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This record contains private information, which has been redacted from public viewing.
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Type:
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Ordinance
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Status:
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Passed
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Title:
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Issuance of Chicago O'Hare International Airport General Airport Senior Lien Revenue (Refunding) Bonds, Series 2016A
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Attachments:
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1. O2016-6083.pdf
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OFFICE OF THE MAYOR CITY OF CHICAGO RAHM EMANUEL mayor July 20, 2016 TO THE HONORABLE, THE CITY COUNCIL OF THE CITY OF CHICAGO Ladies and Gentlemen: At the request of the Chief Financial Officer and the Commissioner of Aviation, I transmit herewith an ordinance authorizing an issuance of General Airport Revenue Bonds. Your favorable consideration of this ordinance will be appreciated. Mayor Very truly yours, ORDINANCE WHEREAS, the City of Chicago (the "City") is a duly constituted and existing municipality within the meaning of Section 1 of Article VII of the 1970 Constitution of the State of Illinois (the "Constitution") having a population in excess of 25,000 and is a home rule unit of local government under Section 6(a) of Article VII of the Constitution; and WHEREAS, the City owns and operates an airport known as Chicago O'Hare International Airport (the "Airport"); and WHEREAS, the City has previously issued various series of its Chicago O'Hare International Airport General Airport Revenue Bonds that are currently outstanding (the "Outstanding Senior Lien Bonds"); and WHEREAS, the Outstanding Senior Lien Bonds are "Senior Lien Obligations" secured under the Master Indenture of Trust Securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations dated as of September 1, 2012 between the City and U.S. Bank National Association, as trustee (the "Senior Lien Trustee"), as supplemented (the "Senior Lien Master Indenture"); and WHEREAS, the City has previously authorized a commercial paper program providing for the issuance from time to time of commercial paper notes for Airport purposes (the "Commercial Paper Notes"); and WHEREAS, the City has previously authorized a line of credit program providing for the issuance from time to time of credit agreement notes for Airport purposes (the "Credit Agreement Notes"); and WHEREAS, the Outstanding Senior Lien Bonds, any Commercial Paper Notes and any Credit Agreement Notes currently or later outstanding are referred to collectively herein as the "Outstanding Airport Obligations"; and WHEREAS, the City has determined to authorize the issuance of its Chicago O'Hare International Airport General Airport Senior Lien Revenue Bonds (the "2016 Senior Lien Bonds") pursuant to the Senior Lien Master Indenture, in one or more series, for the purposes of (i) funding the cost of certain capital projects for the Airport, including, without limitation, capital projects included in the O'Hare Capital Improvement Program or in the O'Hare Modernization Program, which constitute Airport Projects under the Senior Lien Master Indenture and capitalized interest (the "Airport Projects") and (ii) the refunding of any and all Outstanding Airport Obligations; and WHEREAS, the City proposes to issue and sell 2016 Senior Lien Bonds in the manner hereinafter authorized, in one or more series, in an aggregate principal amount not to exceed $3,000,000,000; now therefore Be ll Ordained by ihe Cily Council of the City ofChicago: PART A ARTICLE I AUTHORIZATION, FINDINGS, DETERMINATIONS AND APPROVAL OF DOCUMENTS Section 1.1. Authorization. The above recitals are incorporated in this Ordinance. This Ordinance is adopted pursuant to Section 6(a) of Article VII of the Constitution. This Ordinance authorizes the issuance of the 2016 Senior Lien Bonds as follows: (i) this Part A authorizes the 2016 financing plan, (ii) Part B hereof authorizes the issuance, from time to time, of all or a portion of the 2016 Senior Lien Bonds, in one or more series, in such principal amounts and with such terms and provisions as set forth therein and in the Senior Lien Master Indenture, and the related Supplemental Indentures therein approved; and (iii) Part C hereof provides for the enactment of this Ordinance. Section 1.2. Findings and Determinations. This City Council hereby finds and determines as follows: that the issuance of the 2016 Senior Lien Bonds and the refunding of the Outstanding Airport Obligations and any other bonds, notes or other obligations issued by the City to finance or refinance any Airport Project will result in debt service savings or provide other benefits to the Airport; that the Airport Projects to be financed by the City with the proceeds of the 2016 Senior Lien Bonds are necessary and essential to the efficient operation of the Airport; that the City's ability to issue 2016 Senior Lien Bonds from time to time without further action by this City Council at various times, in various principal amounts and with various interest rates and interest rate mechanisms, maturities, redemption provisions and other terms will enhance the City's opportunities to obtain financing for the Airport upon the most favorable terms available; that from time to time it is desirable to refund (i) outstanding airport revenue bonds and notes of the City (including bonds and notes payable from passenger facility charges or special facility revenues) and other payment obligations related thereto (the "Outstanding Obligations") and (ii) future issues of Airport revenue bonds and notes of the City (including bonds and notes payable from passenger facility charges or special facility revenues) as may be outstanding from time to time, and other payment obligations related thereto (the "Future Outstanding Obligations"); that the delegations of authority that are contained in this Ordinance are necessary and desirable because this City Council cannot itself as advantageously, expeditiously or conveniently exercise such authority and make such specific determinations. Thus, authority is granted to the Mayor, the* Chief Financial Officer appointed by the Mayor or the City -?. Comptroller (the "Authorized Officer" as referred to herein being either the Chief Financial Officer or the City Comptroller) to determine to sell one or more series of 2016 Senior Lien Bonds, at one or more times, as and to the extent such officers determine that such sale or sales is desirable and in the best financial interest ofthe City and the Airport. Section 1.3. Form of Supplemental Indenture. There have been presented to this City Council the form of the Fifty-Second Supplemental Indenture Securing Chicago O'Hare International Airport General Airport Senior Lien Revenue Bonds, Series 2016A (attached hereto as Exhibit A). Section 1.4. Title. This Ordinance may hereafter be cited as the "2016 O'Hare Financing Ordinance." PART B ARTICLE I AUTHORITY AND DEFINITIONS Section 1.1. Authority for Part B. This Part B is authorized pursuant to the Senior Lien Master Indenture (as hereinafter defined). Section 1.2. Definitions. Except as provided in this Section, all defined terms contained in this Part B shall have the same meanings, respectively, as such defined terms are given in the Senior Lien Master Indenture. As used in this Part B, unless the context shall otherwise require, the following words and terms shall have the following respective meanings: "Authorized Officer" is defined in Section 1.2(e) of Part A. "Fifty-Second Supplemental Indenture" means the Fifty-Second Supplemental Indenture Securing Chicago O'Hare International Airport General Airport Senior Lien Revenue Bonds from the City to the Senior Lien Trustee relating to the initial series of 2016 Senior Lien Bonds. "Senior Lien Master Indenture" means the Master Indenture of Trust Securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations, dated as of September 1, 2012 from the City to the Senior Lien Trustee, as the same from time to time may be amended or supplemented by Supplemental Indentures executed and delivered in accordance with the provisions thereof. "Senior Lien Trustee" means U.S. Bank National Association, and its successor in trust, as trustee under the Senior Lien Master Indenture and as Trustee under any Supplemental Indenture. -3- "Supplemental Indenture" means a supplemental indenture authorizing a series of 2016 Senior Lien Bonds, substantially in the form ofthe Fifty-Second Supplemental Indenture. "2016 Senior Lien Bonds" means the 2016 Senior Lien Bonds authorized by Section 2.1 of this Part B. ARTICLE II AUTHORIZATION AND DETAILS OF 2016 SENIOR LIEN BONDS Section 2.1. Authorization of 2016 Senior Lien Bonds. $3,000,000,000 aggregate principal amount of 2016 Senior Lien Bonds are hereby authorized to be issued as Senior Lien Obligations pursuant to the Senior Lien Master Indenture and one or more Supplemental Indentures and for the purposes specified in Section 2.2 of this PartB. The 2016 Senior Lien Bonds may be issued bearing interest at a fixed interest rate or rates as more fully set forth in the related Supplemental Indenture. Any 2016 Senior Lien Bonds may be issued as current interest bonds, as capital appreciation bonds or as capital appreciation bonds that convert to current interest bonds at a future date after their issuance. The 2016 Senior Lien Bonds shall mature not later than January 1, 2057, and shall bear interest from their date, or from the most recent date to which interest has been paid or duly provided for, until the City's obligation with respect to the payment of the principal amount thereof shall be discharged, payable as provided in the related Supplemental Indenture at a rate or rates not in excess of 10% per annum. Each series of 2016 Senior Lien Bonds may be subject to mandatory and optional redemption (including mandatory redemption pursuant to the application of Sinking Fund Payments), upon the terms and conditions set forth in the Senior Lien Master Indenture and the related Supplemental Indenture. The redemption price may be based upon a formula designed to compensate the Owner ofthe 2016 Senior Lien Bonds to be redeemed based upon prevailing market conditions on the date fixed for redemption, commonly known as a "make-whole" redemption price (the "Make-Whole Redemption Price"). At the time of sale of the 2016 Senior Lien Bonds, an Authorized Officer shall determine the provisions of the formula to be used to establish any Make-Whole Redemption Price, which may vary depending on whether the 2016 Senior Lien Bonds are issued on a taxable or tax-exempt basis. An Authorized Officer shall confirm and transmit the applicable Make-Whole Redemption Price on such dates and to such parties as shall be necessary to effectuate such redemption. The 2016 Senior Lien Bonds shall be entitled "Chicago O'Hare International Airport General Airport Senior Lien Revenue Bonds" or "Chicago O'Hare International Airport General Airport Senior Lien Revenue Refunding Bonds," as appropriate. The 2016 Senior Lien Bonds may be issued in one or more separate series, appropriately designated to indicate the order of their issuance. Each 2016 Senior Lien Bond shall be issued in fully registered form and in the denominations set forth in the related Supplemental Indenture; and shall be dated and numbered and further designated and identified as provided in the Senior Lien Master Indenture and the related Supplemental Indenture. -4- Principal of and premium, if any, on the 2016 Senior Lien Bonds shall be payable at the principal corporate trust office of the Senior Lien Trustee or any Paying Agent as provided in the Senior Lien Master Indenture and related Supplemental Indenture. Payment of interest on the 2016 Senior Lien Bonds shall be made to the registered owner thereof and shall be paid by check or draft ofthe Senior Lien Trustee mailed to the registered owner at his or her address as it appears on the registration books of the City kept by the Senior Lien Trustee or at such other address as is furnished to the Senior Lien Trustee in writing by such registered owner, or by wire transfer as further provided in the Senior Lien Master Indenture and related Supplemental Indenture. Subject to the limitations set forth in this Section, authority is hereby delegated to either the Mayor or the Authorized Officer to determine the aggregate principal amount of 2016 Senior Lien Bonds to be issued, the date thereof, the maturities thereof, any provisions for optional redemption thereof, the schedule of Sinking Fund Payments, if any, to be applied to the mandatory redemption thereof (which mandatory redemption shall be at a Redemption Price equal to the principal amount of each 2016 Senior Lien Bond to be redeemed, without premium, plus accrued interest), the rate or rates of interest payable thereon or method for determining such rate or rates and the first interest payment date thereof. Any optional redemption shall be at Redemption Prices that may include a redemption premium for each 2016 Senior Lien Bond to be redeemed expressed as a percentage, not exceeding the greater of twenty percent (20%) of the principal amount or twenty percent (20%) ofthe amortized value as ofthe redemption date (or in the case of capital appreciation bonds, the accreted value as of the redemption date) ofthe 2016 Senior Lien Bond to be redeemed, or as a formula designed to compensate the owner ofthe 2016 Senior Lien Bond to be redeemed based upon prevailing market conditions on the date fixed for such redemption, commonly known as a "make whole" redemption premium. Section 2.2. Purposes. Pursuant to Section 203 of the Senior Lien Master Indenture, the 2016 Senior Lien Bonds are to be issued for the following purposes, as determined by the Authorized Officer at the time of the sale of the 2016 Senior Lien Bonds: the payment, or the reimbursement for the payment, of all or a portion ofthe costs of acquiring, constructing and equipping any Airport Project or Projects; the refunding of any outstanding Airport Obligations (including commercial paper notes and credit agreement notes), Outstanding Obligations and/or Future Outstanding Obligations; the funding of deposits in and the deposit of moneys into the Debt Service Fund, one or more Dedicated Sub-Funds, a program fee account, a debt service reserve account, a capitalized interest account and such other accounts and subaccounts (including capitalized interest accounts for any series of Senior Lien Bonds) as may be provided for in the Senior Lien Master Indenture and the Supplemental Indenture relating to such series; and the payment of the Costs of Issuance ofthe 2016 Senior Lien Bonds. The proceeds of each series of 2016 Senior Lien Bonds shall be applied for the purposes set forth above in the manner and in the amounts specified in a Certificate of an Authorized Officer (as -5- defined in the Senior Lien Master Indenture) delivered in connection with the issuance of such series pursuant to the Senior Lien Master Indenture and the related Supplemental Indenture. Section 2.3. Pledge of Revenues and Other Available Moneys. The 2016 Senior Lien Bonds, together with interest thereon, shall be limited obligations of the City secured by a pledge of the Revenues and by any Other Available Moneys pledged under the Senior Lien Master Indenture and the related Supplemental Indenture, and shall be valid claims of the registered owners thereof only against the funds and assets and other money held by the Senior Lien Trustee with respect thereto and against such Revenues and Other Available Moneys. The 2016 Senior Lien Bonds and the obligation to pay interest thereon do not now and shall never constitute an indebtedness or a loan of credit of the City, or a charge against its general credit or taxing powers, within the meaning of any constitutional or statutory limitation of the State of Illinois. In connection with the issuance of any series of 2016 Senior Lien Bonds secured by a pledge of or otherwise payable from Other Available Moneys, the City shall determine in the related Supplemental Indenture or by a Certificate of an Authorized Officer filed with the Senior Lien Trustee, all of the terms and conditions of such pledge, including the annual payment amount, the lien status thereof and the duration of such pledge. Section 2.4. Approval of Supplemental Indentures. The form of Fifty-Second Supplemental Indenture presented to this meeting is hereby approved in all respects. The Mayor or the Authorized Officer is hereby authorized, with respect to each series of 2016 Senior Lien Bonds, to execute and deliver a Supplemental Indenture in substantially the form ofthe Fifty-Second Supplemental Indenture for and on behalf of the City, and the City Clerk is hereby authorized to attest the same and to affix thereto the corporate seal of the City or a facsimile thereof. Each such Supplemental Indenture shall be substantially in the form of the Fifty-Second Supplemental Indenture, presented lo this meeting and may contain such changes or revisions as shall be approved by the Mayor or the Authorized Officer. The execution and delivery of a Supplemental Indenture shall constitute conclusive evidence of this City Council's approval of the form of such Supplemental Indenture as executed and delivered. Section 2.5. Credit Instruments. The Authorized Officer is hereby authorized to arrange for the provision of (a) one or more Qualified Credit Instruments and (b) one or more Qualified Reserve Account Credit Instruments (as defined in the Fifty-Second Supplemental Indenture) as security for all or a portion of the 2016 Senior Lien Bonds if the Authorized Officer determines that it would be in the best financial interest of the City in the operation of the Airport. Section 2.6. Sale of 2016 Senior Lien Bonds. (a) Subject to the limitations contained in this Ordinance, authority is hereby delegated to the Mayor or the Authorized Officer to sell the 2016 Senior Lien Bonds in one or more series from time to time to one or more underwriters selected by the Authorized Officer pursuant to one or more Contracts of Purchase wilh respect to the 2016 Senior Lien Bonds -6- between the City and such underwriters; provided that the aggregate purchase price of each series of the 2016 Senior Lien Bonds shall not be less than 85% of the principal amount thereof to be issued (less any original issue discount which may be used in the marketing thereof) plus accrued interest thereon from their date to the date of delivery thereof and payment thereof. In addition, one or more of the 2016 Senior Lien Bonds may be issued as bonds the interest on which will be includable in the gross income of the owners thereof for federal income tax purposes under the Code, if determined by the Authorized Officer to be beneficial to the City in the operation of the Airport. The Mayor or the Authorized Officer, with the concurrence of the Chairman of the Committee on Finance of the City Council, is hereby authorized and directed to execute and deliver one or more Contracts of Purchase relating to the 2016 Senior Lien Bonds in substantially the form of the Contracts of Purchase used in connection with the previous sales of airport revenue bonds by the City, together with such changes thereto and modifications thereof as shall be approved by the Mayor or the Authorized Officer, as the case may be, subject to the limitations contained in this Ordinance, the execution and delivery thereof to constitute conclusive evidence of this City Council's approval of such changes and modifications. To evidence the exercise of the authority delegated to the Mayor or the Authorized Officer by this Ordinance, the Mayor or the Authorized Officer, as the case may be, is hereby directed to execute and file with the City Clerk in connection with the sale of 2016 Senior Lien Bonds a certificate setting forth the determinations made pursuant to the authority granted herein, which certificate shall constitute conclusive evidence of the proper exercise by them of such authority. Contemporaneously with the filing of such certificate, the Mayor or the Authorized Officer shall also file with the City Clerk one copy of each Official Statement and executed Contract of Purchase in connection with the 2016 Senior Lien Bonds. Each filing shall be made as soon as practicable subsequent to the execution of the Contract of Purchase. The City Clerk shall direct copies of such filings to the City Council. The Authorized Officer is hereby authorized to cause to be prepared the form or forms of Preliminary Official Statement describing the 2016 Senior Lien Bonds. Each Preliminary Official Statement (or applicable parts thereof) shall be in substantially the form of the Official Statements used in connection with previous sales of airport revenue bonds by the City, together with such changes thereto and modifications thereof as shall be approved by the Authorized Officer. The distribution of each Preliminary Official Statement to prospective purchasers and the use thereof by the underwriters in connection with the offering ofthe 2016 Senior Lien Bonds are hereby authorized and approved. The Mayor or the Authorized Officer is hereby authorized to permit the distribution of a final Official Statement, in substantially the form of each Preliminary Official Statement, with such changes, omissions, insertions and revisions thereto and completions thereof as the Mayor or the Authorized Officer shall deem advisable, and the Mayor or the Authorized Officer is authorized to execute and deliver each such final Official Statement to the underwriters in the name and on behalf of the City, the execution of such final official statement to constitute conclusive evidence of this City Council's approval of such changes and completions. -7- If determined by the Authorized Officer to be in the best financial interest of the City in the operation of the Airport, the Authorized Officer is authorized to procure one or more municipal bond insurance policies covering all or a portion ofthe 2016 Senior Lien Bonds. The Authorized Officer is hereby authorized to execute and deliver a Continuing Disclosure Undertaking (the "Continuing Disclosure Undertaking") evidencing the City's agreement to comply with the requirements of Section (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 in a form approved by the Corporation Counsel. Upon its execution and delivery on behalf of the City as herein provided, the Continuing Disclosure Undertaking will be binding on the City, and the officers, employees and agents of the City are hereby authorized to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Continuing Disclosure Undertaking as executed. The Authorized Officer is hereby further authorized to amend the Continuing Disclosure Undertaking in accordance with its terms from time to time following its execution and delivery as said Authorized Officer shall deem necessary. Notwithstanding any other provision of this Ordinance, the sole remedies for any failure by the City to comply with the Continuing Disclosure Undertaking shall be the ability of the beneficial owner of any 2016 Senior Lien Bond to seek mandamus or specific performance by court order to cause the City to comply with its obligations under the Continuing Disclosure Undertaking. Section 2.7. Execution and Delivery of 2016 Senior Lien Bonds. Pursuant to the Senior Lien Master Indenture, the Mayor shall execute the 2016 Senior Lien Bonds on behalf of the City, by manual or facsimile signature, and the corporate seal of the City or a facsimile thereof shall be affixed, imprinted, engraved or otherwise reproduced on the 2016 Senior Lien Bonds and they shall be attested by the manual or facsimile signature of the City Clerk. The 2016 Senior Lien Bonds shall, upon such execution on behalf of the City, be delivered to the Senior Lien Trustee, for authentication and thereupon shall be authenticated by the Senior Lien Trustee, and shall be delivered pursuant to written order of the City authorizing and directing the delivery of the 2016 Senior Lien Bonds to or upon the order of the underwriters pursuant to the applicable Contract of Purchase. Section 2.8. Redemption, Purchase and Tender. The Mayor or the Authorized Officer is authorized to direct that the Outstanding Airport Obligations to be redeemed be called for redemption prior to maturity (or purchased in lieu of redemption), to select the particular maturity or maturities of the Outstanding Airport Obligations to be redeemed and to select the redemption date or dates or purchase date or dates for the Outstanding Airport Obligations to be redeemed or purchased. The Mayor or the Authorized Officer is authorized (a) to tender for Outstanding Airport Obligations by direct tender or by open market tender, at such tender prices and on such tender payment dates, as shall be determined by the Mayor or the Authorized Officer and (b) on behalf of the City to enter into such agreements with bondholders and financial institutions and otherwise do, or cause to be done, all things necessary or desirable to accomplish the redemption, purchase or tender for purchase of Outstanding Airport Obligations. Section 2.9. Escrow Deposit Agreements. To provide for the payment and retirement of Outstanding Obligations and Future Outstanding Obligations, the Mayor or the Authorized Officer ofthe City is hereby authorized to execute and deliver for and on behalf of the City one -8- or more Escrow Deposit Agreements in substantially the form of escrow deposit agreements previously used for such purpose by the City, together with such changes thereto and modifications thereof as shall be approved by the Mayor or the Authorized Officer, as the case may be, the execution and delivery thereof to constitute conclusive evidence of this City Council's approval of such changes and modifications. Section 2.10. Tax Directives. The City covenants to take any action required by the provisions of Section 148(f) ofthe Code in order to assure compliance with Section 412 ofthe Senior Lien Master Indenture. Nothing contained in this Ordinance shall limit the ability ofthe City to issue a portion of the 2016 Senior Lien Bonds the interest on which will be includable in the gross income of the owners thereof for Federal income tax purposes under the Code, in each case if determined by the Authorized Officer to be in the best financial interest of the City in the operation of the Airport. Section 2.11. Public Approval. The actions of the Committee on Finance of the City Council of the City with respect to the publication of notice for and the holding of a public hearing in connection with the 2016 Senior Lien Bonds are hereby ratified and confirmed in all respects. The adoption of this Ordinance shall constitute the public approval of the 2016 Senior Lien Bonds for purposes of Section 147(f) of the Code. Section 2.12. Debt Service Reserve Funds. The Authorized Officer is hereby authorized to take any or all of the following actions with respect to debt service reserve funds, provided that such action or actions shall not constitute a violation of any covenant made in the Senior Lien Master Indenture, or in any supplemental indenture: (a) apply 2016 Senior Lien Bond proceeds to the funding of any prior debt service reserve fund, (b) transfer moneys among debt service reserve funds, (c) deposit other moneys of the City to any debt service reserve fund, and (d) apply for Airport purposes moneys released from debt service reserve funds upon the redemption or defeasance of bonds. Section 2.13. Approval of 2010 Amendment. By the purchase of the 2016 Senior Lien Bonds, purchasers of such 2016 Senior Lien Bonds agree, for themselves and any successor Owners, to the provisions of any one or more Senior Lien Master Indenture amendments executed and delivered pursuant to the authorization set forth in Part B, Section 2.5(g) of that certain bond ordinance which was adopted by the City Council of the City on November 18, 2009, relating to bond financing for the Airport, including, but not limited to, the 2010 Amendment. Section 2.14. Performance Provisions. The Mayor, the Commissioner of Aviation, the Authorized Officer and the City Clerk for and on behalf of the City shall be, and each of them hereby is, authorized and directed to do any and all things necessary to effect the performance of all obligations of the City under and pursuant to this Ordinance, the Senior Lien Master Indenture and any Supplemental Indenture, and the performance of all other acts of whatever nature necessary to effect and carry out the authority conferred by this Ordinance, the Senior Lien Master Indenture and any Supplemental Indenture, including but not limited to, the exercise following the delivery date of any 2016 Senior Lien Bonds of any power or authority delegated to such official of the City under this Ordinance with respect to the 2016 Senior Lien Bonds upon the initial issuance thereof, but subject to any limitations on or restrictions of such power or -9- authority as herein set forth. The Mayor, the Commissioner of Aviation, the Authorized Officer, the City Clerk and other officers, agents and employees of the City are hereby further authorized, empowered and directed for and on behalf of the City, to execute and deliver all papers, documents, certificates and other instruments that may be required to carry out the authority conferred by this Ordinance, the Senior Lien Master Indenture and any Supplemental Indenture or to evidence said authority. Section 2.15. Proxies. The Mayor and the Authorized Officer may each designate another to act as their respective proxy and to affix their respective signatures to, in the case of the Mayor, each 2016 Senior Lien Bond, whether in temporary or definitive form, and to any other instrument, certificate or document required to be signed by the Mayor or the Authorized Officer, pursuant to this Ordinance and the Senior Lien Master Indenture. In each case, each shall send to the City Council written notice of the person so designated by each, such notice stating the name of the person so selected and identifying the instruments, certificates and documents which such person shall be authorized to sign as proxy for the Mayor and the Authorized Officer, respectively. A written signature of the Mayor or the Authorized Officer, respectively, executed by the person so designated underneath, shall be attached to each notice. Each notice, with signatures attached, shall be recorded in the Journal of the Proceedings of the City Council and filed with the City Clerk. When the signature of the Mayor is placed on an instrument, certificate or document at the direction of the Mayor in the specified manner, the same, in all respects, shall be as binding on the City as if signed by the Mayor in person. When the signature of the Authorized Officer is so affixed to an instrument, certificate or document at the direction of the Authorized Officer, the same, in all respects, shall be as binding on the City as if signed by the Authorized Officer in person. PART C ARTICLE I ENACTMENT Section 1.1. Severability. It is the intention of this City Council that, if any Article, Section, paragraph, clause or provision of this Ordinance shall be ruled by any court of competent jurisdiction to be invalid, the invalidity of such Article, Section, paragraph, clause or provision shall not affect any of the remaining provisions hereof. Section 1.2. Prior Inconsistent Ordinances. If any provision of this Ordinance is in conflict with or inconsistent with any ordinances or resolutions or parts of ordinances or resolutions or the proceedings of the City in effect as of the date hereof the provisions of this Ordinance shall supersede any conflicting or inconsistent provision to the extent of such conflict or inconsistency. No provision of the Municipal Code or violation of any provision of the Municipal Code shall be deemed to impair the validity of this Ordinance or the instruments authorized by this Ordinance, or to impair the security for or payment of the instruments authorized by this Ordinance; provided, further, however, that the foregoing shall not be deemed to affect the availability of any other remedy or penalty for any violation of any provision ofthe Municipal Code. -10- Section 1.3. Effective Date. This Ordinance shall be in full force and effect immediately upon its passage and approval by the Mayor of the City. -11- Exhibit A FIFTY-SECOND SUPPLEMENTAL INDENTURE From City of Chicago To U.S. Bank National Association, as Trustee Securing Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bonds, Series 2016A Dated as of 1,2016 Supplementing a Master Indenture of Trust Securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations dated as of September 1, 2012 between the City of Chicago and U.S. Bank National Association. TABLE OF CONTENTS Page ARTICLE I Definitions 10 ARTICLE II The Bonds 13 Section 2.01. Authorized Amount of Bonds 13 Section 2.02. Issuance of Bonds; Denominations; Numbers 13 Section 2.03. Payment on the Bonds 14 Section 2.04. Execution; Limited Obligations 15 Section 2.05. Authentication 15 Section 2.06. Form of Bonds; Temporary Bonds 16 Section 2.07. Delivery of Bonds 16 Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds 17 Section 2.09. Registration and Exchange of Bonds; Persons Treated as Owners 17 Section 2.10. Book-Entry Provisions 18 ARTICLE III Redemption of Bonds Before Maturity 19 Section 3.01. Redemption Dates and Prices 19 Section 3.02. Notice of Redemption 20 Section 3.03. Deposit of Funds 21 Section 3.04. Partial Redemption of Bonds 21 Section 3.05. Selection of Bonds for Redemption 21 ARTICLE IV Revenues and Funds 21 Section 4.01. Source of Payment of Bonds 21 Section 4.02. Creation of Dedicated Sub-Fund and Accounts in the Debt Service Fund. 21 Section 4.03. Application of Bond Proceeds and Available Funds 22 Section 4.04. Deposits into 2016A Dedicated Sub-Fund and Accounts Therein 23 Section 4.05. Use of Moneys in Principal and Interest Account and the Debt Service Reserve Account for Payment of Bonds 23 Section 4.06. Use of Moneys in the Costs of Issuance Account and the Program Fee Account 24 Section 4.07. Tax Covenants 24 Section 4.08. Nonpresentment of Bonds 24 Section 4.09. Moneys to Be Held in Trust 25 Section 4.10. Debt Service Reserve Account 25 Section 4.12. Deposits into Project Account 25 Section 4.13. Costs of 2016A Airport Projects 25 Section 4.14. Disbursements from Project Account 27 Section 4.15. Progress Reports and Completion Certificate 28 Section 4.16. Permitted Transfers 28 (i) ARTICLE V Investment of Moneys 29 Section 5.01. Investment of Moneys 29 Section 5.02. Investment Income 29 ARTICLE VI Discharge of Lien 29 Section 6.01. Defeasance 29 ARTICLE VII Concerning the Trustee 29 Section 7.01. Acceptance of Trusts 29 Section 7.02. Dealing in Bonds 30 ARTICLE VIII Supplemental Indentures 30 Section 8.01. Supplements or Amendments to Fifty-Second Supplemental Indenture.. 30 ARTICLE IX Indenture Amendment 30 Section 9.01. Written Consent to Indenture Amendment 30 ARTICLE X Insurer Provisions 30 Section 10.01. Insurer Provisions 30 ARTICLE XI Miscellaneous 32 Section 11.01. Fifty-Second Supplemental Indenture as Part of Indenture 32 Section 11.02. Severability 32 Section 11.03. Payments Due on Saturdays, Sundays and Holidays 32 Section 11.04. Counterparts 33 Section 11.05. Rules of Interpretation 33 Section 11.06. Captions 33 Section 11.07. Additional Notices 33 (ii) FIFTY-SECOND SUPPLEMENTAL INDENTURE This Fifty-Second Supplemental Indenture, made and entered into as of 1, 2016, from the City ofChicago (the "City"), a municipal corporation and home rule unit of local government duly organized and existing under the Constitution and laws of the State of Illinois, to U.S. Bank National Association (the "Trustee"), a national banking association duly organized, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the United States of America, as Trustee. WITNESSETH: Whereas, the City is a home rule unit of local government, duly organized and existing under the laws of the State of Illinois, and in accordance with the provisions of Section 6(a) of Article VII of the 1970 Constitution of the State of Illinois is authorized to own and operate commercial and general aviation facilities; and Whereas, the City currently owns and operates an airport known as Chicago O'Hare International Airport; and Whereas, the City has entered into a Master Indenture of Trust securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations, dated as of September 1, 2012, with the Trustee (the "Indenture") which authorizes the issuance of Senior Lien Obligations (as therein defined) in one or more Series pursuant to one or more Supplemental Indentures and the incurrence by the City of Section 208 Obligations (as therein defined) and Section 209 Obligations (as therein defined); and [WHEREAS, in order to refund prior to maturity or pay at maturity certain Prior Airport Obligations (as hereinafter defined), the City has authorized the issuance and sale of $ ,000 aggregate principal amount of Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bonds, Series 2016A (the "Bonds") pursuant to the Indenture and this Fifty-Second Supplemental Indenture; and] [Whereas, in order to provide funds for the financing of the payment, or the reimbursement for the payment, of the costs of one or more Airport Projects, as defined in the Indenture, including the 2016A Airport Projects (as hereinafter defined), the City has authorized the issuance and sale of $ aggregate principal amount of Chicago O'Hare International Airport General Airport Senior Lien Revenue Bonds, Series 2016A (the "Bonds") pursuant to the Indenture and this Fifty-Second Supplemental Indenture; and] Whereas, the Bonds and the Trustee's Certificate of Authentication to be endorsed on such Bonds, are to be in substantially the following form with necessary and appropriate variations, omissions and insertions as permitted or required by the Indenture or this Fifty-Second Supplemental Indenture, to wit: [Form of Bond] No. R- $ UNITED STATES OF AMERICA STATE OF ILLINOIS CITY OF CHICAGO Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bond, Series 2016A Interest Rate Maturity Date Dated Date Cusip % January 1,20 ,2016 Registered Owner: Cede & Co. Principal Amount: City of Chicago (the "Cily"), a municipal corporation and home rule unit of local government duly organized and existing under the laws of the State of Illinois, for value received, hereby promises to pay (but only out of the sources hereinafter provided) to the Registered Owner identified above, or registered assigns, on the maturity date specified above, unless this Bond shall have been called for redemption and payment of the redemption price shall have been duly made or provided for, upon presentation and surrender hereof, the principal sum specified above and to pay (but only out of the sources hereinafter provided) interest on the balance of said principal sum from time to time remaining unpaid from and including the date hereof or from and including the most recent Interest Payment Date (as defined in the hereinafter defined Indenture) with respect to which interest has been paid or duly provided for, until payment of said principal sum has been made or duly provided for, at the interest rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on 1, 201_ and semiannually thereafter on each January 1 and July 1, and to pay interest on overdue principal and, to the extent permitted by law, on overdue premium, if any, and interest at the rate due on this Bond. Principal of, premium, if any, and interest on this Bond shall be payable in lawful money of the United States of America at the corporate trust office in Chicago, Illinois of U.S. Bank National Association, Chicago, Illinois, as trustee, or its successor in trust (the "Trustee"); provided, however, payment ofthe interest on any Interest Payment Date (as defined in the hereinafter defined Indenture) shall be (i) made to the registered owner hereof as of the close of business on the applicable Record Date (as defined in the hereinafter defined Indenture) with respect to such Interest Payment Date and shall be paid by check or draft mailed to such registered owner hereof at the address of such registered owner as it appears on. the registration books of the City maintained by the Trustee as Bond Registrar or at such other address as is furnished in writing by such registered owner to the Trustee as Bond Registrar or (ii) made by wire transfer to such registered owner as of the close of business on such Record Date upon written notice of such wire transfer address in the continental United States by such registered owner to the Bond Registrar given prior to such Record Date (which notice may provide that it will remain in effect until revoked), provided that each such wire transfer shall be made only with respect to an owner of $1,000,000 or more in aggregate principal amount ofthe Bonds as of the close of business on the Record Date relating to such Interest Payment Date, except, in each case, that if and to the extent that there shall be a default in the payment ofthe interest due on such Interest Payment Date, such defaulted interest shall be paid to the registered owners as provided in the Indenture. So long as this Bond is restricted to being registered in the registration books of the City in the name of a Securities Depository (as defined in the Indenture), the provisions of the Indenture governing Book-Entry Bonds shall govern the payment of the principal of and interest on this Bond. The Bonds are limited obligations of the City and shall not constitute an indebtedness of the City or a loan of credit thereof within the meaning of any constitutional or statutory limitation. Neither the faith and credit nor the taxing power of the City, the State of Illinois or any political subdivision thereof is pledged to the payment of the principal of the Bonds, or the interest or any premium thereon, or other costs incident thereto. The Bonds are payable solely from the revenues in the Indenture (as hereinafter defined) pledged to such payment, and no owner or owners of the Bonds shall ever have the right to compel any exercise of the taxing power of the City, the State of Illinois or any political subdivision thereof. Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as if set forth at this place. All capitalized terms used in this Bond shall have the meanings assigned in the Indenture unless otherwise defined herein. It is Hereby Certified, Recited and Declared that all acts and conditions required to be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond have been performed in due time, form and manner as required by law, and that the issuance of this Bond and the series of which it forms a part does not exceed or violate any constitutional or statutory limitation. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture unless and until the certificate of authentication hereon shall have been duly executed by the Trustee. In Witness Whereof, the City of Chicago has caused this Bond to be executed in its name by the manual or facsimile signature of its Mayor and the manual or facsimile of its corporate seal to be printed hereon and attested by the manual or facsimile signature of its City Clerk. Dated: City of Chicago By: Mayor [SEAL] Attest: By: City Clerk [DTC Legend] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DrC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede Co., has an interest herein. [Form of Trustee's Certificate of Authentication] This Bond is one of the Bonds described in the within-mentioned Indenture. U.S. Bank National Association, as Trustee By: Authorized Signature -4- fForm of Reverse of Bond] This Bond is one of an authorized issue of bonds limited in aggregate principal amount to $ ,000 (the "Bonds") issued pursuant to, under authority of and in full compliance with the Constitution and laws of the State of Illinois, particularly Article VII, Section 6(a) of the 1970 Constitution of the State of Illinois and an ordinance of the City Council of the City, and executed under a Master Indenture of Trust securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations dated as of September 1, 2012, from the City to U.S. Bank National Association, as Trustee, as supplemented by a Fifty-Second Supplemental Indenture securing Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bonds, Series 2016A, dated 1, 2016, from the City to the Trustee (collectively, the "Indenture"), [for the purpose of (i) refunding certain outstanding Prior Airport Obligations (as defined in the Indenture), and (ii) paying costs and expenses incidental thereto and to the issuance of the Bonds] [for the purpose of (i) paying the costs of certain projects for Chicago O'Hare International Airport which constitute Airport Projects under the Indenture, funding the Reserve Requirement (as defined in the Indenture) applicable to the Bonds, and paying costs and expenses incidental thereto and to the issuance of the Bonds]. The Bonds and the interest thereon are payable from Revenues (as defined in the Indenture) pledged to the payment thereof under the Indenture and certain other moneys held by or on behalf ofthe Trustee. Copies of the Indenture are on file at the principal corporate trust office of the Trustee, and reference to the Indenture and any and all supplements thereto and modifications and amendments thereof is made for a description of the pledge and covenants securing the Bonds, the nature, extent and manner of enforcement of such pledge, the rights and remedies of the registered owners of the Bonds, and the limitations on such rights and remedies. The Bonds are issuable only as fully registered Bonds in the authorized denominations described in the Indenture. Bonds may be transferred on the books of registration kept by the Bond Registrar by the owner in person or by his or her duly authorized attorney, upon surrender thereof, together with a written instrument of transfer executed by the owner or his or her duly authorized attorney. Upon surrender for registration of transfer of any Bond with all partial redemptions endorsed thereon at the principal office of the Bond Registrar, the City shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same maturity, series and interest rate, aggregate principal amount and tenor and of any authorized denomination or denominations and bearing numbers not contemporaneously outstanding under the Indenture. Bonds may be exchanged at the principal office of the Bond Registrar for an equal aggregate principal amount of Bonds in the appropriate form and in the same maturity, series and interest rate, aggregate principal amount and tenor and of any authorized denomination or denominations. The City shall execute and the Trustee shall authenticate and deliver Bonds which the Bondholder making the exchange is entitled to receive. Such registration of transfer or exchange of Bonds shall be without charge to the owners of such Bonds, but any taxes or other governmental charges required to be paid with respect to -5- the same shall be paid by the owners of the Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege. The Bond Registrar shall not be required to register for transfer or exchange any undelivered Bond or Bonds after the giving of notice calling such Bond for redemption or partial redemption has been made. The person in whose name any Bond is registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of principal, premium, if any, or interest shall be made only to or upon the order of the registered owner thereof or his duly authorized attorney, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. The Bonds maturing on January 1, 20 are subject to mandatory redemption, in part by lot as provided in the Indenture from mandatory Sinking Fund Payments, on January 1 in each of the years and in the respective principal amounts set forth below, at a redemption price equal to the principal amount thereof to be redeemed: Year Principal Amount 20_ $ ,000 20_ ,000 The Bonds maturing on January 1, 20 are subject to mandatory redemption, in part by lot as provided in the Indenture from mandatory Sinking Fund Payments, on January 1 in each of the years and in the respective principal amounts set forth below, at a redemption price equal to the principal amount thereof to be redeemed: Year Principal Amount 20_ $ ,000 20_ ,000 20_ ,000 If the City redeems Bonds pursuant to optional redemption or purchases Bonds subject to mandatory redemption and cancels the same, then an amount equal to the principal amount of Bonds of such maturity so redeemed or purchased shall be deducted from the Principal Installments as provided for such Bonds of such maturity in such order as the City shall determine. The Bonds maturing on or after January 1, 20 are subject to redemption, at the option ofthe City, on or after January 1, 20 , as a whole or in part at any time, and if in part, in such order of maturity as the City shall determine and within any maturity by lot, at a redemption price equal to the principal amount of each Bond to be redeemed, plus accrued interest to the date ofthe redemption. -6- Notice of any such redemption must be given by the Trustee by first-class mail (or registered mail in the case of registered owners of at least $1,000,000 of Bonds) not less than 30 or more than 60 days prior thereto to the registered owners of the Bonds. Failure to mail any such notice to the registered owner of any Bond or any defect therein shall not affect the validity of the proceedings for such redemption of Bonds. This Bond and all other Bonds ofthe series of which it forms a part are issued pursuant to and in full compliance with the Constitution and laws of the State of Illinois, particularly Article VII, Section 6(a) of the 1970 Constitution of the State of Illinois, and pursuant to an ordinance adopted by the City Council of the City, which ordinance authorizes the execution and delivery of the Indenture. This Bond and the series of which it forms a part are limited obligations of the City payable solely from the amounts pledged therefor under the Indenture. No recourse shall be had for the payment ofthe principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture contained against any past, present or future officer, employee or agent, or member of the City Council of the City, or any successor to the City, as such, either directly or through the City, or any successor to the City, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officer, employee or agent, or member of the City Council, as such, is hereby expressly waived and released as a condition of and in consideration for the execution of the Indenture and the issuance of any of the Bonds. The owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall no longer be secured by or entitled to the benefits of the Indenture, except as provided in the Indenture and for the purposes of registration and exchange of Bonds and of such payment, including a provision that the Bonds shall be deemed to be paid if Federal Obligations, as defined therein, maturing as to principal and interest in such amounts and at such times as to insure the availability of sufficient moneys to pay the principal of, premium, if any, and interest on the Bonds and all necessary and proper fees, compensation and expenses of the Trustee shall have been deposited with the Trustee. Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. -7- [Form of Assignment] The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: Ten Com - as tenants in common Ten Ent - as tenants by the entireties Jt Ten - as joint tenants with right of survivorship and not as tenants in common Unif Gift Min Act-Custodian (Cust) (Minor) under Uniform Gifts to Minors Act (State) Additional abbreviations may also be used though not in the above list. For Value Received, the undersigned sells, assigns and transfers unto (Name and Address of Assignee) the within Bond of the City of Chicago and does hereby irrevocably constitute and appoint to transfer said Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature: Signature Guaranteed: NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. -8- Now, Therefore, This Fifty-Second Supplemental Indenture Witnesseth: Granting Clauses That the City, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the Registered Owners thereof, and of the sum of one dollar, lawful money of the United States of America, to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect, to secure the performance and observance by the City of all the covenants expressed or implied herein and in the Bonds, does hereby assign and grant a security interest in and to the following to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the City hereinafter set forth (the "Trust Estate"): Granting Clause First All right, title and interest of the City in and to Revenues (as defined in the Indenture), to the extent pledged and assigned in the granting clauses of the Indenture. Granting Clause Second All moneys and securities from time to time held by the Trustee under the terms of this Fifty-Second Supplemental Indenture, except for moneys deposited with or paid to the Trustee and held in trust hereunder for the redemption of Bonds, notice of the redemption of which has been duly given. Granting Clause Third All moneys and securities from time to time held by the Trustee in the Common Debt Service Reserve Sub-Fund on a parity with the security interest in said Sub-Fund granted or to be granted to the present and future owners of Common Reserve Bonds (as defined in the Indenture). Granting Clause Fourth Any and all other property, rights and interests of every kind and nature from time to time hereafter by delivery or by writing of any kind granted, bargained, sold, alienated, demised, released, conveyed, assigned, transferred, mortgaged, pledged, hypothecated or otherwise subjected hereto, as and for additional security hereunder by the City or by any other person on its behalf or with its written consent to the Trustee, and the Trustee is hereby authorized to receive any and all property thereof at any and all times and to hold and apply the same subject to the terms hereof. To Have and to Hold all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its successors in said trust and assigns forever; -9- In Trust Nevertheless, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise of any ofthe foregoing over any other of the foregoing except to the extent herein or in the Indenture otherwise specifically provided; Provided, However, that if the City, its successors or assigns shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest on the Bonds due or to become due thereon, at the times and in the manner set forth therein according to the true intent and meaning thereof, and shall cause the payments to be made on the Bonds as required under Article VI hereof, or shall provide, as permitted hereby, for the payment thereof and shall well and truly cause to be kept, performed and observed all of its covenants and conditions pursuant to the terms of the Indenture and this Fifty-Second Supplemental Indenture and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then upon the final payment thereof this Fifty-Second Supplemental Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Fifty-Second Supplemental Indenture shall remain in full force and effect. This Fifty-Second Supplemental Indenture Further Witnesseth, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all said property, rights and interests and any other amounts hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as herein expressed, and the City has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective owners of the Bonds, as follows: ARTICLE I Definitions All capitalized terms used herein unless otherwise defined shall have the same meaning as used in Article I ofthe Indenture. In addition, the following words and phrases shall have the following meanings for purposes of this Fifty-Second Supplemental Indenture: "Authorized Denomination" means the principal- amount of $5,000 or any integral multiple thereof. "Bond Registrar" means the person designated to serve as Bond Registrar pursuant to Section 2.09. "Bondholder" or "holder" or "owner of the Bonds" or "registered owner" means the Registered Owner of any Bond. "Bonds" means the Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bonds, Series 2016A, authorized to be issued pursuant to Article II. -10- "Business Day" means a day on which banks located in the city in which the principal corporate trust office of the Trustee is located are not required or authorized to remain closed, and are not in fact closed. "Costs of Issuance Account" means the account of that name established in the 2016A Dedicated Sub-Fund as described in Section 4.02. "Date of Issuance" means , 2016, the date of original issuance and delivery of the Bonds hereunder. "Debt Service Reserve Account" means the account of that name established in the 2016A Dedicated Sub-Fund as described in Section 4.02. "DTC means Depository Trust Company, and its successors and assigns. "Fifty-Second Supplemental Indenture" means this Fifty-Second Supplemental Indenture and any amendments and supplements hereto. "Indenture" means the Master Indenture of Trust securing Chicago O'Hare International Airport General Airport Revenue Senior Lien Obligations, dated as of September 1, 2012, from the City to the Trustee, pursuant to which Senior Lien Obligations are authorized to be issued, and any amendments and supplements thereto, including this Fifty-Second Supplemental Indenture. References to Articles and Sections of the Indenture shall be deemed to refer to Articles and Sections of the Indenture. ["Insured Bonds" means the $ ,000 principal amount of Bonds maturing on January 1, 20_.] ^'Insurer" or " " means , or any successor thereto or assignee thereof] "Interest Payment Date" means January 1 and July 1 of each year, commencing 1, 201 . "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws ofthe State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee. "Ordinance" means the ordinance duly adopted and approved by the City Council of the City on , 2016, which authorizes the issuance and sale ofthe Bonds and the execution of this Fifty-Second Supplemental Indenture. "Participant," when used with respect to any Securities Depository, means any participant of such Securities Depository. -11- {"Policy" means the Municipal Bond Insurance Policy issued by the Insurer guaranteeing the scheduled payment of principal and interest on the Insured Bonds when due.] "Principal and Interest Account" means the account of that name established in the 2016A Dedicated Sub-Fund as described in Section 4.02. "Prior Airport Obligations" means the $ ,000 outstanding aggregate principal amount of Chicago O'Hare International Airport General Airport Third Lien Revenue [Refunding] Bonds, Series , constituting Senior Lien Obligations and more particularly described as follows: Maturity (January 1) Principal Amount Interest Rate 20_ $ ,000 . % 20_ ,000 20_ ,000 20_ ,000 20_ ,000 20_ ,000 20_ ,000 20_ ,000 20 ,000 "Project Account" means the account of that name established in the 2016A Dedicated Sub-Fund as described in Section 4.02. "Program Fee Account" means the account of that name established in the 2016A Dedicated Sub-Fund as described in Section 4.02. "Qualified Credit Provider" means the issuer of a Qualified Reserve Account Credit Instrument, if any. "Qualified Reserve Account Credit Instrument" means a letter of credit, surety bond or non-cancellable insurance policy issued by a domestic or foreign bank, insurance company or other financial institution whose debt obligations on the date of issuance thereof are rated in the highest rating category by S&P and Moody's and, if rated by A.M. Best & Company, is rated in the highest rating category by A.M. Best & Company. Any such letter of credit, surety bond or insurance policy shall be issued in the name of the Trustee and shall contain no restrictions on the ability of the Trustee to receive payment thereunder other than a certification of the Trustee that the funds drawn thereunder are to be used for purposes for which moneys in the Debt Service Reserve Account may be used under this Fifty-Second Supplemental Indenture. "Record Date" means June 15 and December 15 of each year. "Registered Owner" means the person or persons in whose name or names a Bond shall be registered on the books ofthe City kept for that purpose in accordance with provisions hereof. -12- "Reserve Requirement" means, as of the date of computation, an amount equal to the lesser of (a) $ and (b) the maximum amount of principal of and interest on the Bonds payable in the current or any future Bond Year. "Securities Depository" means DTC and any other securities depository registered as a clearing agency with the Securities and Exchange Commission pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and appointed as the securities depository for the Bonds. "S&P" means S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC, a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee. "State" means the State of Illinois. "Tax Certificates" means the Tax Compliance Certificate and the General Tax Certificate of the City with respect to the Bonds, each dated the date of issuance ofthe Bonds. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses hereof. "2016A Airport Projects" means the Airport Projects being financed with the proceeds of the Bonds as described in the Tax Certificates. "2016A Dedicated Sub-Fund'' means the fund of that name established and described in Section 4.02. ARTICLE II The Bonds Section 2.01. Authorized Amount of Bonds. No Bonds may be issued under the provisions of this Fifty-Second Supplemental Indenture except in accordance with this Article. [The Bonds are being issued to provide funds to redeem the Prior Airport Obligations and to pay costs of issuance of the Bonds.] [The Bonds are being issued to provide funds to pay, or to reimburse the City for payment of, costs of the 2016A Airport Projects, to fund the Reserve Requirement, and to pay costs of issuance of the Bonds.] Except as provided in Section 2.08 hereof, the total original principal amount of Bonds that may be issued hereunder is hereby expressly limited to $ ,000. Section 2.02. Issuance of Bonds; Denominations; Numbers. The Bonds shall be issued in the aggregate principal amount of $ ,000 and shall be designated "City of Chicago, Chicago O'Hare International Airport General Airport Senior Lien Revenue [Refunding] Bonds, Series 2016A." -13- The Bonds shall be issued as registered bonds without coupons. The Bonds shall be issued only in Authorized Denominations. The Bonds shall be numbered consecutively from 1 upward bearing numbers not then contemporaneously outstanding (in order of issuance) according to the records ofthe Bond Registrar. The Bonds shall be dated as of the Interest Payment Date next preceding their date of authentication, unless such date of authentication is an Interest Payment Date, in which case the Bonds shall be dated as of such Interest Payment Date, or unless such Bonds are authenticated prior to the first Interest Payment Date, in which event the Bonds shall be dated as of the Date of Issuance. The Bonds shall mature on January 1 of each of the following years in the following principal amounts and bear interest at the following interest rates per annum: Year Principal Amount Interest Rate 20_ $ 20_ 20_ 20_ 20__ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20_ 20 ,000 . % ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 ,000 Interest on the Bonds shall be payable on January 1 and July 1 of each year, commencing 1, 201 . The Bonds shall bear interest from the date thereof or from and including the most recent Interest Payment Date with respect to which interest has been paid or duly provided for. Interest on the Bonds shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. Section 2.03. Payment on the Bonds. Interest on the Bonds shall be payable on each applicable Interest Payment Date. The Bonds shall bear interest from the date thereof or from and including the most recent Interest Payment Date with respect to which interest has been paid -14- or duly provided for. The principal of, premium, if any, and the interest on the Bonds shall be payable in lawful money of the United States of America. Except as provided in Section 2.10 hereof, the principal of and redemption premium, if any, on all Bonds shall be payable at the principal corporate trust office of the Trustee upon the presentation and surrender of the Bonds as the same become due and payable. Except as provided in Sections 2.09 and 2.10 hereof, the interest on the Bonds shall be paid by check drawn upon the Trustee and mailed to the persons in whose names the Bonds are registered at the address of each such person as it appears on the registration books maintained by the Bond Registrar at the close of business on the Record Date next preceding each Interest Payment Date or at such other address as is furnished in writing by such Registered Owner to the Bond Registrar. Interest on the Bonds shall be paid by wire transfer to any Registered Owner who at the close of business on such Record Date has given written notice of its wire transfer address in the continental United States to the Bond Registrar prior to such Record Date (which notice may provide that it will remain in effect until revoked), provided that each such wire transfer shall be made only with respect to a Registered Owner of $1,000,000 or more in aggregate original principal amount of the Bonds as of the close of business on such Record Date. Section 2.04. Execution; Limited Obligations. The Bonds shall be executed on behalf of the City with the official manual or facsimile signature of the Mayor of the City and attested with the official manual or facsimile signature of its City Clerk, and shall have affixed, impressed, imprinted or otherwise reproduced thereon the corporate seal of the City or a facsimile thereof. The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Illinois, and pursuant to the Ordinance, which authorizes the execution and delivery of this Fifty-Second Supplemental Indenture. The Bonds are not general obligations of the City but limited obligations payable solely from Revenues (except to the extent paid out of moneys attributable to the proceeds derived from the sale of the Bonds or to income from the temporary investment thereof) and shall be a valid claim of the respective Registered Owners thereof only against the 2016A Dedicated Sub-Fund [, the Common Debt Service Reserve Sub-Fund on a parity with other Common Reserve Bonds] and other moneys held by the Trustee or otherwise pledged therefor, which amounts are hereby pledged, assigned and otherwise held as security for the equal and ratable payment of the Bonds and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Bonds, except as may be otherwise expressly authorized in the Indenture or in this Fifty-Second Supplemental Indenture. The Bonds shall not constitute an indebtedness ofthe City or a loan of credit thereof within the meaning of any constitutional or statutory limitation, and neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof is pledged to the payment of the principal of, premium, if any, or interest on the Bonds or other costs incident thereto. In case any officer whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, as if he or she had remained in office until delivery. Section 2.05. Authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Fifty-Second Supplemental Indenture unless and until such certificate of authentication in substantially the form hereinabove set forth shall have been duly executed by the Trustee, and such executed certificate of the Trustee upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered -15- under this Fifty-Second Supplemental Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if (a) signed by an authorized signatory of the Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds issued hereunder, and (b) the date of authentication on the Bond is inserted in the place provided therefor on the certificate of authentication. Section 2.06. Form of Bonds; Temporary Bonds. The Bonds issued under this Fifty-Second Supplemental Indenture shall be substantially in the form hereinbefore set forth, with such appropriate variations, omissions and insertions as are permitted or required by this Fifty-Second Supplemental Indenture. Pending preparation of definitive Bonds, or by agreement with the purchasers of the Bonds, the City may issue and, upon its request, the Trustee shall authenticate, in lieu of definitive Bonds, one or more temporary printed or typewritten Bonds in Authorized Denominations and of substantially the tenor recited above. Upon request of the City, the Trustee shall authenticate definitive Bonds in exchange for and upon surrender of any equal principal amount of temporary Bonds. Until so exchanged, temporary Bonds shall have the same rights, remedies and security hereunder as definitive Bonds. Section 2.07. Delivery of Bonds. Upon the execution and delivery of this Fifty-Second Supplemental Indenture, the City shall execute and deliver to the Trustee, and the Trustee shall authenticate, the Bonds and deliver them to the purchasers as may be directed by the City as hereinafter in this Section 2.07 provided. Prior to the delivery by the Trustee of any of the Bonds there shall be filed with the Trustee: A copy, duly certified by the City Clerk, of the Ordinance; Original executed counterpart of the Indenture; Original executed counterpart of this Fifty-Second Supplemental (d) A Counsel's Opinion to the effect that (i) the Indenture and this Fifty-Second Supplemental Indenture have been duly and lawfully authorized by all necessary action on the part of the City, have been duly and lawfully executed by authorized officers of the City, are in full force and effect and are valid and binding upon the City and enforceable in accordance with their terms (except as limited by any applicable bankruptcy, liquidation, reorganization, insolvency or other similar laws or by general principles of equity if equitable remedies are sought); (ii) the Indenture and this Fifty-Second Supplemental Indenture create the valid pledge of Revenues, moneys and securities which they purport to crecite; and (iii) upon their execution, authentication and delivery, the Bonds will have been duly and validly authorized and issued in accordance with the Constitution and laws of the State of Illinois, the Indenture and this Fifty-Second Supplemental Indenture; -16- A written order as to the delivery ofthe Bonds, executed by an Authorized Officer stating (i) the identity of the purchasers, aggregate purchase price and date and place of delivery of the Bonds and (ii) that no Event of Default has occurred and is continuing under the Indenture or this Fifty-Second Supplemental Indenture; The Certificate of the City required by Section 206(e) of the Indenture; and [(g) A Certificate of an Independent Airport Consultant or a Certificate of the City complying with Section 206(f) ofthe Indenture.] [(h) Either the Certificate required by Section 206(f) of the Indenture or the Certificate of the City required by Section 207(b) ofthe Indenture.] Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond is mutilated, lost, stolen or destroyed, the City may execute and the Trustee may authenticate a new Bond of like date, maturity, interest rate and denomination as the Bond mutilated, lost, stolen or destroyed, provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the City and the Trustee evidence of such loss, theft or destruction satisfactory to the City and the Trustee, together with indemnity satisfactory to them. In the event any such Bond shall have matured, instead of issuing a substitute Bond the City may pay the same without surrender thereof. The City and the Trustee may charge the Registered Owner of such Bond with their reasonable fees and expenses in this connection. All Bonds so surrendered to the Trustee shall be cancelled and destroyed, and evidence of such destruction shall be given to the City. Upon the date of final maturity or redemption of all of the Bonds, the Trustee shall destroy any inventory of unissued certificates. Section 2.09. Registration and Exchange of Bonds; Persons Treated as Owners. The City shall cause books for the registration and for the transfer of the Bonds as provided in this Fifty-Second Supplemental Indenture to be kept by the Trustee as the Bond Registrar of the City. Upon surrender for transfer of any Bond at the principal office of the Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the Registered Owner or his or her attorney duly authorized in writing, the City shall execute and the Bond Registrar shall authenticate and deliver in the name of the transferee or transferees a fully registered Bond for a like aggregate principal amount. Bonds may be exchanged at the principal office of the Bond Registrar for a like aggregate principal amount of fully registered Bonds of the same maturity of other authorized denominations. The City shall execute and the Bond Registrar shall authenticate and deliver Bonds which the Bondowners making the exchange are entitled to receive, bearing numbers not contemporaneously then outstanding. The execution by the City of any Bond of any denomination shall constitute full and due authorization of such denomination and the Bond Registrar shall thereby be authorized to authenticate and deliver such Bond. -17- The Bond Registrar shall not be required to register for transfer or exchange any undelivered Bond or any Bond after the giving of notice calling such Bond for redemption or partial redemption. The person in whose name any fully registered Bond is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date notwithstanding the cancellation of such registered Bond upon any transfer or exchange thereof subsequent to the Record Date and prior to such Interest Payment Date, except if and to the extent there shall be a default in the payment of the interest due on such Interest Payment Date, in which case such defaulted interest shall be paid to the person in whose name such Bond is registered either at the close of business on the day preceding the date of payment of such defaulted interest or on a subsequent Record Date for such payment if one shall have been established as hereinafter provided. A subsequent Record Date may be established by or on behalf of the City by notice mailed to the Registered Owners of Bonds not less than 10 days preceding such Record Date, which Record Date shall be not more than 30 days prior to the subsequent interest payment date. Except as provided in the Indenture, as to any Bond the person in whose name the same shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of principal, premium, if any, or interest on any Bond shall be made only to or upon the written order of the Registered Owner thereof or his legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. In each case the Bond Registrar shall require the payment by the Bondowner requesting exchange or transfer of any tax or other governmental charge required to be paid with respect to such exchange or transfer, but otherwise no charge shall be made to the Bondowner for such exchange or transfer. Section 2.10. Book-Entry Provisions. The provisions of this Section shall apply so . long as the Bonds are maintained in book-entry form with DTC or another Securities Depository, any provisions of this Fifty-Second Supplemental Indenture to the contrary notwithstanding. (a) Payments. The Bonds shall be payable to the Securities Depository, or its nominee, as the Registered Owner of the Bonds, in next day funds on each date on which the principal of, premium, if any, and interest on the Bonds is due as set forth in this Fifty-Second Supplemental Indenture and in the Bonds. Such payments shall be made to the offices of the Securities Depository specified by the Securities Depository to the City and the Trustee in writing. Without notice to or the consent of the beneficial owners of the Bonds, the City and the Securities Depository may agree in writing to make payments of principal and interest in a manner different from that set forth herein. If such different manner of payment is agreed upon, the City shall give the Trustee notice thereof, and the Trustee shall make payments with respect to the Bonds in the manner specified in such notice as set forth herein. Neither the City nor the Trustee shall have any obligation with respect to the transfer or crediting of the principal of. premium, if any, and interest on the Bonds to Participants or the beneficial owners ofthe Bonds or their nominees. Replacement of the Securities Depository. If the City receives notice that the Securities Depository has received notice from its Participants having interests in at least 50% in principal amount of the Bonds that the Securities Depository or its successor is incapable of discharging its responsibilities as a securities depository or that it is in the best interests of the beneficial owners that they obtain certificated Bonds, the City shall cause the Trustee to authenticate and deliver Bond certificates. The City shall have no obligation to make any investigation to determine the occurrence of any events that would permit the City to make any determination described in this paragraph. Discontinuance of Book-Entry or Change of Securities Depository. If, following a determination or event specified in paragraph (b) above, the City discontinues the maintenance of the Bonds in book-entry form with the then current Securities Depository, the City will issue replacement Bonds to the replacement Securities Depository, if any, or, if no replacement Securities Depository is selected for the Bonds, directly to the Participants as shown on the records of the former Securities Depository or, to the extent requested by any Participant, to the beneficial owners of the Bonds shown on the records of such Participant. Replacement Bonds shall be in fully registered form and in Authorized Denominations, be payable as to interest on the Interest Payment Date of the Bonds by check or draft mailed to each Registered Owner at the address of such Registered Owner as it appears on the bond registration books maintained by the City for such purpose at the principal corporate trust office of the Trustee or at the option of any Registered Owner of not less than $1,000,000 original principal amount of Bonds, by wire transfer to any address in the continental United States of America on such Interest Payment Date to such Registered Owner as of such Record Date, if such Registered Owner provides the Trustee with written notice of such wire transfer address not later than the Record Date (which notice may provide that it will remain in effect with respect to subsequent Interest Payment Dates unless and until changed or revoked by subsequent notice). Principal and redemption premium, if any, on the replacement Bonds are payable only upon presentation and surrender of such replacement Bond or Bonds at the principal corporate trust office of the Trustee. Effect of Book-Entry System. The Securities Depository and its Participants and the beneficial owners of the Bonds, by their acceptance of the Bonds, agree that the City and the Trustee shall not have liability for the failure of such Securities Depository to perform its obligations to the Participants and the beneficial owners of the Bonds, nor shall the City or the Trustee be liable for the failure of any Participant or other nominee of the beneficial owners to perform any obligation of the Participant to a beneficial owner of the Bonds. ARTICLE III Redemption of Bonds Before Maturity Section 3.01. Redemption Dates and Prices. The Bonds shall be subject to redemption prior to maturity in the amounts, at the times and in the manner provided in this Article III. (a) Optional Redemption. The Bonds maturing on and after January 1, 20 are subject to redemption at the option ofthe City on or after January 1, 20 , as a whole or in part at any time, and if in part, in such order of maturity as the City shall determine and within any maturity by lot, at a redemption price equal to the principal amount of each Bond to be redeemed, plus accrued interest to the date ofthe redemption. (b) Mandatory Sinking Fund Redemption. The Bonds maturing on January 1, 20 are subject to mandatory redemption, in part by lot as provided in the Indenture from mandatory Sinking Fund Payments, on January 1 in each of the years and in the respective principal amounts set forth below, at a redemption price equal to the principal amount thereof to be redeemed: Year Principal Amount 20_ $ ,000 20_ ,000 The January 1, 20 Principal Installment of the 20 term Bonds is $ ,000. The Bonds maturing on January 1, 20 are subject to mandatory redemption, in part by Year 20_ 20_ 20 lot as provided in the Indenture from mandatory Sinking Fund Payments, on January 1 in each of the years and in the respective principal amounts set forth below, at a redemption price equal to the principal amount thereof to be redeemed: Principal Amount $ ,000 ,000 ,000 The January 1, 20 Principal Installment of the 20 term Bonds is $ ,000. If the City redeems Bonds pursuant to optional redemption or purchases Bonds subject to mandatory redemption and cancels the same, then an amount equal to the principal amount of Bonds of such maturity so redeemed or purchased shall be deducted from the Principal Installments as provided for such Bonds of such maturity in such order as the Chief Financial Officer of the City shall determine. Section 3.02. Notice of Redemption. Notice of the redemption of Bonds or any portion thereof pursuant to Section 3.01 hereof identifying the Bonds or portions thereof to be redeemed, specifying the redemption date, the Redemption Price, the places and dates of payment, that from the redemption date interest will cease to accrue, and whether the redemption is conditioned upon sufficient moneys being available on the redemption date (or any other condition), shall be given by the Trustee by mailing a copy of such redemption notice not less than 30 nor more than 60 days prior to the date fixed for redemption, to the Registered Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books. Redemption notices shall be sent by first class mail, except that notices to Registered Owners of at least $1,000,000 of Bonds shall be sent by registered mail. Failure to mail any such notice to -20- the Registered Owner of any Bond or any defect therein shall not affect the validity of the proceedings for such redemption of Bonds. Any notice mailed as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Registered Owner of any Bond receives the notice. Section 3.03. Deposit of Funds. For the redemption of any of the Bonds, the City shall cause to be deposited in the Principal and Interest Account moneys sufficient to pay when due the principal of and premium, if any, and interest on the redemption date to be applied in accordance with the provisions of Section 4.05 hereof. Section 3.04. Partial Redemption of Bonds. If a Bond is of a denomination larger than the minimum Authorized Denomination, all or a portion of such Bond (equal to the minimum Authorized Denomination or any integral multiple thereof) may be redeemed but such Bond shall be redeemed only in a principal amount equal to the minimum Authorized Denomination or any integral multiple thereof. Upon surrender of any Bond for redemption in part only, the City shall execute and the Bond Registrar shall authenticate and deliver to the Registered Owner thereof, at the expense of the City, a new Bond or Bonds of Authorized Denominations in aggregate principal amount equal to the unredeemed portion of the Bond surrendered. Section 3.05. Selection of Bonds for Redemption. If less than all of the Bonds of like maturity and interest rate are called for redemption, the Bonds (or portions thereof) to be redeemed shall be selected by lot by the Trustee. ARTICLE IV Revenues and Funds Section 4.01. Source of Payment of Bonds. The Bonds are not general obligations of the City but are limited obligations as described in Section 2.04 hereof and as provided herein and in the Indenture. Section 4.02. Creation of Dedicated Sub-Fund and Accounts in the Debt Service Fund. (a) Creation of2016A Dedicated Sub-Fund. There is hereby created by the City and ordered established with the Trustee a separate and segregated Dedicated Sub-Fund within the Debt Service- Fund, such Dedicated Sub-Fund to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Bond Dedicated Sub-Fund" (hereinafter called the "2016A Dedicated Sub-Fund"). Moneys on deposit in the 2016A Dedicated Sub-Fund, and in each Account established therein as hereinafter provided, shall be held in trust by the Trustee for the sole and exclusive benefit of the Registered Owners of the Bonds, and shall not be used or available for the payment of any other Senior Lien Obligations. -21- (b) Creation of Accounts. There are hereby created by the City and ordered established with the Trustee separate Accounts within the 2016A Dedicated Sub-Fund, designated as follows: Costs of Issuance Account: an Account to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Costs of Issuance Account" (hereinafter called the "Costs of Issuance Account"); Program Fee Account: an Account to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Program Fee Account" (hereinafter called the "Program Fee Account"); Principal and Interest Account: an Account to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Principal and Interest Account" (hereinafter called the "Principal and Interest Account"); Project Account: an Account to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Project Account" (hereinafter called the "Project Account"); and Debt Service Reserve Account: an Account to be designated the "Chicago O'Hare International Airport 2016A Senior Lien Debt Service Reserve Account" (the "Debt Service Reserve Account"). Section 4.03. Application of Bond Proceeds and Available Funds. The proceeds received by the City from the sale of the Bonds shall be applied as follows: ' (a) Redemption of Prior Airport Obligations: the amount of $ shall be applied by the Trustee for the redemption of the Prior Airport Obligations; Deposit to Costs of Issuance Account: the Trustee shall deposit the amount of $ into the Costs of Issuance Account; Deposit to Debt Service Reserve Account: the Trustee shall deposit the amount of $ into the Debt Service Reserve Account, being an amount equal to the Reserve Requirement; Deposit to Project Account: the Trustee shall deposit the amount of $ into the Project Account; Deposit to Common Debt Service Reserve Sub-Fund: the Trustee shall deposit the amount of $ into the Common Debt Service Reserve Sub- Fund. (f) Payment to the Insurer: the amount of $ applied to pay the premium due to the Insurer for the Policy. On the Date of Issuance, the Trustee shall transfer from the Debt Service Reserve Account of the Chicago O'Hare International Airport Bond Dedicated Sub-Fund to the Debt Service Reserve Account, the sum of $ , being the Reserve Requirement for the Bonds. Section 4.04. Deposits into 2016A Dedicated Sub-Fund and Accounts Therein. On January 1 and July 1 of each year, commencing 1, 201 (each such date referred to herein as the "Deposit Date") there shall be deposited into the 2016A Dedicated Sub-Fund from amounts on deposit in the Debt Service Fund an amount equal to the aggregate of the following amounts, which amounts shall have been calculated by the Trustee on the next preceding December 5 or June 5 (in the case of each January 1 or July 1, respectively) (such aggregate amount with respect to any Deposit Date being referred to herein as the "2016A Deposit Requirement"): for deposit into the Principal and Interest Account, an amount equal to the aggregate of: (i) [for the January 1, 2017 Deposit Date, the Principal Installment due January 1, 2017, and thereafter,] one-half of the Principal Installment coming due on the Bonds on the January 1 next succeeding such date of calculation and (ii) the amount of interest due on the Bonds on the current Deposit Date (reduced, in the case of each January 1 Deposit Date, by investment earnings credited as of the immediately prior calculation date to the Principal and Interest Account); for deposit into the Debt Service Reserve Account, the amount, if any, required as of the close of business on such Deposit Date to restore the Debt Service Reserve Account to an amount equal to the Reserve Requirement, including reimbursement of any Qualified Credit Provider; and for deposit into the Program Fee Account, the amount estimated by the City to be required as of the close of business on such Deposit Date to pay all fees and expenses with respect to the Bonds during the semi-annual period commencing on such Deposit Date. In addition to the 2016A Deposit Requirement, there shall be deposited into the 2016A Dedicated Sub-Fund any other moneys received by the Trustee under and pursuant to the Indenture or this Fifty-Second Supplemental Indenture, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into the 2016A Dedicated Sub-Fund and to one or more accounts therein. Section 4.05. Use of Moneys in Principal and Interest Account and the Debt Service Reserve Account for Payment of Bonds. Moneys in the Principal and Interest Account shall be used solely for payment of principal of, premium, if any, and interest due on each Payment Date with respect to the Bonds (including the optional redemption of Bonds pursuant to Section 3.01(a) hereof) and not otherwise provided for, ratably, without preference or priority of any kind. Moneys in the Debt Service Reserve Account shall be used solely for the payment ofthe principal of, premium, if any, and interest on the Bonds, without preference or priority of any -23- kind, but only if and to the extent moneys are not available for such purpose in the Principal and Interest Account. Section 4.06. Use of Moneys in the Costs of Issuance Account and the Program Fee Account. Moneys in the Costs of Issuance Account shall be used solely for the payment or reimbursement of Costs of Issuance .of the Bonds as directed in a Certificate filed with the Trustee. If after the payment of all Costs of Issuance, as specified in a Certificate filed with the Trustee, there shall be any balance remaining in the Costs of Issuance Account, such balance shall be transferred to the Program Fee Account. Moneys in the Program Fee Account shall be used solely for the payment of fees and expenses with respect to the Bonds as set forth in a Certificate filed with the Trustee. Section 4.07. Tax Covenants. The City covenants to take any action required by the provisions of the Code and within its power to take in order to preserve the exemption from federal income taxation of interest on the Bonds (other than with respect to an alternative minimum tax imposed on interest on the Bonds), including, but not limited to, the provisions of Section 148 of the Code relating to "arbitrage bonds." The City covenants to comply with the provisions of the Tax Certificates. Section 4.08. Nonprescntment of Bonds. If any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity, or at the date fixed for redemption thereof, or otherwise, if moneys sufficient to pay any such Bond shall have been made available to the Trustee for the benefit of the Registered Owner or Owners thereof, subject to the provisions of the immediately following paragraph, all liability of the City to the Registered Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Registered Owner of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature under the Indenture or this Fifty-Second Supplemental Indenture or on, or with respect to, such Bond. Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds within two years after the date on which the same shall have become due shall be repaid by the Trustee to the City upon direction of an Authorized Officer, and thereafter the Registered Owners of such Bonds shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid, and all liability of the Trustee with respect to such moneys shall thereupon cease, and the City shall not be liable for any interest thereon and shall not be regarded as a trustee of such moneys. Before being required to make any such payment to the City, the Trustee may, at the expense of the City, publish such notice as may be deemed appropriate by the Trustee listing the Bonds so payable and not presented, and stating that such moneys remain unclaimed and that after a date set forth therein any balance thereof then remaining will be paid to the City. The obligation of the Trustee under this Section 4.08 to pay any such funds to the City shall be subject, however, to any provisions of law applicable to the Trustee or to such funds providing other requirements for disposition of unclaimed property. Section 4.09. Moneys to He Held in Trust. All moneys required to be deposited with or paid to the Trustee for the account of any Fund or Account referred to in any provision of this Fifty-Second Supplemental Indenture shall be held by the Trustee in trust as provided in Section 1003 ofthe Indenture, and shall, while held by the Trustee, constitute part ofthe Trust Estate and be subject to the lien or security interest created hereby. Section 4.10. Debt Service Reserve Account. The City shall maintain the Debt Service Reserve Account in an amount equal to the Reserve Requirement, which requirement may be satisfied with (i) one or more Qualified Reserve Account Credit Instruments, (ii) Qualified Investments, or (iii) a combination thereof. Any Qualified Investments held to the credit of the Debt Service Reserve Account shall be valued in accordance with Section 307 of the Indenture. If on any valuation date as provided in Section 307 ofthe Indenture the amount on deposit in the Debt Service Reserve Account is more than the Reserve Requirement, the amount of such excess shall be transferred by the Trustee for deposit into the Revenue Fund established under the Indenture. If at any time the Debt Service Reserve Account holds both a Qualified Reserve Account Credit Instrument and Qualified Investments, the Qualified Investments shall be liquidated and the proceeds applied for the purposes for which Debt Service Reserve Account moneys may be applied under this Fifty-Second Supplemental Indenture prior to any draw being made on the Qualified Reserve Account Credit Instrument. If the Debt Service Reserve Account holds Qualified Reserve Account Credit Instruments issued by more than one issuer, draws shall be made under such credit instruments on a pro rata basis to the extent of available funds. Amounts deposited in the 2016A Dedicated Sub-Fund for the purpose of restoring amounts withdrawn from the Debt Service Reserve Account shall be applied first to reimburse the Qualified Credit Provider and thereby reinstate the Qualified Reserve Account Credit Instrument and next to make deposits into the Debt Service Reserve Account. [Section 4.11. Common Debt Service Reserve Sub-Fund. The City hereby designates the Bonds as Common Reserve Bonds. The City and the Trustee covenant and agree that the Common Debt Service Reserve Sub-Fund is to be administered for the equal benefit, protection and security of the Owners of the Common Reserve Bonds and that, with respect to the Common Debt Service Reserve Sub-Fund, all Outstanding Common Reserve Bonds are on a parity and rank equally without preference, priority or distinction.] Section 4.12. Deposits into Project Account. Pending application as provided in Section 4.13, moneys in the Project Account shall be held in trust by the Trustee as provided in Section 4.09. Section 4.13. Costs of 2016A Airport Projects. For the purposes of this Indenture, the costs ofthe 2016A Airport Projects shall include: (a) Obligations incurred for labor and to contractors, builders, and materialmen in connection with the construction, installation and acquisition of the 2016A Airport Projects or any part thereof, and obligations incurred for the installation and acquisition of machinery and equipment; -25- Payment to owners and others for real property including payments for options, easements or other contractual rights; All expenses incurred in the acquisition of real property, including all costs and expenses of whatever kind in connection with the exercise of the power of eminent domain, and including the cost of title searches and reports, abstracts of title, title certificates and opinions, title guarantees, title insurance policies, appraisals, negotiations and surveys; The amount of any damage incidence to or consequent upon the construction, installation and acquisition of the 2016A Airport Projects; The cost of any indemnity, fidelity and surety bonds, the fees and expenses of the Fiduciaries during construction, installation and acquisition of 2016A Airport Projects, and premiums on insurance, if any, in connection with such 2016A Airport Projects during construction, installation and acquisition, including builders' risk insurance; The cost of engineering and architectural services which includes borings and other preliminary investigations to determine foundation or other conditions, expenses necessary or incident to the development of contract documents and supervising construction, as well as for the performance of all other duties of engineers and architects set forth herein in relation to the construction, installation and acquisition of such 2016A Airport Projects or the issuance of the Bonds therefor; Costs of Issuance; Any cost properly chargeable to such 2016A Airport Projects prior to and during construction, installation and acquisition; (i) The cost of restoring, repairing and placing in its original condition, as nearly as practicable, all public or private property damaged or destroyed in the construction of such 2016A Airport Projects and the cost thereof, or the amount required to be paid by the City as adequate compensation for such damage or destruction, and all costs lawfully incurred or damages lawfully payable, with respect to the restoration, relocation, removal, reconstruction or duplication of property made necessary or caused by the construction and installation of such 2016A Airport Projects and the cost thereof; (j) Any obligation or expense incurred by the City for moneys advanced in connection with the construction, installation and acquisition of 2016A Airport Projects and the cost thereof; and (k) All other items of cost and expense not elsewhere in this Section 4.13 specified, incident to the construction, installation and acquisition of 2016A Airport Projects and the financing thereof, including the payment of interest on Bonds. Section 4.14. Disbursements from Project Account, (a) All disbursements from the Project Account shall be made in accordance with requisitions signed by the Chief Financial Officer or the City Comptroller in respect ofeach payment, as to the following: Item number of the payment; The name ofthe person, firm or corporation to whom the payment is due; The amount to be paid; The 2016A Airport Project and purpose, by general classification, for which payment is to be made; That the obligations in stated amounts have been incurred by the City, and that each item thereof is a proper charge against the Project Account (or such sub-account) and is due and has not been included in any prior requisition which has been paid; That there has not been filed with or served upon the City any notice of any lien, right to lien, or attachment upon or claim affecting the right to receive payment of any of the moneys payable to any of the persons, firms or corporations named which have not been released or will not be released simultaneously with the payment of such obligations, and in the event that any assignment of right to receive payment has been made and notice thereof has been given to the City and the City has accepted such assignment, the order directing payment shall recite that fact and direct the payment to be made to the assignee thereof as shown by the records ofthe City; and If applicable, that certain specified disbursements are not required to be certified by a Consulting Engineer pursuant to (b) below, specifying the amount of such disbursements and the reason that such disbursements need not be so certified. (b) In respect to disbursements from the Project Account in payment for work done in connection with the construction, acquisition and installation of 2016A Airport Projects, such requisition, signed by the Chief Financial Officer or the City Comptroller, shall be accompanied by a certificate signed by a Consulting Engineer certifying that the obligations in stated amounts have been incurred by the City, and that each item thereof is a proper charge against the designated sub-account of the Project Account and has not been included in any prior requisition which has been paid, and insofar as any such obligation was incurred for work, materials, equipment or supplies, such work was actually performed in the furtherance of the construction, acquisition and installation of such 2016A Airport Projects delivered at the site of the Airport for those purposes, or delivered for storage or fabrication at a place or places approved by a Consulting Engineer and under the control of the City. Notwithstanding the foregoing, no certificate of a Consulting Engineer shall be required with respect to disbursements for Costs of Issuance or other costs that the Chief Financial Officer or the City Comptroller shall have certified as being costs that are not directly related to the actual construction, acquisition and installation of 2016A Airport Projects such as land acquisition, payment of auditor's fees and other similar costs that may otherwise be paid from the Project Accounts in compliance with the Tax Certificates. -27- (c) Upon receipt of any such orders and accompanying certificates the Trustee shall pay each such obligation from the appropriate sub-account of the Project Account and the Trustee shall make disbursements in accordance with the directions from the Chief Financial Officer or the City Comptroller. The moneys held in the Project Account shall be invested in accordance with the requirements of Article V hereof. Section 4.15. Progress Reports and Completion Certificate, (a) At least once each month during the period ofthe construction, installation and acquisition of each 2016A Airport Project, the cost of which has been paid in whole or in part from Bond proceeds, the City will cause the Consulting Engineer to prepare a progress report in connection with such construction, installation and acquisition of such 2016A Airport Project, including comparisons between the actual time elapsed and the actual costs incurred and the estimates of such time and costs, which shall have been set forth in a statement prepared by the Consulting Engineer and filed with the City. Copies of such progress reports shall be filed with the Trustee and mailed to the holders of the Bonds requesting copies thereof. (b) Promptly after the completion of the construction, installation and acquisition of each such 2016A Airport Project, the City will deliver'to the Trustee a Certificate stating the date of such completion. Section 4.16. Permitted Transfers, (a) Moneys in the Project Account (or any sub-account therein) may be transferred or withdrawn as shall be specified by a Certificate of the City pursuant to paragraph (b) of this Section for any one or more of the following purposes: (i) to make transfers to one or more other Project Accounts, which costs are permitted to be paid from Bond proceeds, (ii) to make transfers into the Debt Service Reserve Account to make up any deficiency therein, (iii) to make transfers to the Principal and Interest Account, (iv) to redeem Bonds in accordance with the provisions of this Fifty-Second Supplemental Indenture, or (v) upon an Event of Default to pay the principal of and interest on the Bonds. (b) Before any such transfer or withdrawal shall be made, the City shall file with the Trustee: its requisition therefor, stating the amount of the transfer or withdrawal and directing the Trustee as to the application of such amount; a Counsel's Opinion stating that in the opinion of the signer, such transfer or withdrawal will not constitute a breach or default on the part of the City of any of the covenants or agreements contained in this Fifty-Second Supplemental Indenture; and an opinion of Bond Counsel to the effect that such transfer or withdrawal will not adversely affect any exemption from Federal income taxes of interest on any Bonds theretofore issued. -28- ARTICLE V Investment of Moneys Section 5.01. Investment of Moneys. Moneys held in the funds, accounts and subaccounts established hereunder shall be invested and reinvested in accordance with the provisions governing investments contained in the Indenture. All such investments shall be held by or under the control ofthe Trustee and shall be deemed at all times a part of the fund, account or subaccount for which they were made. Section 5.02. Investment Income. The interest earned on any investment of moneys held hereunder, any profit realized from such investment and any loss resulting from such investment shall be credited or charged to the fund, account or subaccount for which such investment was made. ARTICLE VI Discharge of Lien Section 6.01. Defeasance. If the City shall pay to the Registered Owners of the Bonds, or provide for the payment of, the principal, and interest and Redemption Price, if any, to become due thereon, at the times and in the manner stipulated in Section 1101 of the Indenture, then this Fifty-Second Supplemental Indenture shall be fully discharged and-satisfied. Upon the satisfaction and discharge of this Fifty-Second Supplemental Indenture, the Trustee shall, upon the request ofthe City, execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction and the Fiduciaries shall pay over or deliver to the City all Funds, Accounts and other moneys or securities held by them pursuant to this Fifty-Second Supplemental Indenture which are not required for the payment or redemption of the Bonds not theretofore surrendered or presented for such payment or redemption. ARTICLE VII Concerning the Trustee Section 7.01. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Fifty-Second Supplemental Indenture, and agrees to perform said trusts, but only upon and subject to the express terms and conditions set forth herein and in the Indenture. Except as otherwise expressly set forth in this Fifty-Second Supplemental Indenture, the Trustee assumes no duties, responsibilities or liabilities by reason of its execution of this Fifty-Second Supplemental Indenture other than as set forth in the Indenture and this Fifty-Second Supplemental Indenture, and this Fifty-Second Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions of its acceptance of the trust under the Indenture, as fully as if said terms and conditions were herein set forth at length. -29- Section 7.02. Dealing in Bonds. The Trustee, in its individual capacity, cither as principal or agent, may also engage in or be interested in any financial or other transaction with the City, and may act as depositary, trustee or agent for any committee or body of the owners of Bonds secured hereby or other obligations of the Gity as freely as if it did not act in any capacity hereunder. ARTICLE VIII Supplemental Indentures Section 8.01. Supplements or Amendments to Fifty-Second Supplemental Indenture. This Fifty-Second Supplemental Indenture may be supplemented or amended in the manner set forth in Articles VII and VIII, respectively, ofthe Indenture. ARTICLE IX Indenture Amendment Section 9.01. Written Consent to Indenture Amendment. The Thirty-Seventh Supplemental Indenture from the City to the Trustee dated April 1, 2010, authorizes the amendment of the Indenture (the "2010 Amendment'"). The 2010 Amendment deletes in full Section 413 of the Indenture which contains restrictions on the sale or transfer of the Airport. In consideration for the security interests granted by the City for the benefit of the Owners of the Bonds, the Owners from time to time of the Bonds hereby consent to the Thirty-Seventh Supplemental Indenture and to the 2010 Amendment of the Indenture. Such consents shall be fully effective for all purposes of Article VIII of the Indenture. The consent of any Owner made pursuant to this Section may be revoked in writing as provided by subsection (b) of Section 803 of the Indenture. ARTICLE X Insurer Provisions Section 10.01. Insurer Provisions. The City hereby designates as the Insurer with respect to the Insured Bonds. The Insurer shall be entitled to the benefits of Section 1104 of the Indenture. Anything contained in this Fifty-Second Supplemental Indenture or in the Bonds to the contrary notwithstanding, the existence of all rights given to the Insurer hereunder or under the Indenture are expressly conditioned on the timely and full performance of the payment obligations ofthe Insurer under the Policy. This Section 10.01 contains certain covenants and restrictions for the benefit of which apply in addition to, and not in substitution of, the provisions of the Indenture. The following covenants shall apply only to the Insured Bonds and shall only be applicable during the period in which any Insured Bonds are Outstanding or any amounts are due to under the Policy, and 's rights have not terminated pursuant to clause (a) of this Section 10.01. The covenants contained in this Section 10.01 may only be enforced by and may be modified, amended or waived at any time with the prior written consent of and without the consent of the Trustee (so long as such modification or amendment imposes no additional duties on the Trustee) or any holder of the Bonds. (a) The existence of all rights given to under this Fifty- Second Supplemental Indenture or the Indenture are expressly conditioned on the timely and full performance of the payment obligations of under the Policy. (b) shall be considered the sole Owner of the Insured Bonds as provided in Section 1104 of the Indenture. (c) It shall constitute an event of default hereunder for purposes of Section 901(d) of the Indenture if the City fails or refuses to comply with the provisions of the Indenture, or defaults in the performance or observance of any covenants, agreements or conditions on its part contained in the Indenture or the Senior Lien Obligations, which materially affects the rights of the Owners of the Senior Lien Obligations and the failure, refusal or default continues for a period of 45 days after written notice of it by the Trustee or the Owners of not less than 25% in principal amount of the Outstanding Senior Lien Obligations; provided, however, that in the case of any such default which can be cured by due diligence but which cannot be cured within the 45-day period, the time to cure is extended for such period as may be necessary to remedy the default with all due diligence, provided that such extension shall not exceed 45 days without the prior written consent of (which consent shall not be unreasonably withheld). To the extent that this Fifty-Second Supplemental Indenture confers upon or gives or grants to any right, remedy or claim under this Fifty-Second Supplemental Indenture, is hereby explicitly recognized as being a third- party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. No amendment or modification of any provisions of this Fifty-Second Supplemental Indenture giving any right, remedy or claim to may be made without the prior written consent of (which consent shall not be unreasonably withheld). (f) No amendment of the Indenture that materially and adversely alters the security for the Insured Bonds shall become effective without the prior written consent of (which consent shall not be unreasonably withheld). (g) The rights granted to hereunder to request, consent to or direct any action are rights granted to in consideration of its issuance of the Policy. Any exercise by of such rights is merely an exercise of 's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the holders ofthe Insured Bonds nor does such -31- action evidence any position of , positive or negative, as to whether Bondholder consent is required in addition to the consent of . (h) Notwithstanding anything in the Indenture to the contrary, in the event that the principal and/or interest due on the Insured Bonds shall be paid by pursuant to the Policy, the Insured Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City and all covenants, agreements and other obligations of the City to the registered owners shall continue to exist and shall run to the benefit of , and shall be subrogated to the rights of such registered owners. The term "Outstanding" under the Indenture includes Insured Bonds described in this clause (h). The lien of the Indenture shall not be discharged unless all amounts due or to become due to hereunder have been paid in full or duly provided for. (i) The City shall pay or reimburse , but only from Revenues and subject and subordinate to all then existing liens on and pledges of Revenues as security for the payment of Airport Obligations, any and all charges, fees, costs and expenses which may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the Indenture; (ii) the pursuit of any remedies under the Indenture or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture whether or not executed or completed, (iv) the violation by the City of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the Indenture or the transactions contemplated thereby, other than amounts resulting from the failure of to honor its obligations under the Policy. reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture. ARTICLE XI Miscellaneous Section 11.01. Fifty-Second Supplemental Indenture as Part of Indenture. This Fifty-Second Supplemental Indenture shall be construed in connection with and as a part of the Indenture and all terms, conditions and covenants contained in the Indenture, except as herein modified and except as restricted in the Indenture to Senior Lien Obligations of another Series, shall apply and be deemed to be for the equal benefit, security and protection ofthe Bonds. Section 11.02. Severability. If any provision of this Fifty-Second Supplemental Indenture shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever. Section 11.03. Payments Due on Saturdays, Sundays and Holidays. If any payment of interest or principal or redemption premium on the Bonds is due on a dale lhat is not a Business Day, payment shall be made on the next succeeding Business Day with the same force and effect as if made on the date which is fixed for such payment, and no interest shall accrue on such amount for the period after such due date. Section 11.04. Counterparts. This Fifty-Second Supplemental Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 11.05. Rules of Interpretation. Unless expressly indicated otherwise, references to Sections or Articles are to be construed as references to Sections or Articles of this instrument as originally executed. Use of the words "herein," "whereby," "hereunder," "hereof," "hereinbefore," "hereinafter" and other equivalent words refer to this Fifty-Second Supplemental Indenture and not solely lo the particular portion in which any such word is used. Section 11.06. Captions. The captions and headings in this Fifty-Second Supplemental Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Fifty-Second Supplemental Indenture. Section 11.07. Additional Notices. Copies of all notices, certificates or other communications given to the City or the Trustee pursuant to the requirements of the Indenture or this Fifty-Second Supplemental Indenture at the addresses set forth in Section 1105 of the Indenture shall be given to the Insurer and to any Qualified Credit Provider of Qualified Credit Instruments held in the Debt Service Reserve Account at the same time and in the same manner. In Witness Whereof, the City has caused these presents to be executed in its name and with its official seal hereunto affixed and attested by its duly authorized officials; and to evidence its acceptance of the trusts hereby created, the Trustee has caused these presents to be executed in its corporate name and attested by its duly authorized officers, as of the date first above written. City of Chicago By: ___ Chief Financial Officer [SEAL] Attest: By: City Clerk U.S. Bank National Association, as Trustee By: Authorized Signatory Attest: By: Authorized Signatory [Signature page to Fifty-Second Supplemental Indenture] 2016 Senior Manager: Co-Senior Managers: Co-Managers: Bond Counsel: Disclosure Counsel: Pension Disclosure Counsel Financial Advisor: Feasibility Consultant Trustee: ORD GARBs (New Money) Firm Name Morgan Stanley Barclays Piper Jaffray Goldman Sachs Ramirez Estrada Hinojosa Blaylock Beal Van Valdes & Moreno Melvin Securities Siebert Brandford & Shank Katten Much in Neal & Leroy, LLC Miller, Canfield, Paddock & Stone McGaugh Law Group Chapman & Cutler Frasca Columbia Capital Management Ricondo & Associates US Bank CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT SECTION I - GENERAL INFORMATION A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Morgan Stanley & Co. LLC d/b/a Morgan Stanley & Company LLC Check ONE of the following three boxes: Indicate whether the Disclosing Party submitting this EDS is: [x] the Applicant OR [ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: OR 3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in which the Disclosing Party holds a right of control: B. Business address of the Disclosing Party: 1585 Broadway New York, New York 10036 Telephone: 312-706-4058 Fax: 312-777-2319 Email: Will jam. Daley®morganstanley. com Name of contact person: william.Daley@morqanstanley.com
Federal Employer Identification No. (if you have one): i !
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being.handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
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SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF TFIE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
Person [x] Limited liability company
Publicly registered business corporation [ ] Limited liability partnership
Privately held business corporation [ ] Joint venture
Sole proprietorship [ ] Not-for-profit corporation
General partnership (Is the not-for-profit corporation also a 501(c)(3))?
Limited partnership [ ] Yes [ ] No
Trust [ ] Other (please specify)
2. For legaFentities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
p] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See EXHIBIT A
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the Cily may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Morgan Stanley Domestic Holdings, Inc 1585 Broadway Now York. NY 10036 100%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business retained or anticipated Address to be retained)
Relationship to Disclosing Party Fees (indicate whether
(subcontractor, attorney, paid or estimated.) NOTE:
lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
Mayer Brown 71 S. Wacker Drive Chicago, IL 60606
(Anticipated to be retained)
(Add sheets if necessary)
[] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
A. COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes
B. FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the. Office of Foreign Assets. Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
See EXHIBIT B in lieu of response to items above
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
Based on a review of Firm expenditures records, and to the best of our knowledge, information and belief,
the Disclosing Party has not given a gift, as defined herein, to any City of Chicago official or employee
at any time during the 12-month period preceding the execution date of this EDS.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
^] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
_x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. 1. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing.Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Morgan Stanley- & Go- LLC d/b/a Morgan Stanley & Company LLC (Print or type name of Disclosing Party)
By:
;n here) J
(Sign here)
William Daley
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
Signed and sworn to before me on (date) 3uLM 1^, SL&lh .
at County, ~^X//J/1 (sfe*).
OFFICIAL SEAL DUMA TYLER Notary PtMc • State of Illinois My CommlsshHf Expires Mar 19,2019
Notary Public.
Commission expires: fY\ 11 Lj
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationsh ip" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section ILB.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability ,company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ xj No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) tlie precise nature of such familial relationship.
Page 13 of 13
Exhibit A
Morgan Stanley & Co. LLC Current Appointments
Board Positions
:;Ass6muli;:M6hit;'/^Kol<;|: -i ::iK^e;iMattiiew-E/T:;::;-::;fiea)y, Brian C. [ r:: - ; ;stem/.Michael: ¦ Wipf, Thomas G.' y[ v.'^-.'\.
Officers
.^liOirector; • ^piredtpr;: Director • :r:^;;Di rector .ibir'ectbr
.:r \.:. ,,.;,/;.Ki^|riii!-.v
RIchter, Rose-Anne N * -1" _ T* . s Chief Compliance Officer ,
^unao^^or^fedn^ iF^llmerijorm:^
;;;GW^i^i^ertneir^ •',v:'i;
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAYWPROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [ ]No [X ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Exhibit B
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2016
OR
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758
Morgan Stanley
(Exact Name of Registrant as specified in its charter)
Delaware 1585 Broadway (212) 761-4000
(State or other jurisdiction of New York, NY 10036 . ilification No.) (Registrant's telephone number,
incorporation or organization) (Address of principal executive offices, . . . • ' including area code)
including zip code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No O
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [x] No ?
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [X] Accelerated Filer [~1
Non-Accelerated Filer fj Smaller reporting company fj
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No [X]
As of April 29, 2016, there were 1,937,024,359 shares of the Registrant's Common Stock, par value S0.01 per share, outstanding.
Part II—Other Information.
Item 1. Legal Proceedings.
The following new matters and developments have occurred since previously reporting certain matters in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Fonn 10-K"). Sec also "Legal Proceedings" in Part 1, Item 3 ofthe 2015 Form 10-K.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters.
On April 1, 2016, the California Attorney General's Office filed an action against the Company and certain affiliates in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees' Retirement System and the California Teachers' Retirement System. The complaint alleges that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief.
Civil Litigation.
On April 21, 2016, the Company filed a motion for summary judgment in Tlie Charles Schwab Corp. v. BNP Paribas Securities Corp., et al.
On April 12, 2016, the court in Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust. Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. granted in part and denied in part the Company's motion to dismiss the amended complaint, dismissing all claims except a single claim, regarding which the motion was denied without prejudice.
On April 12, 2016, the court in Deutsche Bank National Trust Company, solely in its capacity as- Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. granted the Company's motion to dismiss the complaint, and granted the plaintiff the ability to seek to replead certain aspects of the complaint.
Commercial Mortgage Related Matter.
On April 27, 2016, in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital, Inc., the United States Court of Appeals for the Second Circuit vacated the judgment of the United States District Court for the Southern District of New York ("SDNY") and remanded the case to the SDNY for further proceedings consistent with its opinion.
Other Litigation.
On October 20, 2014, a purported class action complaint was filed against the Company and other defendants styled Genesee County Employees' Retirement System v. Bank of America Corporation et al. in the SDNY. The action was later consolidated with four similar actions in SDNY under the lead case styled Alaska Electrical Pension Fund v. Bank of America Corporation et al. A consolidated amended complaint was filed on February 2, 2015 asserting claims for alleged violations of the Sherman Act, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. The consolidated amended complaint alleges, among other things, that the defendants engaged in antitrust violations with regards to the process of setting ISDAfix, a financial benchmark and seeks treble damages, injunctive relief, attorneys' fees and other relief On March 28, 2016, the court granted in part and denied in part the defendants' motion to dismiss the consolidated amended complaint.
Wealth Management Related Matters.
On March 21, 2016, the arbitration panel in Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al. issued an award in favor of plaintiffs in the amount of $32.8 million, plus attorneys' fees and costs.
Morgan Stanley
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 20/5 Commission File Number 1-11758
Morgan Stanley
(Iixacl name of Registrant as specified in its charter)
Delaware 1585 Broadway (212) 761-4000
(State or other jurisdiction of New York, NY 10036 "- .¦ :ntification No.) (Registrant's telephone number,
incorporation or organization; (Address of principal executive offices. including area code)
including zip code)
Securities registered pursuant to Section 12(b) ofthe Act:
Name of exchange on
Title of each class which registered
Common Stock, $0.01 par value New York Stock Exchange
Depositary Shares, each representing l/l ,000th interest in a share of Floating Rate Non-Cumulative Preferred Stock,
Scries A, $0 01 par value New York Stock Exchange
Depositary Shares, each representing l/l,000tlt interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Stock, Series E, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Slock, Series F, S0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Series G,
$0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred
Stock, Series I, $0.01 par value New York Stock Exchange
6 Va% Capital Securities of Morgan Stanley Capital Trust III (and Registrant's guarantee with respect thereto) New York Stock Exchange
6 'A% Capital Securities of Morgan Stanley Capital Trust IV (and Registrant's guarantee with respect thereto) New York Stock Exchange
5 V*% Capital Securities of Morgan Stanley Capital Trust V (and Registrant's guarantee with respect thereto) New York Stock Exchange
6.45% Capital Securities of Morgan Stanley Capital Trust VIII (and Registrant's guarantee with respect thereto) New York Stock Exchange
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 of Morgan Stanley Finance LLC (and
Registrant's guarantee with respect thereto) New York Stock Exchange
Market Vectors ETNs due March 31, 2020 (2 issuances); Market Vectors ETNs due April 30, 2020 (2 issuances') NYSE Area, Inc.
