to current or projected financial condition and resilience arising from adverse strategy design decisions, poor strategic execution, or lack of responsiveness to changes in the banking industry and operating environment. Strategic risks are generally longer-term risks whereas shorter term risks will usually be captured as part of business risk. The Company's primary approach to the management of strategic risk is through its business planning processes which highlight the key dependencies of its strategy, which allows for the assessment of strategic risk at the point that the strategy is devised and agreed. The Company's programme of reverse stress testing is intended to focus on key strategic risks, identifying scenarios that could lead to their realisation as well as contingent actions that could be taken to address their emergence and mitigate the impact of the strategic risk being realised. The Company's strategic risks also include potential impacts arising from the Company's relationship with its stakeholders and its relationship with MUFG. These risks include but are not limited to ongoing group support, maintenance of satisfactory relationships with key regulators, continued ability to meet core client demands, and the ability to attract and retain high quality staff. Strategic risk incorporates business risk which is the sensitivity between expected revenues and expected costs. It is a measure of how easily the cost base can be managed in relation to lower than expected revenues. The risk of doing business is categorised as the volatility of the business planning forecast compared to the realised revenue which is dependent on the market environment. # **Compliance Risk** Compliance risk, including the risk of Financial Crime, is the risk of financial, reputational or other damage to the Company through failing to comply with regulations, rules, guidelines, codes of conduct professional ethics governance and other standards. The Company maintains a governance structure designed to ensure appropriate management, oversight and second-line assurance of significant risks and associated mitigants, including, in respect of compliance risk, a Compliance function with sufficient authority, stature, independence, resources and access to the Board. Accountability for compliance rests with functional units across the Company which own their respective compliance risks. The Compliance function sets and monitors the Company's policies related to compliance risk and financial crime prevention. The Compliance function operates a number of controls and provides independent oversight and challenge on the effectiveness of controls owned by other functional units through the operation of an assurance framework in addition to advising on regulatory change and compliance matters, and escalation of issues arising. The Company's compliance programme and internal control infrastructures evolve in response to changes in regulation, best practice and the Company's risk profile, including from strategic initiatives and new products. #### **Conduct Risk** Conduct Risk comprises of a wide variety of activities and types of behaviour which fall outside the other main categories of risk, such as market, credit, liquidity, and operational risk. It refers to risks attached and associated to the way in which MUFG EMEA and its staff conducts themselves, relate to customers and the wider financial markets. It may negatively impact the company's reputation leading to loss of business, and/or regulatory or criminal sanctions. Accountability for conduct rests with functional units across the Company which own their respective conduct risks. The Company manages conduct risk through: - Strong culture and values - Effective governance and oversight - Clear policies and controls, including both Compliance policies and front office desk procedures - A risk assessment framework covering conduct risk identification and mitigation, informing the compliance programme - Measures of Board risk appetite for conduct risk in the context of the Company's strategic objectives and business plan - Ongoing monitoring, including a formal compliance surveillance and testing programme - Fair customer treatment and product governance - Management information relevant to conduct risk management - Company-wide conduct risk training and awareness programme. # **Legal Risk** Legal risk is the risk of financial loss or reputational damage to the Company arising from failure to identify, understand or adequately manage the Company's legislative and regulatory obligations; contractual rights and obligations; non-contractual obligations (such as duties of care); non-contractual rights (such as intellectual property); and legal disputes. The Company manages legal risk by seeking compliance with all applicable laws and regulations and promoting honesty and integrity by all staff. It seeks to promote prudent business growth and profitability through the rigorous control of legal and regulatory risks in support of the wider objectives of the Company. The Company has an established permanent Legal function that is independent of business activities and has sufficient resources to carry out its role including: - Identification of the main legal and regulatory risk issues affecting the business, recommending how these will be managed and, where appropriate, elevating residual risks to the relevant front office department, risk management department or the Board and its subcommittees - Managing legal and regulatory risk through due diligence, review of contracts and transactions including establishing legal enforceability of collateral arrangements for MUS(EMEA) to liquidate or take possession of collateral in a timely manner in the event of the default, insolvency, bankruptcy or other credit event of obligors, negotiation of transaction documentation and the management of all legal and regulatory actions. ![](_page_33_Picture_26.jpeg) {34}------------------------------------------------ # **Reputational Risk** The risk of loss arising from reputational damage in the event that the business activities deviate substantially from the expectations and confidence of customers, shareholders, investors, society and other wide-ranging stakeholders and any similar risk. The Company has a Reputational Risk Management policy and controls to mitigate the impact and reduce the likelihood of reputational incidents. The policy includes escalation to the EMEA Reputational Risk Management Committee which oversees the reputational risk profile of the company on behalf of the ERMC. Such incidents can occur in any type of risk from market through to operational, or from external risks over which the Company has no direct control. The Reputational Risk Management Policy sets out how the risk of reputational events is managed. # **Status of Regulatory Capital Resources** The Company's regulatory capital resources are assessed under the Capital Requirement Regulation and the Capital Requirements Directive V ('CRDV'). The Company's capital consists of Tier 1 – share capital, retained earnings and Additional Tier 1 instruments, and Tier 2 – subordinated debt which is fixed term and denominated in Japanese Yen. The Company manages its risk profile and its capital resources with the objective of maintaining a capital ratio in excess of the Capital Resources Requirement for its risk profile at all times. The management of the Company's capital is carried out under the principle that it should not unexpectedly need to raise new capital or significantly reduce its risk taking in order to meet its capital management objectives. The Company has fulfilled its capital requirements at all times during the year. The Company's capital resources, Pillar 1 capital requirements and capital ratios for 2025 and 2024 are shown in the table below: | | 2025 | 2024 | |-------------------------------------------------------------------------|-------|-------| | as at 31 December | £'m | £'m | | Common Equity Tier 1 Capital after Deductions | 1,486 | 1,480 | | Additional Tier 1 Capital after Deductions | 464 | 464 | | Tier 2 Capital after Deductions | 208 | 224 | | Total Capital Resources | 2,158 | 2,168 | | Credit Risk (including Concentration Risk) | 388 | 283 | | Market Risk | 284 | 183 | | Operational Risk | 73 | 60 | | Total Capital Requirements | 745 | 526 | | | 2025 | 2024 | | as at 31 December | % | % | | Common Equity Tier 1 Ratio (Common Equity Tier 1/ Risk Weighted Assets) | 15.9 | 22.5 | | Tier 1 Ratio (Tier 1/ Risk Weighted Assets) | 20.9 | 29.6 | | Total Capital Ratio (Total Capital/ Risk Weighted Assets) | 23.2 | 33.0 | ![](_page_34_Picture_11.jpeg) {35}------------------------------------------------ # **Independent auditor's report to the members of MUFG Securities EMEA plc** # **Report on the audit of the financial statements** # **Opinion** In our opinion the financial statements of MUFG Securities EMEA plc (the 'company'): - give a true and fair view of the state of the company's affairs as at 31 December 2025 and of its profit for the year then ended; - have been properly prepared in accordance with United Kingdom adopted international accounting standards and IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB); and - have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise: - the income statement; - the statement of comprehensive income; - the statement of financial position; - the statement of changes in equity; - the cash flow statement; and - the related notes 1 to 36. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international accounting standards and IFRS Accounting Standards as issued by the IASB. #### **Basis for opinion** We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. #### **Conclusions relating to going concern** In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included: - profitability and forecast profitability over the lookout period; - financing arrangements, including the nature of facilities and repayment terms; - evaluation of the business model of the company and its relevance to the group; - assumptions used in the forecasts and historical accuracy of forecasts prepared by management; - amount of headroom in the capital and liquidity forecasts; and - capital and liquidity stress testing. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. # **Other information** The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. # **Responsibilities of directors** As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. {36}------------------------------------------------ In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. ## **Auditor's responsibilities for the audit of the financial statements** Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. #### **Extent to which the audit was considered capable of detecting irregularities, including fraud** Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. We considered the nature of the company's industry and its control environment, and reviewed the company's documentation of their policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of the Head of Compliance, Head of Legal, Chief Risk Officer, Chief Executive Officer, Chief Financial Officer, Head of Internal Audit and members of the Audit Committee and the directors about their own identification and assessment of the risks of irregularities, including those that are specific to the company's business sector. We obtained an understanding of the legal and regulatory frameworks that the company operates in, and identified the key laws and regulations that: - had a direct effect on the determination of material amounts and disclosures in the financial statements. These included the UK Companies Act 2006 and tax legislation; and - do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty. These included the regulation and supervisory requirements of the Prudential Regulation Authority and the Financial Conduct Authority, as well as other regulators such as the United States Securities and Exchange Commission. We discussed among the audit engagement team including relevant internal specialists such as tax, valuations, regulatory specialists and IT specialists regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements. As a result of performing the above, we identified the greatest potential for fraud in the following area and our procedures performed to address them are described below. We have identified the valuation of level 3 derivatives as a significant risk and fraud risk given it requires complex, sophisticated modelling techniques and that inputs that are significant to level 3 derivatives valuation are typically not observable. Performing our audit procedures to evaluate the appropriateness of these models and inputs involved a high degree of auditor judgement, professionals with specialised skills and knowledge, and an increased extent of testing. To address this, we tested the design, implementation and operating effectiveness of key controls. We also involved internal valuation specialists to independently value a sample of level 3 derivatives. To the greatest extent possible, we performed our valuations using independent valuation models and independently externally sourced market data. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. In addressing the risk of fraud through management override of controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business. In addition to the above, our procedures to respond to the risks identified included the following: - reviewing financial statement disclosures by testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements as disclosed in note 30; - performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; - enquiring of management, Internal Audit, Compliance and in-house Legal Counsel and external Legal Counsel concerning actual and potential litigation and claims, and instances of non-compliance with laws and regulations; and - reading minutes of meetings of those charged with governance, reviewing Internal Audit reports and reviewing correspondence with HMRC, the PRA and the FCA. #### **Report on other legal and regulatory requirements** #### **Opinions on other matters prescribed by the Companies Act 2006** In our opinion, based on the work undertaken in the course of the audit: - the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the strategic report and the directors' report have been prepared in accordance with applicable legal requirements. {37}------------------------------------------------ In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report. ## **Matters on which we are required to report by exception** Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. We have nothing to report in respect of these matters. #### **Use of our report** This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. David Roberts, FCA (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor London, United Kingdom 26 March 2026 {38}------------------------------------------------ # **Company income statement** | For the year ended 31 December | Notes | 2025
£'000 | 2024
£'000 | |-----------------------------------------------|-------|---------------|---------------| | | | | | | Interest income | 2 | 136,844 | 220,398 | | Interest expense | 3 | (141,047) | (97,844) | | Net interest (expense) / income | | (4,203) | 122,554 | | Fees and commissions income | | 127,487 | 100,367 | | Fees and commissions expense | | (32,064) | (24,496) | | Net fees and commissions income | | 95,423 | 75,871 | | Trading income | | 337,763 | 188,862 | | Trading income | | 337,763 | 188,862 | | Net investment income | | 7,419 | 9,866 | | Other income | | 5,151 | 5,286 | | Total operating income | | 441,553 | 402,439 | | Administrative expenses | 4 | (335,619) | (338,752) | | Amortisation of intangible assets | 15 | (41,767) | (32,955) | | Depreciation of property, plant and equipment | 16 | (2,946) | (2,872) | | Depreciation of right-of-use assets | 17 | (5,960) | (6,134) | | Total operating expenses | | (386,292) | (380,713) | | Share of profit in subsidiary | 18 | 3,488 | 8,251 | | Profit on ordinary activities before taxation | | 58,749 | 29,977 | | Taxation | 8 | (12,133) | 330 | | Profit attributable to owners of the company | | 46,616 | 30,307 | The above results are derived from continuing operations of the business. ![](_page_38_Picture_4.jpeg) {39}------------------------------------------------ # **Company statement of comprehensive income** | For the year ended 31 December | Notes | 2025
£'000 | 2024
£'000 | |----------------------------------------------------------------------------|-------|---------------|---------------| | | | | | | Profit after tax