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031 NYSE Area, Inc.
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [x] NO d
Indicate by checkmark if Registrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Act. YES ? NO [x]
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES |x) NO ?
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period dial the Registrant was required to submit and post such files). YES (X| NO ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |x)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [xj Accelerated Filer ?
Non-Accelerated Filer ? Smaller reporting company ?
(Do not check if a smaller reporting company)
Indicate by check mark whether Registrant is a shell company (as defined in Exchange Act Rule 12b-2). YES Q NO [X]
As of June 30, 2015, the aggregate market value ofthe common stock of Registrant held by non-affiliates of Registrant was approximately S72,777,054,630. This calculation docs not reflect a determination that persons arc affiliates for any other purposes.
As of January 31, 2016, there were 1,958,568,849 shares of Registrant's common stock, $0.01 par value, outstanding.
Documents Incorporated by Reference: Portions of Registrant's definitive proxy statement for its 2016 annual meeting of shareholders arc incorporated by reference in Part III of this Form 10-K.
Legal Proceedings.
In addition to the matters described below, in the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases'are bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company's business, and involving, among other matters, sales and trading activities, financial products or offerings sponsored, underwritten or sold by the Company, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. The Company's future legal expenses may fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Company.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible, or to estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal questions relevant to the proceedings or investigations in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for a proceeding or investigation. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and investigations will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings or investigations could be material to the Company's operating results and cash flows for a particular period depending on, among other things, the level ofthe Company's revenues or income for such period.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies has increased materially in the financial services industry. As a result, the Company expects that it may become the subject of increased claims for damages and other relief and, while the Company has identified below certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters. The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General's Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities ("RMBS"), collateralized debt obligations ("CDOs"), structured investment vehicles ("SIVs") and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to the Company's due diligence on the loans that it purchased for securitization, the Company's communications with ratings agencies, the Company's disclosures to investors, and the Company's handling of servicing and foreclosure related issues.
Morgan Stanley
[n May 2014, the California Attorney General's Office ("CAAG"), which is one ofthe members ofthe RMBS Working Group, indicated that it has made certain preliminary conclusions that the Company made knowing and material misrepresentations regarding RMBS and that it knowingly caused material misrepresentations to be made regarding the Cheyne SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has further indicated that it believes the Company's conduct violated California law and that it may seek treble damages, penalties and injunctive relief. The Company does not agree with these conclusions and has presented defenses to them to the CAAG.
In October 2014, the Illinois Attorney General's Office ("ILAG") sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company pay ILAG approximately S88 million. The Company and ILAG reached an agreement to resolve the matter on February 10, 2016.
On January 13, 2015, the New York Attorney General's Office ("NYAG"), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprimc securitizations sponsored by the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation ofthe loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to resolve the matter on February 10, 2016.
On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney's Office for the Northern District of California, Civil Division (collectively, the "Civil Division") to pay S2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company. That settlement was finalized on February 10, 2016.
Civil Litigation.
On December 23, 2009, tlie Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiffs purchase of such certificates. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants' omnibus motion to dismiss plaintiffs amended complaint and on August 15, 2011, the court denied the Company's individual motion to dismiss the amended complaint. On March 7, 20l3, the court granted defendants' motion to strike plaintiffs demand for a jury trial. The defendants' joint motions for partial summary judgment were denied on November 9, 2015.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the Company was approximately $276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On August 11, 2011, plaintiffs federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants' demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiffs negligent misrepresentation claims were dismissed with prejudice.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the Superior Court of the State of California, styled 77iMorgan Stanley
containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiffs subsidiary by the Company was approximately SI80 million. The amended complaint raises claims under California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On April 10, 2012, the Company filed a demurrer to certain causes of action in the second amended complaint, which the court overruled on July 24, 2012. On November 24. 2014, plaintiffs negligent misrepresentation claims were dismissed with prejudice. An initial trial of certain of plaintiff s claims is scheduled to begin in July 2016.
On July 15, 2010, China Development Industrial Bank ("CDIB") filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County ("Supreme Court of NY"). The complaint relates to a S275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB's obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Company's motion to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiffs purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $78 million.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately S385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants' motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against the Company with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $332 million.
On August 7, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-4SL and Mortgage Pass-Through Certificates, Series 2006-4SL against the Company styled Morgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $303 million, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreement underlying the transaction, specific performance and unspecified damages and interest. On August 8, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint.
Morgan Stanley
On August 8, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-14SL, Mortgage Pass-Through Certificates, Series 2006-14SL, Morgan Stanley Mortgage Loan Trust 2007-4SL and Mortgage Pass-Through Certificates, Scries 2007-4SL against the Company. The complaint is styled Morgan Stanley Mortgage. Loan Trust 2006-14SL. et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trusts, which had original principal balances of approximately $354 million and $305 million respectively, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreements underlying the transactions, specific performance and unspecified damages and interest. On August 16, 2013, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 28, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-13ARX against the Company styled Morgan Stanley Mortgage Loan' Trust 2006-13ARX v. Morgan Stanley Morlgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. Plaintiff filed an amended complaint on January 17, 2013, which asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $609 million, breached various representations and warranties. The amended complaint seeks, among other relief, declaratory judgment relief, specific performance and unspecified damages and interest. By order entered September 30, 2014, the court granted in part and denied in part the Company's motion to dismiss the amended complaint. On July 13, 2015, plaintiff perfected its appeal from the court's September 30, 2014 decision.
On December 14, 2012, Royal Park Investments SA/NV filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Merrill Lynch et al. On October 24, 2013, plaintiff filed a new complaint against the Company in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Morgan Stanley et al, alleging that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $597 million. The complaint raises common law claims of fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud and seeks, among other things, compensatory and punitive damages. The plaintiff filed an amended complaint on December 1, 2015.
On January 10, 2013, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-10SL and Mortgage Pass-Through Certificates, Scries 2006-10SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $300 million, breached various representations and warranties. The complaint seeks, among other relief, an order requiring the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and interest. On August 8, 2014, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On January 31, 2013, HSH Nordbank AG and certain affiliates filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled HSH Nordbank AG et al. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $524 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On April 12, 2013, defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on July 21, 2015. On August 19, 2015, the Company filed a Notice of Appeal of the court's decision, and on August 20, 2015, the plaintiffs filed a Notice of Cross-Appeal. On August 25, 2015, the plaintiffs filed a motion for leave to amend their complaint.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that
Morgan Stanley
defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $644 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint. The Company perfected its appeal from that decision on June 12, 2015.
On May 17, 2013, plaintiff in 1KB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $132 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company's motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company perfected its appeal from the court's October 29, 2014 decision.
On July 2, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 (hOn July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint styled Morgan Stanley Mortgage Loan Trust 2007-2AX, by U.S. Bank National Association, solely in its capacity as Trustee v. Morgan Stanley Mortgage Capital Holdings LLC, as successor-by-merger to Morgan Stanley Mortgage Capital Inc., and Greenpoint Mortgage Funding, Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy, procedures in the transaction documents, unspecified damages and interest. On August 22, 2013, the Company a filed a motion to dismiss the complaint, which was granted in part and denied in part on November 24, 2014.
On August 26, 2013, a complaint was filed against the Company and certain affiliates in the Supreme Court of NY, styled Phoenix Light SF Limited et al v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiffs, or their assignors, of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs or their assignors by the Company was approximately $344 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation and rescission based on mutual mistake and seeks, among other things, compensatory damages, punitive damages or alternatively rescission or rcscissionary damages associated with the purchase of such certificates. The defendants filed a motion to dismiss the complaint on December 13, 2013, which the parties later agreed would be deemed to be directed at an amended complaint filed on June 17, 2014. On April 23, 2015, the court granted the Company's motion to dismiss the amended complaint, and on May 21, 2015, the plaintiffs filed a notice of appeal of that order.
On November 6, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf ofthe Trustee of the Morgan Stanley
Morgan Stanley
ABS Capital I Inc. Trust. Series 2007-NC3 (MSAC 2007-NC3) v. Morgan Stanley Mortgage Capital Holdings LLC, and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc.' Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. The complaint asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately SI.3 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On December 16, 2013, the Company filed a motion to dismiss the complaint.
On December 30, 2013, Wilmington Trust Company, in its capacity as trustee for Morgan Stanley Mortgage Loan Trust 2007-12, filed a complaint against the Company. The matter is styled Wilmington Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC et al. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $516 million, breached various representations and warranties. The complaint seeks, among other relief, unspecified damages, interest and costs. On February 28, 2014, the defendants filed a motion to dismiss the complaint. .
On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley Structured Trust I 2007-1, filed a complaint against the Company. The matter is styled Deutsche Bank National Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC and is pending in the United States District Court for the Southern District of New York ("SDNY"). The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $735 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified compensatory and/or rescissory damages, interest and costs. On April 3, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 19, 2014, Financial Guaranty Insurance Company ("FGIC") filed a complaint against the Company in the Supreme Court of NY, styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and alleges, among other things, that the net interest margin securities ("NTMS") in the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to certain notes that had an original balance of approximately $475 million. The complaint seeks, among other relief, specific performance of the NIM breach remedy procedures in the transaction documents, unspecified damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On September 23, 2014, FGIC filed a complaint against the Company in the Supreme Court of NY styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Company styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys' fees, costs and other related expenses, and interest. On October 20, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
Morgan Stanley
Commercial Mortgage Related Matter.
On January 25, 2011, the Company was named as a defendant in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital. Inc., a litigation pending in the SDNY. The suit, brought by the trustee of a series of commercial mortgage pass-through certificates, alleges that the Company breached certain representations and warranties with respect to an S81 million commercial mortgage loan that was originated and transferred to the trust by the Company. The complaint seeks, among other things, to have the Company repurchase the loan and pay additional monetary damages. On June 16, 2014, the court granted the Company's supplemental motion for summary judgment. On July 16, 2014, the plaintiff filed a notice of appeal.
Currency Related Matters.
Regulatory and Governmental Matters.
The Company is responding to a number of regulatory and governmental inquiries both in the United States and abroad related to its foreign exchange business. In addition, on June 29, 2015, the Company and a number of other financial institutions were named as respondents in a proceeding before Brazil's Council for Economic Defense related to alleged anticompetitive activity in the foreign exchange market for the Brazilian Real.
Class Action Litigation.
Beginning in December 2013, several foreign exchange dealers (including the Company and certain affiliates) were named as defendants in multiple purported antitnist class actions most of which have now been consolidated into a single proceeding in the United States District Court for the Southern District of New York styled Tn Re Foreign Exchange Benchmark Rates Antitrust Litigation. On July 16, 2015, plaintiffs filed an amended complaint generally alleging that defendants engaged in a conspiracy to fix, maintain or make artificial prices for key benchmark rates, to manipulate bid/ask spreads, and, by their behavior in the over-the-counter market, to thereby cause corresponding manipulation in the foreign exchange futures market. Plaintiffs seek declaratory relief as well as treble damages in an unspecified amount. Defendants filed a motion to dismiss the amended complaint on November 30, 2015.
On September 11, 2015. several foreign exchange dealers (including the Company and an affiliate) were named as defendants in a purported class action filed in the Ontario Superior Court of Justice styled Christopher Staines v. Royal Bank of Canada, et al. The plaintiff has made allegations similar to those in the In Re Foreign Exchange Benchmark Rates Antitrust Litigation and seeks C$1 billion as well as C$50 million in punitive damages. On September 16, 2015, a parallel proceeding was initiated in Quebec Superior Court styled Christine Beland v. Royal Bank of Canada, et al. based on similar allegations and seeking C$100 million as well as C$50 million in punitive damages.
Wealth Management Related Matters.
The Company is currently defending itself in an ongoing arbitration styled Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al., which is pending before a Financial Industry Regulatory Authority arbitration panel in the state of Florida. Plaintiffs assert claims for excessive trading, unauthorized use of discretion, undue influence, negligence and negligent supervision, constructive fraud, abuse of fiduciary duty, unjust enrichment and violations of several Florida statutes in connection with brokerage accounts owned by a former high-net worth wealth management client who is now deceased. Plaintiffs are seeking approximately $475 million in disgorgement, compensatory damages, statutory damages, punitive damages and treble damages under various factual and legal theories.
The following matters were terminated during or following the quarter ended December 31, 2015:
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of NY, styled Sealink Funding Limited v. Morgan Stanley, et al. A second amended complaint, filed on March 20, 2013, alleged that defendants made untrue statements and material omissions in the sale of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold by the Company was approximately $507 million. On April 18, 2014, the court granted the Company's motion to dismiss the second amended complaint. The dismissal was affirmed on appeal on November 12, 2015.
Morgan Stanley
On January 25, 2012, Dexia SA/NV and certain of its affiliated entities filed a complaint against the Company in the Supreme Court of NY. styled Dexia SA/NV et al. v. Morgan Stanley, et al. An amended complaint was filed on May 24, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs by the Company was approximately S626 million. On October 16, 2013, the court granted the defendants' motion to dismiss the amended complaint. The dismissal was affirmed on appeal on January 12, 2016.
On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1,073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations ofthe New Jersey RICO statute, and includes a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.
On August 10, 2012, the FDIC, as receiver for Colonial Bank, filed a complaint against the Company and other defendants in the Circuit Court of Montgomery, Alabama styled Federal Deposit Insurance Corporation as Receiver for Colonial Bank v. Citigroup Mortgage Loan Trust Inc. et al. On January 15. 2014, the FDIC, as receiver for United Western Bank filed a complaint against the Company and others in the District Court of the State of Colorado, styled Federal Deposit Insurance Corporation, as Receiver for United Western Bank v. Banc of America Funding Corp., et al. The complaints in those cases asserted that the Company made untrue statements and material omissions in connection with the sale of mortgage pass-through certificates purchased by Colonial Bank and United Western Bank, respectively. On January 28, 2016, the parties reached an agreement to settle both actions.
On August 5, 2013, Landesbank Baden-Wurttembcrg and two affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of NY, styled Landesbank Baden-Wiirttemberg et al. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $50 million. On January 20, 2016, the parties reached an agreement in principle to settle the litigation.
On August 16, 2013, the.plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Incorporated, et al. filed a complaint against the Company and certain affiliates in the United States District Court for the District of Kansas. On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against the Company and certain affiliates in the SDNY. The complaints alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs in the matters was approximately $567 million and $417 million, respectively. The complaints alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle both matters.
On September 16, 2014, the Virginia Attorney General's Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that the Company and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.
Morgan Stanley
Matters Related to the CDS Market.
On July 1, 2013, the European Commission ("EC") issued a Statement of Objections ("SO") addressed to twelve financial firms (including the Company), the International Swaps and Derivatives Association, Inc. ("ISDA") and Markit Group Limited ("Markit") and various affiliates alleging that, between 2006 and 2009, the recipients breached European Union competition law by taking and refusing to take certain actions in an effort to prevent the development of exchange traded credit default swap ("CDS") products. The Company and the other recipients of the SO filed a response to the SO on January 21, 2014, and attended oral hearings before the EC during the period May 12-19, 2014. On December 4, 2015, the EC announced that it had closed its antitrust investigation into the twelve financial firms, including the Company.
Beginning in May 2013, twelve financial firms (including the Company), as well as ISDA and Markit, were named as defendants in multiple purported antitrust class actions consolidated into a single proceeding in the SDNY styled In Re: Credit Default Swaps Antitrust Litigation. Plaintiffs alleged that defendants violated United States antitrust laws from 2008 to present in connection with their alleged efforts to prevent the development of exchange traded CDS products. The complaints sought, among other relief, certification of a class of plaintiffs who purchased CDS from defendants in the United States, treble damages and injunctive relief. On September 30, 2015, the Company reached an agreement with plaintiffs to settle the litigation. The settlement received preliminary court approval on October 29, 2015, and is subject to final court approval.
Item 4. Mine Safety Disclosures.
Not applicable.
Morgan Stanley
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Morgan Stanley Domestic Holdings, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
f<] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: Horgan Stanley t, Co. llc d/b/a Morgan staniey & company llc
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address ofthe Disclosing Party: 1585 Broadway
New York, NY 10036
Telephone: 212-762-6565 Fax: 212-507-3656 Email: louis .palladino@morganstanley.com
Name of contact person: Louis Paiiadino
Federal Employer Identification No. (if you have one): n/a
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature ofthe Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
[x] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
[J Trust []
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [x] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s). ..
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See EXHIBIT A
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Morgan Stanley Capital Management, LLC 1585 Broadway New York, NY 1003G 100%
SECTION.IH -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any
. state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons .or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither tlie Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the.Office of Foreign Assets. Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
See EXHIBIT B in lieu of response to items above
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None '
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
Based on a review of Firm expenditures records, and to the best of our knowledge, information and belief,
the Disclosing Party has not given a gift, as defined herein, to any City of Chicago official or employee
at any time during the 12-month period preceding the execution date of this EDS.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
fc] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance, with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
_x 1, The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2, The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Haye you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-1 54-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any Fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities wall not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party wilt obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Morgan Stanl&ytffimestic Holdings, Inc.
Louis A. Palladino, Jr.
(Print or type name of person signing)
Vice President
(Print or type title of person signing)
ANGELA WASHINGTON NOTARY PUBllC-SfATE OF NEW YORK No. 01WA6236247 Qualified In New York County My Commission Expiies Fobruoiy 2B, 2019
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" wilh any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l .a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
Exhibit A
Morgan Stanley Domestic Holdings, Inc. Current Appointments
Board Positions
;G6^rnai^^ff^ey^^^¦; jHeaton^Enc'. :; ¦ScViiffm^Eihan^pv^
Officers
mm ' ¦
Creaaey/Robert John > "'«»¦¦'_¦' ' \ J.-f" j
•.^jjhr^fusta^ Njzlolek,.Mamie Elizabeth Q %. "
¦vW-Director. . ¦ ""Director
¦:::;President-p:i^!->r^lyjce President.;
;-:::i"!;::S;^iyice"Rres|der)tf:~
yy:-' ir^^Mi^^ri^id?^,
[f±IjSjce President*. J ""'Treasurer
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [X] Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Exhibit B
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM. 10-Q
fx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2016
OR
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758
Morgan Stanley
(Exact Name of Registrant as specified in its charter)
Delaware 1585 Broadway
(State or other jurisdiction of New York, NY 10036 incorporation or organization) (Address of principal executive offices,
including zip code)
(212) 761-4000
.No.) (Registrant's telephone number,
' including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x) No fj
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [X] No ?
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [x] Accelerated Filer I I
Non-Accelerated Filer fj Smaller reporting company [j"
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No [X]
As of April 29, 2016, there were 1,937,024,359 shares of the Registrant's Common Stock, par value SO.01 per share, outstanding.
Part II—Other Information.
Item 1. Legal Proceedings.
The following new matters and developments have occurred since previously reporting certain matters in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Fonn 10-K"). See also "Legal Proceedings" in Part I, Item 3 ofthe 2015 Form 10-K.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters.
On April I, 2016, the California Attorney General's Office filed an action against the Company and certain affiliates in' California state court stylcd'California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees' Retirement System and the California Teachers' Retirement System. The complaint alleges that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief.
Civil Litigation.
On April 21, 2016, the Company filed a motion for summary judgment in The Charles Schwab Corp. v. BNP Paribus Securities Corp., et al.
On April 12, 2016, the court in Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. granted in part and denied in part the Company's motion to dismiss the amended complaint, dismissing all claims except a single claim, regarding which the motion was denied without prejudice.
On April 12, 2016, the court in Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. granted the Company's motion to dismiss the complaint, and granted the plaintiff the ability to seek to replead certain aspects of the complaint.
Commercial Mortgage Related Matter.
On April 27, 2016, in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital. Inc., the United States Court of Appeals for the Second Circuit vacated the judgment of the United States District Court for the Southern District of New York ("SDNY") and remanded the case to the SDNY for further proceedings consistent with its opinion.
Other Litigation.
On October 20, 2014, a purported class action complaint was filed against the Company and other defendants styled Genesee County Employees' Retirement System v. Bank of America Corporation et al. in the SDNY. The action was later consolidated with four similar actions in SDNY under the lead case styled Alaska Electrical Pension Fund v. Bank of America Corporation et al. A consolidated amended complaint was filed on February 2, 2015 asserting claims for alleged violations of the Sherman Act, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. The consolidated amended complaint alleges, among other things, that the defendants engaged in antitrust violations with regards to the process of setting ISDAfix, a financial benchmark and seeks treble damages, injunctive relief, attorneys' fees and other relief. On March 28, 2016, the court granted in part and denied in part the defendants' motion to dismiss the consolidated amended complaint.
Wealth Management Related Matters.
On March 21, 2016, the arbitration panel in Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al. issued an award in favor of plaintiffs in the amount of S32.8 million, plus attorneys' fees and costs.
Morgan Stanley
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 2015 Commission File Number 1-11758
Morgan Stanley
(Exact name of Registrant as SDCcificd in its charter)
Delaware 1585 Broadway (212) 761-4000
(State or other jurisdiction of New York, NY 10036 ", ° ) (Registrant's telephone number,
'incorporation or organization) (Address of principal executive offices, . .' including area code)
including zip code) '¦
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate Non-Cumulative Preferred Stock,
Scries A, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Stock, Series E, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floaling Rale Non-Cumulative Preferred
Stock, Series F, SO. 01 par value New York Stock Exchange
Depositary Shares, each representing l/l,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Scries G,
$0.01 par value New York Slock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred
Stock, Series I, $0.01 par value New York Stock Exchange
6 Va% Capital Securities of Morgan Stanley Capital Trust III (and Registrant's guarantee with respect thereto) New York Stock Exchange
6 Va% Capital Securities of Morgan Stanley Capital Trust IV (and Registrant's guarantee with respect thereto) New York Stock Exchange
5 '/<% Capital Securities of Morgan Stanley Capital Trust V (and Registrant's guarantee with respect thereto) New York Stock Exchange
6.45% Capital Securities of Morgan Stanley Capital Trust VIII (and Registrant's guarantee with respect thereto) New York Stock Exchange
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 of Morgan Stanley Finance LLC (and
Registrant's guarantee with respect thereto) New York Stock Exchange
Market Vectors ETNs due March 31, 2020 (2 issuances); Market Vectors ETNs due April 30, 2020 (2 issuances) NYSE Area, Inc.
Morgan Stanley Gushing® MLP High Income Index ETNs due March 21,2031 NYSE Area, Inc.
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [x] NO fj
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Act. YES E]NO (x]
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES 13 NO ?
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES [X] NO ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, lo the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Fonn 10-K or any amendment to this Form 10-K. [x]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 ofthe Exchange Act. (Check one):
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Indicate by check mark whether Registrant is a shell company {as defined in Exchange Act Rule 12b-2). YES ? NO [X]
As of June 30, 2015, the aggregate market value of tlie common stock of Registrant held by non-affiliates of Registrant was approximately S72,777,054,630. This calculation docs not reflect a determination that persons arc affiliates for any other purposes.
As of January 31, 2016, there were 1,958,568,849 shares of Registrant's common stock, S0.01 par value, outstanding.
Documents Incorporated by Reference: Portions of Registrant's definitive proxy statement for its 2016 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.
Legal Proceedings.
In addition to the matters described below, in the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company's business, and involving, among other matters, sales and trading activities, financial products or offerings sponsored, underwritten or sold by the Company, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. The Company's future legal expenses may fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Company.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible, or to estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal questions relevant to the proceedings or investigations in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for a proceeding or investigation. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and investigations will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings or investigations could be material to the Company's operating results and cash flows for a particular period depending on, among other things, the level ofthe Company's revenues or income for such period.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies has increased materially in the financial services industry. As a result, the Company expects that it may become the subject of increased claims for damages and other relief and, while the Company has identified below certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters. The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General's Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities ("RMBS"), collateralized debt obligations ("CDOs"), structured investment vehicles ("SIVs") and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which arc in advanced stages, include, but are not limited to, investigations related to the Company's due diligence on the loans that it purchased for securitization, the Company's communications with ratings agencies, the Company's disclosures to investors, and the Company's handling of servicing and foreclosure related issues.
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In May 2014, the California Attorney General's Office ("CAAG"), which is one of the members of the RMBS Working Group, indicated that it has made certain preliminary conclusions that the Company made knowing and material misrepresentations regarding RMBS and that it knowingly caused material misrepresentations (o be made regarding the Cheyne SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has further indicated that it believes the Company's conduct violated California law and that it may seek treble damages, penalties and injunctive relief. The Company does not agree with these conclusions and has presented defenses to them to the CAAG.
In October 2014, the Illinois Attorney General's Office ("ILAG") sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company pay ILAG approximately S88 million. The Company and ILAG reached an agreement to resolve the matter on February 10, 2016.
On January 13, 2015, the New York Attorney General's Office ("NYAG"), which is also a member ofthe RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprime securitizations sponsored by the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to resolve the matter on February 10, 2016.
On February 25, 2015, the Company reached an agreement in principle with the United Slates Department of Justice, Civil Division and the United States Attorney's Office for the Northern District of California, Civil Division (collectively, the "Civil Division") to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company. That settlement was finalized on February 10, 2016.
Civil Litigation.
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiffs purchase of such certificates. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants' omnibus motion to dismiss plaintiff's amended complaint and on August 15, 2011, the court denied the Company's individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants' motion to strike plaintiffs demand for a jury trial. The defendants' joint motions for partial summary judgment were denied on November 9, 2015.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the Company was approximately $276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiffs purchase.of such certificates. On August 11, 2011, plaintiffs federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants' demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiffs negligent misrepresentation claims were dismissed with prejudice.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the Superior Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. The second amended complaint, filed on March 5, 2012, alleges that defendants made untrue statements and material omissions in the sale to one of plaintiffs subsidiaries of a number of mortgage pass-through certificates backed by securitization trusts
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containing residential mortgage loans. Tire total amount of certificates allegedly sold to plaintiffs subsidiary by the Company was approximately SI80 million. The amended complaint raises claims under California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On April 10, 2012, the Company filed a demurrer to certain causes of action in the second amended complaint, which the court overruled on July 24, 2012. On November 24, 2014, plaintiffs negligent misrepresentation claims were dismissed with prejudice. An initial trial of certain of plaintiff s claims is scheduled to begin in July 2016.
On July 15, 2010, China Development Industrial Bank ("CDJB") filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County ("Supreme Court of NY"). The complaint relates to a S275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDTB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB's obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Company's motion to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiffs purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one ofthe securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $78 million.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and mateiial omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately S385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants' motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against the Company with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $332 million.
On August 7, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-4SL and Mortgage Pass-Through Certificates, Series 2006-4SL against the Company styled Morgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $303 million, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreement underlying the transaction, specific performance and unspecified damages and interest. On August 8, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint.
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On August 8, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Morlgage Loan Trust 2006-14SL, Mortgage Pass-Through Certificates, Scries 2006- 14SL, Morgan Stanley Mortgage Loan Trust 2007-4SL and Mortgage Pass-Through Certificates, Series 2007-4SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-14SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest, to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trusts, which had original principal balances of approximately S354 million and $305 million respectively, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreements underlying the transactions, specific performance and unspecified damages and interest. On August 16, 2013, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 28, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-13ARX against the Company styled Morgan Stanley Mortgage Loan Trust 2006-13ARX v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. Plaintiff filed an amended complaint on January 17, 2013, which asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $609 million, breached various representations and warranties. The amended complaint seeks, among other relief, declaratory judgment relief, specific performance and unspecified damages and interest. By order entered September 30, 2014, the court granted in part and denied in part the Company's motion to dismiss the amended complaint. On July 13, 2015, plaintiff perfected its appeal from the court's September 30, 2014 decision.
On December 14, 2012, Royal Park Investments SA/NV filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Merrill Lynch et al. On October 24, 2013, plaintiff filed a new complaint against the Company in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Morgan Stanley et al, alleging that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $597 million. The complaint raises common law claims of fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud and seeks, among other things, compensatory and punitive damages. The plaintiff filed an amended complaint on December 1, 2015.
On January 10, 2013, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006- 10SL and Mortgage Pass-Through Certificates, Series 2006-10SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in, the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $300 million, breached various representations and warranties. The complaint seeks, among other relief, an order requiring the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and interest. On August 8, 2014, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On January 31, 2013, HSH Nordbank AG and certain affiliates filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled HSH Nordbank AG et al. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $524 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On April 12, 2013, defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on July 21, 2015. On August 19, 2015, the Company filed a Notice of Appeal of the court's decision, and on August 20, 2015, the plaintiffs filed a Notice of Cross-Appeal. On August 25, 2015, the plaintiffs filed a motion for leave to amend their complaint.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that
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defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $644 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint. The Company perfected its appeal from that decision on June 12, 2015.
On May 17, 2013, plaintiff in 1KB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by.the Company to plaintiff was approximately SI32 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company's motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company perfected its appeal from the court's October 29, 2014 decision.
On July 2, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 (MSAC 2007-NC1) v. Morgan Stanley ABS Capital I Inc., and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. On February 3, 2014, the plaintiff filed an amended complaint, which asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.25 billion, breached various representations and warranties. The amended complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission and interest. On March 12, 2014, the Company filed a motion to dismiss the amended complaint.
On July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint styled Morgan Stanley Mortgage Loan Trust 2007-2AX, by U.S. Bank National Association, solely in its capacity as Trustee v. Morgan Stanley Mortgage Capital Holdings LLC, as successor-by-merger to Morgan Stanley Mortgage Capital Inc., and Greenpoint Mortgage Funding, Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages and interest. On August 22, 2013, the Company a filed a motion to dismiss the complaint, which was granted in part and denied in part on November 24, 2014.
On August 26, 2013, a complaint was filed against the Company and certain affiliates in the Supreme Court of NY, styled Phoenix Light SF Limited et al v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiffs, or their assignors, of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs or their assignors by the Company was approximately S344 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation and rescission based on mutual mistake and seeks, among other things, compensatory damages, punitive damages or alternatively rescission or rescissionary damages associated with the purchase of such certificates. The defendants filed a motion to dismiss the complaint on December 13, 2013, which the parties later agreed would be deemed to be directed at an amended complaint filed on June 17, 2014. On April 23, 2015, the court granted the Company's motion to dismiss the amended complaint, and on May 21, 2015, the plaintiffs filed a notice of appeal of that order.
On November 6, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley
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ABS Capital I Inc. Trust. Series 2007-NC3 (MSAC 2007-NC3) v. Morgan Stanley Mortgage Capital Holdings LLC, and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. The complaint asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately SI.3 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On December 16, 2013, the Company filed a motion to dismiss the complaint.
On December 30, 2013, Wilmington Trust Company, in its capacity as trustee for Morgan Stanley Mortgage Loan Trust 2007-12, filed a complaint against the Company. The matter is styled Wilmington Trust Company v. Morgan Stanley-Mortgage Capital Holdings LLC et al. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $516 million, breached various representations and warranties. The complaint seeks, among other relief, unspecified damages, interest and costs. On February 28, 2014, the defendants filed a motion to dismiss the complaint.
On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley Structured Trust I 2007-1, filed a complaint against the Company. The matter is styled Deutsche Bank National Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC and is pending in the United States District Court for the Southern District of New York ("SDNY"). The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $735 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified compensatory and/or rescissory damages, interest and costs. On April 3, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 19, 2014, Financial Guaranty Insurance Company ("FGIC") filed a complaint against the Company in the Supreme Court of NY, styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and alleges, among other things, that the net interest margin securities ("NIMS") in the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to certain notes that had an original balance of approximately $475 million. The complaint seeks, among other relief, specific performance of the NIM breach remedy procedures in the transaction documents, unspecified damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On September 23, 2014, FGIC filed a complaint against the Company in the Supreme Court of NY styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately S876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Company styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys' fees, costs and other related expenses, and interest. On October 20, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
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Commercial Mortgage Related Matter.
On January 25, 2011, the Company was named as a defendant in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital. Inc., a litigation pending in the SDNY. The suit, brought by the trustee of a series of commercial mortgage pass-through certificates, alleges that the Company breached certain representations and warranties with respect to an S81 million commercial mortgage loan that was originated and transferred to the trust by the Company. The complaint seeks, among other things, to have the Company repurchase the loan and pay additional monetary damages. On June 16, 2014, the court granted the Company's supplemental motion for summary judgment. On July 16, 2014, the plaintiff filed a notice of appeal.
Currency Related Matters.
Regulatory and Governmental Matters.
The Company is responding to a number of regulatory and governmental inquiries both in the United States and abroad related to its foreign exchange business. In addition, on June 29, 2015, the Company and a number of other financial institutions were named as respondents in a proceeding before Brazil's Council for Economic Defense related to alleged anticompetitive activity in the foreign exchange market for the Brazilian Real.
Class Action Litigation.
Beginning in December 2013, several foreign exchange dealers (including the Company and certain affiliates) were named as defendants in multiple purported antitnist class actions most of which have now been consolidated into a single proceeding in the United States District Court for the Southern District of New York styled In Re Foreign Exchange Benchmark Rates Antitrust Litigation. On July 16, 2015, plaintiffs filed an amended complaint generally alleging that defendants engaged in a conspiracy to fix, maintain or make artificial prices for key benchmark rates, to manipulate bid/ask spreads, and, by their behavior in the over-the-counter market, to thereby cause corresponding manipulation in the foreign exchange futures market. Plaintiffs seek declaratory relief as well as treble damages in an unspecified amount. Defendants filed a motion to dismiss the amended complaint on November 30, 2015.
On September 11, 2015, several foreign exchange dealers (including the Company and an affiliate) were named as defendants in a purported class action filed in the Ontario Superior Court of Justice styled Christopher Staines v. Royal Bank of Canada, et al. The plaintiff has made allegations similar to those in the In Re Foreign Exchange Benchmark Rates Antitrust Litigation and seeks C$1 billion as well as C$50 million in punitive damages. On September 16, 2015, a parallel proceeding was initiated in Quebec Superior Court styled Christine Beland v. Royal Bank of Canada, et al. based on similar allegations and seeking C$100 million as well as C$50 million in punitive damages.
Wealth Management Related Matters.
The Company is currently defending itself in an ongoing arbitration styled Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al, which is pending before a Financial Industry Regulatory Authority arbitration panel in the state of Florida. Plaintiffs assert claims for excessive trading, unauthorized use of discretion, undue influence, negligence and negligent supervision, constructive fraud, abuse of fiduciary duty, unjust enrichment and violations of several Florida statutes in connection with brokerage accounts owned by a former high-net worth wealth management client who is now deceased. Plaintiffs are seeking approximately $475 million in disgorgement, compensatory damages, statutory damages, punitive damages and treble damages under various factual and legal theories.
The following matters were terminated during or following the quarter ended December 31, 2015:
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of NY, styled Sealink Funding Limited v. Morgan Stanley, et al. A second amended complaint, filed on March 20, 2013, alleged that defendants made untrue statements and material omissions in the sale of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold by the Company was approximately $507 million. On April 18, 2014, the court granted the Company's motion to dismiss the second amended complaint. The dismissal was affirmed on appeal on November 12, 2015.
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On January 25, 2012, Dexia SA/NV and certain of its affiliated entities filed a complaint against the Company in the Supreme Court of NY, styled Dexia SA/NV et al. v. Morgan Stanley, et al. An amended complaint was filed on May 24, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs by the Company was approximately S626 million. On October 16, 2013, the court granted the defendants' motion to dismiss the amended complaint. The dismissal was affirmed on appeal on January 12, 2016.
On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1,073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey RICO statute, and includes a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.
On August 10, 2012, the FDIC, as receiver for Colonial Bank, filed a complaint against the Company and other defendants in the Circuit Court of Montgomery, Alabama styled Federal Deposit Insurance Corporation as Receiver for Colonial Bank v. Citigroup Mortgage Loan Trust Inc. et al. On January 15, 2014, the FDIC, as receiver for United Western Bank filed a complaint against the Company and others in the District Court of the State of Colorado, styled Federal Deposit Insurance Corporation, as Receiver for United Western Bank v. Banc of America Funding Corp., et al. The complaints in those cases asserted that the Company made untrue statements and material omissions in connection with the sale of mortgage pass-through certificates purchased by Colonial Bank and United Western Bank, respectively. On January 28, 2016, the parties reached an agreement to settle both actions.
On August 5, 2013, Landesbank Baden-Wurttemberg and two affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of NY, styled Landesbank Baden-Wurttemberg et al. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $50 million. On January 20, 2016, the parties reached an agreement in principle to settle the litigation.
On August 16, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Incorporated, et al. filed a complaint against the Company and certain affiliates in the United States District Court for the District of Kansas. On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against the Company and certain affiliates in the SDNY. The complaints alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs in the matters was approximately $567 million and $417 million, respectively. The complaints alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle both matters.
On September 16, 2014, the Virginia Attorney General's Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et a!., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that the Company and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.
Morgan Stanley
Matters Related to the CDS Market.
On July 1, 2013. the European Commission ("EC") issued a Statement of Objections ("SO") addressed to twelve financial firms (including the Company), the International Swaps and Derivatives Association, Inc. ("ISDA") and Markit Group Limited ("Markit") and various affiliates alleging that, between 2006 and 2009, the recipients breached European Union competition law by taking and refusing to take certain actions in an effort to prevent the development of exchange traded credit default swap ("CDS") products. The Company and the other recipients of the SO filed a response to the SO on January 21, 2014, and attended oral hearings before the EC during the period May 12-19, 2014. On December 4, 2015, the EC announced that it had closed its antitrust investigation into the twelve financial firms, including the Company.
Beginning in May 2013, twelve financial firms (including the Company), as well as ISDA and Markit, were named as defendants in multiple purported antitrust class actions consolidated into a single proceeding in the SDNY styled In Re: Credit Default Swaps Antitrust Litigation. Plaintiffs alleged that defendants violated United States antitrust laws from 2008 to present in connection with their alleged efforts to prevent the development of exchange traded CDS products. The complaints sought, among other relief, certification of a class of plaintiffs who purchased CDS from defendants in the United States, treble damages and injunctive relief. On September 30, 2015, the Company reached an agreement with plaintiffs to settle the litigation. The settlement received preliminary court approval on October 29, 2015, and is subject to final court approval.
Item 4. Mine Safety Disclosures.
Not applicable.
Morgan Stanley
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I--GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Morgan Stanley Capital Management, LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
1. [ ] the Applicant
OR
2. a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: M°-9an staniey t co. llc d/b/a Morgan Stanley & company llc
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 1585 Broadway
New York, NY 10036
Telephone: 212-762-6565 Fax: 212-507-3656 Email: louis .palladino@morganstanley.com
Name of contact person: Louis Paiiadino
Federal Employer Identification No. (if you have one): n/a
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
Person [x]
Publicly registered business corporation [ ]
Privately held business corporation [ ]
Sole proprietorship [ ]
General partnership (Is
Limited partnership
Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [x] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s). ..
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See EXHIBIT A
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Morgan Stanley 1585 Broadway New York, NY 10036 100%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
|x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes > [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 'below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons, or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the. Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
See EXHIBIT B in lieu b£ response to items above
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution dale of this EDS, an employee, or elected or appointed official, ofthe City ofChicago (if none, indicate with "N/A" or "none").
¦ None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
Based on a review of Firm expenditures records, and to the best of our knowledge, information and belief,
the Disclosing Party has not given a gift, as defined herein, to any City of Chicago official or employee
at any time during the 12-month period preceding the execution date of this EDS.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is ' [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes [x]No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
_x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in. form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
o
Haye you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available tp the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor arc the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F. 1., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Louis A. Palladino, Ir.
(Print or type, name of person signing)
Vice President
(Print or type title of person signing)
ANGELA WASHINGTON NOTARY PUBLIC-STATE OF NEW YORK No. 01WA6236247 Qualiflod in Now Yoik County My Commission Expkes Fobruaty 28, 2019
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ xj No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
Exhibit A
Morgan Stanley Capital Management, LLC
Current Appointments
Board Positions
Goodman, Jeffrey >7 J' ' ?iy « ^hjf^an;:;Etiha^
Officers
W^BBM
.SchifMgrt;^
Heaton? E,rjc- > 4,1 c-,Y i -vMefi§a;;jir^ :!rWiadrnj^££L^^
; ;; Manager^ ' Manager'iijfibard oTi'Managefs) ' Mahager(Boarci df-Managers)'.
^President;
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [X ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Exhibit B
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2016
OR
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758
Morgan Stanley
(Exact Name of Registrant as specified in its charter)
Delaware 1585 Broadway
(State or other jurisdiction of New York, NY 10036 incorporation or organization) (Address of principal executive offices,
including zip code)
(212) 761-4000
, io.) (Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X) No Q
'Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [x] No ?
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [x] Accelerated Filer [~1
Non-Accelerated Filer rj Smaller reporting company fj]
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No M
As of April 29, 2016, there were 1,937,024,359 shares of the Registrant's Common Stock, par value SO.01 per share, outstanding.
Part II—Other Information.
Item 1. Legal Proceedings.
The following new matters and developments have occurred since previously reporting certain matters in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K"). Sec also "Legal Proceedings" in Part I, Item 3 of the 2015 Form 10-K.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters.
On April 1, 2016, the California Attorney General's Office filed an action against the Company and certain affiliates in California state court styled California v. Morgan Stanley, et ai, on behalf of California investors, including the California Public Employees' Retirement System and the California Teachers' Retirement System. The complaint alleges that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Chcyne SIV, and asserts violations ofthe California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief.
Civil Litigation.
On April 21, 2016, the Company filed a motion for summary judgment in 'Die Charles Schwab Corp. v. BNP Paribas Securities Corp., et al.
On April 12, 2016, the court in Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. granted in part and denied in part the Company's motion to dismiss the amended complaint, dismissing all claims except a single claim, regarding which the motion was denied without prejudice.
On April 12,2016, the court in Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. granted the Company's motion to dismiss the complaint, and granted the plaintiff the ability to seek to replead certain aspects ofthe complaint.
Commercial Mortgage Related Matter.
On April 27, 2016, in 77ie Bank of New York Mellon Trust. National Association v. Morgan Stanley Mortgage Capital, Inc., the United States Court of Appeals for the Second Circuit vacated the judgment of the United States District Court for the Southern District of New York ("SDNY") and remanded the case to the SDNY for further proceedings consistent with its opinion.
Other Litigation.
On October 20, 2014, a purported class action complaint was filed against the Company and other defendants styled Genesee County Employees' Retirement System v. Bank of America Corporation et al. in the SDNY. The action was later consolidated with four similar actions in SDNY under the lead case styled Alaska Electrical Pension Fund v. Bank of America Corporation et al. A consolidated amended complaint was filed on February 2, 2015 asserting claims for alleged violations of the Sherman Act, breach of contract, breach ofthe implied covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. The consolidated amended complaint alleges, among other things, that the defendants engaged in antitrust violations with regards to the process of setting ISDAfix, a financial benchmark and seeks treble damages, injunctive relief, attorneys' fees and other relief. On March 28, 2016, the court granted in part and denied in part the defendants' motion to dismiss the consolidated amended complaint.
Wealth Management Related Matters.
On March 21, 2016, the arbitration panel in Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al. issued an award in favor of plaintiffs in the amount of $32.8 million, plus attorneys' fees and costs.
Morgan Stanley
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934 For the year ended December 31, 2015 Commission File Number 1-11758
Morgan Stanley
(Rxact name of Registrant as specified in its charter)
Delaware 1585 Broadway (212) 761-4000
(State or other jurisdiction of New York, NY 10036 No.) (Registrant's telephone number,
incorporation or organization) (Address of principal executive offices, ¦ including area code)
including zip code)
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate Non-Cumulative Preferred Stock,
Series A, $0.01 par value New York Stock Exchange
Depositary Shares, each representing I/I,000th interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Stock, Series E, $0.01 par value New York Stock Exchange
Depositary Shares, each representing l/l,000th interest in a share of Fixed-to-Floaling Rate Non-Cumulative Preferred
Stock, Series F, SO.01 par value New York Stock Exchange
Depositary Shares, each representing l/l,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Scries G,
$0.01 par value New York Stock Exchange
Depositary Shares, each representing l/l ,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred
Stock, Scries 1, $0.01 par value New York Stock Exchange
6 '/<% Capital Securities of Morgan Stanley Capital Trust III (and Registrant's guarantee with respect thereto) New York Stock Exchange
6 'A% Capital Securities of Morgan Stanley Capital Trust IV (and Registrant's guarantee with respect thereto) New York Stock Exchange
5 V*% Capital Securities of Morgan Stanley Capital Trust V (and Registrant's guarantee with respect thereto) New York Stock Exchange
6.45% Capital Securities of Morgan Stanley Capital Trust VIII (and Registrant's guarantee with respect thereto) New York Stock Exchange
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 of Morgan Stanley Finance LLC (and
Registrant's guarantee with respect thereto) New York Stock Exchange
Market Vectors ETNs due March 31, 2020 (2 issuances); Market Vectors ETNs due April 30, 2020 (^issuances) NYSE Area, Inc.
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031 NYSE Area, Inc.
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. YES |x] NO FJ
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ? NO (x]
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES 0 NO ?
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES [X] NO ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K. is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Fonn 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer (xj Accelerated Filer ?
Non-Accelerated Filer ? Smaller reporting company ?
(Do not check if a smaller reporting company)
Indicate by check mark whether Registrant is a shell company (as defined in Exchange Act Rule 12b-2). YES 0 NO fx]
As of June 30, 2015, the aggregate market value of the common stock of Registrant held by non-affiliates of Registrant was approximately S72,777,054,630. This calculation docs not reflect a determination that persons arc affiliates for any other purposes.
As of January 31, 2016, there were 1,958,568,849 shares of Registrant's common stock, S0.01 par value, outstanding.
Documents Incorporated by Reference: Portions of Registrant's definitive proxy statement for its 2016 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.
Item 3. Legal Proceedings.
In addition to the matters described below, in the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain ofthe actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases are bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company's business, and involving, among other matters, sales and trading activities, financial products or offerings sponsored, underwritten or sold by the Company, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. The Company's future legal expenses may fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Company.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible, or to estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal questions relevant to the proceedings or investigations in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for a proceeding or investigation. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and investigations will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings or investigations could be material to the Company's operating results and cash flows for a particular period depending on, among other things, the level of the Company's revenues or income for such period.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies has increased materially in the financial services industry. As a result, the Company expects that it may become the subject of increased claims for damages and other relief and, while the Company has identified below certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters. The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General's Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities ("RMBS"), collateralized debt obligations ("CDOs"), structured investment vehicles ("SIVs") and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to the Company's due diligence on the loans that it purchased for securitization, the Company's communications with ratings agencies, the Company's disclosures to investors, and the Company's handling of servicing and foreclosure related issues.
Morgan Stanley
In May 2014, the California Attorney General's Office ("CAAG"), which is one ofthe members of the RMBS Working Group, indicated that it has made certain preliminary conclusions lhat the Company made knowing and material misrepresentations regarding RMBS and that it knowingly caused material misrepresentations to be made regarding the Cheyne SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has further indicated that it believes the Company's conduct violated California law and that it may seek treble damages, penalties and injunctive relief. The Company does not agree with these conclusions and has presented defenses to them to the CAAG.
In October 2014, the Illinois Attorney General's Office ("ILAG") sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company pay ILAG approximately S88 million. The Company and ILAG reached an agreement to resolve the matter on February 10,2016.
On January 13, 2015, the New York Attorney General's Office ("NYAG"), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprimc securitizations sponsored by the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to resolve the matter on February 10, 2016.
On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney's Office for the Northern District of California, Civil Division (collectively, the "Civil Division") to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company. That settlement was finalized on February 10, 2016.
Civil Litigation.
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiffs purchase of such certificates. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants' omnibus motion to dismiss plaintiffs amended complaint and on August 15, 2011, the court denied the Company's individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants' motion to strike plaintiffs demand for a jury trial. The defendants' joint motions for partial summary judgment were denied on November 9, 2015.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the Company was approximately $276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On August 11, 2011, plaintiffs federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants' demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiffs negligent misrepresentation claims were dismissed with prejudice.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the Superior Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. The second amended complaint, filed on March 5, 2012, alleges that defendants made untrue statements and material omissions in the sale to one of plaintiffs subsidiaries of a number of mortgage pass-through certificates backed by securitization trusts
Morgan Stanley
containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiffs subsidiary by the Company was approximately $180 million. The amended complaint raises claims under California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On April 10, 2012, the Company filed a demurrer to certain causes of action in the second amended complaint, which the court overruled on July 24, 2012. On November 24, 2014, plaintiffs negligent misrepresentation claims were dismissed with prejudice. An initial trial of certain of plaintiffs claims is scheduled to begin in July 2016.
On July 15, 2010, China Development Industrial Bank ("CDIB") filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County ("Supreme Court of NY"). The complaint relates to a S275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately S228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB's obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Company's motion to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiffs purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $78 million.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately S385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants' motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against the Company with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $332 million.
On August 7, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-4SL and Mortgage Pass-Through Certificates, Scries 2006-4SL against the Company styled Morgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $303 million, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreement underlying the transaction, specific performance and unspecified damages and interest. On August 8, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint.
Morgan Stanley
On August 8, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-I4SL, Mortgage Pass-Through Certificates, Scries 2006-14SL, Morgan Stanley Mortgage Loan Trust 2007-4SL and Mortgage Pass-Through Certificates, Series 2007-4SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006- 14SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trusts, which had original principal balances of approximately $354 million and $305 million respectively, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreements underlying the transactions, specific performance and unspecified damages and interest. On August 16, 2013, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 28, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-13ARX against the Company styled Morgan Stanley Mortgage Loan Trust 2006-13ARX v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. Plaintiff filed an amended complaint on January 17, 2013, which asserts claims for breach of contract and alleges, among other things, that the loans in the, trust, which had an original principal balance of approximately $609 million, breached various representations and warranties. The amended complaint seeks, among other relief, declaratory judgment relief, specific performance and unspecified damages and interest. By order entered September 30, 2014, the court granted in part and denied in part the Company's motion to dismiss the amended complaint. On July 13, 2015, plaintiff perfected its appeal from the court's September 30, 2014 decision.
On December 14, 2012, Royal Park Investments SA/NV filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Merrill Lynch et al. On October 24, 2013, plaintiff filed a new complaint against the Company in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Morgan Stanley et al., alleging that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $597 million. The complaint raises common law claims of fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud and seeks, among other things, compensatory and punitive damages. The plaintiff filed an amended complaint on December 1, 2015.
On January 10, 2013, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-10SL and Mortgage Pass-Through Certificates, Series 2006-10SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $300 million, breached various representations and warranties. The complaint seeks, among other relief, an order requiring the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and interest. On August 8, 2014, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On January 31, 2013, HSH Nordbank AG and certain affiliates filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled HSH Nordbank AG et al. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $524 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On April 12, 2013, defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on July 21, 2015. On August 19, 2015, the Company filed a Notice of Appeal of the court's decision, and on August 20, 2015, the plaintiffs filed a' Notice of Cross-Appeal. On August 25, 2015, the plaintiffs filed a motion for leave to amend their complaint.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that
Morgan Stanley
defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization (rusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $644 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint. The Company perfected its appeal from that decision on June 12, 2015.
On May 17, 2013, plaintiff in 1KB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $132 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company's motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company perfected its appeal from the court's October 29, 2014 decision.
On July 2, 2013, Deutsche Rank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NCI (MSAC 2007-NCl) v. Morgan Stanley ABS Capital I Inc., and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NCI v. Morgan Stanley ABS Capital I, Inc. On February 3, 2014, the plaintiff filed an amended complaint, which asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.25 billion, breached various representations and warranties. The amended complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission and interest. On March 12, 2014, the Company filed a motion to dismiss the amended complaint.
On July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint styled Morgan Stanley Mortgage Loan Trust 2007-2AX, by U.S. Bank National Association, solely in its capacity as Trustee v. Morgan Stanley Mortgage Capital Holdings LLC, as successor-by-merger to Morgan Stanley Mortgage Capital Inc., and Greenpoint Mortgage Funding, Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages and interest. On August 22, 2013, the Company a filed a motion to dismiss the complaint, which was granted in part and denied in part on November 24, 2014.
On August 26, 2013, a complaint was filed against the Company and certain affiliates in the Supreme Court of NY, styled Phoenix Light SF Limited et al v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiffs, or their assignors, of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs or their assignors by the Company was approximately $344 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation and rescission based on mutual mistake and seeks, among other things, compensatory damages, punitive damages or alternatively rescission or rescissionary damages associated with the purchase of such certificates. The defendants filed a motion to dismiss the complaint on December 13, 2013, which the parties later agreed would be deemed to be directed at an amended complaint filed on June 17, 2014. On April 23, 2015, the court granted the Company's motion to dismiss the amended complaint, and on May 21, 2015, the plaintiffs filed a notice of appeal of that order.
On November 6, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley
Morgan Stanley
ABS Capital I Inc. Trust, Series 2007-NC3 (MSAC 2007-NC3) v. Morgan Stanley Mortgage Capital Holdings LLC, and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. The complaint asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately SI.3 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On December 16, 2013, the Company filed a motion to dismiss the complaint.
On December 30, 2013, Wilmington Trust Company, in its capacity as trustee for Morgan Stanley Mortgage Loan Trust 2007-12, filed a complaint against the Company. The matter is styled Wilmington Trust Company v. Morgan Stanley-Mortgage Capital Holdings LLC et al. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among olher things, that the loans in the trust, which had an original principal balance of approximately $516 million, breached various representations and warranties. The complaint seeks, among other relief unspecified damages, interest and costs. On February 28, 2014, the defendants filed a motion to dismiss the complaint.
On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley Structured Trust I 2007-1, filed a complaint against the Company. The matter is styled Deutsche Bank National Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC and is pending in the United States District Court for the Southern District of New York ("SDNY"). The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $735 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified compensatory and/or rescissory damages, interest and costs. On April 3, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 19, 2014, Financial Guaranty Insurance Company ("FGIC") filed a complaint against the Company in the Supreme Court of NY, styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and alleges, among other things, that the net interest margin securities ("NIMS") in the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to certain notes that had an original balance of approximately $475 million. The complaint seeks, among other relief, specific performance of the NIM breach remedy procedures in the transaction documents, unspecified damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On September 23, 2014, FGIC filed a complaint against the Company in the Supreme Court of NY styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Company styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys' fees, costs and other related expenses, and interest. On October 20, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
Morgan Stanley
Commercial Mortgage Related Matter.
On January 25, 2011, the Company was named as a defendant in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital. Inc., a litigation pending in the SDNY. The suit, brought by the trustee of a series of commercial mortgage pass-through certificates, alleges that the Company breached certain representations and warranties with respect to an S81 million commercial mortgage loan that was originated and transferred to the trust by the Company. The complaint seeks, among other things, to have the Company repurchase the loan and pay additional monetary damages. On June 16, 2014, the court granted the Company's supplemental motion for summary judgment. On July 16, 2014, the plaintiff filed a notice of appeal.
Currency Related Matters.
Regulatory and Governmental Matters.
The Company is responding to a number of regulatory and governmental inquiries both in the United States and abroad related to its foreign exchange business. In addition, on June 29, 2015, the Company and a number of other financial institutions were named as respondents in a proceeding before Brazil's Council for Economic Defense related to alleged anticompetitive activity in the foreign exchange market for the Brazilian Real;
Class Action Litigation.
Beginning in December 2013, several foreign exchange dealers (including the Company and certain affiliates) were named as defendants in multiple purported antitrust class actions most of which have now been consolidated into a single proceeding in the United States District Court for the Southern District of New York styled In Re Foreign Exchange Benchmark Rates Antitrust Litigation. On July 16, 2015, plaintiffs filed an amended complaint generally alleging that defendants engaged in a conspiracy to fix, maintain or make artificial prices for key benchmark rates, to manipulate bid/ask spreads, and, by their behavior in the over-the-counter market, to thereby cause corresponding manipulation in the foreign exchange futures market. Plaintiffs seek declaratory relief as well as treble damages in an unspecified amount. Defendants filed a motion to dismiss the amended complaint on November 30, 2015.
On September 11, 2015, several foreign exchange dealers (including the Company and an affiliate) were named as defendants in a purported class action filed in the Ontario Superior Court of Justice styled Christopher Staines v. Royal Bank of Canada, et al. The plaintiff has made allegations similar to those in the In Re Foreign Exchange Benchmark Rates Antitrust Litigation and seeks C$1 billion as well as C$50 million in punitive damages. On September 16, 2015, a parallel proceeding was initiated in Quebec Superior Court styled Christine Beland v. Royal Bank of Canada, et al. based on similar allegations and seeking C$100 million as well as C$50 million in punitive damages.
Wealth Management Related Matters.
The Company is currently defending itself in an ongoing arbitration styled Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al., which is pending before a Financial Industry Regulatory Authority arbitration panel in the state of Florida. Plaintiffs assert claims for excessive trading, unauthorized use of discretion, undue influence, negligence and negligent supervision, constructive fraud, abuse of fiduciary duty, unjust enrichment and violations of several Florida statutes in connection with brokerage accounts owned by a former high-net worth wealth management client who is now deceased. Plaintiffs are seeking approximately $475 million in disgorgement, compensatory damages, statutory damages, punitive damages and treble damages under various factual and legal theories.
The following matters were terminated during or following the quarter ended December 31, 2015:
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of NY, styled Sealink Funding Limited v. Morgan Stanley, et al. A second amended complaint, filed on March 20, 2013, alleged that defendants made untrue statements and material omissions in the sale of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold by the Company was approximately $507 million. On April 18, 2014, the court granted the Company's motion to dismiss the second amended complaint. The dismissal was affirmed on appeal on November 12, 2015.
Morgan Stanley
On January 25, 2012, Dexia SA/NV and certain of its affiliated entities filed a complaint against the Company in the Supreme Court of NY. styled Dexia SA/NV et al. v. Morgan Stanley, et al. An amended complaint was tiled on May 24, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs by the Company was approximately S626 million. On October 16, 2013, the court granted the defendants' motion to dismiss the amended complaint. The dismissal was affirmed on appeal on January 12, 2016.
On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court ofthe State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total. amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1,073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations ofthe New Jersey RICO statute, and includes a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.
On August 10, 2012, the FDIC, as receiver for Colonial Bank, filed a complaint against the Company and other defendants in the Circuit Court of Montgomery, Alabama styled Federal Deposit Insurance Corporation as Receiver for Colonial Bank v. Citigroup Mortgage Loan Trust Inc. et al. On January 15, 2014, the FDIC, as receiver for United Western Bank filed a complaint against the Company and others in the District Court of the State of Colorado, styled Federal Deposit Insurance Corporation, as Receiver for United Western Bank v. Banc of America Funding Corp., et al. The complaints in those cases asserted that the Company made untrue statements and material omissions in connection with the sale of mortgage pass-through certificates purchased by Colonial Bank and United Western Bank, respectively. On January 28, 2016, the parties reached an agreement to settle both actions.
On August 5, 2013, Landesbank Baden-Wurttembcrg and two affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of NY, styled Landesbank Baden-Wurttemberg et al. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $50 million. On January 20, 2016, the parties reached an agreement in principle to settle the litigation.
On August 16, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Incorporated, et al. filed a complaint against the Company and certain affiliates in the United States District Court for the District of Kansas. On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against the Company and certain affiliates in the SDNY. The complaints alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs in the matters was approximately $567 million and $417 million, respectively. The complaints alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle both matters.
On September 16, 2014, the Virginia Attorney General's Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that the Company and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.
31 Morgan Stanley
Matters Related to the CDS Market.
On July 1, 2013, the European Commission ("EC") issued a Statement of Objections ("SO") addressed lo twelve financial firms (including the Company), the International Swaps and Derivatives Association, Inc. ("ISDA") and Markit Group Limited ("Markit") and various affiliates alleging that, between 2006 and 2009, the recipients breached European Union competition law by taking and refusing to take certain actions in an effort to prevent the development of exchange traded credit default swap ("CDS") products. The Company and the other recipients of the SO filed a response to the SO on January 21, 2014, and attended oral hearings before the EC during the period May 12-19, 2014. On December 4, 2015, the EC announced that it had closed its antitrust investigation into the twelve financial firms, including the Company.
Beginning in May 2013, twelve financial firms (including the Company), as well as ISDA and Markit, were named as defendants in multiple purported antitrust class actions consolidated into a single proceeding in the SDNY styled In Re: Credit Default Swaps Antitrust Litigation. Plaintiffs alleged that defendants violated United States antitrust laws from 2008 to present in connection with their alleged efforts to prevent the development of exchange traded CDS products. The complaints sought, among other relief, certification of a class of plaintiffs who purchased CDS from defendants in the United States, treble damages and injunctive relief. On September 30, 2015, the Company reached an agreement with plaintiffs to settle the litigation. The settlement received preliminary court approval on October 29, 2015, and is subject to final court approval.
Item 4. Mine Safety Disclosures.
Not applicable.
Morgan Stanley
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Morgan Stanley
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
jx] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: "organ Stanley & c° llc d/b/a Morgan stamey t company llc
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name ofthe entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: isss Broadway
/ New York, NY 10036
Telephone: 212-762-7325 Fax: 212-507-0010 Email: j acob . tyler®morganstanley. com
Name of contact person: Jacob e. Tyler
Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature ofthe Disclosing Party:
Person [ ] Limited liability company
Publicly registered business corporation [ ] Limited liability partnership
Privately held business corporation [ ] Joint venture
Sole proprietorship [ ] Not-for-profit corporation
General partnership (Is the not-for-profit corporation also a 501(c)(3))?
Limited partnership [ ] Yes [ ] No
Trust [x] Other (please specify)
Holding Company
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [x] No [ J N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of ail executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See EXHIBIT A
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Mitsubishi UFJ Financial Group. Inc 1A Marunouchi 2-chome, Ch,yoda-ku. Tokyo 100-8330. Japan 22 23%
Under item 1{t) of the rules (the "Rules") regarding the Economic and Disclosure Statement and Affidavit ("EDS") promulgated pursuant lo Section 2-154-050 of tho Municipal Code, Mitsubishi UFJ Financial Group, Inc
as a beneficial owner for a class of other third party investors and is considered "regulated and required to make penodic filings with the federal Secunties and Exchange Commission under the Secunties and
Exchange Act" Mitsubishi UFJ Financial Group, Inc is a publicly traded company and all of its assets are held for the benefit of its shareholders Mitsubishi UFJ Financial Group, Inc is also regulated and required to
make penodic filings with the federal Secunties and Exchange Commission under the Secunties and Exchange act The above ownership interests was obtained from filings that Mitsubishi UFJ Financial Group. Inc
have made with tho Secunties and Exchange Commission Please see the attached annual report.
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
|x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
arc not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
arc not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
c. have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
See EXHIBIT B in lieu of response to items above
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
Based on a review of Firm expenditures records, and to the-best of our knowledge, information and belief,
the Disclosing Party has not given a gift, as defined herein, to any City of Chicago official or employee
at any time during the 12-month period preceding the execution date of this EDS.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
fc] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes [x]No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D,
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check cither 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
_x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501 (c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[]Yes []No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1 -23 and Section 2-1 54-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason'to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under.penalty of perjury, the person signing below: (1) warrants that he/sh e is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Morgan Stanley
(Print or type name of Disclosing Party)
By: \V ^ /\_
(feign here) ][
Jacob E. Tyler
(Print or type name of person signing)
Assistant Secretary
(Print or type title of person signing)
Signed and sworn to before me on (date)
atytJ&.j K^ofk. County, ^ ^ir^ _ fetateV.
J ( £ 4 J —--" Notary Public.
Commission expires: £\ ^ \^}\s^y 2cl ^
MIChlAPL. M. O'BRIEN Paeel2ofl3 Notary Public, Stale of New York 8 No. .31-!}003.142 Qualified in New York County Commission Expires Oct 19, 20 IV
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
Exhibit A
As of May 17,2016
EXECUTIVE OFFICERS AND DIRECTORS OF
MORGAN STANLEY
The names of the directors and the names and titles of the executive officers of Morgan Stanley ("MS") and their principal occupations are set forth below. The business address ofeach ofthe directors or executive officers is that of MS at 1585 Broadway, New York, New York 10036. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to MS and each individual is a United States citizen.
Name
*James P. Gorman ?Erskine B. Bowles ?Alistair Darling2 *Thomas H. Glocer ?Nobuyuki Hirano3
?Robert H. Herz ?Klaus Kleinfeld4 ?Jami Miscik
?Donald T. Nicolaisen ?Hutham S. Olayan
?James W. Owens ?Ryosuke Tamakoshi5 ?Perry M. Traquina ?Rayford Wilkins, Jr.
Title
Chairman of the Board and Chief Executive Officer
Director
Director
Director
President and Chief Executive Officer of Mitsubishi UFJ Financial Group, Inc.
President, Robert H. Herz LLC
Chairman and Chief Executive Officer of Alcoa Inc.
Co-Chief Executive Officer and Vice Chair, Kissinger Associates, Inc.
Director
President and Chief Executive Officer of The Olayan Group's U.S. operations
Director
Senior Advisor to The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Director
Director
|1010|Executive Vice President and Chief Human Resources Officer
Executive Vice President and Chief Legal Officer
Executive Vice President and Chief Risk Officer
Colm Kelleher7
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Operating Officer
Dual citizenship - Australia and United States
Citizenship - England
Citizenship - Japan
Citizenship - Germany
Citizenship - Japan
Citizenship - Japan
Dual citizenship - England and Ireland * Director
|1010|
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Ycs [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ JNo [X J Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Exhibit B
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
UJ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2016
OR
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758
Morgan Stanley
(Exact Name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
1585 Broadway ; (212) 761-4000
New York, NY 10036 '-'.'''> (Registrant's telephone number,
(Address of principal executive offices, • '. .:,'-; including area code)
including zip code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Q
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [Xl No ?
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [x] Accelerated Filer f_D
Non-Accelerated Filer Smaller reporting company Q
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No (X)
As of April 29, 2016, there were 1,937,024,359 shares of the Registrant's Common Stock, par value SO.01 per share, outstanding.
Part II—Other Information. Item 1. Legal Proceedings.
The following new matters and developments have occurred since previously reporting certain matters in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K"). See also "Legal Proceedings" in Part I, Item 3 ofthe 2015 Form 10-K.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters.
On April 1, 2016, the California Attorney General's Office filed an action against the Company and certain affiliates in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees' Retirement System and the California Teachers' Retirement System. The complaint alleges that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief.
Civil Litigation.
On April 21, 2016, the Company filed a motion for summary judgment in The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al.
On April 12, 2016, the court in Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NCI v. Morgan Stanley ABS Capital I, Inc. granted in part and denied in part the Company's motion to dismiss the amended complaint, dismissing all claims except a single claim, regarding which the motion was denied without prejudice.
On April 12, 2016, the court in Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NCS v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. granted the Company's motion to dismiss the complaint, and granted the plaintiff the ability to seek to replead certain aspects of the complaint.
Commercial Mortgage Related Matter.
On April 27, 2016, in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital, Inc., the United States Court of Appeals for the Second Circuit vacated the judgment of the United States District Court for the Southern District of New York ("SDNY") and remanded the case to the SDNY for further proceedings consistent with its opinion.
Other Litigation.
On October 20, 2014, a purported class action complaint was filed against the Company and other defendants styled Genesee County Employees' Retirement System v. Bank of America Corporation et al. in the SDNY. The action was later consolidated with four similar actions in SDNY under the lead case styled Alaska Electrical Pension Fund v. Bank of America Corporation et al. A consolidated amended complaint was filed on February 2, 2015 asserting claims for alleged violations ofthe Sherman Act, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and tortious interference with contract. The consolidated amended complaint alleges, among other things, that the defendants engaged in antitrust violations with regards to the process of setting ISDAfix, a financial benchmark and seeks treble damages, injunctive relief, attorneys' fees and other relief. On March 28, 2016, the court granted in part and denied in part the defendants' motion to dismiss the consolidated amended complaint.
Wealth Management Related Matters.
On March 21, 2016, the arbitration panel in Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al. issued an award in favor of plaintiffs in the amount of S32.8 million, plus attorneys' fees and costs.
Morgan Stanley
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 2015 Commission File Number 1-11758
Morgan Stanley
(Exact name of Registrant as specified in its charter)
Delaware 1585 Broadway (212) 761-4000
(State or other jurisdiction of New York, NY 10036 (Registrant's telephone number,
incorporation or organization) (Address of principal executive offices, including area code)
including zip code)
Securities registered pursuant to Section 12(b) ofthe Act:
Name of exchange on
Title of each class which registered
Common Stock, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate Non-Cumulative Preferred Slock,
Series A, $0.01 par value New York Stock Exchange
Depositary Shares, each representing I/1,000th interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Stock, Series E, $0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixcd-to-Floating Rate Non-Cumulative Preferred
Stock, Series F, SO.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Scries G,
$0.01 par value New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate Non-Cumulative Preferred
Stock, Scries I, $0.01 par value New York Stock Exchange
6'/4% Capital Securities of Morgan Stanley Capital Trust UI (and Registrant's guarantee with respect thereto) New York Stock Exchange
6'/-»% Capital Securities of Morgan Stanley Capital Trust IV (and Registrant's guarantee with respect thereto) New York Stock Exchange
5 Y*% Capital Securities of Morgan Stanley Capital Trust V (and Registrant's guarantee with respect thereto) New York Stock Exchange
6.45% Capital Securities of Morgan Stanley Capital Trust VIII (and Registrant's guarantee with respect thereto) New York Stock Exchange
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026 of Morgan Stanley Finance LLC (and
Registrant's guarantee with respect thereto) New York Stock Exchange
Market Vectors ETNs due March 31,2020 (2 issuances); Market Vectors ETNs due April 30, 2020 (2 issuances) NYSE Area, Inc.
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031 NYSE Area, Inc.
Indicate by check mark if Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES fx] NO FJ
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES fj NO (x|
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period lhat Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES 0 NO ?
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES (X) NO C]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Fonn 10-K. |X]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accclcratcd filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [x] Accelerated Filer Q
Non-Accelerated Filer fj Smaller reporting company Q
(Do not check if a smaller reporting company)
Indicate by check mark whether Registrant is a shell company (as defined in Exchange Act Rule 12b-2) YES O NO [x]
As of June 30, 2015, the aggregate market value ofthe common stock of Registrant held by non-affiliates of Registrant was approximately S72,777,054,630. This calculation docs not reflect a determination that persons arc affiliates for any other purposes.
As of January 31, 2016, there were 1,958,568,849 shares of Registrant's common stock, $0 01 par value, outstanding
Documents Incorporated by Reference: Portions of Registrant's definitive proxy statement for its 2016 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.
Item 3. Legal Proceedings.
In addition to the matters described below, in the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the entities that would otherwise be the primary defendants in such cases arc bankrupt or in financial distress.
The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal arid informal) by governmental and self-regulatory agencies regarding the Company's business, and involving, among other matters, sales and trading activities, financial products or offerings sponsored, underwritten or sold by the Company, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
The Company contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the consolidated financial statements and the Company can reasonably estimate the amount of that loss, the Company accrues the estimated loss by a charge to income. The Company's future legal expenses may fluctuate from period to period, given the current environment regarding government investigations and private litigation affecting global financial services firms, including the Company.
In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible, or to. estimate the amount of any loss. The Company cannot predict with certainty if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantia! or indeterminate damages, restitution, disgorgement or-penalties. Numerous-issues may-need to be resolved, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and by addressing novel or unsettled legal questions relevant to the proceedings or investigations in question, before a loss or additional loss or range of loss or additional loss can be reasonably estimated for a proceeding or investigation. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of such proceedings and investigations will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such proceedings or investigations could be material to the Company's operating results and cash flows for a particular period depending on, among other things, the level ofthe Company's revenues or income for such period.
Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies has increased materially in the financial services industry. As a result, the Company expects that it may become the subject of increased claims for damages and other relief and, while the Company has identified below certain proceedings that the Company believes to be material, individually or collectively, there can be no assurance that additional material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
Residential Mortgage and Credit Crisis Related Matters.
Regulatory and Governmental Matters. The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General's Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities ("RMBS"), collateralized debt obligations ("CDOs"), structured investment vehicles ("SIVs") and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to the Company's due diligence on the loans that it purchased for securitization, the Company's communications with ratings agencies, the Company's disclosures to investors, and the Company's handling of servicing and foreclosure related issues.
Morgan Stanley
In May 2014, the California Attorney General's Office ("CAAG"), which is one of the members ofthe RMBS Working Group, indicated that it has made certain preliminary conclusions that the Company made knowing and material misrepresentations regarding RMBS and that it knowingly caused material misrepresentations to be made regarding the Chcync SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has further indicated that it believes the Company's conduct violated California law and that it may seek treble damages, penalties and injunctive relief. The Company docs not agree with these conclusions and has presented defenses to them to the CAAG.
In October 2014, the Illinois Attorney General's Office ("ILAG") sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company pay ILAG approximately $88 million. The Company and ILAG reached an agreement to resolve the matter on February 10, 2016.
On January 13, 2015, the New York Attorney General's Office ("NYAG"), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprime securitizations sponsored by the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to resolve the matter on February 10, 2016.
On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney's Office for the Northern District of California, Civil Division (collectively, the "Civil Division") to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company. That settlement was finalized on February 10, 2016.
Civil Litigation.
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiffs purchase of such certificates. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants' omnibus motion to dismiss plaintiffs amended complaint and on August 15, 2011, the court denied the Company's individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants' motion to strike plaintiffs demand for a jury trial. The defendants' joint motions for partial summary judgment were denied on November 9, 2015.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the Company was approximately S276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On August 11, 2011, plaintiffs federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants' demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiffs negligent misrepresentation claims were dismissed with prejudice.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the Superior Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. The second amended complaint, filed on March 5, 2012, alleges that defendants made untrue statements and material omissions in the sale to one of plaintiffs subsidiaries of a number of mortgage pass-through certificates backed by securitization trusts
Morgan Stanley
containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiffs subsidiary by the Company was approximately SI80 million. The amended complaint raises claims under California law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On April 10, 2012, the Company filed a demurrer to certain causes of action in the second amended complaint, which the court overruled on July 24, 2012. On November 24, 2014, plaintiffs negligent misrepresentation claims were dismissed with prejudice. An initial trial of certain of plaintiffs claims is scheduled to begin in July 2016.
On July 15, 2010, China Development Industrial Bank ("CDIB") filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County ("Supreme Court of NY"). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB's obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 201 1, the court denied the Company's motion to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiffs purchase of such-certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court'entcred an order dismissing all claims related to one of the securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $78 million.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/KJA GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and -material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants' motions to dismiss the amended complaint were ¦ granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against the Company with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $332 million.
On August 7, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-4SL and Mortgage Pass-Through Certificates, Scries 2006-4SL against the Company styled Morgan Stanley Mortgage Loan Trust 2006-4SL, et al. v. Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $303 million, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreement underlying the transaction, specific performance and unspecified damages and interest. On August 8, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint.
Morgan Stanley
On August 8, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-14SL, Mortgage Pass-Through Certificates, Scries 2006-I4SL, Morgan Stanley Mortgage Loan Trust 2007-4SL and Mortgage Pass-Through Certificates, Series 2007-4SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-14SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trusts, which had original principal balances of approximately $354 million and $305 million respectively, breached various representations and warranties. The complaint seeks, among other relief, rescission of the mortgage loan purchase agreements underlying the transactions, specific performance and unspecified damages and interest. On August 16, 2013, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 28, 2012, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-13ARX against the Company styled Morgan Stanley Mortgage Loan Trust 2006-13ARX v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. Plaintiff filed an amended complaint on January 17, 2013, which asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $609 million, breached various representations and warranties. The amended complaint seeks, among other relief, declaratory judgment relief, specific performance and unspecified damages and interest. By order entered September 30, 2014, the court granted in part and denied in part the Company's motion to dismiss the amended complaint. On July 13, 2015, plaintiff perfected its appeal from the court's September 30, 2014 decision.
On December 14, 2012, Royal Park Investments SA/NV filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Merrill Lynch et al. On October 24, 2013, plaintiff filed a new complaint against the Company in the Supreme Court of NY, styled Royal Park Investments SA/NV v. Morgan Stanley et al., alleging that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $597 million. The complaint raises common law claims of fraud, fraudulent inducement, negligent misrepresentation, and aiding and abetting fraud and seeks, among other things, compensatory and punitive damages. The plaintiff filed an amended complaint on December 1, 2015.
On January 10, 2013, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan Trust 2006-10SL and Mortgage Pass-Through Certificates, Series 2006-10SL against the Company. The complaint is styled Morgan Stanley Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to Morgan Stanley Mortgage Capital Inc. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $300 million, breached various representations and warranties. The complaint seeks, among other relief, an order requiring the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and interest. On August 8, 2014, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On January 31, 2013, HSH Nordbank AG and certain affiliates filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY, styled HSH Nordbank AG et al. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $524 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On April 12, 2013, defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on July 21, 2015. On August 19, 2015, the Company filed a Notice of Appeal ofthe court's decision, and on August 20, 2015, the plaintiffs filed a Notice of Cross-Appeal. On August 25, 2015, the plaintiffs filed a motion for leave to amend their complaint.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that
Morgan Stanley
defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $644 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part the defendants' motion to dismiss the complaint. The Company perfected its appeal from that decision on June 12, 2015.
On May 17, 2013, plaintiff in 1KB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately SI 32 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company's motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company perfected its appeal from the court's October 29, 2014 decision.
On July 2, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator, for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee of the Morgan Stanley. ABS Capital I Inc. Trust, Series 2007-NCI (MSAC 2007-NCI) v. Morgan Stanley ABS Capital I Inc., and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NCI v. Morgan Stanley ABS Capital I, Inc. On February 3, 2014, the plaintiff filed an amended complaint, which asserts claims for breach of contract and breach of the implied covenant of good faith and-fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.25 billion, breached various representations and warranties. The amended complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission and interest. On March 12, 2014, the Company filed a motion to dismiss the amended complaint.
On July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint styled Morgan Stanley Mortgage Loan Trust 2007-2AX, by U.S. Bank National Association, solely in its capacity as Trustee v. Morgan Stanley Mortgage Capital Holdings LLC, as successor-by-merger to Morgan Stanley Mortgage Capital Inc., and Greenpoint Mortgage Funding, Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages and interest. On August 22, 2013, the Company a filed a motion to dismiss the complaint, which was granted in part and denied in part on November 24, 2014.
On August 26, 2013, a complaint was filed against the Company and certain affiliates in the Supreme Court of NY, styled Phoenix Light SF Limited et al v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiffs, or their assignors, of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs or their assignors by the Company was approximately $344 million. The complaint raises common law claims of fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation and rescission based on mutual mistake and seeks, among other things, compensatory damages, punitive damages or alternatively rescission or rescissionary damages associated with the purchase of such certificates. The defendants filed a motion to dismiss the complaint on December 13, 2013, which the parties later agreed would be deemed to be directed at an amended complaint filed on June 17, 2014. On April 23, 2015, the court granted the Company's motion to dismiss the amended complaint, and on May 21, 2015, the plaintiffs filed a notice of appeal of that order.
On November 6, 2013, Deutsche Bank, in its capacity as trustee, became the named plaintiff in Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation, on behalf of the Trustee ofthe Morgan Stanley
Morgan Stanley
ABS Capital I Inc. Trust. Series 2007-NC3 (MSAC 20Q7-NC3) v Morgan Stanley Mortgage Capital Holdings LLC, and filed a complaint in the Supreme Court of NY under the caption Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc Trust, Series 2007-NC3 v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc. The complaint asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately SI.3 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages, rescission, interest and costs. On December 16, 2013, the Company filed a motion to dismiss the complaint.
On December 30, 2013, Wilmington Trust Company, in its capacity as trustee for Morgan Stanley Mortgage Loan Trust 2007-12, filed a complaint against the Company. The matter is styled Wilmington Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC et al. and is pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $516 million, breached various representations and warranties. The complaint seeks, among other relief, unspecified damages, interest and costs. On February 28, 2014, the defendants filed a motion to dismiss the complaint.
On April 28, 2014, Deutsche Bank National Trust Company, in its capacity as trustee for Morgan Stanley Structured Trust I 2007-1, filed a complaint against the Company. The matter is styled Deutsche Bank National Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC and is pending in the United States District Court for the Southern District of New York ("SDNY"). The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $735 million, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, unspecified compensatory and/or rescissory damages, interest and costs. On April 3, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
On September 19, 2014, Financial Guaranty Insurance Company ("FGIC") filed a complaint against the Company in the Supreme Court of NY, styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and alleges, among other things, that the net interest margin securities ("NIMS") in the trust breached various representations and warranties. FGIC issued a financial guaranty policy with respect to certain notes that had an original balance of approximately $475 million. The complaint seeks, among other relief, specific performance of the NIM breach remedy procedures in the transaction documents, unspecified damages, reimbursement of certain payments made pursuant to the transaction documents, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On September 23, 2014, FGIC filed a complaint against the Company in the Supreme Court of NY styled Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. The complaint asserts claims for breach of contract and fraudulent inducement and alleges, among other things, that the loans in the trust breached various representations and warranties and defendants made untrue statements and material omissions to induce FGIC to issue a financial guaranty policy on certain classes of certificates that had an original balance of approximately $876 million. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential and punitive damages, attorneys' fees and interest. On November 24, 2014, the Company filed a motion to dismiss the complaint.
On January 23, 2015, Deutsche Bank National Trust Company, in its capacity as trustee, filed a complaint against the Company styled Deutsche Bank National Trust Company solely in its capacity as Trustee of the Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 v. Morgan Stanley Mortgage Capital Holdings LLC as Successor-by-Merger to Morgan Stanley Mortgage Capital Inc., and Morgan Stanley ABS Capital I Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $1.05 billion, breached various representations and warranties. The complaint seeks, among other relief, specific performance of the loan breach remedy procedures in the transaction documents, compensatory, consequential, rescissory, equitable and punitive damages, attorneys' fees, costs and other related expenses, and interest. On October 20, 2015, the court granted in part and denied in part the Company's motion to dismiss the complaint.
Morgan Stanley
Commercial Mortgage Related Matter.
On January 25, 2011, tlie Company was named as a defendant in The Bank of New York Mellon Trust, National Association v. Morgan Stanley Mortgage Capital, Inc., a litigation pending in the SDNY. The suit, brought by the trustee of a scries of commercial mortgage pass-through certificates, alleges that the Company breached certain representations and warranties with respect to an S81 million commercial mortgage loan that was originated and transferred to the trust by the Company. The complaint seeks, among other things, to have the Company repurchase the loan and pay additional monetary damages. On June 16, 2014, the court granted the Company's supplemental motion for summary judgment. On July 16, 2014, the plaintiff filed a notice of appeal.
Currency Related Matters.
Regulatory and Governmental Matters.
The Company is responding to a number of regulatory and governmental inquiries both in the United States and abroad related to its foreign exchange business. In addition, on June 29, 2015, the Company and a number of other financial institutions were named as respondents in a proceeding before Brazil's Council for Economic Defense related to alleged anticompetitive activity in the foreign exchange market for the Brazilian Real.
Class Action Litigation.
Beginning in December 2013, several foreign exchange dealers (including the Company and certain affiliates) were named as defendants in multiple purported antitrust class actions most of which have now been consolidated into a single proceeding in the United States District Court for the Southern District of New York styled In Re Foreign Exchange Benchmark Rates Antitrust Litigation. On July 16, 2015, plaintiffs filed an amended complaint generally alleging that defendants engaged in a conspiracy to fix, maintain or make artificial prices for key benchmark rates, to manipulate bid/ask spreads, and, by their behavior in the over-the-counter market, to thereby cause corresponding manipulation in the foreign exchange futures market. Plaintiffs seek declaratory relief as well as treble damages in an unspecified amount. Defendants filed a motion to dismiss the amended complaint on November 30, 2015.
On September 11, 2015, several foreign exchange dealers (including the Company and an affiliate) were named as defendants in a purported class action filed in the Ontario Superior Court of Justice styled Christopher Staines v. Royal Batik of Canada, et al The plaintiff has made allegations similar to those in the In Re Foreign Exchange Benchmark Rates Antitrust Litigation and seeks C$1 billion as well as C$50 million in punitive damages. On September 16, 2015, a parallel proceeding was initiated in Quebec Superior Court styled Christine Beland v. Royal Bank of Canada, et al. based on similar allegations and seeking C$100 million as well as C$50 million in punitive damages.
Wealth Management Related Matters.
The Company is currently defending itself in an ongoing arbitration styled Lynnda L. Speer, as Personal Representative of the Estate of Roy M. Speer, et al. v. Morgan Stanley Smith Barney LLC, et al., which is pending before a Financial Industry Regulatory Authority arbitration panel in the state of Florida. Plaintiffs assert claims for excessive trading, unauthorized use of discretion, undue influence, negligence and negligent supervision, constructive fraud, abuse of fiduciary duty, unjust enrichment and violations of several Florida statutes in connection with brokerage accounts owned by a former high-net worth wealth management client who is now deceased. Plaintiffs are seeking approximately $475 million in disgorgement, compensatory damages, statutory damages, punitive damages and treble damages under various factual and legal theories.
The following matters were terminated during or following the quarter ended December 31, 2015:
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of NY, styled Sealink Funding Limited v. Morgan Stanley, et al. A second amended complaint, filed on March 20, 2013, alleged that defendants made untrue statements and material omissions in the sale of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold by the Company was approximately $507 million. On April 18, 2014, the court granted the Company's motion to dismiss the second amended complaint. The dismissal was affirmed on appeal on November 12, 2015.
Morgan Stanley
On January 25, 2012, Dexia SA/NV and certain of its affiliated entities filed a'complaint against the Company in the Supreme Court of NY, styled Dexia SA/NV et al. v. Morgan Stanley, et al. An amended complaint was filed on May 24, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs by the Company was approximately S626 million. On October 16, 2013, the court granted the defendants' motion to dismiss the amended complaint. The dismissal was affirmed on appeal on January 12, 2016.
On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court ofthe State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, el al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1,073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey RICO statute, and includes a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.
On August 10, 2012, the FDIC, as receiver for Colonial Bank, filed a complaint against the Company and other defendants in the Circuit Court of Montgomery, Alabama styled Federal Deposit Insurance Corporation as Receiver for Colonial Bank v. Citigroup Mortgage Loan Trust Inc. et al. On January 15, 2014, the FDIC, as receiver for United Western Bank filed a complaint against the Company and others in the District Court of the State of Colorado, styled Federal Deposit Insurance Corporation, as Receiver for United Western Bank v. Banc of America Funding Corp., et al. The complaints in those cases asserted that the Company made untrue statements and material omissions in connection with the sale of mortgage pass-through certificates purchased by Colonial Bank and United Western Bank, respectively. On January 28, 2016, the parties reached an agreement to settle both actions.
On August 5, 2013, Landesbank Baden-Wurttemberg and two affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of NY, styled Landesbank Baden-Wiirttemberg et al. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage, loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs was approximately $50 million. On January 20, 2016, the parties reached an agreement in principle to settle the litigation.
On August 16, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Incorporated, et al. filed a complaint against the Company and certain affiliates in the United States District Court for the District of Kansas. On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against the Company and certain affiliates in the SDNY. The complaints alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs in the matters was approximately $567 million and $417 million, respectively. The complaints alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle both matters.
On September 16, 2014, the Virginia Attorney General's Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that the Company and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.
Morgan Stanley
Matters Related to the CDS Market.
On July 1, 2013, the European Commission ("EC") issued a Statement of Objections ("SO") addressed to twelve financial firms (including the Company), the International Swaps and Derivatives Association, Inc. ("ISDA") and Markit Group Limited ("Markit") and various affiliates alleging that, between 2006 and 2009, the recipients breached European Union competition law by taking and refusing to take certain actions in an effort to prevent the development of exchange traded credit default swap ("CDS") products. The Company and the other recipients of the SO filed a response to the SO on January 21, 2014, and attended oral hearings before the EC during the period May 12-19, 2014. On December 4, 2015, the EC announced that it had closed its antitrust investigation into the twelve financial firms, including the Company.
Beginning in May 2013, twelve financial firms (including the Company), as well as ISDA and Markit, were named as defendants in multiple purported antitrust class actions consolidated into a single proceeding in the SDNY styled In Re: Credit Default Swaps Antitrust Litigation. Plaintiffs alleged that defendants violated United States antitrust laws from 2008 to present in connection with their alleged efforts to prevent the development of exchange traded CDS products. The complaints sought, among other relief, certification of a class of plaintiffs who purchased CDS from defendants in the United States, treble damages and injunctive relief. On September 30, 2015, the Company reached an agreement with plaintiffs to settle the litigation. The settlement received preliminary court approval on October 29, 2015, and is subject to final court approval.
Item 4. Mine Safety Disclosures.
Not applicable.
Morgan Stanley
As filed with the Securities and Exchange Commission on July 27, 2015
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
? REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2015 OR
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to OR
? SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report
Commission file number 000-54189
KABUSHIKI KAISHA MITSUBISHI UFJ FINANCIAL GROUP
(Exact name of Registrant as specified in its charter)
MITSUBISHI UFJ FINANCIAL GROUP, INC.
(Translation of Registrant's name into English) Japan
(Jurisdiction of incorporation or organization) 7-1, Marunouchi 2-chome Chiyoda-ku, Tokyo 100-8330 Japan
(Address of principal executive offices) Kazutaka Yoneda, +81-3-3240-8111, +81-3-3240-7073, same address as above (Name, Telephone, Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant lo Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common stock, without par value New York Stock Exchanged)
American depositary shares, each of which represents one share of common stock New York Stock Exchange
(1) The listing of the registrant's common stock on the New York Stock Exchange is for technical puiposes only and without trading privileges. Securities registered or to be registered pursuant to Section 12(g) of the Act: Restricted Share Units granting rights to under the UnionBanCal Corporation Stock Bonus Plan Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
$2,300,000,000 Fixed/Floating Rate Non-Cumulative Preferred Securities of MUFG Capital Finance 1 Limited, and Mitsubishi UFJ Financial Group, Inc.'s Guarantee thereof
€750,000,000 Fixed/Floating Rate Non-Cumulative Preferred Securities of MUFG Capital Finance 2 Limited, and Mitsubishi UFJ Financial Group, Inc.'s Guarantee thereof
Restricted Share Units granting rights to common slock pursuant lo the MUFG Americas Holdings Corporation Slock Bonus Plan
Indicate the number of outstanding shares ofeach of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As of March 31, 2015, 14,168,853,820 shares of common slock (including 151,647,230 shares of common stock held by the registrant and its consolidated subsidiaries as treasury slock)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [X] No ?
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ? No fx)
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether (he registrant (1) has filed all reports required lo be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period lhal the registrant was required to file such reports), and (2) has been subject to such filing requirements lor the pasi 90 days.
Yes [X] No ?
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes [X] No ?
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See dcfinilion of 'accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [x] Accelerated filer Q Non-accelerated filer ?
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP 0 International Financial Reporting Standards as issued Other [j
by the International Accounting Standards Board O If "Other" has been checked in response lo lhc previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Ilcm 17 ? Hem 18 ?
If this is an annual report, indicate by check mark whether Ihe registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ? No (X)
TABLE OF CONTENTS
Page
Forward-Looking Statements |910|Item I. Identity of Directors, Senior Management and Advisers |910|Item 2. Offer Statistics and Expected Timetable |910|Item 3. Key Information |910|Item 4. Information on the Company 26
Item 4A. Unresolved Staff Comments 61
Item 5. Operating and Financial Review and Prospects 62
Item 6. Directors, Senior Management and Employees 143
Item 7. Major Shareholders and Related Party Transactions 164
Item 8. Financial Information 165
Item 9. The Offer and Listing 167
Item 10. Additional Information 168
Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk 190
Item 12. Description of Securities Other than Equity Securities 215
Item 13. Defaults, Dividend Arrearages and Delinquencies 217
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 217
Item 15. Controls and Procedures 217
Item 16A. Audit Committee Financial Expert 221
Item 16B. Code of Ethics 221
Item 16C. Principal Accountant Fees and Services 221
Item 16D. Exemptions from the Listing Standards for Audit Committees 222
Item 16E. Purchases of Equity Securities by the Issuer and AffiliatedPurchasers 223
Item 16F. Change in Registrant's Certifying Accountant 223
Item 16G. Corporate Governance 223
Item 16H. Mine Safety Disclosure 225
Item 17. Financial Statements . 226
Item 18. Financial Statements 226
Item 19. Exhibits 226
Selected Statistical Data A-1
Consolidated Financial Statements F-1
For purposes of this Annual Report, we have presented our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, except for risk-adjusted capital ratios, business segment financial information and some other specifically identified information. Unless otherwise stated or the context otherwise requires, all amounts in our financial statements are expressed in Japanese yen.
When we refer in this Annual Report to "MUFG," "wc," "us," "our" and the "Group," we generally mean Mitsubishi UFJ Financial Group, Inc. and its consolidated subsidiaries, but from time to time as the context requires, we mean Mitsubishi UFJ Financial Group, Inc. as an individual legal entity. Similarly, references to "MTFG" and "UFJ Holdings" are to Mitsubishi Tokyo Financial Group, Inc. and to UFJ Holdings, Inc., as single entities, respectively, as well as to MTFG and UFJ Holdings and their respective consolidated subsidiaries, as the context requires. In addition, our "commercial banking subsidiaries" refers to The Bank of Tokyo-Mitsubishi UFJ, Ltd., or "BTMU," and, as the context requires, its consolidated subsidiaries engaged in the commercial banking business. Our "trust banking subsidiaries" refers to Mitsubishi UFJ Trust and Banking Corporation, or "MUTB," and, as the context requires, its consolidated subsidiaries engaged in the trust banking business. Our "banking subsidiaries" refers to BTMU and MUTB and, as the context requires, their respective consolidated subsidiaries engaged in the banking business. Our "securities subsidiaries" refers to Mitsubishi UFJ Securities Holdings Co., Ltd., or "MUSHD," and as the context requires, its consolidated subsidiaries engaged in the securities business.
References to "MUAH" and "MUB" are to MUFG Americas Holdings Corporation and MUFG Union Bank, N.A., as single entities, respectively, as well as to MUAH and MUB and their respective consolidated|1010|
subsidiaries, as the context requires. Effective July 1, 2014, we integrated BTMU's operations in the Americas region with the operations of UnionBanCal Corporation, or "UNBC," which is a wholly owned subsidiary of BTMU, and changed UNBC's corporate name to "MUFG Americas Holdings Corporation!" Union Bank, N.A., which is MUAH's principal subsidiary, was also renamed "MUFG Union Bank, N.A.," effective the same day.
References to "KS" or "Krungsri" are to Bank of Ayudhya Public Company Limited, as a single entity, as well as to KS and its respective consolidated subsidiaries, as the context requires. Effective January 5, 2015, we integrated the operations of the BTMU Bangkok branch with the operations of KS to comply with the Thai regulatory requirement generally referred to as the "one presence" policy, which limits financial conglomerates to a single licensed deposit taking entity in Thailand.
References in this Annual Report to "yen" or "¥" are to Japanese yen, references to "U.S. dollars," "U.S. dollar," "dollars," "U.S.$" or "$" are to United States dollars, and references to "euro" or "€" arc to the currency of the member states ofthe European Monetary Union.
Our fiscal year ends on March 31 of each year. References to years not specified as being fiscal years are to calendar years!
We usually hold the ordinary general meeting of shareholders of Mitsubishi UFJ Financial Group, Inc. in June of each year in Tokyo.
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Forward-Looking Statements
We may from time to time make written or oral forward-looking statements. Written forward-looking statements may appear in documents filed with or submitted to the U.S. Securities and Exchange Commission, or SEC, including this Annual Report, and other reports to shareholders and other communications.
The U.S. Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking information to encourage companies to provide prospective information about themselves. We rely on this safe harbor in making these forward-looking statements.
Forward-looking statements appear in a number of places in this Annual Report and include statements regarding our current intent, business plan, targets, belief or expectations or the current belief or current expectations of our management with respect to our results of operations and financial condition, including, among other matters, our problem loans and loan losses. In many, but not all cases, we use words such as "anticipate," "aim," "believe," "estimate," "expect," "intend," "plan," "probability," "risk," "will," "may" and similar expressions, as they relate to us or our management, to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those which are aimed, anticipated, believed, estimated, expected, intended or planned, or otherwise stated.
Our forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ from those in the forward-looking statements as a result of various factors. We identify in this Annual Report in "Item 3.D. Key Information—Risk Factors," "Item 4.B. Information on the Company—Business Overview," "Item 5. Operating and Financial Review and Prospects" and elsewhere, some, but not necessarily all, of the important factors that could cause these differences.
We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
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PART I
Item 1. Identity of Directors, Senior Management and Advisers. Not applicable.
Item 2. Offer Statistics and Expected Timetable. Not applicable.
Item 3. Key Information.
A. Selected Financial Data
The selected statement of income data and selected balance sheet data set forth below has been derived from our audited consolidated financial statements.
Except for risk-adjusted capital ratios, which are calculated in accordance with Japanese banking regulations based on information derived from our consolidated financial statements prepared in accordance with accounting principles generally accepted in Japan, or Japanese GAAP, the selected financial data set forth below are derived from our consolidated financial statements prepared in accordance with U.S. GAAP.
You should read the selected financial data set forth below in conjunction with "Item 5. Operating and Financial Review and Prospects," "Selected Statistical Data" and our consolidated financial statements and other financial data included elsewhere in this Annual Report. These data are qualified in their entirety by reference to all of that information.
|1010|Fiscal years ended March 31,
2013
Statement of income data:
Interest income*"
Interest expense
Net interest income
Provision (credit) for credit losses
Net interest income after provision (credit) for credit
losses
Non-interest income
Non-interest expense
Income before income tax expense
Income tax expense
¦ Net income before attribution of noncontrolling
interests
Net income (loss) attributable to noncontrolling
interests
Net income attributable to Mitsubishi UFJ Financial
Group
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group
Amounts per share:
Basic earnings per common share—Earnings applicable to
common shareholders of Mitsubishi UFJ Financial
Group
Diluted earnings per common share-—Earnings applicable
to common shareholders of Mitsubishi UFJ Financial
Group
Number of shares used to calculate basic earnings per
common share (in thousands)
Number of shares used lo calculate diluted earnings per
common share (in thousands)12'
Cash dividends per share paid during the fiscal year:
—Common stock
—Preferred stock (Class 3) ... —Preferred stock (Class 5)<3> —Preferred stock (Class 11)"> .