Other comprehensive income from continuing operations: | | 46,616 | 30,307 | | Revaluation of securities at fair value through other comprehensive income | | | | | (FVTOCI) | | | | | Net income / (losses) from changes in fair value | | 966 | (2,769) | | Net gains transferred to net profit | | 2,261 | 2,751 | | Taxation | 8 | (950) | 5 | | Cash flow hedging reserve | | | | | Net gains from changes in fair value | | 60 | 35 | | Taxation | 8 | (11) | (10) | | Net investment hedge reserve | | | | | Change in value of the hedged item due to changes in spot rate | 12 | 11,839 | (8,297) | | Change in value of the hedging instrument due to changes in spot rate | 12 | (11,839) | 8,297 | | Total comprehensive income that may be recycled to profit or loss | | 48,942 | 30,319 | | Other comprehensive income not recycled to profit or loss | | | | | Actuarial gains / (losses) in retirement benefit schemes | | - | - | | Taxation | 8 | - | 1,858 | | Cumulative translation (loss) | | - | (1,707) | | Total other comprehensive income | | - | 151 | | Total comprehensive income for the year attributable to owners of the | | | | | company | | 48,942 | 30,470 | ![](_page_39_Picture_3.jpeg) {40}------------------------------------------------ # **Company statement of financial position** | As at 31 December | Notes | 2025
£'000 | 2024
£'000 | |---------------------------------------------------------------------|-------|---------------|---------------| | ASSETS | | | | | Cash and balances at central banks | | 956,767 | 687,575 | | Securities at FVTOCI | 10 | 1,561,787 | 1,614,850 | | Trading portfolio financial assets | 11 | 13,323,279 | 6,758,395 | | Derivative financial instruments | 12 | 17,517,197 | 16,214,638 | | Reverse repurchase agreements | | 21,672,591 | 29,750,082 | | Other financing at fair value | 13 | 62,260 | 64,303 | | Cash collateral on securities borrowed | | 2,254,514 | 2,829,911 | | Cash collateral paid to derivative counterparties and brokers | | 2,085,799 | 2,532,853 | | Assets at amortised cost | 14 | 73,947 | 126,119 | | Deferred tax asset | 8 | 12,642 | 11,260 | | Intangible assets | 15 | 141,916 | 155,860 | | Property, plant and equipment | 16 | 11,222 | 12,850 | | Right-of-use assets | 17 | 22,635 | 20,635 | | Investment in subsidiary | 18 | 227,133 | 211,902 | | Other assets | 19 | 203,869 | 195,678 | | Total assets | | 60,127,558 | 61,186,911 | | | | | | | LIABILITIES | | | | | Deposits by banks | | - | - | | Trading portfolio financial liabilities | 20 | 3,588,100 | 3,465,298 | | Derivative financial instruments | 12 | 16,408,506 | 16,286,962 | | Repurchase agreements | | 26,108,359 | 25,960,181 | | Cash collateral on securities lent | | 1,108 | 6,403 | | Cash collateral received from derivative counterparties and brokers | | 5,111,083 | 5,180,436 | | Financial liabilities designated at fair value | 21 | 401,407 | 4,044,825 | | Financial liabilities at amortised cost | 22 | 6,047,140 | 3,793,620 | | Other liabilities | 23 | 210,805 | 213,628 | | Total liabilities | | 57,876,508 | 58,951,353 | | EQUITY | | | | | Equity instruments | 24 | 1,847,094 | 1,847,094 | | Other reserves | | (2,976) | (5,302) | | Retained earnings | | 406,932 | 393,766 | | Total equity | | 2,251,050 | 2,235,558 | | Total liabilities and equity | | 60,127,558 | 61,186,911 | Company Number: 1698498 The financial statements on pages 39 to 74 and the unaudited business and risk management policies on pages 25 to 35, were approved by the Board of Directors and authorised for issue on 26th March 2026 and signed on its behalf by: Signed on behalf of the Board Nobuho Nanjo Chief Executive Officer 25 Ropemaker Street London EC2Y 9AJ 26th March 2026 ![](_page_40_Picture_8.jpeg) {41}------------------------------------------------ # **Company statement of changes in equity** | | Notes | Equity
instruments
£'000 | Securities
held at
FVTOCI
£'000 | Cash
flow
hedging
reserve
£'000 | Cumulative
translation
reserve
£'000 | Retained
earnings
£'000 | Total
equity
£'000 | |------------------------------|-------|--------------------------------|------------------------------------------|---------------------------------------------|-----------------------------------------------|-------------------------------|--------------------------| | 2024 | | | | | | | | | As at 1 January 2024 | | 1,847,094 | (3,701) | 94 | - | 411,261 | 2,254,748 | | Profit after tax | | - | - | - | - | 30,307 | 30,307 | | AT1 coupon | 25 | - | - | - | - | (35,828) | (35,828) | | Dividends paid | 25 | - | - | - | - | (13,832) | (13,832) | | Securities held at FVTOCI | | - | (13) | - | - | - | (13) | | Cash flow hedges | | - | - | 25 | - | - | 25 | | Revaluation on equity method | | - | - | - | (10,004) | - | (10,004) | | investment | | | | | | | | | Transfer of NIH instruments* | | - | - | - | 8,297 | - | 8,297 | | Actuarial loss | | - | - | - | - | 1,858 | 1,858 | | As at 31 December 2024 | | 1,847,094 | (3,714) | 119 | (1,707) | 393,766 | 2,235,558 | | 2025 | | | | | | | | | As at 1 January 2025 | | 1,847,094 | (3,714) | 119 | (1,707) | 393,766 | 2,235,558 | | Profit after tax | | - | - | - | - | 46,616 | 46,616 | | AT1 coupon | 25 | - | - | - | - | (33,450) | (33,450) | | Dividends paid | 25 | - | - | - | - | - | - | | Securities held at FVTOCI | | - | 2,274 | - | - | - | 2,274 | | Cash flow hedges | | - | - | 52 | - | - | 52 | | Revaluation on equity method | | - | - | - | 11,839 | - | 11,839 | | investment | | | | | | | | | Transfer of NIH instruments* | | - | - | - | (11,839) | - | (11,839) | | Actuarial loss | | - | - | - | - | - | - | | As at 31 December 2025 | | 1,847,094 | (1,440) | 171 | (1,707) | 406,932 | 2,251,050 | \* Net Investment Hedge ![](_page_41_Picture_4.jpeg) {42}------------------------------------------------ # **Company cash flow statement** | For the year ended 31 December | Note | 2025
£'000 | 2024
£'000 | | |---------------------------------------------------------------------------------|------|---------------|---------------|--| | Reconciliation of profit before tax to net cash flows from operating activities | | | | | | Profit before tax | | 58,749 | 29,977 | | | Adjustment for non-cash items: | | | | | | Depreciation and impairment of property, plant and equipment | | 2,946 | 2,872 | | | Amortisation and impairment of intangible assets | | 41,767 | 32,955 | | | Depreciation of right of use asset | | 5,960 | 6,134 | | | Net loss on disposal of property, plant and equipment and intangible assets | | 534 | 154 | | | (Profit) on investment in subsidiary | | (3,488) | (8,251) | | | Non-cash (gains) on financial liabilities | | (187,261) | (543,790) | | | Other (gains) / losses | | (50,517) | 41,180 | | | Interest income | | (136,844) | (220,398) | | | Interest expense | | 141,047 | 97,844 | | | Changes in operating assets and liabilities: | | | | | | Net (increase) in trading portfolio financial assets and liabilities | | (6,442,082) | (1,647,060) | | | Net (increase) / decrease in derivative financial instruments | | (1,181,015) | 655,362 | | | Net decrease / (increase) in reverse repurchase agreements | | 8,077,491 | (2,162,681) | | | Net increase in repurchase agreements | | 148,178 | 1,576,836 | | | Net decrease in cash collateral for securities and derivatives | | 947,802 | 178,480 | | | Net (decrease) / increase in other assets | | (16,382) | 801,489 | | | Net increase / (decrease) in other liabilities | | 3,633 | (22,055) | | | Interest received | | 97,826 | 185,512 | | | Interest paid | | (64,446) | (65,300) | | | Corporation tax paid | | (2,000) | (500) | | | Net cash used in operating activities | | 1,441,898 | (1,061,240) | | | (Purchase) of property, plant and equipment | | (1,741) | (5,542) | | | (Purchase) of intangible assets | | (28,357) | (38,599) | | | (Purchase) of securities at FVTOCI | | (1,370,014) | (1,085,451) | | | Proceeds from sale or redemption of securities at FVTOCI | | 1,424,666 | 604,054 | | | Purchase of assets at amortised cost | | - | (3,574) | | | Proceeds from sale of assets at amortised cost | | 55,000 | - | | | Interest received | | 46,830 | 43,136 | | | Net cash from investing activities | | 126,384 | (485,976) | | | Repayment of financial liabilities at amortised cost | | (616,449) | - | | | Proceeds of financial liabilities at amortised cost | | - | 637,103 | | | Proceeds from financial liabilities designated at fair value | | 3,825,048 | 4,299,845 | | | Repayments of financial liabilities designated at fair value | | (4,402,703) | (4,437,092) | | | Distributions paid to holders of AT1 capital | | (33,451) | (35,829) | | | Dividends paid | | - | (13,832) | | | Lease payments | | (7,736) | (6,471) | | | Interest paid | | (10,366) | (27,108) | | | Net cash from financing activities | 9 | (1,245,657) | 416,616 | | | Net decrease in cash and cash equivalents | | 322,625 | (1,130,600) | | | Opening cash and cash equivalents | | 687,575 | 1,852,776 | | | Net cash decrease | | 322,625 | (1,130,600) | | | Foreign exchange | | (53,433) | (34,601) | | | Closing cash and cash equivalents | 9 | 956,767 | 687,575 | | | | | | | | | Cash and balances at central banks | | 956,767 | 687,575 | | | Deposits by banks | | - | - | | | Total cash and cash equivalents | 9 | 956,767 | 687,575 | | ![](_page_42_Picture_3.jpeg) {43}------------------------------------------------ # **Notes on Financial Statements** # **1 Accounting policies** #### **Basis of preparation of company accounts** The financial information includes the financial statements of the Company for the year ended 31 December 2025. The financial information has been prepared in accordance with United Kingdom adopted international accounting standards and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). The financial statements have been prepared on a going concern basis due to expected future profitability and a strong capital and liquidity position. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 3 to 19. The financial position of the Company, its liquidity position and borrowing facilities are described through the financial statements beginning on page 39. In addition, the Business and Risk Management Policies on pages 25 to 35 include the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; and various forms of risk. The Company has considerable financial resources in place. Additionally, the Company has contracts with a broad range of customers and financial institutions across different geographic areas. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully, despite the current uncertain global economic outlook. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual financial statements; for details of additional factors considered by the board in reaching this conclusion refer to the Strategic report on pages 3 to 19. The Company has elected to make use of the parent company exemption within IFRS 10, exempting it from the requirement to prepare consolidated financial statements. The Company's parent, MUFG Bank, has been consulted and does not object to this approach. The consolidated financial statements of MUFG Bank will include the results of the Company and its subsidiary. As such, the investment in subsidiary is included within these separate financial statements using the equity method of accounting as defined in IAS 28. The financial statements are presented in pounds sterling which is the presentation and functional currency of the Company. The financial statements have been prepared on a historical cost basis, except for certain financial instruments that are measured at fair value. ## **Use of estimates and judgements** The preparation of financial information requires the use of estimates and judgements about future conditions. The use of available information and the application of assumptions are inherent in the formation of estimates; actual results in the future may differ from estimates upon which financial information is prepared. Critical accounting policies where management estimates are applied are: - the valuation of Level 3 financial instruments, where there is no active market for a financial instrument and valuation techniques are used that depend on unobservable parameters (refer to Note 27), - discretionary compensation accruals following the change of the performance review cycle as well as related vesting and payment dates (refer to Note 4). Critical accounting policies where management judgement is applied: • timing of recognition of day 1 P&L (refer to page 66) #### **Financial instruments** Financial assets and financial liabilities are recognised when the Company becomes a party to the contract and are initially measured at fair value. Regular way purchases and sales of financial instruments are recognised using settlement date accounting. # **Financial assets** Financial assets are classified as financial assets at amortised cost, financial assets at fair value through Other Comprehensive Income ('FVTOCI') or financial assets at fair value through profit and loss ('FVTPL'). The classification of financial assets is determined by a 2-step process: analysis of the business model under which the asset is held; and, where required, analysis of the contractual terms of the financial asset. #### **Financial assets held at amortised cost** Financial assets may be measured at amortised cost where they are: - Held in a business model under which the Company intends to hold the asset in order to collect payments of principal and interest, and - The contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Where assets are held at amortised cost, the carrying value is calculated using the effective interest rate method, less any impairment. ![](_page_43_Picture_26.jpeg) {44}------------------------------------------------ #### **1 Accounting policies (continued)** Financial assets at amortised cost include cash collateral paid to derivative counterparties and brokers, securities and other assets. # **Financial assets held at FVTOCI** Financial assets are measured at fair value through other comprehensive income ('FVTOCI') where they are: • Held in a business model under which the Company may either sell the asset or hold it in order to collect contractual cash flows, and • The contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income is recognised in the income statement using the effective interest method. Foreign exchange gains or losses on assets held at FVTOCI are recognised in net trading income. Fair value changes attributable to hedged risks on instruments designated in fair value hedge accounting relationships are recognised in net trading income. Other fair value changes are recognised directly in shareholder's equity within the Securities held at FVTOCI reserve until the investment is sold or impaired, at which time the balance in equity is recycled to the income statement within net investment income. This category is used for certain high credit quality debt securities purchased by the Company to satisfy regulatory liquidity obligations, and as such, are available to be sold at short notice to meet the cash demands of the business. ## **Financial assets held mandatory at FVTPL** Financial assets are mandatory measured at fair value through profit or loss where they do not meet the criteria to be carried under a different classification. Such financial assets are recognised initially at fair value, with transaction costs taken to the income statement, and are subsequently remeasured at fair value. All subsequent gains and losses from changes in the fair value of these assets and liabilities together with related interest income, interest expense and dividends, are recognised in the income statement within trading income as they arise. The majority of the Company's financial assets are held within this category, including trading portfolio financial assets, derivatives, reverse repurchase agreements, cash collateral on securities borrowed and other financing at fair value. #### **Option to designate a financial asset at FVTPL** The Company may irrevocably designate a financial asset as held at FVTPL upon initial recognition where doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from carrying financial assets or financial liabilities on different bases. The Company does not have any financial assets designated at FVTPL. #### **Option to carry certain equity investments at FVTOCI** The Company may make an irrevocable designation for certain investments in equity securities, that would otherwise be measured at FVTPL, to present changes in fair value through other comprehensive income. Where the Company chooses this election, dividends on those securities will be recorded as income when the Company becomes contractually entitled to receive them. Any other gains or losses on these securities, included those related to currency translation, are recorded in other comprehensive income and may not subsequently be reclassified and recognised within the income statement; these may instead be transferred between elements of shareholder's equity. #### **Identification and measurement of impairment** The recognition and measurement of impairment under IFRS 9 is based on an internal expected credit loss ('ECL') model. The Company recognises expected credit losses for financial assets carried at amortised cost and FVTOCI. The Company calculates 12 month expected losses for the majority of assets held due to the high credit quality of instruments within the amortised cost and FVTOCI categories. 