(in millions, except per share data and number of shares)
¥ 2,550,144 ¥ 2,595,956 ¥ 2,427,521 Y 2,522,283 ¥ 2,894,645
670.673 640.139 556,4 IS 560,972 663,184
2,144,463 2,845,078 2,726,885
2,262,656 666,020
2,067,682 1,821,081 2,468,320
1,420,443 337,917
1,726,561 2,067,909 2,378,599
1,415,871 296,020
1,119,851 50,727
1,879,471 1,955,817 1,871,103 1,961,311 2,231,461
292.035 223,809 144,542 (106.371) 86,998
821,812 433,625
388,187 (64,458)
1,587,436 1,732,008 1,694,822 1,440,576 2,460,446 2,322,642
420,751 4,520
849,942 429,191
1,082,526 1,596,636 67,133 65,509
¥ 452,645 Y 416,231 ¥ 1,069,124 ¥ 1,015,393 ¥ 1,531,127
74.30 ¥
30.55 ¥
70.21
69.98
14,158,698
14,180,080
f 14.00 t 0.14
r 1 07 8 i
107.50
14,118,469
14,137,645
f 18.00 I 0.16
¥ 431,705 ¥ 398,291 ¥ 1,051,184 ¥ 994,152 ¥ 1,522,157
74.16
14,148,060
14,169,080
f 12.00 i 0.15
28.17 ¥
12.00 0.15
30.43 28.09 14,131,567 14,140,136 14,144,737 14,156,820
12.00 ¥
115.00 1.42 5.30 0.07
115.00 1.14 5.30 0.05
57.50 0.57 2.65 0.03
115.00 1.45 5.30 0.07
0.14 $
30.00
0.34
115.00 ¥
1.33 $
5.30 ¥
0.06 $
As of March 31,
2014
Balance sheet data:
Total assels ¥2021850,243
Loans, net of allowance for credit losses 86,261,519
Total liabilities 194,187,331
, Deposits 136,631,704
Long-term debt 13,356.728
Total equity 8,662,912
Capital stock 2,086,232
¥215,202,514 91,012,736 206,344,067 139,493.730 12,593,062 8,858,447 2,087,244
(in millions)
¥230,559,276 97.254,242 219,617,296 148.209,739 12,182,358 10,941,980 2,088,135
¥253,661,077 109,181,991 240,909,633 162,517,786 14,498,678 12,751,444 2,089,245
¥280,886.326 117,209,723 265,604,985 171,991,267 19,968,735 15,281,341 2,090,270
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Fiscal years ended March 31,
2011 2012 2013 2014 2015
(in millions, except percentages)
Other financial data:
Average balances:
Interest-earning assets ¥180,260,385 ¥184,179,147 Y193,824,256 Y212,176.348 Y237.247.664
Interest-bearing liabilities 161,344,664 165.420,569 173,399,441 189.413.309 210,101,348
Total assets 204,781,984 211,835,389 225,682,785 247.729,744 277,557,493
Total equity 8,987,129 8.594,310 9,244,530 10,683,098 13,002,955
Return on equity and assels:
Earnings applicable to common shareholders as a
percentage of average total assets 0 21% 0.19% 0 47% 0.40% 0 55%
Earnings applicable to common shareholders as a
percentage of average lolal equity 4.80% 4.63% 11.37% 9.31% 11.71%
Dividends per common share as a percentage of
basic earnings per common share 39.28% 42.60% 16.15% 19.94% 16.70%
Average total equity as a percentage of average total
assets 4.39% 4.06% 4.10% 4.31% 4.68%
Net interest income as a percentage of average total
interest-earning assets 1.04% 1.06% 0 97% 0.92% 0.94%
Credit quality data:
Allowance Tor credit losses ¥ 1,240,456 ¥ 1,285,507 ¥ 1,335,987 ¥ 1,094,420 ¥ 1,055,479
Allowance for credit losses as a percentage of
loans 1.42% 1.39% 1.36% 0.99% 0.89%
Impaired loans ¥ 1,893,098 ¥ 2,031,868 ¥ 2,200,766 ¥ 1,861,027 ¥ 1,686.806
Impaired loans as a percentage of loans 2.16% 2.20% 2.23% 1.69% 1.43%
Allowance for credit losses related lo impaired loans
as a percentage of impaired loans 39.30% 42.92% 43.39% 40.32% 36.00%
Net loan charge-offs ¥ 342,100 ¥ 173,370 ¥ 112,862 ¥ 153,748 ¥ 150,666
Net loan charge-offs as a percentage of average
loans 0.39% 0.20% 0.12% 0.15% 0.13%
Average interest rate spread 0.99% 1.02% 0.93% 0.89% 0.90%
Risk-adjusted capital ratio calculated under Japanese
GAAP!" 14.89% 14.91% 16.68%, 15.53% 15.68%
Notes:
Interest income for the fiscal year ended March 31, 2012 includes a gain of ¥139,320 million on the conversion rate adjustment of Morgan Stanley's convertible preferred stock. Exclusive of the one-time gain associated with the conversion, interest income would have been lower for the fiscal year ended March 31, 2012.
Includes the common shares lhal were potentially issuable upon conversion of the Class 11 Preferred Stock.
Preferred dividends were ¥57.5 per share and paid semi-annually. In April 2014, we acquired and cancelled all of the issued shares of First Series of Class 5 Preferred Stock. As a result, there is currently no issued Class 5 Preferred Slock. See Note 16 to our audited consolidated financial statements included elsewhere in this Annual Report.
Preferred dividends were ¥2.65 per share and paid semi-annually. In August 2014, wc acquired all of the issued shares of Class 11 Preferred Stock in exchange for 1,245 shares of our common stock held in treasury, and cancelled the acquired shares. See Note 16 to our audited consolidated financial statements included elsewhere in this Annual Report.
Risk-adjusted capital ratios have been calculated in accordance with Japanese banking regulations as applicable on the relevant calculation date, based on information derived from our consolidated financial statements prepared in accordance wilh Japanese GAAP. For a description of the applicable capital ratio calculation and other requirements applicable, sec "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Capital adequacy" and "Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy."
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Exchange Rate Information
The tables below set forth, for each period indicated, certain information concerning the rate of exchange of Japanese yen per U.S. $1.00 based on exchange rate information found on Bloomberg. On July 13, 2015, the closing exchange rate was ¥123.43 to U.S.$1.00 and the inverse rate was U.S.$0.81 to ¥100.00.
Year 2015
February March April May June July1"
High ¥120.48. ¥122.03 ¥120.84 ¥124.46 ¥125.86 ¥123.73
Low ¥116.66 ¥118.33 ¥118.50 ¥118.89 ¥121.94 ¥120.41
Note:
(1) Period from July 1. 2015 to July 13.2015.
Fiscal years ended March 31,
2011 2012 2013 2014 2015
Average (of month-end rates) ¥84.99 ¥78.90 ¥83.32 ¥100.38 ¥110.82
Capitalization and Indebtedness Not applicable.
Reasons for the Offer and Use of Proceeds Not applicable.
Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the risks described in this section, which is intended to disclose all of the risks that we consider material based on the information currently available to us, as well as all the other information in this Annual Report, including our consolidated financial statements and related notes, "Item 5. Operating and Financial Review and Prospects," "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk" and "Selected Statistical Data."
Our business, operating results and financial condition could be materially and adversely affected by any of the factors discussed below. The trading price of our securities could decline due to any of these factors. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in this section and elsewhere in this Annual Report. See "Forward-Looking Statements."
Risks Related to Our Business
Because a large portion of our assels as well as our business operations are in Japan, we may incur losses if economic conditions in Japan worsen.
Our performance is particularly affected by the general economic conditions of Japan where we are headquartered and conduct a significant amount of our business. As of March 31, 2015, 60.3% of our total assets were related to Japanese domestic assets, including Japanese national government and Japanese government agency bonds, which accounted for 70.0% of our total investment securities portfolio and 13.0% of our total assets, respectively. Interest and non-interest income in Japan represented 52.6% of our total interest and non-interest income for the fiscal year ended March 31, 2015. Furthermore, as of March 31, 2015, our loans in Japan accounted for 59.1% of our total loans outstanding.
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There is significant uncertainty surrounding Japan's economy. For example, Japan's fiscal health and sovereign creditworthiness may deteriorate if the Japanese government's economic measures and the Bank of Japan's monetary policies prove ineffective or result in negative consequences. If the prices of Japanese government bonds decline rapidly, resulting in an unexpectedly sudden increase in interest rates, our investment securities portfolio as well as our lending, borrowing, trading and other operations may be negatively impacted. In recent periods, major credit rating agencies have downgraded the credit ratings of Japan's sovereign debt, including a downgrade by Moody's Investor Service, Inc. in December 2014 and a downgrade by Fitch Ratings, Ltd. in April 2015.
Instability in the Japanese stock market and foreign currency exchange rates may also have a significant adverse impact on our asset and liability management as well as our results of operations. Various other factors, including stagnation or deterioration of economic and market conditions in other countries, and growing global competition, may also have a material negative impact on the Japanese economy. For a detailed discussion on the business environment in Japan and abroad, see "Item 5. Operating and Financial Review and Prospects—Business Environment."
Since our domestic loans in Japan accounted for a significant portion of our loan portfolio, deteriorating or stagnant economic conditions in Japan may cause adverse effects on our financial results, such as increases in credit costs, as the credit quality of some borrowers could deteriorate. For example, due to the intensifying global competition and weakening consumer spending in recent periods, some Japanese companies, including electronics manufacturers, have experienced significant financial difficulties. For a further discussion, see "—Risks Related to Our Business—We may suffer additional credit-related losses in the future if our borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers' deteriorating repayment abilities prove inappropriate or insufficient."
If the global economy deteriorates further, our credit-related losses may increase, and the value of the financial instruments we hold may decrease, resulting in losses.
Global economic conditions remain volatile, and it is uncertain how the global economy will evolve over time. The shift in the monetary policy in tlie United States, the prolonged economic stagnation in Europe, slowing economic growth in China in the midst of a shift in the government's economic policy, and the political turmoil in various regions around world could negatively impact wider markets, including those of both emerging and developed countries. As of March 31, 2015, based principally on the domicile of the obligors, assets related to Europe accounted for approximately 9.9% of our total assets, assets related to Asia and Oceania excluding Japan accounted for approximately 9.3% of our total assets, and assets related to the United States accounted for approximately 16.5% of our total assets. If the global economy deteriorates or the global economic recovery significantly slows down again, the availability of credit may become limited, and some of our borrowers may default on their loan obligations to us, increasing our credit losses. In addition, concerns over the sovereign debt problem in some European countries may limit liquidity in the global financial markets. Some of our credit derivative transactions may also be negatively affected, including the protection we sold through single name credit default swaps, and index and basket credit default swaps. The notional amounts of these protections sold as of March 31, 2015 were ¥2,583.2 billion and ¥791.1 billion, respectively. In addition, if credit market conditions worsen, our capital funding structure may need to be adjusted or our funding costs may increase, which could have a material adverse impact on our financial condition and results of operations.
Furthermore, we have incurred losses, and may incur further losses, as a result of changes in the fair value of our financial instruments resulting from weakening market conditions. For example, declines in the fair value of our investment securities, particularly equity investment securities, resulted in our recording impairment losses of¥124.2 billion,¥6.5 billion and ¥5.9 billion for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. As of March 31, 2015, approximately 33.7% of our total assets were financial instruments for which wc measure fair value on a recurring basis, and less than 0.5% of our total assets were financial instruments for which wc measure fair value on a non-recurring basis. Generally, in order to establish the fair value of these
|1010|
instruments, we rely on quoted prices. If the value of these financial instruments declines, a corresponding writedown may be recognized in our consolidated statements of income. In addition, because we hold a large amount of investment securities, short-term fluctuations in the value of our securities may trigger losses'or exit costs for us to manage our risk. For more information on our valuation method for financial instruments, see "Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates."
Our business operations are exposed to risks of natural disasters, terrorism and other disruptions caused by external events.
As a major financial institution incorporated in Japan and operating in major international financial markets, our business operations, ATMs and other information technology systems, personnel, and facilities and other physical assets are subject to the risks of earthquakes, typhoons, floods and other natural disasters, terrorism and other political and social conflicts, health epidemics, and other disruptions caused by external events, which are beyond bur control. As a consequence of such external events, we may be required to incur significant costs and expenses for remedial measures or compensation to customers or transaction counterparties for resulting losses. We may also suffer loss of business. In addition, such external events may have various other significant adverse effects, including deterioration in economic conditions, declines in the business performance of our borrowers and decreases in stock prices, which may result in higher credit costs or impairment or valuation losses on the financial instruments we hold. These effects could materially and adversely affect our business, operating results and financial condition.
As with other Japanese companies, we are exposed to heightened risks of large-scale natural disasters, particularly earthquakes. In particular, a large-scale earthquake occurring in the Tokyo metropolitan area could result in market disruptions or significant damage to, or losses of, tangible or human assets relating to our business and counterparties because many of our important business functions and many of the major Japanese companies and financial markets are located in the area. In addition, such an earthquake could cause a longer-term economic slowdown and a downgrade of Japan's sovereign credit rating due to increases in government spending for disaster recovery measures.
Our risk management policies and procedures may be insufficient to address the consequences of these external events, resulting in our inability to continue to operate a part or the whole of our business. In addition, our redundancy and backup measures may not be sufficient to avoid a material disruption in our operations, and our contingency and business continuity plans may not address all eventualities that may occur in the event of a material disruption cause&.by a largerscale natural disaster such as the March 2011 Great East Japan Earthquake, which led to tsunamis, soil liquefaction and fires, as well as electricity power supply shortages and electricity power conservation measures resulting from the suspension of the operations of the nuclear power plants.
We may suffer additional credit-related losses in the future if our borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers' deteriorating repayment abilities prove inappropriate or insufficient.
When we lend money or commit to lend money, we incur credit risk which is the risk of losses if our borrowers do not repay their loans. We may incur significant credit losses or have to provide for a significant amount of additional allowance for credit losses if:
large borrowers become insolvent or must be restructured;
domestic or global economic conditions, cither generally or in particular industries in which large borrowers operate, deteriorate;
the value of the collateral we hold, such as real estate or securities, declines; or
we are adversely affected by corporate credibility issues among our borrowers, to an extent that is worse than anticipated.
|10 10|
As a percentage of total loans, impaired loans, which primarily include nonaccrual loans and troubled debt restructurings, orTDRs, ranged from 1/13% to 2.23% as ofthe live most recent fiscal year-ends. As of March 31, 2015, impaired loans were ¥1,686.8 billion, representing 1.43% of our total outstanding loans. If the economic conditions in Japan or other parts of the world to which we have significant credit risk exposure worsen, our problem loans and credit-related expenses may increase. An increase in problem loans and credit-related expenses would adversely affect our results of operations, weaken our financial condition and erode our capital base.
We may provide additional loans, equity capital or other forms of support to troubled borrowers in order to facilitate their restructuring and revitalization efforts. We may also forbear from exercising some or all of our rights as a creditor against them, and we may forgive loans to them in conjunction with their debt restructurings. We may take these steps even when such steps might not be warranted from the perspective of our short-term or narrow economic interests or a technical analysis of our legal rights against those borrowers, in light of other factors such as our longer-term economic interests, and our commitment to support the Japanese economy. These practices may substantially increase our exposure to troubled borrowers and increase our losses. Credit losses may also increase if we elect, or are forced by economic or other considerations, to sell or write off our problem loans at a larger discount, in a larger amount or in a different time or manner, than we may otherwise want.
Although we, from time to time, enter into credit derivative transactions, including credit default swap contracts, to manage our credit risk exposure, such transactions may not provide the protection against credit defaults that we intended due to counterparty defaults or similar issues. The credit default swap contracts could also result in significant losses. As of March 31, 2015, the total notional amount of the protection we sold through single name credit default swaps, index and basket credit default swaps, and credit-linked notes was ¥3.37 trillion. In addition, negative changes in financial market conditions may restrict the availability and liquidity of credit default swaps. For more information on our credit derivative transactions, see Note 23 to our consolidated financial statements included elsewhere in this Annual Report.
Our loan losses could prove to be materially different from our estimates and could materially exceed our current allowance for credit losses, in which case we may need to provide for additional allowance for credit losses and may also record credit losses beyond our allowance. Our allowance for credit losses in our loan portfolio is based on evaluations of customers' creditworthiness and the value of collateral we hold. For the fiscal year ended March 31, 2015, we recorded ¥87.0 billion of provision for credit losses. Negative changes in economic conditions, government policies or our borrowers' repayment abilities could require us to provide for additional allowance. For example, companies in the Japanese electronics manufacturing industry in particular have experienced significant declines in sales and financial difficulties due to increased global competition. Moreover, the Japanese electric utility companies, including The Tokyo Electric Power Company, Incorporated, have been significantly affected by the accidents at the Fukushima Daiichi Nuclear Power Plants in March 2011 and subsequent developments, including the suspension of all of the nuclear power plants for seismic safety inspections and other reasons, higher fuel prices in recent periods and compensation issues for affected individuals and companies. Other borrowers in Japan may be adversely affected by electricity power supply shortages and electricity rate increases. As a result, our borrowers may incur financial and non-financial losses that exceed our estimations. In such case, we may need to provide for additional allowance for credit losses. Also, the regulatory standards or guidance on establishing allowances may also change, causing us to change some of the evaluations used in determining the allowances. As a result, we may need to provide for additional allowance for credit losses.
When there is an improvement in asset quality, a credit for credit losses is recorded to reverse the allowance for credit losses to a level management deems appropriate. For example, for the fiscal year ended March 31, 2014, we recorded ¥106.4 billion of credit for credit losses, which was included in our consolidated statements of income. For the fiscal year ended March 31, 2015, wc recorded additional credit for credit losses with respect to some segments of our loan portfolio, while we recorded provision for credit losses for our entire loan portfolio. However, we have historically more often provided for credit losses rather than recording credit for credit losses, and in future periods we may need to recognize a provision for credit losses, which may have a significant negative effect on our results of operations.
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For more information on our loan portfolio, see "Item 5.B. Operating and Financial Review and Prospects— Liquidity and Capital Resources—Financial Condition—Loan Portfolio."
// the Japanese slock market or other global markets decline in the future, we may incur losses on our securities portfolio and our capital ratios will be adversely affected.
A decline in Japanese stock prices could reduce the value ofthe Japanese domestic marketable equity securities that we hold, which accounted for 12.2% of our total investment securities portfolio, and 2.3% of our total assets, as of March 31, 2015. The Nikkei Stock Average, which is the average of 225 blue chip stocks listed on the Tokyo Stock Exchange, fluctuated throughout the fiscal year ended March 31, 2015 declining to an intra-day low of¥13,885.11 on April 11, 2014 and rising to an intra-day high of ¥19,778.60 on March 23, 2015. As of July 6, 2015, the closing price of the Nikkei Stock Average was ¥20,112.12. Recent fluctuations in the Nikkei Stock Average have reflected the volatility in the global economy and investor sentiment as investors continue to observe the changes in economic and monetary policies mainly in Japan, the United States, the Eurozone and Asian countries. In addition, weakening or stagnant economic conditions in these and other regions may have a significant negative impact on Japanese companies, which in turn will cause their stock prices to decline. Concerns over the impact of geopolitical tensions and conflicts in various parts ofthe world on Japanese companies may also adversely affect stock prices in Japan. In addition, the global trend towards further reduction in risk assets could result in lower stock prices, and the recent trend in Japan towards strengthening corporate governance may subject public companies to stricter scrutiny. If stock market prices decline or do not improve, we may incur losses on our securities portfolio. Because we hold a large amount of Japanese domestic marketable equity securities, even short-term fluctuations in the value of our securities may trigger losses or exit costs for us to manage our risk. Declines in the Japanese stock market or other global markets may also materially and adversely affect our capital ratios and financial condition. For a detailed discussion of our holdings of marketable equity securities and the effect of market declines on our capital ratios, see "Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy" and "Selected Statistical Data—Investment Portfolio." See also "Item 5. Operating and Financial Review and Prospects—Business Environment:"
Increases in interest rates could adversely affect the value of our bond portfolio.
The aggregate carrying amount of the Japanese government and corporate bonds and foreign bonds, including U.S. Treasury bonds, that wc held as of March 31, 2015 was 14:0% of our total assets. In particular, the Japanese national government and Japanese government agency bonds accounted for 13.0% of our total assets as of March 31, 2015. For a detailed discussion of our bond portfolio, see "Selected Statistical Data—Investment Portfolio."
The Bank of Japan has been maintaining a very low policy rate (uncollateralized overnight call rate) of 0.10% in an effort to lift tlie economy out of deflation. Short-term interest rates in Japan continue to decline because of the Bank of Japan's so-called "quantitative and qualitative monetary easing" policy. As part of this policy, the Bank of Japan has been purchasing Japanese government bonds with an aim to increase the Bank of Japan's aggregate holding of such bonds by approximately ¥80 trillion each year. The central bank's policies, however, may change, resulting in an interest rate increase. Separate from the central bank's monetary policies, interest rates could also significantly increase in the event that Japanese government bonds decline in value due to such factors as a decline in confidence in the Japanese government's fiscal administration, further issuances of government bonds in connection with emergency economic measures and a heightened market expectation for tapering or cessation of the quantitative and qualitative easing measures in Japan, or in the event that interest rates on U.S. Treasury securities rise due to such factors as changes in the low interest rate policy in the United States. If relevant interest rates increase for these or other reasons, particularly if such increase is unexpected or sudden, we may incur significant losses on sales of, and valuation losses on, our bond portfolio. See "Item 5. Operating and Financial Review and Prospects—Business Environment."
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Fluctuations in foreign currency exchange rates may result in transaction losses on translation of monetary assets and liabilities denominated in foreign currencies as well as foreign currency translation losses wilh respect to our foreign subsidiaries and equity method investees.
Fluctuations in foreign currency exchange rates against the Japanese yen create transaction gains or losses on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. To the extent that our foreign currency-denominated assets and liabilities are not matched in the same currency or appropriately hedged, we could incur losses due to future foreign exchange rate fluctuations. During the fiscal year ended March 31, 2015, the average balance of our foreign interest-earning assets was ¥90.42 trillion and the average balance of our foreign interest-bearing liabilities was ¥58.10 trillion, representing 38.1% of our average total interest-earning assets and 27.7% of our average total interest-bearing liabilities during the same period. For the fiscal year ended March 31, 2015, net foreign exchange losses, which primarily include net transaction losses on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies, net losses on currency derivative instruments entered into for trading purposes, and net gains on translation into Japanese yen of securities accounted for under the fair value option, were ¥113.1 billion, compared to ¥61.8 billion for the previous fiscal year. In addition, wc may incur foreign currency translation losses with respect to our foreign subsidiaries and equity method investees due to fluctuations in foreign currency exchange rates. The average exchange rate for the fiscal year ended March 31, 2015 was ¥109.93 per U.S.$1.00, compared to ¥100.24 per U.S.$1.00 for the previous fiscal year. The change in the average exchange rate of the Japanese yen against the U.S. dollar and other foreign currencies had the effect of increasing total revenue by ¥202.8 billion, increasing net interest income by ¥85.5 billion and income before income tax expense by ¥105.2 billion, respectively, for the fiscal year ended March 31, 2015. As the Bank of Japan has continued to implement its anti-deflation monetary measures under the "quantitative and qualitative monetary easing" policy and the Abe administration has continued to implement economic measures under its "Abenomics" policy, the exchange rate between the Japanese yen and U.S. dollar has been fluctuating, with the Japanese yen depreciating from ¥103.23 to the U.S. dollar on April 1, 2014 to ¥125.86 to the U.S. dollar on June 5, 2015. As of July 6, 2015, the exchange rate was ¥122.57 to the U.S. dollar. For more information on foreign exchange gains and losses and foreign currency translation gains and losses, see "Item 5. Operating and Financial Review and Prospects— Business Environment" and "Item 5.A. Operating and Financial Review and Prospects—Operating Results."
We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation.
We conduct our business subject to ongoing regulation and associated regulatory and legal risks. Global financial institutions, including us, currently face heightened regulatory scrutiny as a result of the concerns developing in the global financial sector, and growing public pressure to demand even greater regulatory surveillance following several high-profile scandals and risk management failures in the financial industry. In the current regulatory environment, we arc subject to various regulatory inquiries or investigations from time to time in connection with various aspects of our business and operations. In addition, multiple government authorities with overlapping jurisdiction more frequently conduct investigations and take other regulatory actions in coordination with one another or separately on tlie same or related matters.
In November 2014, BTMU entered into a consent agreement with the New York State Department of Financial Services, or DFS, to resolve issues relating to instructions given to PricewaterhouseCoopers LLP, or PwC, and the disclosures made to DFS in connection with BTMU's 2007 and 2008 voluntary investigation of BTMU's U.S. dollar clearing activity toward countries under U.S. economic sanctions. BTMU had hired PwC to conduct a historical transaction review report in connection wilh that investigation, and voluntarily submitted the report to DFS's predecessor entity in 2008. Under the terms ofthe agreement with DFS, BTMU made a payment of $315 million to DFS, and agreed to take actions on persons involved in the matter at that time, relocate its U.S. Bank Secrecy Act/Anti-Moncy Laundering, or BSA/AML, and Office of Foreign Assets Control, or OFAC, sanctions compliance programs to New York, and extend, if regarded as necessary by DFS, the period during which an independent consultant is responsible for assessing BTMU's internal controls regarding compliance
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with applicable laws and regulations related to U.S. economic sanctions. Tn June 2013, BTMU reached an agreement with DFS regarding inappropriate operational processing of U.S. dollar clearing transactions with countries subject to OFAC sanctions during the period of 2002 to 2007. Under the terms of the June 201 3 agreement, BTMU made a payment of $250 million to DFS and retained an independent consultant to conduct a compliance review ofthe relevant controls and related matters in BTMU's current operations. In December 2012, BTMU agreed to make a payment of approximately $8.6 million to OFAC to settle potential civil liability for apparent violations of certain U.S. sanctions regulations from 2006 to 2007. BTMU continues to cooperate closely with all relevant regulators and is undertaking necessary actions.
We have received requests and subpoenas for information from government agencies in some jurisdictions that are conducting investigations into past submissions made by panel members, including us, to the bodies that set various interbank benchmark rates. We are cooperating with these investigations and have been conducting an internal investigation among other things. In connection with these matters, we and other panel members are involved as defendants in a number of civil lawsuits, including putative class actions, in the United States.
These developments or other similar matters may result in additional regulatory actions against us or agreements to make significant additional settlement payments. These developments or other matters to which we are subject from time to time may also expose us to substantial monetary damages, legal defense costs, criminal and civil liability, and restrictions on our business operations as well as damage to our reputation. The outcome of such matters, including the extent of the potential impact of any unfavorable outcome on our financial results, however, is inherently uncertain and difficult to predict. The extent of financial, human and other resources required to conduct any investigations or to implement any-corrective or preventive measures is similarly uncertain and could be significant.
Legal and regulatory changes could have a negative impact on our business, financial condition and results of operations.
As a global financial services provider, our business is subject to ongoing changes in laws, regulations, policies, voluntary codes of practice and interpretations in Japan and other markets where we operate. Major global financial institutions currently face an increasingly stricter set of laws, regulations and standards as a result of the concerns enveloping the global financial sector. There is also growing political pressure to demand even greater internal compliance and risk management systems following several high-profile scandals and risk management failures in the financial industry. We may not be able to enhance our compliance risk management systems and programs, which, in some cases, are supported by third-party service providers, in a timely manner or as planned. Our risk management systems and programs may not be fully effective in preventing all violations of laws, regulations and rules.
Our failure or inability to comply fully with the stricter set of laws and regulations could lead to fines, public reprimands, damage to reputation, civil liability, enforced suspension of operations or, in extreme cases, withdrawal of authorization to operate, adversely affecting our business and results of operations. Legal or regulatory compliance failure may also adversely affect our ability to obtain regulatory approvals for future strategic initiatives. Furthermore, failure to take necessary corrective action, or the discovery of violations of laws in the process of further review of any of the matters mentioned above or in the process of implementing any corrective measures, could result in further regulatory action.
We could also be required to incur significant expenses to comply with new or revised regulations. For example, if we adopt a new information system infrastructure in the future, we may be required to incur significant additional costs for establishing and implementing effective internal controls, which may materially and adversely affect our financial condition and results of operations.
Future developments or changes in laws, regulations, policies, voluntary codes of practice and their effects are expected to require greater capital resources and significant management attention, and may require us to
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modify our business strategies and plans. For example, since March 31, 201 3, Japanese banking institutions with international operations have become subject to stricter capital adequacy requirements adopted by the Financial Services Agency of Japan, an agency ofthe Cabinet Office, or the FSA, based in part on the international regulatory framework generally known as "Basel III." For more information, see "—Risks Related to Our Business—We may not be able to maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of our operations." and "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan."
Furthermore, regulatory reforms recently implemented, proposed and currently being debated in the United States may also significantly affect our business operations. For example, in February 2014, the Federal Reserve Board, or FRB, approved final rules strengthening supervision and regulation of large U.S. bank holding companies and foreign banking organizations, or FBOs. These final rules require a large FBO with $50 billion or more in U.S. combined assets excluding the assets held by its U.S. branches or agencies, such as us, to organize all of its U.S. bank and non-bank subsidiaries under a U.S. intermediate holding company that would be subject to U.S. capital requirements, capital stress testing, liquidity buffer requirements, and other enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding companies ofthe same size. The rules will become effective in July 2016, and significant resources and management attention for establishing an appropriate governance structure with an effective internal control system may be required to ensure compliance with the rules. See "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—United States."
Global financial regulatory reform measures may also have a significant impact on our business operations. For example, various international organizations, including the Financial Stability Board and the Basel Committee on Banking Supervision, are currently considering ways to address, among other things, the introduction of total loss-absorbing capacity requirements and capital requirements for the interest rate risk for the banking book as well as revisions to methods of calculating the amount of risk-weighted assets. We intend to continue to monitor developments relating to global regulatory reforms.
Any adverse changes in the business of MUFG Americas Holdings Corporation, an indirect wholly-owned subsidiary in the United States, could significantly affect our results of operations.
MUFG Americas Holdings Corporation, or MUAH, which is an indirect wholly owned subsidiary in the United States formerly called UnionBanCal Corporation, or UNBC, has historically contributed to a significant portion of our net income. MUAH reported net income of $628 million, $667 million and $825 million for the fiscal years ended December 31, 2012, 2013, and 2014 respectively. Any adverse developments which could arise at MUAH may have a significant negative impact on our results of operations and financial condition. The risks relating to MUAH have increased as MUAH has been expanding its business through acquisitions of community banks and other financial-related businesses in the United States. If MUAH is unable to achieve the benefits expected from its business strategies, including its business expansion strategy through acquisitions of community banks and other financial-related businesses, we may suffer an adverse financial impact. For more information, see "Item 4.B. Information on the Company—Business Overview—Global Business Group—MUFG Union Bank, N.A. (MUB)."
Other factors that have negatively affected, and could continue to negatively affect, MUAH's results of operations include difficult economic conditions, such as a downturn in the real estate and housing industries in California and other states within the United States, the fiscal challenges being experienced by the U.S. federal and California state governments, substantial competition in the banking markets in California and other states within the United States and uncertainty over the U.S. economy, as well as fluctuating oil prices, negative trends in debt ratings, and interest rate uncertainties. Since the financial crisis in 2008 and 2009, the U.S. banking industry has operated in an extremely low interest rate environment as a result of the highly accommodative monetary policy of the FRB, which has placed downward pressure on the net interest margins of U.S. banks, including MUAH. Interest rates in the United States may increase, however, as discussions continue on when to further taper or end this monetary policy.
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Significant costs may arise from enterprise-wide compliance and risk management requirements, or failure to comply, with applicable laws and regulations, such as the U.S. Bank Secrecy Act and related amendments under ihe USA PATRIOT Act, and any adverse impact of the implementation of the Dodd-Frank Act. In addition, the FRB and other U.S. bank regulators have adopted final rules to implement the Basel III global regulatory framework for U.S. banks and bank holding companies which require higher quality of capital, as well as significantly revise the calculations for risk-weighted assets. The FRB has also adopted final rules to implement various enhanced prudential standards required by the Dodd-Frank Act for larger U.S. bank holding companies, such as MUAH. These standards require the larger bank holding companies to meet enhanced capital, liquidity and leverage standards. Further, the FRB has adopted final regulations applicable to FBOs operating in tlie United States, which require MUFG's and BTMU's U.S. operations, including those of MUAH, to be restructured and, subject to certain exceptions, conducted under a single U.S. intermediate holding company, or IHC, with its own capital and liquidity requirements. Any actions management may take in response to these proposed regulatory changes may involve the issuance of additional capital or other measures. For more information, see "'Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—United States."
MUFG Union Bank, N.A., or MUB, which is the principal subsidiary of MUAH, and reportedly other financial institutions have been the targets of various denial-of-service or other cyberattacks as part of what appears to be a coordinated effort to disrupt the operations of financial institutions and potentially test their cybersecurity in advance of future and more advanced cyberattacks. These denial-of-service attacks may require substantial resources to defend against and affect customer satisfaction and behavior. Moreover, MUB's information security measures may not be sufficient to defend against cyberattacks and other information security breaches, in which case the consequences could be significant in terms of financial, reputational and other losses. In addition, there have been increasing efforts to breach data security at financial institutions as well as other types of companies, such as large retailers, or with respect to financial transactions, including through the use of social engineering schemes such as "phishing." Even if cyberattacks and similar tactics are not directed specifically at MUB, such attacks on other large institutions could disrupt the overall functioning of the U.S. or global financial system and undermine consumer confidence in banks generally to the detriment of other financial institutions, including MUB.
Any adverse changes in Ihe business of Bank of Ayudhya, an indirect subsidiary in Thailand, could significantly affect our results of operations.
Any adverse changes in the business or management of Bank of Ayudhya Public Company Limited, or KS, a major subsidiary in Thailand in which we hold a 76.88% ownership interest as of March 31, 2015, may negatively affect our financial condition and results of operations. Factors that may negatively affect KS's financial condition and results of operations include:
adverse economic conditions, substantial competition in the banking industry, volatile political and social conditions, natural disasters including floods, terrorism and armed conflicts, restrictions under applicable financial systems and regulations, or significant fluctuations in interest rates, currency exchange rates, stock prices or commodity prices, in Southeast Asia, particularly in Thailand,
the business performance of companies making investments in and entering into markets in the Southeast Asian region, as well as the condition of economies, financial systems, laws and financial markets in the countries where such companies primarily operate,
losses from legal proceedings involving KS,
credit rating downgrades and declines in stock prices of KS's borrowers, and bankruptcies of KS's borrowers resulting from such factors,
defaults on KS's loans to individuals,
adverse changes in the cooperative relationship between us and the other major shareholder of KS. and
costs incurred due to weaknesses in the internal controls and regulatory compliance systems of KS or any of its subsidiaries.
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In connection with our acquisition of KS, we recorded ¥217.4 billion of goodwill. Tf the business of KS deteriorates, we may be required to record impairment losses, which could have a material adverse effect on our results of operations and financial condition. See "Item 5. Operating and Financial Review and Prospects— Recent Developments" and "—Risks Related to Our Business—If the goodwill recorded in connection with our acquisitions becomes impaired, wc may be required to record impairment losses, which may adversely affect our financial results and the price of our securities."
Our strategy to expand the range of our financial products and sendees and the geographic scope of our business globally may fail if we are unable to anticipate or manage new or expanded risks that entail such expansion.
We continue to seek opportunities to expand the range of our products and services beyond our traditional banking, trust, and securities businesses, through development and introduction of new products and services or through acquisitions of or investments in financial institutions with products and services that complement our business. For example, taking advantage of our financial holding company status which enables us to underwrite securities, we are currently seeking to expand our corporate banking operations in the United States. In addition, the sophistication of financial products and management systems has been growing significantly in recent years. As a result, we are exposed to new and increasingly complex risks, while market and regulatory expectations that we manage these risk properly continue to rise. Some ofthe activities that our subsidiaries are expected to engage in, such as derivatives and foreign currency trading, present substantial risks. In some cases, wc have only limited experience with the risks related to the expanded range of these products and services. In addition, we may not be able to successfully develop or operate the necessary information systems. As a result, we may not be able to foresee the risks relating to new products and services.
As we expand the geographic scope of our business, we will also be exposed to risks that are unique to particular jurisdictions or markets. For example, in an effort to further develop our operations in Asia, BTMU entered into a capital and business alliance with Vietnam Joint Stock Commercial Bank for Industry and Trade in December 2012 and acquired approximately 20% of the ordinary shares of the Vietnamese bank in May 2013. In addition, BTMU purchased 72.01% of the outstanding shares of KS in December 2013 and acquired additional shares in January 2015, increasing BTMU's ownership interest to 76.88%. In some cases, we hold minority stakes in financial institutions as we seek to enter new markets or jurisdictions by collaborating with a local business partner. In such circumstances, the controlling shareholder may make or cause to be made business decisions that are inconsistent with our interests and, as a result, we may be unable to achieve the goals initially set out for the expansion strategy. In addition, we may be unable to staff our newly expanded operations with qualified individuals familiar with local legal and regulatory requirements and business practices, exposing us to legal, regulatory, operational and other risks.
Our risk management systems may prove to be inadequate and may not work in all cases or to the degree required. The increasing market, credit, compliance and regulatory risks in relation to the expanding scope of our products, services and trading activities or expanding our business beyond our traditional markets, could result in us incurring substantial losses. In addition, our efforts to offer new services and products or penetrate new markets may not succeed if product or market opportunities develop more slowly than expected, if our new services or products are not well accepted among customers, or if the profitability of opportunities is undermined by competitive pressures. For more information on our recent acquisition transactions, see "Item 5. Operating and Financial Review and Prospects—Recent Developments."
Unanticipated economic changes in, and measures taken in response to such changes by, emerging market countries could result in additional losses.
We are increasingly active, through a network of branches and subsidiaries, in emerging market countries, particularly countries in Asia, Latin America, Central and Eastern Europe, and the Middle East. For example, based principally on the domicile ofthe obligors, assets related to Asia and Oceania excluding Japan increased
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17.4% from ¥22.31 trillion as of March 31, 2014 to ¥26.19 trillion as of March 31, 2015, accounting for 9.3% of our total assets as of March 31, 2015. The economies of emerging market countries can be volatile and susceptible to adverse changes and trends in the global financial markets. For example, a decline in the value of local currencies of these countries could negatively affect the creditworthiness of some of our borrowers in these countries. The loans we have made to borrowers and banks in these countries are often denominated in U.S. dollars, euro or other foreign currencies. These borrowers often do not hedge the loans to protect against fluctuations in the values of local currencies. A devaluation of the local currency would make it more difficult for a borrower earning income in that currency to pay its debts to us and olher foreign lenders. In addition, some countries in which we operate may attempt to support the value of their currencies by raising domestic interest rates. If this happens, the borrowers in these countries would have to devote more of their resources to repaying their domestic obligations, which may adversely affect their ability to repay their debts to us and other foreign lenders. The limited credit availability resulting from these conditions may adversely affect economic conditions in some countries. This could cause a further deterioration ofthe credit quality of borrowers and banks in those countries and cause us to incur further losses. In addition, should there be excessively rapid economic growth and increasing inflationary pressure in some ofthe emerging market countries, such developments could adversely affect the wider regional and global economies. Some emerging market countries may also change their monetary or other economic policies in response to.economic and political instabilities or pressures, which are difficult to predict. As of March 31, 2015, based on the domicile ofthe obligors, our assets in Europe, Asia and Oceania excluding Japan, and other areas excluding Japan and the United States, were ¥27.72 trillion, ¥26.19 trillion and¥l 1.37 trillion, representing 9.9%, 9.3% and 4.0% of our total assets, respectively. See "Item 5.B; Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition."
If our strategic.alliance with Morgan.Stanley.fails, we could suffer financial or reputational loss.
We have a global strategic alliance with-Morgan Stanley, under which we operate two joint venture securities companies in Japan; engage in joint corporate finance operations in the United States and pursue other cooperative opportunities. We hold approximately 21.9% of the voting rights in Morgan Stanley as of March 31, 2015 and continue to hold approximately $521.4 million of perpetual non-cumulative non-convertible preferred stock with a 10% dividend. In addition, we currently have two representatives on Morgan Stanley's board of directors.
We initially entered into this strategic alliance in October 2008 with a view towards long-term cooperation • with Morgan Stanley, and currently plan to deepen the strategic alliance. However, due to any unexpected changes in social, economic or financial conditions, changes in the regulatory environment, or any failure to integrate or share staff, products or services, or to operate, manage or implement the business strategy of the securities joint venture companies or other cooperative opportunities as planned, we may be unable to achieve the expected synergies from this alliance.
If our strategic alliance with Morgan Stanley is terminated, it could have a material negative impact on our business strategy, financial condition, and results of operations. For example, because we conduct our securities operations in Japan through the joint venture companies we have with Morgan Stanley, such termination may result in our inability to attain the planned growth in this line of business.
In addition, with our current investment in Morgan Stanley, we have neither a controlling interest in, nor control over the business operations of Morgan Stanley. If Morgan Stanley makes any business decisions that are inconsistent with our interests, wc may be unable to achieve the goals initially set out for the strategic alliance. Furthermore, although we do not control Morgan Stanley, given the magnitude of our investment, if Morgan Stanley encounters financial or other business difficulties due to adverse changes in the economy, regulatory environment or other factors, we may suffer a financial loss on our investment or damage to our reputation. For example, we recorded an impairment loss of ¥579.5 billion on our investment in Morgan Stanley's common stock for the fiscal year ended March 31, 2012.
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We apply equity method accounting to our investment in Morgan Stanley in our consolidated financial statements. As a result, Morgan Stanley's performance affects our results of operations. In addition fluctuations in Morgan Stanley's stock price or in our equity ownership interest in Morgan Stanley may cause us to recognize additional losses on our investment in Morgan Stanley.
We may incur further losses as a result of financial difficulties relating to other financial institutions, both directly and through the effect they may have on the overall banking environment and on their borrowers.
Some domestic and foreign financial institutions, including banks, non-bank lending and credit institutions, securities companies and insurance companies, have experienced declining asset quality, capital adequacy and other financial problems. This or similar future developments may lead to severe liquidity and solvency problems, which have in the past resulted in the liquidation, government control or restructuring of affected institutions. In addition, allegations or governmental prosecution of improper trading activities or inappropriate business conduct of a specific financial institution could also negatively affect the public perception of other global financial institutions individually and the global financial industry as a whole. These developments may adversely affect our financial results.
Financial difficulties relating to financial institutions could adversely affect us because we have extended loans, some of which may need to be classified as impaired loans, to banks, securities companies, insurance companies and other financial institutions that are not our consolidated subsidiaries. Our loans to banks and other financial institutions have been more than 5% of our total loans as ofeach year-end in the three fiscal years ended March 31, 2015, with the percentage increasing from 12.5% to 13.8% between March 31, 2014 and March 31, 2015. We may also be adversely affected because we are a shareholder of some other banks and financial institutions that are not our consolidated subsidiaries, including our shareholdings in Japanese regional banks and our 21.9% voting interest in Morgan Stanley as of March 31, 2015. If some of the financial institutions to which we have exposure experience financial difficulties, we may need to provide financial support to them even when such support might not be warranted from the perspective of our narrow economic interests because such institutions may be systematically important to the Japanese or global financial system.
We may also be adversely affected because we enter into transactions, such as derivative transactions, in the ordinary course of business, with other banks and financial institutions as counterparties. For example, we enter into credit derivatives with banks, broker-dealers, insurance companies and other financial institutions for managing credit risk exposures, for facilitating client transactions, and for proprietary trading purposes. The notional amount of the protection we sold through these instruments was ¥3.37 trillion as of March 31, 2015.
In addition, financial difficulties relating to financial institutions could indirectly have an adverse effect on us because:
• we may be requested to participate in providing assistance to support distressed financial institutions that are not our consolidated subsidiaries;
the government may elect to provide regulatory, tax, funding or other benefits to those financial institutions to strengthen their capital, facilitate their sale or otherwise, which in turn may increase their competitiveness against us;
deposit insurance premiums could rise if deposit insurance funds prove to be inadequate;
bankruptcies or government support or control of financial institutions could generally undermine confidence in financial institutions or adversely affect the overall banking environment;
failures or financial difficulties experienced by other financial institutions could result in additional regulations or requirements that increase the cost of business for us; and
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negative media coverage of tlie financial industry, regardless of its accuracy and applicability to us, could affect customer or investor sentiment, harm our reputation and have a materially adverse effect on our business or the price of our securities.
Because of our loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan may further adversely affect our financial results.
We have a large loan portfolio in the consumer lending industry as well as large shareholdings in subsidiaries and equity method investees in the consumer finance industry. Our domestic loans to consumers amount to approximately one-seventh of our total outstanding loans. Of this amount, the consumer loans provided by Mitsubishi UFJ NICOS, Co., Ltd., which is our primary consumer financing subsidiary, were ¥564.6 billion as of March 31, 2015, compared to ¥608.6 billion as of March 31, 2014.
Mitsubishi UFJ NICOS's consumer loan portfolio has been adversely affected by a series of regulatory reforms recently implemented in Japan, which has affected the consumer lending industry in recent years. In December 2006, the Japanese Diet passed legislation to reform the regulations relating to the consumer lending business, including amendments to the Act Regulating the Receipt of Contributions, die Receipt of Deposits, and Interest Rates, which, effective June 18, 2010, reduced the maximum permissible interest rate from 29.2% per annum to 20% per annum. The regulatory reforms also included amendments to.the Money Lending Business Act, which, effective June 18, 2010, abolished the so-called "gray-zone interest." Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Prior to June 18, 2010, gray-zone interest was permitted under certain conditions set forth in the Money Lending Business Act. As a result of the regulatory reforms, all interest rates are now subject to tlie lower limits imposed by.the Interest Rate Restriction Act, compelling lending institutions, including our consumer finance subsidiaries and equity method investees, to lower the interest rates they charge borrowers. The regulations that became effective on June 18, 2010 also have had a further negative impact on the business of consumer finance companies as one of the new regulations requires, among other things, consumer finance companies to limit their lending to a single customer to a maximum of one third of the customer's annual income regardless of the customer's repayment capability, significantly affecting consumer financing companies.
The regulations and regulatory reforms affecting the consumer finance business were one of the main factors that contributed to the decrease in interest income attributable to our consumer finance business. Our interest income attributable to the consumer finance business was approximately ¥190 billion and ¥160 billion for the fiscal years ended March 31, 2009 and 2010, respectively. However, following the regulatory changes in June 2010, our interest income attributable to the consumer finance business decreased to approximately ¥120 billion, ¥100 billion and ¥100 billion for the fiscal years ended March 31, 2012, 2013 and 2014, respectively. For the fiscal year ended March 31, 2015, our interest income attributable to the consumer finance business was approximately ¥90 billion.
In addition, as a result of decisions by the Supreme Court of Japan prior to June 18, 2010 imposing stringent requirements under the Money Lending Business Act for charging gray-zone interest rates, consumer finance companies have experienced a significant increase in borrowers' claims for reimbursement of previously collected interest payments in excess of the limits stipulated by the Interest Rate Restriction Act.
Following the various legal developments in June 2010 and other industry developments, Mitsubishi UFJ NICOS revised its estimate of allowance for repayment of excess interest by updating management's future forecast to reflect new reimbursement claims information and other data. As of March 31, 2013, 2014 and 2015, we had ¥77.6 billion, ¥54.1 billion and ¥36.3 billion of allowance for repayment of excess interest, respectively. For the same periods, one of our equity method investees engaged in consumer lending, ACOM CO., LTD., had
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a negative impact of ¥17.0 billion, ¥18.0 billion and ¥19.7 billion, respectively, on net equity in losses of equity method investees in our consolidated statements of income. We intend to carefully monitor future developments and trends.
These developments have adversely affected, and these and any future developments may further adversely affect, the operations and financial condition of our subsidiaries, equity method investees and borrowers which are engaged in consumer lending, which in turn may affect the value of our related shareholdings and loan portfolio.
Our business may be adversely affected by competitive pressures, which have partly increased due to regulatory changes and recent market changes in the financial industry domestically and globally.
In recent years, the Japanese financial system has been undergoing significant changes and regulatory barriers to competition have been reduced. In particular, any further reform ofthe Japanese postal savings system, under which the Japan Post Group companies, including Japan Post Bank Co., Ltd., were established in October 2007, could substantially increase competition within the financial services industry as Japan Post Bank, with the largest deposit base and branch network in Japan, may begin to offer financial services in competition with our business operations generating fee income. In May 2012, amendments to the postal privatization law became effective under which Japan Post Bank and Japan Post Insurance may enter into new businesses upon obtaining government approvals. In December 2014, plans were announced for the public listing in Japan of shares of Japan Post Holdings, Japan Post Bank and Japan Post Insurance in or after the middle of the fiscal year ending March 31, 2016, but remain subject to further government action. If the government's equity holdings decrease to a certain level, Japan Post Bank and Japan Post Insurance will be allowed to enter into new businesses upon submission of a notice to the government. As a result, the Japan Post Group companies may seek to enter into new financial businesses.
Competition may further increase as U.S. and European financial institutions have recently been regaining and enhancing their competitive strength and advances in information and communications technology have allowed non-financial institutions to enter the financial services industry. We also face intensifying competition in areas of our strategic expansion. For example, the Japanese mega banks, including us, and other major international banks have been expanding their operations in the Asian market, where leading local banks have recently been growing and increasing their presence. In addition, there has been significant consolidation and convergence among financial institutions domestically and globally, and this trend may continue in the future and further increase competition in the market. A number of large commercial banks and other broad-based financial services firms have merged or formed strategic alliances with, or have acquired, other financial institutions both in Japan and overseas. As a result of the strategic alliance and the joint venture companies that we formed with Morgan Stanley, we may be perceived as a competitor by some of the financial institutions with which we had a more cooperative relationship in the past. If we are unable to compete effectively in this more competitive and deregulated business environment, our business, results of operations and financial condition will be adversely affected. For a more detailed discussion of our competition in Japan, see "Item 4.B. Information on the Company—Business Overview—Competition."
Future changes in accounting standards could have a negative impact on our business and results of operations.
Future developments or changes in accounting standards arc unpredictable and beyond our control. For example, in response to the recent instabilities in global financial markets, several international organizations which set accounting standards have released proposals to revise standards on accounting for financial instruments. Accounting standards applicable to financial instruments remain subject to debate and revision by international organizations which set accounting standards. If the current accounting standards change in the future, the reported values of some of our financial instruments may need to be modified, and such modification could have a significant impact on our financial results or financial condition. For more information, see "Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates."
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Wc could also be required to incur significant expenses to comply with new accounting standards and regulations. For example, if wc adopt a new accounting system in the future, we may be required to incur significant additional costs for establishing and implementing effective internal controls, which may materially and adversely affect our financial condition and results of operations.
Transactions with counterparties in countries designated by the U.S. Department of State as state sponsors of terrorism may lead some potential customers and investors in the United States and other countries to avoid doing busi?iess with us or investing in our shares.
We, through our subsidiaries, engage in business activities with entities in or affiliated wilh Iran, including transactions with counterparties owned or controlled by the Iranian government, and our commercial banking subsidiary has a representative office in Iran. The U.S. Department of State has designated Iran and other countries as "state sponsors of terrorism," and U.S. law generally prohibits U.S. persons from doing business with such countries. We currently have business activities with entities in or affiliated with such countries in accordance with our policies and procedures designed to ensure compliance with regulations applicable in the jurisdictions in which we operate.
We have loan transactions with counterparties in or affiliated with Iran, the outstanding balance of which was approximately $1.0 million, representing less than 0.0001% of our total assets, as of March 31, 2015. We do not have any loans outstanding to the financial institutions specifically listed by the U.S. government. In addition to such loan transactions, our other transactions with counterparties in or affiliated with countries designated as state sponsors of terrorism consist of receiving deposits or holding assets on behalf of individuals residing in Japan who are citizens of countries designated as state sponsors of terrorism, processing payments to or from entities in or affiliated with these countries on behalf of our customers, and issuing letters of credit and guarantees in connection with transactions with entities in or affiliated with such countries by our customers. These transactions do not have a material impact on our business or financial condition. For a further discussion of transactions required to be disclosed under the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012, see "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation— United States—Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934."
We are aware of initiatives by U.S. governmental entities and non-government entities, including institutional investors such as pension funds, to adopt or consider adopting laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran and other countries identified as state sponsors of terrorism. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers, counter-parties or investors in our shares. In addition, depending on socio-political developments, our reputation may suffer due to oiir transactions with counterparties in or affiliated with these countries. The above circumstances could have an adverse effect on our business and financial condition.
Global financial institutions, including us, have become subject to an increasingly complex set of sanctions laws and regulations in recent years, and this regulatory environment is expected to continue. Moreover, the measures proposed or adopted vary across the major jurisdictions, increasing the cost and resources necessary to design and implement an appropriate global compliance program. The U.S. federal government and some state governments in the United States have enacted legislation designed to limit economic and financial transactions with Iran by limiting the ability of financial institutions that may have engaged in any one of a broad range of activities related to Iran to conduct various transactions in the relevant jurisdictions. The Japanese government has also implemented a series of measures under the Foreign Exchange and Foreign Trade Act, such as freezing the assets of designated financial institutions and others that could contribute to Iran's nuclear activities, and our most recently modified policies and procedures take into account the current Japanese regulatory requirements. There remains a risk of potential U.S. regulatory action against us, however, if U.S. regulators perceive the modified policies and procedures not to be in compliance with applicable regulations.
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We may not be able to maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of our operations.
Wc, as a holding company, and our Japanese banking subsidiaries are required to maintain risk-weighted capital ratios above the levels specified in the capital adequacy guidelines of the FSA which have been revised as of March 31, 2013, as described below. As of March 31, 2015, ourtotal risk-adjusted capital ratio was 15.68% compared to the minimum risk-adjusted capital ratio required of 8.00%, our Tier 1 capital ratio was 12.62% compared to the minimum Tier 1 capital ratio required of 6.00%, and our Common Equity Tier 1 capital ratio was 11.14% compared to the minimum Common Equity Tier 1 capital ratio required of 4.50%. Our capital ratios are calculated in accordance with Japanese banking regulations based on information derived from our financial statements prepared in accordance with Japanese GAAP. In addition, some of our subsidiaries are also subject to the capital adequacy rules of various foreign countries, including the United States where each of MUFG, BTMU, Mitsubishi UFJ Trust and Banking Corporation, or MUTB, and MUAH is a financial holding company under the U.S. Bank Holding Company Act. We or our banking subsidiaries may be unable to continue to satisfy the capital adequacy requirements because of:
increases in our and our banking subsidiaries' credit risk assets and expected losses because of fluctuations in our or our banking subsidiaries' portfolios due to deterioration in the creditworthiness of boiTOwers and the issuers of equity and debt securities,
difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to raise capital under terms and conditions similar to prior financings or issuances,
declines in the value of our or our banking subsidiaries' securities portfolios,
adverse changes in foreign currency exchange rates,
adverse revisions to the capital ratio requirements,
reductions in the value of our or our banking subsidiaries' deferred tax assets, and other adverse developments.
The Group of Central Bank Governors and Heads of Supervision has made a series of announcements regarding the new global regulatory framework, which has been referred to as "Basel III," to strengthen the regulation, supervision and risk management of the banking sector. Various Basel III measures are being phased in from the calendar year 2013, including those designed to raise the level of minimum capital requirements and to establish an internationally harmonized leverage ratio and a global minimum liquidity standard. In addition, the Basel Committee on Banking Supervision has proposed additional loss absorbency requirements to supplement the Common Equity Tier 1 capital requirement ranging from 1% to 3.5% for global systemically important banks, or G-SIBs, depending on the bank's systemic importance. The Financial Stability Board identified us as a G-SIB in its most recent annual report published in November 2014, and indicated that, as a G-SIB, we would be required to hold an additional 1.5% of Common Equity Tier 1 capital. The group of banks identified as G-SIBs is expected to be updated annually, and the group of G-SIBs identified in November 2014 is the first group of G-SIBs to which the stricter capital requirements will initially be applied. The stricter capital requirements are expected to be implemented in phases between January 1, 2016 and December 31, 2018 and will become fully effective on January 1, 2019. Based on tlie Basel III framework, the Japanese capital ratio framework has been revised to implement the more stringent requirements, which are being implemented in phases beginning on March 31, 2013. Likewise, local banking regulators outside of Japan, such as those in the United States, have begun, or are expected, to revise the capital and liquidity requirements imposed on our subsidiaries and operations in those countries to implement the more stringent requirements of Basel III as adopted in those countries.
Under the capital adequacy guidelines of the FSA, which have been revised in connection with the adoption of Basel III. there is a transitional measure relating to the inclusion as a capital item of capital raising instruments issued in or prior to March 2013, and such instruments can be included as a capital item when calculating capital
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ratios to the extent permitted by the transitional measure. Such capital raising instruments may require refinancing upon the expiration of the transition period during which such instruments can be included as a capital item in the calculation of capital ratios. However, in order for newly issued capital raising instruments, other than common stock, to be included as a capital item in the calculation of capital ratios under the capital adequacy guidelines, such instruments must have a clause in their terms and conditions that requires them to be written off or converted into common stock upon the occurrence of certain events, including when the issuing financial institution is deemed non-viable or when the issuing financial institution's capital ratios decline below prescribed levels. As a result, under certain market conditions, we may be unable to refinance or issue capital raising instruments under terms and conditions similar to those of capital raising instruments issued in or prior to March 2013. If such circumstances arise, our and our banking subsidiaries' capital could be reduced, and our and our bank subsidiaries' capital ratio could decrease.
In addition, under the FSA's capital adequacy guidelines, deferred tax assets can be included as a capital item when calculating capital ratios up to a prescribed amount. However, this upper limit is expected to be reduced in phases. If and to the extent the amount of deferred tax assets exceeds this limit and cannot be included in Common Equity Tier 1 capital, our and our banking subsidiaries' capital ratios can decrease.
If our capital ratios fall below required levels, the FSA could require us to take a variety of corrective actions, including withdrawal from all international operations or suspension of all or part of our business operations. In addition, if the capital ratios of our subsidiaries subject to capital adequacy rules of foreign jurisdictions fall below the required levels, the local regulators could also take action against them that may result in reputational damage or financial losses to us. Since maintaining our capital ratios at acceptable levels is crucial to our business, our management devotes a significant amount of attention and resources to capital ratio related issues and may also significantly alter our business strategy or operations if our capital ratios decline to unacceptable levels. For a discussion of our capital ratios and the related regulatory guidelines, see "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation" and "Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy."
If the goodwill recorded in connection with our acquisitions becomes impaired, we may be required to record impairment losses, which may adversely affect our financial results and the price of our securities.
In accordance with U.S. GAAP, we account for our business combinations using the acquisition method of accounting. We recorded the excess of the purchase price over the fair value of the assets and liabilities of the acquired companies as goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. As of March 31, 2015, the total balance of goodwill was ¥807.6 billion.
For the fiscal years ended March 31, 2014 and 2015, we recognized ¥7.8 billion and ¥3.4 billion, respectively, in impairment of goodwill relating to various reporting units in the Integrated Trust Assets Business Group segment. We readjusted its future cash flow projection of the reporting units in this segment, considering the relevant subsidiaries' recent business performance. As a result, the fair values of these reporting units, which were based on discounted future cash flows, fell below the carrying amounts of the reporting units, and the impairment losses were recognized on the related goodwill. The impairment losses were included in Other non-interest expenses in our consolidated statements of income included elsewhere in this Annual Report.
We may be required to record additional impairment losses relating to goodwill in future periods if the fair value of any of our reporting units declines below the fair value of related assets net of liabilities. Any additional impairment losses will negatively affect our financial results, and the price of our securities could be adversely affected. For a detailed discussion of our periodic testing of goodwill for impairment and the goodwill recorded, see "Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates—Accounting for Goodwill and Intangible Assets."
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A further downgrade of our credit ratings could trigger additional collateral obligations under our derivative contracts and increase our funding costs.
In August 2011, Moody's Japan K.K. announced that it downgraded the long-term credit ratings of BTMU and MUTB by one-notch from Aa2 to Aa3, and the long-term credit rating of MUSHD by one-notch from Al to A2. In July 2012, Fitch Rating Japan Limited downgraded the ratings assigned to BTMU and MUTB by one-notch from A to A-, although Fitch subsequently upgraded them. In December 2014, Moody's announced that it downgraded the long-term credit ratings of BTMU and MUTB by one-notch from Aa3 to Al, the long-term credit rating of MUSHD by one-notch from A2 to A3, and the short-term credit rating of MUSHD by one-notch from P-l to P-2. A further credit rating downgrade by Moody's, Fitch, Standard & Poor's Ratings Services LLC or any other credit rating agency may have an adverse impact on us. Substantially all of the derivative contracts with collateral obligations entered into by BTMU, MUTB and MUSHD are subject to a Credit Support Annex, or CSA, as published by the International Swaps and Derivatives Association, Inc., or ISDA. Following the downgrades by Moody's and Fitch, some of our existing CSAs were modified to require, and some ofthe new CSAs that we entered into required, additional collateral at lower thresholds.
Assuming all of the relevant credit rating agencies downgraded the credit ratings of BTMU, MUTB and MUSHD by one-notch on March 31, 2015, wc estimate that our three main subsidiaries under their derivative contracts as of the same date would have been required to provide additional collateral of approximately ¥7.7 billion. Assuming a two-notch downgrade by all of the relevant credit rating agencies occurred on the same date, wc estimate that the additional collateral requirements for BTMU, MUTB and MUSHD under their derivative contracts as ofthe same date would have been approximately ¥17.3 billion. In addition, a further downgrade of the credit ratings of our major subsidiaries could result in higher funding costs. For additional information on the impact of recent downgrades, see "Item 5.B. Operating and Financial Review and Prospects— Liquidity and Capital Resources—Financial Condition—Sources of Funding and Liquidity."
Failure to safeguard personal and other confidential information may result in liability, reputational damage or financial losses.
As our operations expand in volume, complexity and geographic scope, we are exposed to increased risk of confidential information in our possession being lost, leaked, altered or falsified as a result of human or system error, misconduct, unlawful behavior or scheme, unauthorized access or natural or human-caused disasters. Our information systems and information management policies and procedures may not be sufficient to safeguard confidential information against such risks.
As a financial institution in possession of customer information, we are required to treat personal and other confidential information as required by the Act on the Protection of Personal Information of Japan, as well as the Banking Law and the Financial Instruments and Exchange Law. In the event that personal information in our possession about our customers or employees is leaked or improperly accessed and subsequently misused, we may be subject to liability and regulatory action. We may have to provide compensation for economic loss and emotional distress arising out of a failure to protect such information. In addition, such incidents could create a negative public perception of our operations, systems or brand, which may in turn decrease customer and market confidence and materially and adversely affect our business, operating results and financial condition.
Moreover, any loss, leakage, alteration or falsification of confidential information, or any malfunction or failure of our information systems, may result in significant disruptions to our business operations or plans or may require us to incur significant financial, human and other resources to implement corrective measures or enhance our information systems and information management policies and procedures.
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Our operations are highly dependent on our information and communications-systems and are subjeci lo an increasing risk of cyber-attacks and other information security threats.
Our information and communications systems constitute a core infrastructure for our operations. Given our global operations with an extensive network of branches and offices, the proper functioning of our information and communications systems is critical to our ability to efficiently and accurately process a large volume of transactions, ensure adequate internal controls, appropriately manage various risks, and otherwise service our clients and customers. Cyber-attacks and other forms of unauthorized access and computer viruses, which are becoming increasingly more sophisticated and more difficult to predict, detect and prevent, could cause disruptions to, and malfunctions of, such systems and result in unintended releases of confidential and proprietary information stored in or transmitted through the systems, interruptions in the operations of our clients, customers and counterparties, and deterioration in our ability to service our clients and customers. These consequences could result in financial losses, including costs and expenses incurred in connection with countermeasures and improvements as well as compensation to affected parties, lead to regulatory actions, diminish our clients' and customers' satisfaction with and confidence in us, and harm our reputation in the market, which could in turn adversely affect our business, financial condition and results of operations.
Risks Related to. Owning Our Shares
It may not be possible for investors to effect service of process within the United States upon us or our directors or management members, or to enforce against us or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.
We are a joint stock company incorporated under the laws of Japan. Almost all of our directors or management members reside outside the United States. Many of oiir assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon us or these persons or to enforce, against us or these persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. federal or state securities laws.
We believe there is doubt as to the enforceability in Japan, in original actions or in actions brought in Japanese courts to enforce judgments of U.S. courts, of claims predicated solely upon the U.S. federal or state securities laws mainly because the Civil Execution Act of Japan requires Japanese courts to deny requests for the enforcement of judgments of foreign courts if foreign judgments fail to satisfy the requirements prescribed by the Civil Execution Act, including:
the jurisdiction of the foreign court be recognized under laws, regulations, treaties or conventions;
• proper service of process be made on relevant defendants, or relevant defendants be given appropriate protection if such service is not received;
the judgment and proceedings of the foreign court not be repugnant to public policy as applied in Japan; and
there exist reciprocity as to the recognition by a court of the relevant foreign jurisdiction of a final judgment of a Japanese court.
Judgments obtained in the U.S. courts predicated upon the civil liability provisions ofthe U.S. federal or state securities laws may not satisfy these requirements.
Risks Related to Owning Our ADSs
As a holder of ADSs, you have fewer rights than a shareholder of record in our shareholder register since you must act through the depositary to exercise these rights.
The rights of our shareholders under Japanese law to take actions such as voting, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal
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rights arc available only to shareholders of record. Because the depositary, through its custodian, is the record holder of the shares underlying the American Depositary Shares, or ADSs, only the depositary can exercise shareholder tights relating to the deposited shares. ADS holders, in their capacity, will not be able to directly bring a derivative action, examine our accounting books and records and exercise appraisal rights. We have appointed The Bank of New York Mellon as depositary, and we have the authority to replace the depositary.
Pursuant to the deposit agreement among us, the depositary and a holder of ADSs, the depositary will make efforts to exercise voting or any other rights associated with shares underlying ADSs in accordance with the instructions given by ADS holders, and to pay to ADS holders dividends and distributions collected from us. However, the depositary can exercise reasonable discretion in carrying out the instructions or making distributions, and is not liable for failure to do so as long as it has acted in good faith. Therefore, ADS holders may not be able to exercise voting or any other rights in the manner that they had intended, or may lose some or all of the value of the dividends or the distributions. Moreover, the depositary agreement that governs the obligations of the depositary may be amended or terminated by us and the depositary without your consent, notice, or any reason. As a result, you may be prevented from having the rights in connection with the deposited shares exercised in the way you had wished or at all.
ADS holders are dependent on the depositary to receive our communications. Wc send to the depositary all of our communications to ADS holders, including annual reports, notices and voting materials, in Japanese. ADS holders may not receive all of our communications with shareholders of record in our shareholder register in the same manner or on an equal basis. In addition, ADS holders may not be able to exercise their rights as ADS holders due to delays in the depositary transmitting our shareholder communications to ADS holders. For a detailed discussion ofthe rights of ADS holders and the terms ofthe deposit agreement, see "Item 10.B. Additional Information—Memorandum and Articles of Association—American Depositary Shares."
Item 4. Information on the Company.
A. History and Development of the Company
Mitsubishi UFJ Financial Group, Inc.
MUFG is a bank holding company incorporated as a joint stock company (kabushiki kaisha) under the Company Law of Japan. We arc the holding company for Tlie Bank of Tokyo-Mitsubishi UFJ, Ltd., or BTMU, Mitsubishi UFJ Trust and Banking Corporation, or MUTB, Mitsubishi UFJ Securities Holdings Co., Ltd., or MUSHD, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., or MUMSS, Mitsubishi UFJ NICOS Co., Ltd., and other companies engaged in a wide range of financial businesses.
On April 2, 2001, The Bank of Tokyo-Mitsubishi, Ltd., Mitsubishi Trust and Banking Corporation, or Mitsubishi Trust Bank, and Nippon Trust and Banking Co., Ltd. established Mitsubishi Tokyo Financial Group, Inc., or MTFG, to be a holding company for the three entities. Before that, each of the banks had been a publicly traded company. On April 2, 2001, through a stock-for-stock exchange, they became wholly-owned subsidiaries of MTFG, and the former shareholders of the three banks became shareholders of MTFG. Nippon Trust and Banking was later merged into Mitsubishi Trust Bank.
On June 29, 2005, the merger agreement between MTFG and UFJ Holdings was approved at the general shareholders meetings of MTFG and UFJ Holdings. As the surviving entity, MTFG was renamed "Mitsubishi UFJ Financial Group, Inc." The merger ofthe two bank holding companies was completed on October 1, 2005.
On September 30, 2007, MUSHD, which was then called "Mitsubishi UFJ Securities Co., Ltd.," or MUS, became our wholly-owned subsidiary through a share exchange transaction.
On October 13, 2008, we formed a global strategic alliance wilh Morgan Stanley and, as part ofthe alliance, made an equity investment in Morgan Stanley in the form of convertible and non-convertible preferred stock, and subsequently appointed a representative to Morgan Stanley's board of directors.
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On October 21, 2008, we completed a tender offer for outstanding shares of ACOM CO., LTD. common stock, raising our ownership in ACOM to approximately 40%.
On November 4, 200S, BTMU completed the acquisition of all ofthe shares of common stock of UnionBanCal Corporation, or UNBC, not previously owned by BTMU and, as a result, UNBC became a . wholly-owned indirect subsidiary of MUFG.
On May 1, 2010, we and Morgan Stanley integrated our securities and investment banking businesses in Japan into two joint venture securities companies, one of which is MUMSS. MUMSS was created by spinning off the wholesale and retail securities businesses conducted in Japan from MUSHD and subsequently assuming certain operations in Japan from a subsidiary of Morgan Stanley.
On June 30, 2011, we converted all of our Morgan Stanley's convertible preferred stock into Morgan Stanley's common stock, resulting in our holding approximately 22.4% of the voting rights in Morgan Stanley. Further, we appointed a second representative to Morgan Stanley's board of directors on July 20, 2011. Following the conversion on June 30, 2011, Morgan Stanley became our equity-method affiliate. As of March 31, 2015, we held approximately 21.9% of the voting rights in Morgan Stanley and had two representatives appointed to Morgan Stanley's board of directors. We and Morgan Stanley continue to pursue a variety of business opportunities in Japan and abroad in accordance with the global strategic alliance.
On December 18, 2013, we acquired approximately 72.0% of the total outstanding shares of Krungsri, or KS, through BTMU. As a result of the transaction, KS has become a consolidated subsidiary of BTMU.
On July 1, 2014, we integrated BTMU's operations in the Americas region with UNBC's operations, and changed UNBC's corporate name to "MUFG Americas Holdings Corporation," or MUAH. On the same day, Union Bank, N.A., which is MUAH's principal subsidiary and our primary operating subsidiary in the United States, was also renamed "MUFG Union Bank, N.A.," or MUB. MUAH currently oversees BTMU's operations in the Americas region as well as the operations of MUB.
On January 5, 2015, BTMU integrated its Bangkok branch with KS through a contribution in kind of the BTMU Bangkok branch business to KS, and BTMU received newly issued shares of KS common stock. As a result of this transaction, BTMU's ownership interest in KS increased to 76.88%.
On June 25, 2015, our shareholders approved an amendment to our articles of incorporation to adopt our current governance framework with a board of directors and board committees, including statutorily mandated nominating committee, audit committee and compensation committee,each consisting of members of the board of directors. We previously had a governance framework with a board of directors and a board of corporate auditors. See "Item 6.C. Directors, Senior Management and Employees—Board Practices."
Our registered address is 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan, and our telephone number is 81-3-3240-8111.
For a discussion of recent developments, see "Item 5. Operating and Financial Review and Prospects— Recent Developments."
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
BTMU is a major commercial banking organization in Japan that provides a broad range of domestic and international banking services from its offices in Japan and around the world. BTMU's registered head office is located at 7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan, and its telephone number is 81-3-3240-1111. BTMU is a joint stock company (kabushiki kaisha) incorporated in Japan under the Company Law.
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BTMU was formed through the merger, on January 1, 2006, of Bank of Tokyo-Mitsubishi and UFJ Bank Limited after their respective parent companies, MTFG and UFJ Holdings, merged to form MUFG on October 1, 2005.
Bank of Tokyo-Mitsubishi was formed through the merger, on April 1, 1996, of The Mitsubishi Bank, Limited and The Bank of Tokyo, Ltd.
The origins of Mitsubishi Bank can be traced to the Mitsubishi Exchange Office, a money exchange house established in 1880 by Yataro Iwasaki, the founder ofthe Mitsubishi industrial, commercial and financial group. In 1895, the Mitsubishi Exchange Office was succeeded by the Banking Division ofthe Mitsubishi Goshi Kaisha, the holding company ofthe "Mitsubishi group" of companies. Mitsubishi Bank had been a principal bank to many of the Mitsubishi group companies but broadened its relationships to cover a wide range of Japanese industries, small and medium-sized companies and individuals.
Bank of Tokyo was established in 1946 as a successor to The Yokohama Specie Bank, Ltd., a special foreign exchange bank established in 1880. When the government of Japan promulgated the Foreign Exchange Bank Law in 1954, Bank of Tokyo became the only bank licensed under that law. Because of its license, Bank of Tokyo received special consideration from the Ministry of Finance in establishing its offices abroad and in many other aspects relating to foreign exchange and international finance.
UFJ Bank was formed through the merger, on January 15, 2002, of The Sanwa Bank, Limited and The Tokai Bank, Limited.
Sanwa Bank was established in 1933 when the three Osaka-based banks, the Konoike Bank, the Yamaguchi Bank, and the Sanjyushi Bank merged. Sanwa Bank was known as a city bank having the longest history in Japan, since the foundation of Konoike Bank can be traced back to the Konoike Exchange Office established in 1656. The origin of Yamaguchi Bank was also a money exchange house, established in 1863. Sanjyushi Bank was founded by influential fiber wholesalers in 1878. The corporate philosophy of Sanwa Bank had been the creation of premier banking services especially for small and medium-sized companies and individuals.
Tokai Bank was established in 1941 when the three Nagoya-based banks, the Aichi Bank, the Ito Bank, and the Nagoya Bank merged. In 1896, Aichi Bank took over businesses of the Jyuichi Bank established by wholesalers in 1877 and the Hyakusanjyushi Bank established in 1878. Ito Bank and Nagoya Bank were established in 1881 and 1882, respectively. Tokai Bank had expanded the commercial banking business to contribute to economic growth mainly of the Chubu area in Japan, which is known for its manufacturing industries, especially automobiles.
Mitsubishi UFJ Trust and Banking Corporation
MUTB is a major trust bank in Japan, providing trust and banking services to meet the financing and investment needs of clients in Japan and the rest of Asia, as well as in the United States and Europe. MUTB's registered head office is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan, and its telephone number is 81-3-3212-1211. MUTB is a joint stock company (kabushiki kaisha) incorporated in Japan under the Company Law.
MUTB was formed on October 1, 2005 through the merger of Mitsubishi Trust Bank and UFJ Trust Bank Limited. As the surviving entity, Mitsubishi Trust Bank was renamed "Mitsubishi UFJ Trust and Banking Corporation."
Mitsubishi Trust Bank traces its history to The Mitsubishi Trust Company, Limited, which was founded by the leading members of the Mitsubishi group companies in 1927. The Japanese banking and financial industry was reconstructed after World War II and, in 1948, Mitsubishi Trust Bank was authorized to engage in the commercial banking business, in addition to its trust business, under the new name Asahi Trust & Banking Corporation. In 1952, the bank changed its name again to "The Mitsubishi Trust and Banking Corporation."
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Nippon Trust and Banking and The Tokyo Trust Bank, Ltd., which were previously subsidiaries of Bank of Tokyo-Mitsubishi, was merged into Mitsubishi Trust Bank on October 1, 2001.
UFJ Trust Bank was founded in 1959 as The Toyo Trust & Banking Company, Limited, or Toyo Trust Bank. The Sanwa Trust & Banking Company, Limited, which was a subsidiary of Sanwa Bank, was merged into Toyo Trust Bank on October 1, 1999. The Tokai Trust & Banking Company, Limited, which was a subsidiary of Tokai Bank, was merged into Toyo Trust Bank on July 1, 2001. Toyo Trust Bank was renamed "UFJ Trust Bank Limited" on January 15, 2002.
Mitsubishi UFJ Securities Holdings Co., Ltd.
MUSHD is a wholly-owned subsidiary of MUFG. MUSHD functions as an intermediate holding company of MUFG's global securities business. MUSHD's registered head office is located at 5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-0005, Japan, and its telephone number is 81-3-6213-2550. MUSHD is a joint stock company (kabushiki kaisha) incorporated in Japan under the Company Law. MUSHD has major overseas subsidiaries in London, New York, Hong Kong, Singapore and Geneva.
In April 2010, MUSHD, which was previously called "Mitsubishi UFJ Securities Co., Ltd.," or MUS, became an intermediate holding company by spinning off its securities and investment banking business operations to a wholly-owned operating subsidiary established in December 2009, currently MUMSS. Upon the consummation ofthe corporate spin-off transaction, the intermediate holding company was renamed "Mitsubishi UFJ Securities Holdings Co., Ltd." and the operating subsidiary was renamed "Mitsubishi UFJ Securities Co., Ltd." The operating subsidiary was subsequently renamed MUMSS in May 2010 upon integration of our securities operations in Japan with those of Morgan Stanley.
MUS was formed through the merger between Mitsubishi Securities Co., Ltd. and UFJ Tsubasa Securities Co., Ltd. on October 1, 2005, with Mitsubishi Securities being the surviving eri'SFyTThe surviving entity was renamed "Mitsubishi UFJ Securities Co., Ltd." and, in September 2007, became our wholly-owned subsidiary through a share exchange transaction.
Mitsubishi Securities was formed in September 2002 through a merger of Bank of Tokyo-Mitsubishi's securities subsidiaries and affiliate, KOKUSAI Securities Co., Ltd., Tokyo-Mitsubishi Securities Co., Ltd. and Tokyo-Mitsubishi Personal Securities Co., Ltd., and Mitsubishi Trust Bank's securities affiliate, Issei Securities Co., Ltd. In July 2005, MTFG made Mitsubishi Securities a directly-held subsidiary by acquiring all of the shares of Mitsubishi Securities common stock held by Bank of Tokyo-Mitsubishi and Mitsubishi Trust Bank.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
MUMSS is our core securities and investment banking subsidiary. MUMSS was created in May 2010 as one of the two Japanese joint venture securities companies between Morgan Stanley and us as part of our global strategic alliance. MUMSS succeeded to the investment banking operations conducted in Japan by a subsidiary of Morgan Stanley and the wholesale and retail securities businesses conducted in Japan by MUS. MUFG, through MUSHD, holds 60% voting and economic interests in MUMSS. MUMSS's registered head office is located at 5-2 Marunouchi 2-chome, Chiyoda-ku, Tokyo, 100-0005 Japan, and its telephone number is 81-3-6213-8500. MUMSS is a joint stock company (kabushiki kaisha) incorporated in Japan under the Company Law. For more information on our joint venture securities companies, see "—B. Business Overview—Global Strategic Alliance with Morgan Stanley."
Mitsubishi UFJ NICOS Co., Ltd.
Mitsubishi UFJ NICOS is a major credit card company in Japan that issues credit cards, including those issued under the MUFG, NICOS, UFJ and DC brands, and provides a broad range of credit card and other related services for its card members in Japan. Mitsubishi UFJ NICOS is a consolidated subsidiary of MUFG. Mitsubishi
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UFJ NICOS's registered head office is located at 33-5, Hongo 3-chome, Bunkyo-ku, Tokyo 113-841 I, Japan, and its telephone number is 81-3-3811-3111. Mitsubishi UFJ NICOS is a joint stock company (kabushiki kaisha)
incorporated in Japan under the Company Law.
On August 1, 2008, Mitsubishi UFJ NICOS became a wholly-owned subsidiary of MUFG through a share exchange transaction. On the same day, we entered into a share transfer agreement with The Norinchukin Bank, or Norinchukin, under which we sold some of our shares of Mitsubishi UFJ NICOS common stock to Norinchukin. Currently, Mitsubishi UFJ NICOS is a consolidated subsidiary of MUFG. In March 2011, we and Norinchukin made additional equity investments in Mitsubishi UFJ NICOS in proportion to our and Norinchukin's respective beneficial ownership of approximately 85% and 15%, respectively.
Mitsubishi UFJ NICOS was formed through the merger, on April 1, 2007, of UFJ NICOS Co., Ltd. and DC Card Co., Ltd. As the surviving entity, UFJ NICOS Co., Ltd. was renamed "Mitsubishi UFJ NICOS Co., Ltd."
UFJ NICOS was formed through the merger, on October 1, 2005, of Nippon Shinpan Co., Ltd. and UFJ Card Co., Ltd. Originally founded in 1951 and listed on the Tokyo Stock Exchange in 1961, Nippon Shinpan was a leading company in the consumer credit business in Japan. Nippon Shinpan became a subsidiary of MUFG at the time ofthe merger with UFJ Card.
Prior to the merger between MTFG and UFJ Holdings in October 2005, DC Card was a subsidiary of MTFG while UFJ Card was a subsidiary of UFJ Holdings.
B. Business Overview
Wc are one of the world's largest and most diversified financial groups with total assets of ¥280.89 trillion as of March 31, 2015. The Group is comprised of BTMU, MUTB, MUMSS (through MUSHD), Mitsubishi UFJ NICOS and other subsidiaries and affiliates, for which we are the holding company. As a bank holding company, we are regulated under the Banking Law of Japan. Our services include commercial banking, trust banking, securities, credit cards, consumer finance, asset management, leasing and many more fields of financial services. The Group has the largest overseas network among the Japanese banks, comprised of offices and subsidiaries, including MUB and KS, in more than 40 countries.
Since April 2004, we have adopted an integrated business group system comprising our core business areas, which serve as the Group's core sources of net operating profit. As of March 31, 2015, we had five business segments: Integrated Retail Banking Business, Integrated Corporate Banking Business, Integrated Trust Assets Business, Integrated Global Business and Integrated Global Markets Business. In addition to these five integrated business groups, Krungsri, our banking subsidiary in Thailand, was treated as a business segment. For further information on our business segments, see "Item 5.A. Operating and Financial Review and Prospects—Operating Results—Business Segment Analysis."
As we began to implement our new medium-term management strategy in the current fiscal year ending March 31, 2016, we made changes to our business segments. Specifically, effective this current fiscal year, the Integrated Retail Banking Business Group, the Integrated Corporate Banking Business Group, the Integrated Trust Assets Business Group, the Integrated Global Business Group and the Integrated Global Markets Business Group are renamed the Retail Banking Business Group, the Corporate Banking Business Group, the Trust Assets Business Group, the Global Business Group and the Global Markets Business Group, respectively. In addition, the Krungsri segment is integrated into, and made part of, the Global Business Group. The descriptions of the business groups that follow in this Item are based on the current business segments.
MUFG's role as the holding company is to strategically manage and coordinate the activities of these business segments. Group-wide strategies are determined by the holding company and executed by the banking subsidiaries and other subsidiaries.
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In October 200S, each of MUFG, BTMU, MUTB and UNBC (now MUAH) became a financial holding company under the U.S. Bank Holding Company Act. For more information, see "Item 3.D. Key Information— Risk Factors—Risks Related to Our Business—We may not be able to maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of our operations" and "—B. Information on the Company—Business Overview—Supervision and Regulation—United States."
MUFG Management Policy
MUFG Group has formulated the Group Corporate Vision to clarify the nature ofthe Group's overall mission and the type of group it should aspire to be, and as a shared principle to unify the hearts and minds of Group employees, while meeting the expectations of our customers and society. Throughout the Group, the people of MUFG are working under three shared values—Integrity and Responsibility, Professionalism and Teamwork, and Challenging Ourselves to Grow—while aiming to be the world's most trusted financial group.
Corporate Vision
OUR MISSION
To be a .foundation of strength, committed to meeting the needs of our customers, serving society, and fostering shared and sustainable growth for a better world.
OUR VISION —Be the world's most trusted financial group—
Work together to exceed the expectations of our customers
Provide reliable and constant support to our customers
Expand and strengthen our global presence
OUR VALUES
1. Tntegrity and Responsibility 2. Professionalism and Teamwork 3. Challenge Ourselves to Grow
We have declared our message to the world as "Quality for You," with management's emphasis on quality. "Quality for You" means that by providing high-quality services, we aspire to help improve the quality ofthe lives of individual customers and the quality ofeach corporate customer. The "You" expresses the basic stance of MUFG that we seek to contribute not only to the development of our individual customers but also communities and society. We believe that delivering superior quality services, reliability, and global coverage will result in more profound and enduring contributions to society.
Medium- and long-term management strategy
The operating environment for financial institutions is transforming substantially amidst such trends as the changes in consumption patterns stemming from the aging of the Japanese population and its declining birthrate and the advance of information and communications technology. It is crucial to the further progress of the MUFG Group for us to maintain an accurate understanding of such changes, and undertake evolution and reformation of our business model as a preemptive response to these changes. Based on this recognition, the MUFG Group turned its eye toward expected operating environment changes over the next decade, and launched a new medium-term business plan, which outlines the strategics that we intend to implement over the first three years of this period from the fiscal year ending March, 2016 to the fiscal year ending March 31, 2018. The basic policy of the medium-term business plan is defined as "Evolution and reformation to achieve sustainable growth for MUFG," and we have formulated Group business strategies and administrative practices and business foundation strategies of the plan based on three strategic focuses: "Customer perspective," "Group-driven approach," and "Productivity improvements." "Customer perspective" calls on us to develop businesses based on changing customer needs. "Group-driven approach" inspires us to bolster inter-Group company unity and
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consider how (o optimize our business on a Group-wide basis. "Productivity improvements" encapsulates our commitment to boosting competitiveness by pursuing higher levels of rationality and efficiency.
For the Group business strategies, we will seek to enhance support for wealth accumulation and stimulation of consumption for individuals, contribute to the growth of small and medium-sized enterprises, and link contribution to the revitalization of the Japanese economy with the stable growth of MUFG in Japan. Globally, wc aim to enhance and expand businesses by evolving and reforming our Corporate & Investment Banking, or CIB, model, sales and trading operation, and asset management and investor services operations. Wc will also work to further reinforce transaction banking operations and strengthen commercial banking platforms in Asia and the Unites States to construct a next-generation business base.
For the administrative practices and business foundation strategies, MUFG plans to streamline Group-wide operations and create administration practices that are appropriate for a global systemically important financial institution, or G-SIFI, with maintaining a strong capital base as the first priority. This is expected to enable us continue to operate a business model that evolves and transforms on a Group-wide and global basis while taking steps to respond lo the higher expectations of outside stakeholders.
Retail Banking Business Group
The Retail Banking Business Group covers all retail businesses, including commercial banking, trust banking and securities businesses, and offers a full range of banking products and services, including financial consulting services, to retail customers in Japan. This business group integrates the retail businesses of BTMU, MUTB, MUMSS and other affiliate companies of MUFG. We offer a full range of bank deposit products, including a non-interest-bearing deposit account that is redeemable on demand and intended primarily for payment and settlement functions. We also offer a variety of asset management and asset administration services, and trust products and other investment products, as well as other products and services described below.
MUFG, as an integrated financial services group, aims to respond to customers' specific needs, utilizing its breadth of businesses such as commercial banking, trust banking, securities and credit card businesses. The MUFG Group is committed to offering customers safe and reliable services by strengthening frameworks for, among other things, customer protection, legal compliance, and security response.
Service Improvement Project
BTMU has launched a project titled "Do Smartp-" with an aim to improve the quality of services for individual customers. In order to contribute to the lifelong wellbeing of customers and their families, this project focuses on enhancing online banking services with smartphones and other devices, and providing customized consulting to satisfy their needs.
Responding to Investment Needs
We aim to ensure that customers can adequately inform themselves of investment opportunities by providing various mediums such as appointments with representatives, seminars at branches with investment experts as lecturers, and "investment consultation sessions" on weekends and national holidays, and during evening hours. We have also been expanding our product lines, adding services such as investment trusts and foreign currency deposits, in order to be better able to respond to customers' various investment needs. In addition, we have been working proactively to promote the Japanese individual savings account system, generally referred to as the NISA program, which offers tax exemptions on capital gains and dividend income for investments up to ¥1.0 million a year for a maximum of five years. As of March 31, 2015, we had approximately 693,000 NISA accounts.
We have focused on strengthening collaboration among group companies. For example, foreign bonds made available by MUMSS and other group securities companies are also available at BTMU and MUTB. Also,
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BTMU provides "Retail Money Desk" services at 64 branches across Japan, where investment experts seconded from MUMSS respond to customers' sophisticated investment needs. Wc have implemented methods lhat are designed to belter communicate information regarding product and service options to customers. The use of tablet computers enables BTMU's sales representatives to propose products and services that match individual customers' needs by showing them the latest market information, detailed information on major products and services, and asset management and life-plan simulations. All MUTB branches now offer "Private Account," an asset management account service through which each customer can consult with his or her portfolio manager in person to manage investments according to a personalized plan.
Responding to Insurance Needs
BTMU acts as a sales channel for a variety of insurance products, including annuity insurance, single premium whole life insurance, flat-rate premium whole life insurance, medical insurance, cancer insurance and nursing-care insurance. Insurance-sales specialists (insurance planners) and staff members who have taken insurance-sales and other relevant training take care of customers' various insurance needs. Individual annuity insurance, whole life insurance and medical insurance plans arc available at all MUTB branches. Continued efforts will be made to further reinforce product lines and sales framework.
Responding to Needs Relating to Inheritance, Gift and Real Estate
MUTB offers a number of services including a testamentary trust service called "Ishindenshin" which helps customers prepare, maintain and execute wills, an inheritance planning service called "Shisan Keisho Planning" which helps customers manage and analyze financial assets and real estate properties comprehensively, and an inheritance procedure support service called "WakachiAr which helps customers navigate the necessary procedures upon inheritance. BTMU and MUMSS also offer inheritance-related products and services, serving as sales agents of MUTB. MUTB's asset management service called "Zutto Anshin Shintaku," which helps customers and their families protect their funds and allows them to receive funds according to their chosen plan, received the "Nikkei Veritas Award" in the Nikkei Excellent Products & Services Awards for 2012. In April 2013, an educational fund gift trust product called "Magoyorokobu" was launched. BTMU also sells this product as a sales agent of MUTB. In June 2014, MUTB launched a new trust product called "Okuru shiawase," a lifetime gift trust product with services to assist customers with the execution of the gift. MUTB and Mitsubishi UFJ Real Estate Services offer real estate brokerage services for both investment and business properties and residential properties, responding to customers' various real-estate-related needs.
Responding to Loan Needs
With respect to housing loans, BTMU offers "Loans with Supplemental Health Insurance for Seven Major Illnesses" through a third party insurance company to help with loan payments in case of unexpected major illnesses such as cancer or heart attacks, a group credit life insurance plan which is mandatory for housing loans, with reduced qualification requirements ("Wide Danshin") and a preferred interest rate plan ("Gun-to Ureshii Housing Loan"). MUTB also offers housing loan plans incorporating "Wide Danshin" and other plans to respond to customers' needs. BTMU also offers "Card Loans" and "Purpose-Specific Term Loans," depending on customers' needs. A card loan service called "BANQUIC" offers access to cash as quickly as in 40 minutes after the submission of an application through a video teller machine. Also, online applications are accepted 24 hours a day, 365 days a year, and the underwriting process can be completed as quickly as in 30 minutes. Applications are also accepted over the phone. A card loan service called "My Card Plus" automatically loans money into the customers linked account when its balance becomes negative. Customers who already have an account with BTMU can apply for this service online. "Net DE Loan" is a purpose-specific term loan, which BTMU-account-holder customers can, in most circumstances, apply for without visiting a bank branch. This loan can be used to pay for education, motor vehicle purchases and other purposes.
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Responding to Internet Banking Needs
BTMU and MUTB offer Internet banking services called "Mitsubishi Tokyo UFJ Direct" and "Mitsubishi UFJ Trust Direct," respectively, which allow customers to, among other things, transfer money, check their balance, make time deposits, make investments, apply for housing loans, and consult specialists regarding investments. In 2013, transaction screens of "Mitsubishi Tokyo UFJ Direct" were renewed, making the service even more user-friendly. The number of users has grown to approximately 15 million as of March 31, 2015. As a countenneasurc to increasing online fraud and other crimes, in March 2015, BTMU started lo distribute key cards through which customers can obtain a one-time temporary pass code to access their online banking accounts.
Jibun Bank Corporation was founded by BTMU in collaboration with KDDI Corporation in June 2008. The convenience that Jibun Bank offers by allowing users to execute transactions at any time on their cellphones has attracted customers in a wide age group. In addition to enabling users to check their balance and transfer money, Jibun Bank offers other products and services such as yen-denominated time deposits, foreign currency deposits, and, since June 2013, "Jibun Bank FX" (over-the-counter foreign exchange margin trading). As of March 31, 2015, Jibun Bank had approximately 1.9 million retail customer accounts with a total balance of deposits of ¥660 billion. Jibun Bank aims to continue offering high-quality services under the motto of "a bank in the palm of your hand."
Payment Business
Mitsubishi UFJ Nicos offers a variety of credit cards, including "MUFG Card (Gold Card)," a credit card with an annual fee starting at as low as ¥2,000. With five international credit card brands (JCB, Visa, Master Card®, American Express® and China UnionPay) available, MUFG Card is designed to meet customers' various needs. BTMU's "Mitsubishi Tokyo UFJ VISA" offers various reward programs, such as cash-back in exchange for earned points. To accommodate the diverse needs of consumers, "Mitsubishi Tokyo UFJ VISA Debit" card was launched in November 2013. The number of debit cards issued was approximately 453,000 as of March 31, 2015.
Development of Branch and ATM Networks
We have an extensive network of branches in the greater Tokyo, Nagoya and Osaka areas. BTMU and MUTB have a nationwide ATM network, making use of convenience store ATMs and partnerships with other banks in addition to BTMU's and MUTB's own ATMs. In an effort to improve access to its ATMs, BTMU increased its ATM locations and extended operating hours and transaction-fee-free hours in 2013. At the same time, BTMU introduced a revised fee schedule for using partner banks' ATMs and transferring money using ATMs.
Finance Facilitation
We believe that finance facilitation for customers is one of our most important social responsibilities and strive to exemplify that standard. Although the Act Concerning Temporary Measures to Facilitate Financing for Small and Medium-sized Firms and Others has expired in Japan, our basic policy has not changed. We seek to offer consultation and otherwise deal attentively wilh small and medium-sized enterprise customers who wish to modify terms and conditions for repayment.
Strengthening the Compliance Framework
We have been making efforts to strengthen our frameworks for customer protection and legal compliance. BTMU has 260 compliance specialists stationed at its branches across the country. As for MUTB, branches are given guidance by compliance officers based in the Head Office. We intend to continue to strictly monitor the legal compliance associated with selling financial products and services.
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Corporate Hanking Business Group
The Corporate Banking Business Group covers domestic corporate businesses, including commercial banking, investment banking, trust banking and securities businesses, as well as businesses outside of Japan assisting mainly Japanese companies in executing and expanding their operations. Through the integration of these business lines, diverse financial products and services arc provided mainly to our Japanese corporate customers, from large corporations to small and medium-sized enteqjrises. The business group has clarified strategic domains, sales channels and methods to match the different growth stages and financial needs of our coiporatc customers.
Responding to Large Corporation's Needs
We offer large Japanese corporations advanced financial solutions such as derivatives, securitization, syndicated loans and structured finance. Faced with the diversified and globalized needs of our customers, we also provide sophisticated solutions and strategic proposals through collaboration between MUFG group companies and BTMU overseas offices.
Responding to Small and Medium-sized Enterprise's Needs
We provide various financial solutions, such as loans and fund management, remittance and foreign exchange services, to meet the requirements of small and medium-sized enterprise customers. We also help our customers develop business strategies, such as overseas expansions, inheritance-related business transfers and stock listings.
Transaction Banking
Our transaction banking operations support customers with capital management, focusing on cash management and trade finance. Through our global network we support customers who wish to establish a global manufacturing and sales network with our friendly services and commitment to quality.
Investment Banking
A large part of our investment banking business in Japan is provided by MUMSS which was formed in May 2010 through the integration of the domestic wholesale and retail securities business previously conducted by MUS and the investment banking business conducted by Morgan Stanley Japan. See "—Global Strategic Alliance with Morgan Stanley" below.
Trust Banking
MUTB's experience and know-how in corporate real estate strategy consulting, real estate brokerage and appraisal services, stock transfer agency services and stock option services also enable us to offer services tailored to the financial strategies of each client, including securitization of real estate, receivables and other assets.
Trust Assets Business Group
The Trust Assets Business Group covers asset management and administration services for products such as pension trusts and security trusts by integrating the trust banking expertise of MUTB and the international strengths of BTMU. The business group provides a full range of services to corporate and pension funds, including stable and secure pension fund management and administration, advice on pension schemes, and payment of benefits to scheme members.
Our Trust Assets Business Group combines MUTB's trust assets business, comprising trust assets management services, asset administration and custodial services, and the businesses of Mitsubishi UFJ Global Custody S.A., Mitsubishi UFJ Fund Services Moldings Limited, or MFS, and Mitsubishi UFJ Kokusai Asset Management Co., Ltd., which was formed on July 1, 2015 through the merger between two of our asset management subsidiaries in Japan, Mitsubishi UFJ Asset Management Co., Ltd. and KOKUSAI Asset Management Co., Ltd.
Mitsubishi UFJ Global Custody and MFS provide global custody services, administration services for investment funds and fiduciary and trust accounts, and other related services mainly to institutional investors.
MUTB acquired MFS, formerly known as Butterfield Fulcrum Group, in September 2013. We have taken this opportunity to establish and promote a new brand called "MUFG Investor Services." Under this brand, we provide a full suite of global asset administration services, including fund administration, custody, securities lending and foreign exchange as a one stop shop. In May 2014, MFS acquired Meridian Holdings Limited, a Bermuda fund administration service company. In June 2015, MFS reached an agreement with UBS Global Asset Management pursuant to which MFS is expected to acquire UBS Global Asset Management's Alternative Fund Services business in the quarter ending December 31, 2015. Through these transactions, MFS aims to enhance its competitiveness and scale of operations in the global fund administration market, which is expected to grow significantly amid the global trend of strengthening financial regulations.
Mitsubishi UFJ Kokusai Asset Management provides asset management and trust products and services mainly to individual customers and corporate clients in Japan.
With an aim to further enhance its business, MUTB has strategic alliances with asset management companies outside of Japan, including Aberdeen Asset Management PLC, a U.K. asset manager, and AMP Capital Holdings Limited, an Australian asset manager.
Global Business Group
The Global Business Group is charged with the responsibility of effectively coordinating and enhancing our group-wide efforts to strengthen and expand our businesses outside Japan. The Global Business Group is designed to clarify the leadership in, and enhance the coordination for, our business strategies outside Japan on a group-wide basis.
Global business development has been an important pillar of our growth strategy. Aiming to further raise our presence in tlie global financial market, we are shifting our approach from one where each of our group companies individually promotes its global business to a more group-wide approach. The new approach is designed to enable us to exercise our comprehensive expertise to provide our customers with value-added services more effectively.
Global financial regulations have become increasingly stringent in major financial markets, including the United States and Europe following the recent global financial crisis. Moreover, the importance of emerging markets in Asia and other regions has been rapidly growing. As a result, the business environment surrounding the international financial industry is becoming more complex. In addition, customers' financing needs are becoming more diverse and sophisticated as their activities are becoming more globalized.
Amidst this dynamic environment, the Global Business Group covers our businesses outside Japan, including commercial banking services such as loans, deposits and cash management services, retail banking, trust assets and securities businesses (with the retail banking and trust assets businesses being conducted through MUB in the United States and KS in Thailand), through a global network of more than 1,150 offices outside of Japan to provide customers with financial products and services that meet their increasingly diverse and sophisticated financing needs.
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CIB (Corporate and Investment Banking)
Our global CIB business primarily serves large corporations, financial institutions, and sovereign and multinational organizations with a comprehensive set of solutions for their financing needs. Through our global network of offices and branches, we provide a full range of services, including corporate banking services such as project finance, export credit agency, or ECA, finance, and financing through asset-backed commercial papers. Wc also provide investment banking services such as debt/equity issuance and M&A advisory services to help our customers develop their financial strategies and realize their goals. In order to meet customers' various financing needs, we have established a customer-oriented coverage model through which we coordinate our product experts who offer innovative financing services globally. We are among the world's top providers of project finance, one of the core businesses of CIB. We provide professional services in arranging limited-recourse finance and offering financial advice in various sectors, including natural resources, power, and infrastructure, backed by our experience, expertise, knowledge, and global network.
Transaction Banking
We have Transaction Banking offices in six locations around the globe through which we provide commercial banking products and services primarily for large corporations and financial institutions in managing and processing domestic and cross-border payments, mitigating risks in international trade, and providing working capital optimization. We have established the Transaction Banking Group within BTMU, which oversees its entire.transaction banking operations globally, in order to enhance governance, management and quality of services in these operations. Under the Transaction Banking Group, a team of approximately 2,000 officers provides customers with support for their domestic, regional and global trade finance and cash management programs through our extensive global network.
MUFG Union Bank. N.A., (MUB)
MUB is the primary subsidiary of MUAH, which is a wholly owned subsidiary of BTMU and is a bank holding company in the United States. Effective July 1, 2014, BTMU's operations in the Americas region were integrated with MUAH's operations. MUAH oversees BTMU's operations in the Americas region and MUB is the primary operating entity of BTMU in the United States. MUB is a leading regional bank in California, ranked by the Federal Deposit Insurance Corporation, or FDIC, as the 19th largest bank in tlie United States in terms of total deposits as of March 2015. MUB provides a wide range of financial services to consumers, small businesses, middle-market companies and major corporations, primarily in California, Oregon, Washington, and Texas as well as nationally and internationally.
In June 2013, MUB acquired PB Capital Corporation's institutional commercial real estate lending division platform. Headquartered in New York, the commercial real estate lending division of PB Capital had approximately $3.5 billion in loans outstanding on properties in various major metropolitan areas in the United States as of June 14, 2013. In November 2013, MUB acquired First Bank Association Bank Services, a unit of First Bank, which provided a full range of banking services to homeowners associations and community management companies. MUB acquired approximately $570 million in deposits in this transaction.
See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in the business of MUFG Americas Holdings Corporation, an indirect wholly-owned subsidiary in the United States, could significantly affect our results of operations."
Bank of Ayudhya Public Company Limited (KS)
KS is a major subsidiary of BTMU in Thailand. KS provides a comprehensive range of banking, consumer finance, investment, asset management, and other financial products and services to individual consumers, small and medium-sized enterprises, and large corporations mainly in Thailand. In addition, KS's consolidated
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subsidiaries include a major credit card issuer in Thailand as well as a major automobile financing service provider, an asset management company, and a microfinance service provider in Thailand.
In January 2015, BTMU integrated its Bangkok Branch with KS to comply with the Thai regulatory requirement generally referred to as the "one presence" policy, which limits financial conglomerates to a single licensed deposit taking entity in Thailand. As of March 31, 2015, BTMU holds a 76.88% ownership interest in KS. By combining KS's local franchise with competitive presence in the retail and SME banking markets in Thailand with BTMU's global financial expertise, we seek to offer a wider range of high-value financial services to a more diverse and larger customer base.
See "Item 5. Operating and Financial Review and Prospects—Recent Developments" and "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Any adverse changes in the business of Bank of Ayudhya, an indirect subsidiary in Thailand, could significantly affect our results of operations."
Activities in Asia
We have been expanding our operations in Asia in an effort to further develop our businesses abroad. We have opened three overseas branches since January 2014, namely, Bangalore Branch in India, BTMU (China) Suzhou branch, and Yangon branch in Myanmar.
Global Markets Business Group
The Global Markets Business Group became the current business group on July 1, 2012 to cover the businesses specialized in financial markets products such as sales and trading, asset and liability management, and strategic investments globally on a group-wide basis.
The establishment of the Global Markets Business Group resulted in the expansion of the coordination between the Global Business Group and the Global Markets Business Group at BTMU and the collaboration between the two Groups and MUSHD's foreign subsidiaries on some of those subsidiaries' sales and trading businesses. Through this collaboration, we sought to strengthen the cooperation between BTMU and MUSHD of their markets businesses and to expand our client base while improving our trading capabilities to seize interest rate and foreign exchange market opportunities for loans and corporate bond transactions. In April 2014, MUTB began to participate in the Global Markets Business Group in an effort to more fully enhance our group-wide capabilities.
Sales and Trading
We provide financing, hedging, and investing solutions to our retail, corporate, institutional, and governmental clients, through foreign exchange, bonds, equities, derivatives, and money market products. We are actively developing innovative financial products and services to offer and provide through our global network, which is designed to promptly meet diverse customer requirements.
Asset and Liability Management
We manage our interest and liquidity risks residing in our balance sheets through, among other things, transactions designed to manage profit and loss impact attributable to interest rate movements based on our balance sheet forecasts, while aiming to maximize our profit at the same time primarily by investing in highly liquid government bonds such as Japanese government bonds and U.S. treasury bonds and also by utilizing other financial products such as interest rate swaps and cross currency swaps.
Strategic Investments
We seek to enhance our profitability and diversify our portfolios by investing in financial products such as corporate bonds and funds.
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Global Strategic Alliance with Morgan Stanley
As of March 31, 2015, we held approximately 432 million shares of Morgan Stanley's common stock representing approximately 21.9 % ofthe voting rights in Morgan Stanley and Scries C Preferred Stock with a face value of approximately $ 521.4 million and 10% dividend. As of the same date, we had two representatives appointed to Morgan Stanley's board of directors. We adopted the equity method of accounting for our investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012.
In conjunction with Morgan Stanley, we formed two securities joint venture companies in May 2010 to integrate our respective Japanese securities companies. We converted the wholesale and retail securities businesses conducted in Japan by MUS into MUMSS. Morgan Stanley contributed the investment banking operations conducted in Japan by its former wholly-owned subsidiary, Morgan Stanley Japan, to MUMSS, and converted the sales and trading and capital markets businesses conducted in Japan by Morgan Stanley Japan into an entity called Morgan Stanley MUFG Securities, Co., Ltd., or MSMS. We hold a 60% economic interest in MUMSS and MSMS, and Morgan Stanley holds a 40% economic interest in MUMSS and MSMS. We hold a 60% voting interest and Morgan Stanley holds a 40% voting interest in MUMSS, and we hold a 49% voting interest and Morgan Stanley holds a 51% voting interest in MSMS. Morgan Stanley's and our economic and voting interests in the securities joint .venture companies are held through intermediate holding.companies. We have retained control of MUMSS and we account for our interest in MSMS under the equity method due to our significant influence over MSMS. The board of directors of MUMSS has fifteen members, nine of whom are designated by us and six of whom are designated by Morgan Stanley. The board of directors of MSMS has ten members, six of whom are designated by Morgan Stanley and four of whom are designated by us. The CEO of MUMSS is designated by us and the CEO of MSMS is designated by Morgan Stanley.
We have also expanded the scope of our global strategic alliance with Morgan Stanley into other geographies and businesses, including (1) a loan marketing joint venture that provides clients in the United-States with access to the world-class lending and capital markets services from both companies, (2) an agreement to establish business referral arrangements in Asia, Europe, the Middle East and Africa, covering capital markets, loans, fixed income sales and other businesses, (3) a global commodities referral agreement whereby BTMU and its affiliates refer clients in need of commodities-related hedging solutions to certain affiliates of Morgan Stanley, and (4) an employee secondment program to share best practices and expertise in a wide range of business areas.
We completed transactions to transfer shares of Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd. among our consolidated subsidiaries in March 2014. MUMSS holds 75%, and BTMU holds the remaining 25%, ofthe voting rights in the company. Prior to the transactions, MUSHD held 51%, and BTMU held the remaining 49%, of the voting rights in the company. Concurrent with the completion of tlie transactions, the company changed its name to "Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd." In connection with its new shareholdings, Mitsubishi UFJ Morgan Stanley PB Securities entered into a new service agreement with Morgan Stanley. Mitsubishi UFJ Morgan Stanley PB Securities leverages MUFG's broad customer base, utilizes Morgan Stanley's global and high quality insight, and further its collaborations with other group companies by strengthening its coordination with MUMSS. It aims for further development of its wealth management business, which is one of the largest in Japan.
See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—If our strategic alliance with Morgan Stanley fails, we could suffer financial or reputational loss."
Competition
We face strong competition in all of our principal areas of operations. The structural reforms in financial industry regulations and recent developments in financial markets have resulted in some significant changes in the Japanese financial system and prompted banks to merge or reorganize their operations, thus changing the nature of competition from other financial institutions as well as from other types of businesses.
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Japan
Since their formation in 2000 and 2001, the so-called Japanese "mega bank" groups, including us, the Mizuho Financial Group and the Sumitomo Mitsui Financial Group, have continued to expand their businesses and take measures designed to enhance their financial group capabilities. For example, in December 2014, the Sumitomo Mitsui Financial Group announced its agreement with Citigroup Inc., under which SMBC Trust Bank, Ltd., a subsidiary of Sumitomo Mitsui Financial Group, will acquire the retail banking business of Citibank Japan, Ltd. in October 2015, subject to regulatory approvals. In July 2013, Mizuho Bank, Ltd. and Mizuho Corporate Bank, Ltd. merged, and the merged entity presently operates under the corporate name of "Mizuho Bank, Ltd."
Heightened competition among the mega bank groups is currently expected in various financial sectors as they have recently announced plans to expand, or have expanded, their respective businesses. For example, in the securities sector, in May 2010, in conjunction with Morgan Stanley, we created two securities joint venture companies in Japan, MUMSS and MSMS, by integrating the operations of MUS and Morgan Stanley Japan. In January 2013, Mizuho Securities and Mizuho Investors Securities Co., Ltd. merged. For a discussion ofthe two securities joint venture companies created by us and Morgan Stanley, see "—B. Business Overview—Global Strategic Alliance with Morgan Stanley."
In the retail business sector, customers often have needs for a broad range of financial products and services, such as investment trusts and insurance products. Recently, competition has increased due to the development of new products and distribution channels. For example, Japanese banks have started competing with one another by developing innovative proprietary computer technologies that allow them to deliver basic banking services in a more efficient manner and to create sophisticated new products in response to customer demand. Increased competition is expected following the introduction in January 2014 ofthe Japanese individual savings account system, generally referred to as the NISA program, which offers tax exemptions on capital gains and dividend income for investments up to ¥1 million a year for a maximum of five years. In addition, in March 2015, Sumitomo Mitsui Trust Bank announced its agreement with Citigroup Inc., to acquire all of the issued shares of Citi Cards Japan, Inc., which operates Citigroup's credit card business in Japan.
In the private banking sector, competition among the mega bank groups has intensified as a result of recent corporate actions designed to strengthen their operations. We made Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd. a wholly owned subsidiary in December 2012 to enhance our private banking services for high net-worth customers, and changed its name to Mitsubishi UFJ Morgan Stanley PB Securities, Ltd. in March 2014. In October 2013, Sumitomo Mitsui Banking Corporation acquired the former Societe Generale Private Banking Japan, Ltd. from Societe Generale S.A. and changed its name to SMBC Trust Bank Ltd.
In the consumer finance sector, recent regulatory reforms and legal developments have negatively impacted the business environment, resulting in failures of several consumer finance companies and intensified competition among consumer finance companies that have remained in business, particularly among those affiliated with the mega banks. In April 2012, Promise Co., Ltd. became a wholly owned subsidiary of the Sumitomo Mitsui Financial Group, and changed its name as SMBC Consumer Finance Co., Ltd. in July 2012. See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan may further adversely affect our financial results."
The trust assets business is an area that is becoming increasingly competitive because of regulatory changes in the industry that have expanded the products and services that can be offered since the mid-2000s. In addition, there is growing corporate demand for changes in the trust regulatory environment, such as reforms of the pension system and related accounting regulations under Japanese GAAP. Competition may increase in the future as changes are made to respond to such corporate demand and regulatory barriers lo entry are lowered. In
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April 201 1, Sumitomo Trust and Banking and Chuo Mitsui Trust Holdings, Inc. established Sumitomo Mitsui Trust Holdings, Inc., a holding company, to integrate their operations. In April 2012, Sumitomo Trust and Banking, The Chuo Mitsui Trust and Banking Company, Limited and Chuo Mitsui Asset Tmst and Banking Company, Limited, the three trust bank subsidiaries of Sumitomo Mitsui Trust Holdings, merged, and the surviving entity was renamed Sumitomo Mitsui Trust Bank, Limited. In March 2015, the Mizuho Financial Group announced plans to integrate Mizuho Asset Management Co., Ltd., Shinko Asset Management Co., Ltd. and the asset management business of Mizuho Trust & Banking Co., Ltd., all of which are asset management subsidiaries ofthe Mizuho Financial Group in Japan, and DIAM Co., Ltd., which is an asset management joint venture between the Mizuho Financial Group and Dai-ichi Life Insurance Company in Japan. On July 1, 2015, two of our asset management subsidiaries in Japan, Mitsubishi UFJ Asset Management Co., Ltd. and KOKUSAI Asset Management Co., Ltd. merged, and the surviving entity presently operates under the corporate name of "Mitsubishi UFJ Kokusai Asset Management Co., Ltd." As a result, competition is expected to intensify in the asset management and trust assets businesses.
In recent years, the Japanese government has identified several governmental financial institutions as candidates to privatize. In particular, the privatization of the Japan Post Group companies could substantially increase competition within the financial services industry as Japan Post Bank Co., Ltd. is one of the world's largest holders of deposits. Although the Japanese government's privatization plan for the Japan Post Group companies was suspended in December 2009, a revised postal privatization law became effective in May 2012, allowing the government to commence its sales of shares in the Japan Post Group companies. The revised law requires Japan Post Holdings Co., Ltd. to make efforts to sell its shares in Japan Post Bank and Japan Post Insurance Co., Ltd. as soon as possible but does not provide a specific deadline. In December 2014, plans were announced for the public listing in Japan of shares of Japan Post Holdings, Japan Post Bank and Japan Post Insurance in or after the middle of the fiscal year ending March 31, 2016, but remain subject to further government action.' Additionally, under the revised law, Japan Post Bank and Japan Post Insurance may enter into new business areas upon obtaining' government approvals, and if the government's equity holdings decrease to a certain level, the two companies will'be allowed to enter'into new business areas upon submission of a notice to the government. In such case, the Japan Post Group companies may seek to enter into new financial businesses and increasingly compete with us. See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Our business may be adversely affected by competitive pressures, which have partly increased due to regulatory changes and recent market changes in the financial industry domestically and globally" and "—B. Business Overview—The Japanese Financial System—Government Financial Institutions."
The mega bank groups face significant competition with other financial groups as well as companies that have traditionally not been engaged in banking services. For example, the Nomura Group has been a major player in the securities market in Japan. In addition, various Japanese non-bank financial institutions and non-financial companies have entered into the Japanese banking sector. For example, Orix Corporation, a non-bank financial institution, as well as-the Seven & i Holdings Co., Ltd., Sony Corporation and Aeon Co., Ltd., which were non-financial companies, offer various banking services, often through non-traditional distribution channels.
Foreign
In the United States, we face substantial competition in all aspects of our business. We face competition from other large U.S. and non-U.S. money-center banks, as well as from similar institutions that provide financial services. Through MUB, we currently compete principally with U.S. and non-U.S. money-center and regional banks, thrift institutions, asset management companies, inveslment advisory companies, consumer finance companies, credit unions and other financial institutions.
In other international markets, we face competition from commercial banks and similar financial institutions, particularly major international banks and the leading domestic banks in the local financial markets in which we conduct business. For example, Japanese mega banks, including us, and other major international banks have been expanding their operations in the Asian market, where leading local banks also have been
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growing and increasing their presence recently. Furthermore, we are aiming to expand our retail and small and medium-sized enterprise businesses along with our coiporate banking business in South East Asia through our acquisition of KS in Thailand, and compete with leading local banks in such businesses.
In addition, we may face further competition as a result of recent investments, mergers and other business tie-ups among global financial institutions.
The Japanese Financial System
Japanese financial institutions may be categorized into three types: the central bank, namely the Bank of Japan; private banking institutions; and government financial institutions.
The Bank of Japan
The Bank of Japan's role is to maintain price stability and the stability of the financial system to ensure a solid foundation for sound economic development.
Private Banking Institutions
Private banking institutions in Japan are commonly classified into two categories (the following numbers are based on information published by the FSA available as of May 7, 2015):
ordinary banks (125 ordinary banks and 54 foreign commercial banks with ordinary banking operations); and
trust banks (16 trust banks, including two Japanese subsidiaries of foreign financial institutions).
Ordinary banks in tum are classified as city banks, of which there are four, including BTMU, and regional banks, of which there are 106 and other banks, of which there are 15. In general, the operations of ordinary banks correspond to commercial banking operations in the United Slates. City banks and regional banks are distinguished based on head office location as well as the size and scope of their operations.
The city banks are generally considered to constitute the largest and most influential group of banks in Japan. Generally, these banks are based in large cities, such as Tokyo and Osaka, and operate nationally through networks of branch offices. The city banks provide a wide variety of banking and other financial products and services to large corporate customers, including the major industrial companies in Japan, as well as small and medium-sized companies and retail customers.
With some exceptions, the regional banks tend to be much smaller in terms of total assets than the city banks. Each of the regional banks is based in one of the Japanese prefectures and extends its operations into neighboring prefectures. Their customers are mostly regional enterprises and local public utilities. The regional banks also lend to large corporations. In line with the recent trend among financial institutions toward mergers or business tie-ups, various regional banks have announced or are currently negotiating or pursuing integration transactions.
Trust banks, including MUTB, provide various trust services relating to money trusts, pension trusts and investment trusts and offer other services relating to real estate, stock transfer agency and testamentary services as well as banking services.
In recent years, almost all ofthe city banks have consolidated with other city banks and in some cases, integrated with trust banks. Consolidation or integration among these banks was achieved, in most cases, through the use of a bank holding company.
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In addition to ordinary banks and trust banks, other private financial institutions in Japan, including banks operated by non-financial companies, shinkin banks, or credit associations, and credit cooperatives, are engaged primarily in making loans to small businesses and individuals.
Government Financial Institutions
There arc a number of government financial institutions in Japan, which are corporations wholly owned by the government and operate under the government's supervision. Their funds are provided mainly from government sources. Certain types of operations undertaken by these institutions have been or are planned to be assumed by, or integrated with the operations of, private corporations through privatizations and other measures.
Among them are the following:
The Development Bank of Japan, which was established for the purpose of contributing to the economic development of Japan by extending long-term loans, mainly to primary and secondary sector industries, and which was reorganized as a joint stock company in October 2008 as part of its ongoing privatization process, with the government being required by law to continue to hold 50% or more of the shares in the bank until the completion of certain specified investment operations, which the bank is required to endeavor to achieve by March 2026, and more than one-third for an unspecified period thereafter;
Japan Finance Corporation, which was formed in October 2008, through the merger of the.international financial operations ofthe former Japan Bank for International Cooperation, National Life Finance Corporation, Agriculture, Forestry and Fisheries Finance Corporation, and Japan Finance Corporation for Small and Medium Enterprise, for the primary purposes of supplementing and encouraging the private financing of exports, imports, overseas investments and overseas economic cooperation, and supplementing private financing to the general public, small and medium-sized enterprises and those engaged in agriculture, forestry and fishery. In April 2012, Japan Finance Corporation spun off its international operations to create Japan Bank for International Cooperation as a separate government-owned entity;
Japan Housing Finance Agency, which was originally established in June 1950 as the Government Housing Loan Corporation for the purpose of providing housing loans to the general public, and which was reorganized as an incorporated administrative agency and started to specialize in securitization of housing loans in April 2007; and
The Japan Post Group companies, a group of joint stock companies including Japan Post Bank. which were formed in October 2007 as part of the Japanese government's privatization plan for the former Japan Post, a government-run public services corporation, which had been the Postal Service Agency until March 2003. The Japanese government's privatization plan for tlie Japan Post Group companies was suspended in December 2009. In May 2012, a revised postal privatization law became effective, allowing the government to commence its sales of shares in the Japan Post Group companies in the future. In December 2014, plans were announced for the public listing in Japan of shares of Japan Post Holdings, Japan Post Bank and Japan Post Insurance in or after the middle of the fiscal year ending March 31, 2016, but remain subject to further government action.
Supervision and Regulation Japan
Supervision. The FSA, is responsible for supervising and overseeing financial institutions, making policy for the overall Japanese financial system and conducting insolvency proceedings with respect to financial institutions. The Bank of Japan, as the central bank for financial institutions, also has supervisory authority over banks in Japan, based primarily on its contractual agreements and transactions with the banks.
The Banking Law. Among the various laws that regulate financial institutions, the Banking Law and its subordinated orders and ordinances are regarded as the fundamental law for ordinary banks and other private
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financial institutions. The Banking Law addresses capital adequacy, inspections and reporting to banks and bank holding companies, as well as the scope of business activities, disclosure, accounting, limitation on granting credit and standards for arm's length transactions for them. As a result of the amendments lo the Banking Law and the Financial Instruments and Exchange Law, effective as of June 2009, firewall regulations that separate bank holding companies or banks from affiliated securities companies have become less stringent. On the other hand, bank holding companies, banks and other financial institutions are required to establish an appropriate system to better cope with conflicts of interest that may arise from their business operations.
In June 2013, the Diet passed a bill to amend various financial regulation related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings by banks. For example, although a bank is generally prohibited from holding more than 5% of the outstanding shares of another company (other than certain financial institutions) under the Banking Law, the bank may be exempt from such requirement ' and allowed to hold more than 5% of the outstanding shares of such company, if, among olher exempted cases, a bank's shareholding contributes to revitalizing a company's business or the local economy related to such company. The exemption became effective on April 1, 2014.
Bank holding company regulations. A bank holding company is prohibited from carrying out any business other than the management of its subsidiaries and other incidental businesses. A bank holding company may have any of the following as a subsidiary:1 a bank, a securities company, an insurance company and a foreign subsidiary that is engaged in the banking, securities or insurance business. In addition, a bank holding company may have as a subsidiary, any company that is engaged in a finance-related business, such as a credit card company, a leasing company or an investment advisory company. Certain companies that are designated by a ministerial ordinance as those that cultivate new business fields may also become the subsidiaries of a bank holding company.
Capital adequacy. The capital adequacy guidelines adopted by the FSA that are applicable to Japanese bank holding companies and banks with international operations closely follow the risk-weighted approach introduced by the Basel Committee on Banking Supervision of the Bank for International Settlements, or BIS.
The Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global regulatory framework, which has been referred to as "Basel III," in July and September 2010. In December 2010, the Basel Committee agreed on the details ofthe Basel III rules. The agreement on Basel III includes the following: (1) raising the quality of capital to ensure banks are able to better absorb losses both on a going concern basis and on a gone concern basis, (2) increasing the risk coverage of the capital framework, in particular for trading activities, securitizations, exposures to off-balance sheet vehicles and counterparty credit exposures arising from derivatives, (3) raising the level of minimum capital requirements, including an increase in the minimum common equity requirement from 2% to 4.5%, which was phased in between January 1, 2013 and the end of the calendar year 2014, and a capital conservation buffer of 2.5%, which is expected to be phased in between January 1, 2016 and the end of the calendar year 2018, bringing the total common equity requirement to 7%, (4) introducing an internationally harmonized leverage ratio to serve as a backstop to the risk-based capital measure and to contain the build-up of excessive leverage in the system, (5) raising standards for the supervisory review process (Pillar 2) and public disclosures (Pillar 3), together with additional guidance in the areas of valuation practices, stress testing, liquidity risk management, corporate governance and compensation, (6) introducing minimum global liquidity standards consisting of both a short term liquidity coverage ratio and a longer term structural net stable funding ratio, and (7) promoting the build-up of capital buffers that can be drawn down in periods of stress, including both a capital conservation buffer and a countercyclical buffer to protect the banking sector from periods of excess credit growth.
Certain provisions of Basel III have been adopted by the FSA for Japanese banking institutions with international operations conducted by their foreign offices. Under Basel III, Common Equity Tier 1, Tier 1 and total capital ratios are used to assess capital adequacy, which ratios are determined by dividing applicable capital components by risk-weighted assels. Total capital is defined as the sum of Tier 1 and Tier 2 capital.
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Under B;isel III, Tier ] capital is defined to include Common Equity Tier 1 and Additional Tier 1 capital. Common Equity Tier 1 capital is a new category of capital primarily consisting of:
common stock,
capital surplus,
retained earnings, and
accumulated other comprehensive income (progressively phased into the capital ratio calculation over several years).
Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined benefit pension fund net assets (prepaid pension costs) will be deducted from Common Equity Tier 1 capital. The amount of adjustments to be deducted will increase progressively over time.
Additional Tier 1 capital generally consists of Basel III compliant preferred securities and, during the transition period, other capital that meets Tier I requirements under the former Basel II standards, net of regulatory adjustments. Subject to transitional measures, adjustments are made to Additional Tier 1 capital for items including intangible fixed assets, such as goodwill, and foreign currency translation adjustments, with the amounts of such adjustments to Additional Tier 1 capital progressively decreasing over time.
Tier 2 capital generally consists of:
Basel III compliant deferred obligations,
during the transition period, capital that meets Tier II requirements under the former Basel II standards, • allowances for credit losses, and
non-controlling interests in subsidiaries' Tier 2 capital instruments.
Subject to transitional measures, certain items including 45% of unrealized profit on available-for-sale securities and revaluation of land are reflected in Tier 2 capital with the amounts progressively decreasing over time.
In order to qualify as Tier 1 or Tier 2 capital under Basel III, applicable instruments such as preferred shares and subordinated debt must have a clause in their terms and conditions that requires them to be written-off or forced to be converted into common stock upon the occurrence of certain trigger events.
Risk-weighted assets are the sum of risk-weighted assets compiled for credit risk purposes, quotient of dividing the amount equivalent to market risk by 8%, and quotient of dividing the amount equivalent to operational risk by 8%; and also include any amount to be added due to transitional measures as well as floor adjustments, if necessary. Risk-weighted assets include the capital charge of the credit valuation adjustment (CVA), the credit risk related to asset value correlation multiplier for large financial institutions, the 250% risk-weighted threshold items not deducted from Common Equity Tier 1 capital, and certain Basel II capital deductions that were converted to risk-weighted assets under Basel III, such as securitizations and significant investments in commercial entities. Certain Basel III provisions were adopted by the FSA with transitional measures and became effective March 31, 2013.
The capital ratio standards applicable to us are as follows: a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, and a minimum Common Equity Tier 1 capital ratio of 4.5%.
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These minimum capital ratios are applicable to MUFG on a consolidated basis and to BTMU and MUTB on a consolidated as well as stand-alone basis.
We have been granted an approval by the FSA to exclude the majority of our investment in Morgan Stanley from being subject to double gearing adjustments. The approval was granted for a 10-year period, but the approval amount will be phased out by 20% each year starting from March 31, 2019. As of March 31, 2015, a full application of double gearing adjustments with respect to our investment in Morgan Stanley would have reduced our Common Equity Tier 1 capital ratio by approximately 0.6%.
The Basel Committee on Banking Supervision has proposed additional loss absorbency requirements to supplement the Common Equity Tier 1 capital requirement ranging from 1 % to 3.5% for global systemically important banks, or G-SIBs, depending on the bank's systemic importance. The Financial Stability Board, or FSB identified us as a G-SIB in its most recent annual report published in November 2014, and indicated that, as a G-SIB, we will be required to hold an additional 1.5% of Common Equity Tier 1 capital. The group of banks identified as G-SIBs is expected to be updated annually, and the stricter capital requirements arc expected to be implemented in phases between January 1, 2016 and December 31, 2018 and will become fully effective on January 1, 2019.
For a discussion on our capital ratios, sec "Item 5.B. Operating and Financial Review and Prospects— Liquidity and Capital Resources—Capital Adequacy."
In determining capital ratios under the FSA guidelines reflecting Basel III, we and our banking subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to" calculate capital requirements for credit risk as of March 31, 2015. The Standardized Approach is used for some subsidiaries that are considered to be immaterial to the overall MUFG capital requirements, and MUAH has adopted a phased rollout of the internal ratings-based approach. Market risk is reflected in the risk-weighted assets by applying the Internal Models Approach to calculate general market risk and the Standardized Measurement Method to calculate specific risk. Under the Internal Models Approach, we principally use a historical simulation model to calculate value-at-risk, or VaR, amounts by estimating the profit and loss on our portfolio by applying actual fluctuations in historical market rates and prices over a fixed period. Under the FSA guidelines reflecting Basel III, we reflect operational risk in the risk-weighted assets by applying the Standardized Approach as of March 31, 2011 and the Advanced Measurement Approach from March 31, 2012. The Basel Committee on Banking Supervision has issued proposals to revise the current market risk framework, including stricter measures relating to some of our investment securities portfolio. Under the current proposals, certain financial instruments that we hold, including investment securities, could become subject to stricter trading book capital requirements. For more information, see "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Operational Risk Management."
Developments relating to international bank capital regulatory standards. In November 2014, the FSB issued, for public consultation, policy proposals consisting of a set of principles and a detailed term sheet on the adequacy of loss-absorbing and recapitalization capacity for G-SIBs. The proposals have been developed by the FSB in consultation with the Basel Committee on Banking Supervision and will, once finalized, form a new minimum standard of total loss-absorbing capacity, orTLAC. The new TLAC standard is designed to provide home and host authorities with confidence that G-SIBs have sufficient capacity to absorb losses, both before and during resolution, and enable resolution authorities to implement a resolution strategy that minimizes any impact on financial stability and ensures the continuity of critical economic functions. The proposal requires G-SIBs to meet this new standard no earlier than January 1, 2019.
In November 2014, the Basel Committee on Banking Supervision released "Reducing excessive variability in batiks' regulatory capital ratios," a report prepared for the G20 Leaders at the Brisbane Summit. The report set forth the Committee's proposals in three areas designed to improve consistency and comparability in bank capital ratios and restore confidence in risk-weighted capital ratios. Specifically, the proposed policy measures included
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(1) revising the standardized approaches and using the revised standardized approaches as the basis for a capital floor, (2) strengthening the disclosure requirements related to risk weights, and (3) enhancing the monitoring of risk-weighted asset variability through hypothetical portfolio exercises. The report also sets forth a roadmap for revising approaches for measuring credit risk, market risk and operational risk. The Committee is expected to finalize the revisions ofthe standardized approaches for all of these risk categories, capital floors, and credit risk and market risk internal models by the end of 2015 following the public consultation process. The Committee has published consultation papers relating lo these topics except the revisions of credit risk internal models.-
In June 2015, the Basel Committee on Banking Supervision released a consultative document on the risk management, capital treatment and supervision of interest rate risk in the banking book, or IRRBB. IRRBB refers to the current or prospective risk to a financial institution's capital and earnings arising from adverse movements in interest rates that affect the institution's banking book positions. The Committee's proposal is designed to help ensure that banks have appropriate capital to cover potential losses from exposures to changes in interest rates and to limit capital arbitrage between the trading book and the banking book as well as between banking book portfolios that are subject to different accounting treatments. The consultative document presents two options for the regulatory treatment of IRRBB. First, under a standardized minimum capital requirement approach, a uniform Pillar 1 measure would be applied to calculate minimum capital requirements for IRRBB. Second, an enhanced market discipline approach would be an alternative to the first approach, which combines a methodology to assess a bank's capital adequacy with respect to IRRBB, guidance for supervisory responses, disclosure requirements, and a review process and a quantitative assessment of the effectiveness of the implementation ofthe approach. We are currently reviewing and assessing the potential impact of the Committee's proposal on us. Additional capital requirements to cover IRRBB may significantly affect the function of maturity transformation and the regulatory capital management of banks, including us.
Inspection and reporting. By evaluating banks' systems of self-assessment, inspecting their accounts and reviewing their compliance with laws and regulations, tlie FSA monitors the financial soundness of banks, including; the status and performance of their control systems for business activities. The FSA applies the Financial Inspection Rating System, or FIRST, to major banks. By providing inspection results in the form of graded evaluations (i.e., ratings), the FSA expects this rating system to motivate financial institutions to voluntarily improve their management and operations. Additionally, the FSA currently takes the "better regulation" approach in its financial regulation and supervision. This consists of four pillars: (1) optimal combination of rules-based and principles-based supervisory approaches, (2) timely recognition of priority issues and effective responses, (3) encouraging voluntary efforts by financial firms and placing greater emphasis on providing them with incentives, and (4) improving the transparency and predictability of regulatory actions, in pursuit of improvement ofthe quality of financial regulation and supervision.
In September 2014, the FSA announced its updated policy for monitoring financial institutions, which places a greater emphasis on (i) ending Japan's deflation and building an economic growth cycle, and (ii) maintaining the soundness and integrity ofthe financial system and financial institutions so as to ensure the availability of efficient and stable financial services in Japan. Under the new policy, the FSA is expected to increase monitoring of, and communication with, financial institutions, particularly large global financial institutions, including us, and enhance cooperation with financial regulatory bodies in other jurisdictions.
The FSA, if necessary to secure the sound and appropriate operations of a bank's business, may request the submission of reports or materials from, or conduct an on-site inspection of, the bank or the bank holding company. If a bank's capital adequacy ratio falls below a specified level, the FSA may request the bank to submit an improvement plan and may restrict or suspend the bank's operations when it determines lhat action is necessary.
In addition, the Securities and Exchange Surveillance Commission of Japan inspects banks in connection with their securities business as well as financial instruments business operators, such as securities firms.
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The Bank of Japan also conducts inspections of banks. The Bank of Japan Law provides that the Bank of Japan and financial institutions may agree as to the form of inspection to be conducted by the Bank of Japan.
Laws limiting shareholdings of banks. The provisions of the Antimonopoly Act that generally prohibit a bank from holding more than 5% of another company's voting rights do not apply to a bank holding company. However, the Banking Law prohibits a bank holding company and its subsidiaries from holding, on an aggregated basis, more than 15% of the voting rights of companies olher than those which can legally become subsidiaries of bank holding companies. In June 2013, the Diet amended various financial regulation related laws, including the Banking Law, which includes certain deregulations on restrictions for shareholdings by banks, as described above.
In addition, a bank is prohibited from holding shares in other companies exceeding the aggregate of its Common Equity Tier 1 capital amount and Additional Tier 1 capital amount. For a detailed discussion on the capital requirements for Japanese banks, see "Item 5.B. Operating and Financial Review and Prospects— Liquidity and Capital Review—Capital Adequacy."
The Financial Instruments and Exchange Law. Tlie Financial Instruments and Exchange Law provides protection for investors and also regulates sales of a wide range of financial instruments and services, requiring financial institutions to improve their sales rules and strengthen compliance frameworks and procedures. Among the instruments that the Japanese banks deal in, derivatives, foreign currency-denominated deposits; and variable insurance and annuity products are subject to regulations covered by the sales-related rules of conduct under the law.
Article 33 ofthe Financial Instruments and Exchange Law generally prohibits banks from engaging in securities transactions. However, bank holding companies and banks may, through a domestic or overseas securities subsidiary, conduct all types of securities businesses, with appropriate approval from the FSA. Similarly, registered banks are permitted to provide securities intermediation services and engage in certain other similar types of securities related transactions, including retail sales of investment funds and government and municipal bonds.
Subsidiaries of bank holding companies engaging in the securities business are subject to the supervision of the FSA as financial instruments business operators. The Prime Minister has the authority to regulate the securities industry and securities companies, which authority is delegated to the Commissioner of the FSA under the Financial Instruments and Exchange Law. In addition, the Securities and Exchange Surveillance Commission, an external agency of the FSA, is independent from the FSA's olher bureaus and is vested with the authority to conduct day-to-day monitoring ofthe securities markets and to investigate irregular activities that hinder fair trading of securities, including inspections of securities companies as well as banks in connection with their securities business. Furthermore, the Commissioner of the FSA delegates certain authority to the Director General ofthe Local Finance Bureau to inspect local securities companies and their branches. A violation of applicable laws and ordinances may result in various administrative sanctions, including revocation of registration, suspension of business or an order to discharge any director or executive officer who has failed to comply with applicable laws and ordinances. Securities companies are also subject to the rules and regulations of the Japanese stock exchanges and the Japan Securities Dealers Association, a self-regulatory organization of securities companies.
Act on Sales, etc. of Financial Instruments. The Act on Sales, etc. of Financial Instruments was enacted to protect customers from incurring unexpected losses as a result of purchasing financial instruments. Under this act, sellers of financial instruments have a duty to their potential customers to explain important matters such as the nature and magnitude of risks involved regarding the financial instruments that they intend to sell. If a seller fails to comply with the duty, there is a rebuttable presumption that the loss suffered by the customer due to the seller's failure to explain is equal to the amount of decrease in the value of the purchased financial instruments.
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Anti-money laundering laws. Under the Act on Prevention of Transfer of Criminal Proceeds, banks and olher financial institutions are required to report to the responsible ministers—in the case of banks, the Commissioner ofthe FSA—any assets which they receive while conducting their businesses that are suspected of being illicit profits from criminal activities. In November 2014, the Diet passed amendments to the Law for Prevention of Transfer of Criminal Proceeds, which, among others, clarify the method to determine whether any transaction falls under "suspicious transactions" and set forth the matters to be confirmed when a bank enters into a correspondence contract.
Acts concerning trust business conducted by financial institutions. Under the Trust Business Act, joint stock companies that are licensed by the Prime Minister as trust companies, including non-financial companies, are allowed to conduct trust business. In addition, under the Act on Provision, etc. of Trust Business by Financial Institutions, banks and other financial institutions, as permitted by the Prime Minister, are able to conduct trust business. The Trust Business Act provides for a separate type of registration for trustees who conduct only administration type trust business. The Trust Business Act also provides for various duties imposed on the trustee in accordance with and in addition to the Trust Act.
Deposit insurance system and government measures for troubled financial institutions. The Deposit Insurance Act is intended to protect depositors if a financial institution fails to meet its obligations. The Deposit Insurance Corporation was established in accordance with this act.
City banks (including BTMU), regional banks, tiust banks (including MUTB), and various other credit institutions participate in the deposit insurance system on a compulsory basis.
Under the Deposit Insurance Act, the maximum amount of protection is ¥10 million per customer within one bank. All deposits are subject to the ¥10 million maximum, except for non-interest bearing deposits,that are redeemable on demand and used by the depositor primarily for payment and settlement functions ("settlement accounts"). Deposits in settlement accounts are fully protected without a maximum amount limitation. Certain types of deposits are not covered by the deposit insurance system, such as foreign currency deposits and negotiable certificates of deposit. As of April 1, 2015, the Deposit Insurance Corporation charges insurance premiums equal to 0.054% per year on the deposits in the settlement accounts, which are fully protected as mentioned above, and premiums equal to 0.041% per year on the deposits in other accounts.
Under the Deposit Insurance Act, a Financial Reorganization Administrator can be appointed by the Prime Minister if a bank is unable to fully perform its obligations with its assets or may suspend or has suspended repayment of deposits. The Financial Reorganization Administrator will take control of the assets of the troubled bank, dispose of the assets and search for another institution willing to take over its business. The troubled bank's business may also be transferred to a "bridge bank" established by the Deposit Insurance Corporation for the puipose of the temporary maintenance and continuation of operations ofthe troubled bank, and the bridge bank will seek to transfer the troubled bank's assets to another financial institution or dissolve the troubled bank. The Deposit Insurance Corporation protects deposits, as described above, either by providing financial aid for costs' incurred by the financial institution succeeding the' insolvent bank or by paying insurance money directly to depositors. The financial aid, provided by the Deposit Insurance Corporation, may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription of preferred stock, or loss sharing. The Deposit Insurance Act also provides for exceptional measures to cope with systemic risk in the financial industry.
In June 2013, the Diet passed amendments to the Deposit Insurance Act, which established a new procedures for the orderly processing of assets and liabilities of distressed financial institutions to stabilize the financial system, and expanded the scope of financial institutions covered by the new procedures to include financial holding companies, securities firms and insurance companies. Under the new procedures, in case a designated financial institution becomes distressed, such financial institution will be subject to compulsory management of its operations and assets and receive financial assistance in the form of loans or subscription of shares. These amendments became effective on March 6, 2014.
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Further, the Act on Special Measures for Strengthening of Financial Function enables the Japanese government to take special measures to strengthen the capital of financial institutions. Under the act, banks and other financial institutions may apply to receive capital injections from the Deposit Insurance Corporation, subject to government approval, which will be granted subject to the fulfillment of certain requirements, including, among other things, the improvement of profitability and efficiency, facilitation of financing to small and medium-sized business enterprises in the local communities, and that the financial institution be not insolvent. In response to the Great East Japan Earthquake in March, 2011, the act was revised in July 2011, adding a special case for the financial institutions suffering damage from the disaster. The requirement to create an improvement plan of profitability and efficiency is eased for such financial institutions. Moreover, the application deadline has been extended from March 31, 2012 to March 31, 2017.
Regulatory Developments Relating to Lending to Small and Medium-sized Finns and Others. The Act Concerning Temporary Measures to Facilitate Financing for Small and Medium-sized Firms and Others required financial institutions, among other things, to make an effort to reduce their customers' burden of loan repayment by employing methods such as modifying the term of loans at the request of eligible borrowers, including small and medium-sized firms and individual home loan borrowers. This legislation also required financial institutions to internally establish a system to implement the requirements of the legislation and periodically make public disclosure of and report to the relevant authority on the status of implementation. Although this legislation expired on March 31, 2013, the FSA continues to encourage financial institutions to continue to provide support to small and medium-sized firms by revising the Inspection Manual, Supervisory Policy and Ordinance for Enforcement of the Baking Law in order to encourage financial institutions to modify the terms of loans, provide smooth financing, and take active roles in supporting operations of such firms.
The Act on the Protection of Personal Information. With regard to protection of personal information, the Act on the Protection of Personal Information requires, among other things, Japanese banking institutions to limit the use of personal information to the stated purposes and to properly manage the personal information in their possession, and forbids them from providing personal information to third parties without consent. If a bank violates certain provisions of the act, the FSA may advise or order the bank to take proper action. In addition, the Banking Law and the Financial Instruments and Exchange Law contain certain provisions with respect to appropriate handling of customer information.
Act on the Use of Personal Identification Numbers in the Administration of Government Affairs. Pursuant to the Act on the Use of Personal Identification Numbers in the Administration of Government Affairs, which will become effective on October 5, 2015, the Japanese government will adopt a Social Security and Tax Number System, which is designed to (1) improve social security services, (2) enhance public convenience in obtaining government services, and (3) increase the efficiency of the administration of government affairs. Under this system, a 12-digit unique number will be assigned to each person resident in Japan to identify and manage information relating to the person for government service and tax purposes. Effective October 2015, financial institutions are required to implement measures to ensure that such customer information will be protected from inappropriate disclosure and other unauthorized use. We are designing modifications to our customer information systems to comply with the new requirements relating to the personal identifications numbers.
Act Concerning Protection of Depositors from Illegal Withdrawals Made by Counterfeit or Stolen Cards. The Act on Protection, etc. of Depositors and Postal Saving Holders from Unauthorized Automated Withdrawal, etc. Using Counterfeit Cards, etc. and Stolen Cards, etc. requires financial institutions to establish internal systems to prevent illegal withdrawals of deposits made using counterfeit or stolen bank cards. The act also requires a financial institution to compensate depositors for any amount illegally withdrawn using stolen bank cards except in certain cases, including those where the financial institution can verify that it acted in good faith without negligence and there was gross negligence on the part of the relevant depositor. In addition, the act provides that illegal withdrawals with counterfeit bank cards are invalid unless the financial institution acted in good faith without negligence and there was gross negligence on the part ofthe relevant account holder.
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Government Reforms lo Restrict Maximum Interest Rales on Consumer Lending Business. In December 2006, the Diet passed legislation to reform the regulations relating to the consumer lending business, including amendments to the Act Regulating the Receipt of Contributions, Receipt of Deposits and Interest Rates which, effective June 18, 2010, reduced the maximum permissible interest rate from 29.2% per annum to 20% per annum. The regulatory reforms also included amendments to the Law Concerning Lending Business which, effective June 18, 2010, abolished the so-called "gray-zone interest." Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Prior to June 18, 2010, gray-zone interests were permitted under certain conditions set forth in the Law Concerning Lending Business. As a result of the regulatory reforms, all interest rales arc now subject to the lower limits imposed by the Interest Rate Restriction Act, compelling lending institutions, including our consumer finance subsidiaries and equity method investees, to lower the interest rates they charge borrowers. Furthermore, the new regulations, which became effective on June 18, 2010, require, among other things, consumer finance companies to limit their lending to a single customer to a maximum of one third of the customer's annual income regardless of the customer's repayment capability.
In addition, as a result of decisions made by the Supreme Court of Japan prior to June 18, 2010, imposing stringent requirements for charging such gray-zone interest rates, consumer finance companies have been responding to borrowers' claims for reimbursement of previously collected interest payments in excess ofthe limits stipulated by the Interest Rate Restriction-Act;; See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan may further adversely affect our financial results."
Recent Regulatory Actions. In May 2015, kabu.com Securities. Co., Ltd., a securities subsidiary in Japan, received a business improvement order from the FSA under Article 51 of the Financial Instruments and Exchange Act for failing to appropriately operate and manage its information and communication systems. In response to the administrative order, kabu.com Securities submitted to the FSA and announced a business improvement plan in June 2015.
United States '
As a result of our operations in the United States, we arc subject to extensive U.S. federal and state supervision and regulation.
Overall supervision and regulation. We are subject to supervision, regulation and examination with respect to our U.S. operations by the FRB pursuant to the U.S. Bank Holding Company Act of 1956, as amended, or the BHCA, and the International Banking Act of 1978, as amended, or the IB A, because we are a bank holding company and a foreign banking organization, respectively, as defined pursuant to those statutes. The FRB functions as our "umbrella" supervisor under amendments to the BHCA effected by the Gramm-Leach-Bliley Act of 1999, which among other things:
prohibited further expansion of the types of activities in which bank holding companies, acting directly or through non-bank subsidiaries, may engage;
authorized qualifying bank holding companies to opt to become "financial holding companies," and -thereby acquire the authority to engage in an expanded list of activities; and
modified the role of the FRB by specifying new relationships between the FRB and the functional regulators of non-bank subsidiaries of both bank holding companies and financial holding companies.
The BHCA generally prohibits each of a bank holding company and a foreign banking organization that maintains branches or agencies in the United States from, directly or indirectly, acquiring more than 5% ofthe voting shares of any company engaged in non-banking activities in the United States unless the bank holding
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company or foreign banking organization has elected to become a financial holding company, as discussed above, or the FRB has determined, by order or regulation, that such activities arc so closely related to banking as to be a proper incident thereto and has granted its approval to the bank holding company or foreign banking organization for such an acquisition. The BHCA also requires a bank holding company or foreign banking organization that maintains branches or agencies in the United States to obtain the prior approval of an appropriate federal banking authority before acquiring, directly or indirectly, the ownership of more than 5% of the voting shares or control of any U.S. bank or bank holding company. In addition, under the BHCA, a U.S. bank or a U.S. branch or agency of a foreign bank is prohibited from engaging in various tying arrangements involving it or its affiliates in connection wilh any extension of credit, sale or lease of any property or provision of any services.
On October 6, 2008, wc became a financial holding company in the United States. At the same time, BTMU, MUTB, and UNBC (now MUAH), which are also bank.holding companies, elected to become financial holding companies. As noted above, as a financial holding company we are authorized to engage in an expanded list of activities. These activities include those deemed to be financial in nature or incidental to such financial activity, including among other things merchant banking, insurance underwriting, and a full range of securities activities. In addition, we are permitted to engage in certain specified non-banking activities deemed to be closely related to banking, without prior notice to or approval from the FRB. To date, we have utilized this expanded authority by electing to engage in certain securities activities, including securities underwriting, indirectly through certain of our securities subsidiaries. In order to maintain our status as a financial holding company that allows us to expand our activities, we must continue to meet certain standards established by the FRB. Those standards require that we exceed the minimum standards applicable to bank holding companies that have not elected to become financial holding companies. These higher standards include meeting the "well capitalized" and "well managed" standards for financial holding companies as defined in the regulations of the FRB. In addition, as a financial holding company, we must ensure that our U.S. banking subsidiaries identified below meet certain minimum standards under the Community Reinvestment Act of 1977. At this time, we continue to comply with these standards.
17.5. branches and agencies of subsidiary Japanese banks. Under the authority of the IBA, our banking subsidiaries, BTMU and MUTB, operate four branches, one agency and eight representative offices in the United States. BTMU operates branches in Los Angeles, California; Chicago, Illinois; New York, New York; an agency in Houston, Texas; and representative offices in Washington, D.C; San Francisco, California; Seattle, Washington; Atlanta, Georgia; Minneapolis, Minnesota; Dallas, Texas; Jersey City, New Jersey; and Florence, Kentucky. MUTB operates a branch in New York, New York.
The IBA provides, among other things, that the FRB may examine U.S. branches and agencies of foreign banks, and each branch and agency shall be subject to on-site examination by the appropriate federal or state bank supervisor as frequently as would a U.S. bank. The IBA also provides that if the FRB determines that a foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, or if there is reasonable cause to believe that the foreign bank or its affiliate has committed a violation of law or engaged in an unsafe or unsound banking practice in the United States, the FRB may order the foreign bank to terminate activities conducted at a branch or agency in the United States.
U.S. branches and agencies of foreign banks must be licensed, and are also supervised and regulated, by a state or by the Office of the Comptroller of the Currency, or the OCC, the federal regulator of U.S. national banks. All of the branches and agencies of BTMU and MUTB in the United States are state-licensed. Under U.S. federal banking laws, state-licensed branches and agencies of foreign banks may engage only in activities that would be permissible for their federally-licensed counterparts, unless the FRB determines that the additional activity is consistent with safe and sound practices. U.S. federal banking laws also subject state-licensed branches and agencies to the single-borrower lending limits that apply to federal branches and agencies, which generally are the same as the lending limits applicable to national banks, but are based on the capital of the entire foreign bank.
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As an example of state supervision, the branches of BTMU and MUTB in New York are licensed by the New York Stale Department of Financial Services, pursuant to lhc New York Banking Law. Under the New York Banking Law and the Superintendent's Regulations, each of BTMU and MUTB must maintain wilh banks in the State of New York eligible assets as defined and in amounts determined by the Superintendent. These New York branches must also submit written reports concerning their assets and liabilities and other matters, to the extent required by the Superintendent, and are examined at periodic intervals by the New York State Department of Financial Services. In addition, the Superintendent is authorized to take possession ofthe business and property of BTMU and MUTB located in New York whenever events specified in the New York Banking Law occur.
U.S. banking subsidiaries. We indirectly own and control two U.S. banks:
Mitsubishi UFJ Trust & Banking Coiporation (U.S.A.), New York, New York (through MUTB, a registered bank holding company), and
¦ MUFG Union Bank, N.A. or MUB (known prior to July 1, 2014 as Union Bank, N.A.), through BTMU and its subsidiary, MUAH, a registered bank holding company.
Mitsubishi UFJ Trust & Banking Corporation (U.S.A.) is chartered by the State of New York and is subject to tlie supervision, examination and regulatory authority of the Superintendent pursuant to the New York Banking Law. MUB is a national bank subject to the supervision, examination and regulatory authority of the OCC pursuant to the National Bank Act.
The FDIC is the primary federal agency responsible for the supervision, examination and regulation of Mitsubishi UFJ Trust & Banking Corporation (U.S.A.). The FDIC may take enforcement action, including the issuance of prohibitive and affirmative orders, if it determines that a financial institution under its supervision has engaged in unsafe or unsound banking practices, or has committed violations of applicable laws and regulations. The FDIC insures the deposits of both of our U.S. banking subsidiaries up to legally specified maximum amounts. In the event of a failure of an FDIC-insured bank, the FDIC is virtually certain to be appointed as receiver, and would resolve the failure under provisions of the Federal Deposit Insurance Act. An FDIC-insured institution that is affiliated with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. In the liquidation or other resolution of a failed FDIC-insured depository institution, deposits in its U.S. offices and other claims for administrative expenses and employee compensation are afforded priority over other general unsecured claims, including deposits in offices outside the United States, non-deposit claims in all offices and claims of a parent company. Moreover, under longstanding FRB policy, a bank holding company is expected to act as a source of financial strength for its banking subsidiaries and to commit resources to support such banks.
Bank capital requirements and capital distributions. Our U.S. banking subsidiaries are subject to applicable risk-based and leverage capital guidelines issued by U.S. regulators for banks and bank holding companies. In addition, BTMU and MUTB, as foreign banking organizations that have U.S. branches and agencies and that are controlled by us as a financial holding company, are subject to the FRB's requirements that they be "well-capitalized" based on Japan's risk based capital standards, as well as "well managed." All of our U.S. banking subsidiaries and BTMU, MUTB, and MUAH are "well capitalized" as defined under, and otherwise comply with, all U.S. regulatory capital requirements applicable to them. The Federal Deposit Insurance Corporation Improvement Act of 1991, or FDICIA, provides, among other things, for expanded regulation of insured depository institutions, including banks, and their parent holding companies. As required by FDICIA, the federal banking agencies have established five capital tiers ranging from "well capitalized" to "critically undercapitalized" for insured depository institutions. As an institution's capital position deteriorates, the federal banking regulators may take progressively stronger actions, such as further restricting affiliate transactions, activities, asset growth or interest payments. In addition, FDICIA generally prohibits an insured depository
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institution from making capital distributions, including the payment of dividends, or the payment of any management fee to its holding company, if the insured depository institution would subsequently become undercapitalized.
The availability of dividends from insured depository institutions in the United States is limited by various olher statutes and regulations. The National Bank Act and other federal laws prohibit the payment of dividends by a national bank under various circumstances and limit the amount a national bank can pay without the prior approval of the OCC. In addition, state-chartered banking institutions are subject to dividend limitations imposed by applicable federal and state laws.
Other regulated U.S. subsidiaries. Our non-bank subsidiaries that engage in securities-related activities in the United States are regulated by appropriate functional regulators, such as the SEC, any self-regulatory organizations of which they are members, and the appropriate state regulatory agencies. These non-bank subsidiaries are required to meet separate minimum capital standards as imposed by those regulatory authorities.
Anti-Money Laundering Initiatives and the USA PATRIOT Act. A major focus of U.S. governmental policy relating to financial institutions in recent years has been aimed at preventing money laundering and terrorist financing. The USA PATRIOT Act of 2001 substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Department of the Treasury has issued a number of regulations that impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, and to verify the identity of their customers. In addition, the bank regulatory agencies carefully scrutinize the adequacy of an institution's policies, procedures and controls. As a result, there has been an increased number of regulatory sanctions and law enforcement authorities have been taking a more active role in enforcing these laws. Failure of a financial institution to maintain and implement adequate policies, procedures and controls to prevent money laundering and terrorist financing could in some cases have serious legal and reputational consequences for the institution, including the incurrence of expenses to enhance the relevant programs, the imposition of limitations on the scope of their operations and the imposition of fines and other monetary penalties.
Foreign Corrupt Practices Act. In recent years, U.S. regulatory and enforcement agencies including the SEC and the U.S. Department of Justice have significantly increased their enforcement efforts of the Foreign Corrupt Practices Act, or the FCPA. The FCPA prohibits U.S. securities issuers, U.S. domestic entities, and parties doing substantial business within the United States (including their shareholders, directors, agents, officers, and employees) from making improper payments to non-U.S. government officials in order to obtain or retain business. The FCPA also requires U.S. securities issuers to keep their books and records in detail, accurately, and in such a way that they fairly reflect all transactions and dispositions of assets. Those enforcement efforts have targeted a wide range of U.S. and foreign-based entities and have been based on a broad variety of alleged fact patterns, and in a number of cases have resulted in the imposition of substantial criminal and civil penalties or in agreed payments in settlement of alleged violations. Failure of a financial institution doing business in the United States .to maintain adequate policies, procedures, internal controls, and books and records on a global basis that address compliance with FCPA requirements could in some cases have serious legal and reputational consequences for the institution, including the incurrence of expenses to enhance the relevant programs and the imposition of fines and other monetary penalties.
Regulatory Reform Legislation. In response to the global financial crisis and the perception that lax supervision of the financial industry in the United States may have been a contributing cause, new legislation designed to reform the system for supervision and regulation of financial firms doing business in the United States, the so-called Dodd-Frank Act, was signed into law on July 21, 2010. The Dodd-Frank Act is complex and extensive in its coverage and contains a wide range of provisions thai would affect financial institutions operating in the United States, including our U.S. operations. Included among these provisions are sweeping reforms
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designed to reduce systemic risk presented by very large financial firms, promote enhanced supervision, regulation, and prudential standards for financial firms, establish comprehensive supervision of financial markets, impose new limitations on permissible financial institution activities and investments, expand regulation ofthe derivatives markets, protect consumers and investors from financial abuse, and provide the government with the tools needed to manage a financial crisis. Many aspects ofthe legislation require subsequent regulatory action by supervisory agencies for full implementation. Key provisions that impact our operations are summarized below. However certain regulatory rules under the Dodd-Frank Act are not yet finalized, require further interpretive guidance by the relevant supervisory agencies, or do not yet require us to fully implement compliance procedures. Accordingly, while the legislation will have an impact on our operations, we are unable to assess with certainty the full degree of impact of the Dodd-Frank Act on our operations at this time.
Among the components of the Dodd-Frank Act that have impacted or may impact our operations are the provisions relating to the "Volcker Rule," enhanced prudential standards (including capital, liquidity, and structural requirements), resolution plans, credit reporting, derivatives regulation, incentive-based compensation, the establishment of the Consumer Financial Protection Bureau, and debit interchange fees. Although certain of the regulatory rules regarding the foregoing components arc still pending, as noted above, based on information currently available to us, other than the Volcker Rule and derivatives regulations as discussed below, the impact of these components is expected to be mainly limited to our U.S! operations and not to be maferial tb us on a consolidated basis. We intend to continue to monitor developments relating to the Dodd-Frank Act and the potential-impact on our activities inside and'outside of the United States." ~
With respect to the Dodd-Frank Act provisions related to enhanced prudential standards, in February 2014 the FRB issued final rules that established enhanced prudential standards for the U.S. operations of foreign banking organizations such as MUFG. These rules will require us to organize by July 2016 all of our U.S. bank and non-bank subsidiaries under a U.S. intermediate holding company that would be subject to U.S. capital requirements and enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding companies of the same size. Under these rules, we will be required to change the structure of our U.S. operations, including the manner in which we oversee and manage those operations, and may be required to inject capital into our U.S. operations. The rules require foreign banking organizations that have U.S. non-branch assets of $50 billion or more as of June 30, 2014, including MUFG, to have filed an Implementation Plan with tlie FRB by January 1, 2015, describing how we intend to meet the requirements of the rules. MUFG has filed its Implementation Plan and received comments thereon from the FRB. MUFG is currently assessing those comments; making appropriate revisions to its Implementation Plan, and undertaking steps to comply with the Implementation Plan and the requirements ofthe enhanced prudential standards by the July 2016 effective date.
Under the enhanced prudential standards, wc will be required to establish or designate a separately capitalized top-tier U.S. intermediate holding company, or IHC, to hold substantially all of our ownership interests in U.S. subsidiaries by July 1, 2016. Beginning on that date, our IHC will be subject, on a consolidated basis, to the risk-based capital requirements under the U.S. Basel III capital framework, capital planning and stress testing requirements, U.S. liquidity buffer requirements, and other enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding companies of a similar size. The FRB will have the authority to examine the IHC and any of its subsidiaries. U.S. leverage requirements applicable to the IHC will take effect beginning in January 2018. The FRB has also staled that it intends, through future rulemakings, to apply the Basel III liquidity coverage ratio and net stable funding ratio to the U.S. operations of some or all large foreign banking organizations. Our combined U.S. operations, including BTMU's and MUTB's branches, will also be subject to certain requirements related to liquidity and risk management.
Our existing U.S. bank holding company subsidiary, MUAH, is subject to various U.S. prudential requirements and will become subject to others prior to our establishing the IHC. MUAH is currently subject to risk-based and leverage capital requirements, liquidity requirements, and other enhanced prudential standards applicable to large U.S. bank holding companies. MUAH is also subject to capital planning and stress testing requirements and will remain subject to the capital planning and stress testing requirements and certain enhanced
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prudential standards until corresponding requirements applicable to the IHC become effective. On March 5, 2015, the Federal Reserve Board released the results of the 2015 Dodd-Frank Act stress tests, or DFAST. ll found that, even in the severely adverse economic stress test scenario, MUAH would maintain capital ratios well above the required minimum levels. On March 11, 2015, the FRB announced that it had no objections to the capital plan submitted by MUAH as part ofthe 2015 Comprehensive Capital Analysis and Review, or CCAR.
The Volcker Rule was issued in final form by the Federal Reserve in December 2013. Under the Volcker Rule, we are required to cease conducting certain proprietary trading activities (i.e., trading in securities and financial instruments for our own account) subject to certain exceptions, including market-making, hedging, and underwriting activities if such activities are conducted within a rigorous compliance framework. Wc are also restricted from engaging in certain activities regarding hedge funds and private equity funds (covered funds). While the Volcker Rule excludes restrictions on such activities conducted solely outside of the United States, the regulatory definition of such exempted activities is narrow and complex and in some cases requires further clarification. Our proprietary trading and covered funds activities are generally executed outside ofthe United States, but certain activities within the United States could potentially fall within the scope of the Rule. We have undertaken steps that we believe are appropriate to bring our activities and investments into compliance with the Rule. Given the limited amount of potentially restricted activities in which we engage within the United States, we do not expect the proprietary trading or covered fund revenues attributable to our U.S. subsidiaries as a result of the implementation ofthe Volcker Rule to be material to our operations based on our current revenues attributable to the proprietary trading and covered fund activities conducted in our U.S. subsidiaries.
U.S. regulators have also begun to issue final regulations and regulatory determinations governing swaps and derivatives markets as contemplated by the Dodd-Frank Act. To date, BTMU and Mitsubishi UFJ Securities International, pic, or MUSI, have registered as swap dealers with the U.S. Commodity Futures Trading Commission, or CFTC. Depending on the final outcome of the regulations and regulatory determinations governing swaps and derivatives markets under the Dodd-Frank Act, as well as the activities of our other subsidiaries located inside and outside of the United Stales, our other subsidiaries may have to register as swap dealers with, or be subject to the regulations of, the CFTC and/or SEC. Regulation of swap dealers by the CFTC and SEC imposes numerous corporate governance, business conduct, capital, margin, reporting, clearing, execution, and other regulatory requirements on our operations, which may adversely impact our derivatives businesses and make us less competitive than those competitors that are not subject to the same regulations. Although many regulations applicable to swap dealers are already in effect, it is difficult to assess the full impact of these requirements because some of the most important regulatory determinations have not yet been implemented or finalized. For example, U.S. regulators are adopting guidance and rules on the application of U.S. regulations to activities of registered swap dealers outside of the United States. The potential extraterritorial application of swap dealer regulatory requirements could impose significant operational and compliance burdens on our swaps activities outside of the United States.
Foreign Account Tax Compliance Act. The Hiring Incentives to Restore Employment Act was enacted in March 2010 and contains provisions commonly referred to as the Foreign Account Tax Compliance Act, or FATCA. The U.S. Treasury, acting through the Internal Revenue Service, or the IRS, issued final regulations of FATCA in January 2013.
The FATCA framework has been expanded with the introduction of Intergovernmental Agreements, or IGAs, between the U.S. Treasury and foreign governments, which pursue a framework for intergovernmental cooperation to facilitate the implementation of FATCA. The United States and Japan have entered into an IGA.
We have developed internal procedures and processes that we believe address the regulatory requirements under FATCA. However, doing so has required us to develop extensive systems capabilities and internal processes to identify and report U.S. account holders who are subject to FATCA requirements, which has been a complex and costly process requiring significant internal resources. If our procedures and processes are determined not to be adequate to meet the requirements of FATCA, we could potentially be subject to serious
56
legal and reputational consequences, including the imposition of withholding taxes on certain amounts payable to us from U.S. sources, and could be required to expend additional resources lo enhance our systems, procedures and processes and take other measures in response to such consequences.
Capital Adequacy. MUAH and MUB arc required to maintain minimum capital ratios in accordance with rules issued by the U.S. Federal banking agencies. In July 2013, the U.S. Federal banking agencies issued final rules to implement the Basel Committee on Banking Supervision's capital guidance for U.S. banking organizations, or U.S. Basel III. These rules establish more restrictive capital definitions, create additional categories and higher risk weightings for certain asset classes and off-balance sheet exposures, higher minimum capital and leverage ratios and capital conservation buffers that will be added to the minimum capital requirements. These rules supersede the U.S. federal banking agencies' general risk-based capital rules generally referred to as Basel I, the advanced approaches rules generally referred to as Basel II, which are applicable to certain large banking organizations, and leverage rules, and are subject to certain transition provisions. MUAH is required to comply with the U.S. Basel III capital rules beginning January 2015, with certain provisions subject to a phase-ih period, while MUB continues to be subject to the U.S. Basel III capital rules which became effective for advanced approaches institutions on January 1, 2014. The U.S. Basel III capital rules are scheduled to be substantially phased in by January 1, 2019.
For more information, see "Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital Adequacy" and Note 21 to our audited consolidated financial statements included elsewhere in this Annual Report.
Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the U.S. Securities Exchange Act of 1934 requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified Executive Orders. The scope of activities that must be reported includes activities not prohibited by U.S. law and conducted outside the United States in compliance with applicable local law.
During the fiscal year ended March 31, 2015, one of our non-U.S. affiliates engaged in business activities with entities in or affiliated with Iran, including counterparties owned or controlled by the Iranian government. These activities were consistent with rules and regulations applicable to the non-U.S. affiliate. Specifically, our non-U.S. banking subsidiary, BTMU, issued letters of credit and guarantees and provided remittance and other settlement services mainly in connection with customer transactions related to the purchase and exportation of Iranian crude oil to Japan, and in some cases, in connection with other petroleum-related transactions with Iran by its customers. These transactions did not involve U.S. dollars nor clearing services of U.S. banks for the settlement of payments, and were reviewed for compliance with applicable U.S. and non-U.S. laws and regulations. For the fiscal year ended March 31, 2015, the aggregate interest and fee income relating to these transactions was less than ¥130 million, representing less than 0.005% of our total interest and fee income. Some of these transactions were conducted through the use of non-U.S. dollar correspondent accounts and other similar settlement accounts maintained with BTMU outside the United States by Iranian financial institutions and other entities in or affiliated with Iran. In addition lo such accounts, BTMU receives deposits in Japan from and provides settlement services in Japan to fewer than ten Iranian government-related entities and fewer than 100 Iranian government-related individuals such as Iranian diplomats, and maintains settlement accounts outside the United States for certain other financial institutions specified in Executive Order 13382, which settlement accounts were frozen in accordance with applicable laws and regulations. For the fiscal year ended March 31, 2015, the average aggregate balance of deposits held in these accounts represented less than 0.05% of the average balance of our total deposits. The fee income from the transactions attributable to these account holders was less than ¥5 million, representing less than 0.001% of our total fee income. BTMU also holds loans that were arranged prior to changes in applicable laws and regulations to'borrowers in or affiliated with Iran, including entities owned by the Iranian government, the outstanding balance of which was less than ¥200 million,
57
representing less than 0.001 % of our total loans, as of March 31, 201 5. For the fiscal year ended March 31, 2015, the aggregate gross interest and fee income relating to these loan transactions was less than ¥50 million, representing less than 0.005% of our total interest and fee income.
In addition, in accordance with the Joint Plan of Action agreed to among the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) and Iran in November 2013, BTMU has been providing settlement services in connection with humanitarian trade to assist Iran in meeting its domestic needs, namely food, agricultural products, medicine and medical devices, since April 2014. The overall framework for these settlement services was based on an agreement between U.S. and Japanese authorities, and the relevant U.S. regulator has authorized the settlement services as compliant with applicable U.S. laws and regulations. The purchasers of the humanitarian goods were entities in or affiliated with Iran, including entities related to the Iranian government. The sellers of the humanitarian goods were entities permitted by U.S. and Japanese regulators. These transactions did not involve U.S. dollars nor clearing services of U.S. banks for the settlement of payments. These transactions were conducted through the use of special purpose yen accounts maintained with BTMU outside the United Slates by an Iranian financial institution which is affiliated with the Iranian government but tJirough which these transactions were permitted to be settled. BTMU intends to continue to provide the settlement services in connection with the exports of humanitarian goods to Iran in close coordination with U.S. and Japanese authorities.
BTMU will continue to limit its participation in these types of transactions mainly to arrange financing transactions relating to customer imports of Iranian crude oil into Japan or authorized exports of humanitarian goods to Iran, maintain accounts in Japan of Iranian entities and individuals, and obtain interest and fee income and repayment of principal in connection with existing loans to borrowers in or affiliated with Iran, in each case to the extent permitted by applicable laws and regulations.
58
C. Organizational Structure
The following chart prcsenLs our corporate structure summary as of March 31, 20.15:
-(Mitsubishi UFJ Financial Group, Inc
Thc Bank of Tokyo-Mitsubishi UFJ, Lid
kabu com Securities Co., Ltd (1)
MU Frontier Servicer Co., Lid The Mitsubishi UFJ Factors Limited
Mitsubishi UFJ Kescdich and Consulting Co , Ltd.
Mitsubishi UFJ Capital Co., Ltd BOT Lease Co , Ltd
MUFG Americas Holdings Coipoiation
BTMU Capital Corporation
BTMU Leasing & Finance, Inc.
Bank of Ayudhya Public Company Limited
PT U Finance Indonesia
PT. BTMU-BR.I Finance
Domestic
Mitsubishi UFJ Trust and Banking Corporation
The Master Trust Bank of Japan, Ltd.
MU Investments Co , Ltd.
Mitsubishi UFJ Asset Management Co., Ltd. (2)
Mitsubishi UFJ Real Estate Services Co., Ltd
Mitsubishi UFJ Trust & Banking Corporation (U.S A )
Mitsubishi UFJ Baillie Gifford Asset Management Limited
Mitsubishi UFJ Global Custody S.A.
Mitsubishi UFJ Asset Management (UK) Ltd
Mitsubishi UFJ Fund Service Holdings Limited
Mitsubishi UFJ Trust International Limited
Domestic
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Morgan Stanley Secunties Co., Lid
Mitsubishi UFJ Morgan Stanley PB Securities Co , Ltd.
KOKUSAI Asset Management Co., Ltd. (2)
{Mitsubishi UFJ Securities International pic
I Mitsubishi UFJ Securities (USA), Inc.
) Mitsubishi UFJ Wealth Management Bank (Switzerland), Lid.
{Mitsubishi UFJ Secunties (HK) Holdings, Limited
Domestic
Mitsubishi UFJ NICOS Co., Ltd.
Notes:
On April 1, 2015, kabu.com Securities Co , Ltd became a subsidiary of MUSHD, following MUSHD's purchase of shares of kabu.com Securities from BTMU Prior to lhc share purchase transaction, MUSHD held a 11.17* ownership interest, and BTMU held a 44.4% ownership interest, in kabu.com Securities. As a result of the share purchase transaction, MUSHD holds a 50.1% ownership interest, and BTMU holds a 6 0% ownership interest, in kabu.com Securities.
On July 1, 2015 Mitsubishi UFJ Asset Management Co., Ltd. and KOKUSAI Asset Management Co., Ltd. merged. As Ihe surviving entity, Mitsubishi UFJ Asset Management was renamed as '"Mitsubishi UFJ Kokusai Asset Management Co., Lid." Prior lo lhc merger, MUTB, MUFG and BTMU respectively held 50%, 25% and 25% ownership interests in Mitsubishi UFJ Asset Management, while MUSHD, BTMU and MUTB respectively held 82%, 10% and 7% ownership interests in KOKUSAI Asset Management. As a result of the merger, MUTB, MUSHD and BTMU respectively hold 51%, 34% and 15% ownership interests in the surviving entity.
Consumer finance subsidiaries.
59
Set forth below is a list of our principal consolidated subsidiaries as of March 31, 2015:
The Bank of Tokyo-Mitstibishi UFJ, Ltd.
kabu.com Securities Co . Ltd (1)
MU Frontier Servicer Co , Ltd
Mitsubishi UFJ Home Loan CREDIT CO., LTD.
The Mitsubishi UFJ Factors Limited
Mitsubishi UFJ Research and Consulting Ltd.
Mitsubishi UFJ Capital Co , Ltd
BOT Lease Co., Ltd.
Tokyo Credit Services, Lrd.
Mitsubishi UFJ Personal Financial Advisers Co., Ltd.
MU Business Engineering, Ltd
Japan Electronic Monetary Claim Organization
Defined Contribution Plan Consulting of Japan Co , Ltd.
Mitsubishi UFJ Financial Partners Co., Ltd.
Mitsubishi UFJ Tmst and Banking Corporation
The Master Trust Bank of Japan, Ltd.
MU Investments Co., Ltd.
Mitsubishi UFJ Asset Management Co., Ltd. (2)
Mitsubishi UFJ Real Estate Services Co., Ltd.
Ryoshin DC Card Company, Ltd.
Mitsubishi UFJ Securities Holdings Co., Ltd.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
KOKUSAI Asset Management Co., Ltd. (2)
Mitsubishi UFJ NICOS Co., Ltd.
MUFG Americas Holdings Corporation
BTMU Capital Corporation
BTMU Leasing & Finance, Inc.
BTMU LF Capital LLC
PT U Finance Indonesia
PT. BTMU-BRI Finance
Bank of Ayudhya Public Company Limited
BTMU Participation (Thailand) Co., Ltd.
BTMU Lease (Deutschland) GmbH
Mitsubishi UFJ Trust & Banking Corporation (U.S.A )
Mitsubishi UFJ Fund Services Holdings Limited
Mitsubishi UFJ Global Custody S.A.
Mitsubishi UFJ Asset Management (UK) Ltd.
Mitsubishi UFJ Trust International Limited
Mitsubishi UFJ Baillic GifTord Asset Management Limited
Mitsubishi UFJ Securities (USA), Inc
Mitsubishi UFJ Securities International pic
Mitsubishi UFJ Wealth Management Bank (Switzerland), Ltd
Mitsubishi UFJ Securities (HK) Holdings. Limited Mitsubishi UFJ Securities (Singapore), Limited
Country of Imuiponition
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
hi pan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
USA
USA
USA
USA Indonesia Indonesia Thailand Thailand Germany
USA Bermuda Luxembourg
UK
UK
UK
USA
UK. Switzerland Peoples' Republic of China Singapore
Proportion of Ownership [Merest
(%)
100 00% 56.76% 96.47% 99.88% 100.00% 69 45% 41 22%, 22 57% 74 00% 73 69% 100 00% 100.00% 77.50% 100.00% ¦ 100.00% 46 50% 100.00% 100.00% 100.00% . 100.00% 100 00% 60.00% 100.00% 100.00% 84 98% 100.00% 100.00% 100.00% 100.00% 95.00% 55.00% 76.88% 24.50% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 100.00% 100.00% 100.00% 100 00% 100 00%,
PtopotTIOll or Voting inlcrrjl (1)
(•/•)
100 00% 56 77% 96.47% 99.88% 100.00% 69 45% 41 22%, 22.57% 74.00% 73 69% 100 00% 100.00% 77.50% 100 00% 100.00% 46.50% 100.00% 100 00% 100.00% 100.00% 100.00% 60.00% 100.00% 100.00% 84.98%, 100.00% 100.00% 100.00% 100.00% 95.00% 55.00% 76.88% 24.50% 100 00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 100 00%, 100.00% 100 00% 100.00% 100 00%
Notes:
(I) On April I, 2015, kabu.com Secunties Co Ltd. became a subsidiary of MUSHD, fallowing MUSHD's purchase of shares of kabu.com Securities from BTMU. Prior to the share purchase transaction, MUSHD held 0 117% ownership interest, and BTMU held a 44.4% ownership interest, in kabu.com Securities. As a result of the share purchase transaction, MUSHD holds a 50.1% ownership interest, and BTMU holds a 6.0% ownership interest, in kabu.com Securities.
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(2) On July 1, 2015 Mitsubishi UFJ Asset Management Co., Ltd. and KOKUSAI Asset Management Co . Ltd merged As the surviving entity, Mitsubishi UFJ Asset Management was renamed as "Mitsubishi UFJ Kokusai Asset Management Co , Ltd " Prior to the merger, MUTFS, MUFG and BTMU respectively held 50%, 25% and 25% ownership interests in Mitsubishi UFJ Asset Management, while MUSHD, BTMU and MUTB respectively held Ji2%, 10% and 7% ownership interests in KOKUSAI Assel Management. As a result of the merger, MUTB, MUSHD and BTMU respectively hold 51%, 34% and 15% ownership interests in the surviving entity.
D. Property, Plant and Equipment
Premises and equipment as of March 31, 2014 and 2015 consisted ofthe following:
As of March 31, 2014 2015 (in millions)
Land ¥ 403,184 ¥ 409,271
Buildings 747,998 760,974
Equipment and furniture 929,939 615,540
Leasehold improvements 251,875 282,179
Construction in progress 27,606 35,773
Total 2,360,602 2,103,737
Less accumulated depreciation 1,123,954 1,121,532
Premises and equipment—net :•. ¥1,236,648 ¥ 982,205
Our registered address is 7-1, Marunouchi 2-chomc, Chiyoda-ku, Tokyo 100-8330, Japan. As of March 31, 2015, we and our subsidiaries conducted our operations either in premises we owned or in properties we leased.
Tlie following table presents the book values of our material offices and other properties as of March 31, 2015:
Book value (in millions)
Owned land ¥409,271
Owned buildings 218,479
The buildings and land we own are primarily used by us and our subsidiaries as offices and branches. Most of the buildings and land we own are free from material encumbrances.
During the fiscal year ended March 31, 2015, we invested approximately ¥ 162.8 billion, primarily for office renovations and relocation.
Item 4A. Unresolved Staff Comments.
None.
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Item 5. Operating and Financial Review and Prospects.
The following discussion and analysis should be read in conjunction with "Item 3.A. Key Information— Selected Financial Data, " "Selected Statistical Data " and our consolidated financial statements and related notes included elsewhere in this Annual Report.
Page
Introduction 63
Business Environment 72
Recent Developments 78
Critical Accounting Estimates 82
Accounting Changes and Recently Issued Accounting Pronouncements 88
Operating Results 88
Results of Operations 88
Business Segment Analysis 105
Geographic Segment Analysis Ill
Effect of Change in Exchange Rates on Foreign Currency Translation 112
Liquidity and Capital Resources 113
Financial Condition 113
Capital Adequacy 137
Non-exchange Traded Contracts Accounted for at Fair Value 141
Research and Development, Patents and Licenses, etc 141
Trend Information 141
Off-Balance Sheet Arrangements 142
Tabular Disclosure of Contractual Obligations 143
Safe Harbor 143
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Introduction
We are a holding company for The Bank of Tokyo-Mitsubishi UFJ, Ltd., or BTMU, Mitsubishi UFJ Tmst and Banking Corporation, or MUTB, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., or MUMSS (through Mitsubishi UFJ Securities Holdings Co., Ltd., or MUSHD, an intermediate holding company), Mitsubishi UFJ NICOS Co., Ltd., or Mitsubishi UFJ NICOS, and other subsidiaries. Through our subsidiaries and affiliated companies, we engage in a broad range of financial businesses and services, including commercial banking, investment banking, trust banking and asset management services, securities businesses, and credit card businesses, and provide related services to individual and corporate customers.
Summary of Our Recent Financial Results
The following table presents some key figures relating to our financial results:
Fiscal years ended March 31,
2013 2014 2015
(in billions, except per share data)
Net interest income ¥1,871.1 ¥1,961.3 ¥2,231.5
Provision (credit) for credit losses 144.5 (106.4) 87.0
Non-interest income . 2,068.0 1,821.0 2,845.1
Non-interest expense 2,378.7 2,468.3 2,726.9
Incomebeforeincometaxexpen.se 1,415.9 1,420.4 2,262.7
Net income before attribution of noncontrolling interests 1,119.9 1,082.5 1,596.6
Net income attributable to Mitsubishi UFJ Financial Group 1,069.1 1,015.4 1,531.1
Diluted earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group 74.16 69.98 107.50
We reported net income attributable to Mitsubishi UFJ Financial Group of ¥1,531.1 billion for the fiscal year ended March 31, 2015, an increase of ¥515.7 billion from ¥ 1,015.4 billion for the fiscal year ended March 31, 2014. Domestic net income attributable to Mitsubishi UFJ Financial Group was ¥410.7 billion, and foreign net income attributable to Mitsubishi UFJ Financial Group was ¥1,120.4 billion, for the fiscal year ended March 31, 2015. Asia and Oceania excluding Japan, Europe, the United Slates, and other areas including Canada, Latin America, the Caribbean and the Middle East contributed ¥358.6 billion, ¥309.8 billion, ¥187.3 billion and ¥ 264.7 billion, respectively, to foreign net income.
For the fiscal year ended March 31, 2015, our domestic revenue, which consists of interest income and non-interest income attributable to our operations in Japan, was ¥3,016.4 billion, while our total foreign revenue, 1 which consists of interest income and non-interest income attributable to our operations outside of Japan, was ¥2,723.3 billion, with revenue attributable to our operations in Asia and Oceania excluding Japan contributing ¥1,087.4 billion, the United States contributing ¥715.5 billion, and Europe contributing ¥521.4 billion. As a percentage of total revenue, domestic revenue decreased to 52.6% for the fiscal year ended March 31, 2015 from 71.6% for the previous fiscal year.
More specifically, our net income attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2015 mainly reflected the following:
Net interest income. Net interest income is a function of: the amount of interest-earning assels, the amount of interest-bearing liabilities, the general level of interest rates,
63
the so-called "spread," or the difference between the rate of interest earned on interest-earning assets and the rate of interest paid on interest-bearing liabilities, and
the proportion of interest-earning assets financed by non-intcrest-bearing liabilities and equity.
Net interest income for the fiscal year ended March 31, .2015 was ¥ 2,231.5 billion, an increase of ¥270.2 billion from ¥1,961.3 billion for the fiscal year ended March 31, 2014. Interest income increased ¥372.3 billion while interest expense increased only ¥102.1 billion. The increase in interest income reflected higher interest income from foreign loans, foreign currency denominated investment securities and deposits in central banks primarily due to increased volumes of these assets as well as improved average interest rates on foreign loans. These increases were partially offset by a decrease in interest income from domestic loans due to lower interest rales and intensified competition among lending institutions, and a decrease in interest income from foreign trading account assets due to our reduced holding of such securities. The increase in interest expense reflected higher interest payments on foreign deposits due to an increased balance of such deposits as well as higher interest rates on such deposits reflecting the impact of the consolidation of Krungsri, and larger long-term debt primarily reflecting an increase in the balance of borrowings with longer maturities despite the lower interest rates on such long-term debt.
The average interest spread increased 0.01 percentage points to 0.90% for the fiscal year ended March 31, 2015 from 0.89% for the fiscal year ended March .31, 2014, reflecting an increase in the average interest rate for interest-earning assets, particularly foreign loans, and a comparatively limited increase in the average interest rate on interest-bearing liabilities.
The following table shows changes in our net interest income by changes in volume and by changes in rates for the fiscal year ended March 31, 2014 compared lo the fiscal year ended March 31, 2013, and the fiscal year ended March 31, 2015 compared to the fiscal year ended March 31, 2014:
Fiscal Year Ended March 31,2013 Fiscal Year Ended March 31,2014
versus versus
Fiscal Year Ended March 31, 2014 Fiscal Year Ended March 31, 2015
Increase(decrease) Increase(decrease)
due to changes in due to changes in
Volume"' Rate*" Net change Volume"* Rate") Net change
(in millions)
Domestic ¥(22,455) ¥ (48,533) ¥(70,988) ¥(23,228) ¥17,836 ¥(5,392)
Foreign 254,092 (92,896) 161,196 194,317 81,225 275,542
Total ¥231,637 ¥(.141,429) ¥ 90,208 ¥171,089 ¥99,061 ¥270,150
Note:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total' change."
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The following table is a summary of the amount of interest-earning assets and interest-bearing liabilities, average interest rates, the interest rate spread and non-inlerest-bearing liabilities for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2015
Average balance
Average rate
Average balance
Average rate
Average balance
Average rate
Interest-earning assets:
Domestic
Foreign
Total
(in billions, except percentages)
1.95
0.95% ¥135,087.3 0.87% ¥146,830.0
77,089.0 1.75
¥193,824.3 1.25% ¥212,176.3 1.19% ¥237,247.7
0.79% 1.92
1.22%
Financed by:
Interest-bearing liabilities:
Domestic
Foreign
Total
Non-interest-bearing liabilities
Total
Interest rate spread
Net interest income as a percentage of total
interest-earning assets
37,424.6
173,399.5 20,424.8
¥193,824.3
0.73 47,535.3
0.32 189,413.3
— 22,763.0
0.29% ¥212,176.3
0.93%
0.97%
58,102.5
210,101.3 27,146.4
0.26% ¥237,247.7 0.89%
0.92%
0.73 0.32
0.28% 0.90%
0.94%
Provision (credit) for credit losses. Provision for credit losses is charged to operations to maintain the allowance for credit losses at a level deemed appropriate by management. When there is an improvement in asset quality, credit for credit losses is recorded to reduce the allowance for credit losses to an appropriate level. For the fiscal year ended March 31, 2015, we recorded ¥ 87.0 billion of provision for credit losses, compared to credit for credit losses of ¥106.4 billion for the previous fiscal year. The provision for credit losses recorded for the fiscal year ended March 31, 2015 mainly reflected significant deterioration in the operational and financial performance of a large borrower in the domestic electronics manufacturing industry. The credit for credit losses recorded for the previous fiscal year primarily reflected improvements in the repayment ability of a substantial number of large borrowers, resulting in upgrades of their borrower ratings.
Non-interest income. Non-interest income consists of: fees and commissions income, including:
fees and commissions on deposits, • fees and commissions on remittances and transfers,
fees and commissions on foreign trading business,
fees and commissions on credit card business,
fees and commissions on security-related services,
fees and commissions on administration and management services for investment funds, trust fees, guarantee fees, insurance commissions,
fees and commissions on real estate business, and other fees and commissions,
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foreign exchange gains (losses)—net, which include foreign exchange gains (losses) related to derivative contracts (for example, foreign exchange gains (losses) on currency derivatives), foreign exchange gains (losses) on other than derivative contracts (for example, gains (losses) on foreign exchange transactions), and foreign exchange gains (losses) related to the fair value option (for example, foreign exchange gains (losses) on securities under the fair value option),
trading account profits (losses)—net, which primarily include net profits (losses) on trading account securities and interest rate derivative contracts entered into for trading purposes, including assets relating to the following activities:
trading purpose activities, which are conducted mainly for the purpose of generating profits cither through transaction fees or arbitrage gains and involve frequent and short-term selling and buying of securities, commodities or others, and
trading account assets relating to application of certain accounting rules, which are generally not related to trading purpose activities but arc classified as trading accounts due to application of certain accounting rules, such as assets that are subject to fair value option accounting treatment or investment securities held by variable interest entities that are classified as trading account securities.
Of the two categories, trading purpose activities represent a smaller portion of our trading account profits,
investment securities gains (losses)—net, which primarily include net gains or losses on sales and impairment losses on available-for-sale securities,
equity in earnings (losses) of equity method investees—net, which includes our equity interest in the earnings of our equity investees and impairment losses on our investments in equity method investees,
gains on sales of loans, and
other non-interest income.
The following table is a summary of our non-interest income for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
(in billions)
Fees and commissions income ¥1,160.9 ¥1,294.1 ¥1,401.0
Foreign exchange losses—net (39.0) (61.8) (113.1)
Trading account profits (losses)—net 570.3 (33.9) 1,148.7
Investment securities gains—net 156.0 303.5 154.7
Equity in earnings of equity method investees—net 60.2 110.5 172.9
Gains on sales of loans 14.8 17.7 15.0
Government grant for transfer of substitutional portion of Employees' Pension
Fund Plans — 115.2 —
Other non-interest income .' 144.8 15.1 65.9
Total non-interest income ¥2,068.0 ¥1,821.0 ¥2,845.1
Fees and commissions income for the fiscal year ended March 31, 2015 was ¥ 1,401.0 billion, an increase of ¥106.9 billion from¥l,294.1 billion for the fiscal year ended March 31, 2014. The increase reflected a positive impact ofthe consolidation of Krungsri especially in fees and commissions on remittances and transfers, credit card business, insurance business, and administration and management services for inveslment funds.
66
Net foreign exchange losses for the fiscal year ended March 31, 2015 were ¥ 11 3.1 billion, compared to ¥61.8 billion of net foreign exchange losses for the fiscal year ended March 31, 2014. This was mainly due to lower net foreign exchange gains related to the fair value option. The Japanese yen depreciated against almost all the major foreign currencies in the fiscal year ended March 31, 2014, and while the Japanese yen generally remained on a depreciating trend against other major currencies in the fiscal year ended March 31, 2015, the rate of depreciation was smaller particularly against the U.S. dollar and the depreciating trend reversed against the euro for extended periods. The decrease was partially offset by lower foreign exchange losses on other than derivative contracts.
Wc recorded net trading account profit of ¥ 1,148.7 billion for the fiscal year ended March 31, 2015, compared to net trading account losses of ¥33.9 billion for the previous fiscal year. This was attributable to higher fair values of foreign bonds, including U.S. Treasury bonds, due to a decrease in interest rates in the United States. The improvement was also attributable to higher fair values of German and French government bonds as our banking subsidiaries increased their holdings of such bonds and interest rates in Europe decreased due to stagnant economic conditions in the region. The trading business in our securities subsidiaries also contributed to the improvement.
Net investment securities gains for the fiscal year ended March 31, 2015 were¥ 154.7 billion, a decrease of ¥148.8 billion from ¥303.5 billion for the fiscal year ended March 31, 2014. The decrease was partly attributed to a decrease in net gains on sales of available-for-sale debt securities, reflecting reduced volumes of sales of Japanese government bonds mainly in our commercial banking subsidiaries, compared to the previous fiscal year when we decreased our holdings of such bonds as part of our asset and liability management and interest rate risk management measures. The decrease was also due to lower net gains on sales of preferred securities, compared to the previous fiscal year when our banking subsidiaries reported higher gains on sales of preferred securities related to a specific customer.
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2015 was ¥ 172.9 billion, compared to ¥110.5 billion for the previous fiscal year, mainly due to higher earnings of our equity method investees such as Morgan Stanley.
Non-interest expense. Non-interest expense consists of:
salaries and employee benefits, which include the amount of money paid as salaries and bonuses as well as the cost of fringe-benefits,
occupancy expenses—net, which include the amount of money paid as rents for offices and other facilities,
fees and commissions expenses, which include the amount of money paid as fees and commissions on services received,
outsourcing expenses, including data processing, which include the amount of money paid for tlie outsourcing services, including IT-related services,
depreciation of premise and equipment, which includes the depreciation of the value of buildings, equipment and furniture through the passage of time,
amortization of intangible assets, which includes the amount of deductions ofthe cost of investments in software and other intangible assets over their estimated useful lives,
impairment of intangible assets, which includes the amount of reductions in the carrying amounts of intangible assets with indefinite useful lives in excess of their fair values,
insurance premiums, including deposits insurance, which include tlie amount of money paid as the insurance premiums including the deposit insurance premiums paid to the Deposit Insurance Corporation of Japan,
67
communications, which include the amount of money paid for communications such as postal services and telecommunications,
taxes and public charges, which include the amount of tax payments and other public charges,
provision for repayment of excess interest, which includes the amount of money reserved for the estimated amount of repayment of excess interest payments received in our consumer finance and credit card subsidiaries,
impairment of goodwill, which includes the amount of reductions in the carrying amount of goodwill recorded in connection with the acquisition of companies in excess of its fair value, and
other non-interest expenses.
The following table is a summary of our non-interest expense for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
(in billions)
Salaries and employee benefits • ¥ 932.4 ¥1,029.6 ¥1,097.5
Occupancy expenses—net 151.1 158.4 168.7
Fees and commission expenses 209.8 ' 222.0 248.1
Outsourcing expenses, including data processing 198.1 216.7 241.7
Depreciation of premises and equipment 94.0 103.7 108.6
Amortization of intangible assets 207.6 198.1 222.4
Impairment of intangible assets 3.4 0.3 0.7
Insurance premiums, including deposit insurance 98.7 101.1 115.5
Communications 47.1 50.9 54.7
Taxes and public charges 66.9 69.5 96.6
Other non-interest expenses 369.6 318.0 372.4
Total non-interest expense ¥2,378.7 ¥2,468.3 ¥2,726.9
Non-interest expense for the fiscal year ended March 31, 2015 was ¥2,726.9 billion, an increase of ¥258.6 billion from ¥2,468.3 billion for the fiscal year ended March 31, 2014. This increase was partly attributable to an increase in salaries and employee benefits as well as an increase in other non-interest expenses, reflecting BTMU's payment of $315 million, or ¥34.5 billion, to the DFS. See "—Recent Developments."
Core Business Groups
We operate our main businesses under an integrated business group system. This integrates the operations of BTMU, MUTB, MUMSS (through MUSHD), Mitsubishi UFJ NTCOS and other subsidiaries in the following five groups—Retail, Corporate, Trust Assets, Global, and Global Markets, each of which is treated as a business segment. These five businesses serve as the core sources of our revenue. For the fiscal year ended March 31, 2015, in addition to these five integrated business groups, Krungsri, our banking subsidiary in Thailand, was treated as a business segment. Operations that were not covered under the integrated business group system and Krungsri, which mainly consists ofthe corporate center of MUFG, BTMU, MUTB and MUMSS and the elimination of net revenues among business segments, were classified under Other. For further information, see "—A. Operating Results—Business Segment Analysis."
Our business segment information is based on financial information prepared in accordance with Japanese GAAP, as adjusted in accordance with internal management accounting rules and practices and is not consistent
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with our consolidated financial statements included elsewhere in this Annual Report, which have been prepared in accordance with U.S. GAAP. For information on a reconciliation of operating profit under our internal management reporting system lo income before income tax expense shown on the consolidated statements of income, see Note 29 to pur consolidated financial statements included elsewhere in this Annual Report.
The following table sets forth the relative contributions to operating profit for the fiscal year ended March 31, 2015 ofthe five core business groups, Krungsri and other based on our business segment information:
r. .ii. .j¥. . j Integrated Global Business . . . .
Integrated Integrated Integrated b Integrated
Retail Corporate Trust ' tjl"°"p Global
Banking Ranking Assets Other Markets
Business Business Business than Business
Group Group Group MUAH MUAH Total Krungsri Group Other Total
(in billions)
Netrevenuc ¥1,311.3 ¥965.2 ¥172.2 ¥668.6 ¥442.4 ¥1,111.0 ¥240.3 ¥609.4 ¥ (22.5)¥4,386.9
Operating expenses 964.2 448.1 102.1 341.0 298.1 639.1 123.7 191.3 243.0 2,711.5
Operating profit (loss) ... ¥ 347.1 ¥517.1 ¥70.1 ¥327.6 ¥144.3 ¥ 471.9 ¥116.6 ¥418.1 ¥(265.5) ¥1,675.4
Summary of Our Recent Financial Condition
The following table presents some key asset figures:
As of March 31,
2014 2015
(in trillions)
Total assets ¥253.66 ¥280.89
Net loans 109.18 117.21
Loans, net of unearned income, unamortized premiums and deferred loan fees 110.28 118.27
Allowance for credit losses (1.10) (1.06)
Investment securities 55.33 52.21
Available-for-sale securities 51.89 47.49
Held-to-maturity securities 2.71 4.13
Trading account assets 40.65 46.90
-Trading securities 28.84 30.18
Trading derivative assets 11.81 16.72
Interest-earning deposits in other banks 20.50 37.36
Total assets as of March 31, 2015 were ¥ 280.89 trillion, an increase of ¥27.23 trillion from ¥253.66 trillion as of March 31, 2014. Between March 31, 2014 and March 31, 2015, domestic assets increased ¥10.47 trillion to ¥169.28 trillion, and foreign assets increased ¥16.76 trillion to ¥111.61 trillion.
Total loans outstanding as of March 31, 2015 were¥ 118.27 trillion, an increase of ¥7.99 trillion from ¥110.28 trillion as of March 31, 2014. This increase was due to an increase in foreign loans, particularly loans booked at MUB in the United States and at Krungsri in Thailand, mainly due to stronger demand for funds and the depreciation of the Japanese yen against the U.S. dollar. The balance of domestic loans slightly decreased . between March 31, 2014 and 2015.
Total allowance for credit losses as of March 31, 2015 was¥ 1,055.5 billion, a decrease of ¥38.9 billion from¥l,094.4 billion as of March 31, 2014. The decrease was primarily because the repayment ability of a number of large borrowers and a substantial portion of smaller borrowers in the Commercial segment improved, resulting in upgrades of their borrower ratings, and a substantial portion of borrowers in the Residential segment became current with their payments.
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Total investment secunties as of March 31, 2015 were ¥ 52.21 trillion, a decrease of ¥3.12 trillion from ¥55.33 trillion as of March 31, 2014. This was mainly due to a decrease in our holding of Japanese government bonds primarily in response to the Bank of Japan's monetary policy and measures to purchase such bonds in the market to stimulate the economy by increasing liquidity, and also as part of our asset and liability management. These decreases were partially offset by an increase in marketable equity securities in our banking and securities subsidiaries, primarily reflecting higher equity prices. In addition, our commercial banking subsidiaries increased their holdings of held-to-maturity Japanese government bonds to manage the interest rate fluctuation risk primarily relating to core deposits.
Trading account assets as of March 31, 2015 were ¥ 46.90 trillion, compared to ¥40.65 trillion as of March 31, 2014. Of the¥ 6.25 trillion of increase in trading account assets, ¥1.34 trillion was attributable to an increase in trading securities due to the purchase of foreign currency denominated bonds, especially those denominated in euro, while ¥4.91 trillion was attributable to an increase in trading derivative assets. Increases in trading derivative assets were mainly attributable to an increase in the fair values of interest rate related derivatives in our commercial banking and securities subsidiaries, and to an increase in the notional amount of foreign exchange related derivatives in our banking subsidiaries.
Interest-earning deposits in other banks as of March 31, 2015 were ¥ 37.36 trillion, an increase of ¥16.86 trillion from ¥20.50 trillion as of March 31, 2014 mainly due to increased interest-earning deposits with the Bank of Japan and the FRB. A significant portion ofthe cash received as a result of our sale of Japanese government bonds was deposited with the Bank of Japan. Similarly, a significant portion ofthe cash received as a result of our sale of U.S. Treasury bonds was deposited with the FRB.
The following table presents some key liability figures:
As of March 31, 2014 2015 (in trillions)
Total liabilities ¥240.91 ¥265.61
Total deposits 162.52 171.99
Domestic 121.51 125.80
Overseas 41.01 46.19
Payables under repurchase agreements 21.27 20.73
Other short-term borrowings 11.11 11.55
Trading account liabilities 11.98 17.03
Long-term debt 14.50 19:97
Total liabilities as of March 31, 2015 were ¥ 265.61 trillion, an increase of ¥24.70 trillion from ¥240.91 trillion as of March 31, 2014.
Total deposits as of March 31, 2015 were¥ 171.99 trillion, an increase of¥9.47 trillion from¥162.52 trillion as of March 31, 2014. This was mainly due to a higher balance of interest-bearing deposits in Japan, the United States at MUAH, and Thailand at KS.
Trading account liabilities as of March 31, 2015 were¥ 17.03 trillion, compared to¥l 1.98 trillion as of March 31, 2014, as the fair values of interest rate-related and currency-related trading derivatives increased in our commercial banking and securities subsidiaries, and as the fair value of foreign exchange-related trading derivatives in our banking subsidiaries also increased.
Long-term debt as of March 31, 2015 was¥ 19.97 trillion, an increase of¥5.47 trillion from ¥14.50 trillion as of March 31, 2014. This primarily reflected increased long-term borrowings in our banking subsidiaries and issuances of bonds by us and by our banking subsidiaries to diversify our funding sources. The Basel Ill-compliant bonds that MUFG issued were also included in long-term debt.