12 month expected credit losses represent that portion of lifetime expected credit losses which result from default events on the asset that are possible within 12 months of the reporting date. The ECL for the current and prior year is not material. #### **Financial liabilities** Financial liabilities are held at amortised cost except where they meet the conditions listed below to be carried at FVTPL. Where liabilities are held at amortised cost, the carrying value is calculated using the effective interest rate method. #### **Trading liabilities** Repurchase agreements, derivatives, short positions in debt (bonds, pass through notes and asset backed securities) and equity securities, or positions which are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit taking, are classified as held for trading. Such financial liabilities are recognised initially at fair value, with transaction costs taken to the income statement, and are subsequently remeasured at fair value. All subsequent gains and losses from changes in the fair value of these liabilities together with related interest income, interest expense and dividends, are recognised in the income statement within trading income as they arise. ![](_page_44_Picture_24.jpeg) {45}------------------------------------------------ #### **1 Accounting policies (continued)** #### **Financial liabilities designated at FVTPL** Financial liabilities, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and are so designated by management upon initial recognition. The Company may designate financial liabilities at fair value when doing so results in more relevant information due to the following: - It eliminates or significantly reduces valuation or recognition inconsistencies that would otherwise arise from measuring financial assets or financial liabilities, or recognising gains and losses on them, on different bases. Under this criterion, the main class of financial instruments designated by the Company includes medium term note issues and money market loans and deposits. The return on certain instruments has been matched with derivatives. An accounting mismatch would arise if the debt securities and money market transactions were accounted for at amortised cost, because the related derivatives are measured at fair value with movements in the fair value taken through the income statement. By designating these assets and liabilities at fair value, the movement in their fair value will also be recorded in the income statement. - Groups of financial assets, financial liabilities or combinations thereof are managed and their performance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy, and information about groups of financial instruments is reported to management on that basis. - Certain financial instruments contain one or more embedded derivatives that significantly modify the cash flows resulting from those financial instruments. Where financial liabilities have been designated at FVTPL, movements in their value due to changes in the Company's own credit risk are required to be recorded through other comprehensive income. As the Company does not have significant debt issuances to external investors, it measures changes in the value of issued debt due to movements in own credit by assessing movements in the credit spread charged by investors when they purchase newly issued debt from the treasury function of the immediate parent. The Company sources funds through this treasury function and carries a credit rating consistent with its immediate parent. Due to the stability of funding costs achieved by the immediate parent, these changes in value were not material during the period. The Company trades structured notes, reported within financial liabilities designated at fair value, which include embedded derivatives and have elected to designate these at FVTPL. All other subsequent gains and losses from changes in the fair value of these liabilities, together with related interest expense are recognised within trading, in the income statement. #### **Issued debt – financial liability vs equity classification** Issued financial instruments or their components are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue a variable number of the Company's own equity instruments to the holder of the instrument. The proceeds of the issue are recorded directly in equity and held at historical cost. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. Dividends and other returns to equity holders are recognised as a deduction from distributable reserves within equity when paid or declared by the Company. Issued financial instruments or their components are classified as liabilities if the underlying contract results in a present obligation for the Company to either deliver cash, another financial asset, or a variable number of the Company's own equity shares to the holder of the instrument. Financial liabilities are measured at amortised cost, except for trading liabilities and liabilities designated at fair value, which are held at FVTPL. Where issued financial instruments contain both liability and equity components, these are accounted for separately. The fair value of the debt is estimated first, and the remainder of the proceeds are included within equity. No such compound instruments existed at year-end or throughout the year. #### **Embedded derivatives** Derivatives may be embedded in other contractual arrangements. Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not clearly and closely related to those of the host; the terms of the embedded derivatives would meet the definition of a stand-alone derivative if they were contained in a separate contract; and the combined contract is a financial liability not held for trading or designated at fair value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. The Company has embedded derivatives within its issued structured notes portfolio. Those notes are carried at FVTPL under the fair value option. #### **Repurchase and resale agreements** Securities which have been sold subject to an agreement to repurchase remain on the statement of financial position and a liability based on the net present value of the associated future cash out flows are recorded within liabilities. Securities acquired in purchase and resale transactions are not recognised on the statement of financial position and an asset based on the net present value of the associated future cash receipts is recorded within assets. Sale and repurchase and reverse repurchase agreements are managed together as a portfolio on a fair value basis and are accounted for at FVTPL. As such, the balances recorded in assets and liabilities are subsequently remeasured at fair value. Gains and losses from changes in the fair value of the associated cash flows are recognised in the income statement as they arise. Assets and liabilities are offset and the net amount reported on the statement of financial position when there is a currently legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis. ![](_page_45_Picture_19.jpeg) {46}------------------------------------------------ #### **1 Accounting policies (continued)** #### **Derivatives** Where contracts meet the definition of a derivative within IFRS 9, they are recognised initially, and are subsequently remeasured, at fair value. All changes in fair value, except for certain gains and losses related to cash flow hedges and net investment hedges, are recognised in the income statement within trading income as they arise. Fair values are obtained from quoted market prices in active markets or using valuation techniques where an active market does not exist. Valuation techniques include discounted cash flow models, recent market transactions and option pricing models as appropriate. All derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. Derivatives are recognised by applying trade date accounting. Financial assets and liabilities are offset and the net amount reported on the statement of financial position if, and only if, the entity currently has a legally enforceable right of offset and there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously. In many cases, even though master netting agreements are in place, the related assets and liabilities are presented gross on the statement of financial position as these requirements are not met. The value of derivative contracts has been adjusted to include the impact of counterparty credit risk ('CVA') and the cost and benefit of funding ('FVA'). The impact of changes in the Company's own credit risk ('DVA') is materially included within the application of FVA. The Company is the beneficiary of an intercompany guarantee from MUFG Bank which provides the Company with protection against default over a portfolio of corporate derivatives. This guarantee does not meet the definition in IFRS 9 of a financial guarantee, and as such is accounted for as a credit derivative. ## **Collateral** Cash collateral pledged by the Company, which is included within cash collateral paid to derivative counterparties and brokers balances, is classified within financial assets at amortised cost. Cash collateral pledged by counterparties, which is included within the cash collateral received from derivative counterparties and brokers balance, is classified as a financial liability measured at amortised cost. Where securities are posted to counterparties as collateral against liabilities of the Company the security will be retained on the Company's statement of financial position and will not impact the recorded liability. Collateral received in the form of securities are not recorded on the statement of financial position. ## **Derecognition of financial assets and liabilities** Financial assets are derecognised when the rights to receive cash flows from the assets have expired; or when the Company has transferred both its contractual right to receive the cash flows of the financial assets, and substantially all the risks and rewards of ownership; or where control is not retained. Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expired. ## **Hedge accounting** At the inception of a hedging relationship, the Company documents the relationship between the hedging instruments and the hedged items, its risk management objective, its strategy for undertaking the hedge, and how it will assess hedge effectiveness. The Company also requires a documented assessment, both at hedge inception and on an ongoing basis, of whether or not the hedging relationships continue to meet hedge effectiveness requirements. Following the adoption of IFRS 9 hedge accounting, the Company assesses the following hedge effectiveness requirements using a combination of qualitative and, where applicable, quantitative methods: - An economic relationship exists between the hedged item and the hedging instrument. - Credit risk does not dominate the changes in value of either the hedged item or the hedging instrument; and - The hedge ratio is consistent with the Company's risk management policy. Hedges are designated by the Company as one of: hedges of the change in fair value of recognised assets or liabilities ('fair value hedges'); hedges of the variability of cash flows attributable to a recognised asset or liability or a forecast transaction ('cash flow hedges'); or hedges of a net investment in a foreign operation. ## **Fair value hedges** Changes in the fair value of derivatives that are designated, and qualify, as fair value hedging instruments are recorded in the income statement, along with changes in the fair value of the hedged assets, liabilities or groups thereof that are attributable to the hedged risk. If a hedging relationship no longer meets the criteria for hedge accounting, taking into account any reliefs from usual criteria for changes to hedging relationships required by IBOR reform, the cumulative adjustment to the carrying amount of the hedged item is amortised to the income statement based on a recalculated effective interest rate over the residual period to maturity, unless the hedged item has been derecognised, in which case, it is released to the income statement immediately. #### **Cash flow hedges** The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in shareholder's equity within the cash flow hedging reserve. Any gain or loss in fair value relating to an ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity until the hedged transaction is recognised in the income statement. When a hedged forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. ![](_page_46_Picture_22.jpeg) {47}------------------------------------------------ ## **1 Accounting policies (continued)** #### **Net investment hedges** The effective portion of changes in the fair value of derivatives that are designated and qualify as net investment hedges is recognised in shareholder's equity within the net investment hedge reserve. Any gain or loss in fair value relating to an ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement only when the subsidiary is derecognised. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity until the subsidiary is de-recognised. #### **Fair value measurement of financial assets and liabilities** Fair value is the amount for which an asset could be sold, or a liability transferred, between knowledgeable, willing parties in an arm's length transaction on the measurement date. When available, the Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis. If the market for a financial instrument is not active, the Company establishes fair value using valuation techniques. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analysis and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data. When unobservable market data has a significant impact on the valuation of financial instruments and the model valuations indicate initial profits or losses on the transaction, the entire initial gain or loss is not recognised immediately in the income statement. The initial gain or loss is measured as the difference in fair value indicated by the valuation model price and the transaction price. These gains or losses are deferred and recognised over the life of the transaction on a systematic basis, or when the inputs become observable, or the transaction matures or is closed out, or when the Company enters into an eligible offsetting or economic hedging transaction which provides a market data point to demonstrate observability of the unobservable input(s). Refer to Note 27 for further detail on the fair value of financial instruments. #### **Transactions in which the Company acts as an agent** Where the Company acts as an intermediary on behalf of another entity and does not have exposure to the significant risks and rewards associated with the activities performed, it is determined to be acting in an agency capacity. When examining relationships, MUS(EMEA) reviews which entity has primary responsibility for providing services to customers, has inventory risk, has latitude to establish prices, or bears credit risk of the transaction. In the absence of evidence or analysis to the contrary, MUS(EMEA) will follow the legal form of transactions and arrangements will be reported as principal relationships. When the Company acts as an agent on behalf of another entity, neither the amounts collected from clients on behalf of the principal entity, nor the amounts paid away to the principal entity are recorded as revenue. Rather, MUS(EMEA) records the net commissions received from the principal as revenue and such revenue is accrued as the service is provided. Similarly, unsettled amounts relating to agency trading will not be shown on the statement of financial position. #### **Fees and commissions** Fees and commissions income include fees received when the Company acts as an underwriter or agent and from the provision of advisory services. Fees and commissions income typically arise on contracts where there is a single performance obligation. Syndication fees are generally not an integral part of the EIR and are recognised when the related service are performed. Revenues are recognised when the performance obligations are satisfied in accordance with the contract. This may be at a particular point in time or over a period of time. Fees and commissions expenses include transaction and service fees. Amounts are recognised as the related services are received. #### **Client money segregation** The Company holds money on behalf of some clients in accordance with the Client Money Rules of the Financial Conduct Authority. Such monies and the corresponding amounts due to clients are not held on the statement of financial position as the clients retain beneficial ownership. #### **Net interest income** The interest balances presented within the income statement represent the returns and costs to the firm of holding regulatory buffer assets, interest on collateral paid, and long term investment positions. These positions are held and managed within the Treasury function. Interest income represents coupon income and amortisation of any premium or discount arising upon purchase of securities held at FVTOCI and certain securities held at amortised cost. Interest expense represents the cost of funding these positions and includes the cost of interest payable on subordinated debt, interest payable on senior unsecured debt which is carried at amortised cost, interest on collateral received, and interest costs on other sources of funds that support these investments. ![](_page_47_Picture_19.jpeg) {48}------------------------------------------------ ## **1 Accounting policies (continued)** #### **Net trading income** Trading income includes all gains and losses from changes