70
Shareholders' Equity
The following table presents some key shareholders' equity figures:
As of March 31, 2014 2015 (in trillions)
Total Mitsubishi UFJ Financial Group shareholders'equity ¥12.21 ¥14.68
Retained earnings 2.40 3.66
Accumulated other comprehensive income, net of taxes 1.36 3.07
Capital Ratio
The following tables present our risk-adjusted capital ratios in accordance with Basel III as of March 31, 2014 and 2015. Underlying figures are calculated in accordance with Japanese banking regulations based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The figures in the tables below are rounded down.
Common Equity Tier 1 Capital
As of March 31, 2014 2015
Minimum Common Equity Tier I Capital 4.00% 4.50%
MUFG (consolidated) 11.25 11.14
BTMU (consolidated) 11.05 10.88
BTMU (stand-alone) 11.88 11.90
MUTB (consolidated) 14.21 14.70
MUTB (stand-alone) 13.72 14.35
Tier J Capital
As of March 31, 2014 2015
Minimum Tier I Capital 5.50% 6.00%
MUFG (consolidated) : 12.45 12.62
BTMU (consolidated) 12.21 12.33
BTMU (stand-alone) 13.74 13.54
MUTB (consolidated) 14.76 15.26
MUTB (stand-alone) 14.37 14.90
Total Capital
As of March 31, 2014 2015
Minimum Total Capital 8.00% 8.00%
MUFG (consolidated) 15.53 15.68
BTMU (consolidated) 15.57 15.61
BTMU (stand-alone) 17.52 17.23
MUTB (consolidated) 18.38 19.15
MUTB (stand-alone) 18.51 19.16
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Business Environment
Through our subsidiaries and affiliated companies, we engage in a broad range of financial businesses and services, including commercial banking, inveslment banking, tmst banking and asset management services, securities businesses and credit card businesses, and provide related services to individuals primarily in Japan and the United States and to corporate customers around the world. Our results of operations and financial condition are exposed to changes in various external economic factors, including:
general economic conditions,
interest rates,
foreign currency exchange rates, and stock and real estate prices.
The global economy lacked strong momentum during the fiscal year ended March 31, 2015. Although gradually improving trends in Japan and the United States generally continued, recovery in Europe and in other Asian countries was limited.
In Japan, since the introduction of the "Abenomics" policy at the end ofthe calendar year 2012 and the Bank of Japan's "quantitative and qualitative monetary easing" policy in April 2013 and its expansion in October 2014, the Japanese yen has depreciated against the U.S. dollar. This has generally had a positive effect on the Japanese economy while concerns still remain over the effectiveness of the government's economic measures in the longer-term. In the United States, stock, land and housing prices gradually improved while the FRB maintained its zero-interest rate policy, a policy to maintain the federal funds target rate between zero and 0.25%. However, uncertainty remains as-to whether the improving trends would continue if, for example, the FRB raises the policy interest rate. Eurozone GDP growth turned positive in the quarter ended June 30, 2013 for the first time in seven quarters and it has maintained a positive growth for the eight consecutive quarters since then, but the rate of economic recovery in the region has remained slow and there is uncertainty over the Greek sovereign debt problem.
Economic Environment in Japan
In the fiscal year ended March 31, 2015, Japan's economic recovery remained slow with negative or low GDP growth as private spending declined after the Abe administration increased the consumption tax rate to 8% from 5% in April 2014. In financial markets, long-term interest rates generally decreased, while the equity market maintained an upward trend for the twelve-month period. In the foreign exchange market, the Japanese yen continued to depreciate mainly against the U.S. dollar during the same period. There remains significant uncertainty surrounding the future of tlie Japanese economy despite the economic stimulus measures implemented by the Japanese government and the monetary policy maintained by the Bank of Japan, including the decision to postpone the effective date of the additional increase in the consumption tax rate to 10% until April 2017, as the consumer price inflation rate has been declining.
In October 2014, the Bank of Japan further expanded its anti-deflation monetary measures under the "quantitative and qualitative monetary easing" policy, which included:
money market operations with an aim to increase Japan's monetary base by approximately ¥80 trillion per annum (representing an addition of about ¥10 trillion to ¥20 trillion to the previous target);
market purchases of Japanese government bonds with an aim to increase the Bank of Japan's aggregate holding of such bonds by approximately ¥80 trillion per annum (representing an addition of about ¥30 trillion to the previous target) and shifting the target average remaining maturity of the bonds purchased by the Bank of Japan to approximately seven to ten years (representing an increase of about three years from the previous target); and
72
purchases of exchange-traded funds and Japanese real estate investment trusts with an aim to increase the Bank of Japan's aggregate holdings of such funds and tnists by about ¥3 trillion per annum (representing an increase of three times the previous target) and ¥90 billion per annum (representing an increase of three times the previous target), respectively.
As the Bank of Japan continued to supply cash to the market through its purchase of Japanese government bonds, interest rates remained at historic low levels and the Japanese yen depreciated against the U.S. dollar, contributing to increases in stock prices and real estate purchases.
In December 2014, following the general election, the Abe administration introduced a supplemental budget of ¥3.5 trillion aiming to revitalize the Japanese economy by focusing on the following four areas: support of households and companies, stimulation of regional economies in Japan, recovery from natural disasters including the Great East Japan Earthquake in March 2011, and measures to recreate a stable and virtuous cycle of activities within the Japanese economy.
The following table sets forth the seasonally adjusted growth rates of Japan's real GDP and its components on a quaner-on-quarter basis for the periods indicated:
Calendar Year (Unit: %)
_ 2012 2013 - - - 2014 - 2015
2Q 3Q 4Q 1Q 2Q 3Q 4Q~ 1Q 2Q 3Q 4Q 1Q
Gross Domestic Product (0.5) (0.4) (0.1) 1.3 0.7 0.5 (0.2) 1.1 (1.7) (0.5) 0.3 1.0
Private Consumption ... . 0.7 (0.3) 0.1 1.2 0.9 0.3 (0.2) 2.1 (5.1) 0.4 0.4 0.4
Private Residential
Investment 4.2 2.8 1.3 0.8 1.5 4.6 ' 2.9 2.0 (10.8) (6.4) (0.6) 1.7
Private Non-Residential
Investment 0.8 (1.0) (0.2) (1.7) 2.6 0.8 1.5 5.1. (4.8) 0.1 0.3 2.7
Government
Consumption (0.4) 0.4 0.7 0.9 0.6 (0.1) 0.0 (0.3) 0.3 0.2 0.3 0.1
Public Investment (1.6) (3.4) (0.7) 5.7 2.9 5.1 0.1 (0.9) 0.7 1.6 0.1 (1.5)
Exports (0.4) (3.8) (3.6) 4.0 3.0 (0.4) 0.1 6.1 (0.0) 1.6 3.2 2.4
Imports 1.9 (0.6) (2.3) Ll 2.4 1.8 3.1 6.6 (5.2) 1.1 1.4 2.9
Source: Cabinet Office, Government of Japan
Private consumption was negatively impacted by the consumption tax rate increase in April 2014. The negative impact weakened after the six months ended September 31, 2014, and private nonresidential investment showed signs of recovery beginning in the third quarter of 2014. Exports showed consistent growth, reflecting increased global IT-related demand from the United States and newly industrialized economies and the depreciation of the Japanese yen. Housing investments continued to decline through the nine months ended December 31, 2014, until they began to stabilize in 2015. Public investment had been positive since 2013 except for the first quarter in 2014, but turned negative in the quarter ended March 31, 2015.
The following table sets forth the growth rates of Japan's nationwide consumer price indices on a year-on-year basis for the periods indicated:
Calendar Year (Unit: %)
2014 2015 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May
Consumer Price Index ... 3.4 3.7 3.6 3.4 3.3 3.2 2.9 2.4 2.4 2.4 2.2 2.3 0.6 0.5 Source. Ministry of Internal Affairs and Communications of Japan
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The following table sets forth Japan's nationwide unemployment rates for the periods indicated:
Calendar Year (Unit: %)
2014 20Ti Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Fel». Mar. Apr. May
Unemployment Rate .. 3.6 3.6 3.7 3.7 3.5 3.6 3.5 3.5 3.4 3.6 3.5 3.4 3.3 • 3.3
Source: Ministry of Internal Affairs and Communications of Japan
The Bank of Japan has sought to keep short-term interest rates low by maintaining its "quantitative and qualitative monetary easing" policy in recent periods. Long-term interest rates remained under downward pressure in recent periods with some fluctuations during the twelve months ended March 31, 2015 due to factors such as the economic conditions in the United States, Eurozone countries and China, including interest rate fluctuations, geopolitical issues in Ukraine and the Middle East, the debt crisis in Greece, and the slowdown of Japan's economic growth.
The following chart shows the interest rate trends in Japan since April 2013: %
1.0 0.9
^^-•Newly Issued Japanese Government Bonds Yield (10 years) (End of Month)
^—Uncollateralized Overnight Call Rates (End of Month)
Source: Bank of Japan
The closing price of the Nikkei Stock Average, which is the average of 225 blue chip stocks listed on the Tokyo Stock Exchange, was on an upward trend during the twelve months ended March 31, 2015. In the six months ended September 30, 2014, the Nikkei Stock Average fluctuated between approximately ¥14,000 and ¥15,500 from April 2014 to August 2014 and increased to an intra-day high of ¥16,374.14 on September 25, 2014. The upward trend has since continued, particularly in response to the Bank of Japan's expansion ofthe "quantitative and qualitative monetary easing" policy in October 2014 and the depreciation of the Japanese yen against the U.S. dollar, reaching approximately ¥20,000 by April 2015, the highest since the 2008 financial crisis. The Tokyo Stock Price Index, generally referred to as TOPIX, a composite index of all stocks listed on the First Section of the Tokyo Stock Exchange, has followed similar trends since April 2014.
74
The following chart shows the daily closing price ofthe Nikkei Stock Average since April 2013:
Yen 22,000 21.000 20.000 19,000 18,000 17,000 16,000 15.000 14,000 13,000 12,000 11,000 10,000
C O V> O •?> O V> •!> -f~ K> ¦> S» ^ ^ N." •£> ¦}> •!? * * ¦!?
^¦¦¦Nikkei Stock Average
The Japanese yen fluctuated around ¥102 to the U.S: dollar fronr April 2014 to mid-August 2014. In September 2014, the Japanese yen declined to approximately¥H0 against U.S: dollar with a growing market expectation for further monetary easing by the Bank of Japan. After the announcement of the expansion of monetary easing in October 2014, the Japanese yen-depreciated rapidly to around ¥120 to the U.S. dollar in early December 2014. Since April 2015, the Japanese yen has fluctuated between approximately ¥120 and ¥125 to the U.S. dollar.
The following chart shows the foreign exchange rates expressed in Japanese yen per U.S. dollar since April 2013:
Yen per US Dollar
¦130 |
Yen/Dollar Spot Rate at 17:00 (Tokyo time)
Source: Bank of Japan
The Japanese yen was on an appreciating trend against the euro from April to October 2014. The exchange rate was around ¥135 to the euro in mid-October 2014, down from nearly ¥143 to the euro in April 2014. The Japanese yen depreciated against the euro as the Japanese yen was sold against other major currencies following the Bank of Japan's announcement of the additional anti-deflation measures in October 2014. By the end of December 2014, the exchange rate reached nearly ¥150 to the euro. Tlie trend reversed in January 2015 as concerns over the European economy and geopolitical events in Europe grew and the European Central Bank, or
75
' the ECB, announced its decision to'inttoduce quantitative monetary easing, with the exchange rate falling to below ¥130 to the euro in March 2015. Since April 2015, the Japanese yen has fluctuated between approximately ¥130 and ¥140 to the euro.
According to a land price survey conducted by the Japanese government, the average residential land price in Japan declined 0.4% between January 1, 2014 and January 1, 2015. The average commercial land price in Japan was unchanged during the same period. In the three major metropolitan areas of Tokyo, Osaka and Nagoya, the average residential land price increased 0.4% between January 1, 2014 and January 1, 2015, while the average commercial land price in those areas increased 1.8% during the same period. In the local regions of Japan, which consist of regions other than the three major metropolitan areas, the average residential land price declined 1.1% between January 1, 2014 and January 1, 2015, and the average commercial land price also declined 1.4% during the same period.
According to Teikoku Databank, a Japanese research institution, the number of companies that filed for legal bankruptcies in Japan from April 2014 to March 2015 was 9,044, a decrease of 10.5% from the previous fiscal year. The total debt size of companies that filed for legal bankruptcy in Japan in the twelve months ended March 31, 2015 was ¥1,887.0 billion, a decrease of 31.3% from the previous fiscal year. The decrease was mainly due to the positive effects ofthe Japanese government's economic stimulus measures. Higher exports also contributed to the decrease in the number of bankruptcies in the manufacturing and wholesale sectors.
International Financial Markets
International economies generally demonstrated signs of recovery in the fiscal year ended March 31, 2015, particularly in developed economies. The U.S. economy showed continued growth through the nine months ended December 31, 2014, reflecting increases in personal consumption and private domestic residential investment influenced by historic low policy interest rates, but began to show signs of a slowdown in the quarter ended March 31, 2015. The Eurozone economy has also shown a moderate recovery, and the rate of growth, which was declining in the six months ended September 30, 2014, stabilized in the second half of the fiscal year. However, there is significant uncertainty regarding the future of the Eurozone economy because of uncertainty over the Greek sovereign debt problem, including its impact on financial markets on a global basis. The Chinese economy maintained stable growth but at a low rate, reflecting the problem of excess production capacity faced by manufacturers. Emerging economies continued to lack momentum, as they were negatively affected by declining commodity prices.
U.S. Economy
The following tabic sets forth the growth rates of U.S. real gross domestic product, or GDP, and its components on a quarter-on-quarter basis for the periods indicated:
_2Q
Gross Domestic Product 1.6
Personal Consumption
Expenditures 1.3
Gross Private Domestic
Investment 5.8
Fixed Investment 4.4
Non-residential 4.4
Residential 4.3
Government Consumption Expenditures and Gross
Investment (0.4)
Exports 4.8
Imports 4.0
2013
2014
2012
2.5 0.1 2.7
3Q 4Q 1Q 2Q 3Q 4Q IQ 2Q 3Q 4Q
1.9 1.9 3.6
2.5 3.2
1.8
6.9 4.9 1.6 19.0
4.4
3.7 4.5 4.7 3.8
4.5 3.5 (2.1) 4.6 5.0 2.2
19.1 9.5 9.7
1.6 3.1 0.8 14.1
(5.3) 6.6 3.6
20.4
7.6 2.7 1.5 7.8
16.8 6.6 5.5
11.2
7.2 7.7 8.9 3.2
(6.9) 0.2 1.6
(5.3)
2.0 3.7 1.2
2.7 2.1
(3.9) (0.8)
0.2 6.3
0.2 5.1
4.4 4.5
(3.8) 10.0
(0.8) (9.2)
1.7 I I.I
3.8 6.3 10.4 (8-5)
(6.0) 1.5
(0.6) (3.5) (0.3) 8.5 0.6 1.3 2.2 11.3 (0.9) 10.4
(Unit: %)
2015 IQ
(0.2)
2.1
2.4 (0.3) (2.0)
6.5
(0.6) (5.9) 7.1
Source U.S. Depanmcni ol Commerce Burcau'of Economic Analysis
76
The U.S. real GDP declined by 6.2% in the first quarter of 2015, falling for the first time since April 2014. Although personal consumption expenditures maintained positive growth, gross private non-residential investment and exports marked negative growth reflecting the strong U.S. dollar and a sharp decline in oil prices.
The Consumer Price Index for All Urban Consumers, or CPI-U, declined 0.1% before seasonal adjustment over the 12 months ended March 31, 2015. Month on month seasonally adjusted CPI-U was generally positive, but was negative 0.3% in November and December 2014 and negative 0.7% in January 2015, reflecting declining oil prices.
Housing prices showed a 5.2% improvement during the fiscal year ended March 31, 2015. As of March 2015, the Federal Housing Finance Agency's U.S. house price index recorded its fifteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index. This also marked the thirteenth consecutive quarter where the purchase-only house price index showed an increase compared lo the same quarter of tlie previous year.
Interest rates on U.S. Treasury bonds generally decreased during tlie twelve months ended March 3.1, 2015, despite the tapering ofthe monetary easing policy. The yield on 10-year U.S. Treasury bonds decreased to below 1.7% in January 2015 from 2.7% on March 31, 2014, influenced in part by.lower commodity prices and heightened global geopolitical concerns. The yield began rising again in February 2015, and has since fluctuated
between approximately! .8% and 2.4% in light of a heightened, market expectation forthe.FRB.'.s .decision.to
raise policy interest rates.
Stock prices in the United States were on a generally improving trend during the fiscal year ended March 31, 2015, with the Dow Jones Industrial Average rising from around $16,500 in April 2014 to over $18,000 in March 2015. During the same period, the NASDAQ composite index was also on an upward trend, rising from around 4,000 to approximately 5,000. Subsequently, stock prices reached.historical high levels as the U.S. economy showed signs of gradual growth, reflecting improved economic conditions supported by increased private consumption and lower unemployment rates.
The following table sets forth U.S. unemployment rates on a month-on-month basis for the periods indicated:
Calendar Year (Unit: %)
2014 2015 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. . Apr. May Jun.
Unemployment
Rate 6.2 6.3 6.1 6.2 6.1 5.9 5.7 5.8 5.6 5.7 5.5 5.5 5.4 5.5 5.3
Source: United States Department of Labor, Bureau of Labor Statistics, BLS Information
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Eurozone Economy
The following table sets forth the growth rates of Eurozone real gross domestic product and its main expenditure components on a quartcr-on-quarter basis for the periods indicated:
Calendar Year (Unit: %)
2012 2013 2014 2015
2Q 3Q 4Q IQ 2Q 3Q 4Q IQ 2Q 3Q 4Q IQ
Gross Domestic Product (0.3) (0.1) (0.3) (0.4) 0.4 0.2 0.3 0.2 0.1 0.2 0.4 0 4
Private Final Consumption ... . (0.4) (0.1) (0.5) (0.3) 0.2 0.2 0.0 0.3 0.3 0.5 0.4 0.5
Gross Fixed Capital
Formation (1.1) (1.0) (0.4) (2.2) 0.8 0.7 0.5 0.5 (0.5) 0.1 0.4 0.8
Government Final
Consumption (0.1) (0.1) 0.0 0.1 0.1 0.2 0.1 0.2 0.2 0.2 0.1 0.6
Exports 0.8 0.8 (0.8) 0.4 1.6 0.5 0.8 0.5 1.3 1.4 0.8 0.6
Imports (0.3) 0.2 (0.7) 0.0 1.4 1.6 0.2 0.7 1.3 1.7 0.8 1.2
Source: European Central Bank —Eurosyslem
The Eurozone's economic growth remained weak, during the twelve months ended March 31, 2015, with low GDP growth rates. Although exports showed stronger growth reflecting the depreciation of the euro against other major currencies, there was limited growth in the domestic sector. In addition, there is significant uncertainty over the Greek sovereign debt problem. Financial markets remain closely attuned to the risks relating to the problem.
In January 2015, the ECB announced a decision to launch an expanded asset purchase program to purchase €60 billion in assets monthly, including government and private sector bonds, and to be carried out until the end of September 2016. The ECB is expected to provide more than €1.0 trillion for quantitative easing aimed at revitalizing the Eurozone economy and countering the risk of deflation.
Eurozone long-term interest rates, including German Bunds and French Obligations Assimilables du Tre'sor, or OATs, were generally on decreasing trends during the twelve months ended March 31, 2015. The yield on 10-year German Bunds decreased significantly, dropping 139 basis points from 1.57% on March 31, 2014 to 0.18% on March 31, 2015, reflecting a market expectation of the ECB's decision to introduce quantitative easing. Since April 2015, the yield on 10-year German Bunds has rebounded and fluctuated between approximately 0.5% and 1.0%. The yield on 10-year French OATs has followed a similar trend.
The following table sets forth Eurozone unemployment rates on a month-on-month basis for the periods indicated:
Calendar Year (Unit: %)
2014 2015 Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May
Unemployment
Rate 11.7 11.7 11.6 11.6 11.5 11.5 11.5 11.5 11.4 11.3 11.2 11.2 11.1 11.1
Source: European Central Bank - Eurosyslem
The unemployment rate gradually recovered during the fiscal year ended March 31, 2015. The unemployment rate for May 2015 was 11.1%,.the lowest in the last twelve months.
Recent Developments
During the fiscal year ended March 31, 2015, we continued to pursue global growth opportunities, including opportunities to expand our business in Southeast Asia and the operations of MUB in the United States. Wc plan
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to continue to selectively review and consider growth opportunities that will enhance our global competitiveness. We will monitor regulatory developments and pursue prudent transactions that will create a strong capital structure to enable us to contribute to the real economy, both domestically and globally, as a provider of a stable source of funds and high quality financial services. In order to respond to the increasingly complex market and legal risks, we continue to endeavor to enhance our compliance and internal control frameworks.
Integration of Bank of Ayudhya and BTMU Bangkok Branch
In January 2015, BTMU integrated its Bangkok Branch with Krungsri through a contribution in kind of the BTMU Bangkok Branch business to Krungsri. In connection with this transaction, Krungsri issued 1,281,618,026 common shares to BTMU, which increased BTMU's ownership interest in Krungsri to 76.88%. Previously, in December 2013, BTMU acquired a 72.01% ownership interest in Krungsri. The integration was completed pursuant to a Conditional Branch Purchase Agreement that BTMU and Krungsri entered into in September 2013 to comply with the Thai regulatory requirement generally referred to as the "one presence" policy, which limits financial conglomerates to a single licensed deposit taking entity in Thailand.
Integration of BTMU's Operations in the Americas with UNBC's Operations
Effective July 1, 2014, we integrated BTMU's operations in the Americas region with die operations of UnionBanCal Corporation, or UNBC, which is a wholly owned subsidiary of BTMU, and changed UNBC's corporate name to "MUFG Americas Holdings Corporation," or MUAH. Union Bank, N.A., which is MUAH's principal subsidiary and our primary operating subsidiary in the United States, was also renamed "MUFG Union Bank, N.A.," or MUB, effective the same day. MUAH currently oversees BTMU's operations in the Americas region as well as the operations of MUB.
Implementation of Share Repurchase Programs
During May and June 2015, we repurchased 111,151,800 shares of our common stock for ¥99,999,972,728 under a share repurchase program that was adopted in May 201'5 and completed in June 2015. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 160,000,000 shares of our common stock and an aggregate of ¥100.0 billion between May 18, 2015 and July 31, 2015.
In addition, during November and December 2014, we repurchasedT48,595,500 shares of our common stock for ¥99,999,965,771 under a share repurchase program that was adopted in November 2014 and completed in December 2014. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 180,000,000 shares of our common stock and an aggregate of ¥100.0 billion between November 17, 2014 and March 31, 2015.
The purposes of these programs were to enhance shareholder value, improve our capital efficiency and allow the implementation of flexible capital policies in response to changes in the business environment. Based on the Japanese GAAP information used to calculate our capital ratios as of March 31, 2015, the 2014 program resulted in a decline in our capital ratios by approximately one tenth of a percentage point, and we estimate that the 2015 program would result in a decline in our capital ratios by approximately one tenth of a percentage point.
Redemption of Preferred Securities Issued by Special Purpose Company
In January 2015, we redeemed a total of ¥130.0 billion of "Series C" Japanese yen-denominated non-cumulative preferred securities issued by an overseas special purpose company in the Cayman Islands called MUFG Capital Finance 9 Limited. Under the transitional measures for Basel III, preferred securities that were previously reflected as part of Tier I capital under Basel II can be counted towards additional Tier 1 capital up to
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a prescribed amount. However, because the aggregate amount of such preferred securities outstanding after the redemption of Series C preferred securities exceeded the prescribed threshold amount, the redemption of Series C preferred securities did not affect our capital ratio under Basel III.
Recent Regulatory Developments in the United States
In November 2014, BTMU entered into a consent agreement wilh DFS to resolve issues relating to instructions given to PwC, and the disclosures made to DFS in connection with BTMU's 2007 and 2008 voluntary investigation of BTMU's U.S. dollar clearing activity toward countries under U.S. economic sanctions. BTMU had lured PwC to conduct a historical transaction review report in connection wilh lhat investigation, and voluntarily submitted the report to DFS's predecessor entity in 2008. Under the terms of the agreement with DFS, BTMU made a payment of $315 million to DFS, and agreed to take actions on persons involved in the matter at that time, relocate its U.S. BSA/AML and OFAC sanctions compliance programs to New York, and extend, if regarded as necessary by DFS, the period during which an independent consultant is responsible for assessing BTMU's internal controls regarding compliance with applicable laws and regulations related to U.S. economic sanctions. In June 2013, BTMU reached an agreement with DFS regarding inappropriate operational processing of U.S. dollar clearing transactions with countries subject to OFAC sanctions during the period of 2002 to 2007. Under the terms of the June 2013 agreement, BTMU made a payment of $250 million to DFS and retained an independent consultant to conduct a compliance review ofthe relevant controls and related matters in BTMU's current operations. In December 2012, BTMU agreed to make a payment of approximately $8.6 million to OFAC to settle potential civil liability for apparent violations of certain U.S. sanctions regulations from 2006 to 2007. BTMU continues to cooperate closely with all relevant regulators and is undertaking necessary actions.
For a detailed description of these and other recent regulatory and legal developments, see "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation."
Acquisition of Outstanding Classes of Preferred Stock
In August 2014, we acquired all of the 1,000 outstanding shares of Class 11 Preferred Stock in exchange for 1,245 shares of our common stock and cancelled all of the acquired shares. In April 2014, we acquired all ofthe 156,000,000 outstanding shares of First Series of Class 5 Preferred Stock for ¥390.0 billion and cancelled all of the acquired shares. The cancellation of the acquired shares of Class 5 and Class 11 Preferred Stock resulted in a reduction in our capital surplus of ¥390,001 million. As a result, we currently have no outstanding shares of any class of preferred stock.
Exposures lo Selected European Countries
Several European countries, including Italy, Spain, Portugal, Ireland and Greece, have been experiencing difficult economic and fiscal situations to varying degrees of severity. We are closely monitoring our exposures in, and to, these countries.
The following table sets forth information about the aggregate exposure to selected European countries of BTMU, MUTB and MUSHD, which were our subsidiaries holding the exposure, as of March 31, 2015. The information in the table is categorized by counterparty, consisting of sovereign, non-sovereign financial institutions and non-sovereign non-financial institutions, and by type of financial instrument, which include loans, securities, derivatives and credit default swap, or CDS, protection (sold and bought). The securities exposure includes available-for-sale, held-to-maturity and trading securities. The information included in the table below is based on information compiled for internal risk management purposes only, and not for financial accounting purposes. The exposures are determined based on the country in which the borrower's head office is
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located. However, in the case of a subsidiary located in a country different from that in which its parent company is located, the country exposure is determined based on the country in which the subsidiary is located.
March 31, 2015
Gross
Loans CDS exposure CDS
(funded & protection (funded & protection Net
unfunded) Securities1" Derivatives12' sold'3' unfunded) bought'-1' exposure'4'
(in billiions)
Italy $4.7 $0.5 $0.8 $0.0 $6.0 $0.3 $5.7
Sovereign — 0.1 — — 0.1 — 0.1
Financial Institutions ... 0.1 0.1 0.0 0.0 0.2 0.0 0.2
Others 4.6 0.3 0.8 0.0 5.7 0.3 5.4
Spain 2.8 0.3 0.1 0.0 3.2 0.1 3.1
Sovereign — — — — — — —
Financial Institutions ... 0.0 0.1 0.0 0.0 0.1 0.0 0.1
Others 2.8 .0.2 0.1 0.0 3.1 0.1 3.0
Portugal 0.3 0.0 0.0 0.0 0.3 0.1 0.2
Sovereign — — — ' — — — —
Financial Institutions ... — 0.0 — — 0.0 — 0.0
- Others 0:3-—0.00.00:30:10.2
Ireland 0.2 0.1 0.0 — 0.3 — 0.3
Sovereign — — — — — — —
Financial Institutions ... — 0.0 0.0 — 0.0 — 0.0
Others 0.2 0.1 0.0 — 0.3 — 0.3
Greece — — — — — — —
Sovereign — — — — — — —
Financial Institutions ... — — — — — — —
Others — — — — — — —
Total $8.0 $0.9 $0.9 $0.0 $9.8 $0.5 $9.3
Sovereign — 0.1 — — 0.1 — 0.1
Financial Institutions ... 0.1 0.2 0.0 0.0 0.3 0.0 0.3
Others 7.9 0.6 0.9 0.0 9.4 0.5 8.9
Notes:
Securities include held-to-maturity securities, available-for-sale securities, and trading securities. Held-to-maturity securities are shown at amortized cost, and available-for-sale secunties and trading securities are shown at fair value.
Derivatives amounts represent current exposures, taking into consideration legally enforceable master netting agreements.
CDS protection amounts represent notional amounts.
Net exposure represents gross exposure (funded & unfunded), net of CDS protection bought.
To the extent financial instruments are originally denominated in currencies olher than U.S. dollars, the exposure amounts have been translated into U.S. dollars at an internal exchange rate used for our internal risk management purposes as of March 31, 2015.
Based on information collected for internal risk management purposes as of March 31, 2015, the consolidated exposure of BTMU, MUTB and MUSHD listed above to Italy, Spain, Portugal, Ireland and Greece represented less than 1% of our total assets.
As of March 31, 2015, other than BTMU, MUFG group companies had limited exposures to those European countries, except such other group companies' exposures to sovereign bonds issued by those countries as discussed below. As of the same date, BTMU and MUSHD held no sovereign bonds issued by those European countries.
As of March 31, 2015, on a consolidated basis, we had a total balance of $0.1 billion of Italian sovereign bonds, which were held by MUTB. We had no Spanish, Portuguese, Irish or Greek government bonds as of March 31, 2015.
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As of March 31, 2015, excluding sovereign bonds, we had net exposure totalling $9.2 billion relating to the European countries identified in the table above. These exposures mainly consisted of commercial loan exposures to corporations and structured finance transactions. Our exposures to Italy and Spain mainly related to the infrastructure sector, such as electricity, gas and telecommunications. Our loan-related exposures to financial institutions in those countries were limited and not material.
In addition to these exposures, we also have indirect exposures. Examples of indirect exposures include country risk exposures related to the collateral received on secured financing transactions. These indirect exposures are managed in the normal course of business through our credit, market and operational risk management framework.
Critical Accounting Estimates
Our consolidated financial statements included elsewhere in this Annual Report are prepared in accordance with U.S. GAAP. Many of the accounting policies require management to make difficult, complex or subjective judgments regarding the valuation of assets and liabilities. The accounting policies are fundamental to understanding our operating and financial review and prospects. The notes to our consolidated financial statements included elsewhere in this Annual Report provide a summary of our significant accounting policies. The following is a summary of the critical accounting estimates:
Allowance for Credit Losses
The allowance for credit losses represents management's best estimate of probable losses in our loan portfolio. The evaluation process, including credit-ratings and self-assessments, involves a number of estimates and judgments. The allowance is based on two principles of accounting guidance: (1) the guidance on contingencies requires that losses be accrued when they are probable of occurring and can be estimated, and (2) the guidance on accounting by creditors for impairment of a loan requires that losses be accrued based on the difference between the loan balance, on the one hand, and the present value of expected future cash flows discounted at the loan's original effective interest rate, the fair value of collateral or the loan's observable market value, on the other hand.
We divide our loan portfolio into the following segments—Commercial, Residential, Card, MUAH and Krungsri based on the segments used to determine the allowance for credit losses. We further divide tlie Commercial segment into classes based on initial measurement attributes, risk characteristics, and our approach to monitoring and assessing credit risk. We determine the appropriate level ofthe allowance for credit losses for each of our loan portfolios by evaluating various factors and assumptions, such as the borrower's credit rating, collateral value, historical loss experience, and probability of insolvency based on the number of actual delinquencies as well as existing economic conditions. We update these factors and assumptions on a regular basis and upon the occurrence of unexpected changes in the economic environment.
For the Commercial, MUAH and Krungsri segments, our allowance for credit losses primarily consists of allocated allowances. The allocated allowance comprises (1) an allowance for loans individually evaluated for impairment, (2) an allowance for large groups of smaller-balance homogeneous loans, and (3) a formula allowance. The allocated allowance within the Commercial segment also includes an allowance for country risk exposure. The allowance for country risk exposure within the Commercial segment covers transfer risk which is not specifically covered by other types of allowance. Both the allowance for country risk exposure and the formula allowance are provided for performing loans that are not subject to either the allowance for loans individually evaluated for impairment or the allowance for large groups of smaller-balance homogeneous loans.
The allowance for credit losses within the MUAH segment also includes an unallocated allowance which captures losses that are attributable to economic events in various industry or geographic sectors whose impact on our loan portfolio in this segment have occurred but have yet to be recognized in the allocated allowance.
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For the Residential and Card segments, the loans are smaller-balance homogeneous loans that are pooled by the risk ratings based on the number of delinquencies. We principally determine the allowance for credit losses based on the probability of insolvency, the number of actual delinquencies and historical loss experience.
For all portfolio segments, key elements relating to the policies and discipline used in determining the allowance for credit losses are our credit classification and the related borrower categorization process. Each of these components is determined based on estimates subject to change when actual events occur. The categorization is based on conditions that may affect the ability of borrowers to service their debt, taking into consideration current financial information, historical payment experience, credit documentation, public information, analyses of relevant industry segments and current trends. In determining the appropriate level of allowance, we evaluate the probable loss by category of loan based on its type and characteristics.
In addition to the allowance for credit losses on our loan portfolio, we maintain an allowance for credit losses on off-balance sheet credit instruments, including commitments to extend credit, a variety of guarantees and standby letters of credit and other financial instruments. This allowance is included in other liabilities.
Determining the adequacy ofthe allowance for credit losses requires the exercise of considerable judgment and the use of estimates, such as those discussed above. Our actual losses could be more or less than the estimates. To the extent that actual losses differ from management's estimates, additional provisions for credit losses may be required that Would adversely "impact ''oWoperatihg'reTuIls'and financial condition in" future periods. For further information regarding our methodologies used in establishing the allowance for credit losses by portfolio segments and allowance for credit losses policies, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report and "—B. Liquidity and Capital Resources-—Financial Condition—Loan Portfolio."
For more information on our credit and borrower ratings, sec "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management."
Impairment of Investment Securities
U.S. GAAP requires the recognition in earnings of an impairment loss on investment securities for a decline in fair value that is other than temporary. Determination of whether a decline is other than temporary often involves estimating the outcome of future events. Management judgment is required in determining whether factors exist that indicate that an impairment loss has been incurred at the balance sheet date. These judgments are based on subjective as well as objective factors. Wc conduct'a review semi-annually to identify and evaluate investment securities that have indications of possible impairment. The assessment of other-than-temporary impairment requires judgment and therefore can have an impact on the results of operations. Impairment is evaluated considering various factors, and their significance varies from case to case.
Debt and marketable equity securities. In determining whether a decline in fair value below cost is other than temporary for a particular equity security, we generally consider factors such as the ability and positive intent to hold the investments for a period of time sufficient to allow for any anticipated recovery in fair value. In addition, an other-than-temporary impairment is recognized in earnings for marketable equity securities when one of the following criteria is met:
• the fair value of investments is 20% or more below cost as of the end of the reporting period,
due to the financial condition and near-term prospects ofthe issuer, the issuer is categorized as "Likely to become Bankrupt," "Virtually Bankrupt" or "Bankrupt or de facto Bankrupt" status under the Japanese banking regulations,
the fair value ofthe investment has been below cost for six months or longer, or
the fair value of the securities is below cost and a decision has been made to sell the securities.
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For debt securities, an other-than-temporary impairment is recognized in earnings if we have an intent to sell a debt security or if it is more likely than not we will be required to sell the debt security before recovery of its amortized cost basis. When wc do not intend to sell a debt security and if it is more likely than not that we will not be required to sell the debt security before recovery of its amortized cost basis, the credit component of an other-than-temporary impairment of the debt security is recognized in earnings, but the noncredit component is recognized in accumulated other comprehensive income.
Certain securities held by BTMU, MUTB and certain other subsidiaries, which primarily consist of debt securities issued by the Japanese national government and generally considered to be.of minimal credit risk, are determined nol lo be impaired as the respective subsidiaries do not have an intention to sell the securities, or it is more likely than not that those subsidiaries will not be required to sell before recovery of their amortized cost basis.
The determination of other-than-temporary impairment for certain debt securities held by MUAH, which primarily consist of residential mortgage-backed securities and certain asset-backed securities, is made on the basis of a cash flow analysis and monitoring of performance of such securities, as well as whether MUAH intends to sell, or is more likely than not required to sell, the securities before recovery of their amortized cost basis.
Nonmarketable equity securities. Nonmarketable equity securities include unlisted preferred securities mainly issued by public companies as well as equity securities of companies that are not publicly traded or are thinly traded. The securities consist of cost-method investments, which are primarily carried at cost because their fair values are not readily determinable. For nonmarketable equity securities issued by public companies, such as preferred stock convertible to marketable common stock in the future, we estimate fair value using commonly accepted valuation models, such as option pricing models based on a number of factors, including the quoted market price of the underlying marketable common stock, volatility and dividend repayments as appropriate, to determine if the investment is impaired in each reporting period. If the fair value of the investment is less than the cost of the investment, we proceed to evaluate whether the impairment is other than temporary. When the decline is other than temporary, those nonmarketable equity securities issued by public companies are written down to fair value estimated by commonly accepted valuation models.
With respect to the other nonmarketable equity securities, we perform a test to determine whether any impairment indicator exists with respect to each cost-method investment in each reporting period. The primary method we use to identify impairment indicators is a comparison of our share in an investee's net assets to the carrying amount of our investment in the investee. We also consider whether significant adverse changes in the regulatory, economic or technological environment have occurred with respect to the investee. We periodically monitor the status of each investee including the credit ratings, which are generally updated once a year based on the annual financial statements of issuers. In addition, if an event that could impact the credit rating of an issuer occurs, we reassess the appropriateness of the credit rating assigned to the issuer in order to maintain an updated credit rating. If an impairment indicator exists, we estimate the fair value of the cost-method investment. If the fair value of the investment is less than the cost of the investment, we proceed to conduct the other-than-temporary impairment evaluation. When we determine that the decline is other than temporary, such remaining nonmarketable equity securities are written down to the estimated fair value, determined based on such factors as the ratio of our investment in the issuer to the issuer's net assets and the latest transaction price, if applicable.
Equity method investees. We determine whether any loss on investments is other than temporary, through consideration of various factors, such as the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the investees, and our intent and ability to retain the investment in the investees for a period of time sufficient to allow for any anticipated recovery in the fair value. We also evaluate additional factors, such as the condition and trend of the economic cycle, and trends in the general market.
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Our assessment of potential impairment involves risks and uncertainties depending on market conditions that arc global or regional in nature and the condition of specific issuers or industries, as well as management's subjective assessment of the estimated future performance of investments. If we later conclude that a decline is other than temporary, the impairment loss may significantly affect our operating results and financial condition in future periods.
For further information on the amount of the impairment losses and the aggregate amount of unrealized gross losses on investment securities, see Note 3 to our consolidated financial statements included elsewhere in this Annual Report.
Allowance for Repayment of Excess Interest
We maintain an allowance for repayment of excess interest based on our estimate ofthe potential liability exposure. Our estimate of the potential liability exposure represents the estimated amount of claims for repayment of excess interest to be received in the future. We expect that any such claim will be made on the basis of a 2006 ruling of" the Japanese Supreme Court, or the Ruling. Under the Ruling, lenders are generally required to reimburse borrowers for interest payments made in excess of the limits stipulated by the Interest Rale Restriction Act upon receiving claims for reimbursement, despite the then-effective provisions of the Law Concerning Lending Business that exempted a lender from this requirement if the lender provided required " notices to the borrower and met"other"specified requirements, arid the borrower voluntarily made the interest payment.
While we have not entered into any consumer loan agreement after April 2007 that imposes an interest rate exceeding the limits stipulated by the Interest Rate Restriction Act, we need to estimate the number of possible claims for reimbursement of excess interest payments. To determine the allowance for repayment of excess interest, we analyze the historical number of repayment claims wc have received, tlie amount of such claims, borrowers' profiles, the actual amount of reimbursements we have made, management's future forecasts, and other events that are expected to possibly affect the repayment claim trends in order to arrive at our best estimate of the potential liability. We believe that the provision for repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse effect on our financial position and results of operations. The allowance is recorded as a liability in Other liabilities.
For further information, see Note 26 to our consolidated financial statements included elsewhere in this Annual Report and "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Because of our loans to consumers and our shareholdings in companies engaged in consumer lending, changes in the business or regulatory environment for consumer finance companies in Japan may further adversely affect our financial results."
Income Taxes
Valuation of deferred tax assets. A valuation allowance for defened tax assets is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefit of existing deductible temporary differences or carryforwards ultimately depends on the existence of sufficient taxable income.
In determining a valuation allowance, we perform a review of future reversals of existing taxable temporary differences, and future taxable income exclusive of reversing temporary differences. Future taxable income is developed from forecasted operating results, based on recent historical trends and approved business plans, the eligible carryforward periods and other relevant factors. For certain subsidiaries where strong negative evidence
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exists, such as cumulative losses and the expiration of unused operating loss carryforwards in recent years, a valuation allowance is recognized against the deferred tax assets to the extent that it is more likely than not that they will not be realized.
Forecasted operating results, which serve as the basis of our estimation of future taxable income, have a significant effect on the amount ofthe valuation allowance. In developing forecasted operating results, we assume that our operating performance is stable for certain entities where strong positive evidence exists, including core earnings based on past performance over a certain period of time. The actual results may be adversely affected by unexpected or sudden changes in interest rates as well as an increase in credit-related expenses due to the deterioration of economic conditions in Japan and material declines in the Japanese stock market to the extent that such impacts exceed our original forecast. In addition, near-term taxable income also influences the expiration of unused operating loss carryforwards since the Japanese corporate tax law permits operating losses to be deducted for a predetermined period generally no longer than seven years for losses generated prior to April 1, 2008 and nine years for losses generated in fiscal years ending after April 1, 2008. For further information on the amount of operating loss carryforwards and the expiration dates, see Note 7 to our consolidated financial statements included elsewhere in this Annual Report.
Because the establishment of the valuation allowance is an inherently uncertain process involving estimates as discussed above, the currently established valuation allowance may not be sufficient. If the estimated valuation allowance is not sufficient, we will incur additional deferred tax expenses, which could materially affect our operating results and financial condition in future periods.
Recognition and Measurement of Uncertain Tax Positions. We provide reserves for unrecognized tax benefits as required under the guidance on accounting for uncertainty in income taxes. In applying the guidance, we consider the relative risks and merits of positions taken in tax returns filed and to be filed, considering statutory, judicial, and regulatory guidance applicable to those positions. The guidance requires us to make assumptions and judgments about potential outcomes that lie outside of management's control. To the extent that the tax authorities disagree with our conclusions, and depending on the final resolution of those disagreements, our effective tax rate may be materially affected in the period of final settlement with tax authorities.
Accounting for Goodwill and Intangible Assets
Accounting for Goodwill. U.S. GAAP requires us to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired, using a two-step process that begins with an estimation of the fair value of a reporting unit of our business, which is to be compared with the carrying amount of the unit, to identify potential impairment of goodwill. A reporting unit is an operating segment or component of an operating segment that constitutes a business for which discrete financial information is available and is regularly reviewed by management. The fair value of a reporting unit is defined as the amount at which the unit as a whole could be bought or sold in a current transaction between willing parties. For a reporting unit for which an observable quoted price is not available, the fair value is determined using an income approach. In the income approach, the present value of expected future cash flows is calculated by taking the net present value based on each reporting unit's internal forecasts. A control premium factor is also considered in relation to market capitalization.
If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss recorded in our consolidated statements of income. This test requires comparison of the implied fair value of the unit's goodwill with the carrying amount of that goodwill. The estimate of the implied fair value of the reporting unit's goodwill requires us to allocate the fair value of a reporting unit to all of the assets and liabilities of that reporting unit, including unrecognized intangible assets, if any, since the-implied fair value is determined as the excess of the fair value of a reporting unit over the net amounts assigned to its assets and liabilities in the allocation. Accordingly, the second step of the impairment test also requires an estimate of the fair value of individual assels and liabilities, including any unrecognized intangible assets that belong to that unit. A change in the estimation could have an impact on
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impairment recognition since it is driven by hypothetical assumptions, such as customer behavior and interest rate forecasts. The estimation is based on information available to management al the time the estimation is made.
Accounting for Intangible Assets. Intangible assets are amortized over their estimated useful lives unless they have indefinite useful lives. Amortization for intangible assets is computed in a manner that best reflects the economic benefits of the intangible assets. Intangible assets having indefinite useful lives are subject to annual impairment tests. An impairment exists if the carrying value of an indefinite lived asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount exceeds the fair value of the intangible asset. Each reporting period, wc evaluate the remaining useful life of an intangible asset to determine whether events and circumstances warrant a revision to the remaining useful life. When the useful life of intangible assets that were previously not subject to amortization is determined to no longer be indefinite, for example, when unanticipated competition enters the market, the intangible asset becomes subject to amortization over the remaining period that it is expected to contribute to positive cash flows.
Accrued Severance Indemnities and Pension Liabilities
We have defined retirement benefit plans, including lump-sum severance indemnities and pension plans, which cover substantially all of our employees. Severance indemnities and pension costs are calculated based . ...upon a numbcr.of actuarial assumptions, including discount rates. expected long-term rates of return-on our-plan assets and rates of increase in future compensation levels. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods, and affect our recognized net periodic pension costs and accrued severance indemnities and pension obligations in future periods. Differences in actual experience or changes in assumptions may affect our financial condition and operating results in future periods.
The discount rates for the domestic plans are set to reflect the interest rates of high-quality fixed-rate instruments with maturities that correspond to the timing of future benefit payments.
In developing our assumptions for expected long-term rates of return, we refer to tlie historical average returns earned by the plan assets and the rates of return expected to be available for reinvestment of existing plan assets, which reflect recent changes in trends and economic conditions, including market prices. We also evaluate input from our actuaries, as well as their reviey/s of asset class return expectations.
Valuation of Financial Instruments
We measure certain financial assets and liabilities at fair value. The majority of such assets and liabilities are measured at fair value on a recurring basis, including trading securities, trading derivatives and investment securities. In addition, certain other assets and liabilities are measured at fair value on a non-recurring basis, including held for sale loans which are carried at the lower of cost or fair value, collateral dependent loans and nonmarketable equity securities subject to impairment.
We have elected the fair value option for certain foreign securities classified as available-for-sale securities, whose unrealized gains and losses are reported in income.
The guidance on the measurement of fair value defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We have an established'and documented process for determining fair value in accordance with the guidance. To determine fair value, we use quoted prices which include those provided from pricing vendors, where available. We generally obtain one price or quote per instrument and do not adjust it to determine fair value ofthe instrument. Certain asset-backed securities are valued based on non-binding quotes provided by independent broker-dealers where no or few observable inputs are available to measure fair value. We do not adjust such broker-dealer quotes to the extent that there is no evidence that would indicate that the quotes are not
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indicative ofthe fair values ofthe securities. We perform internal price verification procedures to ensure that the quotes provided from the independent broker-dealers are reasonable. Such verification procedures include analytical review of periodic price changes, comparison analysis between periodic price changes and changes of indices such as a credit default swap index, or inquiries regarding the underlying inputs and assumptions used by the broker-dealers such as probability of default, prepayment rate and discount margin. These verification procedures are periodically performed by independent risk management departments. For collateralized loan obligations, or CLOs, backed by general corporate loans, the fair value is determined by weighting the internal model valuation and the non-binding broker-dealer quotes. If quoted prices are not available to determine fair value of derivatives, the fair value is based upon valuation techniques that use, where possible, current market-based or independently sourced parameters, such as interest rates, yield curves, foreign exchange rales, volatilities and credit curves. The fair values of trading liabilities are determined by discounting future cash flows at a rate which incorporates our own creditworthiness. In addition, valuation adjustments may be made to ensure that the financial instruments are recorded at fair value. These adjustments include, but are not limited to, amounts that reflect counterparty credit quality, liquidity risk, and model risk. Our financial models are validated and periodically reviewed by risk management departments independent of divisions that created the models.
For a further discussion of the valuation techniques applied to the material assets or liabilities, see Note 31 to our consolidated financial statements included elsewhere in this Annual Report.
Accounting Changes and Recently Issued Accounting Pronouncements
See "Accounting Changes" and "Recently Issued Accounting Pronouncements" in Note 1 to our consolidated financial statements included elsewhere in this Annual Report.
A. Operating Results Results of Operations
The following table sets forth a summary of our results of operations for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
(in billions)
Interest income ¥2,427.5 ¥2,522.3 ¥2,894.6
Interest expense 556.4 561.0 663.1
Net interest income 1,871.1 1,961.3 2,231.5
Provision (credit) for credit losses 144.5 (106.4) 87.0
Non-interest income 2,068.0 1,821.0 2,845.1
Non-interest expense 2,378.7 2,468.3 2,726.9
Income before income tax expense 1,415.9 1,420.4 2,262.7
Income tax expense 296.0 337.9 666.1
Net income before attribution of noncontrolling interests ¥1,119.9 ¥1,082.5 ¥1,596.6
Net income attributable to noncontrolling interests 50.8 67.1 65.5
Net income attributable to Mitsubishi UFJ Financial Group ¥1,069.1 ¥1,015.4 ¥1,531.1
Major components of our net income for the fiscal years ended March 31, 2013, 2014 and 2015 arc discussed in further detail below.
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Net Interest Income
The following table is a summary of the interest rate spread for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 201J
Average Average Average Average Average Average
balance rate balance rate balance rate
(in billions, except percentages)
Interest-earning assets:
Domestic ¥134,759.6 0.95% ¥135,087.3 0.87% ¥146,830.0 0.79%
Foreign 59,064.7 1.95 77,089.0 1.75 90,417.7 1.92
Total ¥193,824.3 1.25% ¥212,176.3 1.19% ¥237,247.7 1.22%
Financed by:
Interest-bearing liabilities:
Domestic ¥135,974.9 0.21% ¥141,878.0 0.18% ¥151,998.8 0.16%
Foreign 37,424.6 0.73 47,535.3 0.64 58,102.5 0.73
Total 173,399.5 0.32 189,413.3 0.30 210,101.3 0.32
Non-interest-bearing liabilities 20,424.8 — 22,763.0 — 27,146.4 —
Total T.r. ......... . . . 7.; .".¥193,824:3" 0:29% "¥212,176.3 0.26% '¥237,247.7 0.28%
Interest rate spread 0.93% 0.89% 0.90%
Net interest income as a percentage of total
interest-earning assets 0.97% ¦ 0.92% 0.94%
Our net interest income for each of the fiscal years ended March 31, 2013, 2014 and 2015 was not materially affected by gains or losses resulting from interest rate and other derivative contracts. Wc use such derivative instruments to manage the risks affecting the values of our financial assets and liabilities. Although these contracts are generally entered into for risk management purposes, a majority of them do not meet the specific conditions to qualify for hedge accounting under U.S. GAAP and thus are accounted for as trading assets or liabilities. Any gains or losses resulting from such derivative instruments are recorded as part of Trading account profits—net. For a detailed discussion of our risk management activities, see "—A. Operating Results— Results of Operations—Non-Interest Income" and "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk."
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
Net interest income for the fiscal year ended March 31, 2015 was ¥ 2,231.5 billion, an increase of ¥270.2 billion from ¥1,961.3 billion for the fiscal year ended March 31, 2014. Both interest income and interest expense increased, with the increase in interest income exceeding the increase in interest expense, mainly reflecting higher interest rates on, and higher balance of, our foreign loans. The average interest rate spread (which is the average interest rate on interest-earning assets minus the average interest rate on interest-bearing liabilities) increased, reflecting improved interest rate spreads on foreign activities. The average balance of interest-earning assets increased, primarily reflecting larger volumes of interest-earning deposits in other banks and loans.
Interest income increased ¥372.3 billion to^2,89A-6.billion for the fiscal year ended March 31, 201.5 from ¥2,522.3 billion for the previous fiscal year. Ofthe ¥372.3 billion of increase in interest income, ¥317.5 billion was attributable to interest income from loans. In particular, loans booked at foreign branches and subsidiaries improved with the average loan balance for the fiscal year ended March 31, 2015 increasing ¥10,718.6 billion compared to the previous fiscal year. This reflected a higher lending volume and the depreciation of the Japanese yen against the U.S. dollar. The average interest rale on such loans for the fiscal year ended March 31, 2015 increased 0.28 percentage points compared to the previous fiscal year, reflecting the impact of the consolidation of KS. Interest income from the domestic loan business decreased due to downward pressure on interest rates.
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[merest income from deposits in other banks increased ¥17.2 billion mainly due to a higher balance of deposits in central banks including the Bank of Japan and the FRB. Interest income from investment securities increased ¥41.4 billion due to a higher balance of foreign currency-denominated investment securities as well as a higher average interest rate on domestic investment securities, which mainly reflected increased dividends on domestic equity securities. These increases were partially offset by a decrease of ¥7.4 billion in interest income from trading account assets due to a decrease in the average balance of foreign currency-denominated trading securities in the commercial banking subsidiaries.
Interest expense also increased ¥102.1 billion to ¥663.1 billion for the fiscal year ended March 3 1, 2015 from ¥561.0 billion for the previous fiscal year. Interest expense on interest-bearing foreign deposits increased ¥85.6 billion, reflecting a ¥6,907.4 billion increase in the balance of such deposits and a 0.13 percentage point increase in the average interest rate on such deposits. This was mainly due to the impact ofthe consolidation of KS. Interest expense on domestic interest-bearing deposits decreased ¥11.5 billion, reflecting downward pressure on interest rates in Japan. Interest expense on long-term debt increased ¥22.8 billion, reflecting higher balances of both domestic and foreign long-term borrowings, despite lower average interest rates on such borrowings as wc were able to refinance at lower interest rates.
The average interest rate spread increased 0.01 percentage points to 0.90% for the fiscal year ended March 31, 2015 from 0.89% for the previous fiscal year. For the fiscal year ended March 31, 2015, compared to the previous fiscal year, the average interest rate on assets increased 0.03 percentage points to 1.22% from 1.19%, while the average interest rate on liabilities increased 0.02 percentage points to 0.32% from 0.30%, which resulted in the overall increase in the average interest rate spread. The average interest rate spread on foreign activities increased 0.08 percentage points to 1.19% from 1.11%, while the average interest rate spread on domestic activities decreased 0.06 percentage points to 0.63% from 0.69%. The wider interest rate spread on foreign activities was mainly because interest rates on interest-earning assets such as loans increased at steeper rates than interest rates on interest-bearing liabilities such as deposits and long-term debt. Lower short-term and long-term interest rates and intensified competition resulted in the decline in interest rates on domestic assets and liabilities. As interest rates on domestic interest-bearing liabilities remained at near-zero levels in the past two fiscal years, the decreases in interest rates on domestic interest-earning assets exceeded the decreases in interest rates on domestic interest-bearing liabilities.
In Japan, the Bank of Japan sought to keep short-term interest rates low by maintaining its "quantitative and qualitative monetary easing" policy throughout die past two fiscal years. As a result, the average interest rate on domestic assets continued to decline, while the average interest rate on domestic liabilities reached and remained at historically low levels. If the Bank of Japan continues to maintain its current policy on its short-term policy interest rate as well as other monetary easing policies, our interest rate spread on domestic activities will likely continue to be under severe pressure. Monetary easing policies adopted in foreign markets in the Americas, Europe, Asia and other regions have placed downward pressure on short-term interest rates in recent periods. However, changes in monetary policies in the United States and geopolitical issues around the world have recently begun to add volatility in both long-term and short-term interest rates, affecting our interest spread. For further information on the Bank of Japan's monetary policy and recent interest rate fluctuations in Japan, see "—Business Environment—Economic Environment in Japan."
The average interest-earning assets for the fiscal year ended March 31, 2015 were ¥237,247.7 billion, an increase of ¥25,071.4 billion from ¥212,176.3 billion for the fiscal year ended March 31, 2014. The average domestic interest-earning assets increased ¥11,742.7 billion to ¥146,830.0 billion mainly due to increases in interest-earning deposits in other banks, particularly the Bank of Japan. This was partially offset by a decrease in the balance of Japanese government bonds held as available-for-sale securities as a result of sales of such bonds to reduce the risk of a sudden and drastic increase in short-term interest rates. The average foreign interest-earning assets increased ¥13,328.6 billion to ¥90,417.7 billion mainly due to an increase in foreign loans. The increase in foreign loans was mainly due to increased lending of MUB in the United States and the impact of the consolidation of KS as well as the depreciation of the Japanese yen against the U.S. dollar.
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The average interest-bearing liabilities for the Fiscal year ended March 31, 2015 were ¥210,101.3 billion, an increase of ¥20,688.0 billion from ¥189,413.3 billion for the fiscal year ended March 31, 2014. The average domestic interest-bearing liabilities increased ¥10,120.8 billion to ¥151,998.8 billion mainly due to increases in interest-bearing deposits, short-term market funding and long-term debt. The higher balance of deposits was mainly due to increases in ordinary deposits in the banking subsidiaries, partially offset by decreases in term deposits in our commercial banking subsidiaries and negotiable certificates of deposit in our trust banking subsidiaries. The increase in short-term market funding was mainly due to an increase in payables under securities lending transactions in our securities subsidiaries. The increase in long-term debt is mainly due to increased long-term borrowings in our banking subsidiaries as part of their asset and liability management in light of continued low interest rates and a larger balance of loans. The average foreign interest-bearing liabilities increased ¥10,567.2 billion to ¥58,102.5 billion mainly due to increases in deposits in KS, MUAH and foreign branches of our banking subsidiaries, as well as increases in other short-term borrowings and trading account liabilities as we began to switch funding sources from our group companies to third-party lenders in order to take advantage ofthe comparatively favorable market interest rate environment.
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 20J3
Net interest income for the fiscal year ended March 31, 2014 was ¥1,961.3 billion, an increase of ¥90.2 billion from ¥1,871.1 billion for the fiscal year ended March 31, 2013.
Interest income increased ¥94.8 billion to ¥2,522.3 billion for the fiscal year ended March 31, 2014 from ¥2,427.5 billion for the previous fiscal year. Of the ¥94.8 billion of increase in interest income, ¥85.9 billion was attributable to interest income from loans, including fees, especially from foreign branches and subsidiaries reflecting a higher volume of loans, while interest income from the domestic loan business decreased due to downward pressure on interest rates. Interest income from deposits in other banks increased ¥19.8 billion mainly due to a higher balance of deposits in central banks including the Bank of Japan and the FRB, and interest income from trading account assets increased ¥12.6 billion-due to a higher volume of foreign currency denominated bonds which were held by our banking subsidiaries and which were accounted for as trading securities. These increases were partially offset by a decrease of ¥28.5 billion in interest income from investment securities due to lower interest rates and a decrease in the balance of debt securities held as investment securities.
Interest expense also increased ¥4.6 billion to ¥561.0 billion for the fiscal year ended March 31, 2014 from ¥556.4 billion for the previous fiscal year. For the fiscal year ended March 31, 2014, compared to the previous fiscal year, interest expense on activities in Japan decreased ¥29.0 billion and interest expense on foreign activities increased ¥33.5 billion. The decrease in interest expense on domestic activities was mainly due to decreases in expenses on interest-bearing deposits and long-term debt, reflecting downward pressure on interest rates in Japan despite an increase in the balance of these liabilities. The increase in interest expense on foreign activities was mainly due to a higher volume of deposits in our banking subsidiaries, an increase in long-term debt, reflecting an increase in the balance of borrowings with longer maturities, and higher long-term interest rates, which were partially offset by a decrease in interest expense on payables under repurchase agreements and securities lending transactions mainly due to lower short-term interest rates, such as Euro Overnight Index Average, or EONIA, rates used for repurchase transactions.
The average interest rate spread (the average interest rate for interest-earning assets minus the average interest rate for interest-bearing Ii_ab_ilities)_decreased 0,04 percentagc.points to 0.89% for the fiscal year ended March 31, 2014 from 0.93% for the previous fiscal year. For the fiscal year ended March 31, 2014, compared to the previous fiscal year, the average interest rate on interest-earning assets decreased 0.06 percentage points to 1.19% from 1.25%, while the average interest rate on interest-bearing liabilities decreased 0.02 percentage points to 0.30% from 0.32%, which resulted in the overall decrease in the average interest rate spread. The average interest rate spread on domestic activities decreased 0.05 percentage points to 0.69% from 0.74%, and the average interest rate spread on foreign activities decreased 0.11 percentage points to 1.11% from 1.22%. The lower interest rates and intensified competitive environment caused the interest rates on both domestic and
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foreign activities in botli assels and liabilities to decline. As the interest rates on domestic interest-bearing liabilities remained at near-zero levels, the decreases in the interest rates on domestic interest-earning assets exceeded the decreases in the interest rates on domestic interest-bearing liabilities.
In Japan, the Bank of Japan sought to keep short-term interest rates low by maintaining its "quantitative and qualitative monetary easing" policy throughout the reporting period. As a result, the average interest rate on domestic interest-earning assets continued to decline, while the average interest rate on domestic interest-bearing liabilities reached and remained at historically low levels. If the Bank of Japan continues to maintain its current policy on its short-term policy interest rate as well as other monetary easing policies, our interest rate spread on domestic activities will likely continue to be under severe pressure. Moreover, monetary casing policies adopted in foreign markets in the Americas, Europe, Asia and other regions have negatively affected our interest rate spread on foreign activities in recent periods. In addition, our interest rate spread may be affected by changes in long-term interest rates, which, for example, have been fluctuating to an increasing degree in Japan in recent periods due to wider fluctuations in long-term Japanese government bond prices. For further information on the Bank of Japan's monetary policy and recent interest rate fluctuations in Japan, see "—Business Environment— Economic Environment in Japan."
Average interest-earning assets for the fiscal year ended March 31, 2014 were ¥212,176.3 billion, an increase of ¥18,352.0 billion from ¥193,824.3 billion for the fiscal year ended March 31, 2013. Average domestic interest-earning assets for the fiscal year ended March 31, 2014 were ¥135,087.3 billion, an increase of ¥327.7 billion from ¥134,759.6 billion for the previous fiscal year, mainly due to increases in interest-earning deposits in other banks, particularly the Bank of Japan, and loans mainly to the national government of Japan. Average foreign interest-earning assets for the fiscal year ended March 31, 2014 were ¥77,089.0 billion, an increase of ¥18,024.3 billion from ¥59,064.7 billion for the previous fiscal year, mainly due to increases in loans and trading account assets. The increase in foreign loans was mainly due to an increase in loans at the overseas branches of BTMU, especially the New York branch, and MUB through the acquisition of a local bank. The increase in foreign trading account assets was primarily due to an increase in the value of foreign debt securities translated into Japanese yen resulting from the depreciation of the Japanese yen against other major currencies as of March 31, 2014 compared to March 31, 2013.
Average interest-bearing liabilities for the fiscal year ended March 31, 2014 were ¥189,413.3 billion, an increase of ¥16,013.8 billion from ¥173,399.5 billion for the fiscal year ended March 31, 2013. Average domestic interest-bearing liabilities for the fiscal year ended March 31, 2014 were ¥141,878.0 billion, an increase of ¥5,903.1 billion from ¥135,974.9 billion for the previous fiscal year, mainly due to increases in deposits, and call money, funds purchased, and payables under repurchase agreements and securities lending transactions. The increase in deposits was mainly due to increases in the ordinary deposits in our commercial and trust banking subsidiaries, while the increase in call money, funds purchased and payables under repurchase agreements and securities lending transactions was mainly due to increases in payables under repurchase agreements in our commercial and trust banking subsidiaries, as well as increases in payables under securities lending transactions in our trust banking subsidiaries. Average foreign interest-bearing liabilities for the fiscal year ended March 31, 2014 were ¥47,535.3 billion, an increase of ¥10,110.7 billion from ¥37,424.6 billion for the previous fiscal year, . mainly due to increases in deposits in foreign branches of BTMU and MUB, as well as increases in call money, funds purchased, and payables under repurchase agreements and securities lending transactions reflecting higher payables under securities lending transactions in foreign branches and subsidiaries of our securities subsidiaries.
Provision (credit) for credit losses
Provision (credit) for credit losses is charged to operations to maintain the allowance for credit losses at a level deemed appropriate by management. For more information on our provision for credit losses and a description of the approach and methodology used to establish the allowance for credit losses, see —B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio—Allowance policy."
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Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
We recorded ¥ 87.0 billion of provision for credit losses for the fiscal year ended March 31, 2015, compared to credit for credit losses of ¥106.4 billion for the previous fiscal year. By segment, for the fiscal year ended March 31, 2015, ¥ 22.6 billion, ¥ 2.6 billion and ¥ 94.6 billion of provision for credit losses were recorded in the Commercial, Card and Krungsri segments, respectively, while ¥30.9 billion and ¥1.9 billion of credit for credit losses was recorded in the Residential and MUAH segments, respectively. For the previous fiscal year, ¥70.1 billion, ¥36,0 billion and ¥5.9 billion of credit for credit losses were recorded in the Commercial, Residential and MUAH segments, respectively, while ¥5.6 billion of provision for credit losses was recorded in the Card segment.
The provision recorded in the Commercial segment for the fiscal year ended March 31, 2015 mainly reflected significant deterioration in the operational and financial performance of a large borrower in the domestic electronics manufacturing industry. The provision recorded in the Krungsri segment primarily consisted of provisions of allowance for large groups of smaller-balance homogenous loans and formula allowance for loans that have been extended since the date of our acquisition of Krungsri, as well as provisions of allowance for loans individually evaluated for impairment particularly in the consumer and SME portfolios that were adversely affected by a slowdown in the economic growth in Thailand. The credit for credit losses recorded in the Residential segment was mainly because the stable corporate environment in recent periods contributed to higher income for borrowers in Japan.
We recorded ¥ 17.5 billion of credit for credit losses for our domestic loan portfolio for the fiscal year ended March 31, 2015, compared to credit for credit losses of ¥81.4 billion for the previous fiscal year. We recorded ¥104.5 billion of provision for credit losses for our foreign portfolio for tlie fiscal year ended March 31, 2015, compared to credit for credit losses of ¥25.0 billion for the previous fiscal year. The increase in provision for credit losses in our foreign portfolio was primarily attributable to the Krungsri segment.
For more information, see "—B. Liquidity and Capital Resources—Financial Condition—Loan Portfolio."
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
We recorded ¥106.4 billion of credit for credit losses for the fiscal year ended March 31, 2014 compared to provision for credit losses of ¥144.5 billion for the fiscal year ended March 31, 2013. By segment, ¥70.1 billion, ¥36.0 billion and ¥5.9 billion of credit for credit losses were recorded in the Commercial, Residential and MUAH segments, respectively, and ¥5.6 billion of provision for credit losses was recorded in the Card segment for the fiscal year ended March 31, 2014, compared to ¥127:9 billion, ¥1.3 billion, ¥12.4 billion and ¥2.9 billion of provision for credit losses in the Commercial, Residential, Card and MUAH segments, respectively, for the previous fiscal year.
The improvement in the Commercial segment was mainly due to the upgrades of the internal borrower ratings of a substantial portion of large borrowers in the segment whose financial performance and prospects improved in light of favorable economic conditions in Japan, including a depreciating Japanese yen and rising stock prices. The improvement in the Residential segment was mainly due to an overall improvement in the credit quality ofthe loan portfolio ofthe segment, including a decrease in the number of civil rehabilitation filings made by individual borrowers, as economic conditions were generally favorable in Japan. The improvement in the Card segment primarily reflected an overall improvement in the credit quality of the loan portfolio of the segment partially as a result of our implementation of stricter borrower screening under regulatory reforms in the consumer finance industry.
The credit for credit losses in our domestic loan portfolio was ¥81.4 billion for the fiscal year ended March 31, 2014, compared to provision for credit losses of ¥115.7 billion for the fiscal year ended March 31, 2013. The credit for credit losses in our foreign portfolio for the fiscal year ended March 31, 2014 was ¥25.0 billion, compared to provision for credit losses of ¥28.8 billion for the previous fiscal year. MUAH had reversal of allowance for credit losses of ¥5.9 billion for the fiscal year ended March 31, 2014 primarily due to improved credit quality of its loan portfolio.
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Non-Interest Income
The following table is a summary of our non-interest income for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
(in billions)
Fees and commissions income'1':
Fees and commissions on deposits Y 39.6 ¥ 46.1 ¥ 57.1
Fees and commissions on remittances and transfers 155.2 158.8 168.1
Fees and commissions on foreign trading business 58.9 68.3 71.5
Fees and commissions on credit card business 149.7 157.2 179.7
Fees and commissions on security-related services 218.0 300.1 285.7
Fees and commissions on administration and management services for
investment funds 117.2 126.7 141.1
Trust fees 92.5 105.7 106.9
Guarantee fees 55.4 52.6 53.0
Insurance commissions 33.5 39.7 63.3
Fees and commissions on real estate business 28.0 34.7 36.4
Other fees and commission 212.9 204.2 238.2
Total 1,160.9 1,294.1 1,401.0
Foreign exchange losses—net (39.0) (61.8) (113.1)
Trading account profits (losses)—net:
Net losses on interest rate and other derivative contracts (82.7) (84.4) (37.4)
Net profits on trading account securities, excluding derivatives 653.0 50.5 1,186.1
Total 570.3 (33.9) 1,148.7
Investment securities gains—net:
Net gains on sales of available-for-sale securities:
Debt securities 185.9 128.8 71.2
Marketable equity securities 64.8 77.7 70.5
Impairment losses on available-for-sale securities:
Debt securities (8.3) (2.6) (3.5)
Marketable equity securities (113.5) (0.3) (0.6)
Other 27.1 99.9 17.1
Total 156.0 303.5 154.7
Equity in earnings of equity method investees—net 60.2 110.5 172.9
Gains on sales of loans '. 14.8 17.7 15.0
Government grant for transfer of substitutional portion of Employees' Pension
Fund Plans — 115.2 —
Other non-interest income 144.8 75.7 65.9
Total non-interest income ¥2,068.0 ¥1,821.0 ¥2,845.1
Note:
(1) Reflects the changes made to the components of fees and commissions in the fiscal year ended March 31, 2015. The following
components have been redefined in 2015 and certain reclassifications were made between the components: Fees and commissions on deposits. Fees and commissions on remittances and transfers, Fees and commissions on security-related services, Fees and commissions on administration and management services for investment funds and Other lees and commissions. The amounts for tire fiscal years ended March 31, 2013 and 2014 have been reclassified to conform to the presentation for the fiscal year ended March 31, 2015.
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Fees and commissions income
Fees and commissions income consist of the following:
Fees and commissions on deposits consist of fees and commissions charged for ATM transactions and other deposit and withdrawal services.
Fees and commissions on remittances and transfers consist of fees and commissions charged for settlement services such as domestic fund remittances, including those made through electronic banking.
Fees and commissions on foreign trading business consist of fees and commissions charged for fund collection and financing services related to foreign trading business activities.
Fees and commissions on credit card business consist of fees and commissions related to the credit card business such as interchange income, annual fees, royalty and other service charges from franchisees.
Fees and commissions on security-related services primarily consist of fees and commissions for sales and transfers of securities, including investment funds, underwriting, brokerage and advisory services, securitization arrangement services, and agency services for the calculation and payment of dividends.
Fees and commissions on administration and management services for investment funds primarily consist of fees and commissions earned on managing investment funds on behalf of clients.
TrusTfeTs'consisi primarilyo'f feesTan^ services for corporate pension plans and investment funds.
Guarantee fees consist of fees related to the guarantee business, including those charged for providing guarantees on residential mortgage loans and other loans.
Insurance commissions consist of commissions earned by acting as agent for insurance companies for the sale of insurance products.
Fees and commissions on real estate business primarily consist of fees from real estate agent services.
Other fees and commissions include various fees and commissions, such as arrangement fees and agent fees, other than the fees mentioned above.
Net foreign exchange gains (losses)
Net foreign exchange gains (losses) consist of the following:
Foreign exchange gains (losses) related to derivative contracts are net gains (losses) primarily on currency derivative instruments entered into for trading purposes. For the details of derivative contracts, see Note 23 to our consolidated financial statements included elsewhere in this Annual Report.
Foreign exchange gains (losses) on other than derivative contracts include foreign exchange trading gains (losses) as well as transaction gains (losses) on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. The transaction gains (losses) on the translation into Japanese yen fluctuate from period to period depending upon the spot rates at the end of each fiscal year. In principle, all transaction gains (losses) on translation of monetary assets and liabilities denominated in foreign currencies are included in current earnings.
Foreign exchange gains (losses) rclatcd to the fair"value option include transaction gains (losses)" on translation into Japanese yen of securities under the fair value option. For the details ofthe fair value option, see Note 31 to our consolidated financial statements included elsewhere in this Annual Report.
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Net trading account profits (losses)
Trading account assets and liabilities are carried at fair value and any changes in the value are recorded in net trading account profits (losses). Activities reported in our net trading account profits (losses) can generally be classified into two categories:
trading purpose activities, which are conducted mainly for the purpose of generating profits either through transaction fees or arbitrage gains and involve frequent and short-term selling and buying of securities, commodities or others; and
trading account assets relating to the application of certain accounting rules, which are generally not related to trading purpose activities, but are simply classified as trading accounts due to the application of certain accounting rules.
Of the two categories, trading purpose activities represent a smaller portion of our trading account profits.
We generally do not separate, for financial reporting purposes, customer originated trading activities from those with non-customer related, proprietary trading activities. When an order for a financial product is placed by a customer, a dealer offers a price which includes certain transaction fees, often referred to as the "margin" to the market price. The margin is determined by considering factors such as administrative costs, transaction amount and liquidity of the applicable currency. Once the customer agrees to the offered price, the deal is completed and the position is recorded in our ledger as a single entry without any separation of components. To manage the risk relating to the customer side position, we often enter into an offsetting transaction with the market. Unrealized gains and losses as of the period-end for both the customer side position and the market side position are recorded within the same trading account profits and losses.
Net trading account profits (losses) consist of net profits (losses) on interest rate and other derivative contracts and net profits (losses) on trading account securities, excluding derivatives.
Net profits (losses) on interest rate and other derivative contracts arc reported for net profits (losses) on derivative instruments which primarily relate to trading purpose activities and include:
• Interest rate contracts, which are mainly utilized to manage interest rate risks which could arise from mismatches between assets and liabilities resulting from customer originated trading activities;
Equity contracts, which are mainly utilized to manage the risk that would arise from price fluctuations of stocks held in connection with customer transactions;
• Credit derivatives, which are mainly utilized as a part of our credit portfolio risk management; and
Commodity contracts, which are mainly utilized to meet customers' demand for hedging the risks relating to their transactions, and to diversify our portfolio.
Derivative instruments for trading purposes also include those used as hedges of net exposures rather than for specifically identified assets or liabilities, which do not meet the specific criteria for hedge accounting.
Net profits (losses) on trading account securities, excluding derivatives, consist of :
Net profits (losses) on trading account securities, which primarily consist of gains and losses on trading and valuation of trading securities which relate to trading purpose activities. Net profits (losses) on investment securities held by certain consolidated variable interest entities are included in accordance with the applicable accounting rules.
Net profits (losses) on trading account securities under the fair value option, which are classified into trading accounts profits (losses) in accordance with certain accounting rules. For the details ofthe fair value option, see Note 31 to our consolidated financial statements included elsewhere in this Annual Report.
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Net investment securities gams (losses)
Net investment securities gains (losses) primarily include net gains (losses) on sales of marketable securities, particularly debt securities and marketable equity securities that are classified as available-for-sale securities. In addition, impairment losses are recognized as an offset of net investment securities gains (losses) when management concludes that declines in fair value of investment securities are other than temporary.
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
Non-interest income increased ¥1,024.1 billion to ¥ 2,845.1 billion for the fiscal year ended March 31, 2015 from ¥1,821.0 billion for the fiscal year ended March 31, 2014. This increase was mainly attributable to a ¥1,135.6 billion increase in net profits on trading account securities, excluding derivatives. This increase was partially offset by a ¥148.8 billion decrease in net investments securities gains.
Fees and commissions income
Fees and commissions income increased ¥106.9 billion to ¥1,401.0 billion for the fiscal year ended March 31, 2015 from ¥1,294.1 billion for the fiscal year ended March 31, 2014. This increase was primarily due to the positive impact of the consolidation of KS particularly on fees and commissions on remittances and transfers, fees and commissions on credit card business, fees and commissions on administration and management services for investment funds, and insurance commissions. Fees and commission on deposits increased due to higher fees charged for domestic retail banking transactions conducted through channels operated by third-party business partners. Other fees and commissions also increased due to advisory fees received for a large-scale structured finance project. These increases were partially offset by a decrease in fees and commissions on security-related services due to lower brokerage commissions on equity securities, reflecting the less active Japanese equity market compare to the previous fiscal year.
Net foreign exchange losses
The following table sets forth the details of our foreign exchange gains and losses for the fiscal years ended March 31, 2014 and 2015:
Fiscal years ended March 31, 2014 2015 (in billions)
Foreign exchange losses—net:
Net foreign exchange losses on derivative contracts ¥ (52.7) ¥(217.5)
Net foreign exchange losses on other than derivative contracts (2,026.4) (862.2)
Net foreign exchange gains related to the fair value option 2,017.3 966.6
Total ¥ (61.8) ¥(113.1)
Net foreign exchange losses for the fiscal year ended March 31, 2015 were ¥113.1 billion, compared to ¥61.8 billion of net foreign exchange losses for the fiscal year ended March 31, 2014. This was mainly due to a decrease of ¥1,050.7 billion in net foreign exchange gains related to the fair value option. The Japanese yen depreciated against other major currencies in the fiscal year ended March 31, 2014, and while the Japanese yen generally remained on a depreciating trend against other major-currencies in-thc fiscal year ended March 31, 2015, the rate of depreciation was smaller, particularly against the U.S. dollar, and the depreciating trend reversed against the euro for extended periods. This was partially offset by an improvement of ¥1,164.2 billion in net foreign exchange losses on other than derivative contracts mainly due to lower foreign exchange translation losses on monetary liabilities denominated in foreign currencies in our commercial banking subsidiaries, reflecting the gradual depreciation of the Japanese yen against other major currencies.
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Net trading account profits (losses)
The following table sets forth details of our trading account profits and losses for the fiscal years ended March 31, 2014 and 2015:
Fiscal years ended March 31,
2014 2015 (in billions)
Trading account profits (losses)—net:
Net losses on interest rate and other derivative contracts
Interest rate contracts ¥ 29.9 ¥ 261.6
Equity contracts (104.7) (255.1)
Commodity contracts 2.9 (6.3)
Credit derivatives (6.4) 5.1
Other (6.1) (42.7)
Total ¥ (84.4) ¥ (37.4)
Net profits on trading account securities, excluding derivatives
Trading account securities ¥ 276.5 ¥ 496.7
Trading account securities under the fair value option (226.0) 689.4
Total ¥ 50.5 ¥1,186.1
Total ¥ (33.9) ¥1,148.7
We recorded net trading account profit of ¥1,148.7 billion for the fiscal year ended March 31, 2015, compared to net trading account losses of ¥33.9 billion for the fiscal year ended March 31, 2014. This was mainly due to an improvement of ¥915.4 billion in net profits on trading account securities under tlie fair value option, which primarily consisted of a ¥584.6 billion improvement in our commercial banking subsidiaries and a ¥332.5 billion improvement in our trust banking subsidiaries. These improvements reflected higher fair values of foreign currency denominated bonds, including U.S. Treasury bonds, as interest rates in the United States decreased. The improvements were also attributable to increases in fair values of Eurozone sovereign bonds, including German and French government bonds, as our banking subsidiaries increased their holdings of such bonds and interest rates decreased in Europe where economic conditions remained stagnant. Net profits on trading account securities also increased ¥220.2 billion primarily due to larger gains from the trading business in our securities subsidiaries taking advantage of declining long-term-interest rates in Japan during the fiscal year ended March 31, 2015.
Net investment securities gains
Net investment securities gains decreased ¥148.8 billion to ¥154.7 billion for the fiscal year ended March 31, 2015 from ¥303.5 billion for the fiscal year ended March 31, 2014. This decrease was partly due to a decrease of ¥57.6 billion in net gains on sales of available-for-sale debt securities, reflecting reduced volumes of sales of Japanese government bonds, compared to the previous fiscal year when we decreased our holdings of such bonds as part of our asset and liability management and interest rate risk management measures. The decrease in net investment securities gains was also attributable to a decrease of ¥82.8 billion in net gains on sales of other investment securities as our banking subsidiaries reported comparatively higher gains on sales of preferred securities related to a specific customer in the fiscal year ended March 31, 2014.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for tlie fiscal year ended March 31, 2015 was ¥172.9 billion, compared to¥l 10.5 billion for the previous fiscal year, reflecting higher earnings of our equity method investees, including Morgan Stanley.
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Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
Non-interest income for the fiscal year ended March 31, 2014 was ¥1 ,S21.0 billion, a decrease of ¥247.0 billion from ¥2,068.0 billion for the fiscal year ended March 31, 2013. This decrease was mainly attributable to a ¥602.5 billion decrease in net profits on trading account securities, excluding derivatives, to ¥50.5 billion for the fiscal year ended March 31, 2014 from ¥653.0 billion for the fiscal year ended March 31, 2013. This decrease was partially offset by a¥133.2 billion increase in fees and commissions income, primarily due to higher fees and commissions on securities business and investment funds business, and by a ¥147.5 billion increase in investment securities gains mainly attributable lo a¥l 13.2 billion improvement in impairment losses on available-for-sale marketable equity securities, and by a one-lime adjustment of ¥115.2 billion in connection with the transfer of Ihe substitutional portion of MUTB's benefit obligations relating to employee benefit funds to the Japanese government.
Fees and commissions income
Fees and commissions income for the fiscal year ended March 31, 2014 was ¥1,294.1 billion, an increase of ¥133.2 billion from ¥.1,160.9 billion for the fiscal year ended March 31, 2013. This increase was mainly due to an increase of ¥82.1 billion in fees and commissions on security-related services, particularly commissions from brokerage and underwriting activities in our securities subsidiaries. A larger amount of sales of mutual funds in _.our.banking.subsidiaries.also.conlributed_to the increased njfces.and commissions on security-related services._In_ addition, trust fees increased ¥13.2 billion and fees and commissions on administration and management services for investment funds increased ¥9.5 billion as the trust business and the investment fund administration and management services business benefitted from the active equity market in Japan during the period.
Net foreign exchange losses
The following table sets forth the details of our foreign exchange gains and losses for the fiscal years ended March 31, 2013 and 2014:
Fiscal years ended March 31, 2013 2014
(in billions)
Foreign exchange losses—net:
Net foreign exchange losses on derivative contracts ¥ (94.2) ¥ (52.7)
Net foreign exchange losses on other than derivative contracts (2,130.7) (2,026.4)
Net foreign exchange gains related to the fair value option 2,185.9 2,017.3
Total ¥ (39.0) ¥ (61.8)
Net foreign exchange losses for the fiscal year ended March 31, 2014 were ¥61.8 billion, compared to ¥39.0 billion of net foreign exchange losses for the fiscal year ended March 31, 2013. This was mainly due to a decrease of ¥168.6 billion in net foreign exchange gains related to the fair value option. This decrease was primarily because the Japanese yen depreciated to smaller degrees against other major currencies during tlie fiscal year ended March 31, 2014, compared to the previous fiscal year. This was partially offset by an improvement of ¥104.3 billion in foreign exchange losses on other than derivative contracts mainly due to lower foreign exchange translation losses on monetary liabilities denominated in foreign currencies in our commercial banking "subsidiaries, reflecting the graduardepreciafiori of the Japanese yen against other major currencies, and" by an improvement of ¥41.5 billion in foreign exchange losses on derivative contracts mainly in our tmst banking and securities subsidiaries.
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Net trading account profits (losses)
The following table sets forth details of our trading account profits and losses for the fiscal years ended March 31, 2013 and 2014:
Fiscal years ended March 31,
2013 2014
(in billions)
Trading account profits (losses)—net:
Net losses on interest rate and other derivative contracts
Interest rate contracts ¥121.4 ¥ 29.9
Equity contracts (137.6) (104.7)
Commodity contracts 3.8 2.9
Credit derivatives (10.9) (6.4)
Other (59.4) (6.1)
Total ¥ (82.7) ¥ (84.4)
Net profits on trading account securities, excluding derivatives
Trading account securities ¥341.2 ¥ 276.5
Trading account securities under the fair value option 311.8 (226.0)
Total ¥ 653.0 ¥ 50.5
Total ¥ 570.3 ¥ (33.9)
We recorded net trading account losses of ¥33.9 billion for the fiscal year ended March 31, 2014 compared to net trading account profits of ¥570.3 billion for the fiscal year ended March 31, 2013. This was mainly due to a decrease of ¥602.5 billion in net profits on trading account securities, excluding derivatives, which primarily consisted of a decrease of ¥393.3 billion in our commercial banking subsidiaries and a decrease of ¥239.9 billion in our trust banking subsidiaries. Due to the increases in interest rates in the United States reflecting the tapering of the quantitative monetary easing program by the FRB, the fair values of foreign bonds, including U.S. Treasury bonds, decreased significantly. In addition, we also incurred losses on transactions in mutual funds investing in debt securities executed in the trading account.
Net investment securities gains
Net investment securities gains for the fiscal year ended March 31, 2014 were¥303.5 billion, an increase of ¥147.5 billion from ¥156.0 billion for the fiscal year ended March 31, 2013. This increase was mainly due to an improvement of ¥113.2 billion in impairment losses on marketable equity securities, an increase of ¥12.9 billion in gains on sales of marketable equity securities, and an improvement of ¥5.7 billion in impairment losses on debt securities, due to higher stock prices reflecting an overall improvement in financial performance of the corporate sector in Japan, which benefited from the depreciation of the Japanese yen against other major currencies and increased private consumption. The increase in net investment securities gains was also attributable to higher gains on sales of unlisted preferred securities of other companies held by our banking subsidiaries. However, this was partially offset by a ¥57.1 billion decrease in net gains on sales of debt securities due to a lower volume of debt securities, including Japanese government bonds, sold.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the fiscal year ended March 31, 2014 was ¥110.5 billion, compared to net equity in earnings of equity method investees of ¥60.2 billion for the previous fiscal year, mainly due to higher earnings from the equity method investees such as Morgan Stanley.
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Government grant for transfer of substitutional portion of Employees' Pension Fund Plans
We recorded a one-time adjustment of ¥115.2 billion for the fiscal year ended March 31, 2014, in connection with the transfer to the Japanese government of the substitutional portion of MUTB's benefit obligations relating to employee benefit funds.
In December 2011, in accordance with the Defined Benefit Corporate Pension Plan Act, which permits each
employer and employees' pension fund plan to separate the substitutional portion of the employees' pension fund
from the rest of the fund and transfer the related obligation and assets to the Japanese government, MUTB
obtained an approval from the Minister of Health, Labor and Welfare for an exemption from the obligation to
pay benefits for future employee services related to the substitutional portion of the governmental welfare
pension program. In January 2013, MUTB also obtained an approval for an exemption from the obligation to pay
benefits for past employee services related to the substitutional portion. To complete the separation process, the
substitutional obligation and the related plan assets were transferred to the Japanese government on February 17,
2014. In accordance with the guidance, which addresses the accounting for the transfer to the Japanese
government of a substitutional portion of employee pension fund liabilities, MUTB accounted for the entire
separation process, upon completion of transfer of the plan assets to the government, as a single settlement
transaction. For the fiscal year ended March 31, 2014, MUTB recognized the difference of ¥115.2 billion
between the accumulated benefit obligations settled and the assets transferred to the Japanese government as a
government subsidy _ _ _ . __
Non-Interest Expense
The following table shows a summary of our non-interest expense for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
(in billions)
Salaries and employee benefits ¥ 932.4 ¥1,029.6 ¥1,097.5
Occupancy expenses—net 151.1 158.4 168.7
Fees and commissions expenses 209.8 222.0 248.1
Outsourcing expenses, including data processing 198.1 216.7 241.7
Depreciation of premises and equipment 94.0 103.7 108.6
Amortization of intangible assets 207.6 198.1 222.4
Impairment of intangible assets 3.4 0.3 0.7
Insurance premiums, including deposit insurance 98.7 101.1 115.5
Communications 47.1 50.9 54.7
Taxes and public charges 66.9 69.5 96.6
Other non-interest expenses 369.6 318.0 372.4
Total non-interest expense ¥2,378.7 ¥2,468.3 ¥2,726.9
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
Non-interest expense increased ¥258.6i billion to ¥2,726.9 billion for the fiscal year ended March 31, 2015 from ¥2,468.3 billion for the previous fiscal year. Major factors affecting this change in non-interest expense are discussed below.
Salaries and employee benefits
Salaries and employee benefits for the fiscal year ended March 31, 2015 were ¥1,097.5 billion, an increase of ¥67.9 billion from ¥1,029.6 billion for the previous fiscal year. This increase was primarily due to an increase
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in salaries of ¥49.4 billion as a result of the consolidation of KS. Salaries also increased in our commercial banking subsidiaries' foreign offices and subsidiaries mainly due to the depreciation of the Japanese yen against the U.S. dollar.
Fees and commissions expenses
Fees and commissions expenses for the fiscal year ended March 31, 2015 was ¥248.1 billion, an increase of ¥26.1 billion from ¥222.0 billion for the fiscal year ended March 31, 2014. This increase was mainly due to the impact of the consolidation of KS and large expenses relating to our consumer finance business.
Outsourcing expenses, including data processing
Outsourcing expenses, including data processing, for the fiscal year ended March 31, 2015 was ¥241.7 billion, an increase of ¥25.0 billion from ¥216.7 billion for the fiscal year ended March 31, 2014. A substantial portion of this increase was recorded in our commercial banking subsidiaries due to higher fees for upgrading system software in foreign branches and subsidiaries, including MUAH, in connection wilh the integration of their operations in the United Slates and the enhancement of their regulatory compliance system enhancement.
Amortization of intangible assets
Amortization of intangible assets for the fiscal year ended March 31, 2015 was ¥222.4 billion, an increase of ¥24.3 billion from¥198.1 billion for the fiscal year ended March 31, 2014. This increase was mainly due to an increase in amortization of KS's intangible assets such as customer relationships as KS's intangible assets became subject to amortization in the fiscal year ended March 31, 2015. We recorded ¥124.3 billion of intangible assets relating to KS's customer relationships as of the acquisition date of December 18, 2013. We decided to apply the fixed-installment depreciation method to these customer relationships for eight to 14-year periods, depending on the characteristics of each of the customer relationships.
Taxes and public charges
Taxes and public charges for the fiscal year ended March 31, 2015 was ¥96.6 billion, an increase of ¥27.1 billion from ¥69.5 billion for tlie fiscal year ended March 31, 2014. This increase was mainly due to the increase in the Japanese consumption tax rate from 5% to 8% in April 2014.
Other non-interest expenses
Other non-interest expenses for the fiscal year ended March 31, 2015 were ¥372.4 billion, an increase of ¥54.4 billion from ¥318.0 billion for the fiscal year ended March 31, 2014. This increase reflected BTMU's payment of $315 million, or ¥34.5 billion, to the DFS in November 2014. See "—Recent Developments."
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
Non-interest expense for the fiscal year ended March 31, 2014 was ¥2,468.3 billion, an increase of ¥89.6 billion from ¥2,378.7 billion for the previous fiscal year. This increase was mainly due to a ¥97.2 billion increase in salaries and employee benefits expenses reflecting an increase in the number of employees in our commercial banking subsidiaries and higher performance-based compensation in our securities subsidiaries, a ¥18.6 billion increase in outsourcing expenses, including data processing, and a¥12.2 billion increase in fees and commissions expenses. These increases were partially offset by a ¥51.6 billion decrease in other non-interest expenses.
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Salaries and employee benefits
Salaries and employee benefits for the fiscal year ended March 31, 2014 were ¥1,029.6 billion, an increase of ¥97.2 billion from ¥932.4 billion for the previous fiscal year. This increase was due to a one-time loss of ¥40.7 billion in connection with the transfer to the Japanese government of the substitutional portion of MUTB's benefit obligations relating to employee benefit funds, an increase in the number of employees in foreign branches, especially in New York, of our commercial banking subsidiaries, MUAH's acquisition of local banks, larger bonus payments under a performance-based bonus plan in our securities subsidiaries, and tlie depreciation of Japanese yen against other major currencies.
Fees and commissions expenses
Fees and commissions expenses for the fiscal year ended March 31, 2014 was ¥222.0 billion, an increase of ¥12.2 billion from ¥209.8 billion for the fiscal year ended March 31, 2013. This increase was mainly due to an increase in fees and commissions expenses recorded in our consumer finance subsidiaries reflecting an increased volume of transactions. The fees and commissions expenses in our commercial banking, trust banking and securities subsidiaries also increased during the fiscal year due to higher transaction volumes as the subsidiaries took advantage of improvements in the business environment after the introduction of "Abenomics" in December
2012.
Outsourcing expenses, including data processing
Outsourcing expenses, including data processing, for the fiscal year ended March 31, 2014 was ¥216.7 billion, an increase of ¥18.6 billion from ¥198.1 billion for the fiscal year ended March 31, 2013. A substantial portion of this increase was recorded in our commercial banking subsidiaries due to. higher maintenance fees related to system software in foreign branches and subsidiaries, including MUAH. The increase in outsourcing expenses was also attributable to higher outsourcing fees incurred by our securities subsidiaries, and an increase in the number of temporary employees obtained from temporary staffing agencies.
Other non-interest expenses
Other non-interest expenses for the fiscal year ended March 31, 2014 were ¥318.0 billion, a decrease of ¥51.6 billion from ¥369.6 billion for the fiscal year ended March 31, 2013, when other non-interest expenses included the realization of losses which were previously recorded in foreign currency translation included in accumulated other comprehensive income, resulting from the deconsolidation of several overseas variable interest entities, or VIEs. There were no such non-interest expenses recorded for the fiscal year ended March 31, 2014.
Income Tax Expense
The following table shows a summary of our income tax expense for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
Income before income tax expense
Income tax expense
Effective income tax rate
Combined normal effective statutory tax rate
(in billions, except percentages)
¥1,415.9 ¥1,420.4¥2,262.7 296.0 337.9 666.0 20.9% 23.8% 29.4% 38.0% 38.0% 35.6%
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Reconciling items between the combined normal effective statutory tax rates and the effective income tax rates for the fiscal years ended March 31, 2013, 2014 and 2015 are summarized as follows:
Fiscal years ended March 31,
2013 2014 2015
Combined normal effective statutory tax rate 38.0% 38.0% 35.6%
Increase (decrease) in taxes resulting from:
Nondeductible expenses 0.1 0.2 0.1
Foreign tax credits and payments (0.8) (0.6) (1.0)
Lower tax rates applicable to income of subsidiaries (0.5) (0.4) (0.1)
Change in valuation allowance (7.3) (12.4) (1.3)
Realization of previously unrecognized tax effects of subsidiaries (10.7) (0.1) —
Nontaxable dividends received (2.3) (3.3) (1.6)
Undistributed earnings of subsidiaries 1.5 0.5 0.1
Tax and interest expense for uncertainty in income taxes (0.1) — (0.2)
Expiration of loss carryforward 2.1 — —
Effect of changes in tax laws — 1.2 (1.7)
Other—net 0.9 0.7 (0.5)
Effective income tax rate 20.9% 23.8% 29.4%
The effective income tax rate for the fiscal year ended March 31, 2015 was 29.4%, 6.2 percentage points lower than the combined normal effective statutory rate of 35.6%. This was partly due to our receipt of nontaxable dividends. Under Japanese tax law, a certain percentage of dividends received is regarded as nontaxable and excluded from gross revenue in computing taxable income. This creates a permanent difference between our taxable income for Japanese tax purposes and our income before income tax expense reported under U.S. GAAP. Another factor contributing to the lower effective income tax rate was a reduction in valuation allowances to the extent that it was more likely than not that the defened tax assets would be realized mainly because certain subsidiaries were expected to remain profitable in future periods, considering the current business environment.
In addition, the lower effective income tax rate was also attributable to the effect of changes in tax law. Under the "2015 Tax Reform" enacted by the Japanese Diet on March 31, 2015, the effective statutory rate of corporate income tax will be reduced from approximately 35.6% to 33.9% starting in a corporation's fiscal year that begins on or after April 1, 2015. The tax reform legislation also includes changes in the limitation on the use of net operating loss carryforwards from 80% to 65% of taxable income for the two-year period between April 1, 2015 and March 31, 2017, and from 65% to 50% for the fiscal years beginning on or after April 1, 2017, respectively, and a one-year increase in the carryforward period of certain nel operating loss carryforwards from nine years to ten years for the fiscal years beginning on or after April 1, 2017. The changes in tax laws resulted in a decrease of ¥39,966 million in income tax expense for the fiscal year ended March 31, 2015.
The effective income tax rate for the fiscal year ended March 31, 2014 was 23.8%, 14.2 percentage points lower than the combined normal effective statutory tax rate of 38.0%. This lower effective income tax rate primarily reflected a decrease in the valuation allowance against defened tax assets which accounted for 12.4 percentage points of tlie difference between the combined normal effective statutory tax rate and the effective income tax rate. For the fiscal year ended March 31, 2014, we recorded a valuation allowance release on the basis of management's reassessment of the amount of our defened tax assets that were more likely than not to be realized. As of March 31, 2014, management considered new evidence, both positive and negative, that could impact management's view with regard to future realization of defened tax assets. As a result, among others,
a release of valuation allowance of ¥91.1 billion was due to tlie application of the consolidated corporate-tax system beginning with the fiscal year ending March 31, 2015. This is because MUFG would be able to utilize income in more profitable subsidiaries to realize the benefit of net operating loss
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carryforwards and existing deductible temporary differences recorded at MUFG. A consolidated basis for corporate income taxes results in the reporting of taxable income or loss based upon the combined profits or losses ofthe parent company and its wholly owned domestic subsidiaries. Management believes that the net operating loss carryforwards related to corporate taxes will be fully utilized by the application ofthe consolidated corporate-tax system; and
a release of valuation allowance of ¥45.9 billion was due to the profitability improvement of a certain subsidiary. Management considered various factors, including the improved operating performance and cumulative operating results over the prior several years ofthe subsidiary as well as the outlook regarding prospective operating performance of the subsidiary, and determined that sufficient positive evidence exists as of March 31, 2014, to conclude that it is more likely than not that additional deferred tax assets would be realizable.
The effective income tax rate of 20.9% for the fiscal year ended March 31, 2013 was 17.1 percentage points lower than the combined normal effective statutory tax rate of 38.0%. This lower effective income tax rate primarily reflected the liquidation of a subsidiary, whose assets and operations we took over after the liquidation, and the realization of tax benefits from the temporary differences not previously recognized as part of deferred tax assets. The lower effective tax rate also reflected a ¥ 161.7 billion decrease in valuation allowance to ¥483.0 billion as of March 31, 2013 from ¥644.7 billion as of March 31, 2012. The valuation allowance was reduced to the extent that it was more likely than not that the deferred tax assets would be realized primarily because certain subsidiaries were considered to have returned to sustained profitability.
On March 20, 2014, the Japanese Diet enacted the "2014 Tax Reform" which terminated the temporary surtax levied on corporate income taxes one year earlier than the change in tax law on November 30, 2011 as described above. As a result,-the effective statutory rate of corporate income tax for the fiscal year ending March 31, 2015 was set at approximately 35.6%. The change in tax law resulted in an increase of ¥16.7 billion in income tax expense for the fiscal year ended March 31, 2014.
Net income attributable to noncontrolling interests
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
We recorded net income attributable to noncontrolling interests of ¥65.5 billion for the fiscal year ended March 31, 2015, compared to ¥67.1 billion for the previous fiscal year.
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
We recorded net income attributable to noncontrolling interests of ¥67.1 billion for the fiscal year ended March 31, 2014, compared to net income attributable to noncontrolling interests of ¥50.7 billion for the previous fiscal year. This increase was mainly due to an increase in net income recorded at MUMSS, in which MUFG has a 60% economic interest, in the fiscal year ended March 31, 2014.
Business Segment Analysis
We measure the performance of each of our business segments primarily in terms of "operating profit." Operating profit and other segment information in this Annual Report are based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information are not consistent with our consolidated financial statements prepared on the basis of U.S. GAAP. For example, operating profit does not reflect items such as a part of the provision for credit losses (primarily equivalent to the formula allowance under U.S. GAAP), foreign exchange gains (losses) and investment securities gains (losses). For information on a reconciliation of operating profit under the internal management reporting system to income before income tax expense shown on the consolidated statements of income, see Note 29 to our consolidated financial statements included elsewhere in this Annual Report. We do not use information on the segments' total assets lo allocate our resources and assess performance. Accordingly, business segment information on total assets is nol presented.
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We operate our main businesses under an integrated business group system, which integrates the operations of BTMU. MUTB, MUMSS (through MUSHD), Mitsubishi UFJ NICOS and other subsidiaries in the following five groups—Retail, Corporate, Trust Assets, Global, and Global Markets, each of which is treated as a business segment. These five businesses serve as the core sources of our revenue. For the fiscal year ended March 31, 2015, in addition to these five integrated business groups, Krungsri, our banking subsidiary in Thailand, was treated as a business segment. Operations that were not covered under the integrated business group system or Krungsri, as well as the elimination of duplicated amounts of net revenues among business segments, were classified under "Other" as further described below.
The following is a brief explanation of our business segments for the fiscal year ended March 31, 2015:
Integrated Retail Banking Business Group—Covers all domestic retail businesses, including commercial banking, trust banking and securities businesses. This business group integrates the retail businesses of BTMU, MUTB, MUMSS, Mitsubishi UFJ NICOS and other subsidiaries as well as retail product development, promotion and marketing in a single management structure. At the same time, this business group has developed and implemented MUFG Plaza, a one-stop, comprehensive financial services concept that provides integrated banking, trust and securities services.
Integrated Corporate Banking Business Group—Covers all domestic corporate businesses, including commercial banking, investment banking, trust banking and securities businesses. Through the integration of these business lines, diverse financial products and services are provided to our corporate clients. This business group has clarified strategic domains, sales channels and methods to match the different growth stages and financial needs of our corporate clients.
Integrated Trust Assets Business Group—Covers asset management and administration services for products such as pension trusts and security trusts by integrating the trust banking expertise of MUTB and the global network of BTMU. This business group provides a full range of services to corporate and other pension funds, including stable and secure pension fund management and administration, advice on pension schemes and payment of benefits to scheme members.
Integrated Global Business Group—Covers businesses outside Japan, including commercial banking such as loans, deposits and cash management services, investment banking, retail banking, tmst banking and securities businesses (with the retail banking and tmst assets businesses being conducted through MUB), through a global network of more than 500 offices outside Japan to provide customers with financial products and services that meet their increasingly diverse and sophisticated financing needs. MUB is one of the largest commercial banks in California by both total assets and total deposits. MUB provides a wide range of financial services to consumers, small businesses, middle market companies and major corporations, primarily in California, Oregon and Washington but also nationally and internationally. MUB's parent company is MUAH, which is a bank holding company in the United States.
Krungsri—Covers businesses conducted mainly in Thailand by Krungsri. Krungsri provides a comprehensive range of banking, consumer finance, investment, asset management, and other financial products and services to individual consumers, small and medium-sized enterprises, and large corporations mainly in Thailand. In addition, Krungsri's consolidated subsidiaries include the major credit card issuer in Thailand as well as a major automobile financing service provider, an asset management company, and a microfinance service provider in Thailand. Wc hold a 76.88% ownership interest in Krungsri as of March 31, 2015. The amounts for this segment in the table below represent the respective amounts before taking into account the noncontrolling interest in Krungsri and before taking into account the integration between Krungsri and BTMU's Bangkok branch.
Integrated Global Markets Business Group—Covers asset and liability management and strategic investments of BTMU and MUTB, and sales and trading of financial products of BTMU, MUTB and MUSHD.
Other—Consists mainly ofthe coiporate centers of MUFG, BTMU, MUTB and MUMSS. The elimination of duplicated amounts of net revenue among business segments is also reflected in Other.
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Effective April 1, 2014 and October 1, 2014, in order to further streamline and integrate our managerial accounting methodologies on a group-wide basis, we made modifications to such methodologies, which mainly affected the Integrated Retail Banking Business Group and the Integrated Global Markets Business Group. These modifications had no impact on our total operating profit for the fiscal years ended March 31, 2013 and 2014, but affected net revenue and operating expense allocations among business segments. Prior period business segment information has been reclassified to enable comparisons between the relevant amounts for the fiscal years ended March 31, 2013, 2014 and 2015, respectively.
For further information, see Note 29 to our consolidated financial statements included elsewhere in this Annual Report.
Effective this current fiscal year ending March 31, 2016, the Integrated Retail Banking Business Group, the Integrated Corporate Banking Business Group, the Integrated Trust Assets Business Group, the Integrated Global Business Group and the Integrated Global Markets Business Group are renamed the Retail Banking Business Group, the Corporate Banking Business Group, the Trust Assets Business Group, the Global Business Group and the Global Markets Business Group, respectively. In addition, the Krungsri segment is integrated into and made part of the Global Business Group.
The following table set forth our business segment information for the fiscal years ended March 31, 2013, 2014 and 2015:
^Rff C^oraU InInteg . ate.tC.oba , Business Group «<'
Banking Banking Assets Other - Markets
Business Business Business than Business Group Group Group MUAII MUAH Total Krungsri Group Other Total
(in billions)
Fiscal year ended March 31, 2013:
Net revenue: .'. ¥1,211.2 ¥863.2 ¥139.6 ¥465.4 ¥288.5 ¥ 753.9 ¥ — ¥759.9 ¥ (10.9) ¥3,716.9
Operating expenses 917.3 434.3 88.8 246.8 205.4 452.2 — 142.5 174.2 2,209.3
Operating profit (loss) ... ¥ 293.9 ¥428.9 ¥50.8 ¥218.6 ¥83.1 ¥ 301.7 ¥ — ¥617.4 ¥(185.1) ¥1,507.6
Fiscal year ended March 31,2014:
Net revenue: ¥1.296.3 ¥924.0 ¥159.7 ¥567.9 ¥375.9 ¥ 943.8 ¥ — ¥563.2 ¥ (13.6) ¥3,873.4
Operating expenses 961.9 438.5 94.8 299.9 266.9 566.8 — 176.5 171.8 2,410.3
OperaUng profit (loss) ... ¥ 334.4 ¥485.5 ¥ 64.9 ¥268.0 ¥109.0 ¥ 377.0 ¥ — ¥386.7 ¥(185.4) ¥1,463.1
Fiscal year ended March 31,2015:
Net revenue: ¥1,311.3 ¥965.2 ¥172.2 ¥668 6 ¥442.4 ¥1,111.0 ¥240.3 ¥609.4 ¥ (22.5) ¥4,386.9
Operatingexpens.es 964.2 448.1 102.1 341.0 298.1 639.1 123.7 191.3 243.0 2.711.5
Operating profit (loss) ... ¥ 347.1 ¥517.1 ¥70.1 ¥327.6 ¥144.3 ¥ 471.9 ¥116.6 ¥418.1 ¥(265.5) ¥1,675.4
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
Integrated Retail Banking Business Group
Net revenue of the Integrated Retail Banking Business Group increased ¥15.0 billion to ¥1,311.3 billion for the fiscal year ended March 31, 2015 from ¥1,296.3 billion for the fiscal year ended March 31, 2014. Net revenue ofthe Integrated Retail Banking Business Group mainly consists of domestic revenues from commercial banking operations, such as deposits and lending operations, and fees related to sales of investment products to retail customers, as well as fees received by subsidiaries within the Integrated Retail Banking Business Group. The increase in net revenue was mainly due to increases in volumes of consumer finance products and sales of financial products such as insurance products, despite the negative impact of lower interest income from loans such as home loans due to lower interest rates and decreased volumes in the zero-interest rate and competitive housing market environment.
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Operating expenses of the Integrated Retail Banking Business Group increased ¥2.3 billion to ¥964.2 billion for the fiscal year ended March 31, 2015 from ¥961.9 billion for the fiscal year ended March 31, 2014.
Operating profit of the Integrated Retail Banking Business Group increased ¥12.7 billion to ¥347.1 billion for the fiscal year ended March 31, 2015 from ¥334.4 billion for the fiscal year ended March 31, 2014.
Integrated Corporate Banking Business Group
Nel revenue of the Integrated Corporate Banking Business Group increased ¥41.2 billion to ¥965.2 billion for the fiscal year ended March 31, 2015 from ¥924.0 billion for the fiscal year ended March 31, 2014. Net revenue ofthe Integrated Corporate Banking Business Group mainly consists of domestic revenues from corporate lending and other commercial banking operations, investment banking and tmst banking businesses in relation to corporate clients, as well as fees received by subsidiaries within the Integrated Corporate Banking Business Group. The increase in net revenue was mainly from the investment banking businesses such as structured financing in our banking subsidiaries and from the primary and secondary businesses in our securities subsidiaries, reflecting improved market conditions in and outside of Japan.
Operating expenses of the Integrated Corporate Banking Business Group increased ¥9.6 billion to ¥448.1 billion for the fiscal year ended March 31, 2015 from ¥438.5 billion for the fiscal year ended March 31, 2014.
Operating profit of the Integrated Corporate Banking Business Group increased ¥31.6 billion to ¥517.1 billion for the fiscal year ended March 31, 2015 from ¥485.5 billion for the fiscal year ended March 31, 2014.
Integrated Trust Assets Business Group
Net revenue of the Integrated Tmst Assets Business Group increased ¥12.5 billion to ¥172.2 billion for the fiscal year ended March 31, 2015 from ¥159.7 billion for the fiscal year ended March 31, 2014. Net revenue of the Integrated Tmst Assets Business Group mainly consists of fees from asset management and administration services for products such as pension trusts and investment tmsts. Improvements in market conditions since the introduction of "Abenomics" continued to have a positive impact on the businesses of the Integrated Trust Assets Business Group.
Operating expenses of the Integrated Trust Assets Business Group increased by ¥7.3 billion to ¥102.1 billion for the fiscal year ended March 31, 2015 from ¥94.8 billion for the fiscal year ended March 31, 2014.
Operating profit of the Integrated Tmst Assets Business Group increased ¥5.2 billion to ¥70.1 billion for the fiscal year ended March 31, 2015 from ¥64.9 billion for the fiscal year ended March 31, 2014.
Integrated Global Business Group
Net revenue of the Integrated Global Business Group increased ¥167.2 billion to ¥1,111.0 billion for the fiscal year ended March 31, 2015 from ¥943.8 billion for the fiscal year ended March 31, 2014. Net revenue of the Integrated Global Business Group mainly consists of revenues from commercial banking businesses outside of Japan, including loan, deposit and cash management, investment banking, retail banking, trust banking and securities businesses. The increase in net revenue mainly came from increases in fees and commissions income and interest income from loans to both Japanese and non-Japanese companies in Asia and the Americas. The depreciation of the Japanese yen mainly against the U.S. dollar also contributed to the increase in net revenue of the Integrated Global Business Group.
Operating expenses of the Integrated Global Business Group increased ¥72.3 billion to ¥639.1 billion for die fiscal year ended March 31, 2015 from ¥566.8 billion for the fiscal year ended March 31, 2014, mainly due to increases in salaries in foreign branches of our commercial banking and securities subsidiaries, the cost for enhancing our global financial regulatory compliance system and the depreciation of the Japanese yen against other major currencies.
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Operating profit of the Integrated Global Business Group increased ¥94.9 billion to ¥471.9 billion for the fiscal year ended March 31, 2015 from ¥377.0 billion for the fiscal year ended March 31, 2014.
Krungsri
In December 2013, BTMU acquired a controlling interest in Krungsri. Accordingly, no business segment information was stated for the fiscal year ended March 31, 2014 in the above table. For (he fiscal year ended March 31, 2015, nel revenue of Krungsri was ¥240.3 billion.
Operating expenses of Krungsri were ¥123.7 billion for the fiscal year ended March 31, 2015.
As a result, operating profit of Krungsri was ¥116.6 billion for the fiscal year ended March 31, 2015.
Integrated Global Markets Business Group
Net revenue of the Integrated Global Markets Business Group increased ¥46.2 billion to ¥609.4 billion for the fiscal year ended March 31, 2015 from ¥563.2 billion for the fiscal year ended March 31, 2014. This increase was mainly due to higher capital gains, in the strategic investment business in our commercial and trust banking subsidiaries, reflecting improved stock prices in major markets, and higher gains in the sales and trading business in our commercial banking and security subsidiaries, reflecting higher volatility in the financial markets.
Operating.expenses of the Integrated Global Markets Business Group increased ¥14.8 billion to¥191.3 billion for the fiscal year ended March 31, 2015 from ¥176.5 billion for the fiscal year.ended March 31, 2014, primarily due to an increase in salaries, including performance-based bonuses in our overseas securities subsidiaries, reflecting increased market activities.
Operating profit ofthe Integrated Global Markets Business Group increased ¥31.4 billion to ¥418.1 billion for the fiscal year, ended March 31, 2015 from ¥386.7 billion for the fiscal year ended March 31, 2014.
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
Integrated Retail Banking Business Group
Net revenue of the Integrated Retail Banking Business Group increased ¥85.1 billion to ¥1,296.3 billion for the fiscal year ended March 31, 2014 from ¥1,211.2 billion for the fiscal year ended March 31, 2013. Net revenue ofthe Integrated Retail Banking Business Group mainly consists of domestic revenues from commercial banking operations, such as deposits and lending operations, and fees related to sales of investment products to retail customers, as well as fees received by subsidiaries within the Integrated Retail Banking Business Group. The increase in net revenue was mainly due to increases in volumes of sales of financial products such as mutual funds, debt securities and equity securities, reflecting improved market conditions since the introduction of "Abenomics" despite the negative impact of lower interest income from loans due to lower interest rates.
Operating expenses of the Integrated Retail Banking Business Group increased ¥44.6 billion to ¥961.9 billion for the fiscal year ended March 31, 2014 from ¥917.3 billion for the fiscal year ended March 31, 2013. .
Operating profit of the Integrated Retail Banking Business Group increased ¥40.5 billion to ¥334.4 billion ...for-the fiscal year-ended March 31, 2014 from ¥293.9-billion-for the-fiscal year ended March 31, 2013. — ' -
Integrated Corporate Banking Business Group
Net revenue ofthe Integrated Corporate Banking Business Group increased ¥60.8 billion to ¥924.0 billion for the fiscal year ended March 31, 2014 from ¥863.2 billion for the fiscal year ended March 31, 2013. Net revenue ofthe Integrated Corporate Banking Business Group mainly consists of domestic revenues from corporate lending and other commercial banking operations, investment banking and trust banking businesses in
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relation to corporate clients, as well as fees received by subsidiaries within the Integrated Corporate Banking Business Group. The increase in net revenue was mainly from inveslment banking businesses such as derivalive sales and structured financing in our banking subsidiaries and from primary and secondary businesses in our securities subsidiaries, reflecting improved market conditions in Japan.
Operating expenses of the Integrated Corporate Banking Business Group were ¥438.5 billion for the fiscal year ended March 31, 2014, an increase of ¥4.2 billion from ¥434.3 billion for the fiscal year ended March 31, 2013.
Operating profit of the Integrated Corporate Banking Business Group increased ¥56.6 billion to ¥485.5 billion for the fiscal year ended March 31, 2014 from ¥428.9 billion for the fiscal year ended March 31, 2013.
Integrated Trust Assets Business Group
Net revenue of the Integrated Trust Assets Business Group increased ¥20.1 billion to ¥159.7 billion for the fiscal year ended March 31, 2014 from¥139.6 billion for the fiscal year ended March 31, 2013. Net revenue of the Integrated Trust Assets Business Group mainly consists of fees from asset management and administration services for products such as pension trusts.and investment trusts. Improvements in market conditions since the introduction of "Abenomics" had a positive impact on the businesses of the Integrated Trust Assets Business Group.
Operating expenses of the Integrated Tmst Assets Business Group increased by ¥6.0 billion to ¥94.8 billion for tlie fiscal year ended March 31, 2014 from ¥88.8 billion for the fiscal year ended March 31, 2013.
Operating profit of the Integrated Tmst Assets Business Group increased ¥14.1 billion to ¥64.9 billion for the fiscal year ended March 31, 2014 from ¥50.8 billion for the fiscal year ended March 31, 2013.
Integrated Global Business Group
Net revenue of the Integrated Global Business Group increased ¥189.9 billion to ¥943.8 billion for the fiscal year ended March 31, 2014 from ¥753.9 billion for the fiscal year ended March 31, 2013. Net revenue of the Integrated Global Business Group mainly consists of revenues from commercial banking businesses outside of Japan, including loan, deposit and cash management, investment banking, retail banking, tmst banking and securities businesses. The increase in net revenue mainly came from increases in fees and commissions income in Asia and interest income from loans to both Japanese and non-Japanese companies in the Americas. The depreciation of the Japanese yen against other major currencies also contributed to the increase in net revenue of the business group.
Operating expenses of the Integrated Global Business Group increased ¥114.6 billion to ¥566.8 billion for the fiscal year ended March 31, 2014 from ¥452.2 billion for the fiscal year ended March 31, 2013, mainly due to increases in salaries in foreign branches of our commercial banking and securities subsidiaries, and the depreciation ofthe Japanese yen against other major currencies.
Operating profit of the Integrated Global Business Group increased ¥75.3 billion to ¥377.0 billion for the fiscal year ended March 31, 2014 from ¥301.7 billion for the fiscal year ended March 31, 2013.
Integrated Global Markets Business Group
_ Net revenue ofthe Integrated Global Markets Business Group decreased ¥196.7 billion to ¥563.2 billion for the fiscal year ended March 31, 2014 from ¥759.9 billion for the fiscal year ended March 31, 2013. This decrease was mainly due to lower gains in sales of debt securities, particularly Japanese government bonds held as investment securities, in our commercial and trust banking subsidiaries, reflecting lower volumes of debt securities sold, despite increases in gains from the equity and debt securities trading in our securities subsidiaries.
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Operating expenses ofthe Integrated Global Markets Business Group increased ¥34.0 billion to ¥176.5 billion for the fiscal year ended March 31, 2014 from ¥142.5 billion for the fiscal year ended March 31, 2013, primarily due to an increase in salaries, including performance-based bonuses in our securities subsidiaries, reflecting increased market activities.
Operating profit of the Integrated Global Markets Business Group decreased ¥230.7 billion to ¥386.7 billion for the fiscal year ended March 31, 2014 from ¥617.4 billion for the fiscal year ended March 31, 2013.
Geographic Segment Analysis
The table below sets forth our total revenue, income (loss) before income tax expense (benefit) and net income (loss) attributable to Mitsubishi UFJ Financial Group on a geographic basis for the fiscal years ended March 31, 2013, 2014 and 2015. Assets, income and expenses attributable to foreign operations are allocated to geographical areas based on the domicile of the debtors and customers. For further information, see Note 30 to our consolidated financial statements included elsewhere in this Annual Report.
Fiscal years ended March 31,
2013 2014 2015
(in billiuns)
Total revenue (interest income and non-interest income):
Domestic '.T77:7..7."7.'77 77777. ¥3,016.0 ¥3,110.1 ~¥37)T6.4
Foreign:
United States of America 426.4 219.0 715.5
Europe 256.5 155.0 521.4
Asia/Oceania excluding Japan 585.5 569.0 1,087.4
Other areas!" 211.1 290.3 399.0
Total foreign 1,479.5 1,233.3 2,723.3
Total ¥4,495.5 ¥4,343.3 ¥5,739.7
Income (loss) before income tax expense (benefit):
Domestic ¥ 767.2 ¥1,157.8 ¥1,003.4
Foreign:
United States of America 98.8 (207.1) 200.2
Europe 96.5 11.6 354.5
Asia/Oceania excluding Japan 317.1 253.8 414.4
Other areas*" 136.3 204.3 290.2
Total foreign 648.7 262.6 1,259.3
Total ¥1,415.9 ¥1,420.4 ¥2,262.7
Net income (loss) attributable to Mitsubishi UFJ Financial Group
Domestic ¥ 499.1 ¥ 859.8 ¥ 410.7
Foreign:
United States of America '. 95.6 (131.5) 187.3
Europe 78.4 6.5 309.8
-Asia/Oceania excluding Japan :. . . :. :. .: . : .....:. 275:0 149:4 " 358:6
Other areas'" 121.0 131.2 264.7
Total foreign 570.0 155.6 1,120.4
Total ¥1,069.1 ¥1,015.4 ¥1,531.1
Note:
(1) Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
Ill
Fiscal Year Ended March 31, 2015 Compared lo Fiscal Year Ended March 31, 2014
Domestic net income attributable to Mitsubishi UFJ Financial Group decreased ¥449.1 billion to ¥410.7 billion for the fiscal year ended March 31, 2015 from ¥859.8 billion for the fiscal year ended March 31, 2014. This was mainly due to lower interest income from the domestic loan business, an increase in provision for credit losses, and smaller gains on sales of available-for-sale securities during the fiscal year ended March 31, 2015.
Foreign net income attributable to Mitsubishi UFJ Financial Group increased ¥964.8 billion to ¥1,120.4 billion for the fiscal year ended March 31, 2015 from ¥155.6 billion for the fiscal year ended March 31, 2014. The increase in foreign net income was mainly due to an increase in net income in Europe, reflecting higher fair values of foreign currency denominated bonds related to the fair value option, including German and French government bonds, as our banking subsidiaries increased their holdings of such bonds and interest rates decreased in the region where economic conditions remained stagnant. The increase in foreign net income in the United States and Asia reflected increases in the loan balance of MUAH and KS, and increases in lending interest rates in these regions.
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
Domestic net income attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2014 was ¥859.8 billion, compared to net income of ¥499.1 billion for the fiscal year ended March 31, 2013.
This was mainly due to an increase in non-interest income, particularly fees and commissions on securities business, investment fund business and trust business, as our commercial banking, trust banking and securities subsidiaries took advantage of increased market activities in Japan.
Foreign net income attributable to Mitsubishi UFJ Financial Group for the fiscal year ended March 31, 2014 was ¥155.6 billion, a decrease of ¥414.4 billion from ¥570.0 billion for the fiscal year ended March 31, 201,3. The decrease in foreign net income was mainly due to a decrease in net income in the U.S. region reflecting lower fair values of foreign currency denominated bonds related to the fair value option, including U.S. Treasury bonds, as interest rates rose in the United States where the FRB began tapering its quantitative monetary easing program.
Effect of Change in Exchange Rates on Foreign Currency Translation
Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014
The average exchange rate for the fiscal year ended March 31, 2015 was ¥109.93 per U.S.$1.00, compared to the average exchange rate of ¥100.24 per U.S.$1.00 for the previous fiscal year. The average exchange rate for the conversion of the U.S. dollar financial statements of some of our foreign subsidiaries for the fiscal year ended December 31, 2014 was ¥105.85 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended December 31, 2013 of ¥97.65 perU.S.$1.00.
The change in the average exchange rate of the Japanese yen against the U.S. dollar and other foreign currencies had the effect of increasing total revenue by ¥202.8 billion, net interest income by ¥85.5 billion and income before income tax expense by ¥105.2 billion, respectively, for the fiscal year ended March 31, 2015.
Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013
The average exchange rate for the fiscal year ended March 31, 2014 was ¥100.24 per U.S.$ 1.00, compared to the average exchange rate of ¥83.10 per U.S.$1.00 for the previous fiscal year. The average exchange rate for the conversion of the U.S. dollar financial statements of some of our foreign subsidiaries for the fiscal year ended December 31, 2013 was ¥97.65 per U.S.$1.00, compared to the average exchange rate for the fiscal year ended December 31, 2012 of ¥79.82 per U.S.$1.00.
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The change in the average exchange rale of (he Japanese yen against the U.S. dollar and other foreign currencies had the effect of increasing total revenue by ¥285.2 billion, net interest income by ¥171.0 billion and income before income lax expense by ¥ 115.4 billion, respectively, for the fiscal year ended March 31, 2014.
B. Liquidity and Capital Resources Financial Condition Total Assets
Our total assets as of March 31, 2015 were ¥280.89 trillion, an increase of ¥27.23 trillion from ¥253.66 trillion as of March 31, 2014. The increase in total assets mainly reflected increases in interest-earning deposits in other banks of ¥16.86 trillion, loans (before allowance for credit losses) of ¥7.99 trillion, and trading account assets of ¥6.25 trillion, which were partially offset by a decrease in available-for-sale securities of ¥4.40 trillion.
The following table shows our total assets as of March 31, 2014 and 2015 by geographic region based principally on the domicile of the obligors:
As of March 31, 2014 2015
. — - - —- -(in trillions) —
Japan ¥158.81 ¥169.28
Foreign:
United States 40.63 46.33
Europe 22.35 27.72
Asia/Oceania excluding Japan 22.31 26.19
Other areas'" 9.56 11.37
Total, foreign \ 94.85 111.61
Total ¥253.66 ¥280.89
Note:
(1)' Other areas primarily include Canada, Latin America, the Caribbean and the Middle East.
We have allocated a substantial portion of our assets to international activities. As a result, reported amounts are affected by changes in the exchange rate of the Japanese yen against the U.S. dollar and other foreign currencies. Foreign assets are denominated primarily in U.S. dollars. The Japanese yen amount of foreign currency-denominated assets increased as the relevant foreign exchange rates appreciated against the Japanese yen. For example, as of March 31, 2015 the exchange rate was ¥120.17 perU.S.Sl.OO, as compared with ¥102.92 as of March 31, 2014. This depreciation of the Japanese yen against the U.S. dollar and other foreign currencies between March 3L 2014 and March 31, 2015 resulted in a ¥9.84 trillion increase in the Japanese yen amount of our total assets as of March 31, 2015.
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Loan Portfolio
The following table sets forth our loans outstanding, before deduction of allowance for credit losses, as of March 31, 2014 and 2015, based on tlie industry segment loan classifications as defined by the Bank of Japan for regulatory reporting purposes, which is not necessarily based on the use of proceeds:
As of March 31,
2014 2015
(in billions)
Domestic:
Manufacturing ¥ 11,540.8 ¥ 11,703.4
Construction 980.9 977.9
Real estate 10,989.6 10,911.2
Services 2,693.6 2,684.4
Wholesale and retail 8,475.1 8,345.5
Banks and other financial institutions'" 3,985.1 4,330.0
Communication and information services 1,443.5 1,527.8
Other industries • 13,496.7 12,674.0
Consumer 16,921.3 16,720.6
Total domestic 70,526.6 69,874.8
Foreign:
Governments and official institutions 811.5 1,052.1
Banks and other financial institutions'" 9,792.2 11,973.0
Commercial and industrial 24,533.8 29,593.2
Other 4,872.4 6,065.8
Total foreign 40,009.9 48,684.1
Unearned income, unamortized premium—net and deferred loan fees—net (260.1) (293.7)
Total'2) ¥110,276.4 ¥118,265.2
Notes:
Loans to the so-called "non-bank finance companies" arc generally included in the "Banks and other financial institutions" category. Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
The above table includes loans held for sale of ¥46.6 billion and ¥88.9 billion as of March 31, 2014 and 2015, respectively, which are carried at the lower of cost or estimated fair value.
Loans are our primary use of funds. For the fiscal year ended March 31, 2015, the average balance of loans was ¥114.02 trillion, accounting for 48.1 % of the average total interest-earning assets, compared to ¥102.60 trillion, representing 48.4% of the average total interest-earning assets, for the previous fiscal year. As of March 31, 2015, our total loans were¥l 18.27 trillion, accounting for 42.1% of total assets, compared to¥l 10.28 trillion, accounting for 43.5% of total assets as of March 31, 2014. As a percentage of total loans before unearned income, net unamortized premiums and net deferred loan fees, between March 31, 2014 and March 31, 2015, domestic loans decreased from 63.8% to 58.9%, while foreign loans increased from 36.2% to 41.1%.
Our domestic loan balance decreased ¥0.65 trillion, or 0.9%, between March 31, 2014 and March 31, 2015. This was mainly due to a decrease in our loans outstanding to borrowers in the other industries category, primarily reflecting repayments of loans made to central government institutions.
Our foreign loan balance increased ¥8.67 trillion, or 21.7%, between March 31, 2014 and March 31, 2015. This was mainly due to increased lending activity in the Americas, particularly in the United States, where economic conditions continued to improve at a moderate pace, as well as in Asia, where emerging economies continued to grow. The depreciation of the Japanese yen against the U.S. dollar also contributed to the increase in the balance of foreign loans.
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Changes in the allowance for credit losses and provision (credit) for credit losses
The following table shows a summary of the changes in the allowance for credit losses by portfolio
for the fiscal years ended March 31, 2014 and 2015:
Fiscal year ended March 31,2014: Commercial Residential Card MUAH Krungsri12'
(in billions)
Allowance for credit losses:
Balance at beginning of fiscal year ¥1,068.5 ¥157.2 ¥51.9 ¥58.4 ¥—
Provision (credit) for credit losses (70.1) (36.0) 5.6 (5.9) —
Charge-offs 158.9 4.6 20.1 7.5 —
Recoveries 29.5 0.3 3.2 4.4 —
Net charge-offs 129.4 4.3 16.9 3.1 —
Others") 7.9 ' 0.0 — 10.6 —
Balance at end of fiscal year ¥ 876.9 ¥116.9 ¥40.6 ¥60.0 ¥—
Fiscal year ended March 31,20)5: Commercial Residential Card MUAH Krungsri'2"
(in billions)
Allowance for credit losses:
Balance at beginning^of fiscal year _. ... _. ¥ 876.9 ¥116.9 ¥40.6 .¥60.0 _ ¥—..
Provision (credit) for credit losses 22.6 (30.9) 2.6 (1.9) 94.6
Charge-offs 119.2 13.8 10.8 5.3 28.0
Recoveries 19.0 0.2 3.3 4.0 —
Net charge-offs 100.2 13.6 7.5 1.3 28.0
Others") 8^4 — — 8.0 8.3
Balance at end of fiscal year ¥807.7 ¥72.4 ¥35.7 ¥64.8 ¥74.9
segment
Total
,336.0 (106.4) 191.1 37.4
153.7 18.5
¥1,094.4
Total
¥1,094.4 87.0 177.1 26.5
150.6 24.7
¥1,055.5
Notes:
Others are principally comprised of gains or losses from foreign exchange translation.
For the Krungsri segment, which is a new portfolio segment added following our acquisition of Krungsri in December 2013, the acquired loans were recorded at their fair values as of the acquisition date, and there were no indications lhat an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no allowance for credit loss is stated as of March 31, 2014 in the above table. In addition, the information relating to the Krungsri segment is shown in the table on a basis prior to the integration between Krungsri and BTMU's Bangkok branch
We recorded ¥87.0 billion of provision for credit losses for the fiscal year ended March 31, 2015, compared to ¥106.4 billion of credit for credit losses for the previous fiscal year. Significant trends in each portfolio , segment are discussed below.
Commercial segment—A large borrower in the domestic electronics manufacturing industry began experiencing significant deterioration in its operational and financial performance in the second half of the fiscal year ended March 31, 2015, requiring modifications to the terms of a substantial portion of its loans and an impairment allowance.
Residential segment—The stable corporate environment in recent periods has contributed to higher income for borrowers in the segment. This trend resulted in an overall improvement in the credit quality of our .residential-loan portfolio.-In light of this improvement and other factors, we continued to record credit for credit losses.
Card segment—We continued to apply refined borrower screening, which we had originally implemented in June 2010 under regulatory reforms in the consumer finance industry. In addition, the stable corporate environment in recent periods has contributed to higher income for borrowers in the segment. These factors resulted in an overall improvement in the credit quality of our card loan portfolio. In light of this improvement and other factors, we recorded a smaller provision for credit losses.
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MUAH segment—Economic conditions continued to gradually improve in the United States with rising stock and real estate prices. This trend resulted in an overall improvement in the credit quality ofthe MUAH segment. In light of this improvement and other factors, we continued to record credit for credit losses.
Krungsri segment—We acquired KS in December 2013 and recorded the acquired loans at their fair values as of the acquisition date. We had no allowance for credit losses set aside as of March 31, 2014. We recorded ¥94.6 billion of provision for credit losses for the fiscal year ended March 31, 2015, primarily consisting of provisions of allowance for large groups of smaller-balance homogenous loans and formula allowance for loans that have been extended since the date of our acquisition of Krungsri, as well as provisions of allowance for loans individually evaluated for impairment particularly in the consumer and SME portfolios that were adversely affected by a slowdown in the economic growth in Thailand.
Charge-offs for the fiscal year ended March 31, 2015 were ¥177.1 billion, a decrease of ¥14.0 billion from ¥191.1 billion for the previous fiscal year. This was primarily due to a decrease in charge-offs in the Commercial segment, where a sizable portion of the loan outstanding to a large borrower in the domestic manufacturing category was charged off during the fiscal year ended March 31, 2014 to assist the borrower in improving its financial performance and repayment ability. The decrease in charge-offs in the Commercial segment was partially offset by an increase in charge-offs in the Residential segment, where portions of our apartment loans were charged off in connection with the sale of such loans to third parties.
Our total allowance for credit losses as of March 31, 2015 was ¥1,055.5 billion, a decrease of ¥38.9 billion from ¥1,094.4 billion as of March 31, 2014, as we recorded a provision for credit losses of ¥87.0 billion while we had net charge-offs of ¥150.6 billion for the fiscal year ended March 31, 2015. For further information on our allowance for credit losses, see "—Allowance for credit losses" below.
Allowance policy
We maintain an allowance for credit losses to absorb probable losses inherent in the loan portfolio. We have divided our allowance for loan losses into five portfolio segments—Commercial, Residential, Card, MUAH and Krungsri.
For all portfolio segments, key elements relating to the policies and discipline used in determining the allowance for credit losses are our credit classification and related borrower categorization process, which are closely linked to the risk grading standards set by the Japanese regulatory authorities for asset evaluation and assessment, and are used as a basis for establishing the allowance for credit losses and charge-offs. The categorization is based on conditions that may affect the ability of borrowers to service their debt, such as current financial condition and results of operations, historical payment experience, credit documentation, other public information and current trends.
For more information on our credit and borrower ratings, see "—Credit quality indicator" and "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management."
For the Commercial, MUAH and Krungsri segments, our allowance for credit losses primarily consists of allocated allowances. The allocated allowances consist of (1) an allowance for loans individually evaluated for impairment, (2) an allowance for large groups of smaller-balance homogeneous loans, and (3) a formula allowance. The allocated allowance within the Commercial segment also includes an allowance for country risk exposure. The allowance for country risk exposure within the Commercial segment covers transfer risk which is not specifically covered by other types of allowances. Both the allowance for country risk exposure and the formula allowance are provided for performing loans that are not subject to either the allowance for loans individually evaluated for impairment or the allowance for large groups of smaller-balance homogeneous loans. The allowance for credit losses within the MUAH segment also includes an unallocated allowance which captures losses that are attributable to economic events in various industry or geographic sectors whose impact
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on our loan portfolios in these segments have occurred but have yet to be recognized in the allocated allowance For the Residential and Card segments, the loans are smaller-balance homogeneous loans that are pooled by the risk ratings based on the number of delinquencies.
For more information on our methodologies used to estimate the allowance for each portfolio segment, see "Summary of Significant Accounting Policies" in Note 1 to our consolidated financial statements included elsewhere in this Annual Report, and "—Critical Accounting Estimates—Allowance for Credit Losses" above.
During the fiscal year ended March 31, 2015, we did not make any significant changes to the methodologies and policies used to determine our allowance for credit losses.
Allowance for credit losses
Allowance for credit losses and recorded investment in loans by portfolio segment as of March 31, 2014 and 2015 are shown below:
As of March 31,2014: Commercial Residential Card MUAH Krungsri'2> Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment ... ¥ 640.5 ¥ 69.6 ¥ 29.2 ¥ 4.1 ¥ — ¥ 743.4
Collectively evaluated for impairment ... 209.1 45.4 11.3 55.8 — 321.6
"Loans acquired with deteriorated-credit ~ — """
quality 27.3 L9 01_ OA —• 29.4
Total ¥ 876.9 ¥ 116.9 ¥ 40.6 ¥ 60.0 ¥ — ¥ 1,094.4
Loans:
Individually evaluated for impairment ... ¥ 1,459.3 ¥ 211.8 ¥102.9 ¥ 64.0 ¥ — ¥ 1,838.0
Collectively evaluated for impairment ... 83,052.5 14,751.2 493.0 7,060.6 3,025.2 108,382.5
Loans acquired with deteriorated credit
quality 75.7 15.3 12.7 115.0 50.7 269.4
Total") ¥84,587.5 ¥14,978.3 ¥608.6 ¥7,239.6 ¥3,075.9 ¥110,489.9
As of March 31,2015: Commercial Residential Card MUAH Krungsri*2' Total
(in billions)
Allowance for credit losses:
Individually evaluated for impairment ... ¥ 516.1 ¥ 49.3 ¥ 25.7 ¥ 4.2 ¥ 7.5 ¥ 602.8
Collectively evaluated for impairment ... 269.3 21.3 9.9 60.2 66.9 427.6
Loans acquired with deteriorated credit
quality 22.3 L8 (U 04 (L5 25.1
Total ¥ 807.7 ¥ 72.4 ¥ 35.7 ¥ 64.8 ¥ 74.9 ¥ 1,055.5
Loans:
Individually evaluated for impairment ... ¥ 1,317.5 ¥ 167.1 ¥90.1 ¥ 60.7 ¥ 31.9 ¥ 1,667.3
Collectively evaluated for impairment ... 88,833.2 14,366.0 462.5 9,171.9 3,788.9 116,622.5
Loans acquired with deteriorated credit
quality ! 56.0 13.4 12.0 62.2 36.5 180.1
Total") ¥90,206.7 ¥14,546.5 ¥564.6 ¥9,294.8 ¥3,857.3 ¥118,469.9
Notes:
Total loans in the above table do not include loans held for sale and represent balances without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
For the Krungsri segment, which is a portfolio segment newly added following our acquisition of Krungsri in December 2013, the acquired loans were recorded at their fair values as of the acquisition dale, and there were no indications lhal an allowance for credil loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no allowance for credit loss is slated as of March 31. 2014 in the above table. In addition, the information relating lo the Krungsri segment is shown in the table on a basis prior to the integration between Krungsri and BTMU's Bangkok branch.
1 17
Our total allowance for credit losses as of March 31, 2015 was ¥1,055.5 billion, a decrease of ¥38.9 billion from ¥1,094.4 billion as of March 31, 2014. The total allowance for credit losses represented 0.89% of the total loan balance as of March 31, 2015, compared to 0.99% as of March 31, 2014. Significant trends in each portfolio segment are discussed below.
Commercial segment—The allowance for credit losses for loans individually evaluated for impairment decreased ¥124.4 billion primarily because the financial performance and repayment ability of a number of large borrowers and a substantial portion of smaller borrowers improved, which resulted in upgrades of the borrower ratings assigned to these borrowers to the Normal category and reductions in loans individually evaluated for impairment. The allowance for credit losses for loans collectively evaluated for impairment increased ¥60.2 billion mainly reflected the unmodified portion of the loans to a large borrower in the domestic electronics manufacturing industry whose borrower rating was downgraded as its operational and financial performance deteriorated and concessions were made on a portion of its loans. The ratio of total allowance for credit losses to the total loan balance in this segment as of March 31, 2015 was 0.90%, compared to 1.04% as of March 31, 2014.
Residential segment—The total allowance for this segment decreased ¥44.5 billion. The stable corporate environment in recent periods has contributed to higher income for borrowers in the segment. As a substantial number of borrowers became current with their payments, nonaccrual loans decreased ¥15.6 billion, or 14.0%, between March 31, 2014 and March 31, 2015. This had a positive effect on the credit quality of our residential loan portfolio, resulting in ¥30.9 billion of credit for credit losses. In addition, ¥13.8 billion of loans were charged off mainly due to the sale of some of our apartment loans. The ratio of total allowance for credit losses to the total loan balance in this segment as of March 31, 2015 was 0.50%, compared to 0.78% as of March 31, 2014.
Card segment—The total allowance for this segment decreased ¥4.9 billion. As a substantial number of borrowers became current with their payments, nonaccrual loans decreased ¥5.5 billion, or 7.6%, between March 31, 2014 and March 31, 2015. The continued application of our refined borrower screening and higher income for borrowers in the stable corporate environment had a positive effect on the credit quality of our card loan portfolio. The ratio of total allowance for credit losses to the total loan balance in this segment as of March 31, 2015 was 6.32%, compared to 6.68% as of March 31, 2014.
MUAH segment—The total allowance for this segment increased ¥4.8 billion due to the impact of the depreciation of the Japanese yen against the U.S. dollar, which more than offset the impact of the improved credit quality of this portfolio, reflecting stronger economic conditions in the United States. The ratio of total allowance for credit losses to the total loan balance in this segment as of March 31, 2015 was 0.70%, compared to 0.83% as of March 31, 2014.
Krungsri segment—The total allowance for this segment was ¥74.9 billion as of March 31, 2015. During the fiscal year ended March 31, 2015, we recorded ¥94.6 billion of provision for credit losses, ¥28.0 billion of charge-offs, and ¥8.3 billion of foreign exchange translation adjustments. We had no allowance for credit losses set aside as of March 31, 2014 as we acquired KS in December 2013 and recorded the acquired loans at their fair values as of the acquisition date. The provision for credit losses for the fiscal year ended March 31, 2015 primarily consisted of provisions of allowance for large groups of smaller-balance homogenous loans and formula allowance for loans that have been extended since the date of our acquisition of Krungsri, as well as provisions of allowance for loans individually evaluated for impairment particularly in the consumer and SME portfolios that were adversely affected by a slowdown in the economic growth in Thailand. The ratio of total allowance for credit losses to the total loan balance in this segment as of March 31, 2015 was 1.94%.
Allowance for off-balance sheet credit instruments
We maintain an allowance for credit losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is included in other liabilities. We have adopted for such instruments the same methodology used in determining the allowance for credit losses on loans.
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The allowance for credit losses on off-balance sheet credit instruments was ¥73.3 billion as of March 31, 2015, an increase of ¥3.4 billion from ¥69.9 billion as of March 31, 2014.
Sales of nonperforming loans
The following table presents comparative data relating to the principal amount of nonperforming loans sold and reversal of allowance for credit losses:
Reversal of
Principal Allowance Loans, allowance amount of for credit net of for credit loans'1' fosses'2' allowance losses
(in billions)
For the fiscal year ended March 31, 2014 ¥38.7 ¥22.0 ¥16.7 ¥(5.8)
For the fiscal year ended March 31,2015 ¥14.9 ¥6.8 ¥8.1 ¥(3.3)
Notes:
Represents principal amount after the deduction of charge-offs made before the sales of nonperforming loans.
Represents allowance for credit losses at the latest balance-sheet date.
While we originate various types of loans to corporate and individual borrowers in Japan and overseas in the n'ormal'co'ursc of busineTsTw; dispose of horiperf6Tfriing~I6ans In ordeT "to improve our'loan quaU'ty. Most of such" nonperforming loans were disposed of by sales to third parties without any continuing involvement.
Through the sale of nonperforming loans to third parties, additional provisions or gains may arise from factors such as a changein the credit quality of the borrowers or the value of the underlying collateral subsequent to the prior reporting date, and the risk appetite and investment policy of the purchasers.
In connection with the sale of loans, including performing loans, we recorded net gains of ¥19.0 billion and ¥15.3 billion for the fiscal years ended March 31, 2014 and 2015, respectively.
Nonaccrual loans and troubled debt restructurings
We consider a loan to be a nonaccrual loan when substantial doubt exists as to the full and timely payment of interest on, or repayment of, the principal of the loan, which is a borrower condition that generally corresponds to borrowers in categories 13 and below in our internal rating system (which corresponds to "Likely to become Bankrupt," "Virtually Bankrupt" and "Bankrupt or de facto Bankrupt" status under Japanese banking regulations). Substantially all nonaccrual loans are also impaired loans. Loans are also placed in nonaccrual status when principal or interest is contractually past due one month or more with respect to loans within all classes ofthe Commercial segment, diree months or more with respect to loans within the Card, MUAH and Krungsri segments, and six months or more with respect to loans within the Residential segment.
We modify certain loans in conjunction with our loss-mitigation activities. Through these modifications, concessions are granted to a borrower who is experiencing financial difficulty, generally in order to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize payments received from the borrower. The concessions granted vary by portfolio segment, by program, and by borrower-specific characteristics, andmay includeinterest rate,reductions, term extensions,.paymentd.eferrals, and.partial principal . forgiveness. Loan modifications that represent concessions made to borrowers who are experiencing financial difficulties are identified as troubled debt restructurings, or TDRs. TDRs are also considered impaired loans, and an allowance for credit losses is separately established for each loan.
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been restructured as a TDR and the borrower is not delinquent under the restructured terms, and demonstrates that its financial
condition lias improved, wc may reclassify the loan to accrual status. This determination is generally performed at least once a year through a detailed internal credit rating review process. Although we have not defined any minimum period to qualify for an upgrade, it is not common for a borrower to be able to demonstrate that its business problems have been resolved or can soon be resolved within a short period of time following a restructuring. If the borrower is upgraded to,category 12 or higher in our internal rating system (which corresponds to "Normal" and "Close Watch" status under the Japanese banking regulations), a TDR would be reclassified to accrual status. However, we will continue to designate the loan as a TDR even if the loan is reclassified to accrual status.
A loan that has been modified into a TDR is considered to be a TDR until it matures, is repaid, or is otherwise liquidated, regardless of whether the borrower performs under the modified terms.
For more information on our credit and borrower ratings, see "—Credit Quality Indicator" and "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management."
For more information on our TDRs, see Note 4 to our consolidated financial statements included elsewhere in this Annual Report.
The following table shows information about the nonaccrual status of loans by class as of March 31, 2014 and 2015:
As of March 31,
2014 2015
(in billions)
Commercial
. Domestic ¥ 737.9 ¥514.0
Manufacturing 167.8 118.9
Construction 30.1 20.1
Real estate 142.0 77.0
Services 72.1 54.2
Wholesale and retail 211.8 158.0
Banks and other financial institutions 7.2 5.7
Communication and information services 24.9 23.2
Other industries 36.0 18.6
Consumer 46.0 38.3
Foreign-excluding MUAH and Krungsri 82.6 96.9
Residential 111.2 95.6
Card 72.5 67.0
MUAH 46.6 45.2
Krungsri 26.0 68.1
Total") ¥1,076.8 ¥886.8
Note:
(1) The above table does not include loans held for sale of nil and ¥0.6 billion as of March 31, 2014 and 2015, respectively, and loans acquired with deteriorated credit quality of ¥38.7 billion and ¥26.2 billion as of March 31, 2014 and 2015, respectively.
Total nonaccrual loans decreased ¥190.0 billion. Significant trends in each portfolio segment are discussed below.
Commercial segment—Nonaccrual loans in the domestic commercial category decreased ¥223.9 billion.-Approximately 25% of this decrease was attributable to large borrowers. In particular, in the real estate category,
120
the repayment ability of a large borrower improved, and the loan to the borrower was transferred from nonaccrual status lo accrual status, while the loan lo another large borrower was sold to a third party. In the wholesale and retail category, a portion ofthe loan to a large borrower was repaid and the remaining loan balance was forgiven. In the manufacturing category, the repayment ability of a large borrower improved, and the loan to the borrower was transferred front nonaccrual status to accrual status. Nonaccrual loans in the foreign excluding MUAH and Krungsri category increased ¥14.3 billion due to the loans to a large borrower being downgraded under our internal borrower grading system.
Residential segment—Nonaccrual loans in the segment decreased ¥15.6 billion primarily due to the transfer from nonaccrual status to accrual status of loans to borrowers who became current with their payments as the stable corporate environment in recent periods has contributed to higher income for borrowers in the segment.
Card segment—Nonaccrual loans in the segment decreased ¥5.5 billion, as a substantial number of borrowers became current with their payments.
MUAH segment—Nonaccrual loans in the segment decreased ¥1.4 billion, reflecting the overall improvement in the credit quality of the loan portfolio.
Krungsri segment—Nonaccrual loans in the segment increased ¥42.1 billion primarily because the credit quality of the cWsumef and SME loan p6rtf61i6s"w6Tsened~as7he"c€onolm
The following table shows information about outstanding recorded investment balances of TDRs by class as of March 31, 2014 and 2015:
As of March 31,
2014 2015
(in billions)
Commercial")
Domestic ¥528.1 ¥611.4
Manufacturing 257.0 348.9
Construction 13.7 12.9
Real estate 64.0 63.5
Services 57.5 45.2
Wholesale and retail 95.8 108.5
Banks and other financial institutions 1.2 0.7
Communication and information services 12.0 9.6
Other industries . 10.5 9.5
Consumer 16.4 12.6
Foreign-excluding MUAH and Krungsri 114.3 97.0
Residential") 99.3 71.5
Card'2' 103.6 90.7
MUAH(2) 62.4 56.3
Krungsri^) 19.9
Total ¥907.7 ¥946.8
Notes'
(1) TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual
loans with concessions granted. -- - -
TDRs for the Card, MUAH and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding recorded investment balances as of March 31, 2014 and 2015 arc nonaccrual TDRs as follows: ¥51.8 billion and ¥46.0 billion—Card; ¥23.7 billion and ¥22.2 billion—MUAH; and nil and ¥7.1 billion—Krungsn, respectively.
For the Krungsri segment, which is a new portfolio segment added following our acquisition of Krungsri in December 2013, the acquired loans were recorded at their fair values as of the acquisition date, and (here were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31. 2014. Therefore, no TDRs are stated as of March 31, 2014 in the above table.
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Total TDRs increased ¥39.1 billion. Significant trends in eacli portfolio segment are discussed below.
Commercial segment—TDRs in the domestic commercial category increased ¥83.3 billion. This increase was attributable to a large borrower in the electronics equipment manufacturing industry that began experiencing significant deterioration in its operational and financial performance. TDRs in the foreign excluding MUAH and Krungsri category decreased ¥17.3 billion primarily as a result of the collection on the loan to a large borrower.
Residential segment—TDRs in the segment decreased ¥27.8 billion primarily as a result of repayments of loans classified as TDRs. The stable corporate environment contributed to higher income for borrowers in the segment.
Card segment—TDRs in the segment decreased ¥12.9 billion mainly due to repayments of loans classified as TDRs pursuant to their respective restructured terms.
MUAH segment—TDRs in the segment decreased ¥6.1 billion mainly due to repayments of loans classified as TDRs pursuant to their respective restructured terms.
Krungsri segment—TDRs in the segment were¥19.9 billion as of March 31, 2015, which reflected deterioration in the repayment ability of consumer and SME borrowers as the economic growth slowed in Thailand. We had no TDRs as of March 31, 2014 as we acquired KS in December 2013 and recorded the acquired loans at their fair values as of the acquisition date.
In the above table, TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual loans with concessions granted, whereas TDRs for the Card, MUAH and Krungsri segments include accrual and nonaccrual loans.
The primary type of concessions we granted to loans in the Commercial, Residential and Krungsri segments during the fiscal year ended March 31, 2015 were extensions of the stated maturity dates. During the same fiscal year, reductions in the stated rates were the primary type of concessions we granted to loans in the Card segment, and payment deferrals were the primary type of concessions we granted to loans in the MUAH segment.
Impaired loans and impairment allowance
Impaired loans primarily include nonaccrual loans and TDRs. We consider a loan to be impaired when, based on current information and events, it is probable that we will be unable to collect all of the scheduled payments of interest on, and repayment of, the principal, of the loan when due according to the contractual terms of the loan agreement.
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The following table shows information about impaired loans by class as of March 31, 2014 and 2015:
As of March 31, 2014
Recorded Loan Balance
Requiring an Allowance for Credit Losses
Not Requiring an Allowance for Credit Losses'"
Unpaid Principal Balance
Related Allowance for Credit Losses
Commercial
Domestic
Manufacturing
Construction
Real estate
Services
Wholesale and retail
Banks and other financial
institutions
Communication and information
services
Other industries
Consumer
Foreign-excluding MUAH and
Krungsri
Loans-acquired-with deteriorated credit -
quality
Residential
Card
MUAH
Krungsri'1'
Total'")
¥1,006.3 368.9 30.5 141.2 102.0 249.0
8.3
25.4 36.8 44.2
193.3
18.8 203.6 102.9
39.6
¥1,564.5
¥257.2 55.0 13.3 63.7 27.3 58.6
0.1
11.5 9.6 18.1
2.4
0.2 11.6
0.7 24.4
¥296.5
(in billions)
¥1
¥1,263.5 423.9 43.8 204.9 129.3 307.6
8.4
36.9 46.4 62.3
195.7
19.0 215.2 103.6
64.0
¥1,861.0 ¥1,983.0
¥544.3 181.4 18.7 52.8 54.5 169.5
7.0
16.5 26.9 17.0
96.2
6.1 70.4 29.2
4.1
¥750.3
As of March 31, 2015
Recorded Loan Balance
Requiring an Allowance for Credit Losses
Commercial
Domestic ¥ 890.9
Manufacturing 420.9
Construction 21.0
Real estate 90.7
Services 74.5
Wholesale and retail 205.4
Banks and other financial
institutions 5.9
Communication and information
services 21.4
Other industries 20.5
Consumer 30.6
Foreign-excluding MUAH and
Krungsri 192.3
Loans acquired with deteriorated credit
quality 12.1
Residential 160.3
Card 90.1
MUAH 39.5
Krungsri'3' 24.1
Total'4' ¥1,409.3
Total'2'
(in billions)
¥1
¦ ¥1,125.1 , 467.8 ' 33.0 140.4 99.2 266.5
6.4
32.8 28.1 50.9
192.4
.- 12.1
169.8 90.7 60.7 36.0
¥1,686.8 ¥1,815.9
Related Allowance for Credit Losses
¥424.5 178.9 11.5 32.3 38.1 120.9
5.1
13.9 12.6 11.2
91.6
3.3 50.0 25.7 4.2 8.0
¥607.3
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Notes
These loans do not require an allowance for credit losses because the fair values of the impaired loans equal or exceed Ihe recorded investments in the loans.
Included in impaired loans as of March 31, 2014 and 2015 arc accrual TDRs as follows: ¥642.4 billion and ¥708.4 billion—Commercial, ¥99.4 billion and ¥71.5 billion—Residential, ¥51.8 billion and ¥44 7 billion—Card,¥38.7 billion and¥34.1 billion—MUAH; and ml and ¥8.5 billion—Krungsri, respectively •
For the Krungsri segment, which is a new portfolio segment added following our acquisition of Krungsri in December 2013, the acquired loans were recorded at their fair values as of the acquisition date, and there were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no impaired loans are stated as of March 31, 2014 in the above table. In addition, the information relating to the Krungsri segment is shown in the table on a basis prior to the integration between Krungsri and BTMU's Bangkok branch
In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of nil and ¥0.6 billion as of March 31, 2014 and 2015, respectively.
The following table shows information regarding the average recorded loan balance and recognized interest income on impaired loans for the fiscal years ended March 31, 2014 and 2015:
Fiscal years ended March 31,
2014
Average Recognized Recorded Loan Interest Balance Income
(in billions)
Commercial
Domestic ¥1,359.6 ¥23.3 ¥1,181.9
Manufacturing 430.4 7.0 440.3
Construction 47.8 0.9 38.9
Real estate 228.1 3.5 170.5
Services '... 140.6 2.8 115.4
Wholesale and retail 339.6 5.9 283.2
Banks and other financial institutions 10.7 0.2 7.2
Communication and information services 44.4 0.9 35.2
Other industries 49.6 1.0 35.2
Consumer 68.4 1.1 56.0
Foreign-excluding MUAH and Krungsri 187.7 2.8 183.7
Loans acquired with deteriorated credit quality .. 30.1 1.7 14.7
Residential 264.3 5.1 187.6
Card 114.0 5.2 97.2
MUAH 60.9 3.5 59.7
Krungsri — — 18.8
Total ¥2,016.6 ¥41.6 ¥1,743.6
Recognized Interest Income
¥23.2 8.3 0:9 3.2 2.7 5.4 0.1 0.8 0.7 1.1 3.2 0.7 4.2 4.2 2.0 0.6
¥38.1
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Credit quality indicator
The following table sets forth credit quality indicators of loans by class as of March 31, 2014 and 2015:
Likely to become Bankrupt or Close Legally/Virtually
As of March 31,2014: Normal Watch Bankrupt Total'"
(in billions)
Commercial
Domestic ¥50,608.9 ¥ 3,549.1 ¥737.7 ¥54,895.7
Manufacturing 10,032.9 1,329.4 167.8 11,530.1
Constntction 786.6 163.3 30.1 980.0
Real estate 9,747.1 716.3 141.8 10,605.2
Services 2,279.4 328.1 72.1 2,679.6
Wholesale and retail 7,582.6 651.7 211.7 8,446.0
Banks and other financial institutions 3,959.3 18.5 7.2 3,985.0
Communication and information services 1,349.2 68.8 25.0 1,443.0
Other industries 13,274.0 182.7 36.1 13,492.8
Consumer 1,597.8 90.3 45.9 1,734.0
Foreign-excluding MUAH and Krungsri 28,399.2 1,132.1 84.8 29,616.1
Loans acquired with deteriorated credit quality 32.4 33.1 10.2 75.7
Total .-::.-. .-- - ¥ 79,040.5 ¥4,714.3 - Y 832.7 ¥-84;587:5 -
Accrual Nonaccrual Total'" (in billions)
Residential ¥14,864.9 ¥113.4 ¥14,978.3
Card ¥ 535.5 ¥ 73.1 ¥ 608.6
Credit Quality Based on Credit Quality Based on
the Number of Delinquencies Internal Credit Ratings
Special
Accrual Nonaccrual Pass Mention Classified Total'"'2)
(in billions)
MUAH ¥3,003.8 ¥35.0 ¥3,947.0 ¥98.6 ¥95.2 ¥7,179.6
Special Substandard or Doubtful Normal Mention or Doubtful of Less Total'"
(in billions)
Krungsri ¥2,923.1 ¥101.2 ¥51.6 . ¥3,075.9
Likely to become Bankrupt or Close Legally/Virtually
As of March 31,2015: Normal Watch Bankrupt Total"'
(in billions)
Commercial
Domestic ¥51,408.6 ¥2,782.4 ¥514.0 ¥54,705.0
Manufacturing 10,523.0 1,049.4 118.9 11,691.3
Construction 887.0 70.0 20.1 977.1
Real estate 10,101.7 559.1 76.9 10,737.7
Services 2,383.1 235.5 54.2 2,672.8
Wholesale and retail 7,583.0 583.0 157.9 8,323.9
Banks and otlierTinanciariristitutiohs ". 4,313.4 10.6 5.7 4,329.7
Communication and information services 1,449.7 54.5 23.2 1,527.4
Other industries 12,504.6 147.5 18.7 12,670.8
Consumer 1,663.1 72.8 38.4 1,774.3
Foreign-excluding MUAH and Krungsri 34,355.6 990.5 99.6 35,445.7
Loans acquired with deteriorated credit quality 20.9 28.4 6.7 56.0
, Total ¥ 85,785.1 ¥3,801.3 ¥620.3 ¥90,206.7
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Accrual Nonaccrual
Residential ¥14,449.1
Card ¥ 497.0
(in billions)
¥97.4 ¥14,546.5 ¥67.6 ¥ 564.6
Credit Quality Rased on the Number of Delinquencies
Credit Quality Based on Internal Credit Ratings
Special
Mention Classified Total""21
(in billions)
¥5,229.7 ¥76.7 ¥80.9 ¥9,240.9
Normal
Special Mention
Krungsri ¥3,653.9 ¥118.2
Substandard or Doubtful
or Doubtful of Loss Total"'
(in billions)
¥85.2 ¥3,857.3
Notes:
Total loans in the above table do not include loans held for sale.
Total loans of MUAH do not include FDIC covered loans and small business loans which are nol individually rated totaling ¥60.0 billion and ¥53.9 billion as of March 31, 2014 and 2015, respectively. We will be reimbursed for a substantial portion of any future losses on FDIC covered loans under the terms of the FDIC loss share agreements.
We classify loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, historical and current financial information, historical and current payment experience, credit documentation, public and non-public information about borrowers and current economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal credit rating assigned to each borrower based on our internal borrower ratings of 1 through 15 with the rating of 1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a borrower, we evaluate the borrower's expected debt-service capability based on various information, including financial and operating information of the borrower as well as information on the industry in which the borrower operates, and the borrower's business profile, management and compliance system. In evaluating a borrower's debt-service capability, we also conduct an assessment ofthe level of earnings and an analysis of the borrower's net worth. Based on the internal borrower rating, loans within the Commercial segment are categorized as Normal (internal borrower ratings of 1 through 9), Close Watch (internal borrower ratings of 10 through 12), and Likely to become Bankrupt or Legally/Virtually Bankrupt (internal borrower ratings of 13 through 15). Loans to borrowers categorized as Normal represent those that are not deemed to have collectibility issues. Loans to borrowers categorized as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of serious concern with respect to its business performance and financial condition, including business problems requiring long-term solutions, or the borrower's loans are TDRs or loans contractually past due 90 days or more for special reasons. Loans to borrowers categorized as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
For more information on our credit and borrower ratings, see "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management."
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card segment, and consumer loans within the MUAH segment. The accrual status of these loans is determined based on the number of delinquent payments.
126
Commercial loans within the MUAH segment are categorized as either pass or criticized based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment ofthe loan and result in further downgrade. Classified credits are those that are internally risk graded as Substandard or Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction ofthe debt. A credit classified as Doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, and Substandard, which is further divided into Substandard, Doubtful and Doubtful of Loss, primarily based on their delinquency status. Loans categorized as Special Mention generally represent those that have overdue principal or interest payments for a cumulative period exceeding one month commencing from the contractual due date. Loans categorized as Substandard, Doubtful or Doubtful of Loss generally represent those that have overdue principal or interest payments for a cumulative period exceeding three months, commencing from the contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of March 31. For the MUAH and Krungsri segments, credit quality indicators are generally based on information as of December 31.
Significant trends in each portfolio segment are discussed below.
Commercial segment—The ratio of loans classified as Close Watch or below to total loans in the segment decreased 1.7 percentage points to 4.9% as of March 31, 2015 from 6.6% as of March 31, 2014. The decrease reflected a decrease in loans rated Close Watch or below and an increase in total loans in the segment. Loans classified as Close Watch or below decreased for all categories in the segment, particularly for the domestic manufacturing, real estate, and wholesale and retail categories, and the foreign excluding MUAH and Krungsri category. The decrease in the domestic manufacturing category was primarily due to an improvement in the financial performance and prospects of a large borrower, whose borrower rating was upgraded to Normal, as well as the disposition of the loan to a large borrower. The decrease in the domestic real estate category was mainly because the loans to one large borrower were upgraded to Normal after considering its repayment ability under the current modified terms and the loans to one large borrower were sold to a third party purchaser. The decrease in the domestic wholesale and retail category was primarily because a portion of the loan to a large borrower was repaid and the remaining loan balance was forgiven. The decrease in the foreign excluding MUAH and Krungsri category was mainly attributable to improved conditions of borrowers of loans booked at BTMU's branches in the United States and Asia. The increase in total loans in the segment was mainly due to an increase in foreign loans.
Residential segment—The ratio of loans classified as Nonaccrual to total loans in the segment decreased 0.1 percentage points to 0.7% as of March 31, 2015 from 0.8% as of March 31, 2014. This was mainly due to a decrease of ¥16.0 billion in nonaccrual loans in the segment primarily as a result of the transfer to accrual status of loans to borrowers who became current with their payments.
Card segment—The ratio of loans classified as Nonaccrual to total loans in the segment was 12.0% as of March 31, 2014 and March 31, 2015.
MUAH segment—The ratio of loans classified as Special Mention or below and Nonaccrual to total loans in the segment decreased 1.1 percentage points to 2.1% as of March 31, 2015 from 3.2% as of March 31, 2014. The decrease was primarily as a result of collections and transfers of loans to accrual status as economic conditions continued to improve in the United States.
Krungsri segment—The ratio of loans classified as Special Mention or below to total loans in the segment increased 0.3 percentage points to 5.3% as of March 31, 2015 from 5.0% as of March 31, 2014. The increase was
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primarily due lo increases in loans classified as Doubtful or Doubtful of Loss mainly because the credit quality of the consumer loan portfolio worsened as Thailand's economic growth slowed.
Past due analysis
Aging of past clue loans by class as of March 31, 2014 and 2015 are shown below:
As ofMarcli31,2014:
Commercial
Domestic ¥ 26.2
Manufacturing 5.3
Construction 0.7
Real estate 4.9
Services 4.3
Wholesale and retail 4.7
Banks and other financial
institutions 0.0
Communication and
information services 0.7
Other industries 0.6
Consumer 5.0
Foreign-excluding MUAH and
Krungsri 3.3
Residential -. 85.5
Card 21.6
MUAH 30.1
Krungsri 66.9
Total ¥233.6
Total Past Due
Current (in billions)
¥ 54,815.9 11,517.6 978.7 10,590.7 2,672.5 8,418.5
Total
53.6 7.2 0.6 9.6 2.8
22.8
0.1
1.4 1.6 7.5
7.1 54.5 33.4 14.3 22.1
f 79.8 12.5 1.3 14.5 7.1 27.5
0.1
2.1 2.2 12.5
10.4 140.0 55.0 44.4 89.0
Loans'1"1)
3,984.9
1,440.9 13,490.6 1,721.5
29,605.7 14,823.0 540.9 7,078.6 2,936.2
¥ 54,895.7 11,530.1 980.0 10,605.2 2,679.6 8,446.0
3,985.0
1,443.0 13,492.8 1,734.0
29,616.1 14,963.0 595.9 7,123.0 3,025.2
¥185.0 ¥418.6 ¥109,800.3 ¥110,218.9
Recorded Investment 90 Days and
Accruing
¥ 6.5
0.0 2.2 0.0 0.0
4.3
0.4 40.5
0.5 ¥47.9
As ofMarch31,201S:
Commercial
Domestic ¥ 14.1
Manufacturing 1.6
Construction 0.2
Real estate 3.1
Services 1.1
Wholesale and retail 2.7
Banks and other financial
institutions 0.0
Communication and
information services 0.5
Other industries 0.3
Consumer 4.6
Foreign-excluding MUAH and
Krungsri 9.4
Residential 82.9
Card 18.7
MUAH 21.0
Krungsri 88.1
Total ¥234.2
22.8 2.5 0.5 5.8 1.3 4.2
0.5
0.4 0.3 7.3
2.1 53.7 32.1 11.1 57.9
(¦ 36.9 4.1 0.7 8.9 2.4 6.9
0.5
0.9 0.6 11.9
11.5 136.6 50.8 32.1 146.0
Current (in billions)
¥ 54,668.1 11,687.2 976.4 10,728.8 2,670.4 8,317.0
4,329.2
1,526.5 12,670.2 1,762.4
35,434.2 14,396.6 501.7 9,199.4 3,674.8
¥179.7 ¥413.9 ¥117,874.8 ¥118,288.7
Recorded Investment 90 Days and
Accruing
¥ 5.6 0.2
0.9 0.1 0.1
0.0 4.3
41.8 0.3
¥47.7
Notes
Total loans in the above table do not include loans held for sale and loans acquired with deteriorated credit quality
Total loans of MUAH do not include Yl.6 billion and ¥1.1 billion of'FDIC covered loans as of March 31. 21)14 and 2U15, respectively, which are not subject to the guidance on loans and debt secunties acquired with deteriorated credit quality.
Total past due loans as of March 31, 2015 were ¥413.9 billion, a decrease of ¥4.7 billion from ¥418.6 billion as of March 31, 2014. This reflected an overall improvement in the credit quality of the Commercial, Residential, Card and MUAH segments, more than offsetting the increase in past due loans in the Krungsri segment.
Investment Portfolio
Our investment securities primarily consist of Japanese government bonds, corporate bonds and marketable equity securities. Japanese government bonds are mostly classified as available-for-sale securities. Our investment in Japanese government bonds is a part of our asset and liability management policy with respect to investing the amount of yen-dominated funds exceeding our net loans. The percentage of our holding of available-for-sale Japanese government bonds to the total investment securities decreased to 67.8% as of March 31, 2015 from 75.2% as of March 31, 2014. We also hold Japanese government bonds that are classified as held-to-maturity securities, which accounted for 2.2% of our investment portfolio as of March 31, 2015.
" —Historicallyr we have"held e^u'ily'Tecuritieso'f some of c^uTcustbmers primari ly" for strategic purposes, i n~~ particular, to maintain long-term relationships with these customers. We continue to focus on reducing our investment in equity securities for such purposes in order to reduce the price fluctuation risk in our equity portfolio from a risk management perspective and to respond to applicable regulatory requirements as well as increasing market expectation for us to reduce our equity portfolio. As of March 31, 2015, however, our investment in marketable equity securities increased mainly due to a higher fair value of our equity portfolio, reflecting increased stock prices in Japan and increased holdings of mutual funds by our banking subsidiaries as part of their investment strategy. As of March 31, 2014 and March 31, 2015, the aggregate book value of our marketable equity securities under Japanese GAAP satisfied the requirements of the legislation prohibiting banks from holding equity securities in excess of their Tier 1 capital.
Investment securities decreased ¥3.12 trillion to ¥52.21 trillion as of March 31, 2015 from ¥55.33 trillion as of March 31, 2014, primarily due to a decrease in our holding of Japanese government bonds primarily in response to the Bank of Japan's monetary policy and measure to purchase such bonds in tlie market to stimulate the economy by increasing liquidity and also as part of our asset and liability management. The .decrease in our holding of Japanese government bonds was partially offset by an increase in marketable equity securities in our banking subsidiaries reflecting the higher fair values of such securities due to higher stock prices.
Investment securities other than available-for-sale securities or held-to-maturity securities, which are nonmarketable equity securities presented on our consolidated balance sheet as other investment securities, were primarily carried at cost of ¥0.59 trillion as of March 31, 2015 and ¥0.74 trillion as of March 31, 2014, respectively, because their fair values were not readily determinable.
For the fiscal year ended March 31, 2015, losses resulting from impairment of investment securities were ¥5.9 billion, compared to ¥6.5 billion for the fiscal year ended March 31, 2014.
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The following table shows information regarding the amortized cost, net unrealized gains (losses), and fair value of our available-for-sale and held-to-maturity investment securities as of March 31, 2014 and 2015.
As of March 31,
2014 2015
Net Net
Amortized unrealized Amortized unrealized
cost Fair value gains (losses) cost Fair value gains (losses)
(in billions)
Available-for-sale securities: Debt securities:
Japanese government and Japanese government agency
bonds ¥41,388.6 ¥41,589.0 ¥ 200.4 ¥35,079.9 ¥35,405.6 ¥ 325.7
Japanese prefectural and
municipal bonds 195.1 203.1 8.0 186.9 194.4 7.5
Foreign governments and
official institutions bonds ... 1,272.2 1,271.4 (0.8) 1,661.3 1,682.5 21.2
Corporate bonds 1,523.0 1,561.2 38.2 1,226.3 1,255.6 29.3
Mortgage-backed securities 1,220.4 1,180.8 (39.6) 1,149.8 1,139.4 (10.4)
Asset-backed securities*') 1,060.8 1,058.0 (2.8) 1,255.9 1,246.0 (9.9)
Other debt securities 184.5 184.9 0.4 179.9 182.3 2.4
Marketable equity securities 2,457.0 4,837.3 2,380.3 2,568.3 6,384.6 3,816.3
Total available-for-sale securities ¥49,301.6. ¥51,885.7 ¥2,584.1 ¥43,308.3 ¥47,490.4 ¥4,182.1
Held-to-maturity debt securities*2) ¥ 2,707.0 ¥ 2,735.1 ¥ 28.1 ¥ 4,130.5 ¥ 4,184.1 ¥ 53.6
Notes.
AAA and AA-rated products account for approximately two-thirds of our asset-backed securities.
See Note 3 to our consolidated financial statements included elsewhere in this Annual Report for more details.
Net unrealized gains on available-for-sale securities were ¥4,182.1 billion as of March 31, 2015, an increase of ¥1,598.0 billion from ¥2,584.1 billion as of March 31, 2014. This increase primarily consisted of a ¥1,436.0 billion increase in net unrealized gains on marketable equity securities, reflecting the general increase in Japanese stock prices as the Japanese yen depreciated against other major currencies, and a ¥125.3 billion increase in net unrealized gains on Japanese government bonds, reflecting lower interest rates in major markets, including Japan, affected by conditions in the Euro-zone market.
The amortized cost of held-to-maturity securities increased ¥1,423.5 billion between March 31, 2014 and March 31, 2015. The increase was mainly due to the increased holdings of Japanese government bonds in our commercial banking subsidiaries to manage the interest rate fluctuation risk primarily relating to core deposits. This increase was partially offset by the redemption of Japanese government bonds held by our trust banking subsidiaries.
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The following table shows information relating to our investment securities other than available-for-sale securities or held-to-maturity securities as of March 31, 2014 and 2015:
As of March 31,
2014 2015
(in billions)
Other investment securities:
Nonmarketable equity securities
Unlisted preferred securities") ¥583.2 ¥446.0
Others'*) 128.2 118.6
Investment securities held by investment companies and brokers and dealers'3' 26.2 22.5
Total ¥737.6 ¥587.1
Notes.
These securities are mainly issued by public companies, including preferred stocks issued by Morgan Stanley, preferred securities issued by our non-consolidated funding vehicles, and other unlisted preferred securities issued by several Japanese public companies. Those securities are primarily carried at cost. The decrease of ¥137.2 billion in unlisted preferred securities was mainly due to redemption of the preferred securities issued by one of our capital raising vehicles.
These securities arc equity securities issued by unlisted companies other than unlisted preferred securities. Those securities are primarily carried at cost.
These inveslment securities are held by.ccrtain subsidiaries subject to specializcd-industry-accounting-principles for-investmcnl
companies and brokers and dealers, and are measured at fair value.
Cash and Due from Banks
Cash and due from banks fluctuates significantly from day to day depending upon financial market conditions. Cash and due from banks as of March 31, 2015 were ¥3.35 trillion, a decrease of ¥0.34 trillion from ¥3.69 trillion as of March 31, 2014.
Interest-earning Deposits in Olher Banks
Interest-earning deposits in other banks fluctuate significantly from day to day depending upon financial market conditions. Interest-earning deposits in other banks as of March 31, 2015 were ¥37.36 trillion, an increase of ¥16.86 trillion compared to ¥20.50 trilUon as of March 31, 2014, mainly due to increased interest-earning deposits with the Bank of Japan and the FRB by our banking subsidiaries. The average interest-earning deposits in other banks by our domestic offices for the fiscal year ended March 31, 2015 were ¥21.49 trillion, an increase of ¥11.16 trillion compared to the previous fiscal year, while the1 average interest-earning deposits in other banks by our overseas offices were ¥8.48 trillion, an increase of ¥1.95 trillion compared to the previous fiscal year.
Trading Account Assets
Trading account assets as of March 31, 2015 were ¥46.90 trillion, compared to ¥40.65 trillion as of March 31, 2014. Trading account assets consist of trading securities and trading derivative assets. Trading securities increased ¥1.34 trillion to ¥30.18 trillion as of March 31, 2015 from ¥28.84 trillion as of March 31, 2014. This increase was mainly due to increases in the fair values of foreign currency-denominated bonds held by our banking subsidiaries. The fair values of such bonds increased as a result of our banking subsidiaries increasing their holdings of euro-denominated foreign bonds, and also due to the impact of the depreciation of the Japanese yen against the U.S. dollar on the Japanese-yen value of the U.S^dollar denominated^ banking subsidiaries. Interest rates in the Euro-zone decreased during the fiscal year ended March 31, 2015 as stagnant economic conditions continued in the region, resulting in the value ofthe U.S. dollar appreciating against other major currencies, including Japanese yen. Trading derivative assels increased ¥4.91 trillion to ¥16.72 trillion as of March 31, 2015 from ¥11.81 trillion as of March 31, 2014. This increase was mainly attributable to an increase in the fair values of interest rate-related derivatives in our commercial banking and securities subsidiaries, and to an increase in the notional amount of foreign exchange related derivatives in our baking subsidiaries.
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Deferred Tax Assets
Deferred tax assets decreased ¥0.27 trillion to ¥0.09 trillion as of March 31, 2015 from ¥0.36 trillion as of March 31, 2014. This decrease was primarily as a result ofthe offset against deferred tax liabilities within the same tax jurisdiction. Deferred tax liabilities increased primarily due to an increase in net unrealized gains on investment securities.
Fore more information, see Note 7 to our consolidated financial statements included elsewhere in this Annual Rcpott.
Accounts Receivable
Accounts receivable, which are included in other assets, decreased ¥1.71 trillion to ¥1.50 trillion as of March 31, 2015 from ¥3.21 trillion as of March 31, 2014, reflecting a decrease in account receivables related to the sales of debt securities in our commercial banking subsidiaries.
Investment in Equity Method Investees
¦ Investment in equity method investees, which is included in other assets, increased ¥0.43 trillion to ¥2.05 trillion as of March 31, 2015 from ¥1.62 trillion as of March 31, 2014. The increase was mainly due to the impact of the depreciation of the Japanese yen against the U.S. dollar on our investment in Morgan Stanley and other investees.
For more information, see Note 14 to our consolidated financial statements included elsewhere in this Annual Report.
Cash Collateral Pledged
Cash collateral pledged, which is included in other assets, increased ¥0.67 trillion to ¥1.72 trillion as of March 31, 2015 from ¥1.05 trillion as of March 31, 2014. This was primarily due to an increase in derivatives transactions in our banking and securities subsidiaries.
Total Liabilities
As of March 31, 2015, total liabilities were ¥265.60 trillion, an increase of¥24.69 trillion from ¥240.91 trillion as of March 31, 2014. The total balance of deposits was ¥171.99 trillion as of March 31, 2015, an increase of ¥9.47 trillion from ¥162.52 trillion as of March 31, 2014. Long-term debt as of March 31, 2015 was ¥19.97 trillion, an increase of ¥5.47 trillion from ¥14.50 trillion as of March 31, 2014. Trading account liabilities were ¥17.03 trillion as of March 31, 2015, an increase of¥5.05 trillion from¥l 1.98 trillion as of March 31, 2014.
The depreciation of the Japanese yen against the U.S. dollar and other foreign currencies between March 31, 2014 and March 31, 2015 resulted in an increase of ¥8.60 trillion in the Japanese yen equivalent amount of foreign currency-denominated liabilities as of March 31, 2015.
Deposits
Deposits are our primary source of funds. The balance of domestic deposits increased ¥4.29 trillion to ¥125.80 trillion as of March 31, 2015 from ¥121.51 trillion as of March 31, 2014, and the balance of foreign deposits increased ¥5.18 trillion to ¥46.19 trillion as of March 31, 2015 from ¥41.01 trillion as of March 31, 2014. The increases in domestic deposits were mainly due to an increase in ordinary deposits in the domestic offices of our banking subsidiaries which was partially offset by a decrease in term deposits in our banking subsidiaries and a decrease in certificates of deposit in our trust banking subsidiaries. The increases in foreign deposits were mainly due to an increase in interest-bearing deposits in Krungsri and MUAH, partly due to the depreciation of Japanese yen against other major currencies.
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The average total balance of interest-bearing deposits increased ¥10.89 trillion to ¥144.20 trillion for the fiscal year ended March 31, 2015 from ¥133.31 trillion for the fiscal year ended March 31, 2014.
Short-term Borrowings
We use short-term borrowings as a funding source and in our management of interest rate risk. For management of interest rale risk, short-term borrowings are used in asset and liability management operations to match interest rate risk exposure resulting from loans and other interest-earning assets and to manage funding costs of various financial instruments at an appropriate level, based on our forecast of future interest rate levels. Short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities lending transactions, due to tmst accounts and other short-term borrowings.
Short-term borrowings increased ¥3.70 trillion to ¥45.76 trillion as of March 31, 2015 from ¥42.06 trillion as of March 31, 2014. This increase was primarily attributable to an increase of ¥2.68 trillion in payables under securities lending transactions. The increase in payables under securities lending transactions was primarily due to an increase in such transactions by our banking subsidiaries, partially offset by lower transaction volumes in our securities subsidiaries as they decreased their holdings of Japanese government bonds, which resulted in the subsidiaries holding a smaller amount of bonds available for securities lending transactions.
Trading Account Liabilities
Trading account liabilities as of March 31, 2015 were¥17.03 trillion, compared to ¥11.98 trillion as of March 31, 2014. Trading account liabilities mainly consist of trading derivative liabilities. The increase in trading derivative liabilities was mainly attributable to increases in the fair values of interest rate-related and currency-related derivatives in our commercial banking and securities subsidiaries, and an increase in the fair value of foreign exchange-related trading derivatives in our banking subsidiaries.
Long-term Debt
Long-term debt as of March 31, 2015 was ¥19.97 trillion, an increase of ¥5.47 trillion from ¥14.50 trillion as of March 31, 2014. This increase was due to increases in long-term borrowings and issuances of bonds by us and by our banking subsidiaries to diversify our funding sources as the volumes of loans both in Japan and foreign countries were on an upward trend in the fiscal year ended March 31, 2015.
The Basel Ill-compliant bonds that MUFG issued were also included in long-term debt. The terms and conditions of these bonds contain a clause that requires the bonds to be written off upon the occurrence of certain events, including when the Japanese banking regulator deems us to be at risk of becoming non-viable.
Other Liabilities
Other liabilities increased ¥2.26 trillion to ¥7.87 trillion as of March 31, 2015 from ¥5.61 trillion as of March 31, 2014. This increase was mainly due to increases in accounts payable, cash collateral received and deferred tax liabilities. The increase in accounts payable was due to a larger amount of investment securities purchased towards the end ofthe fiscal year ended March 31, 2015 in our trust banking and securities subsidiaries. Tlie increase iii cash'collaterarrcceiveil wasi due to larger volumes of derivatives transactions in our commercial banking and securities subsidiaries.
Sources of Funding and Liquidity
Our primary source of liquidity is from a large balance of deposits, mainly ordinary deposits, certificates of deposit and time deposits. Time deposits have historically shown a high rollover rate among our corporate
133
customers and individual depositors. The average deposit balance increased from ¥151.95 trillion for the fiscal year ended March 31, 2014 lo ¥164.59 trillion for the fiscal year ended March 31, 2015. These deposits provide us with a sizable source of stable and low-cost funds. Our average deposits, combined with average total equity of ¥13.00 trillion, funded 64.0% of our average total assets of ¥277.56 trillion during the fiscal year ended March 31, 2015. Our deposits exceeded our loans, net of allowance for credit losses, by ¥54.78 trillion as of March 31, 2015, compared to ¥53.34 trillion as of March 31, 2014. As part of our asset and liability management policy, a significant portion of the amount of yen-denominated funds exceeding our net loans has been invested in Japanese government bonds or deposited with the Bank of Japan in recent periods.
The remaining funding was primarily provided by short-term borrowings and long-term senior and subordinated debt. Short-term borrowings consist of call money and funds purchased, payables under repurchase agreements, payables under securities lending transactions, due to trust account, and other short-term borrowings. From time to time, we have issued long-term instruments such as straight bonds with maturities between three to ten years. The balance of our short-term borrowings as of March 31, 2015 was ¥45.76 trillion, and the average balance of our short-term borrowings for the fiscal year ended March 31, 2015 was ¥45.19 trillion. The balance of our long-term debt as of March 31, 2015 was ¥19.97 trillion, and the average balance of our long-term debt for the fiscal year ended March 31, 2015 was ¥17.60 trillion. Liquidity may also be provided by the sale of financial assets, including available-for-sale securities, trading account securities and loans. Additional liquidity may be provided by the maturity of loans.
We manage liquidity separately at certain of our foreign and domestic non-bank and bank subsidiaries because they are subject to separate regulatory requirements, pursue different business models and have distinctive liquidity risk profiles. We manage our group-wide liquidity on a consolidated basis based on the tests and analyses conducted at the subsidiary level. Liquidity risk management measures at the subsidiary level include the following:
Domestic bank subsidiaries—Our major domestic bank subsidiaries, BTMU and MUTB, set liquidity and funding limits designed to maintain their respective requirements for funding from market sources below pre-determined levels for certain periods (e.g., one-day, two-week and one-month). The major domestic bank subsidiaries also monitor the balance of buffer assets they respectively hold, including Japanese government bonds and U.S. Treasury bonds, which can be used for cash funding even in periods of stress. In addition, the major domestic bank subsidiaries regularly perform liquidity stress testing designed to evaluate the impact of systemic market stress conditions and institution-specific stress events, including credit rating downgrades, on their liquidity positions;
Foreign bank subsidiaries—Our major foreign bank subsidiaries, MUAH and Krungsri, monitors various liquidity metrics, including total available liquidity, the net non-core funding dependence ratio, and minimum liquidity assets, as a tool to maintain a sufficient amount of liquidity and diversity of funding sources to allow the major foreign bank subsidiaries to meet expected obligations in both stable and adverse conditions. In addition, the major foreign bank subsidiaries regularly conduct stress testing, which incorporates both bank-specific and systemic market scenarios that would adversely affect its liquidity position, to facilitate the identification of appropriate remedial measures to help ensure that it maintains adequate liquidity in adverse conditions;
Securities subsidiaries—Our securities subsidiaries implement liquidity and funding limits designed to maintain their requirements for funding from market sources below pre-determined levels for specified periods. In addition, the securities subsidiaries regularly conduct analyses designed to assess the period for which they can continue to meet their respective liquidity requirements by selling or pledging assets they respectively hold under scenarios where they are unable to access any additional sources of financing in the market; and
Non-bank subsidiaries—Our non-bank subsidiaries, including Mitsubishi UFJ NICOS, regularly conduct cash flow analyses designed to assess their ability to generate sufficient liquidity for specified periods, considering the cash and cash equivalents as well as deposits they respectively hold, and their
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respective operating income and expenses under scenarios where they are no longer able to obtain funding from markets through issuance of commercial paper, bonds or olher instruments. The non-bank subsidiaries also conduct analyses to ensure sufficient liquidity and funding are available from our bank subsidiaries and other financial institutions outside of our group of companies.
We collect and evaluate the results ofthe stress tests individually performed by our major subsidiaries to ensure our ability to meet our liquidity requirements on a consolidated basis in stress scenarios.
We manage our funding sources using buffer assets, primarily Japanese government bonds, for cash funding. As of March 31, 2015, we held ¥35.41 trillion of Japanese national government and Japanese government agency bonds as available-for-sale securities. Our major domestic commercial banking subsidiaries use liquidity-supplying assets, primarily commitment lines for minor currencies funding. In addition, the major bank subsidiaries use a liquidity gap, or the excess of cash inflows over cash outflows, for cash funding.
See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—A further downgrade of our credit ratings could trigger additional collateral obligations under our derivative contracts and increase our funding costs."
In January 2013, the Basel Committee on Banking Supervision introduced supplemental measurements to "support ifsPnnciples for Sound Liquidity Risk ManagemehT alid Supirm " liquidity coverage ratio, or LCR, and net stable funding ratio, or NSFR, and are designed to promote the short term resilience of the liquidity risk profile of banks. The Committee announced final LCR rules in January 2014 and final NSFR rules in October 2014.
The LCR is a measure to determine whether a bank has a sufficient amount of high-quality liquid assets to survive in a 30-day financial stress scenario, including sizable deposit outflows, inability to issue new bonds or access the interbank market, stoppage of the collateralized funding market, need for additional collateral in connection with derivative transactions, and significant outflows of cash under commitment lines to customers. In Japan, once a bank or bank holding company fails to meet tlie minimum LCR of 100%, it is required to immediately report to the FSA. If the FSA deems tlie financial condition of the bank or bank holding company serious, the FSA may issue a business improvement order. The LCR requirements began to apply to banks and bank holding companies in Japan in March 2015, with the minimum ratio applicable in 2015 set at 60% and increasing annually by 10 percentage points to 100% by 2019. Banks and bank holding companies are also required to disclose their LCR ratios starting in June 2015.
The NSFR is a measure to determine whether a bank has sustainable and long-term liabilities and capital for its assels and activities. The Basel Committee on Banking Supervision issued the final standard of NSFR in October 2014. In Japan, details of the NSFR requirements are currently under discussion.
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Total Equity
The following table presents a summary of our total equity as of March 31, 2014 and 2015:
March 31, 2014 March 31, 2015
(in billions, except percentages)
Capital stock ¥ 2,089.2 ¥ 2,090.3
Capital surplus 6,363.4 5,959.6
Retained earnings 2,397.2 3,664.4
Appropriated for legal reserve 239.6 239.6
Unappropriated retained earnings 2,157.6 3,424.8
Net unrealized gains on investment securities, net of taxes 1,272.7 2,304.6
Accumulated other comprehensive income, net of taxes, other than net unrealized
gains on investment securities 85.0 762.7
Treasury stock, at cost (2.5) (102.5)
Total Mitsubishi UFJ Financial Group shareholders'equity ¥12,205.0 ¥14,679.1
Noncontrolling interests 546.4 602.2
Total equity ¥12,751.4 ¥15,281.3
Ratio of total equity to total assets 5.03% 5.44%
Shareholders' equity as of March 31, 2015 was ¥14,679.1 billion, an increase of ¥2,474.1 billion from ¥12,205.0 billion as of March 31, 2014.
Capital surplus as of March 31, 2015 was ¥5,959.6 billion, a decrease of ¥403.8 billion from ¥6,363.4 billion as of March 31, 2014. This decrease was mainly due to the acquisition and cancellation of the outstanding shares of preferred stock. See "Recent Developments."
Retained earnings as of March 31, 2015 were ¥3,664.4 billion, an increase of ¥1,267.2 billion from ¥2,397.2 billion as of March 31, 2014, reflecting the net income of our banking and securities subsidiaries for the fiscal year ended March 31, 2015. We decided to pay our year-end dividend of ¥9.0 per share of common stock for the six months ended March 31, 2015, resulting in an annual dividend of ¥18.0 per share of common stock for the fiscal year ended March 31, 2015.
Net unrealized gains on investment securities, net of taxes, as of March 31, 2015 wcre¥2,304.6 billion, an increase of ¥1,031.9 billion from ¥1,272.7 billion as of March 31, 2014. The increase was mainly due to favorable price movements in the equity market in Japan during the fiscal year ended March 31, 2015, with the Japanese yen depreciating against the U.S. dollar in light of varying monetary policies of the central banks.
Accumulated other comprehensive income, net of taxes, other tiian net unrealized gains on investment securities includes, among other things, foreign currency translation adjustments, net of taxes. Foreign currency translation adjustments, net of taxes, as of March 31, 2015 were a positive adjustment of ¥947.6 billion, compared to ¥289.5 billion as of March 31, 2014. This improvement was recorded largely in MUAH, Krungsri, Morgan Stanley and odier foreign subsidiaries, including BTMU Liquidity Reserve Investment Limited, a Cayman subsidiary set up to purchase and hold U.S. Treasury bonds, reflecting the depreciation ofthe Japanese yen against the U.S. dollar.
Total equity increased ¥2,529.9 billion to¥15,281.3 billion as of March 31, 2015 from ¥12,751.4 billion as of March 31, 2014. The ratio of total equity to total assets increased 0.41 percentage points to 5.44% as of March 31, 2015 from 5.03% as of March 31, 2014. The increase in total equity as of March 31, 2015 was principally attributable to an increase in unappropriated retained earnings of ¥1,267.2 billion, reflecting ¥1,531.1 billion of net income attributable to Mitsubishi UFJ Financial Group, partially offset by dividends of ¥263.9 billion.
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Due to our holdings of a large amount of marketable equity securities and the volatility of the equity markets in Japan, changes in the fair value of marketable equity securities have significantly affected our total equity m recent years. The following tabic presents information relating to the accumulated net unrealized gains, net of taxes, in respect of available-for-sale investment securities as of March 31, 2014 and 2015:
March 31, 2014 March 31,2015
Accumulated net unrealized gains on investment securities
Accumulated nel unrealized gains to total equity
(in billions, except percentages)
¥1,272.7 ¥2,304.6 9.98% 15.08%
Capital Adequacy
We are subject to various regulatory capital requirements promulgated by the regulatory authorities ofthe countries in which we operate. Failure to meet minimum capital requirements can result in mandatory actions being taken by regulators that could have a direct material effect on our consolidated financial statements. Moreover, if our capital ratios are perceived to be low, our counterparties may avoid entering into transactions with us, which in turn could negatively affect our business and operations. For further information, see "Item 3.D. Key Information— Risk Factors—Risks Related to Our Business—We may not be able to maintain our capital ratios above minimum required levels, which could result in the suspension of some or all of our operations."
We continually, monitor our risk-adjusted capital ratio closely and manage our operations in consideration of the capital ratio requirements. These ratios are affected not only by fluctuations in the value of our assets, including our credit risk assets such as loans and equity securities, the risk weights of which depend on the borrowers' or issuers' internal ratings, marketable securities and defened tax assets, but also by fluctuations in the value of the Japanese yen against the U.S. dollar and other foreign currencies and by general price levels of Japanese equity securities.
Capital Requirements for Banking Institutions in Japan
We, as a holding company, and our Japanese banking subsidiaries are required to maintain risk-weighted capital ratios above the levels specified in the capital adequacy guidelines ofthe FSA which have been revised based on Basel III as of March 31, 2013.
For a discussion of applicable capital ratio requirements, "Item 4.B. Information on the Company— Business Overview—Supervision and Regulation—Japan—Capital adequacy."
Under Japanese regulatory capital requirements, our consolidated capital components, including Common Equity Tier 1, Tier 1, and Tier 2 capital and risk-weighted assets, are calculated based on our consolidated financial statements prepared under Japanese GAAP. Each of tlie consolidated and stand-alone capital components and risk-weighted assets of our banking subsidiaries in Japan is also calculated based on consolidated and non-consolidated financial statements prepared under Japanese GAAP.
For additional discussion of the calculation of our capital ratios, see Note 21 to our consolidated financial statements included elsewhere in this Annual Report.
137
Mitsubishi UFJ Financial Group Ratios
The table below presents our consolidated total capital components, risk-weighted assets, nsk-adjusted capital ratios and leverage ratio in accordance with Basel III as of March 31, 2014 and 2015 Underlying figures arc calculated in accordance with Japanese banking regulations based on information derived from out-consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The percentages in the table below are rounded down. For further information, see Note 21 to our consolidated financial statements included elsewhere in this Annual Report.
As of March 31, Minimum capital As of Marcli 31, Minimum capital
2014 ratios required 2015 ratios required
(in billions, except percentages) (in billions, except percentages)
Capital components:
Common Equity Tier 1 ¥11,153.0 ¥12,466.6
Additional Tier 1 1,188.8 1,663.7
Tier 1 capital 12,341.9 14,130.3
Tier 2 capital 3,052.5 3,422.0
Total capital ¥15,394.3 ¥17,552.3
Risk-weighted assets ¥99,084.3 ¥111,901.6
Capital ratios:
Common Equity Tier 1 11.25% 4.00% 11.14% 4.50%
Tier 1 capital 12.45 5.50- 12.62 6.00
Total capital 15.53 8.00 15.68 8.00
Leverage ratio'" — — 4.72 —
Note:
(1) The disclosure requirement relating to leverage ratios became effective on March 31, 2015. Minimum leverage ratio requirements are expected to be implemented on March 31, 2018.
As of March 31, 2015, management believed that we were in compliance with all capital adequacy requirements to which we were subject.
Our Common Equity Tier 1 ratio as of March 31, 2015 decreased from the ratio as of March 31, 2014 due to an increase in our risk-weighted assets despite increases in our consolidated regulatory capital amounts.
Tlie increase in our risk-weighted assets was mainly due to an increase in credit risk caused by an increase in the loan balance and the depreciation of the Japanese yen against other currencies. The increases in our consolidated regulatory capital amounts, particularly the Common Equity Tier 1 capital, were mainly due to an increase in retained earnings, positive foreign currency translation adjustments and larger unrealized gains on investment securities.
138
Ratios of Our Major Banking Subsidiaries in Japan
The table below presents the risk-adjusted capital ratios and leverage ratios of BTMU and MUTB in accordance with Basel III as of March 31, 2014 and 2015. Underlying figures arc calculated in accordance with Japanese banking regulations based on information derived from each bank's consolidated and non-consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The percentages in the table below are rounded down. For further information, see Note 21 to our consolidated financial statements included elsewhere in this Annual Report.
As of As of
March 31, Minimum capital March 31, Minimum capital
2014 ratios required 2015 ratios required
Consolidated: BTMU
Common Equity Tier 1 capital ratio 11.05% 4.00% 10.88% 4.50%
Tier 1 capital ratio 12.21 5.50 12.33 6.00
Total capital ratio 15.57 8.00 15.61 8.00
Leverage ratio'1' — — 4.64 —
MUTB
Common Equity Tier 1 capital ratio 14.21 4.00 14.70 4.50
Tier 1 capital ratio 14.76 5.50 15.26 6.00
Total-capital-ratio :T: r~ :: : . r:: ~: rr: ;:. r ;18:38 - 8:00 ~ 19715 8700
Leverage ratio"' — — 4.72 —
Stand-alone: BTMU
Common Equity Tier 1 capital ratio 11.88 4.00 11.90 4.50
Tier 1 capital ratio 13.74 5.50 13.54 6.00
Total capital ratio 17.52 8.00 17.23 8.00
MUTB
- Common Equity Tier 1 capital ratio 13.72 4.00 14.35 4.50
Tier 1 capital ratio 14.37 5.50 14.90 6.00
Total capital ratio 18.51 8.00 19.16 8.00
Note:
(1) The disclosure requirement relating to leverage ratios became effective on March 31, 2015. Minimum leverage ratio requirements are expected lo be implemented on March 31, 2018.
As of March 31, 2015, management believes that our banking subsidiaries were in compliance with all capital adequacy requirements to which they were subject.
Capital Requirements for Banking Institutions in the United States
In the United States, MUAH and MUB are subject to various regulatory capital requirements administered by the U. S. Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on MUAH's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, MUAH and MUB must meet specific capital guidelines that involve quantitative measures of MUAH's and MUB's assets, liabilities, and certain off-balance sheet items as calculated
under-regulatory accounting practices.-MUAH's capital amounts and MUB's prompt corrective-action-
classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
In addition, as foreign banking organizations that have U.S. branches and agencies and also as entities that are controlled by MUFG, which is a financial holding company, BTMU and MUTB are subject to the FRB's requirements.
139
Capital Ratios of Hanking Subsidiaries in the United States
The table below presents the risk-adjusted capital ratios of MUAH and MUB, both subsidiaries of BTMU, calculated in accordance with applicable U.S. banking regulations as of December 31, 2013 and 2014:
a rr> i n Ratio OCC
As of December 31, ... . ., . . , .
- Minimum capital requires to be
2013 2014 ratios required "well capitalized"
MUAH:
Tier 1 capital (to risk-weighted assets) 12.41% 12.79% 4.00% —
Tier I capital (to quarterly average assets)"' 11.27 11.25 4.00 —
Total capital (to risk-weighted assets) 14.61 14.74 8.00 —
MUB:
Tier I capital (to risk-weighted assets) 12.94% 13.09% 5.50% 6.00%
Tier I capital (to quarterly average assets)"' 11.13 11.09 4.00 5.00
Total capital (to risk-weighted assets) 14.91 14.78 8.00 10.00
Note:
(I) Excludes certain intangible assets.