in FV of financial assets and liabilities. Any coupon receivable or payable on items which are part of the trading activities of the Company are included directly within trading income. The Company has elected to present the fair value movement of trading assets and liabilities in trading income, including any related interest income, expense, foreign exchange gains/losses and dividend. ## **Other income** Other income includes revenues for providing administrative support services to other Group companies, which are recognised when the performance obligations are satisfied. #### **Foreign currencies** Monetary assets and liabilities denominated in foreign currencies and open forward foreign exchange contracts are translated into the functional currency using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Gains or losses on translation are generally included in the income statement. Gains or losses on translation are included in OCI for the following items: - a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and - qualifying cash flow hedges to the extent that the hedges are effective. The assets and liabilities of the Company recognised in foreign currencies are translated to the Company's functional currency at the exchange rates of the reporting date. The income and expenses of the Company are translated to the Company's functional currency at the exchange rates at the dates of the transactions. #### **Property, plant and equipment and intangible assets** Property, plant and equipment and intangible assets are measured at cost less accumulated depreciation or amortisation respectively, less any accumulated impairment losses. Expenditure to bring purchased software into operational use and internally developed software are recognised as intangible assets when the Company considers that the software will be used in a manner that will generate future economic benefits and can reliably measure the costs of development. All fixed assets are reviewed for impairment on an annual basis. Assets are impaired where it is considered that the future economic benefit of the asset is lower than its carrying amount. Such impairment losses are included directly in the income statement. Depreciation is provided to write off the cost less estimated residual value of tangible fixed assets and intangible software assets by equal instalments over their estimated useful lives as follows: | Office furniture and fittings | 5 years | |--------------------------------|-------------| | Office machinery and equipment | 3 – 5 years | | Intangible software | 4 – 7 years | #### **Leases** The Company classifies a contract as containing a lease if the contract conveys the right to control the use of an identified asset for the period of time in exchange for consideration. As a lessee, the Company recognises a lease liability and a corresponding right-of-use asset for all arrangements containing a lease, with the exception of short term leases (with the term of 12 months or less) and leases of assets of low value. Lease liability is initially measured at the present value of the remaining lease payments at the commencement date, discounted applying lessee's incremental borrowing rate when there is no interest rate implicit in the lease, and presented within Other Liabilities (refer to Note 17). The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The associated right-of-use asset is initially recognised at the amount equal to the lease liability, adjusted by any accrued or prepaid lease payments, an initial estimate of restoration costs and any initial direct costs incurred by the Company as a lessee and presented as a separate line in the statement of financial position. Right-of-use asset is depreciated from the commencement date to the earlier of the useful life of the underlying asset or the end of the lease term. The Company applies the requirements of IAS 36 to determine whether the right-of-use asset has been impaired and to account for any identified impairment losses. The Company does not hold any contracts where it acts as a lessor. ![](_page_48_Picture_24.jpeg) {49}------------------------------------------------ ## **1 Accounting policies (continued)** #### **Investments in subsidiaries** The Company has elected to make use of the parent company exemption within IFRS 10, exempting it from the requirement to prepare consolidated financial statements. The Company's parent, MUFG Bank, has been consulted and does not object to this approach. The consolidated financial statements of MUFG Bank will include the results of the Company and its subsidiary. As such, the investment in the subsidiary is included within these separate financial statements using the equity method of accounting as defined in IAS 28. Under the equity method of accounting, the initial investment in the subsidiary is recorded at cost in the functional currency of the Company. The value of the investment will not be re-measured after the initial recording date, except for the following: - The Company's share of the net profit / loss of the subsidiary at each reporting date recording any net income / (expense) as a gain / (loss) in the PL and an increase / (decrease) in the value of the equity investment - Any dividends or distributions received from the subsidiary will reduce the value of the investment on the statement of financial position - Movements in the value of the equity method investment due to changes in foreign currency exchange rates across periods will be recorded in Other Comprehensive Income. #### **Taxation** Taxation comprises current and deferred tax. Current tax and deferred tax are recognised in the income statement except to the extent that they relate to items recognised directly in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of all temporary differences and tax losses that have originated but not reversed by the balance sheet date. Temporary differences are divergences between the Company's results for tax purposes and its results as stated in the financial statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. Temporary differences and tax losses are taken into account if they have originated prior to the balance sheet date and are expected to reverse in one or more future periods. Deferred tax is calculated at the tax rates that are expected to be applied to temporary differences or tax losses when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend to settle current tax liabilities and assets on a net basis. A deferred tax asset is recognised for unused tax losses and other deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax balances are not discounted. ## **Employee benefits** Staff are remunerated through both salary and annual performance based discretionary compensation awards. Performance based awards are calculated annually and reflect the performance of both the individual and the Company during that annual period. Portions of performancebased awards are paid by the Company on deferred terms. From 2011 onwards, a portion of these deferred awards for certain employee's subject to the PRA's Remuneration Code is linked to the performance of the share price of MUFG. These awards are termed Notional Stock Units ('NSU's'). Where payments are made on a deferred basis and the cash value is fixed at the award date, the Company recognises the costs of the deferred awards during the period that the award is made, even though cash payments will not be made until future periods. The Company considers that this treatment most effectively represents the costs of employee compensation for the period. Where payments are made on a deferred basis and the cash value is linked to the MUFG share price, the Company amortises the expected cost of the award across the entire deferral period, and records as an expense only that portion which is deemed to have accrued during the current period. The Company records post grant date changes in the value of the total award due to changes in the MUFG share price directly through expenses. #### **Provisions** Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. #### **Financial guarantee contracts** A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued are initially measured at their fair values and subsequently at the higher of the amount initially recognised less the cumulative amount of income recognised in accordance with IFRS 15 and the loss allowance. ![](_page_49_Picture_24.jpeg) {50}------------------------------------------------ #### **1 Accounting policies (continued)** #### **Future accounting developments** #### **IFRS 7: Financial Instruments: Disclosures and IFRS 9: Financial Instruments** In May 2024, the IASB issued Amendments to the Classification and Measurements of Financial Instruments, detailing amendments to both IFRS 7: Financial Instruments: Disclosures and IFRS 9: Financial Instruments. These amendments are effective from 1 January 2026. The amendments relate to: - specification of criteria that, if met, permit an entity to derecognise a financial liability settled through electronic transfer before the settlement date; - enhanced clarification and guidance on the classification of financial assets (including non-recourse and Contractually Linked features); and - improvements to the disclosure of fair value changes relating to equity instruments a company has presented in OCI (rather than P&L). #### **IFRS 18: Presentation and Disclosure in Financial Statements** In April 2024, the IASB issued IFRS 18: Presentation and Disclosure in Financial Statements which sets out more detailed requirements for the presentation and structure of IFRS financial statements than those currently prescribed by IAS 1: Presentation of Financial Statements. IFRS 18 is effective from 1 January 2027. While IFRS 18 will not change recognition or measurement bases, it might have a significant impact on presenting information in the financial statements, in particular the income statement. IFRS 18 focuses on: - Classification (P&L geography) of income and expenses. - Inclusion of sub-totals in the P&L. - Requiring disclosures about management-defined performance measures; and - Adding new principles for aggregation and disaggregation of information. The Company is currently performing an assessment to determine the impact of the above standards on the financial statements. #### **First time adoption of accounting standards** There are no newly adopted accounting standards or amendments to existing standards that are likely to have a material impact on the Company's financial reporting in the current year. #### **2 Interest income** | | 2025
£'000 | 2024
£'000 | |--------------------------------|---------------|---------------| | Interest on non-trading assets | 136,844 | 220,398 | | | 136,844 | 220,398 | Interest income includes coupons earned on Securities at FVTOCI and Assets at amortised cost as well as interest on cash deposits, interest on collateral and interest on overnight deposits placed with the Bank of England of £46.3m (2024: £111.1m). #### **3 Interest expense** | | 2025
£'000 | 2024
£'000 | |--------------------------------------|---------------|---------------| | Interest on non-trading liabilities | 63,288 | 63,837 | | Interest on intercompany loans | 75,991 | 32,096 | | Interest on subordinated liabilities | 1,768 | 1,911 | | | 141,047 | 97,844 | Interest on intercompany loans, senior unsecured loan and subordinated liabilities refers to the intercompany debt issued to the Company's immediate parent, MUFG Bank, and other MUFG group entities (refer to Note 22). ![](_page_50_Picture_25.jpeg) {51}------------------------------------------------ # **4 Administrative expenses** | | 2025
£'000 | 2024
£'000 | |-------------------------------------|---------------|---------------| | Personnel expenses | | | | Wages and salaries | 146,860 | 141,371 | | Retirement benefits | 7,593 | 6,945 | | Social security costs | 20,382 | 17,853 | | | 174,835 | 166,169 | | General and administrative expenses | | | | Auditor's remuneration (Note 5) | 1,554 | 1,525 | | Other administrative expense | 159,230 | 171,058 | | | 160,784 | 172,583 | | Total administrative expenses | 335,619 | 338,752 | The average number of employees of the Company was 646 (2024: 655), split 218:428 (2024: 192:463) between front office and support staff, respectively. Included within 'wages and salaries' is a discretionary compensation accrual of £30.1m (2024: £30.2m) representing management's best estimate of the charge. Research and development spend is referenced in the Directors Report on page 21. # **5 Auditor's remuneration** The analysis of the auditor's remuneration is as follows: | | 2025
£'000 | 2024
£'000 | |--------------------------------------------------------------------|---------------|---------------| | Fees payable to the Company's auditor for audit and other services | | | | Statutory audit fees | 1,293 | 1,264 | | Audit related assurance services | 261 | 261 | | Total auditor's remuneration | 1,554 | 1,525 | | Statutory audit fees of the Company's subsidiary | 309 | 263 | Fees for audit of the Company's subsidiary are not incurred, nor expensed by the Company. # **6 Share based payment plans** # **Notional Stock Units** The Company awarded NSUs to a number of employees during the year. The NSUs are deferred over a period of 3, 5 or 7 years, depending on award date and the individual's role, and track the performance of MUFG shares (see accounting policies). | | 2025 | | 2024 | | |-----------------------------------------------------|-------------------|--------|-------------------|--------| | | No. Units
'000 | Value | No. Units
'000 | Value | | No. of NSUs outstanding as at 1 January | 3,087 | | 3,466 | | | Granted during the year:
No. of NSUs granted | 1,123 | | 1,253 | | | Value in £'000 equivalent at grant date | | 11,450 | | 10,193 | | Less: | | | | | | No. of NSUs vested during the year | (1,448) | | (1,600) | | | No. of NSUs forfeited / cancelled (unvested) | (28) | | (32) | | | No. of NSUs as at 31 December | 2,734 | | 3,087 | | | Fair value of outstanding NSUs at 31 December £'000 | | 32,232 | | 28,397 | | Average share price at vesting / payment (JPY) | | 1,982 | | 1,712 | ![](_page_51_Picture_14.jpeg) {52}------------------------------------------------ ## **7 Retirement benefits** The Company provides a defined contribution pension scheme, the Group Personal Pension Plan ('GPPP'), for employees of the Company. The assets of the scheme are held separately from those of the Company in an independently administered fund. The cost for the period recognised in the income statement was £7.9m (2024: £7.3m). The Company previously provided a funded, final salary, defined benefit pension scheme. The assets of the scheme were held separately from those of the Company in a segregated fund administered by trustees. In 2022 the Company requested the Trustees for a wind-up of the fund, resulting in a complete buy-out of the scheme on 21st June 2023. The buy-out triggered a complete settlement of the defined benefit scheme. On completion of the buy-out, a pension surplus of £18.5m existed. This amount (less taxes due) was returned to the Company in 2024. The amounts recognised in the statement of financial position as at the year-end are as follows: | | 2025
£'000 | 2024
£'000 | |-------------------------------------|---------------|---------------| | Present value of funded obligations | - | - | | Fair value of plan assets | - | - | | Recognisable surplus in the scheme | - | - | | Prepaid expense | - | 4,894 | | Related deferred tax (liability) | - | (4,894) | | Net pension asset | - | - | Movement in recognisable surplus during the year are as follows: | | 2025
£'000 | 2024
£'000 | |---------------------------------------|---------------|---------------| | Surplus at start of year | - | 18,583 | | Income recognised in income statement | - | 993 | | Recognised actuarial gain | - | - | | Surplus cash repaid | - | (14,682) | | Deferred tax (liability) | - | (4,894) | | Surplus at end of year | - | - | Amounts recognised in Other Comprehensive Income (OCI) #### **8 Applicable taxes** | | 2025
£'000 | 2024
£'000 | |-----------------------------------------------|---------------|---------------| | UK corporation tax | | | | Current year | (7,697) | (18) | | Adjustments in respect of prior years | (115) | (1,997) | | | (7,812) | (2,015) | | Foreign tax | | | | Current year | (1,748) | (2,782) | | Pillar II Domestic Top-up Tax
Current year | (25) | - | | Total current tax | (9,585) | (4,797) | ![](_page_52_Picture_12.jpeg) {53}------------------------------------------------ # **8 Applicable taxes (continued)** | Deferred tax | | | |------------------------------------------------------------------|----------|-------| | Origination and reversal of timing differences | 694 | 4,539 | | Effect of decrease in rate used to recognise deferred tax assets | (1,121) | - | | Adjustments in respect of prior years | (2,121) | 588 | | Total deferred tax | (2,548) | 5,127 | | | | | | Total tax expense | (12,133) | 330 | | | | | Corporation tax is calculated at 28% (2024: 28%) of the estimated taxable profit for the year including the surcharge applicable to banks and banking groups. The charge for the year can be reconciled to the profit in the income statement as follows: | | 2025
£'000 | 2024
£'000 | |-------------------------------------------------------------------------------|---------------|---------------| | Profit on ordinary activities before taxation | 58,749 | 29,977 | | Tax at the UK corporation tax rate of 28% (2024: 28%) | (16,450) | (8,394) | | Tax effect of expenses that are not deductible in determining taxable profits | (2,058) | (333) | | Foreign tax suffered | (1,259) | (2,003) | | Deferred tax prior year adjustment | (2,121) | 588 | | Effect of reduction in rate used to recognise deferred tax assets | (1,246) | - | | Revaluation of deferred tax assets | (237) | 30 | | Current tax prior year adjustment | (115) | (1,997) | | Share of group bank surcharge allowance | 1,046 | - | | Tax impact of profit / (loss) in subsidiary | 977 | 2,425 | | AT1 coupon | 9,366 | 10,032 | | Corporation tax rate differences | (36) | (18) | | Tax expense for the year | (12,133) | 330 | In addition to the amount charged to the income statement, the following amounts related to tax have been recognised in Equity: | | 2025
£'000 | 2024
£'000 | |---------------------------------------------------------------------|---------------|---------------| | Deferred tax | | | | Items that will not be reclassified subsequently to profit and loss | | | | Remeasurement of net defined benefit liability | - | 1,858 | | Items that may be reclassified subsequently to profit or loss | | | | Securities held at FVTOCI losses in period | (950) | 5 | | Cash flow hedges (gains) in period | (11) | (10) | | Total income tax recognised in other comprehensive income | (961) | 1,853 | ![](_page_53_Picture_7.jpeg) {54}------------------------------------------------ ## **8 Applicable taxes (continued)** #### **Deferred tax assets** The following are the deferred tax assets and liabilities recognised by the Company and movements thereon during the current reporting period. | | Charge
to
balance
sheet
£'000 | Charge
to profit
or loss
£'000 | Charge
to OCI
£'000 | Balance as
at 31
December
2025
£'000 | |--------------------------------------|-------------------------------------------|-----------------------------------------|---------------------------|--------------------------------------------------| | | | | | | | Accelerated tax depreciation | - | 114 | - | (503) | | Research & development expenditure | - | 1,361 | - | (7,973) | | Deferred compensation | - | 1,321 | - | 20,513 | | Spreading of transitional adjustment | - | (129) | - | 249 | | Cash flow hedge reserve | - | - | (11) | (58) | | Securities at FVTOCI | - | - | (950) | 415 | | Retirement benefit obligations | 4,892 | - | - | - | | Tax losses | - | (5,215) | - | - | | Total | 4,892 | (2,549) | (961) | 12,642 | Deferred tax assets are valued at the applicable tax rate based on the period in which the underlying temporary difference is expected to unwind. #### **Pillar Two** Pillar Two legislation has been enacted or substantively enacted in the jurisdictions in which the Company and its subsidiary operate. The Company, as part of MUFG group, is within scope of Pillar Two legislation. The Company applies the temporary exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12. The Company has performed an assessment of its potential exposure to Pillar Two income taxes. This assessment is based on the most recent information available regarding the financial performance of the constituent entities. Based on the assessment performed, the exposure to top-up taxes under the Pillar Two rules is not expected to be material. A small accrual has been recognised in respect of top-up taxes for the current period, reflecting the Company's conservative approach to compliance and estimation. However, this accrual is not indicative of a broader exposure, and the Company does not anticipate significant Pillar Two tax liabilities in the foreseeable future. The Company continues to monitor legislative developments and will reassess its position as further guidance and jurisdictional rules are implemented. ## **9 Notes to the cash flow statement** Cash and cash equivalents comprise cash and short term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their face value. Cash and cash equivalents as shown in the statement of cash flows can be reconciled to the related items in the statement of financial position as shown below. | | 2025
£'000 | 2024
£'000 | |------------------------------------|---------------|---------------| | Cash and balances at central banks | 956,767 | 687,575 | | Total cash and cash equivalents | 956,767 | 687,575 | The table below details changes to the Company's liabilities arising from financing activities, including both cash and non-cash changes. ![](_page_54_Picture_16.jpeg) {55}------------------------------------------------ ## **9 Notes to the cash flow statement (continued)** | Balance
as at
1 January
2025 | Financing
cash and
interest
flows | Changes
in fair
values | Effect of
changes in
foreign
exchange
rates | Other
non-cash
movements | Balance
as at 31
December
2025
£'000 | |---------------------------------------|--------------------------------------------|--------------------------------------|---------------------------------------------------------|--------------------------------------------|--------------------------------------------------| | | | | | | | | 334,739 | (120,860) | 6,759 | (18,160) | - | 202,478 | | 738,254 | (739,476) | 8,833 | (7,611) | - | - | | 605,655 | (390,011) | 1,146 | (17,861) | - | 198,929 | | 2,366,177 | (2,303,671) | (1,138) | (61,368) | - | - | | | | | | | 343,948 | | | | | | | 5,496,546 | | | | | | | 206,646 | | 23,124 | (7,736) | - | - | 8,533 | 23,921 | | 7,861,569 | (1,201,840) | 15,600 | (267,926) | 65,065 | 6,472,468 | | | £'000
982,484
2,590,544
220,592 | £'000
(616,449)
2,976,363
- | £'000
-
-
- | £'000
(32,776)
(115,150)
(15,000) | £'000
10,689
44,789
1,054 | #### **10 Securities at fair value through other comprehensive income** The following table gives the carrying value of securities at fair value through other comprehensive income by major classifications. | | 2025
£'000 | 2024
£'000 | |--------------------------------|---------------|---------------| | Government bonds | 820,651 | 906,809 | | Other public sector securities | 740,486 | 707,397 | | Total debt securities | 1,561,137 | 1,614,206 | | Equity instruments | 650 | 644 | | Total securities at FVTOCI | 1,561,787 | 1,614,850 | Expected credit losses have been calculated for securities within this category and reported as an adjustment to both profit or loss and OCI. Expected credit losses as at 31 December 2025 were £300k (2024: £291k). #### **11 Trading portfolio financial assets** | | 2025
£'000 | 2024
£'000 | |------------------------------------------|---------------|---------------| | | | | | Government bonds | 2,375,328 | 1,453,794 | | Corporation bonds | 646,009 | 700,784 | | Other public sector securities | 84,745 | 22,132 | | Total debt securities | 3,106,082 | 2,176,710 | | Equity instruments | 10,217,197 | 4,581,685 | | Total trading portfolio financial assets | 13,323,279 | 6,758,395 | | Of which listed: | | | | Debt securities | 2,702,598 | 2,008,862 | | Equity instruments | 8,641,528 | 3,032,584 | | Of which unlisted: | | | | Debt securities | 403,484 | 167,848 | | Equity instruments | 1,575,669 | 1,549,101 | | | 13,323,279 | 6,758,395 | ![](_page_55_Picture_9.jpeg) {56}------------------------------------------------ ## **12 Derivative financial instruments** | | 2025 | | | |-------------------------------------------------|-----------------------------|-------------------------------|------------------------------------| | | Notional
amount
£'000 | Fair value
assets
£'000 | Fair value
liabilities
£'000 | | Derivatives held for trading | | | | | Foreign exchange contracts | 267,814,955 | 5,415,195 | 4,680,195 | | Interest rate contracts | 5,190,095,237 | 11,717,622 | 11,394,985 | | Credit derivative contracts | 14,927,748 | 139,300 | 113,637 | | Equity contracts | 19,216,017 | 118,818 | 121,237 | | Commodity contracts | 806,491 | 96,023 | 96,025 | | Other | 1,330,739 | 29,500 | - | | Total trading contracts | 5,494,191,187 | 17,516,458 | 16,406,079 | | Derivatives designated as fair value hedges | | | | | Interest rate swaps contracts | 1,837,593 | 198 | 2,403 | | Derivatives designated as cash flow hedges | | | | | Currency swaps contracts | 1,832 | 541 | - | | Derivatives designated as net investment hedges | | | | | Currency swaps contracts | 228,329 | - | 24 | | Total hedging contracts | 2,067,754 | 739 | 2,427 | | Total derivative financial instruments | 5,496,258,941 | 17,517,197 | 16,408,506 | | | 2024 | | | |-------------------------------------------------|-----------------------------|-------------------------------|------------------------------------| | | Notional
amount
£'000 | Fair value
assets
£'000 | Fair value
liabilities
£'000 | | Derivatives held for trading | | | | | Foreign exchange contracts | 268,936,924 | 7,223,369 | 6,580,798 | | Interest rate contracts | 4,447,828,218 | 8,422,687 | 9,371,747 | | Credit derivative contracts | 12,805,786 | 141,722 | 72,395 | | Equity contracts | 7,635,876 | 308,278 | 158,435 | | Commodity contracts | 867,477 | 99,952 | 100,119 | | Other | 1,202,987 | 15,470 | - | | Total trading contracts | 4,739,277,268 | 16,211,478 | 16,283,494 | | Derivatives designated as fair value hedges | | | | | Interest rate swaps contracts | 2,466,553 | 43 | 3,468 | | Derivatives designated as cash flow hedges | | | | | Currency swaps contracts | 1,832 | 368 | - | | Derivatives designated as net investment hedges | | | | | Currency swaps contracts | 213,625 | 2,749 | - | | Total hedging contracts | 2,682,010 | 3,160 | 3,468 | | Total derivative financial instruments | 4,741,959,278 | 16,214,638 | 16,286,962 | The derivative trades reported within "Other" represent a series of litigation swaps entered into with bilateral counterparties in relation to Visa B shares. The valuation methodology for these trades includes an estimation of the remaining term of a specific litigation process, an estimation of the resolution amount and related funding costs. The market risk exposures related to the outcome of the litigation are considered adequately mitigated and the related funding is managed under standard terms employed by the Treasury desk. Material changes in any of these inputs would result in significantly higher or lower derivative fair values. The effect of changing these inputs to reasonably possible alternative assumptions is included within estimates provided on page 64. OTC credit derivatives include a credit derivative asset, which relates to a financial guarantee provided by a group company, MUFG Bank, for the uncollateralised derivatives exposures within a portfolio of corporate counterparties. At year end, the present value of this derivative totalled £35m (2024: £48m), this amount is offset by a CVA adjustment in respect of the exposure to the underlying corporate counterparties. This largely pertains to interest rate and foreign exchange contracts. CVA is measured on a portfolio basis by counterparty and later allocated at a transaction level for financial reporting; allocations are based on absolute derivative notional values. Cash flow hedge consists of FX derivatives hedging currency exposures on bonds denominated in foreign currencies on the Treasury Liquid Asset Portfolio which are classified as Securities at FVTOCI. The notional size of the derivative is exactly matched to the underlying bond. ![](_page_56_Picture_8.jpeg) {57}------------------------------------------------ # **12 Derivative financial instruments (continued)** | | 2025
£'000 | 2024
£'000 | |-----------------------------------------------------------------------|---------------|---------------| | Gains and losses arising from fair value hedges - interest rate risk: | | | | Securities at FVTOCI | | | | On hedging instruments | (19,842) | 15,079 | | On the hedged items attributable to the hedged risk | 19,793 | (14,838) | | Net gains | (49) | 241 | | Financial liabilities at amortised cost | | | | On hedging instruments | 17,167 | 20,373 | | On the hedged items attributable to the hedged risk | (17,666) | (20,315) | | Net gains | (499) | 58 | | Gains and losses arising from net investment hedges: | | | | On hedging instruments | (11,839) | 8,297 | | On the hedged items attributable to the hedged risk | 11,839 | (8,297) | | Net gains / (losses) | - | - | The gains and losses on ineffective portions of hedges are recognised immediately in Trading Income. The impact during 2025 was not significant (2024: not significant). Fair value hedges of interest rate risk comprise swaps that are used to protect against changes in the fair value of bonds and loans due to movements in market interest rates. The fair value of the bonds at year end are £1,280m (2024: £1,227m). Fair value hedges related to the MUFG Bank USD and JPY amortised loans and subordinated liabilities consist of currency swaps. The carrying value of the loan and liabilities at year end is £551m (2024: £1,194m). Potential sources of ineffectiveness in the Company's fair value hedges include bid-offer spreads, CVA provisioning, discounting and intraday market movements between instigation of the trade and end of day pricing. Net investment hedges consist of foreign currency exchange contracts to hedge the exposure to foreign currency which arises from translation of the equity method investment. Potential sources of ineffectiveness include a decline in the local currency carrying amount of the net investment to below the value of the designated hedge item. The notional size of the derivative is exactly matched to the euro investment in subsidiary. # **13 Other financing at fair value** | As at period ended | 2025
£'000 | 2024
£'000 | |----------------------------------|------------------|---------------| | Other secured financing
Loans | 38,683
23,577 | 64,303
- | | | 62,260 | 64,303 | 'Other secured financing' relates to structured financing arrangements facing special purpose vehicles where financing is secured by underlying debt portfolios. 'Loans' relate to the partial drawdown on facilities granted to clients, refer to Note 30 for undrawn facilities. All these are carried mandatory at fair value through P&L. # **14 Assets at amortised cost** | | 2025
£'000 | 2024
£'000 | |--------------------------------|---------------|---------------| | Other public sector securities | 73,947 | 126,119 | | Total assets at amortised cost | 73,947 | 126,119 | ![](_page_57_Picture_13.jpeg) {58}------------------------------------------------ # **15 Intangible assets** | | Software
£'000 | |----------------------------------|-------------------| | Cost | | | As at 1 January 2024 | 348,179 | | Additions | 38,599 | | Disposals | (154) | | Reclassification to other assets | - | | As at 31 December 2024 | 386,624 | | Additions | 28,357 | | Disposals | (534) | | Reclassification to other assets | - | | As at 31 December 2025 | 414,447 | | Amortisation | | | As at 1 January 2024 | 197,809 | | Charge for the Year | 32,955 | | Disposals | - | | As at 31 December 2024 | 230,764 | | Charge for the Year | 41,767 | | Disposals | - | | As at 31 December 2025 | 272,531 | | Carrying amount: | | | As at 31 December 2024 | 155,860 | | As at 31 December 2025 | 141,916 | #### **16 Property, plant and equipment** | | Leasehold
improve
ments
£'000 | Office
furniture &
fittings
£'000 | Office
machinery
&
equipment
£'000 | Total
£'000 | |------------------------|----------------------------------------|--------------------------------------------|------------------------------------------------|----------------| | Cost | | | | | | As at 1 January 2024 | 14,178 | 149 | 20,099 | 34,426 | | Additions | 1,167 | - | 4,375 | 5,542 | | Disposals | - | - | - | - | | As at 31 December 2024 | 15,345 | 149 | 24,474 | 39,968 | | Additions | (424) | - | 1,741 | 1,317 | | Disposals | - | - | - | - | | As at 31 December 2025 | 14,921 | 149 | 26,215 | 41,285 | | Depreciation | | | | | | As at 1 January 2024 | 10,126 | 149 | 13,970 | 24,245 | | Charge for the year | 817 | - | 2,055 | 2,872 | | As at 31 December 2024 | 10,943 | 149 | 16,025 | 27,117 | | Charge for the year | 814 | - | 2,132 | 2,946 | | Depreciation | 11,757 | 149 | 18,157 | 30,063 | | Carrying amount | | | | | | As at 31 December 2024 | 4,402 | - | 8,449 | 12,851 | | As at 31 December 2025 | 3,164 | - | 8,058 | 11,222 | | | | | | | ![](_page_58_Picture_5.jpeg) {59}------------------------------------------------ #### **17 Leases** The Company's leases include office space and a data centre in addition to previously recognised finance leases for certain fixtures, equipment and software. Lease terms vary between periods of 5 to 20 years. Lease contracts include lease and non-lease components. For the office lease, the Company has chosen to apply the practical expedient and account for lease and non-lease components as a single contract. For the data centre lease, the Company has elected to separate the components based on their respective stand-alone prices. Right-of-use assets ('ROU assets') are measured at cost, which comprises the amount of the initial measurement of lease liability with no other payments, initial direct costs or restoration costs applicable. Lease liability is measured on the net present value basis and includes fixed payments only as all leases are on a fixed repayment basis. No arrangements have been entered into for contingent rental payments, residual value guarantees, purchase options or penalties for terminating the lease. Payments relating to short term leases, which are signed for the period of 12 months or less, are recognised on the straight-line basis. The Company does not have any leases classified as low value. ## **Right-of-use assets** | | | Office