Management believes that, as of December 31, 2014, MUAH and MUB were in compliance with all capital adequacy requirements to which they were subject.
As of December 31, 2013 and 2014, the OCC categorized MUB as "well-capitalized." To be categorized as "well-capitalized," MUB must maintain minimum ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to quarterly average assets (leverage ratio) as set forth in the table. There are no conditions or events since December 31, 2014 that would cause management to believe that MUB's category has changed.
For further information, see Note 21 to our consolidated financial statements included elsewhere in this Annual Report.
Capital Requirements for Securities Firms in Japan and Overseas
We have securities subsidiaries in Japan and overseas, which are also subject to regulatory capital requirements. In Japan, the Financial Instruments and Exchange Law of Japan and related ordinances require financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assets, as determined in accordance with Japanese GAAP, against amounts equivalent to market, counterparty credit and operations risks. Specific guidelines are issued as a ministerial ordinance which details the definition of essential components of the capital ratios, including capital, deductible fixed asset items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than 140% will call for regulatory reporting and a capital ratio of less than 100% may lead to a suspension of all or part of the business for a period of time and cancellation of registration. Overseas securities subsidiaries are subject to the relevant regulatory capital requirements of the countries or jurisdictions in which they operate.
Capital Adequacy Ratio of MUMSS
As of March 31, 2015, MUMSS' capital accounts less certain fixed assets of ¥398.2 billion on a stand-alone basis and ¥426.1 billion on a consolidated basis represented 299.9% and 302.0% ofthe total amounts equivalent to market, counterparty credit and operations risks, respectively, as calculated pursuant to the Financial Instruments and Exchange Law of Japan. As of March 31, 2014, MUMSS' capital accounts less certain fixed assets of ¥377.3 billion on a stand-alone basis and ¥400.6 billion on a consolidated basis represented 291.5% and 293.7% ofthe total amount equivalent to market, counterparty credit and operations risks, respectively, as calculated pursuant to Ihe applicable law.
140
For further information, see Note 21 to our consolidated financial statements included elsewhere in this Annual Report.
Non-exchange Traded Contracts Accounted for at Fair Value
The use of non-exchange traded or over-the-counter contracts provides us with the ability to adapt to the varied requirements of a wide customer base while mitigating market risks. Non-exchange traded contracts are accounted for at fair value, which is generally based on pricing models or quoted prices for instruments with similar characteristics. Gains or losses on non-exchange traded contracts are included in "Trading account profits (losses)—net" in our consolidated statements of operations included elsewhere in this Annual Report. The following table summarizes the changes in fair value of non-exchange traded contracts for the fiscal years ended March 31, 2014 and 2015:
Fiscal years ended March 31,
2014 ~ 2015 ~
(in millions)
Net fair value of contracts outstanding at beginning of fiscal year ¥12,968 ¥16,739
Changes attributable to contracts realized or otherwise settled during the fiscal
year (1,319) (12,637)
— Fair value of-new contracts entered into during-the-fiscal-year--. : (27042) (883)
Other changes in fair value, principally revaluation at end of fiscal year 7,132 (1,646)
Net fair value of contracts outstanding at end of fiscal year ¥16,739 ¥ 1,573
The following table summarizes the maturities of non-exchange traded contracts as of March 31, 2015:
Net fair value of contracts—unrealized gains
Prices provided by Prices based on models and other external sources other valuation methods
(in millions)
Maturity less than 1 year ¥1,397 ¥(371)
Maturity less than 3 years 150 (19)
Maturity less than 5 years 40 —
Maturity 5 years or more —'¦ 376
Total fair value ¥1,587 ¥ (14)
Research and Development, Patents and Licenses, etc.
Not applicable.
Trend Information
See the discussions in "—Business Environment," "—Recent Developments," "—A. Operating Results" and "—B. Liquidity and Capital Resources."
141
E. Off-Balance Sheet Arrangements
In the normal course of business, we engage in several types of off-balance sheet arrangements to meet the financing needs of customers, including various types of guarantees, credit commitments and commercial letters of credit. The following table summarizes these commitments as of March 31, 2015:
Amount of commitment by expiration period
I year 1-5 Over
or less years 5 years Total
(in billions)
Guarantees:
Standby letters of credit and financial guarantees ¥ 2,567 ¥1,440 ¥ 543 ¥ 4,550
Performance guarantees 1,939 848 104 2,891
Derivative instruments 30,345 21,781 8,809 60,935
Liabilities of trust accounts 6,854 555 882 8,291
Total guarantees 41,705 24,624 10,338 76,667
Other off-balance sheet instruments:
Commitments to extend credit 51,653 24,992 2,092 78,737
Commercial letters of credit 671 324 — 995
Commitments to make investments 26 21 15 62
Others 2 5 14 21
Total other off-balance sheet instruments 52,352 25,342 2,121 79,815
Total ¥94,057 ¥49,966 ¥12,459 ¥156,482
See Note 24 lo our consolidated financial statements included elsewhere in this Annual Report for a description of the nature of our guarantees and other off-balance sheet instruments.
The contractual amounts of these guarantees and other off-balance sheet instruments represent the amounts at risk if the contracts were to be fully drawn upon as a result of a subsequent default by our customer and a decline in the value of the underlying collateral. Since many of these commitments expire without being drawn upon, the total contractual or notional amounts of these commitments do not necessarily represent our future cash requirements. As of March 31, 2015, approximately 60% of these commitments have an expiration date within one year, 32% have an expiration date from one year to five years, and 8% have an expiration date after five years. Such risks are monitored and managed as a part of our risk management system as set forth in "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk." We evaluate off-balance sheet arrangements in the manner described in Note 1 to our consolidated financial statements included elsewhere in this Annual Report
The fees generated specifically from off-balance sheet arrangements are not a dominant source of our overall fees and commissions.
Some of our off-balance sheet arrangements are related to activities of special purpose entities, most of which arc VIEs. For further information, see Note 25 to our consolidated financial statements included elsewhere in this Annual Report.
142
F. Tabular Disclosure of Contractual Obligations
The following table shows a summary of our contractual obligations outstanding as of March 31, 2015:
Payments due by period
Less than 1-3 3-5 Over
1 year years years 5 years Total
(in billions)
Contractual obligations:
Time deposit obligations ¥60,996 ¥ 9,742 ¥2,149 ¥ 711 ¥73,598
Estimated interest expense on time deposit obligations"1 118 19 6 — 143
Long-term debt obligations 1,588 5,809 6,413 6,143 19,953
Capital lease obligations 5 5 2 4 16
Operating lease obligations 92 151 115 403 761
Purchase obligations 38 22 22 5 87
Totals) . ¥62,837 ¥15,748 ¥8,707 ¥7,266 ¥94,558
Notes'
Contractual obligations related to estimated interest expense on time deposit obligations are calculated by applying the March 31, 2015 weighted-average interest rale on outstanding lime deposits
The total amount of expected future pension payments is nol included in the above table or the total amount of commitments outstanding as of March 31, 2015. Wc expect to contribute approximately ¥83.4 billion for pension and other benefits for our employees for the fiscal year ending March 31, 2016. For further information, sec Note 13 to our consolidated financial statements included elsewhere in this Annual Report.
The above table docs nol include unrecognized lax benefits and interest and penalties related to income lax associated with the guidance on accounting for uncertainty in income taxes as we cannot estimate reasonably the timing of cash settlement of the liabilities for unrecognized tax benefit. The lolal amount ofthe liabilities for unrecognized tax benefits is ¥10.9 billion as of March 31, 2015. Among the liabilities for unrecognized tax benefits, it is reasonably possible that the unrecognized tax benefits will decrease by an amount nol exceeding ¥1 billion during the next twelve months. For further information, see Note 7 fo our consolidated financial statements included elsewhere in this Annual Report.
Purchase obligations include any legally binding contractual obligations that require us to spend more than ¥100 million annually under the contract. Purchase obligations in the table primarily include commitments to make investments into corporate recovery or private equity investment funds.
G. Safe Harbor
See.the discussion under "Forward-Looking Statements."
Item 6. Directors, Senior Management and Employees.
A. Directors and Senior Management Directors
The following table sets forth the members of our board of directors as of July 3, 2015, together with their respective dates of birth, positions and experience:
Business Experience
Kiyoshi Sono (April 18, 1953)
"Director" April 1976"
Chairman May 2004
(Representative January 2006
Corporate Executive May 2006
Officer) May 2010
Joined Sanwa Bank Executive Officer of UFJ Bank Executive Officer of BTMU Managing Executive Officer of BTMU Senior Managing Executive Officer of BTMU
143
Name
(Dale of Birth)
Tatsuo Wakabayashi (September 29, 1952)
Takashi Nagaoka (March 3, 1954)
Director
Deputy Chairman (Representative
Corporate
Executive Officer)
Director
Deputy Chairman (Representative
Corporate
Executive Officer)
May 2012 Managing Officer of MUFG
June 2012 Deputy President of BTMU
May 2014 Deputy Chairman of BTMU (incumbent)
Retired from Managing Officer of MUFG
June 2014 Chairman of MUFG
Director of Mitsubishi UFJ NICOS Co., Ltd. (incumbent)
June 2015 Director and Chairman of MUFG
(incumbent)
April 1977 Joined Mitsubishi Trust Bank
June 2004 Director (Non-Board Member Director) of
Mitsubishi Trust Bank
October 2005 Executive Officer of MUTB
June 2006 Managing Executive Officer of MUTB
June 2008 Managing Director of MUTB
June 2009 Senior Managing Director of MUTB
June 2010 Managing Officer of MUFG
June 2011 Director of MUFG
April 2012 President of MUTB
April 2013 Deputy Chairman of MUFG
December 2013 President and Chairman of MUTB
June 2015 Director and Deputy Chairman of MUFG
(incumbent) President, CEO, and Chairman of MUTB
(incumbent)
April 1976 Joined Mitsubishi Bank
June 2003 Non-Board Member Director of Bank of
Tokyo-Mitsubishi
January 2006 Executive Officer of BTMU
May 2006 Managing Executive Officer of BTMU
April 2008 Managing Officer of MUFG
June 2008 Managing Director of BTMU
May 2010 Senior Managing Executive Officer of
BTMU
Retired from Managing Officer of MUFG
April 2011 Managing Officer of MUFG
June 2011 Deputy President of BTMU
May 2012 Retired from Managing Officer of MUFG
May 2014 Retired from Deputy President of BTMU
June 2014 Advisor of MUSHD.
Advisor of MUMSS
President & CEO of MUMSS (incumbent)
President & CEO of MUSHD (incumbent)
Director of MUFG
June 2015 Director and Deputy Chairman of MUFG
(incumbent)
144
Name
(Date of Birth)
Nobuyuki Hirano (October 23, 1951)
Takashi Oyamada (November 2, 1955)
Tadashi Kuroda (June 7, 1958)
Director April 1974
President & Group June 2001
CEO
(Representative July 2004
Corporate Executive May 2005
Officer)
June 2005
October 2005 January 2006 October 2008 June 2009
June 2010 October 2010 April 2012
April 1979 June 2005
April-2013-June 2015
Director
Deputy President &
Group COO (Representative
Corporate Executive
Officer)
Director
Senior Managing
May 2013
Executive Officer (Group CSO)
Joined Mitsubishi Bank
Non-Board Member Director of Bank of Tokyo-Mitsubishi
Executive Officer of MTFG
Non-Board Member Managing Director of Bank of Tokyo-Mitsubishi
Managing Director of Bank of Tokyo-Mitsubishi
Director of MTFG
Director of MUFG
Managing Director of BTMU
Senior Managing Director of BTMU
Deputy President of BTMU
Managing Officer of MUFG
Director of MUFG
Deputy President of MUFG
President of BTMU (incumbent)
Director of MUFG
-President & CEO of MUFG
Director and President & Group CEO of MUFG (incumbent)
Joined Mitsubishi Bank
Non-Board Member Director of Bank of
Tokyo-Mitsubishi Executive Officer of MTFG Executive Officer of MUFG Executive Officer of BTMU Managing Director of BTMU Director of MUFG
Managing Executive Officer of BTMU Retired from Director of MUFG Senior Managing Executive Officer of BTMU
Deputy President of BTMU (incumbent) Deputy President of MUFG Director and Deputy President & Group COO of MUFG (incumbent)
Joined Sanwa Bank
Executive Officer of BTMU
Retired from Executive Officer of BTMU
Senior Managing Executive Officer of
Mitsubishi UFJ Research and Consulting
Co., Ltd. (MURC) Director and Senior Managing Executive Officer of MURC
Managing Executive Officer of BTMU Retired from Director and Senior
Managing Executive Officer of MURC
145
Name
(Date of Birth)
May 2014
June 2014
May 2015 June 2015
Muneaki Tokunari Director April 1982
(March 6, 1960) Managing Executive June 2009
Officer
(Group CFO) June 2011
Masamichi Yasuda (August 22,1960)
April 2012 June 2012 June 2013 June 2014 June 2015
Director
Managing Executive
Officer (Group CRO)
Director
Takashi Mikumo (Septembcr8, 1957)
Takehiko Shimamoto Director (November 15, 1959)
Retired from Managing Executive Officer
of BTMU Managing Officer of MUFG Director of MUTB (incumbent) Managing Director of MUFG Senior Managing Director of MUFG Senior Managing Director of BTMU
(incumbent) Director and Senior Managing Executive
Officer of MUFG (incumbent)
Joined Mitsubishi Trust Bank Executive Officer of MUTB Executive Officer of MUFG Managing Executive Officer of MUTB Managing Director of MUTB Director of MUFG Senior Managing Director of MUTB Managing Officer of MUFG Retired from Senior Managing Director of MUTB
Managing Director of BTMU (incumbent) Director and Managing Executive Officer of MUFG (incumbent)
Joined Bank of Tokyo Executive Officer of BTMU Executive Officer of MUFG Managing Executive Officer of BTMU Managing Officer of MUFG Managing Director of BTMU (incumbent) Director and Managing Executive Officer of MUFG (incumbent)
Joined Toyo Trust Bank Executive Officer of MUTB Executive Officer of MUFG Managing Director of MUTB Retired from Executive Officer of MUFG Senior Managing Director of MUTB Retired from Senior Managing Director of MUTB
Corporate Auditor (Full-Time) of MUFG Director of MUFG (incumbent)
Joined Mitsubishi Bank
Executive Officer of BTMU
Executive Officer of MUFG
Managing Executive Officer of BTMU
Managing Officer of MUFG
Managing Director of BTMU
Retired from Managing Director of BTMU
Corporate Auditor of MUMSS (incumbent)
Corporate Auditor of MUSHD (incumbent)
Director of MUFG (incumbent)
146
Name
(Dale of Birth)
Yuko Kawamoto (May 31, 1958)
April 1982 Joined Bank of Tokyo
April 1986 Left Bank of Tokyo
September 1988 Joined McKinsey & Company, Inc.
July 2001 Senior Expert of McKinsey & Company,
Inc., Tokyo office
March 2004 Left McKinsey & Company, Inc.
April 2004 Professor at Waseda Graduate School of
Finance, Accounting and Law
(incumbent)
June 2004 Director of Osaka Exchange, Inc.
(currently Japan Exchange Group, Inc.)
June 2006 Audit & Supervisory Board Member of
Tokio Marine Holdings, Inc.
(incumbent)
January 2013 Director of Japan Exchange Group, Inc.
June 2013 Director of MUFG (incumbent)
June 2014 Retired from Director of Japan Exchange
Group, Inc. -
Haruka Matsuyama (August 22, 1967)
Kunie Okamoto
(September 11, 1944)
Tsutomu Okuda (October 14, 1939)
Director
(Outside Director)
Director
(Outside Director)
Director
(Outside Director)-
April 1995 Assistant Judge, Tokyo District Court
July 2000 Attorney at law, Hibiya Park Law Offices
Member, the Daini Tokyo Bar Association January 2002 Partner of Hibiya Park Law Offices (incumbent)
June 2012 Corporate Auditor of Vitec Co., Ltd.
(incumbent)
June 2013 Director of T&D Holdings, Inc.
(incumbent)
June 2014 Corporate Auditor of MITSUI & CO.,
LTD. (incumbent) Director of MUFG (incumbent)
June 1969 Joined Nippon Life Insurance Company
(Nippon Life)
July 1995 Director of Nippon Life
March 1999 Managing Director of Nippon Life
March 2002 Senior Managing Director of Nippon Life
April 2005 President of Nippon Life
June 2005 Corporate Auditor of UFJ Holdings, Inc.
October 2005 Corporate Auditor of MUFG
April 2011 Chairman of Nippon Life (incumbent)
June 2014 Director of MUFG (incumbent)
April 1964 Joined The Daimaru, Inc.
September 1991 Managing Director of Daimaru Australia Pty. Ltd.
May 1995 Director of The Daimaru, Inc.
May 1996 Managing Director of The Daimaru, Inc.
March 1997 President of The Daimaru, Inc.
May 2003 Chairman and Chief Executive Officer of
The Daimaru, Inc.
147
Name
(Date of Birth)
Hiroshi Kawakami (May 3, 1949)
Yukihiro Sato (March 12, 1947)
Director
(Outside Director)
Director
(Outside Director)
September 2007 Chairman of The Daimaru, Inc.
President and Chief Executive Officer of J.
Front Retailing Co., Ltd. March 2010 Chairman and Chief Executive Officer of J.
Front Retailing Co., Ltd. January 2013 Director of Japan Exchange Group, Inc.
(incumbent)
April 2013 Director and Senior Advisor of J.Front
Retailing Co., Ltd.
May 2014 Senior Advisor of J.Front Retailing Co.,
Ltd. (incumbent)
June 2014 Director of MUFG (incumbent)
April 1972 Joined Toyota Motor Corporation
June 2003 Managing Officer of TOYOTA MOTOR
CORPORATION (TOYOTA)
June 2007 Senior Managing Director of TOYOTA
June 2008 Vice President of Toyota Tsusho
Corporation
June 2009 President & CEO of Central Japan
International Airport Co., Ltd.
June 2015 Senior Advisor of Central Japan
International Aiiport Co., Ltd. (incumbent) Director of MUFG (incumbent)
April 1969 Joined Mitsubishi Electric Corporation
June 2001 Director and General Manager, Corporate
Accounting Division of Mitsubishi
Electric Corporation
April 2003 Managing Director and General Manager,
Corporate Accounting Division of
Mitsubishi Electric Corporation
June 2003 Director, Senior Executive Officer and *
General Manager, Corporate Accounting
Division of Mitsubishi Electric
Corporation
April 2005 Director and Senior Vice President of
Mitsubishi Electric Corporation
April 2007 Director, Representative Executive Officer
and Executive Vice President of
Mitsubishi Electric Corporation
April 2009 Director of Mitsubishi Electric Corporation
June 2009 Senior Corporate Adviser of Mitsubishi
Electric Corporation
June 2013 Adviser of Mitsubishi Electric Corporation
June 2014 Corporate Auditor of MUFG
July 2014 Adviser of Mitsubishi Electric Corporation
(incumbent)
June 2015 Director of MUFG (incumbent)
148
Name
(Date of Birth)
Akira Yamale Director
(November 23, 1952) (Outside Director)
November 1977 Joined Price Waterhouse Japan March 1983 Registered certified public accountant of Japan
July 1991 Partner of Aoyama Audit Corporation and
Price Waterhouse
April 2000 Partner of ChuoAoyama Audit Corporation
and PricewaterhouseCoopers
September 2006 Partner of PricewaterhouseCoopers Aarata
June 2013 Retired PricewaterhouseCoopers Aarata
Audit & Supervisory Board member,
Nomura Real Estate Holdings, Inc. Audit & Supervisory Board member,
Nomura Real Estate Development, Co.,
Ltd.
June 2015 Director of MUFG. (incumbent)
Director & Supervisory Board member, Nomura , Real Estate Holdings, Inc.
- - (incumbent) .
Member of Board of Statutory Auditors, Prudential Holdings of Japan (incumbent)
Corporate Executive Officers
The following table sets forth our corporate executive officers as of July 3, 2015, together with their respective dates of birth, positions and experience:
Name
(Date of Birth)
Kiyoshi Sono (April 18, 1953)
Tatsuo Wakabayashi (September 29, 1952)
Takashi Nagaoka (March 3, 1954)
Nobuyuki Hirano (October 23, 1951)
Takashi Oyamada (November 2, 1955)
Takashi Morimura (June 5,1952)
Position in MUFG
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
Senior Managing Executive Officer
(Group Head, Global Business Group)
Business Experience
See "Directors" under this Item 6.A.
See "Directors" under this Item 6. A.
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
See "Directors" under this Item 6.A.
April 1975 Joined Bank of Tokyo
June 2002 Non-Board Member Director of Bank of
Tokyo-Mitsubishi May 2005 Non-Board Member Managing Director of
Bank of Tokyo-Mitsubishi January 2006 Managing Executive Officer of BTMU May 2009 Senior Managing Executive Officer of BTMU May 2011 Managing Officer of MUFG
149
Business Experience
Hidekazu Fukumoto (November 6,1955)
Senior Managing Executive Officer
(Group Head,
Corporate Banking Business Group)
June 2015
April 1978 May 2005 October 2005 December 2005 January 2006 May 2006 April 2008
May 2010 June 2010 May 2012
May 2014
June 2015
Deputy President of BTMU (incumbent) Senior Managing Executive Officer of MUFG (incumbent)
Joined Sanwa Bank Executive Officer of BTMU Executive Officer of MUFG Managing Executive Officer of BTMU Managing Officer of MUFG Managing Director of BTMU Senior Managing Director of BTMU
(incumbent) Senior Managing Executive Officer of
MUFG (incumbent)
Joined Toyo Trust Bank Executive Officer of MUTB. Managing Executive Officer of MUTB Executive Officer of the Company Senior Managing Executive Officer of MUTB
Deputy President of MUTB (incumbent) Director of MUFG
Senior Managing Executive Officer of MUFG (incumbent)
Joined Mitsubishi Bank Executive Officer of UFJ Bank Limited Executive Officer of MUFG Retired from Executive Officer of MUFG Executive Officer of BTMU Executive Officer of MUFG Managing Executive Officer of BTMU Retired from Executive Officer of MUFG Managing Officer of MUFG Managing Director of BTMU Senior Managing Director of BTMU Retired from Managing Officer of MUFG Deputy President of BTMU (incumbent) Managing Officer of MUFG Senior Managing Executive Officer of MUFG (incumbent)
Joined Mitsubishi Bank
Executive Officer of BTMU
Retired from Executive Officer of BTMU
Deputy President Chief Executive Officer
of MUMSS Senior Executive Officer of MUSHD Managing Officer of MUFG Retired from Deputy President Chief
Executive Officer of MUMSS Retired from Senior Executive Officer of
MUSHD
150
Busincss Experience
Tadashi Kuroda (June 7, 1958)
Saburo Araki (August 6, 1957)
Akira Hamamoto (May 19,1960)
Takahiro Yanai (May 4,1958)
Masamichi Yasuda (August 22,1960)
Muneaki Tokunari (March 6, 1960)
Yoichi Orikasa (August 31,1964)
Managing Executive Officer of BTMU
June 2014 Managing Director of BTMU
May 2015 Senior Managing Director of BTMU
(incumbent)
June 2015 Senior Managing Executive Officer of
See "Directors" under this Item 6.A.
Senior Managing Executive Officer
(Group Chief Human Resources Officer, or Group CHRO)
MUFG (incumbent)
See "Directors" under this Item 6.A.
April 1981 Joined Mitsubishi Bank
June 2007 Executive Officer of BTMU
May 2009 Executive Officer of MUFG
May 2011 Managing Executive Officer of BTMU
Managing Officer of MUFG May 2012 Retired from Managing Officer of MUFG June 2012 Managing Director of BTMU
Director of MUFG
June 2014 Managing Officer of MUFG
May 2015 Senior Managing Director of BTMU
(incumbent) ~ ~ "
June 2015 Senior Managing Executive Officer of
MUFG (incumbent)
April 1983 Joined Tokai Bank
June 2010 Executive Officer of MUFG
May 2011 Executive Officer of BTMU
May 2013 Managing Executive Officer of BTMU
May 2015 Managing Officer of MUFG
June 2015 Managing Director of BTMU (incumbent)
Managing Executive Officer of MUFG (incumbent)
April 1982 Joined Mitsubishi Bank Limited April 2008 Executive Officer of BTMU
Executive Officer of MUFG May 2012 Managing Executive Officer of BTMU
Managing Officer of MUFG
June 2015 Managing Director of BTMU (incumbent)
Managing Executive Officer of MUFG (incumbent)
See "Directors" under this Item 6.A.
June 2010
May 2012
May 2013
June 2013 June 2015
See "Directors" under this Item 6.A.
Corporate Executive April 1987
Joined Tokai Bank
Deputy General Manager, Securitization & _ Asset Finance Di vision of BTMU General Manager, Nagoya Commercial
Banking Office of BTMU General Manager, Internal Audit Division of
MUFG
Executive Officer of MUFG Corporate Executive Officer of MUFG (incumbent)
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The board of directors and corporate executive officers may be contacted through our headquarters at Mitsubishi UFJ Financial Group, Inc., 7-1, Marunouchi 2-chomc, Chiyoda-ku, Tokyo 100-8330, Japan.
No family relationship exists among any of our directors or corporate executive officers .
Ms. Yuko Kawamoto has, in the past, worked at The Bank of Tokyo, Ltd. (currently The Bank of Tokyo-Mitsubishi UFJ, Ltd.) and thus does not satisfy the requirements for an outside director provided in Article 2, Item 15 of the Company Law. However, she has experience and knowledge derived from having served as a management consultant and graduate school professor for more than 25 years after her career at The Bank of Tokyo. Therefore, her conditions are believed to be the same as those of an outside director in terms of independence from the Company. We expect her to reflect such experience and knowledge in her duties as a director, including supervising business operations, from a perspective from outside of MUFG. Moreover, as a result of revisions to the Company Law, following the conclusion of the June 2016 General Meeting of Shareholders Ms. Kawamoto is expected to meet the requirements of an outside director.
B. Compensation
The aggregate amount of compensation paid, including benefits in kind granted and any contingent and deferred compensation by MUFG and its subsidiaries during the fiscal year ended March 31, 2015 to our directors (excluding outside directors), to corporate auditors (excluding outside corporate auditors) and to outside directors and corporate auditors, was ¥1,024 million, ¥95 million and ¥124 million, respectively.
The compensation paid during or prior to the fiscal year ended March 31, 2015, as discussed in further detail below, was determined under our previous corporate governance framework with a board of corporate auditors separate from the board of directors, which was modified in June 25, 2015 with the approval of our shareholders abolishing the board of corporate auditors and creating board committees. For information on the determination of compensation under our new governance framework, see "—C. Board Practices."
The compensation paid by MUFG and its subsidiaries during the fiscal year ended March 31, 2015 to our directors and corporate auditors consisted of annual base salaries, stock acquisition rights, bonuses and other benefits. Under our previous governance framework, the maximum aggregate amount of each type of compensation for our directors and corporate auditors was approved at a general meeting of our shareholders. The amount and allocation of compensation for each director were then proposed to, and voted upon by, the board of directors. The amount and allocation of compensation for each coiporate auditor were determined through discussions and agreement among the corporate auditors. The nomination and compensation committee deliberated and made proposals to the board of directors regarding matters relating to, among other things, the compensation of our directors.
The following table sets forth details ofthe aggregate compensation paid by MUFG and its subsidiaries during the fiscal year ended March 31, 2015 to our directors (excluding outside directors) and corporate auditors (excluding outside corporate auditors):
Non-Adjustable Compensation
Stock Adjustable
Number of Directors and Aggregate Base Acquisition Compensation Retirement
Corporate Auditors'" Compensation Salary Rights (Cash Bonuses) Allowances'2' Other
(in millions)
18 ¥1,119 ¥748 ¥145 ¥175 ¥51 ¥0
Notes
Includes current directors and coiporate auditors as well as those who retired during the fiscal year ended March 31, 2015 but excludes outside directors and outside corporate auditors.
Represents the aggregate amount of retirement allowances paid in cash during the fiscal year ended March 31, 2015, pursuant io a onetime shareholders' approval in June 2007 for the retirement allowances to be paid lo the directors and corporate auditors who were elected prior lo lhal dale al the lime of their retirement. A reserve in the tolal amount of such retirement allowances was set aside as of September 30, 2007. For more information, see '"—Retirement Allowances" below.
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The following table sets forth the details of individual compensation paid, including benefits in kind granted but excluding retirement allowances paid, by MUFG and its subsidiaries in an amount equal to or exceeding ¥100 million during the fiscal year ended March 31, 2015:
Aggregate amount
Compensation paid
Annual Stock Paid by salary options Bonus
Takamune Okihara ¥110
Tatsuo Wakabayashi ¥103
Nobuyuki Hirano ¥125
(in millions)
MUFG ¥13
BTMU 44
MUFG ¥17
MUTB 53
MUFG ¥17
BTMU 63
¥ 2 32 ¥ 3 9
V 1 -t ->
13
¥ 4 15
¥ 6 15
¥ 6 23
Annual Base Salary
Annual base salaries were paid to our directors (including outside directors) and corporate auditors
(including outside corporate auditors) in the form of monthly cash installment payments. The aggregate annual
base salary paid to our directors (excluding outside corporate directors) and corporate auditors (excluding outside
"cbrpbrafe auditors) fonhe^ million: The aggregate annual base salary
paid to our outside directors and outside corporate auditors for the same period was ¥115 million.
Stock-based Compensation Plans
We have issued stock acquisition rights to further motivate our directors (excluding outside directors) and certain of our officers to contribute to the improvement of our stock prices and profits. The number of options granted to each director and officer was determined by comprehensively taking into account each grantee's seniority of the position heid at MUFG or its subsidiaries, experience and contribution to our performance throughout the period ofthe grantee's service within the maximum aggregate number of options approved by our shareholders. On June 27, 2013, our shareholders approved modifications to the previous shareholder authorization for granting stock acquisition rights to our directors, corporate auditors and certain of our officers so that no outside directors or corporate auditors (including outside corporate auditors) would be eligible for any stock-based compensation plan adopted by the board of directors on or after that date.
As part of our compensation structure, on June 28, 2007, our shareholders approved the creation of a stock-based compensation plan for our directors, corporate auditors and certain of our officers. On November 21, 2007, the board of directors adopted a plan entitled "First Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on December 6, 2007, we allotted an aggregate of 3,224 stock acquisition rights to our directors and an aggregate of 493 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at¥l per share of common stock. The stock acquisition rights were subject to a one-year vesting period. The rights are exercisable until December 5, 2037, but only after the date on which a grantee's service as a director and an officer of as a corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value ofeach stock acquisition right was ¥103,200.
As part of our compensation structure, on June 27, 2008, the board of directors adopted another stock-based compensation plan entitled "Second Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, coiporate auditors and certain of our officers. Under the stock-based compensation plan, on July 15, 2008, we allotted an aggregate of 4,690 stock acquisition rights to our directors and an aggregate of 495 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at¥l per share of
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common stock. The stock acquisition t ights were subject to a one-year vesting period. The rights ate exercisable until July 14, 203S, but only after the date on which a grantee's service as a director and an officer or as a corporate auditor ofeach of MUFG and the relevant subsidiaries terminates. The fair value ofeach stock acquisition right was ¥92,300.
As part of our compensation structure, on June 26, 2009, the board of directors adopted another stock-based compensation plan entitled "Third Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on July 14, 2009, we allotted an aggregate of 6,466 stock acquisition rights to our directors and an aggregate of 872 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock acquisition rights were subject to a one-year vesting period. The rights arc exercisable until July 13, 2039, but only after the date on which a grantee's service as a director and an officer or as a corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock acquisition right was ¥48,700.
As part of our compensation structure, on June 29, 2010, the board of directors adopted another stock-based compensation plan entitled "Fourth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on July 16, 2010, we allotted an aggregate of 8,014 stock acquisition rights to our directors and an aggregate of 1,149 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at¥l per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights arc exercisable until July 15, 2040, but only after the date on which a grantee's service as a director and an officer or as a corporate auditor of each of MUFG and the relevant subsidiaries terminates. Tlie fair value of each stock acquisition right was ¥36,600.
As part of our compensation structure, on June 29, 2011, the board of directors adopted another stock-based compensation plan entitled "Fifth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on July 20, 2011, we allotted an aggregate of 7,740 stock acquisition rights to our directors and an aggregate of 1,160 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at¥l per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 19, 2041, but only after the date on which a grantee's service as a director and an officer or as a corporate auditor ofeach of MUFG and the relevant subsidiaries terminates. The fair value ofeach stock acquisition right was ¥33,700.
As part of our compensation structure, on June 28, 2012, the board of directors adopted another stock-based compensation plan entitled "Sixth Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors, corporate auditors and certain of our officers. Under the stock-based compensation plan, on July 18, 2012, we allotted an aggregate of 10,002 stock acquisition rights to our directors and an aggregate of 1,1'61 stock acquisition rights to our corporate auditors for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 17, 2042. but only after the date on which a grantee's service as a director and an officer or as a corporate auditor of each of MUFG and the relevant subsidiaries terminates. The fair value ofeach stock acquisition right was ¥33,100.
As part of our compensation structure, on June 27, 2013, the board of directors adopted a stock-based compensation plan entitled "Seventh Series of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors (excluding outside directors) and certain of our officers. Under the stock-based
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compensation plan, on July 17, 2013, we allotted an aggregate of 4,103 stock acquisition rights to our directors (excluding outside directors) for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 16, 2043, but only after the date on which a grantee's service as a director and an officer of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock acquisition right was ¥61,100.
As part of our compensation structure, on June 27, 2014, the board of directors adopted a stock-based compensation plan entitled "Eighth Scries of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc." for our directors (excluding outside directors) and certain of our officers. Under the stock-based compensation plan, on July 15, 2014, we allotted an aggregate of 3,315 stock acquisition rights to our directors (excluding outside directors) for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 14, 2044, but only after the date on which a grantee's service as a director and an officer of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock acquisition right was ¥53,900.
As part of our compensation structure, on June 25, 2015, the board of directors adopted a stock-based compensation plan entitled "Ninth Scries of Stock Acquisition Rights of Mitsubishi UFJ Financial Group, Inc."
Jorour directors (excludingoutside_directors).and_certain.of our_officers. Under the stock-based compensation
plan, on July 14, 2015, we allotted an aggregate of 3,096 stock acquisition rights to our directors (excluding outside directors) and our corporate executive officers for their respective services to MUFG and its subsidiaries. Each stock acquisition right represents a right to purchase 100 shares of MUFG common stock at ¥1 per share of common stock. The stock acquisition rights are subject to a one-year vesting period. The rights are exercisable until July 13, 2045, but only after the date on which a grantee's service as a director and an officer of each of MUFG and the relevant subsidiaries terminates. The fair value of each stock acquisition right was ¥80,200.
Bonuses
We from time to time paid cash bonuses to our directors to further motivate them to' contribute to the improvement of our stock prices and profits if such bonuses were deemed appropriate based on a balanced scorecard approach taking into account the results of operations of the MUFG Group and each director's individual performance of his duties as a director in light of both quantitative and qualitative criteria, including pur medium-term strategy for improving our corporate value. None of the outside directors and corporate auditors (including outside corporate auditors) is eligible to receive'a cash bonus. The nomination and compensation committee evaluated the amount of cash bonuses annually to determine the reasonableness ofthe amount in proportion to the aggregate compensation approved by our shareholders. The aggregate cash bonus paid to our directors for the fiscal year ended March 31, 2015 was ¥175 million.
Retirement Allowances
Prior to June 28, 2007, in accordance with customary Japanese practice, when a director or corporate auditor retired, a proposal to pay a retirement allowance was submitted at the annual ordinary general meeting of shareholders for approval. The retirement allowance consisted of a one-time payment of a portion of the allowance paid at the time of retirement and periodic payments ofthe remaining amount for a prescribed number of years. After thcshareholders' approvaHvas obtained, the retirement allowance for a director or corporate auditor was fixed by the board of directors or by consultation among the corporate auditors in accordance with our internal regulations and practice and generally reflected the position of the director or corporate auditor at the time of retirement, the length of his service as a director or corporate auditor and his contribution to our performance. Historically, MUFG did not set aside reserves for any retirement payments for directors and corporate auditors made under this practice.
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Pursuant to a one-time shareholders' approval in June 2007, retirement allowances are paid in cash to the directors and corporate auditors who were elected prior to that date at the time of their retirement. A reserve in the total amount of such retirement allowances was set aside as of September 30, 2007. The aggregate amount of retirement allowances paid in cash by MUFG and its subsidiaries pursuant to the one-time shareholder approval during the fiscal year ended March 31, 2015 to our directors (excluding outside directors), to corporate auditors (excluding outside corporate auditors) and to outside directors and corporate auditors, who have retired from their respective positions held at MUFG or, if such directors and corporate auditors concurrently held positions at MUFG's subsidiaries, who have retired from such positions, was ¥51 million, nil and ¥9 million, respectively.
MUFG Americas Holdings Corporation Stock Bonus Plan
Upon the integration of the U.S. branch banking operations of BTMU with MUB's operations on July 1, 2014, MUAH assumed tlie obligations under the BTMU Headquarters for the Americas, or HQA, Stock Bonus ¦ Plan described below. Effective June 8, 2015, MUAH amended and restated the BTMU HQA Stock Bonus Plan as the MUFG Americas Holdings Corporation Stock Bonus Plan, or the MUAH Stock Bonus Plan.
Under the MUAH Stock Bonus Plan, qualified key employees of MUAH are granted Restricted Share Units, or RSUs, representing a right to receive American Depositary Receipts, or ADRs, evidencing ADSs, each exchangeable for one share of MUFG common stock, from an independent trust established to administer the plan grants, upon the satisfaction of vesting conditions, to be determined pursuant to the plan as well as a Restricted Share Unit Agreement between MUAH and the grantees.
Unless otherwise provided in the relevant Restricted Share Unit Agreement, RSUs will become vested and nonforfeitable as follows: one-third (33 '/3%) of a grantee's RSUs vests on each one year anniversary of the date of the grant such that all of the RSUs become fully vested after three years from the grant date so long as the grantee satisfies the specified continuous service requirements and any other conditions under the applicable plan documents, subject to certain clawback provisions.
Under the MUAH Stock Bonus Plan, the grantees are entitled to "dividend equivalent credits" on their granted but unvested RSUs when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the grantees would have received on the shares had the shares been issued to the grantees in exchange for their granted but unvested RSUs. Accumulated dividend equivalents are paid to grantees in shares on an annual basis.
The ADSs to be delivered to grantees will be purchased on the open market by the trustee of the independent trust pursuant to a trust agreement between MUAH and the tnistee. As of July 15, 2015, 12,150,646 RSUs have been granted under the MUAH Stock Bonus Plan.
BTMU Headquarters for the Americas Stock Bonus Plan
As described above, the BTMU HQA Stock Bonus Plan was amended and restated as the MUAH Slock Bonus Plan as of June 8, 2015.
Under the BTMU HQA Stock Bonus Plan, qualified key employees of BTMU HQA were granted RSUs, representing a right to receive ADRs, evidencing ADSs, each exchangeable for one share of MUFG common stock, from an independent tmst established to administer the plan grants, upon the satisfaction of vesting conditions. The RSUs vest pro-rata on each anniversary of the grant date and become fully vested three years from the grant date so long as the grantee satisfies the specified continuous service requirements and any other conditions under the plan documents as well as a Restricted Share Unit Agreement between BTMU HQA and the grantees.
Giants previously made under the BTMU HQA Plan were not entitled to any dividend rights, voting rights or other stockholder rights.
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The ADSs to be delivered to grantees will be purchased on the open market by the trustee of the independent tmst pursuant to a trust agreement between BTMU HQA and the trustee. Through June 7, 2015, 5,367,466 RSUs were granted under the previous BTMU HQA Plan, of which 1,710,099 RSUs were outstanding as of July 15, 2015. No further RSUs will be granted under the previous BTMU HQA Stock Bonus Plan.
For more information on the BTMU HQA Stock Bonus Plan, see Note 32 to our consolidated financial statements included elsewhere in this Annual Report. See also "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers."
UNBC Stock Bonus Plan
Under the UNBC Stock Bonus Plan, selected employees of UNBC and its subsidiaries were paid some or a portion of annual bonuses in the form of RSUs representing a right to receive ADRs, evidencing ADSs, each exchangeable for one share of MUFG common stock, from an independent tmst established to administer the plan grants upon the satisfaction of vesting conditions as determined pursuant to the plan as well as a Restricted Share Unit Agreement between UNBC and tlie grantees.
Unless otherwise provided in the relevant Restricted Share Unit Agreement, RSUs become vested and nonforfeitable as follows: one-third (33 1/3%) of a grantee's RSUs vests on each one year anniversary of the date of the grant such that all of the RSUs become fully vested after three years from the grant date so long as the grantee remains an employee of UNBC or its subsidiaries.
Under the UNBC Plan, the grantees were not entitled to any dividend rights, voting rights or other stockholder rights.
The ADSs to be delivered to grantees will be purchased on the open market by tlie trustee of tlie independent tmst pursuant to a tmst agreement between UNBC and the tmstee. As of July 15, 2015, 26,734,407 RSUs have been granted under the plan, of which 6,235,367 RSUs were outstanding. No further RSUs will be granted under the UNBC Stock Bonus Plan.
For more information on the UNBC Stock Bonus Plan, see Note 32 to our consolidated financial statements included elsewhere in this Annual Report. See also "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers."
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Share Ownership
As of June 30, 2015, our directors and corporate executive officers held the following numbers of shares of our common stock:
Number of Shares
Directors Registered
Kiyoshi Sono 47,420
Tatsuo Wakabayashi 21,400
Takashi Nagaoka .' 386,940
Nobuyuki Hirano 36,300
Takashi Oyamada 41,850
Tadashi Kuroda 94,900
Muneaki Tokunari 55,600
Masamichi Yasuda 9,600
Takashi Mikumo 252,700
Takehiko Shimamoto 25,500
Yuko Kawamoto 9,800
Haruka Matsuyama —
Kunie Okamoto 46,136
Tsutomu Okuda 2,700
Hiroshi Kawakami —
YukihiroSato 10,800
Akira Yamate —
Number of Shares
Corporate Executive Officers Registered
Takashi Morimura 32,200
Satoshi Murabayashi 3,000
Junichi Okamoto 13,720
Hidekazu Fukumoto 26,430
NaotoHirota 162,000
Saburo Araki 32,680
Akira Hamamoto 86,400
Takahiro Yanai ., 3,800
Yoichi Orikasa 1,400
None of the shares of our common stock held by our directors and coq^orate executive officers have voting rights that arc different from shares of our common stock held by any other shareholder.
For information on the stock-based compensation plans for our directors and corporate executive officers, see "—Stock-based Compensation Plans."
C. Board Practices
Our articles of incorporation provide for a board of directors with statutorily mandated nominating and governance committee, audit committee and compensation committee, each consisting of members ofthe board of directors, as well as a risk committee that we have set up on a voluntary basis consisting of outside directors and professionals. Our coiporate executive officers are responsible for executing and managing our business operations based on a delegation of authority by the board of directors, and our directors set our key management policies and oversee the execution of duties by these corporate executive officers.
In June 2015, our shareholders approved an amendment to our articles of incorporation to adopt our current governance framework with a board of directors and board committees. We previously had a governance
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framework with a board of directors and a board of corporate auditors. The Company Law of Japan permits three types of governance system for large companies such as MUFG: (1) a company with a nominating committee, an audit committee and a compensation committee, (2) a company wilh a board of corporate auditors, and (3) a company with an audit and supervisory committee. Our previous governance framework was based on the second system, and our newly adopted governance system is based on the first system.
With respect to companies adopting the firsl system, including MUFG, each ofthe nominating, audit and compensation committees must consist of members ofthe board of directors, and the majority ofeach committee must be outside directors as defined by the Company Law. In addition, the board of directors must appoint corporate executive officers {shikkoyaku) to execute and manage the business operations of the company under the authority delegated by the board of directors. Based on this system, our current governance framework is designed to facilitate more flexible and swifter decision-making and increase transparency in our management processes.
An "outside director" is defined by the Company Law as a person who meets all ofthe following conditions:
the person is not currently, and has not been in the ten years prior to his or her assumption of office as
outside director, an executive director, who is a director concurrently performing an executive role
(gyomu shikko torishimariyaku), a corporate executive officer, a manager (shihainin), or any other type
of employeeof-thecompany-or-any-ofits subsidiaries; _
if the person has been a non-executive director, a corporate auditor, or an accounting adviser (kaikei sanyo) of the company or any of its subsidiaries within the ten years prior to his or her assumption of office as outside director, the person was not an executive director, a corporate executive officer, a manager or any other type of employee of the company or any of its subsidiary in the ten years prior to his or her assumption of office as such;
the person is not a director, a corporate executive officer, a manager or any other type of employee of the company's parent company, or a person who controls the company;
the person is not an executive director, a corporate executive officer, a manager or any other type of employee of another subsidiary of tlie company's parent company; and
the person is not a family member within the second degree of kinship of a director, a corporate executive officer, a manager, or any other type of important employee of the company or its parent company.
Board of Directors
Our board of directors consists of directors who are elected at a general meeting of shareholders. Under our articles of incorporation, the number of directors may not exceed 20. We currently have 17 directors, six of whom are outside directors and three of whom are internal non-executive directors.
The regular term of office of a director is one year from the date of election, and directors may serve their terms until the close of the annual general meeting of shareholders held for the following year after their election. Directors may serve any number of consecutive terms.
Under the Company Law, the board of directors has the authority to determine our basic management policy^ make 'decisions on the execution aria management of burbusines's" operations; arid oversee- the execution"' by the corporate executive officers of their duties. The board of directors may delegate, to the extent permitted by the Company Law, the authority to make decisions on the execution and management of our business operations. Our board of directors has delegated most of this authority to the corporate executive officers.
The board of directors elects the Chairman and the Deputy Chairman from among its members and appoints key management members based on recommendations submitted to it by the nominating committee.
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Under the Company Law, a resolution of the board of directors is required if any director wishes to engage in any business that is in competition with us or any transaction with us. Additionally, no director may vote on a proposal, arrangement or contract in which that director is deemed to be particularly interested.
Neither the Company Law nor our articles of incorporation contain special provisions as to the borrowing power exercisable by a director, the retirement age of our directors, or a requirement of our directors to hold any shares of our capital stock.
Under the Company Law and our articles of incorporation, we may exempt, by resolution ofthe board of directors, our directors from liabilities to MUFG arising in connection with their failure to execute their duties in good faith and without gross negligence within the limits stipulated by applicable laws and regulations. In addition, we have entered into a liability limitation agreement with each outside director and non-executive director which limits the maximum amount of their liability to MUFG arising in connection wilh a failure to execute their duties in good faith and without gross negligence to the greater of either ¥10 million or the aggregate sum of the amounts prescribed in Paragraph 1 of Article 425 of the Company Law and Articles 113 and 114 of the Company Law Enforcement Regulations.
None of our directors is party to a service contract with MUFG or any of its subsidiaries that provides for benefits upon end of their director term.
Nominating Committee
Our nominating committee, which we call the nominating and governance committee, determines the contents of proposals regarding the election and removal of director candidates to be submitted to general meetings of shareholders. The committee also considers and makes recommendations to the board of directors regarding the appointment and removal of the Chairman and the Deputy Chairman of the board of directors and the President & Group CEO of MUFG as well as the chairman and the deputy chairman of the board of directors, the president and others of each of our major subsidiaries. In addition, the committee discusses and makes recommendations to the board of directors on matters pertaining to our governance policy and framework.
Under the Company Law, the nominating committee must consist of at least three directors, and the majority of its members must be outside directors. Our nominating and governance committee currently consists of six directors. The chairman of the committee is Tsutomu Okuda, an outside director. The other members of this committee are Yuko Kawamoto, a director, Haruka Matsuyama, Kunie Okamoto and Hiroshi Kawakami, who are outside directors, and Nobuyuki Hirano, President & Group CEO.
Audit Committee
The audit committee determines the contents of proposals pertaining to the election, removal and non-reappointment of our auditor to be submitted to general meetings of shareholders. The committee also monitors and audits the execution by the directors and the corporate executive officers of their duties and prepares audit reports to the board of directors. In order to effectively perform its duties, the committee reviews, inspects and investigates, as necessary, the management of the operations of MUFG and its subsidiaries, including financial reporting and internal controls. In addition, the committee has the power to consent to decisions on the compensation to be paid to our auditor.
Under the Company Law, the audit committee must consist of at least three non-executive directors, and the majority of its members must be outside directors. Our audit committee currently has five members. The chairman ofthe committee is Akira Yamate, an outside director. The other members of this committee are Haruka Matsuyama and Yukihiro Sato, who are outside directors, and Takashi Mikumo and Takchiko Shimamoto, who are non-executive directors.
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Compensation Committee
The compensation committee establishes our policy regarding the determination of the compensation of MUFG's directors, corporate executive officers, executive officers (shikko yakuin) and others and also determines the details of individual compensation based on the policy. The committee discusses and makes recommendations to the board of directors regarding the establishment, revision and abolition of compensation systems for the chairman, the deputy chairman, the president and others of each of our major subsidiaries.
Under the Company Law, the compensation committee must consist of at least three directors, and the majority of its members must be outside directors. Our compensation committee currently consist of six directors. The chairman of the committee is Kunie Okamoto, an outside director. The other members of this committee are Yuko Kawamoto, a director, Haruka Matsuyama, Tsutomu Okuda and Hiroshi Kawakami, who are outside directors, and Nobuyuki Hirano, President & Group CEO.
Risk Committee
In addition to the foregoing three committees, which are mandated by the Company Law, we have a risk
committee, which was initially established under our previous'governance framework and which we continue to
have under our current governance framework on a voluntary basis. The risk committee deliberates and makes
recommendations to the board of directors on matters regarding group-wide risk management as well as
significanrcompliance"issues. '""~ """~"
MUFG Corporate Governance Policies provide that the committee shall consist of outside directors and outside professionals, who are professionals with no prior employment relationship with any of tlie MUFG group companies. The committee currently has four members. The chairperson of the committee is Yuko Kawamoto, a director. The other members of this committee are Tsutomu Okuda, an outside director, and Akira Ariyoshi and Kenzo Yamamoto, who are outside professionals. Between April 2014 and March 2015, the committee met four times.
Corporate Executive Officers
Our corporate executive officers are responsible for executing and managing our business operations within the scope of the authority delegated to them by the board of directors.
Under the Company Law, at least-one corporate executive officer must be appointed by a resolution of the board of directors. We currently have 17 corporate executive officers. Under our articles of incorporation, the board of directors shall appoint a president and a deputy president, who, as representative executive officers, may represent us severally. The term of office of each corporate executive officer expires at the conclusion of the first meeting of the board of directors convened after the ordinary general meeting of shareholders for the last fiscal year that ends within one year following the corporate executive officer's assumption of office.
Under the Company Law of Japan, a resolution of the board of directors is required if any executive officer wishes to engage in any business that is in competition with us or any transaction with us.
Under the Company Law and our articles of incorporation, we may exempt, by resolution of the board of directors, our corporate executive officers from liabilities to MUFG arising in connection with their failure to 'execute tlieir"duties In good faith and wiihout"gross negligence within thelimits"stipulated by applicable laws and regulations. We, however, currently have no such arrangements with any of our executive directors.
Committees Established on a Voluntary Basis under Our Previous Governance Framework
Under our previous governance framework, we had a nomination and compensation committee, an internal audit and compliance committee, and a governance committee, each voluntarily established to support our board
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of directors. These committees have been replaced by the three statutorily mandated committees under our newly adopted governance framework. Between April 2014 and March 2015, the nomination and compensation committee met 12 times, the internal audit and compliance committee met 15 times, and the governance committee met seven times.
For additional information on our board of directors and corporate executive officers, see "—A. Directors and Senior Management" and ''Item 10.B. Additional Information—Memorandum and Articles of Incorporation."
For a summary of significant differences in corporate governance practices between MUFG and U.S. companies listed on the New York Stock Exchange, see "Item 16G. Corporate Governance."
D. Employees
As of March 31, 2015, we had approximately 102,300 employees, an increase of approximately 1,800 employees compared with the number of employees as of March 31, 2014. In addition, as of March 31, 2015, we had approximately 34,900 part-time and temporary employees. The following tables show the percentages of our employees across our different business units and in different locations as of March 31, 2015:
Business unit
Bank of Tokyo-Mitsubishi UFJ:
Retail Banking Business Unit 16%
Corporate Banking Business Unit 9
Global Business Unit 23
Bank of Ayudhya Public Company Limited 19
Global Markets Unit |910|Corporate Services |910|Corporate Center/Independent Divisions |910|Mitsubishi UFJ Trust and Banking Corporation:
Tmst-Banking |910|Trust Assets |910|Real Estate |910|Global Markets |910|Administration and subsidiaries |910|Mitsubishi UFJ Securities Holdings:
Sales Marketing Business Unit |910|Global Investment Banking Business Unit |910|Global Markets Business Unit |9 10|International Business Unit |910|Corporate Center and Others |910|Mitsubishi UFJ NICOS:
Business Marketing Division |910|Credit Risk Management & Risk Assets Administration Division |910|Merchant Business Management Division |9 10|Operations Division ¦. |910|Systems Division |9 10|Corporate Division |9 10|Others |910|100%
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Location
Bank of Tokyo-Mitsubishi UFJ:
Japan : 35%
United States 13
Europe |910|Asia/Oceania excluding Japan |910|Bank of Ayudhya Pubtic Company Limited'') 19
Other areas |910|Mitsubishi UF.J Trust and Banking Corporation:
Japan 10
United States |9 10|Europe |910|Asia/Oceania excluding Japan |9 10|Mitsubishi UFJ Securities Holdings:
Japan |910|United States |9 10|Europe |9 10|Asia/Oceania excluding Japan |9 10|Mitsubishi UFJ NICOS:
United States |9 10|Europe |9 10|Asia/Oceania excluding Japan |9 10|Others |910|100%
Note:
(1) Bank of Ayudhya Public Company Limited is located in Thailand.
Most of our employees are members of an employees' union, which negotiates on behalf of employees in relation to remuneration and working conditions. We believe our labor relations to be good.
E. Share Ownership
The information required by this item is set forth in "—B. Compensation."
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Item 7. Major Shareholders and Related Party Transactions. A. Major Shareholders Common Stock
As of March 31, 2015, we had 676,170 registered shareholders of our common stock. The ten largest holders of our common stock appearing on the register of shareholders as of March 31, 2015, and the number and the percentage of such shares held by each of them, were as follows:
Number of shares Percentage of
Name held total shares in issue14'
Japan Trustee Services Bank, Ltd. (Trust account)'" 685,860,400 4.84%
The Master Trust Bank of Japan, Ltd. (Trust account)"' 578,365,800 4.08
The Bank of New York Mellon SA/NV 10 240,414,475 1.69
State Street Bank and Trust Company 215,355,292 1.51
State Street Bank and Trust Company 505223 189,201,633 1.33
Nippon Life Insurance Company 182,072,553 1.28
The Bank of New York Mellon as Depositary Bank for DR Holders'2' 181,415,674 1.28
Meiji Yasuda Life Insurance Company'3' 175,000,000 1.23
Japan Trustee Services Bank, Ltd. (Trust account 9)"' 167,915,900 1.18
State Street Bank West Client—Treaty 505234 166,380,178 1.17
Total 2,781,981,905 19.63%
Notes:
Includes the shares held in trust accounts, which do nol disclose ihe names of beneficiaries.
An owner of record for our American depositary shares.
These shares are those held in a pension tmst account with The Master Trust Bank of Japan, Ltd. for the benefit of retirement plans with voting rights retained by Meiji Yasuda Life Insurance Company.
Numbers are truncated after two decimal points.
As of March 31, 2015, 1,550,246 shares, representing approximately 0.01% of our outstanding common stock, were held by our directors and coiporate auditors. Our major shareholders do not have different voting rights.
As of March 31, 2015, 2,388,839,119 shares, representing 16.85% of our outstanding common stock, were owned by 361 U.S. shareholders of record who are resident in the United States, one of whom is the ADR depository's nominee holding 181,415,674 shares, or 1.28%, of our issued common stock.
B. Related Party Transactions
As of March 31, 2015, we held approximately 21.9% of the voting rights in Morgan Stanley and Series C Preferred Stock with a face value of approximately $521.4 million, or ¥53.6 billion, and 10% dividend. We also have two representatives appointed to Morgan Stanley's board of directors. We adopted the equity method of accounting for our investment in Morgan Stanley beginning with the fiscal year ended March 31, 2012.
Wc and Morgan Stanley have two securities joint venture companies, namely, MUMSS and MSMS, in Japan. We hold a 60% economic interest in MUMSS and MSMS, and Morgan Stanley holds a 40% economic interest in MUMSS and MSMS. We hold a 60% voting interest and Morgan Stanley holds a 40% voting interest in MUMSS, and we hold a 49% voting interest and Morgan Stanley holds a 51% voting interest in MSMS.
We and Morgan Stanley continue to pursue a variety of business opportunities in Japan and abroad in accordance with the global strategic alliance. For a detailed discussion of our global alliance with Morgan Stanley, see "Item 4.B. Information on the Company—Business Overview—Global Strategic Alliance with Morgan Stanley."
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We and our banking subsidiaries had, and expect to have in the future, banking transactions and other transactions in the ordinary course of business with our related patties. Although for the fiscal year ended March 31, 2015, such transactions included, but were not limited to, call money, loans, electronic data processing, leases and management of properties, those transactions were immaterial and were made at prevailing market rates, terms "and conditions and do not involve more than the normal risk of collectibility or present other unfavorable features.
None of our directors, corporate executive officers or corporate auditors, nor any of the close members of their respective families, has had any transactions or has any presently proposed transactions that are material or any transactions that are unusual in their nature or conditions, involving goods, services or tangible or intangible assets, to which we were, are or will be a party.
No loans have been made to our directors, corporate executive officers or corporate auditors other than in the normal course of business, on normal commercial terms and conditions, involving the normal risk of collectibility, and presenting normal features. In addition, no loans have been made to our directors, corporate executive officers or corporate auditors other than as permitted under Section 13(k) of the U.S. Securities Exchange Act and Rule 13k-1 promulgated thereunder.
No family relationship exists among any of our directors or corporate executive officers. No arrangement or understanding exists between any of our directors or corporate executive officers and any other person pursuant to which any director or corporate executive officer was elected to their position at MUFG.
As part of our compensation structure, we have granted stock acquisition rights to our directors and corporate executive officers. For a detailed discussion of the stock acquisition rights, sec "Item 6.B. Directors, Senior Management and Employees—Compensation."
C. Interests of Experts and Counsel Not applicable.
Item 8. Financial Information.
A. Consolidated Statements and Other Financial Information
The information required hy. this .item is set forth in our consolidated financial statements starting.on page F-1 of this Annual Report and in "Selected Statistical Data" starting on page A-1 of this Annual Report.
Legal Proceedings
From time to time, we are involved in various litigation matters and other legal proceedings, including regulatory actions. Although the final resolution of any such matters and proceedings could have a material effect on our consolidated operating results for a particular reporting period, based on our current knowledge and consultation with legal counsel, we believe the current litigation matters and other legal proceedings, when ultimately determined, will not materially affect our results of operations or financial position. For more information, see "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Wc may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations; whichxould result in significant financial losses, restrictions on ouroperations and"damage to our reputation."
Distributions
Our board of directors submits a recommendation for a year-end dividend for our shareholders' approval at the ordinary general meeting of shareholders customarily held in June of each year. The year-end dividend is
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usually distributed immediately following shareholders' approval to holders of record at the end of the preceding fiscal year. In addition to year-end dividends, we may make cash distributions by way of interim dividends to shareholders of record as of September 30 of each year as distribution of surplus by resolution of our board of directors. Year-end dividends in the amount of ¥ 18 per share of our common stock for the fiscal year ended March 3 1, 2015 were approved by shareholders at the ordinary general meeting of shareholders held on June 25, 2015.
See "Item 10.B. Additional Information—Memorandum and Articles of Association" for additional information on our dividends policy.
Under the Japanese foreign exchange regulations currently in effect, dividends paid on shares held by nonresidents of Japan may be converted into any foreign currency and repatriated abroad. Under the terms of the deposit agreement pursuant to which ADSs are issued, the depositary is required, to the extent that in its judgment it can convert Japanese yen on a reasonable basis into U.S. dollars and transfer the resulting U.S. dollars to the United States, to convert all cash dividends that it receives in respect of deposited shares into U.S. dollars and to distribute the amount received, after deduction of any applicable withholding taxes, to the holders of ADSs. See "Item 10.D. Additional Information—Exchange Controls" and "Item 12.D. Description of Securities Other than Equity Securities—American Depositary Shares."
B. Significant Changes
Other than as described in this Annual Report, no significant changes have occurred since the date of our consolidated financial statements included in this Annual Report.
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Item 9. The Offer and Listing.
A. Offer and Listing Details
Market Price Information
The following table shows, for the periods indicated, the reported intra-day high and low trade prices for shares of our common stock on the Tokyo Stock Exchange, or the TSE, and of the ADSs on the New York Stock Exchange, or the NYSE:
Price per share on the TSE Price per ADS on the NYSE
High Low High Low
(yen) (U.S.S)
Fiscal year ended March 31,2011 520 321 5.68 4.44
Fiscal year ended March 31,2012 448 318 5.36 4.01
Fiscal year ended March 31,2013 592 328 6.10 4.16
Fiscal year ended March 31, 2014
Firstquarter 755 515 7.31 5.52
Second quarter 677 575 6.81 5.82
. Third quarter ' 715 598 6.74 6.13
Fourth quarter 697 519 6.64 5.19
Fiscal year ended March 31, 201'5
Firstquarter '."7. " 642 ~"523 6.27 ' 5.21
Second quarter 639.8 571.0 6.31 5.58
Third quarter 700.3 546.2 5.92 5.13
Fourth quarter 811.0 604.0 6.72 5.17
February 792.0 617.4 6.65 5.30
March 811.0 735.2 6.72 6.20
Fiscal year ending March 31, 2016
April 895.0 809.8 7.41 6.28
May 931.3 830.2 7.62 6.96
June 936.8 851.0 7.53 6.98
July (through July 13) 907.6 803.7 7.34 6.80
B. Plan of Distribution
Not applicable.
Markets
The primary market for our common stock is the TSE. Our common stock is also listed on the Nagoya Stock Exchange in Japan. ADSs, each representing one share of common stock, are quoted on the NYSE under the symbol, "MTU."
Selling Shareholders
Not applicable.
Dilution
Not applicable.
Expenses of the Issue Not applicable.
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Item 10. Additional Information.
A. Share Capital
Not applicable.
13. Memorandum and Articles of Association Our Corporate Purpose
Article 2 of our Articles of Incorporation provides that our corporate purpose is to carry on the following businesses:
administration of management of banks, trust banks, specialized securities companies, insurance companies or other companies which we may own as our subsidiaries under the Banking Law; and
any other businesses incidental to tlie foregoing businesses mentioned in the preceding clause. Board of Directors
For discussion of the provisions of our Articles of Incorporation as they apply to our directors, see "Item 6.C Directors, Senior Management and Employees—Board Practices."
Common Stock
We summarize below the material provisions of our Articles of Incorporation, our share handling regulations and the Company Law as they relate to a type of joint stock company known as kabushiki kaisha, witliin which we fall. Because it is a summary, this discussion should be read together with our Articles of Incorporation and share handling regulations, which have been filed as exhibits to this Annual Report.
General
A joint stock company is a legal entity incorporated under the Company Law. The investment and rights of the shareholders of a joint stock company are represented by shares of stock in the company and shareholders' liability is limited to the amount of the subscription for the shares.
As of June 25, 2015, our authorized common share capital was comprised of 33,000,000,000 shares of common stock with no par value.
As of March 31, 2015, a total of 14,168.853,820 shares of common stock (including 151,647,230 shares of common stock held by us and our consolidated subsidiaries as treasury stock) had been issued. Each of the shares issued and outstanding was fully paid and non-assessable.
As of June 25, 2015, we were authorized to issue 800.000,000 shares of preferred stock, including 400,000,000 shares of each of the second to fourth series of class 5 preferred stock (provided the aggregate number of shares authorized to be issued with respect tp the four series of class 5 preferred stock does not exceed 400,000,000 shares), 200,000,000 shares of each of the first to fourth scries of class 6 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the four series of class 6 preferred stock does not exceed 200,000,000 shares), 200,000,000 shares of each of the first to fourth series of class 7 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the four series of class 7 preferred stock does not exceed 200,000,000 shares).
We may issue shares from our authorized but unissued share capital following a resolution to that effect by our board of directors. An increase in our authorized share capital is only possible by amendment of our Articles of Incorporation, which generally requires shareholders' special approval.
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In order to assert shareholder rights against us, a shareholder must have its name and address registered on our register of shareholders, in accordance with the Company Law and our share handling regulations. The registered holder of deposited shares underlying the ADSs is the depositary for the ADSs, or its nominee. Accordingly, holders of ADSs will not be able to assert shareholder rights other than as provided in the agreement among us, the depositary and the holders of the ADSs.
Under the Act on Book-Entry Transfer of Company Bonds, Shares, etc., the shares of all Japanese companies listed on any Japanese stock exchange, including our shares, arc traded without share certificates through entry in the books maintained under a central clearing system.
Dividends
Dividends are distributed in proportion to the number of shares owned by each shareholder on the record date for the dividend. Dividends for each financial period may be distributed following shareholders' approval at a general meeting of shareholders.
Payment of dividends on common stock is subject to the preferential dividend rights of holders of preferred stock.
Under the Banking Law and our Articles of Incorporation, our financial accounts are closed on March 31 of
eacffyear, andThviderias, if any,"¥re paid tolihaTehoIde^ March 3rf6llo"wiri"g-shareholders'
approval at a general meeting of shareholders. In addition to year-end dividends, our board of directors'may by resolution declare an interim cash dividend to shareholders of record as of September 30 of each year. Under the Company Law, distribution of dividends will take the form of distribution of surplus (as defined below). We will be permitted to make distributions of surplus to our shareholders any number of times per fiscal year pursuant to resolutions of our genera] meetings of shareholders, subject to certain limitations described below. Distributions of surplus are in principle required to be authorized by a resolution of a general meeting of shareholders.' Distributions of surplus would, however, be permitted to be made pursuant to a resolution of our board of directors if:
our Articles of Incorporation so provide (our Articles of Incorporation currently contain no such provisions);
the normal term of office of our directors is one year; and
certain conditions concerning our non-consolidated annual financial, statements and certain documents for the latest fiscal year as required by an ordinance ofthe Ministry of Justiceare satisfied.
In an exception to the above rule, even if the requirements described in (a) through (c) are not met, we are permitted to make distributions of surplus in cash to our shareholders by resolutions ofthe board of directors once per fiscal year as mentioned above concerning interim cash dividend.
Under the Company Law, distributions of surplus may be made in cash or in kind in proportion to the number of shares of common stock held by each shareholder. A resolution of a general meeting of shareholders or our board of directors authorizing a distribution of surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date ofthe distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general - - meeting of-shareholders or (as the case may-be) our-board of directors^ grant to our shareholders the right to require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders. See "—B. Memorandum and Articles of Association—Common Stock—Voting Rights."
Under the Company Law, we may make distributions of surplus to the extent that the aggregate book value of the assets to be distributed to shareholders does not exceed the distributable amount (as defined below) as of
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the effective date of such distributions of surplus. The amount of surplus (the "surplus") at any given time shall be the amount of our assets and Ihe book value of our treasury stock after subtracting the amounts of items (1) through (5) below as they appear on our non-consolidated balance sheet as of the end of our last fiscal year, and after reflecting the changes in our surplus after the end of our last fiscal year, by adding the amounts of items (6), (7) and (8) below and/or subtracting the amounts of items (9), (10) and (11) below:
our liabilities;
our stated capital;
our additional paid-in capital;
our accumulated legal reserve;
other amounts as are set out in an ordinance of the Ministry of Justice;
(if we transferred our treasury slock after the end of the last fiscal year) the transfer price of our treasury stock after subtracting the book value thereof;
(if wc decreased our stated capital after the end of the last fiscal year) the amount of decrease in our stated capital (excluding the amount transferred to additional paid-in capital or legal reserve);
(if we decreased our additional paid-in capital or legal reserve after'thc end of the last fiscal year) the amount of decrease in our additional paid-in capital or legal reserve (excluding the amount transferred to stated capital);
(if we cancelled our treasury stock after the end of the last fiscal year) the book value ofthe cancelled treasury stock;
(if we distributed surplus to shareholders after the end of the last fiscal year) the amount of the assets distributed to shareholders by way of such distribution of surplus; and
other amounts as arc set out in an ordinance of the Ministry of Justice.
A distributable amount (the "distributable amount") at any given time shall be the aggregate amount of (a) the surplus, (b) the amount of profit as recorded for the period after the end of our last fiscal year until the date of an extraordinary settlement of account (if any) as is set out in an ordinance of the Ministry of Justice and (c) the transfer price of our treasury stock in the same period, after subtracting the amounts of the following items:
the book value of our treasury stock;
(if we transferred our treasury stock after the end of the last fiscal year) the transfer price of our treasury stock;
the losses recorded for the period after the end of our last fiscal year until the date of an extraordinary settlement of account (if any) as set out in an ordinance of the Ministry of Justice; and
other amounts as set out in an ordinance of the Ministry of Justice.
In Japan, the "ex-dividend" date and the record date for any dividends precede the date of determination of the amount of the dividend to be paid. The market price of shares generally becomes ex-dividend on the third business day prior to the record date. Under our Articles of Incorporation, we are not obligated to pay any dividends which are left unclaimed for a period of five years after the date on which they first became payable.
Capital and Reserves
Under the Company Law, we may reduce our additional paid-in capital or legal reserve (without limitation as to the amount of such reduction) as mentioned previously, generally by resolution of a general meeting of shareholders and, if so resolved in the same resolution, may account for the whole or any part of the amount of such reduction as stated capital. We may also reduce our stated capital generally by special resolution of a general meeting of shareholders and, if so resolved in the same resolution, such reduction may account for the
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whole or any part ofthe amount of such reduction as additional paid-in capital or legal reserve. Conversely, we may reduce our surplus and increase either (i) stated capital or (ii) additional paid-in capital and/or legal reserve by the same amount, in either case by resolution of a general meeting of shareholders.
Stock Splits-Stock splits of our outstanding stock may be effected at any time by resolution of the board of directors. When a stock split is to be effected, we may increase the authorized share capital to cover the number of shares to be increased by the stock split by amending our Articles of Incorporation by resolution of the board of directors without approval by special resolution of the general meeting of shareholders, unless more than one class of stock is issued and outstanding. We must give public notice of the stock split, specifying a record date at least two weeks prior to the record date.
Wc conducted a stock split pursuant to which each of our shares of common and preferred stock were split into 1,000 shares of the respective classes of securities, effective as of September 30, 2007. Our Articles of Incorporation were amended to increase the authorized share capital to cover the number of shares increased by the stock split, which amendment became effective simultaneously with the effectiveness of the stock split.
Unit Share (tan-gen kabu) System
We have adopted a unit share system, where 100 shares of either common or preferred stock shall each constitute a unit, as the amendment of our Articles of Incorporation to provide for such system was approved at the shareholders' meetings on June 27 and 28, 2007.
Under the unit share system, each unit is entitled to one voting right. A holder of less than one unit has no voting right. Our Articles of Incorporation provide that the holders of shares constituting less than a full unit will not have shareholder rights except for those specified in the Company Law or an ordinance of the Ministry of Justice, including rights (i) to receive dividends, (ii) to receive cash or other assets in case of consolidation or split of shares, stock-for-stock exchange or stock-for-stock transfer, corporate split or merger or (iii) to be allotted rights to subscribe for free for new shares and stock acquisition rights when such rights are granted to shareholders. Shareholders may require us to purchase shares constituting less than a unit at the current market price. In addition, holders of shares constituting less than a unit may require us to sell them such number of shares, which, when combined wilh the number of shares already held by such holder, shall constitute a whole unit of share; provided that we will be obliged to comply with such request only when we own a sufficient number of shares to accommodate the desired sale and purchase. The board of directors may reduce the number of shares constituting a unit or cease to use the unit share system by amendments to the Articles of Incorporation without shareholders' approval even though amendments to the Articles of Incorporation generally require a special resolution of the general meeting of shareholders.
General Meeting of Shareholders
The ordinary general meeting of our shareholders is usually held in June of each year in Tokyo. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least two weeks' advance notice to shareholders who are entitled to vote at the relevant general meeting of shareholders. The record date for ordinary general meetings of our shareholders is March 31.
Any shareholder holding at least 300 voting rights or 1 % of the total number of voting rights for six consecutive months or longer may propose a matter to be considered at a general meeting of shareholders by submitting a written request to a director at least eight weeks prior to the date of the meeting. The number of minimum voting rights, minimum percentage and time period necessary for exercising the minority shareholder rights described above may be decreased or shortened if our Articles of Incorporation so provide. Our Articles of Incorporation currently contain no such provisions.
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Voting Rights
A holder of shares of our common stock is generally entitled to one voting right for each unit of common stock held. The following shares of common stock are not entitled to voting rights even when such shares constitute a whole unit, and such shares of common stock are not considered when determining whether a quorum exists for a shareholders' meeting:
treasury stock;
shares held by a company in which we and/or our subsidiaries own 25% or more of the total voting rights; and
shares issued after the record date as a result of conversion of convertible stock, exercise of stock acquisition rights, and fractional shareholders becoming a shareholder of a whole unit share.
On the other hand, holders of certain class of preferred stock shall be entitled to a voting right for each unit of preferred stock held under certain conditions provided for by relevant laws or regulations and our Articles of Incorporation, for example, when a proposal to pay the full amount of preferential dividends on any class of preferred stock in compliance with the terms of such preferred stock is not included in the agenda ofthe relevant shareholders meeting. See "—Preferred Stock."
Under our Articles of Incorporation, except as otherwise provided by law or by other provisions of our Articles of Incorporation, a resolution can be adopted at a shareholders' meeting by the holders of a majority of the voting rights represented at the meeting. The Company Law and our Articles of Incorporation require a quorum of not less than one-third of the total number of voting rights for election of our directors and corporate auditors.
The Company Law and our Articles of Incorporation provide that a quorum of not less than one-third of outstanding voting rights, excluding those owned by our subsidiaries and affiliates of which we own, directly or indirectly, 25 percent or more, must be present at a shareholders' meeting to approve specified corporate actions, such as:
the amendment of our Articles of Incorporation, except in some limited cases;
the repurchase of our own stock from a specific shareholder other than our subsidiary;
the consolidation of shares;
the offering to persons other than shareholders of stock at a specially favorable price, or of stock acquisition rights or bonds or notes with stock acquisition rights with specially favorable conditions;
the removal of a corporate auditor;
the exemption from liability of a director or corporate auditor, with certain exceptions;
a reduction in stated capital with certain exceptions in which a shareholders' resolution is not required; a distribution of in-kind dividends which meets certain requirements;
the transfer of the whole or an important part of our business, except in some limited circumstances; the acquisition ofthe whole business of another company, except in some limited circumstances; a dissolution, merger or consolidation, except for certain types of mergers;
a stock-for-stock exchange (kabushiki-kokan) or stock-for-stock transfer (kabushiki-iten), except in some limited circumstances; and
a coiporate split, except in some limited circumstances.
A special resolution representing at least two-thirds of the voting rights represented at the meeting is required to approve these actions. ,
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Our Articles of Incorporation do not include any provision that grants shareholders cumulative voting rights at elections of directors or corporate auditors.
Subscription Rights
Holders of our shares have no preemptive rights under our Articles of Incorporation. Under the Company Law, however, our board of directors may determine that shareholders be given subscription rights in connection wilh a particular issue of new shares. In this case, these subscription rights must be given on uniform terms to all shareholders, and if a specified record date is set, it must be announced in a public notice at least two weeks prior to the record date. A notification to each individual shareholder must also be given at least two weeks prior to the subscription date.
Under the Company Law, rights to subscribe for new shares may not be transferred; however, we may allot stock acquisition rights to shareholders without consideration, and such rights will be transferable.
Stock Acquisition Rights
We may issue stock acquisition rights (shinkabu yoyakuken), which in the United States are often in the form of warrants, or bonds with stock acquisition rights that cannot be detached (shinkabu yoyakuken-tsuki shasai), which in the United-States-are often in the form of convertible bonds or bonds with non-detachable— — warrants. Except where the issuance would be on "specially favorable" conditions, the issuance of stock-acquisition rights or bonds with stock acquisition rights may be authorized by a resolution of our board of directors. Upon exercise of the stock acquisition rights, the holder of such rights may acquire shares by paying the applicable exercise price or, if so determined by a resolution of our board of directors, by making a substitute payment, such as having the convertible bonds redeemed for no cash in lieu ofthe exercise price.
Liquidation Rights
Upon our liquidation, the assets remaining after payment of all debts, liquidation expenses, taxes and preferred distributions to holders of shares of our preferred stock will be distributed among the holders of shares of our common stock in proportion to the number of shares they own.
Transfer Agent
MUTB is the transfer agent for our common stock. The office of MUTB for this purpose is located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan. MUTB maintains our register of shareholders.
Reports to Shareholders
We furnish to our shareholders notices, in Japanese, of shareholders' meetings, annual'business reports, including our financial statements, and notices of resolutions adopted at our shareholders' meetings.
Record Dates
As stated above, March 31 is the record date for the payment of annual dividends (if any),-the determination of shareholders entitled to vote at ordinary general meetings of our shareholders, and the determination of class shareholders entitled to vote at meetings of our class shareholders if any matter to be resolved at an ordinary general meeting of our shareholders requires a resolution by our class shareholders in addition to a resolution by our shareholders. September 30 is the record date for the payment of interim dividends, if any. In addition, by a resolution of our board of directors and after giving at least two weeks' prior public notice, we may at any time set a record date in order to determine the shareholders who are entitled to the rights pertaining to our shares.
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Repurchase of Our Shares
We may repurchase our own shares:
through the Tokyo Stock Exchange or other stock exchanges on which our shares are listed, if authorized by a resolution of a general meeting of shareholders or our board of directors;
by way of a tender offer, if authorized by a resolution of a general meeting of shareholders or our board of directors;
from a specific party, if authorized by a special resolution of a general meeting of shareholders and we give notice thereof to shareholders prior to such general meeting, in general;
from all shareholders of a specific class of shares offering to sell their shares, if authorized by a resolution of a general meeting of shareholders or our board of directors and we give a public notice or notice thereof to all ofthe shareholders (if we repurchase any class of preferred stock, notices to all shareholders ofthe relevant class of preferred stock); or
• from our subsidiaries, if authorized by a resolution of the board of directors.
When the repurchase is made by us from a specific party, as authorized by a special resolution of a general meeting of shareholders, any shareholder may make a demand lo a director, five days or more prior to the relevant shareholders' meeting, that we also repurchase the shares held by that shareholder. However, no such right will be available if the shares have a market price, and if the purchase price does not exceed the then market price calculated in a manner set forth in an ordinance of the Ministry of Justice.
Repurchase of our own shares described above must satisfy various specified requirements. In general, the same restrictions on the distributable amount as described in the seventh paragraph under "—Common Stock— Dividends." arc applicable to the repurchase of our own shares, so the total amount of the repurchase price may not exceed the distributable amount.
We may hold our own shares so repurchased without restrictions. In addition, we may cancel or dispose of our repurchased shares by a resolution of our board of directors. As of March 31, 2015, we (excluding our subsidiaries) owned 148,872,202 shares of treasury stock.
Preferred Stock
The following is a summary of information concerning the shares of our preferred stock, including brief summaries of the relevant provisions of our Articles of Incorporation, the share handling regulations and the Company Law as currently in effect. The detailed rights of our preferred stock are set out in our Articles of Incorporation and the resolutions of our board of directors relating to the issuance ofthe relevant stock.
General
As of March 31, 2015, we were authorized under our Articles of Incorporation to issue four classes of preferred stock totaling 800,001,000 shares of preferred stock, including 400,000,000 shares of each of the first to fourth series of class 5 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the four series of class 5 preferred stock does not exceed 400,000,000 shares), 200,000,000 shares of each of the first to fourth series of class 6 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the four series of class 6 preferred stock does not exceed 200,000,000 shares), 200,000,000 shares of each of the first to fourth series of class 7 preferred stock (provided the aggregate number of shares authorized to be issued with respect to the four series of class 7 preferred slock does not exceed 200,000,000 shares) and 1,000 shares of class 11 preferred stock. Our preferred stock has equal preference over our shares of common stock with respect to dividend entitlements and distribution of assets upon our liquidation. However, holders of shares of our preferred stock arc not entitled to vote at general meetings of shareholders.
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subject to the exceptions provided under our Articles of Incorporation. On April 1, 2014, MUFG acquired all of the 156,000,000 outstanding shares of first series of class 5 preferred slock for ¥390.0 billion and cancelled all the acquired shares. On August 1, 2014, MUFG acquired all of the 1,000 outstanding shares of class 11 preferred stock in exchange for 1,245 shares of our common stock held in treasury. As a result, we will have no outstanding shares of any class of preferred stock.
We may acquire shares of second to fourth series of class 5 and first to fourth series of class 6 preferred
stock at our discretion pursuant to the terms and conditions provided by our Articles of Incorporation and the
resolution of our board of directors. The provisions for acquisition of shares of second to fourth series of class 5
and first to fourth series of class 6 preferred stock will be determined by the board of directors at the time of
issuance of such preferred stock. When issued, any holder of shares of firsl to fourth series of class 6 preferred
stock or first to fourth series of class 7 preferred stock may request acquisition of shares of such preferred stock
in exchange for shares of our common stock during the period determined by resolution of the board of directors
adopted at the time of issuance of such shares of preferred slock. Any shares of first to fourth series of class 6
preferred stock or first to fourth series of class 7 preferred stock for which no request for acquisition in exchange
for shares of our common stock is made during such period will be mandatorily acquired on the day immediately
following the last day of such period (the "Mandatory Acquisition Date") in the number obtained by dividing an
amount equivalent to the subscription price per each relevant share of preferred stock by the average daily
closing price of our common stock as reported by the Tokyo Stock Exchange for the 30 trading days
commencing on the_45th.trading day prior.to_the.Mandatory.Acquisition.Date ._
Additionally, in order to enable the relevant preferred stock to meet the criteria for Additional Tier 1 capital under Basel III requirements as adopted by the FSA and became effective on March 31, 2013, the terms of the second to fourth series of class 5 as well as all the series of class 6 and class 7 preferred stock were amended in June 2013 to have mandatory acquisition provisions. When newly issuing these preferred stock, the board of directors will determine events that will require us to acquire the relevant preferred stock pursuant to the capital adequacy requirements applicable to us. Upon the occurrence of such events, we will acquire all the relevant preferred stock on an acquisition date, which is a date determined by the board of directors either at the time of the issuance or after the occurrence of such event. We shall acquire the relevant preferred stock in exchange for common stock or for no consideration as determined by the board of directors at the time of the issuance, considering certain factors including the market conditions. The formula to be used in exchanging the preferred stock for common stock will also be determined by the board of directors at the time of the issuance. For more information, see "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation— Japan—Capital adequacy."
Preferred Dividends
In priority to the payment of dividends to holders of our common stock, the amount of preferred dividends payable each fiscal year for each class of our preferred stock is set forth below:
• second to fourth series of class 5 preferred stock: to be set by resolution of our board of directors at the time of issuance, up to a maximum of ¥250.00 per share;
first to fourth series of class 6 preferred stock: to be set by resolution of our board of directors at the time of issuance, up to a maximum of ¥125.00 per share; and
first to fourth series of class 7 preferred stock: to be set by resolution of our board of directors at the
time"of issuance/up "to a 'maximum of ¥125^00'per shafel ' ~ "
In the event that our board of directors decides to pay an interim dividend to holders of record of our common stock as of September 30 of any year, we will, in priority to the payment of that interim dividend, pay a preferred interim dividend in the amount specified in our Articles of Incorporation to holders of record of our preferred stock as of September 30 ofthe same year. The amount of any preferred interim dividend will be deducted from the preferred dividend payable on the relevant class of our preferred stock for the same fiscal year.
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No preferred dividend will be paid on any of our preferred slock converted into our common stock for the period from the date following the record date for the preferred dividend or preferred interim dividend last preceding the relevant conversion date to the relevant conversion date, but the common stock issued upon conversion will be entitled to receive any dividend payable to holders of record of common stock upon the next succeeding record date for common stock dividends.
No payment of dividends on our preferred stock or any other shares can be made unless we have a sufficient distributable amount and a resolution to distribute such distributable amount is obtained at the relevant ordinary general meeting of shareholders, in the case of annual preferred dividends, or at the board of directors, in the case of preferred interim dividends.
Dividends on our preferred stock are non-cumulative. If the full amount of any dividend is not declared on our preferred stock in respect of any fiscal year, holders of our preferred stock do not have any right to receive dividends in respect of the deficiency in any subsequent fiscal year, and we will have no obligation to pay the deficiency or to pay any interest regardless of whether or not dividends are paid in respect of any subsequent fiscal year. The holders of our preferred stock are not entitled to any further dividends or other participation in or distribution of our profits.
Liquidation Rights
In the event of our voluntary or involuntary liquidation, record holders of our preferred stock are entitled, equally in rank as among themselves, to receive before any distribution out of our residual assets is made to holders of our common stock, a distribution out of our residual assets of:
¥2,500 per share of second to fourth series of class 5 preferred stock;
• ¥2,500 per share of first to fourth series of class 6 preferred stock; and
¥2,500 per share of first to fourth series of class 7 preferred stock.
The holders of our preferred stock are not entitled to any further dividends or other participation in or distribution of our residual assets upon our liquidation.
Voting Rights
No holder of our preferred stock has the right to receive notice of, or to vote at, a general meeting of shareholders, except as otherwise specifically provided under our Articles of Incorporation or other applicable law. Under our Articles of Incorporation, holders of our preferred stock will be entitled to receive notice of, and have one voting right per unit of preferred stock at, our general meetings of shareholders:
from the commencement of our ordinary general meeting of shareholders1 if an agenda for approval to declare a preferred dividend is not submitted to such meeting; or
from the close of any ordinary general meeting of shareholders if a proposed resolution to declare a preferred dividend is not approved at such meeting.
In each case, holders of our preferred stock will be entitled to receive notice of and vote at the relevant general meetings of shareholders unless and until such time as a resolution of an ordinary general meeting of shareholders declaring a preferred dividend is passed.
American Depositary Shares
The Bank of New York Mellon will issue ADRs. Each ADR will represent ownership interests in ADSs. Each ADS represents one share of our common stock. Each ADS is held by BTMU, acting as custodian, at its principal office in Tokyo, on behalf of The Bank of New York Mellon, acting as depositary. Each ADS will also represent securities, cash or other property deposited with The Bank of New York Mellon but not distributed to
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ADS holders. The Bank of New York Mellon's corporate trust off ice is located at 101 Barclay Street, New York, New York 10286 and its principal executive office is located at One Wall Street, New York, New York 10286.
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
The Bank of New York Mellon will actually be the registered holder of the common stock, so you will have to rely on it to exercise your rights as a shareholder. Our obligations and the obligations of The Bank of New York Mellon are set out in a. deposit agreement among us, The Bank of New York Mellon and you, as an ADS holder. The deposit agreement and the ADSs are governed by New York law.
The following is a summary of the material terms of the deposit agreement. Because it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the form of ADR.
Share Dividends and Other Distributions
TheBank of New York Mellon has agreedto payto_you the cash dividends or other distributions "it" or the" "
custodian receives oh shares of common stock or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.
Cash. The Bank of New York Mellon will convert any cash dividend or other cash distribution we pay on our common stock into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any approval from the Japanese government is needed and cannot be obtained, the deposit agreement allows The Bank of New York Mellon to distribute the Japanese yen only to those ADS holders to whom it is possible to do so. The Bank of New York Mellon will hold the Japanese yen it cannot convert for the account of the ADS holders who have not been paid. It will not invest the Japanese yen and it will not be liable for any interest.
Before making a distribution, any withholding taxes that must be paid under Japanese law will be deducted. See "—E. Taxation—Japanese Taxation." The Bank of New York Mellon will distribute only whole U.S. dollars and cents and will-round-fractional cents to the nearest whole cent. If the relevant exchange rates fluctuate during a time when The Bank of New York Mellon cannot convert the Japanese currency, you may lose some or all of the value of the distribution.
Shares. The Bank of New York Mellon may distribute new ADSs representing any shares we may distribute as a dividend or free distribution, if we furnish The Bank of New York Mellon promptly with satisfactory evidence that it is legal to do so. The Bank of New York Mellon will only distribute whole ADSs. It will sell shares which would require it to issue a fractional ADS and distribute the net proceeds in the same way as it distributes cash dividends. If The Bank of New York Mellon does not distribute additional ADSs, each ADS will also represent the new shares.
Rights to receive additional shares. If wc offer holders of our common stock any rights to subscribe for additional shares of-common stock or any other rights, The Bank of New York Mellon may,~after consultation with us, make those rights available to you. We must first instruct The Bank of New York Mellon to do so and furnish it with satisfactory evidence that it is legal to do so. If we do not furnish this evidence and/or do not give these instructions, and The Bank of New York Mellon decides that it is practical to sell the rights, The Bank of New York Mellon will sell the rights and distribute the proceeds in the same way as it distributes cash dividends. The Bank of New York Mellon may allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.
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If The Bank of New York Mellon makes rights available to you, upon instruction .from you it will exercise the rights and purchase the shares on your behalf. The Bank of New York Mellon will then deposit the shares and issue ADSs to you. It will only exercise the rights if you pay it the exercise price and any other charges the rights require you lo pay.
U.S. securities laws may restrict the sale, deposit, cancellation and transfer ofthe ADSs issued after the exercise of the rights. For example, you may not be able to trade the ADSs freely in the United States. In this case, The Bank of New York Mellon may issue the ADSs under a separate restricted deposit agreement which will contain the same provisions as the deposit agreement, except for changes needed to put the restrictions in place. The Bank of New York Mellon will not offer you rights unless those rights and the securities to which the rights relate arc either exempt from registration or have been registered under the U.S. Securities Act with respect to a distribution to you. We will have no obligation to register under the Securities Act those rights or the securities to which they relate.
Other distributions. The Bank of New York Mellon will send to you anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New York Mellon has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it docs with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property.
The Bank of New York Mellon is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions wc make on our shares or any value for them if it is illegal or impractical for us or The Bank of New York Mellon to make them available to you. ¦
Deposit, Withdrawal and Cancellation
The Bank of New York Mellon will issue ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York Mellon will register the appropriate number of ADSs in the names you request and will deliver the ADSs at its corporate trust office to the persons you request.
In certain circumstances, subject to the provisions of the deposit agreement, The Bank of New York Mellon may issue ADSs before the deposit of the underlying shares. This is called a pre-release of ADSs. A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs instead of the shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions:
Before or at the time of die pre-release, the person to whom the pre-release is made must represent to the depositary in writing that it or its customer, as the case may be, owns the shares to be deposited;
The pre-release must be fully collateralized with cash or collateral that the depositary considers appropriate; and
The depositary must be able to close out the pre-release on not more than five business days' notice.
The pre-release will be subject to whatever indemnities and credit regulations that the depositary considers appropriate. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of a pre-release.
You may turn in your ADSs at the Corporate Trust Office of The Bank of New York Mellon's office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,
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The Bank of New York Mellon will deliver (I) (he underlying shares to an account designated by you and
(2) any other deposited securities underlying the ADS at the office ofthe custodian. Or, at your request, risk and
expense, The Bank of New York Mellon will deliver the deposited securities al its Coiporate Trust Office.
The ADSs may only be presented for cancellation and release of the underlying shares of common stock or other deposited securities in multiples of 100 ADSs. Holders of ADRs evidencing less than 100 ADSs arc not entitled to delivery of any underlying shares or other deposited securities unless ADRs, together with other ADRs presented by the same holder at the same time, represent in the aggregate at least 100 ADSs. If any ADSs are surrendered but not cancelled pursuant to the preceding sentence, The Bank of New York Mellon will execute and deliver an ADR or ADRs evidencing the balance of ADSs not so cancelled to the person or persons surrendering the same.
Voting Rights
If you are an ADS holder on a record date fixed by The Bank of New York Mellon, you may instruct The Bank of New York Mellon to vote the shares underlying your ADSs at a meeting of our shareholders in accordance with the procedures set forth in the deposit agreement.
The Bank of New York Mellon will notify you of the upcoming meeting and arrange to deliver our voting
.materials to you. The notice shall contain (a) such information as is contained in such notice of meeting, .(b). a.
statement that as of the close of business on a specified record date you will be entitled, subject to any applicable
provision of Japanese law and our Articles of Incorporation, to instruct The Bank of New York Mellon as to the
exercise of the voting rights, if any, pertaining to the amount of shares or other deposited securities represented
by your ADSs, and (c) a brief statement as to the manner in which such instructions may be given, including an
express indication that instructions may be given to The Bank of New York Mellon to give a discretionary proxy
to a person designated by us. Upon your written request, received on or before the date established by The Bank
of New York Mellon for such purpose, The Bank of New York Mellon shall endeavor in so far as practicable to
vote or cause to be voted the amount of shares or other deposited securities represented-by your ADSs in
accordance with the instructions set forth in your request. So long as Japanese law provides that votes may only
be cast with respect to one or more whole shares or other deposited securities, The Bank of New York Mellon
will aggregate voting instructions to the extent such instructions are the same and vote such whole shares or other
deposited securities in accordance with your instructions. If, after aggregation of all instructions to vote received
by The Bank of New York Mellon, any portion of the aggregated instructions constitutes instructions with
respect to less than a whole share or other deposited securities, The Bank of New York Mellon will not vote or
cause to be voted the shares or other deposited securities to which such portion of the instructions apply. The
Bank of New York Mellon will not vote or attempt to exercise the right to vote that attaches to the shares or other
deposited securities, other than in accordance with the instructions of the ADS holders. If no instructions are
received by The Bank of New York Mellon from you with respect to any of the deposited securities represented
by your ADSs on or before the date established by The Bank of New York Mellon for such purpose, The Bank of
New York Mellon shall deem you to have instructed Tlie Bank of New York Mellon to give a discretionary
proxy to a person designated by us with respect to such deposited securities and The Bank of New York Mellon
shall give a discretionary proxy to a person designated by us to vote such deposited securities, provided that no
such instruction shall be given with respect to any matter as to which we inform The Bank of New York Mellon
(and we have agreed to provide such information as promptly as practicable in writing) that (1) we do not wish
such proxy given, (2) substantial opposition exists or (3) such matter materially and adversely affects the rights
of holders of shares. - -
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct The Bank of New York Mellon to vote your shares. In addition, The Bank of New York Mellon is not responsible for failing to carry out voting instructions or for the manner of carrying out voting insuuetions as long as it has acted in good faith. This means that you may not be able to exercise your right to vote and there may be nothing you can do if your shares are not voted as you requested.
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Fees and Expenses
See "Item 12.D. Description of Securities Other than Equity Securities—American Depositary Shares." Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities underlying your ADSs. The Bank of New York Mellon may refuse to transfer your ADSs or allow you to withdraw the deposited securities underlying your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities underlying your ADSs to pay any taxes owed and you will remain liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce tlie number of ADSs to reflect the sale and pay to you any property remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers If we:
reclassify, split up or consolidate any of our shares or the deposited securities;
recapitalize, reorganize, merge, liquidate, consolidate or sell all or substantially all of our assets or take any similar action; or
distribute securities on the shares that are not distributed to you, then,
the cash, shares or other securities received by The Bank of New York Mellon will become deposited securities and each ADS will automatically represent its equal share of the new'deposited securities unless additional ADSs are issued; and
The Bank of New York Mellon may, and will if we request, issue new ADSs or ask you to surrender your outstanding ADSs in exchange for new ADSs, identifying the new deposited securities.
Amendment and Termination
We may agree with The Bank of New York Mellon to amend the deposit agreement and the ADSs without your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses, or prejudices an important right of ADS holders, it will only become effective three months after The Bank of New York Mellon notifies you of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADS, to agree lo the amendment and to be bound by the ADSs and the deposit agreement as amended. However, no amendment will impair your right to receive the deposited securities in exchange for your ADSs.
The Bank of New York Mellon will terminate the deposit agreement if we ask it to do so, in which case it must notify you at least 30 days before termination. The Bank of New York Mellon may also terminate the deposit agreement if The Bank of New York Mellon has told us that it would like to resign and we have not appointed a new depositary bank within 60 days.
If any ADSs remain outstanding after termination, The Bank of New York Mellon will stop registering the transfers of ADSs, will stop distributing dividends to ADS holders and will not give any further notices or do anything else under the deposit agreement other than:
collect dividends and distributions on the deposited securities;
sell rights and other property offered to holders of deposited securities; and
deliver shares and other deposited securities in exchange for ADSs surrendered lo The Bank of New York Mellon.
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At any tune after one year following termination, The Bank of New York Mellon may sell any remaining deposited securities. After that. The Bank of New York Mellon will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit ofthe ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The Bank of New York Mellon's only obligations will be to account for the money and other cash and with respect to indemnification and to retain depositary documents. After termination, our only obligations will be with respect to indemnification and to pay certain amounts to The Bank of New York Mellon.
Limitations on Obligations and Liability to ADS Holders
The deposit agreement expressly limits our obligations and the obligations of The Bank of New York Mellon. It also limits our liability and the liability of The Bank of New York Mellon. We and The Bank of New York Mellon:
are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
are not liable if either is prevented or delayed by law, any provision of our Articles of Incorporation or circumstances beyond their control from performing their obligations under the deposit agreement;
are not liable if either exercises or fails to exercise discretion permitted under the deposit agreement;
• have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the
deposit agreement on your behalf or on behalf of any other party unless indemnified to their satisfaction; and
may rely upon any advice of or information from legal counsel, accountants, any person depositing shares, any ADS holder or any other .person believed in good faith to be competent to give them that advice or information.
In the deposit agreement, we and The Bank of New York Mellon agree to indemnify each other for liabilities arising out of acts performed or omitted by the other party in accordance with the deposit agreement.
Requirements for Depositary Actions
Before The Bank of New York Mellon will issue or register transfer of an ADS, make a distribution on an ADS, or permit withdrawal of shares, it may require:
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;
production of satisfactory proof of the identity and genuineness of any signature or olher information it deems necessary; and
compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
The Bank of New York Mellon may refuse to deliver, transfer, or register transfers of ADSs generally when its transfer books are closed, when our transfer books are closed or at any time if it or we think it advisable to do
You have the right to cancel your ADSs and withdraw the underlying shares at any time except:
when temporary delays arise because: (1) The Bank of New York Mellon has closed its transfer books or we have closed our transfer books; (2) the transfer of shares is blocked to permit voting at a shareholders' meeting; or (3) we are paying a dividend on the shares;
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when you or other ADS holders seeking lo withdraw shares owe money to pay fees, taxes and similar charges; or
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations lhat apply to ADSs or to the withdrawal of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Reports and Other Communications
The Bank of New York Mellon will make available for your inspection at its coiporate trust office any reports and communications, including any proxy soliciting material, that it receives from us, if those reports and communications are both (a) received by The Bank of New York Mellon as the holder of the deposited securities and (b) made generally available by us to the holders of the deposited securities. If we ask it to, The Bank of New York Mellon will also send you copies of those reports it receives from us.
Inspection of Transfer Books
The Bank of New York Mellon will keep books for the registration and transfer of ADSs, which will be open for your inspection at all reasonable times. You will only have the right to inspect those books if tlie inspection is for the purpose of communicating with other owners of ADSs in connection with our business or a matter related to the deposit agreement or the ADSs.