machinery | | |----------------------------------|----------|---------------------|---------| | | | & | | | | Property | equipment | Total | | | £'000 | £'000 | £'000 | | 2024 | | | | | Balance as at 1 January 2024 | 20,309 | 2,987 | 23,296 | | Additions to right-of-use assets | 88 | 3,385 | 3,473 | | Derecognition | - | - | - | | Depreciation charge for the year | (3,569) | (2,565) | (6,134) | | Balance as at 31 December 2024 | 16,828 | 3,807 | 20,635 | | 2025 | | | | | Balance as at 1 January 2025 | 16,828 | 3,807 | 20,635 | | Additions to right-of-use assets | 7,960 | - | 7,960 | | Depreciation charge for the year | (3,733) | (2,227) | (5,960) | | Balance as at 31 December 2025 | 21,055 | 1,580 | 22,635 | | | 2025
£'000 | 2024
£'000 | |--------------------------------------------------|---------------|---------------| | Other amounts recognised in the income statement | | | | Interest on lease liability | 667 | 456 | | Expense relating to short term leases | 777 | 811 | | Amounts recognised in the cash flow statement | | | | Total cash outflow for leases | 7,736 | 6,471 | Refer to Note 32 for maturity analysis of lease liabilities. ## **18 Investment in subsidiary** | | 2025
£'000 | 2024
£'000 | |-------------------------------------------|---------------|---------------| | As at 1 January | 211,902 | 213,745 | | Purchase of equity
Share of net profit | 3,488 | 8,251 | | Impact of foreign currency revaluation | 11,743 | (10,094) | | As at 31 December | 227,133 | 211,902 | The above balances relate to the wholly owned subsidiary: MUS(EU). Further corporate structure references are included within the Strategic report on pages 3 to 19 and in Note 35. ![](_page_59_Picture_14.jpeg) {60}------------------------------------------------ # **19 Other assets** | | 2025
£'000 | 2024
£'000 | |---------------------------------------------------|------------------|---------------| | Prepayments and accrued income | 24,732 | 28,886 | | Current taxation | 12,964 | 15,713 | | Collateral – other
Trade and other receivables | 8,485
157,688 | -
151,079 | | | 203,869 | 195,678 | 'Trade and other receivables' is driven by intercompany balances and default fund deposits. # **20 Trading portfolio financial liabilities** | | 2025
£'000 | 2024
£'000 | |-----------------------------------------------|---------------|---------------| | | | | | Government bonds | 1,007,007 | 850,167 | | Corporation bonds | 143,843 | 213,812 | | Other public sector securities | 1,035 | 1,626 | | Total debt securities | 1,151,885 | 1,065,605 | | Equity instruments | 2,436,215 | 2,399,693 | | Total trading portfolio financial liabilities | 3,588,100 | 3,465,298 | | Of which listed: | | | | Debt securities | 1,151,853 | 1,065,605 | | Equity instruments | 2,436,215 | 2,399,693 | | Of which unlisted: | | | | Debt securities | 32 | - | | | 3,588,100 | 3,465,298 | # **21 Financial liabilities designated at fair value** | | 2025
£'000 | 2024
£'000 | |-----------------------------|---------------|---------------| | Own issued notes | 202,478 | 334,739 | | Commercial paper | - | 738,254 | | Other financial liabilities | 198,929 | 605,655 | | MUSHD loan facility | - | 2,366,177 | | | 401,407 | 4,044,825 | 'Own issued notes' includes issuances with structured payment profiles. The Company issues these notes to raise term funding and satisfy investor demand and carries them at fair value through profit and loss. The structured return profiles include securities which pay coupon only where certain conditions relating to equity performance, foreign currency movements, or other factors are met. Issuances are typically denominated in JPY and USD. 'Commercial paper' represents short term issuances where the funding typically carries a 3-month term. Issuances are typically denominated in GBP, USD and EUR. 'Other financial liabilities' represents funded swap transactions denominated in JPY and USD. 'MUSHD loan facility' represents senior unsecured intercompany borrowings lent under an uncommitted loan facility which allowed the Company to borrow JPY funds from MUSHD. These facilities were repaid during the year. The Company has assessed the change in value of these liabilities due to changes in own credit with reference to published credit assessments and a proxy cost of funds curve. In light of the observed stability of the proxy spread for own credit, the Company has assessed this change in value to be immaterial. ![](_page_60_Picture_13.jpeg) {61}------------------------------------------------ # **22 Financial liabilities at amortised cost** | As at period ended | 2025
£'000 | 2024
£'000 | |------------------------------------|---------------|---------------| | MUFG Bank USD loan | 343,948 | 982,484 | | Subordinated liabilities | 206,646 | 220,592 | | Intercompany money market deposits | 5,496,546 | 2,590,544 | | | 6,047,140 | 3,793,620 | 'MUFG Bank USD loan' relates to long term, amortised cost loans from MUFG Bank, which were novated from MUSHD on 1 October 2025, and have maturity dates in 2030. These loans are designated in a fair value hedge relationship. The accumulated amount of fair value hedge adjustments included in the carrying amount of these loans is £9m (2024: £25m). 'Subordinated liabilities' are loans agreed between the Company and MUFG Bank, which were novated from MUSHD on 1 October 2025, and are due to mature in 2031. These liabilities are designated in a fair value hedge relationship. The accumulated amount of fair value hedge adjustments included in the carrying amount of these loans is £2m (2024: £3m). 'Intercompany money market deposits' are placed by MUFG Bank, denominated in EUR, JPY and USD. #### **23 Other liabilities** | | 2025
£'000 | 2024
£'000 | |--------------------------|---------------|---------------| | Tax and social security | 5,468 | 4,372 | | Lease liabilities | 23,921 | 23,125 | | Trade and other payables | 181,416 | 186,131 | | | 210,805 | 213,628 | 'Trade and other payables' is driven by compensation related accruals, intercompany balances and brokerage fees. #### **24 Equity instruments** | | 2025
£'000 | 2024
£'000 | |---------------------------------------------------------------------------------------|----------------|----------------| | Ordinary shares of £1 each
Share capital as at 1 January
Issued during the year | 1,383,241
- | 1,383,241
- | | Allotted, called up and fully paid as at 31 December | 1,383,241 | 1,383,241 | | Additional Tier 1 capital
Total Additional Tier 1 capital as at 31 December | 463,853 | 463,853 | | Total equity instruments | 1,847,094 | 1,847,094 | At 31 December 2025, the Company has in issue £1,383m (2024: £1,383m) £1 ordinary shares which carry no right to fixed income. The company has authorised share capital of £2,000m (2024: £2,000m) with a nominal value of £1 per share. Additional Tier 1 capital instruments are issued to MUFG Bank. These instruments include a contingent conversion feature which has the effect of converting the instruments to ordinary share capital of the Company if a trigger event, being a breach of minimum Common Equity Tier 1 capital ratio, occurs at any time. The instruments are perpetual and are subordinated to senior creditors and subordinated loan creditors of the Company. The instruments bear a floating rate of interest. All interest payments are cancellable in certain circumstances, where certain distribution tests are breached, and are non-cumulative. Further information regarding capital management is included within Business and Risk Management Policies on pages 25 to 35. ![](_page_61_Picture_14.jpeg) {62}------------------------------------------------ ## **25 Distributions on equity instruments** In 2025, the Directors approved total coupon payments on Additional Tier 1 capital instruments of £33.5m (2024: £35.8m). Refer to Note 24 for terms of issuance. On 15 January 2026, the Directors approved a coupon payment on the AT1 capital instruments of £15.3m (2024: £17.4m). The amount has not been accrued in the results for the period ended 31 December 2025 as it was not due at that date. These payments will provide tax relief at the relevant prevailing tax rate in the next financial year. No ordinary dividend was approved and paid during the year (2024: £13.8m). #### **26 Report on Directors' remuneration and interests** | | 2025 | 2024 | |------------------------------------------------------------|-------|-------| | | £'000 | £'000 | | Remuneration of key management personnel | | | | Short term employment benefits | 2,188 | 3,061 | | Other long term benefits | 560 | 444 | | Notional share based payments | 1,014 | 1,367 | | | 3,762 | 4,872 | | Realised MTM / interest on NSUs & other long term benefits | 383 | 491 | | Total remuneration of key management personnel | 4,145 | 5,363 | The number of Directors who were members of the Group defined contribution personal pension plan during the period was 1 (2024: 1), the contributions totalled £2k (2024: £13k). NSUs are cash settled awards linked to the share price of the ultimate holding company, MUFG. Deferred NSU compensation expense is prorated across the entire deferral period. Deferred cash compensation expense is recognised during the period the award is made. Non-executive Directors provided by other Group companies receive no fees or other remuneration for their services to the Company. The key management are the same personnel as the Directors of the Company. The emoluments of the highest paid Director were as follows: | | 2025
£'000 | 2024
£'000 | |------------------------------------------------------------|---------------|---------------| | Remuneration award | | | | Short term employment benefits | 531 | 1,079 | | Other long term benefits | 428 | 338 | | Notional share based payments | 797 | 1,104 | | | 1,756 | 2,521 | | Realised MTM / interest on NSUs & other long term benefits | 369 | 286 | | Total remuneration | 2,125 | 2,807 | ![](_page_62_Picture_12.jpeg) {63}------------------------------------------------ ## **27 Fair value of financial instruments** The majority of the Company's assets and liabilities are carried on the statement of financial position at fair value, in which case fair value is equal to the carrying value. The following table presents a comparison by category of book amounts and fair value of the Company's financial assets and liabilities for those items which are not carried at fair value on the statement of financial position. | | 2025 | | 2024
£'000 | | |---------------------------------------------------------------|----------------------------|------------------------|----------------------------|------------------------| | | Carrying
value
£'000 | Fair
value
£'000 | Carrying
value
£'000 | Fair
value
£'000 | | Assets | | | | | | at amortised cost | | | | | | Cash and balances at central banks | 956,767 | 956,767 | 687,575 | 687,575 | | Cash collateral paid to derivative counterparties and brokers | 2,085,799 | 2,085,799 | 2,532,853 | 2,532,853 | | Assets at amortised cost | 73,947 | 75,094 | 126,119 | 127,490 | | * Other assets | 169,658 | 169,658 | 156,318 | 156,318 | | Liabilities | | | | | | at amortised cost | | | | | | Cash collateral received from derivative counterparties and | 5,111,083 | 5,111,083 | 5,180,436 | 5,180,436 | | brokers | | | | | | Financial liabilities at amortised cost | 6,047,140 | 6,049,748 | 3,793,620 | 3,795,063 | | * Other liabilities | 199,390 | 199,390 | 203,003 | 203,003 | \*2024 figures have been restated to represent financial assets and liability values. Previously non-financial amounts were also included. Fair value of assets at amortised cost has been calculated using market quoted prices. Financial liabilities at amortised cost has been calculated using a discounted cash flow model with a spread over the relevant benchmark to represent the idiosyncratic credit and funding cost. Both these items would all be classified in either level 1 or level 2 within the fair value hierarchy. FX gain of £175m (2024: £323m) was recognised on financial assets and liabilities not carried at fair value, driven by revaluation of cash collateral received from derivative counterparties. The currency exposure is economically hedged with instruments held at fair value, with FX gains and losses and associated fair value gains and losses being recognised net in the income statement as trading income. #### **Valuation of financial assets and liabilities** Valuation techniques incorporate assumptions about factors that other market participants would use in their valuations, including interest rate yield curves, exchange rates, volatilities and prepayment and default rates. The Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making measurements: - Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. - Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. - Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted and or broker prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Issued structured notes and certain other hybrid instrument liabilities are designated at fair value. The spread applied to these instruments is derived from the spreads at which the Company issues structured notes. The change in fair value due to credit risk on these instruments is not significant (2024: not significant). The fair value of certain financial instruments is measured using valuation techniques that are determined in full or partly on assumptions that are not supported by observable market prices. The effect of changing these assumptions to a range of reasonably possible alternative assumptions would provide a range from £22.5m (2024: £16.5m) lower to £13.7m (2024: £6.9m) higher than the fair value recognised in the financial statements for these assets and liabilities, with the current year range driven by the litigation swaps referred to in Note 12. The movements in balances of level 3 items are detailed on page 66. There were no movements between levels 1 and 2 during the year. The Company has prepared a Value-at-Risk analysis which reflects interdependencies between market risk factors, refer to pages 27 to 29. ![](_page_63_Picture_16.jpeg) {64}------------------------------------------------ ## **27 Fair value of financial instruments (continued)** | | 2025 | | | | |------------------------------------------------|------------------|-------------------------|------------------|-------------------------| | | Level 1
£'000 | Level 2
£'000 | Level 3
£'000 | Total
£'000 | | Assets | | | | | | Financial assets at FVTPL | | | | | | Trading portfolio financial assets | 11,096,995 | 2,226,284 | - | 13,323,279 | | Reverse repurchase agreements - fair value | - | 21,672,591 | - | 21,672,591 | | Cash collateral on securities borrowed | - | 2,254,514 | - | 2,254,514 | | Derivative financial instruments | 49,429 | 15,513,294 | 1,954,474 | 17,517,197 | | Other financing held at fair value | - | 62,260 | - | 62,260 | | Financial assets at FVTOCI | | | | - | | Securities at FVTOCI | 921,878 | 639,259 | 650 | 1,561,787 | | | 12,068,302 | 42,368,202 | 1,955,124 | 56,391,628 | | Liabilities | | | | | | Financial liabilities at FVTPL | | | | | | Trading portfolio financial liabilities | 3,444,257 | 143,843 | - | 3,588,100 | | Repurchase agreements - fair value | - | 26,108,359 | - | 26,108,359 | | Cash collateral on securities lent | - | 1,108 | - | 1,108 | | Derivative financial instruments | 41,969 | 16,106,485 | 260,052 | 16,408,506 | | Financial liabilities designated at FVTPL | | | | - | | Financial liabilities designated at fair value | - | 401,407 | - | 401,407 | | | 3,486,226 | 42,761,202 | 260,052 | 46,507,480 | | | 2024 | | | | | | Level 1 | Level 2 | Level 3 | Total | | | £'000 | £'000 | £'000 | £'000 | | Assets | | | | | | Financial assets at FVTPL | | | | | | Trading portfolio financial assets | 4,499,596 | 2,258,799 | - | 6,758,395 | | Reverse repurchase agreements - fair value | - | 29,750,082 | - | 29,750,082 | | Cash collateral on securities borrowed | - | 2,829,911 | - | 2,829,911 | | Derivative financial instruments | 57,136 | 15,782,244 | 375,258 | 16,214,638 | | Other financing held at fair value | - | 64,303 | - | 64,303 | | Financial assets at FVTOCI | | | | | | Securities at FVTOCI | 1,076,113 | 538,093 | 644 | 1,614,850 | | | 5,632,845 | 51,223,432 | 375,902 | 57,232,179 | | Liabilities | | | | | | Financial liabilities at FVTPL | | | | | | Trading portfolio financial liabilities | 3,251,256 | 214,042 | - | 3,465,298 | | Repurchase agreements - fair value | - | 25,960,181 | - | 25,960,181 | | Cash collateral on securities lent | - | 6,403 | - | 6,403 | | Derivative financial instruments | 59,616 | 15,913,849 | 313,497 | 16,286,962 | | Financial liabilities designated at FVTPL | | | | | | Financial liabilities designated at fair value | -
3,310,872 | 4,044,825
46,139,300 | -
313,497 | 4,044,825
49,763,669 | | | | | | | The Company discontinued the legal contracts with MUFG Bank Tokyo and Mitsubishi UFJ Morgan Stanley Securities respectively, which characterised margin payments on certain derivative contracts as periodic settlement (termed 'Settled-to-Market' or STM) during the period. The derivative exposures in question reverted to a more conventional treatment under which margin payments are treated as collateral and are presented separately from the derivative exposure (termed 'Collateralised-to-Market' or CTM). This change was effective from 30 June 2025 and 30 December 2025. This resulted in an increase in the gross exposure of derivative assets and liabilities on the balance sheet, and a commensurate increase in collateral balances. ![](_page_64_Picture_4.jpeg) {65}------------------------------------------------ # **27 Fair value of financial instruments (continued)** The table below shows a reconciliation from the beginning balances to the end balances for the fair value of instruments in level 3 of the fair value hierarchy. This does not include movements in level 1 or level 2 derivatives that are also used to hedge the level 3 assets and liabilities. | | Derivative
assets
£'000 | Securities at
FVTOCI
£'000 | Derivative
liabilities
£'000 | Financial
liabilities
designated
at fair value
£'000 | |----------------------------------------|-------------------------------|----------------------------------|------------------------------------|------------------------------------------------------------------| | 2024 | | | | | | As at 31 December 2023 | 367,427 | 409 | (379,410) | (160,308) | | Total gains/(losses) in profit or loss | 354,512 | - | 269,703 | (38,341) | | Total gains in reserves | - | 2 | - | - | | Purchases | - | 269 | - | - | | Issues | - | - | - | - | | Settlements | (385,260) | (36) | (237,221) | 134,138 | | Transfers into level 3 | 77,611 | - | - | - | | Transfers from level 3 | (39,032) | - | 33,431 | 64,511 | | Closing balance 31 December | 375,258 | 644 | (313,497) | - | | Net unrealised gains/(losses) in PL | 59,895 | - | (23,633) | - | | 2025 | | | | | | As at 31 December 2024 | 375,258 | 644 | (313,497) | - | | Total gains/(losses) in profit or loss | 173,105 | - | (28,943) | - | | Total gains in reserves | - | (35) | - | - | | Purchases | - | 52 | - | - | | Issues | - | - | - | - | | Settlements | 1,443,506 | (11) | 77,600 | - | | Transfers into level 3 | - | - | - | - | | Transfers from level 3 | (37,395) | - | 4,788 | - | | Closing balance 31 December | 1,954,474 | 650 | (260,052) | - | | Net unrealised gains/(losses) in PL | 37,094 | - | (8,371) | - | Financial liabilities designated at fair value represent selected structured notes which contain exotic embedded derivatives. Changes in the size of this exotic component relative to the overall instrument has resulted in movements between levels 2 and 3 in the hierarchy. Issuances during the period mainly relate to notes with embedded derivatives referencing major equity indices. #### **Financial instruments valued using models with unobservable inputs** The amount that has yet to be recognised in the Company income statement relating to the difference between the fair value at initial recognition (the transaction price) and the amount that would have arisen had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases, is as follows: | | 2025
£'000 | 2024
£'000 | |--------------------------------------------------------------------|---------------|---------------| | Unamortised balance at 1 January | 2,170 | 2,511 | | Deferral on new transactions | 5,355 | 3,098 | | Amortised to the profit and loss account during the financial year | (3,310) | (3,439) | | Unamortised balance at 31 December | 4,215 | 2,170 | #### **Financial assets designated at fair value** The Company did not have any financial assets voluntarily designated at fair value as at 31 December 2025 (2024: nil). ![](_page_65_Picture_10.jpeg) {66}------------------------------------------------ # **27 Fair value of financial instruments (continued)** # **Significant unobservable inputs** The disclosures below describe the valuation techniques and significant unobservable inputs for assets and liabilities classified as Level 3 along with the range of values used for those significant unobservable inputs. There were no Level 3 financial liabilities designated at fair value (2024: nil) that contain embedded derivatives with inputs represented by the interest rate, foreign exchange and equity derivatives described in the table below. | | Total | Total | | | Range | | | |------------------------------|-----------------|----------------------|---------------------------|------------------------------------|--------|--------|--------| | 2025 | assets
£'000 | liabilities
£'000 | Valuation
technique(s) | Significant unobservable
inputs | Min | Max | Units | | Derivatives | | | | | | | | | Interest rate
derivatives | 1,704,738 | (160,866) | Option model | Recovery rate | 80.00 | 90.00 | % | | | | | | Option volatility | 0.68 | 68.10 | % | | | | | | Deal contingent probability | 100.00 | 100.00 | % | | | | | | Deal contingent term | 1.80 | 2.20 | Months | | Foreign | 88,046 | (1,788) | Option model | Recovery rate | 80.00 | 90.00 | % | | exchange | | | | IR - IR Correlation | 30.00 | 70.00 | % | | derivatives | | | | FX - IR Correlation | 35.00 | 60.00 | % | | | | | | Correlation - underlying
assets | 50.00 | 50.00 | % | | | | | | Option volatility | 9.40 | 21.27 | % | | Equity
derivatives | 901 | (1,373) | Basket Correlations | Correlation - underlying
assets | 58.00 | 93.00 | % | | | | | | Equity - FX Correlation | 6.00 | 50.00 | % | | Commodities | 96,023 | (96,025) | Discounted cash
flow | Commodity - gas swap rate | 3.30 | 7.05 | | | Other | 64,766 | - | Discounted cash
flow | Term of Litigation swap | 1 | 12 | Months | | | | | | A/B share ratio | 1.56 | 1.56 | | | | | | | CVA beta | 0.23 | 2.09 | | | | | | | | | | | # **1,954,474 (260,052)** | 2024 | Total
assets
£'000 | Total
liabilities
£'000 | Valuation
technique(s) | Significant unobservable
inputs | Min | Range
Max | Units | |-----------------------|--------------------------|-------------------------------|---------------------------|------------------------------------|-------|--------------|--------| | Derivatives | | | | | | | | | Interest rate | 105,876 | (208,278) | Option model | IR - IR Correlation | 30.00 | 98.70 | % | | derivatives | | | | FX - IR Correlation | 35.00 | 60.00 | % | | | | | | Recovery rate | 80.00 | 90.00 | % | | | | | | Option volatility | 65.30 | 134.58 | % | | Foreign | 102,340 | (4,899) | Option model | IR - IR Correlation | 30.00 | 70.00 | % | | exchange | | | | FX - IR Correlation | 20.00 | 60.00 | % | | derivatives | | | | Recovery rate | 80.00 | 90.00 | % | | | | | | Correlation - underlying
assets | 50.00 | 66.43 | % | | | | | | Option volatility | 10.70 | 20.93 | % | | Equity
derivatives | 3,516 | (201) | Basket correlations | Correlation - underlying
assets | 58.00 | 95.00 | % | | | | | | Equity - FX Correlation | 6.00 | 50.00 | % | | Commodities | 99,952 | (100,119) | Option model | Commodity - IR Correlation | 25.00 | 75.00 | % | | | | | | Commodity - gas swap rate | 3.44 | 8.18 | | | Other | 63,574 | - | Discounted cash | Term of Litigation swap | 3 | 12 | months | | | | | flow | A/B share ratio | 1.57 | 1.57 | | | | | | | CVA beta | 0.23 | 13.40 | | | | 375,258 | (313,497) | | | | | | ![](_page_66_Picture_7.jpeg) {67}------------------------------------------------ # **27 Fair value of financial instruments (continued)** The following provides a summary description of significant unobservable inputs included in the table above: - Correlation is a measure of the relationship between the movements of two variables (i.e. how much the change in one variable may be linked to the change in the other variable). Correlation is often an input into valuation of derivative contracts with more than one underlying risk. A significant increase in correlation in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. - Option volatility is a measure of the degree of variation in price movements for a given derivative underlying and therefore represents an estimate of how much a particular underlying instrument, parameter or index could change on average over time. In general, a significant increase in volatility in isolation will result in an increase in fair value for the holder of a simple option. - Commodity gas swap rate is the rate for a swap of a gas index linked payment for a fixed rate. Whilst there is a traded market for many gas indices, observability of data is more challenging at longer maturities, and a swap curve needs to be inferred using extrapolation techniques. - Term of litigation swap relates to a series of swaps linked to an asset which is affected by a legal case, where the payments under the swap terminate at the earlier of exercise of call options in the favour of the counterparty, some of which are immediately exercisable, where applicable, or soon after the litigation ends. The term of the swap is therefore difficult to quantify and needs to be estimated from available information, legal commentary and judgement to determine if and when the call options may be exercised. A decrease in the expectation of the term of the swap would generally result in an unfavourable movement in the fair value. - The A/B share ratio denotes the common stock conversion rate for the Visa B-1 shares and is calculated based on the amounts in the related litigation escrow account. As legal provisions are added to the escrow account the ratio decreases which results in unfavourable movements in fair value. Associated to this is the probability of conversion ratio risk which is linked to the ramifications of the exchange offer with respect to the documentation and risks of the associated litigation swaps. The CVA beta relates to a parameter that is used to infer a credit curve for a credit name which does not have a tradable credit curve in the market. The beta expresses a relationship between a liquid credit index and credit names of similar sectors, ratings and regions. - Deal contingent probability is the probability of a specified underlying event or transaction going ahead. If the event or transaction occurs, the associated deal-contingent swaps become effective, however if the event or transaction does not occur, the dealcontingent swaps are cancelled with no cash flows. The probability estimate is based on contractual milestones, observable market indicators where available, and management judgement regarding the progress and certainty of the underlying transaction. The deal contingent term represents the expected timing of completion of the underlying event or transaction. - Recovery rate is the percentage of a defaulted loan or distressed asset's value that is expected to be recovered in the event of a default. It is determined using historical loss data, collateral valuations, market-based loss-given-default (LGD) benchmarks and management judgement. # **28 Post-balance sheet events** The Directors' approved an AT1 coupon payment of £15.3m on 15 January 2026, refer to Note 25 for details. On 8 January 2026, MUFG announced its intention to establish a universal bank within the European Union through the merger of MUFG Bank (Europe) N.V. and MUFG Securities (Europe) N.V. Subject to obtaining the necessary approvals, the merger is planned for the 2026/27 fiscal year. This does not affect the financial position as of 31 December 2025. In accordance with IAS 10, this is considered a non-adjusting event and is disclosed to provide additional context to the users of the financial statements. # **29 Collateral** Assets are pledged as collateral to secure liabilities under repurchase agreements, securities lending agreements, borrowing transactions to note holders as part of structuring transactions, and agreements for derivative transactions. The following table summarises the nature and carrying amount of the assets pledged: | | 2025
£'000 | 2024
£'000 | | |------------------------------------|---------------|---------------|--| | Trading securities | 3,953,805 | 1,954,496 | | | Investment securities | 892,297 | 654,758 | | | Total assets pledged as collateral | 4,846,102 | 2,609,254 | | ![](_page_67_Picture_17.jpeg) {68}------------------------------------------------ ## **29 Collateral (continued)** The above pledged assets as collateral were entered into by the Company in the normal course of business by which it transfers recognised financial assets to third parties or to special purpose entities, but the transfer does not qualify for de-recognition as stated in the accounting policies. The Company will continue to recognise financial assets transferred when it retains control of the security, retains rights to receive cash flows from the assets, and substantially all the risks and rewards of ownership. The associated liabilities have a carrying value of £4,328m (2024: £2,335m). Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Company is allowed to resell or repledge the collateral held. The fair value of collateral accepted with the right to repledge to others was as follows: | | | 2025 | | 2024 | | |---------------------|---------------------|-------------------------------|---------------------|-------------------------------|--| | | Fair Value
£'000 | Sold or
repledged
£'000 | Fair Value
£'000 | Sold or
repledged
£'000 | | | Accepted collateral | 49,489,970 | 43,427,500 | 50,341,185 | 43,534,864 | | These balances represent substantially all of the collateral received by the Company in relation to assets. The Company has the obligation to return the collateral on the maturity date of the secured transaction. The process by which assets are pledged as collateral and accepted as collateral is generally conducted under standard documentation used by financial market participants. #### **Collateral Management of Repurchase Agreements** Securities purchased under agreements to resell ('reverse repurchase agreements') and securities sold under agreements to repurchase ('repurchase agreements') are mainly collateralised by highly rated credit bonds (predominantly government and corporate bonds). The repurchase agreements are treated as collateralised financing transactions and are carried at the contract amounts at which the securities will subsequently be reacquired or resold as specified in the respective agreements. It is the Company's policy to generally take possession of securities purchased under agreements to resell at the time such agreements are made. The Company's agreements with counterparties contain provisions allowing for additional collateral to be obtained, or excess collateral returned, based on market valuations of such collateral. The Company revalues the collateral underlying its repurchase and reverse repurchase agreements on a daily basis. In the event the market value of such securities falls below the related agreement to resell at contract amount plus accrued interest, the Company will generally request additional collateral. ## **Unconsolidated structured entities in which the Company has an interest** The Company is involved with various special purpose entities in the normal course of business. These have been established as structured entities such that voting or similar rights are not the deciding factor in determining control of the entity. The structured entities are typically asset repackaging transactions established to source funding, purchase credit protection or provide returns to investors that are not otherwise readily available in the market. The principal risk to the structure is the credit risk of the securities acting as collateral to the investors who retain the risk and rewards. The following tables represent the total assets, maximum exposure to loss and assets and liabilities which relate to the Company's interest in non-consolidated special purpose vehicles ('SPVs'). Maximum exposure is determined by the carrying amount of any on-balance sheet assets net of any recourse liabilities, where applicable. | As at 31 December 2025 | SPVs for
structured
financing
£'000 | Repackaged
instruments
£'000 | Other
£'000 | Total
£'000 | |------------------------------------------------|----------------------------------------------|------------------------------------|----------------|----------------| | Trading portfolio financial assets | 6,558 | 94,701 | 10,540 | 111,799 | | Derivative financial instruments | 15,964 | 62,736 | 78,109 | 156,809 | | Reverse repurchase agreements | 116,846 | - | 584,200 | 701,046 | | Derivative cash collateral pledged | 855 | - | 201 | 1,056 | | Other financing held at fair value | - | - | - | - | | Total Assets | 140,223 | 157,437 | 673,050 | 970,710 | | Trading portfolio financial liabilities | - | 8,435 | 1,621 | 10,056 | | Derivative financial liabilities | 58,710 | 22,626 | 16,219 | 97,555 | | Financial liabilities designated at fair value | - | 198,929 | - | 198,929 | | Repurchase agreements | 291,362 | - | - | 291,362 | | Derivative cash collateral received | - | - | - | - | | Total Liabilities | 350,072 | 229,990 | 17,840 | 597,902 | | Maximum Exposure | 133,983 | 156,545 | 671,170 | 961,698 | ![](_page_68_Picture_13.jpeg) {69}------------------------------------------------ # **29 Collateral (continued)** # **As at 31 December 2024** | Trading portfolio financial assets | 30,671 | 2,722 | 3,530 | 36,923 | |------------------------------------------------|---------|---------|---------|-----------| | Derivative financial instruments | 74,709 | 36,776 | 103,105 | 214,590 | | Reverse repurchase agreements | 68,568 | 568,346 | 566,235 | 1,203,149 | | Derivative cash collateral pledged | 1,590 | - | - | 1,590 | | Other financing held at fair value | - | 4,233 | - | 4,233 | | Total Assets | 175,538 | 612,077 | 672,870 | 1,460,485 | | | | | | | | Trading portfolio financial liabilities | 161 | 4,978 | 36 | 5,175 | | Derivative financial liabilities | 135,525 | 6,464 | 32,319 | 174,308 | | Financial liabilities designated at fair value | - | 455,873 | - | 455,873 | | Repurchase agreements | 5,846 | - | 2,427 | 8,273 | | Derivative cash collateral received | - | - | 4,558 | 4,558 | | Total Liabilities | 141,532 | 467,315 | 39,340 | 648,187 | | Maximum Exposure | 167,831 | 611,155 | 670,442 | 1,449,428 | # **30 Guarantees, commitments and contingent liabilities** At the year end, the Company was committed to provide facilities in favour of external counterparties. The facilities are provided in major currencies and total £230.3m (2024: £199.7m) equivalent; where facilities are partially drawn down the undrawn portion is reported as a commitment and the drawn portion reflected as a loan on the statement of financial position within other financing at fair value amounting to £23.6m as at 31 December 2025 (2024: £nil), refer to Note 13. Once drawn, balances are measured at FVTPL. We continue to co-operate with the Cologne Public Prosecutor and the German Federal Tax Office who are investigating numerous institutions and individuals in connection with alleged transactions and practices (known as cum/ex transactions) which may be found to be illegal under German law. MUS(EMEA) is not engaged in active litigation with the German authorities and there remain uncertainties which mean it is difficult to predict resolution of the matter including any potential impact or its timing or materiality on MUS(EMEA). As a result of this uncertainty, as of today it is not probable that there will be an outflow of economic benefit which can be measured reliably. A former employee has filed a claim before the Employment Tribunal (England and Wales) on 13 January 2023 against MUS(EMEA) and separately, in the High Court against MUS(EMEA) on 24 June 2024. The grounds of the Employment Tribunal claim relate to direct discrimination (race and/or religion), unfair dismissal, victimisation and dismissal as a result of making protected disclosures and in the High Court claim relate to breach of contract. The Claimant seeks compensation for all losses incurred and aggravated damages. MUS(EMEA) is robustly defending the claims and does not anticipate settlement of the claims. As of today, it is not probable that there will be an outflow of economic benefit which can be measured reliably. In addition to the matters noted above, from time to time we are required to provide information to regulatory authorities and tax authorities in connection with enquiries on a range of matters. The outcome of these enquiries may result in an outflow of economic benefits, where an estimate of outflow, if any, can be reliably measured the company will raise a provision at the year end. # **31 Provisions** | | 2025
£'000 | 2024
£'000 | |----------------------------------|---------------|---------------| | As at 1 January | 7,543 | 495 | | Provision recognised in the year | - | 7,543 | | Provision used in the year | (7,543) | (495) | | As at 31 December | - | 7,543 | The Company is required to provide for costs where it is probable that a past event creates an obligation which will demand the outflow of economic resources and a reliable estimate of the size of that outflow can be made. The SEC announced on 6th August 2025 that it had entered into a settlement agreement with MUS(EMEA) regarding violations of certain security-based swap dealer rules. MUS(EMEA) acknowledged the SEC's findings and is committed to ensuring that these issues do not recur. MUS(EMEA) paid a penalty of \$9.8mm to the SEC in settlement of this matter during the year. The prior year provision in relation to this matter was released at the date of settlement. ![](_page_69_Picture_13.jpeg) {70}------------------------------------------------ ## **32 Contractual maturity analysis** The breakdown of financial liabilities by contractual maturity is shown in the table below. These are based on the contractual terms, except for derivatives which are deemed to be on demand. The balances do not agree directly to the balances in the statement of financial position as the table incorporates contractual cash flows on an undiscounted basis. The repurchase agreement balances are presented on a gross basis, not taking account of any balances which have been offset in the statement of financial position. Derivative contracts are reflected as on demand at their fair value. | | | Due
within 3 | Due
between
3 and 12 | Due
between
1 and 5 | Over 5 | | |----------------------------------------------------------------------------|--------------------|-----------------|----------------------------|---------------------------|----------------|----------------| | | On demand
£'000 | months
£'000 | months
£'000 | years
£'000 | years
£'000 | Total
£'000 | | | | | 2025 | | | | | Trading portfolio financial liabilities | 3,588,100 | - | - | - | - | 3,588,100 | | Repurchase agreements | 796,709 | 32,216,253 | 1,092,423 | - | - | 34,105,385 | | Cash collateral on securities
lent | 1,108 | - | - | - | - | 1,108 | | Cash collateral received from
derivatives counterparties and
brokers | 5,111,083 | - | - | - | - | 5,111,083 | | Derivatives | 16,408,506 | - | - | - | - | 16,408,506 | | Financial liabilities designated at fair
value | - | 116,508 | 108,678 | 76,372 | 107,690 | 409,248 | | Financial liabilities at amortised cost | - | 15,406 | 117,253 | 6,247,431 | 210,151 | 6,590,241 | | Other liabilities (excl. lease liability) | 116,614 | 18,513 | 4,925 | 33,896 | 1,521 | 175,469 | | Lease liability | - | 720 | 4,944 | 19,613 | 275 | 25,552 | | | 26,022,120 | 32,367,400 | 1,328,223 | 6,377,312 | 319,637 | 66,414,692 | | | | | 2024
£'000 | | | | |----------------------------------------------------------------------------|------------|------------|---------------|-----------|---------|------------| | Deposits by banks | - | - | - | - | - | - | | Trading portfolio financial liabilities | 3,465,298 | - | - | - | - | 3,465,298 | | Repurchase agreements | 2,167,229 | 31,117,518 | 476,636 | 124,003 | - | 33,885,386 | | Cash collateral on securities
lent | 6,403 | 12,749 | 84,333 | - | - | 103,485 | | Cash collateral received from
derivatives counterparties and
brokers | 5,180,436 | - | - | - | - | 5,180,436 | | Derivatives | 16,286,962 | - | - | - | - | 16,286,962 | | Financial liabilities designated at fair
value | - | 539,746 | 680,836 | 2,721,806 | 125,820 | 4,068,208 | | Financial liabilities at amortised cost | - | 636,115 | 28,701 | 2,744,327 | 610,300 | 4,019,443 | | * Other liabilities (excl. lease
liability) | 125,241 | - | 18,768 | 34,720 | 1,149 | 179,878 | | Lease liability | - | 1,348 | 3,742 | 18,465 | 807 | 24,362 | | | 27,231,569 | 32,307,476 | 1,293,016 | 5,643,321 | 738,076 | 67,213,458 | \*2024 figures have been restated to represent financial liability values. Previously non-financial amounts were also included. The Company holds liquid assets comprising cash and cash equivalents and investment securities for which there is an active and liquid market. These assets can be readily sold to meet liquidity requirements. Financial liabilities designated at fair value include certain note issuances with structured payment profiles. The notes are issued across a range of currencies and interest rate profiles, with the most prevalent being JPY floating rate notes. The Company issues these notes to raise term funding and satisfy investor demand and carries them at fair value through profit and loss. Some of the notes may be redeemed prior to maturity subject to certain knock-out events, at the option of the issuer or holder of the debt. These factors are contractually specified at the point of issuance. ![](_page_70_Picture_8.jpeg) {71}------------------------------------------------ #### **33 Offsetting financial assets and financial liabilities** In accordance with IAS 32 Financial Instruments: Presentation, the Company reports financial assets and financial liabilities on a net basis on the statement of financial position only if there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on: - All financial assets and liabilities that are reported net on the statement of financial position; and - All derivative financial instruments, reverse repurchase and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting. The table identifies the amounts that have been offset in the statement of financial position and also those amounts that are covered by enforceable netting arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of IAS 32 described above. The net amounts presented in the following table are not intended to represent the Company's actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements. | | | | Amounts subject to enforceable netting arrangements | | | | | | | |--------------------------------------------------------|---------------------------|----------------------------------|-----------------------------------------------------|---------------------------|-----------------------------|----------------------------------|------------------------|-------------------------------|-------------------------| | | | Effects of offsetting on balance | | | Related amounts not offset | | Exposure | | | | | | | Net
amounts | Financial | | | | Not
subject to
enforce- | Balance | | | Gross
amounts
£'000 | offset
£'000 | Amounts on balance
sheet
£'000 | instru-
ments
£'000 | Cash
collateral
£'000 | Financial
collateral
£'000 | Net
amount
£'000 | able
netting
£'000 | sheet
total
£'000 | | As at 31 December 2025 | | | | | | | | | | | Derivative financial assets | 14,139,535 | | 14,139,535 10,348,623 | | 2,265,341 | 67,281 | 1,458,290 | | 3,377,662 17,517,197 | | Reverse repurchase
agreements | 28,785,963 7,945,049 | | 20.840.914 | 586,271 | | - 20.117.402 | 137,242 | | 831,677 21,672,591 | | Cash collateral on securities
borrowed | 2,254,514 | | 2,254,514 | | | 2,222,617 | 31,897 | | - 2,254,514 | | Other Secured Financing | 38,683 | | 38,683 | | | 38,683 | | | 38,683 | | Total Assets | 45,218,695 | 7,945,049 | | 37,273,646 10,934,894 | | 2,265,341 22,445,983 | 1,627,428 | | 4,209,339 41,482,985 | | Derivative financial liabilities | 13,048,834 | | | 13,048,834 10,348,623 | 1,599,198 | 290,675 | 810,338 | | 3,359,672 16,408,506 | | Repurchase agreements
Cash collateral on securities | 33,895,058 | 7,945,049 | 25,950,010 | 586,271 | | 6,646 25,249,799 | 107,294 | | 158,349 26,108,359 | | lent | 1,108 | | 1,108 | | | 208 | 900 | | 1,108 | | Total Liabilities | 46,945,000 | 7,945,049 | | 38,999,952 10,934,894 | | 1,605,844 25,540,682 | 918,532 | | 3,518,021 42,517,973 | | As at 31 December 2024 | | | | | | | | | | | Derivative financial assets | 14,420,277 | | | 14,420,277 11,216,500 | 1,222,588 | 75,122 | 1,906,067 | | 1,794,361 16,214,638 | | Reverse repurchase
agreements | 36,415,421 7,993,417 | | 28,422,004 | 1,348,525 | | - 27,043,462 | 30.017 | | 1,328,078 29,750,082 | | Cash collateral on securities
borrowed | 2,927,360 | 97,449 | 2,829,911 | | | 2,790,755 | 39,156 | | - 2,829,911 | | Other Secured Financing | 64,303 | | 64,303 | | | 64,303 | | | 64,303 | | Total Assets | 53,827,361 | 8,090,866 | | 45,736,495 12,565,025 | | 1,222,588 29,973,642 | 1,975,240 | | 3,122,439 48,858,934 | | Derivative financial liabilities | 14,527,443 | | | 14,527,443 11,216,500 | 2,045,107 | 246,755 | 1,019,081 | | 1,759,519 16,286,962 | | Repurchase agreements | 33,913,910 | 7,993,417 | 25,920,493 | 1,348,525 | | 13,973 24,462,655 | 95,340 | | 39,688 25,960,181 | | Cash collateral on securities
lent | 103,852 | 97,449 | 6,403 | | | 6,396 | 7 | | 6,403 | | Total Liabilities | 48,545,205 | 8,090,866 | 40,454,339 | 12,565,025 | | 2,059,080 24,715,806 | 1,114,428 | | 1,799,207 42,253,546 | ![](_page_71_Picture_8.jpeg) {72}------------------------------------------------ # **34 Related party transactions** Balances and transactions between the Company and related parties are disclosed below. | | Parent
Company | Subsidiary | MUFG | Other
related
parties | Total | |-------------------|-------------------|------------|------------|-----------------------------|------------| | | £'000 | £'000 | £'000 | £'000 | £'000 | | | | | 2025 | | | | Income | 27,958 | 13,677 | 127,158 | 2,101 | 170,894 | | Expenses | 105,235 | 36,014 | 59,830 | 1,747 | 202,826 | | Total assets | 4,197,725 | 440,841 | 5,181,659 | 408,775 | 10,229,000 | | Total liabilities | 12,440,494 | 619,878 | 1,163,079 | 329,505 | 14,552,956 | | | | | | | | | | | | 2024 | | | | Income | - | 49,497 | 191,395 | 5,272 | 246,164 | | Expenses | 43,545 | 91,291 | 66,138 | 11,419 | 212,393 | | Total assets | 7,536 | 899,685 | 11,259,524 | 588,874 | 12,755,619 | | Total liabilities | 3,728,167 | 1,681,215 | 8,267,545 | 532,653 | 14,209,580 | All related parties are wholly owned subsidiaries of MUFG, with the exception of Morgan Stanley Group companies, which are presented as 'Other Related Parties' due to their affiliate status with MUFG. Transactions executed with related parties are entered into at market price on an arm's length basis considered to be materially in line with Japanese funding rates for similar institutions. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. Income includes fee allocations from the Equity and Structuring businesses which relate to the sourcing of Group orders and income for interregional note issuances, respectively. Expenses include interest for subordinated loans and management fees paid to the parent company as well as fees paid for a keepwell and guarantees in place between MUS(EMEA), MUFG Bank and MUFG. The keepwell guarantee provided by MUFG Bank and MUFG covers unsecured liabilities external to the MUFG Group up to an \$8 billion limit. Total assets include the credit derivative, which is a MUFG Bank guarantee, referred to in Note 12. There are no material related party transactions with key management, and persons connected with them, other than remuneration disclosed in Note 26. # **35 Group information** MUFG Securities EMEA plc is a private company, limited by shares, incorporated in England and Wales under the Companies Act 2006. The principal activities of the Company and the nature of the Company's operations are set out in the Strategic Report on pages 3 to 19. The address of the registered office is: MUFG Securities EMEA plc 25 Ropemaker Street London EC2Y 9AJ United Kingdom The address of the wholly owned subsidiary is: MUFG Securities (Europe) N.V. World Trade Center, Tower One, 11th floor Zuidplein 98 1077 XV Amsterdam The Netherlands The Company's immediate parent undertaking is MUFG Bank, Ltd. a company registered in Japan. The Company's ultimate parent company and ultimate controlling party is Mitsubishi UFJ Financial Group, incorporated in Japan. The audited consolidated financial statements of MUFG Bank, Ltd. are made available to the public annually and may be obtained from its registered office at: MUFG Bank, Ltd. 1-4-5 Marunouchi Chiyoda-ku Tokyo 100-8388 Japan ![](_page_72_Picture_15.jpeg) {73}------------------------------------------------ # **36 Country by country reporting** Article 89 of CRD IV requires regulated entities to report on certain tax, financial and statistical data for each country in which they operate. The Company is a qualifying institution under the terms of CRD IV. As the Company has elected to make use of the parent company exemption within IFRS 10, the preceding notes have been prepared on a company only basis, whereas the following disclosure is on a consolidated basis to comply with this directive. Details of the subsidiaries and branches are as follows: | Country | Entity | Nature of activities | |----------------------|----------------------------------------------|----------------------| | | | | | United Kingdom | MUFG Securities (EMEA) plc | Financial services | | United Arab Emirates | MUFG Securities (EMEA) plc (Dubai Branch) | Financial services | | Netherlands | MUFG Securities (Europe) N.V. | Financial services | | France | MUFG Securities (Europe) N.V. (Paris Branch) | Financial services | | | United Arab | | | | |-------------------------------------------|----------------|----------|-------------|---------| | | United Kingdom | Emirates | Netherlands | France | | | | | | | | Average number of employees | 646 | 5 | 17 | 37 | | Turnover (£'000) | 440,903 | 650 | 17,027 | 29,826 | | Profit / (loss) before tax (£'000) | 58,671 | 78 | 1,738 | 5,539 | | Corporation tax paid / (received) (£'000) | 2,000 | 17 | 1,896 | (1,282) | ![](_page_73_Picture_7.jpeg) Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.