Material Contracts
Except as described elsewhere in this Annual Report, all material contracts entered into by us in the past two years preceding the filing of this Annual Report were entered into in the ordinary course of business.
Exchange Controls
Foreign Exchange and Foreign Trade Law
The Foreign Exchange and Foreign Trade Law of Japan and the cabinet orders and ministerial ordinances incidental thereto, collectively known as the Foreign Exchange Law, set forth, among other matters, regulations relating to the receipt by non-residents of Japan of payment with respect to shares to be issued by us and the acquisition and holding of shares by non-residents of Japan and foreign investors, both as defined below. It also applies in some cases to the acquisition and holding of ADSs representing such shares acquired and held by nonresidents of Japan and by foreign investors. Generally, the Foreign Exchange Law currently in effect does not affect the right of a non-resident of Japan to purchase or sell an ADS outside Japan for non-Japanese currency.
"Non-residents of Japan" are defined as individuals who are not resident in Japan and corporations whose principal offices are located outside Japan. Generally, the branches and offices of non-resident corporations which are located in Japan are regarded as residents of Japan while the branches and offices of Japanese corporations located outside Japan are regarded as non-residents of Japan.
"Foreign investors" are defined as: non resident individuals;
corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan;
corporations of which 50% or more of the shares are directly or indirectly held by individuals not resident of Japan and corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; and
corporations, a majority of officers (or a majority of officers having the power of representation) of which are non-resident individuals.
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Dividends and Proceeds of Sales
Under the Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan of, shares held by non-residents of Japan may in general be converted into any foreign currency and repatriated abroad. The acquisition of our shares by non-residents by way of a slock split is not subject to any notification or repotting requirements.
Acquisition of Shares
In general, a non-resident who acquires shares from a resident of Japan is not subject to any prior filing requirement, although the Foreign Exchange Law empowers the Minister of Finance of Japan to require a prior approval for any such acquisition in certain limited circumstances.
If a foreign investor acquires our shares, and, together with parties who have a special relationship with that foreign investor, holds 10% or more of our issued shares as a result of such acquisition, the foreign investor must file a report of such acquisition with the Minister of Finance and any other competent Minister by the fifteenth day of the month immediately following the month to which the date of such acquisition belongs. In certain limited circumstances, however, a prior notification of such acquisition must be filed with the Minister of Finance and any other competent Minister, who may modify or prohibit the proposed acquisition.
Deposit and Withdrawal under American Depositary Facility
The deposit of shares with us, in our capacity as custodian and agent for the depositary, in Tokyo, the issuance of ADSs by the depositary to a non-resident of Japan in respect of the deposit and the withdrawal ofthe underlying shares upon the surrender of the ADSs are not subject to any of the formalities or restrictions referred to above. However, where as a result of a deposit or withdrawal the aggregate number of shares held by the depositary, including shares deposited with us as custodian for the depositary, or the holder surrendering ADSs, as the case may be, would be 10% or more of the total outstanding shares, a report will be required, and in specified circumstances, a prior notification may be required, as noted above.
Reporting of Substantial Shareholdings
The Financial Instruments and Exchange Law of Japan requires any person who has become, beneficially and solely or jointly, a holder of more than 5% of the total issued shares of capital stock of a company listed on any Japanese financial instruments exchange or whose shares are traded on the over-the-counter market in Japan to file with the director of a competent finance bureau within 5 business days a report concerning.such shareholdings.
A similar report must also be filed in respect of any subsequent change of 1 % or more in any such holding ratio or any change in material matters set out in reports previously filed, with certain exceptions. For this puipose, shares issuable to such person upon exchange of exchangeable securities, conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights (including those incorporated in bonds with stock acquisition rights) are taken into account in determining both the number of shares held by such holder and the issuer's total issued shares of capital stock. Copies of such report must also be furnished to the issuer of such shares and all Japanese financial instruments exchanges on which the shares are listed or (in the case of shares traded over-the-counter) the Japan Securities Dealers Association.
E. Taxation~— " ~-- --
Japanese Taxation
The following sets forth the material Japanese tax consequences to owners of shares of our common stock or ADSs who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan to which the relevant income is attributable, which we refer to as "non-resident holders" in this section. The statements regarding Japanese tax laws below arc based on the laws in force and as inteipreted by the Japanese
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taxation authorities as at the date of this Annual Report and are subject to changes in the applicable Japanese laws, double taxation treaties, conventions or agreements or interpretations thereof occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of shares of our common stock or ADSs, including specifically the tax consequences under Japanese law, the laws of the jurisdiction of which they are resident and any tax treaty between Japan and their country of residence, by consulting their own tax advisers.
For the purpose of Japanese tax law and the Convention between the Government of the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, or the Tax Convention, a U.S. holder of ADSs will be treated as the owner of the shares of our common stock underlying the ADSs evidenced by the ADRs.
Generally, a non-resident holder of shares of our common stock or ADSs is subject to Japanese withholding tax on dividends paid by us. In the absence of any applicable tax treaty, convention or agreement reducing the rate of withholding tax, the rate of Japanese withholding tax applicable to dividends paid by us to non-resident holders is (i) 15.315% for dividends to be paid on or before December 31, 2037 and (ii) 15% for dividends to be .paid thereafter, except for dividends paid to any individual non-resident holder who holds 3% or more of our issued shares for which the applicable rate is (a) 20.42% for dividends to be paid on or before December 31, 2037 and (b) 20% for dividends to be paid thereafter, pursuant to Japanese tax law.
The Tax Convention establishes the maximum rate of Japanese withholding tax which may be imposed on dividends paid to a U.S. resident not having a permanent establishment in Japan. Under the Tax Convention, the maximum withholding rate for U.S. holders (as defined below) is generally set at 10% of the gross amount distributed. However, the maximum rate is 5% of the gross amount distributed if the recipient is a corporation and owns directly or indirectly, on the date on which entitlement to the dividends is determined, at least 10% of the voting shares of the paying corporation. Furthermore, the amount distributed shall not be taxed if the recipient is (i) a pension fund which is a U.S. resident, provided that such dividends are not derived from the carrying on of a business, directly or indirectly, by such pension fund or (ii) a parent company with a controlling interest in the paying company and satisfies certain other requirements. U.S. holders (as defined below) are urged to consult their own tax advisors with respect to their eligibility for benefits under the Tax Convention.
Japanese tax law provides in general that if the Japanese statutory rate is lower than the maximum rate applicable under tax treaties, conventions or agreements, the Japanese statutory rate as stated above shall be applicable.
Non-resident holders of shares who are entitled to a reduced rate of Japanese withholding tax on payments of dividends on the shares of our common stock or ADSs by us are required to submit an Application Form for the Income Tax Convention regarding Relief from Japanese Income Tax on Dividends, or an Application Form for the Income Tax Convention, in advance through a paying handling agent to the relevant tax authority before the payment of dividends. A standing proxy for non-resident holders may provide this application service for the non-resident holders. In this regard, a certain simplified special filing procedure is available for non-resident holders to claim treaty benefits of exemption from or reduction of Japanese withholding tax with respect to dividends to be paid on or after January 1, 2014, by submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks (together with any other required forms and documents). With respect to ADSs, this reduced rate or exemption will be applicable to non-resident holders of ADSs if the depositary or its agent submits two Application Forms (one before payment of dividends and the other within eight months after the record date concerning such payment of dividends), together with certain other documents. To claim this reduced rate or exemption, non-resident holders of ADSs will be required to file a proof of taxpayer status, residence and beneficial ownership, as applicable, and to provide other information or documents as may be required by the depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case
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may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable lax treaty) or the full amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty), as the case may be, by complying with a certain subsequent filing procedure. We do not assume any responsibility to ensure withholding at the reduced rate, or exemption therefrom, for non-resident holders who would be so eligible under an applicable tax treaty but where the required procedures as stated above are not followed.
Gains derived from the sale or olher disposition of shares of our common stock or ADSs by a non-resident holder are not, in general, subject to Japanese income or coiporation taxes or other Japanese taxes.
Any deposits or withdrawals of shares of our common stock by a non-resident holder in exchange for ADSs are not subject to Japanese income or corporation tax.
Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired shares of our common stock or ADSs as legatee, heir or donee, even if none ofthe individual, the decedent or the donor is a Japanese resident.
U.S. Taxation — ~~"~" " "
The following sets forth the material U.S. federal income tax consequences of the ownership of shares and ADSs by a U.S. holder, as defined below. This summary is based on U.S. federal income tax laws, including the U.S: Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions, and the Tax Convention (as defined above), all of which are subject to change, possibly with retroactive effect.
The following summary is not a complete analysis or description of all potential U.S. federal income tax consequences to a particular U.S. holder. It does not address all U.S. federal income tax considerations that may be relevant to all categories of potential purchasers, certain of which (such as banks or other financial institutions, insurance companies, dealers in securities, tax-exempt entities, non-U.S. persons, persons holding a share or an ADS as part of a "straddle," "hedge," conversion or integrated transaction, holders whose "functional currency" is not the U.S. dollar, holders liable for alternative minimum tax and holders of 10% or more of our voting shares) are subject to special tax treatment. This summary does not address any foreign, state, local or other tax consequences of investments in our shares or ADSs.
This summary addresses only shares or ADSs that are held as capital assets within the meaning of Section 1221 of the Code.
As used herein, a "U.S. holder" is a beneficial owner of shares or ADSs, as the case may be, that is:
a citizen or resident of the United States as determined for U.S. federal income tax purposes;
• a corporation or other entity taxable as a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or a trust
the administration of which is subject to (1) the supervision of a court within the United States and (2) the control of one or more U.S. persons as described in Section 7701 (a)(30) of the Code: or
that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
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A "Non-U.S. holder" is any beneficial holder of shares or ADSs thai is not a U.S. holder.
If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities ofthe partnership. If you are a partner of a partnership holding shares or ADSs, you should consult your tax advisor.
We urge U.S. holders to consult their own tax advisors concerning the U.S. federal, state and local and other tax consequences to them of the purchase, ownership and disposition of shares or ADSs.
This summary is based in part on the assumption that each obligation under the deposit agreement and any related agreement will be performed in accordance with its respective terms. Subject to the discussion in the next paragraph, for U.S. federal income tax purposes, holders of ADSs will be treated as the owners ofthe shares represented by the ADSs. Accordingly, withdrawals or deposits of shares in exchange for ADSs generally will not be subject to U.S. federal income tax.
The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying shares (for example, pre-releasing ADSs to persons who do not have beneficial ownership ofthe securities underlying the ADSs). Accordingly, the discussion on the creditability of Japanese taxes and the availability ofthe reduced rate of tax for dividends received by certain non-corporate U.S. holders, each as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of ADSs and us if, as a result of such actions, the holders of ADSs arc not properly treated as beneficial owners of the underlying shares. We are not aware of any intention to take any such actions, and accordingly, the remainder of this discussion assumes that holders of ADSs will be properly treated as beneficial owners of the underlying shares.
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a "passive foreign investment company" (a "PFIC") for any taxable year during which the U.S. holder held shares or ADSs, as discussed in more detail below. U.S. holders should consult their own tax advisors as to the potential application of the PFIC rules to their ownership and disposition of shares or ADSs.
Taxation of Dividends
Subject to the application ofthe PFIC rules discussed below, U.S. holders will include the gross amount of any distribution received with respect to shares or ADSs (before reduction for Japanese withholding taxes), to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax puiposes), as ordinary income in their gross income. As discussed below, for certain U.S. holders, dividends may be eligible for a reduced rate of taxation. The amount of distribution of property other than cash will be the fair market value of such property on the date ofthe distribution. Dividends received by a U.S. holder will not be eligible for the "dividends-received deduction" allowed to U.S. corporations in respect of dividends received from other U.S. corporations. To the extent that an amount received by a U.S. holder exceeds such holder's allocable share of our current earnings and profits, such excess will be applied first to reduce such holder's tax basis in its shares or ADSs, thereby increasing the amount of gain or decreasing the amount of loss recognized on a subsequent disposition of the shares or ADSs. Then, to the extent such distribution exceeds such U.S. holder's tax basis, such excess will be treated as capital gain. However, we do not maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles, and U.S. holders should therefore assume that any distribution by us with respect to shares or ADSs will constitute ordinary dividend income. The amount of the dividend will be the U.S. dollar value of the Japanese yen payments received. This value will be determined at the spot Japanese yen/U.S. dollar rate on the date the dividend is received by the depositary in the case of U.S. holders of ADSs, or by the shareholder in the case of U.S. holders of shares, regardless of whether the dividend payment is in fact converted into U.S. dollars at that time. If the Japanese yen received as a dividend are not converted into U.S. dollars on the date of receipt, a U.S. holder will have basis in such Japanese yen equal to their U.S. dollar value on the date of receipt, and any foreign currency gains or losses resulting from the
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conversion ofthe Japanese yen will generally be treated as U.S. source ordinary income or loss. If the Japanese yen received as a dividend are converted into U.S. dollars on the date of receipt, a U.S. holder will generally not be required lo recognize foreign currency gain or loss in respect of the dividend income.
If a U.S. holder is eligible for benefits under the Tax Convention, (he holder may be able to claim a reduced rate of Japanese withholding tax. All U.S. holders should consult their tax advisors about their eligibility for reduction of Japanese withholding tax. A U.S. holder may claim a deduction or a foreign tax credit, subject to other applicable limitations, only for tax withheld at the appropriate rate. A U.S. holder would be allowed a foreign tax credit for withholding tax for any portion of the tax that could have been avoided by claiming benefits under the Tax Convention. For foreign tax credit limitation purposes, the dividend will be income from sources outside the United States. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends we pay will constitute "passive income" or, in the case of certain U.S. holders, "financial services income." The rules governing U.S. foreign tax credits are very complex and U.S. holders should consult their tax advisors regarding the availability of foreign tax credits under their particular circumstances.
Subject to applicable exceptions with respect to short-term and hedged positions, qualified dividends received by non-corporate U.S. holders from a qualified corporation may be eligible for reduced rates of taxation. Qualified corporations include those foreign corporations eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includes an exchange of information provision. The Tax Convention meets these requirements. We believe that we arc a qualified foreign corporation and that dividends received by U.S. investors with respect to our shares or ADSs will be qualified dividends. Dividends received by U.S. investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding taxable year are not qualified dividends. <
Passive Foreign Investment Company Considerations
Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a PFIC, for any taxable year during which the U.S. holder held shares or ADSs. A foreign corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is passive income (the "income test"), or (ii) 50% or more of the average fair market value of its assets (determined quarterly) is attributable to assets that produce or are held for the production of passive income (the "asset test"). For this purpose, passive income generally includes dividends, interest, royalties, rents and certain gains from the sale of stock and securities. If a foreign corporation owns at least 25% (by value) of the stock of another corporation, the corporation will be treated, for purposes of the PFIC tests, as owning a proportionate share of the other corporation's assets and receiving its proportionate share of the other corporation's income. The determination of whether a foreign corporation is a PFIC is made annually.
Proposed Treasury regulations convert what would otherwise be passive income into non-passive income when such income is banking income earned by an active bank. Based upon these proposed Treasury regulations and certain IRS guidance relating to the treatment of certain qualifying government bonds, and upon certain management estimates and assumptions, we do not believe that we were a PFIC for the year ended March 31, 2015 because we did not meet either the income test or the asset test. The determination of whether we are a PFIC must be made annually and involves a fact-intensive analysis based upon, among other things, the composition of our income and assets and the value of our assets from time to time. It is possible that we may become a PFIC in the fiscal-year ending March"3172016'or any future taxable year due to charig"es""i"n""our"iffcome or asset composition. In addition, a decrease in the price of our shares may also result in our becoming a PFIC. Furthermore, there can be no assurance that the above-described proposed Treasury regulations will be finalized in their current form or that the above IRS guidance which is scheduled to expire for taxable years beginning after 2016 will continue to apply. Moreover, the application of the proposed Treasury regulations is not clear. If we were classified as a PFIC in any year during which a U.S. holder owns shares or ADSs and the U.S. holder does not make a "mark-to-market" election, as discussed below, we generally would continue to be treated as a
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PFIC as lo such U.S. holder in all succeeding years, regardless of whether wc continue to meet the income or asset test discussed above. U.S. Holders arc urged to consult their own lax advisors with respect to the tax consequences to them if we were lo become a PFIC for any taxable year in which they own our shares or ADSs.
If we were classified as a PFIC for any taxable year during which a U.S. holder holds our shares or ADSs, the U.S. holder would generally not receive capital gains treatment upon the sale of the shares or ADSs and would be subject to increased tax liability (generally including an interest charge) upon the sale or other disposition of the shares or ADSs or upon the receipt of certain distributions treated as "excess distributions," unless the U.S. holder makes the mark-to-market election described below. An excess distribution generally would be any distribution to a U.S. holder with respect lo shares or ADSs during a single taxable year that is greater than 125% of the average annual distributions received by a U.S. holder with respect to shares or ADSs during the three preceding taxable years or, if shorter, during the U.S. holder's holding period for the shares or ADSs.
Mark-to-Market Election. If the shares or ADSs are regularly traded on a registered national securities exchange or certain other exchanges or markets, then such shares or ADSs would constitute "marketable stock" for purposes of the PFIC rules, and a U.S. holder would not be subject to the foregoing PFIC rules if such holder made a mark-to-market election. After making such an election, the U.S. holder generally would include as ordinary income each year during which the election is in effect and during which we are a PFIC the excess, if any, of the fair market value of our shares or ADSs at the end of the taxable year over such holder's adjusted basis in such shares or ADSs. These amounts of ordinary income would not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. holder also would be allowed to take an ordinary loss in respect of the excess, if any, of the holder's adjusted basis in our shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income that was previously included as a result of the mark-to-market election). A U.S. holder's tax basis in our shares or ADSs would be adjusted to reflect any income or loss amounts resulting from a mark-to-market election. If made, a mark-to-market election would be effective for the taxable year for which the election was made and for all subsequent taxable years unless the shares or ADSs cease to qualify as "marketable stock" for purposes of the PFIC rules or the Internal Revenue Service consented to the revocation of the election. In the event that we are classified as a PFIC, U.S. holders are urged to consult their tax advisors regarding the availability of the mark-to-market election, and whether the election would be advisable in the holder's particular circumstances.
QEF Election. The PFIC rules outlined above also would not apply to a U.S. holder if such holder alternatively elected to treat us as a "qualified electing fund" or "QEF." An election to treat us as a QEF will not be available, however, if we do not provide the information necessary to make such an election. We will not provide U.S. holders with the information necessary to make a QEF election, and thus, the QEF election will not be available with respect to our shares.
Notwithstanding any election made with respect to our shares, dividends received with respect to our shares will not constitute "qualified dividend income" if we are a PFIC in either the year of the distribution or the preceding taxable year. Dividends that do not constitute qualified dividend income are not eligible for taxation at the reduced tax rate described above in "—Taxation of Dividends." Instead, such dividends would be subject to tax at ordinary income rates.
If a U.S. holder owns shares or ADSs during any year in which we are a PFIC, the U.S. holder must also file IRS Form 8621 regarding distributions received on the shares or ADSs, any gain realized on the shares or ADSs, and any "reportable election" in accordance with the instructions to such form. In addition, each U.S. holder is required to file a separate IRS Form 8621 if such U.S. holder owns shares or ADSs during any year in which we are a PFIC whether or not such U.S. holder received distributions on the shares or ADSs, realized a gain on the shares or ADSs or made a "reportable election" during such year. U.S. holders are urged to consult their own tax advisors concerning the U.S. federal income tax consequences of holding shares or ADSs if the Company were considered a PFIC in any taxable year.
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Taxation of Capital Gains
Subject to tlie application of the PFIC rules discussed above, upon a sale or other disposition of shares or ADSs, a U.S. holder will recognize a gain or loss in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. holder's tax basis, determined in U.S. dollars, in such shares or ADSs. Such gains or losses will be capital gains or losses and will be long-term capital gains or losses if the U.S. holder's holding period for such shares or ADSs exceeds one year. Long-term capital gains of non-corporate U.S. holders (including individuals) are generally eligible for reduced rates of taxation. A U.S. holder's adjusted tax basis in its shares or ADSs will generally be the cost to the holder of such shares or ADSs. Any such gains or losses realized by a U.S. holder upon disposal of the shares or ADSs will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of capital losses is subject to limitations under the Code.
Information Reporting and Backup Withholding
Dividends paid on shares or ADSs to a U.S. holder, or proceeds from a U.S. holder's sale or other disposition of shares or ADSs, may be subject to information reporting requirements. Those dividends or proceeds from sale or disposition may also be subject to backup withholding unless the U.S. holder:
is a corporation or other exempt recipient, and, when required, demonstrates this fact; or
• provides a~corrcct taxpayer identification'numbcr on~a~properly completed U.Srlntcrnal Revenue"
Service Form W-9 or other appropriate form which certifies that the U.S. holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against the U.S. holder's U.S. federal income tax liability or refundable to the extent that it exceeds such liability if the U.S. holder provides the required.information to the Internal Revenue Service. If a U.S. holder is required to and does not provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the Internal Revenue Service. All holders should consult their tax advisors as to their qualification for the exemption from backup withholding and the procedure for obtaining an exemption.
In addition, certain U.S. holders who are individuals that hold certain foreign financial assets (which may include our shares or ADSs) are required to report information relating to such assets, subject to certain exceptions. U.S. Holders should consult their tax advisors regarding the effect, if any, of this requirement on their ownership and disposition of our shares and ADSs.
Additional Tax on Investment Income
U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds will be subject to an additional 3.8% tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, shares or ADSs, subject to certain limitations and exceptions.
Dividends and Paying Agents
Not applicable.
Statement by Experts Not applicable.
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II. Documents on Display
We file periodic reports and other information with the SEC. You may read and copy any document that we file with the SEC at the SEC's public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference rooms. The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC ().
I. Subsidiary Information
Please refer to discussion under "Item 4.C. Information on the Company—Organizational Structure."
Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk.
Since the financial crisis in 2008, financial groups such as us have been expected to ensure increasingly more sophisticated and comprehensive risk management. Risk management plays an increasingly important role in our operations as a financial group operating globally through various subsidiaries.
Wc identify various risks arising from businesses based on uniform criteria, and implement integrated risk management to ensure a stronger financial condition and to maximize shareholder value. Based on this approach, we identify, measure, control and monitor a wide variety of risks so as to achieve a stable balance between earnings and risks. We undertake risk management to create an appropriate capital structure and to achieve optimal allocation of resources.
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Risk Classification
At the holding company level, we broadly classify and define risk categories faced by the Group including those that are summarized below. Group companies perform more detailed risk management based on their respective operations.
Type of Risk
Credit Risk
Market Risk
Liquidity Risk
Operational Risk
Operations Risk
Information Asset Risk
Tangible Asset Risk
Personnel Risk Legal Risk
Reputation Risk
The risk of financial loss in credit assets (including off-balance sheet instalments) caused by deterioration in the credit conditions of counterparties. This category includes country risk.
Market risk is the risk of financial loss where the value of our assets and liabilities could be adversely affected by changes in market variables such as interest rates, securities prices and foreign exchange rates. Market liquidity risk is the risk of financial loss caused by the inability to secure market transactions at the required volume or price levels as a result of market turbulence or lack of trading liquidity.
The risk of incurring loss if a poor financial position at a group company hampers the ability to meet funding requirements or necessitates fund procurement at interest rates markedly higher than normal.
The risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events:" "
The risk of incurring loss that might be caused by negligence of correct operational processing, or by incidents or misconduct by either officers or staff, as well as other similar risks.
The risk of loss caused by loss, alteration, falsification or leakage of information, or by destruction, disruption, errors or misuse of information systems, as well as other similar risks.
The risk of loss due to damage to tangible assets or deterioration in the operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk.
The risk of loss due to an outflow or loss of human resources or deterioration in employee morale, as well as risks similar to this risk.
The risk of loss due to failure to comply with applicable laws and regulations, adequately evaluate contractual rights and obligations, or appropriately deal with disputes, as well as other similar risks.
The risk of loss due to deterioration in reputation as a consequence of tlie spread of rumors among customers or in the market, or as a consequence of inadequate response to a particular circumstance by MUFG, as well as other similar risks.
Risk Management System
We have adopted an integrated risk management system to promote close cooperation among the holding company and group companies. The holding company and the major subsidiaries (which include BTMU, MUTB and MUSHD) each appoint a chief risk officer and establish an independent risk management division. The board of directors of the holding company determines risk management policies for various type of risk based on the discussions at, and reports and recommendations from, committees established specially for-risk-management purposes. The holding company has established committees to assist management in managing risks relevant to the Group. Following the fundamental risk management policies determined by the board of directors, each group company establishes its own systems and procedures for identifying, analyzing and managing various types of risks from both quantitative and qualitative perspectives. The holding company seeks to enhance group wide risk identification, to integrate and improve the Group's risk management system and related methods, to maintain asset quality, and to eliminate concentrations of specific risks.
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The following diagram summarizes our integrated risk management framework:
t I It
^fl Eilublahfunilancnlalpolic) and ^fl ^fl
H I provide guidance tmd advice H H
I ? ? I
I I
E
I
I
Scheduled lo be established in 2015.
Scheduled to be renamed to "Credit Committee" in 2015.
Crisis Management Framework
In order to have a clear critical response rationale and associated decision-making criteria, we have developed systems designed to ensure that our operations are not interrupted or can be restored to normal quickly in the event of a natural disaster or system failure so as to minimize any disruption to customers and markets. A crisis management team within the holding company is the central coordinating body in the event of any emergency. Based on information collected from crisis management personnel at the major subsidiaries, this central body would assess the overall impact of a crisis on the Group's business and establish task forces that could implement all countermeasures to restore full operations. We have business continuity plans to maintain continuous operational viability in the event of natural disasters, system failures and other types of emergencies. Regular training drills are conducted to upgrade the practical effectiveness of these systems.
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Recognizing that our operations, particularly in Japan, are subject to the risk of earthquakes and olher natural disasters as well as accidents resulting from such disasters, including a sudden massive blackout in major metropolitan areas in Japan, and that our contingency plans may not address all eventualities that may occur in the event of a material disruption to our operations, we have been conducting a comprehensive review of our existing business continuity plan to more effectively respond to such extreme scenarios, and continue to contemplate and implement measures to augment our current business continuity management framework, including enhancing our off-site back-up data storage and other information technology systems.
Implementation of Basel Standards
Basel II, as adopted by the FSA, has been applied to Japanese banks since March 31, 2007. Certain provisions of Basel III were adopted by the FSA effective March 31, 2013 for Japanese banking institutions with international operations conducted by their foreign offices. Basel III is based on Basel II's comprehensive regulatory framework which is built on "three pillars": (!) minimum capital requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market discipline through the disclosure of information. Based on the Basel principles, MUFG has adopted the Advanced Internal Ratings-Based Approach to calculate its capital requirements for credit risk since March 31, 2009. The Standardized Approach is used for some subsidiaries thai are considered lo be immaterial to our overall capital requirements, and MUFG Americas Holding Corporation, or MUAH, has adopted a phased rollout of thelntemal Ratings-Based Approach. MUFG has adopted the Advanced Measurement Approach since March 31, 2012 to calculate its capital requirements for operational risk, except that
- wc use tlie Basic-Indicator-Approach for cntitics-that are deemed to be-less important in the calculation-of-the
operational risk equivalent amount and for entities that-are still preparing to implement-the Advanced Measurement Approach. As for market risk, MUFG has adopted the Internal Models Approach mainly to calculate general market risk and adopted tlie Standardized Measurement Method to calculate specific risk.'
In response to the recent financial crisis, the Group of Central Bank Governors and Heads of Supervision has made a series of announcements regarding the'new global regulatory framework; which has been referred to as "Basel III," to strengthen the regulation, supervision and risk management of the:banking sector.-Various-'Basel III measures are being phased in from the calendar year 2013; including those designed to raise the level of minimum capital requirements and to establish an internationally harmonized leverage'ratio and a global minimum liquidity standard. In addition, the Basel Committee on Banking Supervision has proposed additional loss absorbency requirements to supplement the Common Equity Tier 1 capital requirement ranging from 1% to 3.5% for G-SIBs, depending on the bank's systemic importance. The Financial Stability Board identified us as a G-SIB in its most recent annual report published in November 2013, and indicated that; as a G-SIB, we would be required to hold an additional 1.5% of Common Equity Tier 1 capital. The group of banks identified as G-SIBs is expected to be updated annually, and the group of G-SIBs identified in November 2014 is the first group of G-SIBs to which the stricter capital requirements will initially be applied. The stricter capital requirements are expected to be implemented in phases between January 1, 2016 and December 31, 2018 and will become fully effective on January 1, 2019.
Based on the Basel III framework, the Japanese capital ratio framework has been revised to implement the more stringent requirements, which are being implemented in phases beginning on March 31, 2013. Likewise, local banking regulators outside of Japan, such as those in the United States, have begun, or are expected, to revise the capital and liquidity requirements imposed on our subsidiaries and operations in those countries to implement the more stringent requirements of Basel III as adopted in those countries. We intend to carefully monitor further developments with an aim to enhance our corporate value and maximize shareholder value by integrating the
various strengths within the.MUFG Group. For more information on the Basel regulatory_framew.ork.and
requirements, see "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation."
Credit Risk Management
Credit risk is the risk of losses due to deterioration in the financial condition of a borrower. We have established risk management systems to maintain asset quality, manage credit risk exposure and achieve earnings commensurate with risk.
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Our major banking subsidiaries (which include BTMU and MUTB) apply a uniform credit rating system for asset evaluation and assessment, loan pricing, and quantitative measurement of credit risk. This system also underpins the calculation of capital requirements and management of credit portfolios. We continually seek to upgrade credit portfolio management, or CPM, expertise to achieve an improved risk-adjusted return based on the Group's credit portfolio status and flexible response capability to economic and other external changes.
Credit Risk Management System
The credit portfolios of our major banking subsidiaries are monitored and assessed on a regular basis by the holding company to maintain and improve asset quality. A uniform credit rating and asset evaluation and assessment system is used to ensure timely and proper evaluation of all credit risks.
Under our credit risk management system, each of our subsidiaries in the banking, securities, consumer finance, and leasing businesses, manages its respective credit risk on a consolidated basis based on the attributes of the risk, while the holding company oversees and manages credit risk on an overall group-wide basis. The holding company also convenes regular committee meetings to monitor credit risk management at banking subsidiaries and to issue guidance where necessary.
Each major banking subsidiary has in place a system of checks and balances in which a credit administration section that is independent of the business promotion sections screens individual transactions and manages the extension of credit. At the management level, regular meetings of the Credit & Investment Management Committee and related deliberative bodies ensure full discussion of important matters related to credit risk management. Besides such checks and balances and internal oversight systems, credit examination sections also undertake credit testing and evaluation to ensure appropriate credit risk management.
The following diagram summarizes the credit risk management framework for our major banking subsidiaries:
Credit administration sections
Credit screening and management
Business promotion sections
Credit risk management sections
Quantitative risk monitoring .
Credit testing and evaluation
Credit examination sections
Notes:
Scheduled to be established in 2015.
Scheduled to be renamed to "Credit Committee" in 2015.
Credit Rating System
MUFG and its major banking subsidiaries use an integrated credit rating system to evaluate credit risk. The credit rating system consists primarily of borrower rating, facility risk rating, structured finance rating and asset securitization rating.
Country risk is also rated on a uniform group-wide basis. Our country risk rating is reviewed periodically to lake into account relevant political and economic factors, including foreign currency availability.
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Risk exposure for small retail loans, such as residential mortgage loans, is managed by grouping loans into various pools and assigning ratings at the pool level.
Borrower rating
Our borrower rating classifies borrowers into 15 grades based on evaluations of their expected debt-service capability over the next three to five years.
The following table sets forth our borrower grades:
Definition of MUFG Borrower Rating
MUFG Borrower Rating MUFG Borrower Rating Definition |109|The capacity to meet financial commitments is extremely certain, and the borrower has the highest level of creditworthiness. |109|The capacity to meet financial commitments is highly certain, but there arc some elements that may result in lower creditworthiness in the future. |109|The capacity to meet financial commitments is sufficiently certain, but there is the possibility that creditworthiness may fall in-the long run. |109|There are no problems concerning the capacity to meet financial commitments, but there is the -possibility-that-creditworthiness may-fall-in the long run. - —
'5 There are no problems concerning the capacity to meet financial commitments, and creditworthiness is in the middle range. |109|There are no problems concerning the capacity to meet financial commitments presently, but there are elements that require attention if the situation changes. |109|There are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor. |109|There.are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor, and creditworthiness is relatively low. |10 9|The capacity to meet financial commitments is somewhat poor, and creditworthiness is the lowest among "Normal" customers.
10 through 12 Borrowers who must be closely monitored because of the following business performance and financial conditions: (1) Borrowers who have problematic business performance, such as virtually delinquent principal repayment or interest payment; (2) Borrowers whose business performance is unsteady, or who have unfavorable financial conditions; (3) Borrowers who have problems with loan conditions, for whom interest rates have been reduced or shelved.
10 Although business problems are not serious or their improvement is seen to be remarkable, there are elements of potential concern with respect to the borrower's management, and close monitoring is required.
11 Business problems arc serious, or require long-term solutions. Serious elements concerning business administration ofthe borrower have emerged, and subsequent debt repayment needs to be monitored closely.
12 Borrowers who fall under the criteria of Rating 10 or 11 and have a loan concession granted. Borrowers who have "Loans contractually past due 90 days or more." (As a rule, delinquent borrowers are categorized as "Likely to Become Bankrupt," but the definition here applies to borrowers delinquent for 90 days or more because of inheritance and other special reasons.)
13 Bondwers~wlio pose a serious risk" with respect to debt repayment, loss is likely to occur in the course of transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in achieving restructuring plans, and are likely to become bankrupt in the future.
14 While not legally bankrupt, borrowers who are considered to be virtually bankrupt because they arc in serious financial difficulty and have no prospects for an improvement in their business operations.
15 Borrowers who arc legally bankrupt (i.e., who have no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation, or filing for legal liquidation).
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The Japanese regulatory authorities require Japanese banks to categorize borrowers as follows:
Normal borrowers (generally corresponding to borrowers in categories 1 through 9 in our ratings), which are borrowers that are performing well, with no significant financial concerns,
Borrowers requiring close watch (generally corresponding to borrowers in categories 10 through 12 in our ratings), which include loans that have been amended to allow for delays or forgiveness of interest payments, borrowers experiencing difficulty in complying with loan terms and conditions and borrowers that arc recording losses or performing badly,
Borrowers likely to become bankrupt (generally corresponding to borrowers in category 13 in our ratings), which relate to borrowers who pose a serious risk with respect to debt repayment, loss is likely to occur in the course of transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in achieving restructuring plans, and are likely to become bankrupt in Ihe future.
Virtually bankrupt borrowers (generally corresponding to borrowers in category 14 in our ratings), which are not legally bankrupt, but borrowers who are considered to be virtually bankrupt because they are in serious financial difficulty and have no prospects for an improvement in their business operations, and
Bankrupt borrowers or de facto bankrupt borrowers (generally corresponding to borrowers in category 15 in our ratings), which are borrowers who are legally bankrupt (i.e., who have no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation, or filing for legal liquidation) proceedings.
The primary data utilized in our assessment of borrowers include the borrower's financial statements and notes thereto as well as other public disclosure made by the borrower. In addition, when appropriate and possible, we obtain non-public financial and operating information from borrowers, such as the borrower's business plan, borrower's self-evaluation of its operating assets and other borrower information about its business and products.
Based on the borrower and industry information, we assign borrower ratings mainly by applying financial scoring models—either developed internally or by third party vendors, depending on the borrower's attributes, whether the borrower is domestic or foreign, whether the borrower is a large corporation or a small and medium-sized corporation, and whether the borrower is a corporate entity or another type of legal entity (such as a school, hospital or fund).
For example, for domestic small and medium-sized corporations, which constitute the largest borrower attribute in our current loan portfolio in terms of number of borrowers, we have adopted an internally developed financial scoring model, exclusively designed and developed for such attribute. We have selected various financial ratios that we believe to be useful and meaningful to quantitatively measure and assess the borrowers' financial standing and repayment capability. Such financial ratios represent, among other things, borrowers' growth, profitability, stability, cash flow, company size and capital efficiency. The model is periodically tested against historical results. The following is an illustration of some of the financial ratios we utilize as part of our financial scoring model:
To measure growth: Sales growth, and growth in total assets,
To measure profitability: Current profit to sales, and profit before tax to sales, and
To measure stability: Equity ratio and current ratio.
The financial score obtained through the models is reviewed and, when necessary, adjusted downward to reflect our qualitative assessment of the borrower's financial strength and other factors that could affect the borrower's ability to service the debt. For example, we take into account: capability of turning around the business (in case of borrowers with losses) or recovering positive net worth (in case of borrowers with negative
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net worth), industry risk, management risk, legal risk, as well as our assessment of the probability of receiving support from parent companies (if the borrower is a subsidiary of a large listed company).
When adjusting the results of primary financial scoring assigned to borrowers with losses, we consider the severity of losses and the possibility of improving operating results. We analyze and assess whether the loss is temporary, the trend in operating results is improving, or the loss is expected to continue for an extended period. When adjusting the results of primary financial scoring assigned to borrowers with losses or borrowers with negative net worth, we also analyze whether the borrower can return to a positive net worth, and the time period needed to achieve such recovery (one to two years, three to five years, or five years or more).
In addition, adjustments based on industry risk are based on future prospects, applicable laws and regulations, and other factors surrounding the industry. Adjustments for management risk reflect our assessment of management's track record, the composition of the management team including the board of directors, any management succession plan as well as the risk management and compliance framework ofthe borrower. Adjustments for legal risk are made when the borrower is facing a lawsuit and when there is a possibility of a significant claim payment related to product liability, intellectual property, environmental problems, building standard law, and other legal issues.
When assessing the probability of receiving support from parent companies, various factors are examined,
_such_asjhe parent company\s_cre.dk stan^ the parent,
whether the borrower is consolidated by the parent, and the proportion of the borrower in consolidated sales and profits of the parent.
In addition, we consider outside ratings, and our internal borrower ratings may be adjusted when deemed appropriate.
Facility risk rating •
Facility risk rating is used to evaluate and classify the quality of individual credit facilities, including guarantees and collateral. Ratings are assigned by quantitatively measuring the estimated loss rate of a facility in the event of a default.
Structured finance rating and asset securitization rating
Structured finance rating and asset securitization rating are used to evaluate and classify the quality of individual credit facilities, including guarantees and collateral, and focus on the structure, including the applicable credit period, of each credit facility. In evaluating the debt service potential of a credit facility, we scrutinize its underlying structure to determine the likelihood of tlie planned future cash flows being achieved.
Pool assignment
Each major banking subsidiary has its own system for pooling and rating small retail loans designed to reflect the risk profile of its loan portfolios.
Asset evaluation and assessment system
The asset evaluation and assessment system is used to classify assets held by us according to the probability of collection and the risk of any impairment in value based on borrower classifications consistent with the boiTower ratings and the status of collateral, guarantees, and other factors.
The system is used to conduct write-offs and allocate allowances against credit risk in a timely and adequate manner.
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Quantitative Analysis of Credit Risk
MUFG and its major banking subsidiaries manage credit risk by monitoring credit amount and expected losses, and run simulations based on internal models to estimate the maximum amount of credit risk. These models are used for internal management putposes, including loan pricing and measuring economic capital.
When quantifying credit risk amounts using the internal models, MUFG and its major banking subsidiaries consider various parameters, including probability of default, or PD, loss given default, or LGD, and exposure at default, or EAD, used in their borrower ratings, facility risk ratings and pool assignments as well as any credit concentration risk in particular borrower groups or industry sectors. MUFG and its major banking subsidiaries also share credit portfolio data in appropriate cases.
Loan Portfolio Management
We aim to achieve and maintain levels of earnings commensurate with credit risk exposure. Products are priced to take into account expected losses, based on the internal credit ratings.
We assess and monitor loan amounts and credit exposure by credit rating, industry and region. Portfolios arc managed to limit concentrations of risk in specific categories in accordance with our Large Credit Guidelines.
To manage country risk, we have established specific credit ceilings by country. These ceilings are reviewed when there is a material change in a country's credit standing, in addition to being subject to a regular periodic review.
Continuous CPM Improvement
With the prevalence of securitized products and credit derivatives in global markets, wc seek to supplement conventional CPM techniques with advanced methods based on the use of such market-based instruments.
Through credit risk quantification and portfolio management, we aim to improve the risk return profile of the Group's credit portfolio, using financial markets to rebalance credit portfolios in a dynamic and active manner based on an accurate assessment of credit risk. The following diagram summarizes our CPM framework:
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Credit Portfolio Management (CPM) Framework
Risk Management of Strategic Equity Portfolio
Strategic equity investment risk is the risk of loss caused by a decline in the prices of our equity investments.
We hold shares of various corporate clients for strategic putposes, in particular to maintain long-term relationships with these clients. These investments have the potential to increase business revenue and appreciate in value. At the same time, we are exposed to the risk of price fluctuation in the Japanese stock market. For that reason, in recent years, it has been a high priority for us to reduce our equity portfolio to limit the risks associated with holding a large equity portfolio, but also to respond to applicable regulatory requirements as well as increasing market expectations and demands for us to reduce our equity portfolio. We are required to comply with a regulatory framework that prohibits Japanese banks from holding an amount of shares in excess of their adjusted Tier 1 capital.
Wc use quantitative analysis to manage the risks associated with the portfolio of equities held for strategic purposes. According to internal calculations, the market value of our strategically held (Tokyo Stock Exchange-listed) stocks (excluding foreign stock exchange-listed stocks) as of March 31, 2015 was subject to a variation of approximately ¥3.73 billion when TOPIX index moves one point in either direction.
We seek to manage and reduce strategic equity portfolio risk based on such types of simulation. The aim is tb"kccp this"risk-at appropriate levels compared with Tier 1 capifal~wHile generatihgTetunis^ the degree of risk exposure.
Market Risk Management
Market risk is the risk that the value of our assets and liabilities could be adversely affected by changes in market variables such as interest rates, securities prices, or foreign exchange rates.
Management of market risk at MUFG aims to control related risk exposure across the Group while ensuring that earnings are commensurate with levels of risk.
Market Risk Management System
We have adopted an integrated system to manage market risk from our trading and non-trading activities. The holding company monitors group-wide market risk, while each of the major subsidiaries manages its market risks on a consolidated and global basis.
At each of the major subsidiaries, checks and balances arc maintained through a system in which back and middle offices operate independently from front offices. In addition, separate Asset-Liability Management, or ALM, Committee, ALM Council and Risk Management Meetings are held at each of the major subsidiaries every month to deliberate important matters related to market risk and control.
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Tlie holding company and the major subsidiaries allocate economic capital commensurate with levels of market risk and determined within the scope of their capital bases. The major subsidiaries have established quantitative limits relating to market risk based on their allocated economic capital. In addition, in order to keep losses within predetermined limits, the major subsidiaries have also set limits for the maximum amount of losses arising from market activities. The following diagram summarizes the market risk management system ofeach major subsidiary:
Market Risk Management System of Our Major Subsidiaries
Board of Directors / Executive Committee ALM Committee / ALM Council / Risk Management Meeting
rading result report
Report
Front Office Quantitative risk monitoring Middle Office (Market risk management departments)
A _ .Confirmation of contracts and agreements
Back Office
Market Risk Management and Control
At the holding company and the major subsidiaries, market risk exposure is reported to the Chief Risk Management Officers on a daily basis. At die holding company, the Chief Risk Management Officer monitors market risk exposure across the Group as well as the major subsidiaries' control over their quantitative limits for market risk and losses. Meanwhile, the Chief Risk Management Officers at the major subsidiaries monitor their own market risk exposure and their control over their quantitative limits for market risk and losses. In addition, various analyses on risk profiles, including stress testing, are conducted and reported to the Executive Committees and the Corporate Risk Management Committees on a regular basis. At the business unit levels in the major subsidiaries, the market risks on their marketable assets and liabilities, such as interest rate risk and foreign exchange rate risk, are controlled by entering into various hedging transactions using marketable securities and derivatives.
As part of our market risk management activities, we use certain derivative financial instruments to manage our interest rate and currency exposures. We maintain an overall interest rate risk management strategy that incorporates the use of interest rate contracts to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. We enter into interest rate swaps and other contracts as part of our interest rate risk management strategy primarily to alter the interest rate sensitivity of our loans, investment securities and deposit liabilities. Our principal objectives in risk management include asset and liability management. Asset and liability management is viewed as one of the methods for us to manage our interest rate exposures on interest-earning assets and interest-bearing liabilities. Interest rate contracts, which are generally non-leveraged generic interest rate and basis swaps, options and futures, allow us to effectively manage our interest rate risk position. Option contracts primarily consist of caps, floors, swaptions and options on index futures. Futures contracts used for asset and liability management activities are primarily index futures providing for cash payments based upon the movement of an underlying rate index. We enter into forward exchange contracts, currency swaps and other contracts in response to currency exposures resulting from on-balance sheet assets and liabilities denominated in foreign currencies in order to limit the net foreign exchange position by currency to an appropriate level.
These market risk management activities are performed in accordance with the predetermined rules and procedures. The internal auditors regularly verify the appropriateness ofthe management controls over these activities and the risk evaluation models adopted.
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Market Risk Measurement Model
Market risks consist of general risks and specific risks. General market risks result from changes in entire markets, while specific risks relate to changes in the prices of individual stocks and bonds which are independent ofthe overall direction of the market.
To measure market risks, MUFG uses the VaR method which estimates changes in the market value of portfolios within a certain period by statistically analyzing past market data. Since the daily variation in market risk is significantly greater than that in other types of risk, MUFG measures and manages market risk using VaR on a daily basis.
Market risk for trading and non-trading activities is measured using a uniform market risk measurement model. The principal model used for these activities is a historical simulation, orHS, model (holding period, 10 business days; confidence interval, 99%; and observation period, 701 business days). The HS modei calculates VaR amounts by estimating the profit and loss on the current portfolio by applying actual fluctuations in market rates and prices over a fixed period in the past. This method is designed to capture certain statistically infrequent movements, such as a fat tail, and accounts for the characteristics of financial instruments with nonlinear behavior. The holding company and banking subsidiaries also use the HS model to calculate as part of the calculation of their Basel III regulatory capital adequacy ratios.
In calculating measurement system throughout the Group. Our major subsidiaries calculate their VaR based on the risk and market data prepared by the information systems of their front offices'and other departments. The major subsidiaries provide this risk data to the holding company, which calculates overall VaR, taking into account the diversification effect among all portfolios of the major subsidiaries.
For the purpose of internally evaluating capital adequacy on an economic capital basis in terms of market risk, wc use this market risk measurement model to calculate risk amounts based on a holding period of one year and a confidence interval of 99.9%.
Monitoring and managing our sensitivity to interest rate fluctuations is the key to managing market risk in MUFG's non-trading activities. Tlie major banking subsidiaries take the following approach to measuring risks concerning core deposits, loan prepayments and early deposit withdrawals.
To measure interest rate risk relating to deposits without contract-based fixed maturities, the amount of "core deposits" is calculated through a statistical analysis based on deposit balance trend data and the outlook for interest rates on deposits, business decisions, and other factors. The amount of "core deposit" is categorized into various groups of maturity terms of up to ten years to recognize interest rate risk. The calculation assumptions and methods to determine the amount of core deposits and maturity term categorization are regularly reviewed.
Meanwhile, deposits and loans with contract-based maturities are sometimes cancelled or repaid before their maturity dates. To measure interest rate risk for these deposits and loans, we reflect these early termination events mainly by applying early termination rates calculated based on a statistical analysis of historical repayment and cancellation data together with historical market interest rate data.
Summaries of Market Risks (Fiscal Year Ended March 31, 2015)
Trading activities
The aggregate VaR for our total trading activities as of March 31, 2015 was ¥21.86 billion, comprising interest rate risk exposure of ¥17.63 billion, foreign exchange risk exposure of ¥8.80 billion, and equity-related risk exposure of ¥0.99 billion. Compared with the VaR as of March 31, 2014, we experienced an increase in market risk during the fiscal year ended March 31, 2015, primarily due to an increase in foreign exchange risk.
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Our average daily VaR for the fiscal year ended March 31, 2015 was ¥20.51 billion. Based on a .simple sum of figures across market risk categories, interest rate risk accounted for approximately 71%, foreign exchange risk for approximately 19% and equity-related risk for approximately 8%, of our total trading activity market risks.
Due to the nature of trading operations which involves frequent changes in trading positions, market risk varied substantially during the fiscal year, depending on our trading positions.
The following tables set forth the VaR related to our trading activities by risk category for the periods indicated:
April 1,2013—March 31,2014 Average Maximum!" Minimum") March 31,2014
(in billions)
MUFG ¥20.79 ¥29.50 ¥15.34 ¥18 09
Interest rate 17.33 21.93 14.02 14.98
Yen 8.59 14.07 5.36 6.16
U.S. Dollars 6.66 11.12 3.95 5.05
Foreign exchange 6.93 15.30 3.46 3.46
Equities 2.07 7.35 0.79 2.90
Commodities 0.74 1.39 0.31 1.25
Less diversification effect (6.28) — — (4.50)
April 1,2014—March 31,2015 Average Maximum"' Minimum"' March 31,2015
(in billions)
MUFG ¥20.51 ¥25.01 ¥16.02 ¥21.86
Interest rate 18.25 23.79 14.74 17.63
Yen 7.65 12.95 4.87 9.50
U.S. Dollars 6.39 10.56 4.33 7.41
Foreign exchange 4.91 . 10.78 1.88 8.80
Equities 2.23 3.75 0.89 0.99
Commodities 0.26 1.27 0.00 0.05
Less diversification effect (5.14) — — (5.61)
Assumptions for VaR calculations:
Historical simulation method Holding period: 10 business days Confidence interval: 99% Observation period: 701 business days
Note:
(1) The maximum and minimum VaR overall and for various risk categories were taken from different days. A simple summation of VaR by risk category is not equal lo total VaR due to the effect of diversification.
The average daily VaR by quarter in the fiscal year ended March 31, 2015 was as follows:
Quarter Daily average VaR
(in billions)
April—June 2014 ¥20.03
July—September 2014 19.98
October—December 2014 20.84
January—March 2015 21.19
The quantitative market risk figures from trading activities tend to fluctuate widely due to the market sensitive nature ofthe trading business. During the fiscal year ended March 31, 2015, the revenue from our
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trading activities has been relatively stable, keeping positive numbers in 238 days out of 260 trading days in the period. During the same period, there were 130 days with positive revenue exceeding ¥1 billion and 2 days with negative revenue exceeding minus ¥1 billion.
Non-trading Aetivitiex
The aggregate VaR for our total non-trading activities as of March 31, 2015, excluding market risks related to our strategic equity portfolio and measured using the same standards as trading activities, was ¥412.6 billion. Market risk related to interest rates equaled ¥396.8 billion and equities-related risk equaled ¥158.0 billion.
Compared with the VaR for MUFG as of March 31, 2014, the increase in the overall market risk was ¥80.5 billion. Market risk related to interest rates increased ¥92.6 billion. Equity related risk decreased ¥14.9 billion.
Based on a simple sum of figures across market risk categories, interest rate risks accounted for approximately 70% of our total non-trading activity market risks. Looking at a breakdown of interest rate related risk by currency, as of March 31, 2015, the yen accounted for approximately 49% while the U.S. dollar accounted for approximately 24%, and the euro approximately 27%.
The^fojlowingjable shows the_VaR related to our non-trading activities by risk category for the fiscal year ended March 31, 2015:
j
April 1,2014—March 31,2015 Average Maximum'" Minimum'" March 31,2015
(in billions)
Interest rate ¥387.0 ¥455.0 ¥305.6 ¥396.8 '
Yen 239.5 280.1 196.3 264.7
U.S. Dollars 121.7 145.8 99.7 132.8
Foreign exchange ^.3 0.9 1.3
Equities Jr . f 161.3 185.7 125.9 150.8
Totald 1.....* 394.8 452.7 332.4 412.6
Assumptions for VaR calculations:
Historical simulation method Holding period: 10 business days Confidence interval: 99% Observation period: 701 business days
Note:
(1) The maximum and minimum VaR overall for each category and in total were taken from different days. The equities-related risk figures do not include market risk exposure from our strategic equity portfolio. A simple summation of VaR by risk category is not equal lo tolal VaR due to the effect of diversification.
The average daily interest rate VaR by quarter in the fiscal year ended March 31, 2015 was as follows.
Quarter Daily average VaR
(in billions)
April—June 2014 ¥357.5
- Juiy^-September2014 381.1
October—December 2014 425.1
January—March 2015 416.0
Comparing the proportion of each currency's interest rate VaR to the total interest rate VaR as of March 31, 2015 against that as of March 31, 2014, there was no change in the Japanese yen at 49%, a 12 percentage point increase in the euro from 15% to 27%, and a 12 percentage point decrease in the U.S. dollar from 36% to 24%.
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Backtesting
We conduct backtesting in which a VaR is compared with hypothetical profits and losses on a daily basis to verify the accuracy of our VaR measurement model. We also conduct additional backtesting using other methods, including testing VaR against actual realized and unrealized losses and testing VaR by various changing parameters such as confidence intervals and observation periods used in the model.
Hypothetical losses never exceeded VaR in tlie fiscal year ended March 31, 2015. This means that our VaR model provided reasonably accurate measurements of market risk during the fiscal year.
The following graph shows daily VaR of trading activities and the distribution of corresponding hypothetical profits and losses for the fiscal year ended March 31, 2015:
daily PL (billion yen)
VaR (billion yen)
The following graph shows VaR of trading activities and hypothetical profits and losses on a daily basis for the fiscal year ended March 31, 2015:
(billion yen)
?.ir^—^--.^
Stress Testing
We use the HS-VaR model, which calculates potential changes in the market value of our portfolio as a statistically possible amount of losses that could be incurred due to market fluctuations within a certain period (or holding period, of 10 business days) based on historical market volatility for a certain period (or observation period, of 701 business days, or approximately three years). Actual losses may exceed the value at risk obtained
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by the application ofthe model in the event, for example, that the market fluctuates to a degree not accounted for in the observation period, or that the correlations among various risk factors, including interest rales and foreign currency exchange rates, deviate from those assumed in the model.
In order to complement these weaknesses of the HS-VaR model and measure potential losses that the model is not designed to capture, we conduct stress testing. For example, we measure on a quarterly basis potential losses that could be incurred in our portfolio by applying various stress scenarios, including the 10-year most extreme movement in each of the risk factors as well as actual past market movement observed beyond the 10 year historical observation period. In addition, the holding company and major subsidiaries conduct stress testing, as appropriate, by applying various stress scenarios, including those which take into account estimates regarding future market volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. Since October 2011, the holding company and major subsidiaries have also been measuring stressed VaR relating to their trading activities based on a one-year observation period with the highest VaR at least in the immediately preceding ten years.
Liquidity Risk Management
Liquidity risk is the risk of incurring losses if a poor financial position hampers the ability to meet funding requirements, or necessitates fund procurement at interest rates markedly higher than normal.
- Our major subsidiaries maintain appropriate liquidity in both Japanese yen and foreign currencies-by- - - - -
managing their funding-sources and mechanisms, such.as .liquidity-gap, liquidity-supplying products such as commitment lines, and buffer assets.
We have established a group-wide system-for managing-liquidity risk by categorizing the risk in the following three stages: Normal, Wilh-Cpncern, and Critical. The front offices,and risk management offices of the major subsidiaries and the holding company exchange information and data on liquidity risk even at the Normal stage. At higher alert stages, we centralize information about liquidity risk and discuss issues relating to group-wide liquidity control actions among group companies, if necessary. We have also established a system for liaison and consultation on funding in preparation for contingency, such as natural disasters, wars and terrorist attacks. Tlie holding company and the major subsidiaries conduct group-wide contingency preparedness drills on a regular basis to ensure smooth implementation in the event of an emergency.
For more information, see "Item 5.B-. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Sources of Funding and Liquidity."
Operational Risk Management
Operational risk refers to the risk of loss caused by either internal control issues such as inadequate operational processes or misconduct, system failures, or external factors such as serious political instability, major terrorist activity, health epidemics orriatural disasters. The term includes a broad range of risks that could lead to losses, including operations risk, information asset risk, tangible asset risk, personnel risk, legal risk and reputation risk. These risks that comprise operational risk are referred to as sub-category risks.
The holding company has established, based on its Executive Committee's determination, the MUFG Operational Risk Management Policy as a group-wide policy for managing operational risk. This policy sets forth the core principles regarding operational risk management, including the definition of operational risk, and the risk management systenrand processes: The policy also requires the board of directors and the Executive - ¦¦ Committee to formulate fundamental principles of operational risk management and establish and maintain an appropriate risk management system. The Chief Risk Management Officer is responsible for recognizing, evaluating, and appropriately managing operational risk in accordance with the fundamental principles formulated by the board of directors and the Executive Committee. A division in charge of operational risk management has been established that is independent of business promotion sections to manage overall operational risk in a comprehensive manner. These fundamental principles have also been approved by the
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boards of directors of the major subsidiaries, providing a consistent framework for operational risk management ofthe Group. The diagram below sets forth the operational risk management system ofeach major banking subsidiary:
Operational Risk Management System of Our Major Banking Subsidiaries
Bdartl'df Djrectpt^^ecutive Committee 'u ' :'r' 'f" ^committees K^^in^%s^%anagment::V' * r-':
Reporting on risk profile
t;iHea'a'i0fTlce_;and¥. L';fWtfBranches£:£$ Instruction
Reporting
As set forth in the following diagram, we have established a risk management framework for loss data collection, control self assessment, or CSA, and measurement of operational risk in order to appropriately identify, recognize, evaluate, measure, control, monitor and report operational risk.
We have also established group-wide reporting guidelines with respect to loss data collection and its monitoring. We focus our efforts on ensuring accurate assessment of the status of operational risk losses and the implementation of appropriate countermeasures, while maintaining databases of internal and external loss events.
The following diagram summarizes our operational risk management framework: Operational Risk Management Framework
monitoring
prompt reporting to management and relevant supervisors
monitoring of economic capital
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Operations Risk Management
Operations risk refers to the risk of loss that is attnbutable to the actions of executives or employees, whether accidental or the result of neglect or deliberate misconduct. The Group companies offer a wide range of financial services, ranging from commercial banking products such as deposits, exchange services and loans to trust and related services covering pensions, securities, real estate and securitization, as well as transfer agent services. Cognizant ofthe potentially significant impact that operations risk-related events could have in terms of both economic losses and damage to our reputation, our banking subsidiaries continue to improve their management systems to create and apply appropriate operations risk-related controls.
Specific ongoing measures to reduce operations risk include the development of databases to manage, analyze and prevent the recurrence of related loss events; efforts to tighten controls over administrative procedures and related operating authority, while striving to improve human resources management;.investments in systems to improve the efficiency of administrative operations; and programs to expand and upgrade internal auditing and operational guidance systems.
Senior management receives regular reports on the status of our businesses from an operations risk management perspective. We work to promote the sharing within the Group of information and expertise concerning any operational incidents and the measures implemented to prevent any recurrence.
— —Efforts to upgrade the management of operations risk continue with the aim of providing our customers with a variety of high-quality services.
Information Asset Risk Management
Information asset risk refers to the risk of loss caused by loss, alteration, falsification or leakage of information, or by destruction, disruption, errors or misuse of information systems, as well as risks similar to this risk. In order to ensure proper handling of information and prevent loss or leakage of information, our major banking subsidiaries strive to better manage and reduce such risks through the appointment of managers with specific responsibilities for information security issues, the establishment of internal procedures, training courses designed for all staff, and the implementation of measures to ensure stable IT systems control. We have also formulated the Personal Information Protection Policy as the basis for ongoing programs to protect the confidentiality of personal information.
Systems planning, development and operations include appropriate design and extensive testing phases to ensure that systems are designed to help prevent failures while providing sufficient safeguards for the security of personal information. The status ofthe development of any mission-critical IT systems is reported regularly to senior management. Wc have developed disaster countermeasures systems and have also been investing in duplication of the Group's IT infrastructure to minimize damage in the event of any system failure. Emergency drills are conducted to help increase staff preparedness.
With the aim of preventing any recurrence, wc also work to promote sharing of information within the Group related to the causes of any loss or leakage of information, or system failure.
Tangible Asset Risk Management
— Tangible asset risk refers to the risk of loss due to damage to tangible assets or deterioration in the-" operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk. Tangible assets include movable physical properties and immovable properties, owned or leased, such as land, buildings, equipment attached to buildings, fixtures and furniture. We recognize the potentially significant impact tangible asset risk-related events can have on the management and execution of the Group's businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk.
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Personnel Risk Management
Personnel risk refers to the risk of loss due to an outflow or loss of human resources or deterioration in employee morale, as well as risks similar to this risk. Wc recognize the potentially significant impact personnel risk-related events can have on the management and execution ofthe Group's businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk.
Legal Risk Management
Legal risk refers to the risk of loss due to failure to comply with applicable laws and regulations, adequately evaluate contractual rights and obligations, or appropriately deal with disputes, as well as other similar risks. We recognize the potentially significant impact legal risk-related events can have on the management and execution ofthe Group's businesses, which in turn can result in economic, reputation and other losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk.
Specifically, in order to promote compliance, we have established our Principles of Ethics and Conduct as the basic legal compliance policy for tlie Group's directors and employees. In addition, a compliance management division has been established at each of the holding company and the major subsidiaries. See "—Compliance" below. Moreover, the legal division at each ofthe holding company and the major subsidiaries centrally and uniformly evaluates legal issues prior to entering into contracts, deals with disputes and manages other legal matters. Through these and other measures, we endeavor to effectively manage our legal risk.
Reputation Risk Management
Reputation risk refers to the risk of loss due to deterioration in reputation as a consequence of the spread of rumors among customers or in the market, or as a consequence of our inadequate response to particular situations, as well as risks similar to this risk. We recognize the potentially significant impact reputation risk-related events can have on the management and execution ofthe Group's businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk.
Specifically, in order to manage our reputation risk effectively on a group-wide basis, we have established a risk management system designed to ensure mutual consultation and reporting if a reputation risk-related event occurs or is anticipated and, through this system, share relevant information within the Group.
Through the risk control framework and risk management system, we seek to minimize damage to the reputation and credibility of, and the market confidence in, the Group by promptly obtaining an accurate understanding of relevant facts relating to reputation risk-related events and disclosing information concerning the events and the measures we take in response to such events in an appropriate and timely manner.
Regulatory Capital Requirements for Operational Risk
(1) Adoption of the Advanced Measurement Approach (AMA)
We have employed the AMA since March 31, 2012, in place ofthe Standardized Approach that we had been using previously, for calculation of the operational risk equivalent amount in connection with measuring capital adequacy ratios based on the Basel Standards. On the other hand, wc use the Basic Indicator Approach, or BIA, for entities that are deemed to be less important in the calculation of the operational risk equivalent amount and for entities that are still preparing to implement the AMA.
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Outline of AMA
We have established a measurement model designed to account for four data elements—internal loss data, external loss data, scenario analysis, and business environment and internal control factors, or BEICFs—and calculate the operational risk equivalent amount by estimating the maximum loss using a 99.9th percentile one-tailed confidence interval and a one-year holding period.
In calculating the operational risk equivalent amount, we exclude expected losses relating lo the amount of allowance for repayment of excess interest associated with the consumer finance business of a subsidiary. We do not exclude any other expected losses and do not reflect the risk mitigating impact of insurance. In addition, we • lake into account credit risk-related events that are not reflected in the measurement of the credit risk equivalent amount.
Outline of Measurement Mode!
Our operational risk equivalent amount measured under the AMA is a simple sum of the amounts calculated separately for BTMU on a consolidated basis, MUTB on a consolidated basis, and the total amount for other Group companies (including the holding company, MUSHD and Mitsubishi UFJ NICOS). For each of BTMU and MUTB on consolidated basis, the operational risk equivalent amount is a simple sum of the amounts calculated based on the seven loss event types defined by the Basel Standards. For other Group companies, the operational risk equivalent amount is a simple sum of the amounts calculated based on eight loss event types '"consisting"of the^^ seveh~16ss~evenf"types defined by the Basel Standards and an additional' loss event type representing losses relating to repayment of excess interest associated with the consumer finance business of a subsidiary. We do not reflect the correlation effects among the loss event types in the calculation of our operational risk equivalent amount.
Outline of Measurement Model
Iniernal Fraud ." Risk Equivalent Amount.
External Fraud v. Risk Equivalent Amount
Employment Practices ind Workplace Safety. . Risk Equivalent Amount ¦
Clients, Products, and Business Practices
"."RiskEquivaleirtAmoum
Damage to Physical Assets Risk Equivalent Amount
Busing36 Olsruplion and System Failure* Rlitt Equivalent Amount
Execution, Delivery, and Proce&s Management ¦"¦*-;-„ Risk Equi volant Amount :
Repiymenl ol Cauu Interest 1 '-"RJik Equivalent Amount-. . *.'<
The risk equivalent amount for each loss event type represents the amount of maximum loss estimated with a 99.9th percentile one-tailed confidence interval and a one-year holding period based on the distribution of losses arising from all relevant risk events for a one-year period (Loss Distribution). A Loss Distribution combines a Frequency Distribution (through which the frequency of occurrence of risk events is expressed) and a
Loss Severity Distribution (through which the amounts of losses resulting from risk events are expressed)
through Monte Carlo simulations. The data used for this purpose include internal loss data and scenario data. Scenario data are generated through a scenario analysis. External data and BEICFs are taken into account in the scenario analysis and reflected in scenario data. The Frequency Distribution is derived from the occurrence frequency information in internal loss data and scenario data expressed through a Poisson Distribution. The Loss Severity Distribution is derived from the amount information in internal loss data and scenario data expressed in a non-parametric manner (where no underlying distribution is assumed).
209
With respect to the risk of losses relating to repayment of excess interest associated with the consumer finance business of a subsidiary, the risk equivalent amount represents the amount of maximum loss estimated with a 99.9th percentile one-tailed confidence interval and a one-year holding period based on a normal distribution assumed by applying data on losses that arose in a given period, excluding any related expected losses.
We confirm the appropriateness of the measurement models by periodic verification and back testing.
(4) Outline of Scenario Analysis
As an initial step of our scenario analysis, we identify potential severe loss events that wc have not experienced but may potentially experience in the future. In this identification process, we seek to ensure exhaustive coverage of potential severe loss events by comprehensively examining our experience relating to loss events and legal proceedings, external loss data, the control self-assessment results and other relevant information.
In the next step, we prepare scenario data for each identified severe loss event by quantifying the values depending on its occurrence frequency and loss severity, taking into account relevant transaction amounts and restructuring costs as well as BEICFs. In preparing scenario data, we apply an analysis method we deem appropriate for the type and nature of the operational risk involved.
In order to obtain an operational risk equivalent amount that is commensurate with, and appropriate for, our risk profile, we assess the need for an additional scenario or modification to our existing scenarios semi-annually.
We then reflect, as necessary, new risks arising as a result of changes in the business environment and the results of the implementation of measures to enhance our internal controls in response to newly identified risks in our scenario data.
Compliance Basic Policy
We have clarified our mission, our vision and our values in the Corporate Vision and have expressed our commitment to meeting the expectations of customers and society as a whole. Furthermore, we have established Principles of Ethics and Conduct as the guidelines for how the Group's directors and employees act to realize the Corporate Vision, in which we have expressed our commitment to complying with laws and regulations, to acting with honesty and integrity, and to behaving in a manner that supports and strengthens the tmst and confidence of society.
In addition, as we expand the geographic scope of our business globally, we are committed to keeping abreast with developments in laws and regulations of the jurisdictions in which we operate including anti-money laundering and anti-bribery, as well as paying attention to trends in financial crimes.
See "Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Legal and regulatory changes could have a negative impact on our business, financial condition and results of operations." and "Item 3.D. Key Information—rRisk Factors—Risks Related to Our Business—We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation." See also "Item 4.B. Information on the Company—Business Overview—Supervision and Regulation."
210
Principles of Ethics and Conduct Introduction
These Principles of Ethics and Conduct establish clear and consistent standards for all MUFG employees to guide decisions and actions. They reflect and support the MUFG Corporate Vision. The principles are organized in three sections. Chapter 1 presents the attitude that we adopt with our customers, to act with honesty and integrity and pursue their best interests, which is a core component of our business practices. Chapter 2 presents a set of standards to help us fulfill our responsibilities as a good corporate citizen. MUFG's reputation depends upon the trust and confidence of our customers and other stakeholders, including local communities, and we are responsible to society on a global level. Chapter 3 describes the actions and mindset that will create a stimulating and supportive working environment as MUFG continues to grow. Our success depends on building and maintaining a dynamic workplace where all employees can reach their full potential in ways that support our customers and contribute to society as a whole.
Outline / Overview
Chapter 1 Customer Focus
Wc place our diverse customers at tlie center of all our activities and always act in their best interests. MUFG is able to thrive today because ofthe trust and confidence that customers have placed in us—the result of years of fair, transparent, andJionorable dealings. Our business cujnire is_not driven by_the prospect of shorty term, immediate gains. Instead, we place a premium on supporting long-term, sustainable relationships with our customers to help them meet their goals.
1-1. Acting with Honesty and Integrity
We always place our diverse customers at the center of all activities and act with honesty and integrity in all of our dealings with them. We protect customer assets, including their personal information, and strive at all times not to damage their interests.
1-2. Controlling Quality
In order to cam the lasting trust and confidence of our customers, we maintain thorough quality control of our products and services in all aspects from product design and development to delivery, and continually improve our processes to provide accurate and secure transactions.
3. Exceeding Customer Expectations
We strive to satisfy the diverse needs of our customers worldwide and to exceed their expectations through the highest standards of professionalism and by effectively leveraging our global network and consolidated strength.
Chapter 2 Responsibility as a Corporate Citizen
As a member of MUFG with global operations, we act honorably, with honesty and integrity, and comply at all times with laws, regulations, rules, and internal policies globally. We strive to maintain stability and confidence in the global financial system and to contribute to the sound growth and development of society. We behave in a manner that supports and strengthens the trust and confidence that MUFG has built up over the years.
1. Adherence to Laws and Regulations
We always judge and act with honesty and integrity, do what is right, and comply with both the letter and the spirit ofthe laws, regulations, and rules that apply to us. We avoid insider trading, do not engage in anticompetitive conduct or any form of corrupt activity, and publicly disclose corporate information in an appropriate manner.
211
2-2. Combating Criminal Activity
We do nol conduct business with criminal elements. We do not allow our financial products and services to be used for illegal or improper activities such as money laundering, fraud, or financing terrorist activities.
3. Commitment to Social Sustainability
We respect the history, culture, and customs of local communities and strive to contribute to their development and the protection ofthe environment through our corporate activities and employee volunteer efforts.
Chapter 3 Ethical and Dynamic Workplace
We are committed to creating a working environment that fosters mutual respect among MUFG employees, supports the full expression of our individuality as professionals, promotes the power of teamwork, honors diversity, transcends differences, and embraces new challenges.
1. Stimulating Workplace
We strive to enhance our knowledge and expertise, focus on maximizing the value of teamwork, and view changes in the business environment as opportunities to launch new initiatives.
3-2. Ethical Workplace
We respect the diversity and human rights of all MUFG employees. We do not engage in or tolerate discrimination, harassment, intimidation, or any other behavior or activity that is inconsistent with these core beliefs. We report any violations of laws and rules, and we manage corporate assets appropriately.
Compliance Framework
Management and coordination of compliance-related matters are the responsibility of separate compliance management divisions established at the holding company and the major subsidiaries. Each compliance management division formulates compliance programs and organizes training courses to promote compliance, and regularly reports to each company's board of directors and Executive Committee on the status of compliance activities.
The holding company has established a Group Compliance Committee and each major subsidiary has established a Compliance Committee for deliberating key issues related to compliance. Additionally, the holding company has a Group Chief Compliance Officer, or CCO, Committee, which consists of the CCO of tlie holding company acting as committee chairman and the CCOs of the major subsidiaries. The Group CCO Committee deliberates important matters related to compliance and compliance-related issues for which the Group should share a common understanding.
212
The following diagram summarizes our compliance framework: Compliance Framework
~„.- cr:iun<>flVTiMt:iBlsfain.TO .........
Consultation and report
Guidance, advice and instruction
Bank of Tokyo-Mitsubishi UFJ Mitsubishi UFJ Trust and Banking Mitsubisju^UFJ Securities Q^er Subsidiaries
Internal Reporting System and Accounting Auditing Hotline
The major subsidiaries have established internal reporting systems that aim to identify compliance issues early so that any problems can be quickly rectified. This system includes an independent external compliance hotline. Furthermore, the holding company has set up an MUFG Group Compliance Helpline that acts in parallel with group-company internal reporting systems and provides a reporting channel for directors and employees of group companies.
In addition to these internal reporting systems, the holding company has also established an accounting auditing hotline that provides a means to report any problems related to MUFG accounting.
MUFG Accounting Auditing Hotline
MUFG has set up an accounting auditing hotline to be used to make reports related to instances of improper practices (violations of laws and regulations) and inappropriate practices, or of practices raising questions about such impropriety or inappropriateness, regarding accounting-and internal control or audits related to accounting in Group companies. The reporting process works as follows, and may be carried out via letter or e-mail:
Hokusci Law Office, P.C.
Address: Kojimachi 4-3-4, Chiyoda-ku, Tokyo
e-mail: MUFG-accounting-audit-hotline@hokusei-law.com
213
When reporting information please pay attention to the following:
Matters subject to reporting are limited to instances regarding MUFG Group companies.
Please provide detailed information with respect to the matter. Without detailed factual information there is a limit to how much our investigations can achieve.
Anonymous information will be accepted.
No information regarding the identity ofthe informant will be passed on to third parties without the approval of the informant him- or herself. However, this excludes instances where disclosure is legally mandated, or to the extent that the information is necessary for surveys or reports, when data may be passed on following the removal of the informant's name.
Please submit reports in either Japanese or English.
If the informant wishes, we will endeavor to report back to the informant on the response taken within a reasonable period of time following the receipt of specific information, but cannot promise to do so in all instances.
Internal Audit
Hole of Internal Audit
Internal audit functions within MUFG seek lo verify the adequacy and effectiveness of internal control systems from a standpoint independent of the operating functions. This includes monitoring the status of risk management and compliance systems, which are critical to the maintenance of sound and appropriate business operations. Internal audit results are reported to senior management. An additional role of internal audit is to make suggestions to help improve or rectify any issues or specific problems thai are identified.
Group Internal Audit Framework
The holding company has instituted MUFG's internal audit policy to define the policy, function and organizational position of internal audits. Separate internal audit divisions have been created within the holding company and certain subsidiaries. Through close cooperation and collaboration among the internal audit divisions of the holding company and these subsidiaries, these internal audit divisions provide coverage for the Group and also support the board of directors of the holding company in monitoring and overseeing all MUFG Operations.
In addition to having primary responsibility for initiating and preparing plans and proposals related to internal audits of the Group, the internal audit division at the holding company monitors and, as necessary, guides, advises and administers the internal audit divisions of subsidiaries and affiliated companies. The internal audit divisions within the major subsidiaries conduct audits ofthe respective head office and branch operations of these companies. In addition, each of these internal audit divisions undertakes direct audits of their respective subsidiaries, and monitors and oversees the separate internal audit functions established within them. This helps to evaluate and verify the adequacy and effectiveness of internal controls within MUFG on a consolidated basis.
Implementing Effective and Efficient Internal Audits
To ensure that internal audit processes use available resources with optimal effectiveness and efficiency, the internal audit divisions implement risk-focused internal audits in which the nature and magnitude of the associated risks are considered in determining audit priorities and the frequency and depth of internal audit activities. The internal audit divisions ensure that audit personnel attend key meetings, collect important internal control documents and access databases to facilitate efficient off-site monitoring.
214
Reports to the Audit Committee
The holding company has an audit committee within its board of directors as required by the Company Law of Japan, and the major subsidiaries have established internal audit and compliance committees. Within each of the holding company and the major subsidiaries, the internal audit division reports to the committee on important matters, including the results of the internal audits and basic policies for planning internal audits.
Item 12. Description of Securities Other than Equity Securities.
Debt Securities
Not applicable.
Warrants and Rights
Not applicable.
Other Securities
Not applicable.
215
U. American Depositary Shares
Fees, charges and other payments relating to ADSs
As a holder of our ADSs, you will be required to pay to The Bank of New York Mellon, as depositary for the ADRs, or the "Depositary," either directly or indirectly, the following fees or charges. The Depositary collects its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.
ADS holders must pay: For:
$5.00 (or less) per 100 ADSs (or portion thereof)
1.02 (or less) per ADS
A fee equivalent to the fee that would be payable if securities distributed to the ADS holder had been shares and the shares had been deposited for issuance of ADRs
Registration or transfer fees
Expenses of The Bank of New York Mellon
Taxes and other governmental charges The Bank of New York Mellon or BTMU, as custodian, have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
Each issuance of an ADR, including as a result of a distribution of shares or rights or other property
Each cancellation of an ADR, including if the agreement terminates
Any cash distribution, to the extent permitted by any securities exchange on which the ADSs may be listed for trading
Distribution of securities distributed lo holders of deposited securities which are distributed by the Depositary to ADS registered holders
Transfer and registration of shares on the share register from your name to the name of The Bank of New York Mellon or its agent and vice versa when you deposit or withdraw shares
Conversion of foreign currency to U.S. dollars, as well as cable, telex and facsimile transmission expenses
As necessary
Fees Waived or Paid by the Depositary
The Depositary has agreed to waive the standard out-of-pocket administrative, maintenance and other expenses for providing services to the registered holders of our ADSs, which consisted of the expenses of postage and envelopes for mailing annual reports, printing and distributing dividend checks, stationery, postage, facsimile, and telephone calls. For the fiscal year ended March 31, 2015, the Depositary waived $132,171.61 of standard out-of-pocket expenses.
The Depositary has also agreed to reimburse us for expenses related to the administration and maintenance of the ADS program, including investor relations expenses, the annual New York Stock Exchange listing fees and other program-related expenses. There is a limit on the amount of expenses for which the Depositary will reimburse us based on the number of outstanding ADSs. For the fiscal year ended March 31, 2015, the Depositary reimbursed us $1.0 million for such expenses.
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
None.
Item 15. Controls and Procedures.
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer, or CEO, and the Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of 1934, as of the end of the period covered by this Annual Report.
Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31,2015.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the U.S. Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by; or under the supervision of, MUFG's principal executive and principal financial officers, and effected by MUFG's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:
pertain to tlie maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of MUFG,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
• expenditures of MUFG arc being made only in accordance with authorizations of management and directors of MUFG, and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of MUFG's assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods arc subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management evaluated the effectiveness of our internal control over financial reporting as of March 31, 2015 based on the criteria established in "Interna! Control—Integrated Framework~(2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, management has concluded that MUFG maintained effective internal control over financial reporting as of March 31, 2015.
The effectiveness of our internal control over financial reporting as of March 31, 2015 has been audited by Deloitte Touche Tohmatsu LLC, an independent registered public accounting firm, as stated in its report, presented on page 219.
217
Changes' in Internal Control Over Financial Reporting
During the period covered by this Annual Report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
218
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Mitsubishi UFJ Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
We have audited the internal control over financial reporting of Mitsubishi UFJ Financial Group, Inc. (Kabushiki Kaisha Mitsubishi UFJ Financial Group) ("MUFG") and subsidiaries (together, the "MUFG Group") as of March 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The MUFG Group's management is responsible for maintaining effective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the MUFG Group's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform (he audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material .weakness exists, testing and.eyaluating thc.design and operating effecti veness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by tlie company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the MUFG Group maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2015, based on the criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission; -
219
We have also audited, in accordance with the standards ofthe Public Company Accounting Oversight Board (United States), the consolidated bal ancc sheets ofthe MUPG Group as ol March 31, 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year ended March 31, 2015 (all expressed in Japanese Yen) and our report dated July 27, 2015 expressed an unqualified opinion on those financial statements.
Isl Deloitte Touche Tohmatsu LLC
Tokyo, Japan July 27, 2015
220
Item 16A. Audit Committee Financial Expert.
Our board of directors has determined that Mr. Akira Yamate, an outside director, is an "audit committee financial expert" as defined in Item 16A of Form 20-F and is "independent" as defined in the listing standards of the New York Stock Exchange. Mr. Yamate has spent most of his professional carrier as a certified public accountant in Japan, auditing Japanese coiporations, including those registered with the U.S. Securities and Exchange Commission. Mr. Yamate is also the chair of our audit committee.
Item 1 6B. Code of Ethics.
Wc have adopted a code of ethics, which consists of internal rules named Principles of Ethics and Conduct, compliance rules, compliance manual and rules of employment. Each of these rules applies to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our internal compliance rules were most recently amended on July 3, 2015. The amendments were intended to reflect organizational changes relating to our corporate governance framework and enhancements in our compliance framework. A copy of the Principles of Ethics and Conduct and the sections of our compliance rules, compliance manual and rules of employment relating to the "code of ethics" (as defined in paragraph (b) of Item 16B of Form 20-F) is attached as Exhibit 11 to this Annual Report.
No waivers of the Principles of Ethics and Conduct or the ethical framework and code of conduct, as applicable, or the relevant sections ofourcompliancerulesrcompliance manualand nilesofemployment were-granted to our principal executive officer, principal financial officer, principal accounting officer, directors or corporate auditors during the fiscal year ended March 31, 2015.
Item 16C. Principal Accountant Fees and Services.
Fees and Services of Deloitte Touche Tohmatsu LLC
The aggregate fees billed by Deloitte Touche Tohmatsu LLC, our independent registered public accounting firm and its affiliates, for the fiscal years ended March 31, 2014 and 2015 are presented in the following table:
2014 2035
(in millions)
Audit fees ' ¥6,029 ¥6,753
Audit-related fees 499 537
Tax fees 309 304
All other fees 14 201
Total ¥6,851 ¥7,795
The description of our fees billed for each category described above is as follows:
Audit fees—Audit fees are primarily for annual audit of our financial statements, review of our semi-annual condensed financial statements, statutory audit of our financial statements and audits of our subsidiary financial statements and attestation services relating to the internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act.
Audit-related fees—Audit-related fees primarily include accounting consultations, agreed upon procedures on internal controls, employee benefit plan audit, and advisory services relating to internal control reviews.
Tax fees—Tax fees relate primarily to tax compliance, including assistance with preparation of tax return filings, tax advisory and tax planning services.
All other fees-—All other fees primarily include fees for risk management and compliance advisory services.
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['re-Approval Policies and Procedures for Services by Deloitte Touche Tohmatsu LLC
Our board of corporate auditors performs tlie pre-approval function required by applicable SEC rules and regulations. Our board of corporate auditors has established pre-approval policies and procedures that MUFG and its subsidiaries must follow before engaging Deloitte Touche Tohmatsu LLC to perform audit and permitted non-audit services.
When MUFG or a subsidiary intends to engage Deloitte Touche Tohmatsu LLC to perform audit and permitted non-audit services, it must make an application for pre-approval on either a periodic or casc-by-casc basis.
Periodic application is an application for pre-approval made each fiscal year for services that arc expected to be provided by Deloitte Touche Tohmatsu LLC during the next fiscal year.
• Case-by-case application is an application for pre-approval made on a case-by-case basis for services to be provided by Deloitte Touche Tohmatsu LLC that are not covered by the periodic application.
Pre-approval is resolved in principle by our board of corporate auditors prior to engagement, although if necessary a full-time corporate auditor may consider any case-by-case application for pre-approval on behalf of the board of corporate auditors prior to the next scheduled board of corporate auditors meeting. Such decisions made individually by a full-time corporate auditor are reported to and ratified by the board of corporate auditors as appropriate at the next scheduled board of corporate auditors meeting.
Fees approved pursuant to the procedures described in paragraph 2-01(c)(7)(i)(C) of Regulation S-X, which provides for an exception to the general requirement for pre-approval in certain circumstances, were less than 0.1% for the fiscal year ended March 31, 2014 and approximately 0.6% for the fiscal year ended March 31, 2015.
Review of Tohmatsu's Independence
On July 14, 2015, Deloitte Touche Tohmatsu LLC ("Tohmatsu") advised MUFG's Audit Committee that a senior partner who serves in an executive management role at Tohmatsu and is in the Chain of Command of Tohmatsu's audit engagement of MUFG's financial statements ("Partner in Senior Management" or "PISM") had a savings account balance at BTMU that was not in compliance with SEC independence rules that require any accounts with audit clients not to have balances in excess of the jurisdiction's deposit insurance limits. The PISM's account balance, from time to time and for extended periods of time during the fiscal periods covered by the audited financial statements included in this Annual Report, exceeded the deposit insurance limit in Japan for interest-accruing accounts, which is ¥10 million.
In addition, Tohmatsu communicated to MUFG's Audit Committee about other bank account balances in excess of the Japanese deposit insurance limits during the fiscal periods covered by the audited financial statements included in this Annual Report held by three partners and five staff members on Tohmatsu's audit team for MUFG's subsidiaries or affiliates. Tohmatsu reported to MUFG's Audit Committee, and stated in its representation letter to the Audit Committee as required by the rules of the Public Company Accounting Oversight Board, that, based on its investigation of the facts and circumstances related to these matters, in Tohmatsu's opinion, Tohmatsu's objectivity, impartiality and integrity with respect to its audit of MUFG's Financial statements were unaffected. Tohmatsu's conclusion was based on, among other things, the results of its internal investigation, including that:
although the PISM held the Advisory Partner position to the MUFG engagement, he did not substantively participate in the MUFG audit and did not affect the results of the audit through ¦ performance evaluations of the MUFG audit team or otherwise;
the amounts in the bank accounts at issue in excess of the insured deposit limit were small relative to the level of income for those individuals and the risk of loss was not material to them; and
the work performed was nol compromised or influenced by the bank account balances at BTMU.
222
Following Tohmatsu's disclosure, the Audit Committee engaged counsel to review the circumstances relating lo the PISM and the other reported violations of Tohmatsu partners and employees. Based on the report by Tohmatsu and on discussions with Tohmatsu and after reviewing the situation, the Audit Committee concluded that Tohmatsu's ability to exercise objective and impartial judgment on issues encompassed within the audit of MUFG's financial statements has not been impaired. Following this determination, the Audit Committee concluded that the audited financial statements may be included in MUFG's Annual Report on Form 20-F for the fiscal year ended March 31, 2015. The Audit Committee is in discussions with Tohmatsu about the measures Tohmatsu will take to avoid future violations by Tohmatsu partners and employees of SFC independence rules.
Item 16D. Exemptions from the Listing Standards for Audit Committees. Not applicable.
In June 2015, our shareholders approved an amendment to our articles of incoiporation to adopt our current governance framework with a board of directors and board committees, including an audit committee. For more information, see "Item 6.C. Directors, Senior Management and Employees—Board Practices."
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
. Issuer-Purchases of-CommonStock- - — - —
Total
Number of Maximum
Shares Number of
Purchased Shares that
as Part of May Yet Be
Total Publicly Purchased
Number of Announced Under the
Shares Average Price Plans or Plans or
Purchased"' Paid per Share Programs Programs121
April 1 to April 30,2014 3,308 ¥560.23 — —
May 1 to May 31,2014 2,554 553.55 — —
June 1 to June 30,2014 2,938 606.68 — —
July 1 to July 31,2014 9,139 608.59 — —
August 1 to August 31,2014 5,350 598.07 — —
September 1 to September 30,2014 5,362 611.44 — —
October 1 to October 31,2014 4,032 594.83 — —
November 1 to November 30,2014 5,606 670.90 35,061,300 180,000,000
December 1 to December 31, 2014 10,118 673,60 113,534,200 180,000,000
January Ito January 31,2015 6,193 635.96 — 180,000,000
February 1 to February 28,2015 6,059 703.81 — 180,000,000
March 1 to March 31,2015 8,278 775.91 — 180,000,000
Total 68,937 672.96 148,595,500 180,000,000
Note:
All ofthe purchased shares were shares constituting less lhan one unit (100 shares) purchased from registered holders of such shares at the current market price of those shares.
During November and December 2014, we repurchased 148,595,500 shares of our common stock for ¥99,999,965,771 under a share repurchase.pi ogram.that was adopted in November 2014 and completed in December 2014. Under the program,.we .were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 180,000,000 shares of our common stock and an aggregate of ¥100 0 billion between November 17, 2014 and March 31, 2015.
We did not make any purchases of shares of our common stock other than as shown in the above table for the fiscal year ended March 31, 2015.
223
During May and June 2015, we repurchased 111,151,800 shares of our common stock for ¥99,999,972,728 under a share repurchase program that was adopted in May 2015 and completed in June 2015. Under the program, wc were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 160,000,000 shares of our common stock and an aggregate of ¥100.0 billion between May 18, 2015 and July 31, 2015.
In connection with the BTMU Headquarters for the Americas Stock Bonus Plan, 635,703 ADSs were purchased by the trustee ofthe independent trust between April 1, 2014 and March 31, 2015. In the same period, 2,731,634 ADSs were purchased by the trustee of the independent trust in connection with the UNBC Stock Bonus Plan. For descriptions of our stock bonus plans, see "Item 6.B. Directors, Senior Management and Employees—Compensation."
Item 16F. Change in Registrant's Certifying Accountant.
None.
Item 16G. Corporate Governance.
The NYSE allows NYSE-listed companies that are foreign private issuers, such as MUFG, with certain exceptions, to follow home-country practices in lieu of the corporate governance practices followed by U.S. companies pursuant to the NYSE's Listed Company Manual. The following is a summary of the significant differences between MUFG's corporate governance practices and those followed by U.S. listed companies under the NYSE's Listed Company Manual.
A NYSE-listed U.S. company must have a majority of directors that meet the independence requirements under Section 303A of the NYSE's Listed Company Manual.
As of June 30, 2015, we have six outside directors as members of our board of directors, which consists of a total of seventeen members. Under our newly adopted governance system, we are required to have a majority of outside directors on each of our nominating, audit and compensation committees. For a description of an outside director, see "Item 6.C. Directors and Senior Management—Board Practices."
The Tokyo Stock Exchange rules require listed companies, including us, to identify at least one individual who the company believes is unlikely to have a conflict of interest with general shareholders and have such individual serve as an independent director or outside corporate auditor.
Further, a listed company with fewer than two outside directors who are considered independent based on such internal standards as the company establishes pursuant to the Tokyo Stock Exchange requirements must publicly disclose the reason for not having at least two such directors on its board of directors. In addition, if a listed company determines that at least one-third of the members of its board of directors should be independent outside directors, the listed company must disclose its policy relating to the determination. We have adopted and made public our corporate governance policy providing, among other things, that, in general cases, at least one-third ofthe members of our board of directors will be independent outside directors, and that, in general cases, the majority of the members of our board of directors will be non-executive directors.
A NYSE-listed U.S. company must have an audit committee composed entirely of independent directors.
Under the Company Law, we are required to have an audit committee consisting of at least three non-executive directors, and the majority of its members must be outside directors. Currently, our audit committee consists of three outside directors and two non-executive directors. Our audit committee satisfies the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, including the independence requirements thereunder.
224
A NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors.
Under the Company Law, we are required to have a compensation committee consisting of at least three directors, and the majority of its members must be outside directors. Currently, our compensation committee consists of six directors, four of whom are outside directors.
A NYSE-listed U.S. company must have a nominating or corporate governance committee composed entirely of independent directors.
Under the Company Law, we are required to have a nominating committee consisting of at least three directors, and the majority of its members must be outside directors. Currently, our nominating committee, which we call the nominating and governance committee, consist of six directors, four of whom are outside directors.
A NYSE-listed U.S. company must obtain shareholder approval with respect to any equity compensation plan.
Under the Company Law, an equity compensation plan for directors and executive officers is deemed to be compensation for the services performed by the company's directors and executive officers. Our compensation committee establishes the policy with respect to the determination of the individual compensation of our -- directors and executive officersr including equity compensation ^ the form of stock acquisition-rights-(granting~ the holder thereof-the right to acquire from-thc-issuer shares of its stock at a prescribed price), and determines individual compensation in accordance with the policy. Under the Company Law, a public company seeking to issue stock acquisition rights must obtain the approval of its board of directors, not its shareholders.
When stock acquisition rights are issued under terms and conditions that are especially favorable to the recipients thereof, such issuance must be approved by a "special resolution" of a general meeting of shareholders. Under our articles of incorporation, the quorum for a special resolution is at least one-third of the total outstanding voting-rights, and the approval of at least two-thirds of the voting rights represented at the relevant general meeting of shareholders is required to pass a special resolution.
A NYSE-listed U.S. company must adopt and disclose Corporate Governance Guidelines and a Code of Business Conduct and Ethics, and it must also disclose any exemptions granted to directors or executives.
Our corporate governance policies, which are called the "MUFG Corporate Governance Policies," are based on applicable home-country rules, particularly the Tokyo Stock Exchange rules, which require listed companies, such as us, to adopt a corporate governance code setting forth fundamental principles designed to establish an effective corporate governance system or explain in their coiporate governance reports the reasons for not adopting such a code. We disclose these: policies on our website.
We have adopted a code of ethics, compliance rules and a compliance manual, which meet the definition of "code of ethics" in "Item 16B. Code of Ethics."
A NYSE-listed U.S. company must hold regularly scheduled executive sessions where participants are limited to non-management directors.
Under the Company Law,"Japanese corporations arc nOt obliged to hold executive scssibhs where participants are limited to non-management directors. Such executive sessions are also not required under our internal corporate governance rules.
Item 16H. Mine Safety Disclosure.
Not Applicable.
225
PART III
Item 17. Financial Statements.
In lieu of responding to this item, wc have responded to (tern 18 of this Annual Report.
Item 18. Financial Statements.
The information required by this item is set forth in our consolidated financial statements starting on page F-1 of this Annual Report-Item 19. Exhibits.
Exhibit Description
1(a) Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on June 25,
2015. (English translation)
1(b) Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015. (English translation)
1(c) Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015. (English translation)
1(d) Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27,
2013. (English Translation)*
2(a) Form of American Depositary Receipt.**
2(b) Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The Bank of New York Mellon and the holders from time to time of American Depositary Receipts issued thereunder.**|109|Subsidiaries of the Company—see "Item 4.C. Information on the Company—Organizational
Structure."
Principles of Ethics and Conduct, Compliance Rules, Compliance Manual, and Rules of Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
15 Consent of independent registered public accounting firm
101 .INS XBRL Instance Document
101.SCH XBRL Schema Document
101.CAL XBRL Calculation Linkbase Document
101.DEF XBRL Definition Linkbase Document
101.LAB XBRL Label Linkbase Document
Notes:
' Incorporated hy reference to our registration statement on Form S-8 (File No 333-204845) tiled on June 10, 2015. ** Tncorporated by reference lo our annual report on Form 20-F (Fde No 000-54189) field on July 23. 2012.
226
SELECTED STATISTICAL DATA
Due to close integration of our foreign and domestic activities, il is difficult to make a precise determination ofthe assets, liabilities, income and expenses of our foreign operations. The foreign operations as presented include the business conducted by overseas subsidiaries and branches, and the international business principally conducted by the international banking-related divisions headquartered in Japan. Our management believes lhat the results appropriately represent our domestic and foreign activities.
A-1
I. Distribution of Assets, Liabilities and Equity; Interest Rates and Interest Differential
Average Balance Sheets, Interest and Average Rates
The following table shows our average balances, interest and average interest rates for the fiscal years ended March 31, 2013, 2014 and 2015. Average balances arc generally based on a daily average while a month-end average is used for certain average balances when it is nol practicable to obtain applicable daily averages. The average balances determined by such methods are considered to be representative of our operations.
Fiscal years ended March 31,
2013 2014 2015
Average Interest Average Average Interest Average Average Interest Average balance income rate balance income rate balance income rate
(in millions, except percentages)
Assets:
Interest-earning assets:
Interest-earning deposits in other banks:
Domestic ¥ 2,855,051 ¥ 3,964 O.I4%¥ 10,321,128¥ 10,990 0.11% V 21,485,054 ¥ 21,218 0.10%
Foreign 3,763,476 23,340 0.62 6,520,619 36,066 0.55 8,475,102 43,052 0.51
Total 6,618,527 27,304 0.41 16,841,747 47,056 0.28 29,960,156 64,270 0.21
Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions:
Domestic 3,133,225 3,456 0.11 958,054 2,506 0.26 1,844,761 4,526 0.25
Foreign 6,972,640 53,376 0.77 9,421,311 59,227 0.63 10,799,658 60,813 0.56
Total 10,105,865 56,832 0.56 10,379,365 61,733 0.59 12.644,419 65,339 0.52
Trading account assets:
Domestic 5,780,004 45,367 0.78 5,211,819 40,044 0.77 6,981,937 46,229 0.66
Foreign 18,504,836 349,421 1.89 22,827,441 367,371 1.61 20,891,721 353,791 1.69
Total 24,284,840 394,788 1.63 28,039,260 407,415 1.45 27,873,658 400,020 1.44
Investment securities'":
Domestic 55,159,363 259,420 0.47 49,152,403 222,644 0.45 46,374,540 236,285 0.51
Foreign 4,617,964 111,407 2.41 5,166,347 119,693 2.32 6,379,303 147,457 2.31
Total 59,777,327 370.827 0.62 54,318,750 342,337 0.63 52,753,843 383,742 0.73
Loans'2':
Domestic 67,831,943 964,031 1.42 69,443,921 900,085 1.30 70,143,714 848,843 1.21
Foreign 25,205,754 613,739 2.43 33,153,305 763,657 2.30 43,871,874 1,132,431 2.58
Total 93,037,697 1,577,770 1.70 102,597,226 1,663,742 1.62 114,015,588 1,981,274 1.74
Total interest-earning assets:
Domestic 134,759,586 1,276,238 0.95 135.087,325 1,176,269 0.87 146,830,006 1,157,101 0.79
Foreign 59,064,670 1,151,283 1.95 77,089,023 1,346,014 1.75 90,417,658 1,737,544 1.92
Total ..: 193,824,256 2,427,521 1.25 212,176,348 2,522,283 1.19 237,247,664 2,894,645 1.22
Non-interest-earning assets:
Cash and due from banks . 3,131,561 3,441,312 3,722,685
Other non-interest-eaming
assets 30,016,918 33,369,623 37,604,759
Allowance for credit
losses (1,289,950) (1,257,539) (1,017,615)
Total non-interest-
eaming assets . . 31.858,529 35,553,396 40,309,829
Total assets ¥225,682,785 ¥247,729,744 ¥277,557,493
Notes:
Tax-exempt income of tax-exempt investment securities has not been calculated on a lax equivalent basis because the effect of such calculation would not be material.
Average balances on loans outstanding include all nonaccrual and restructured loans. See "'III Loan Portfolio." The aniorli7.ed portion of net loan origination fees (costs) is included in interest income on loans, which accounts for an insignificant amount of an adjustment to the yields.
A-2
!
Fiscal years ended March 31,
Average balance
Liabilities and equity: Interest-bearing liabilities:
Deposits:
Domestic V 99,884.032
Foreign 23,436,714
Total 123,320,746
Call money, funds
purchased, and
payables under
repurchase
agreements and
securities lending
transactions:
Domestic 16,284,255
Foreign 7,948,167
Total 24,232,422
Due to trust account—
Domestic 590,150
Other short-term- — —
borrowings and
trading account
liabilities:
Domestic 10,247,601
Foreign 3,153,184
Total 13,400,785
Long-term debt:
Domestic 8,968,836
Foreign 2,886,502
Total 11,855,338
Total interest-bearing liabilities:
Domestic 135,974,874
Foreign 37,424,567
Total 173,399,441
Non-interest-bcaring
liabilities 43,038,814
Total equity 9,244,530
Total liabilities and
equity ¥225,682,785
Net interest income and
interest rate spread
Net interest income as a
percentage of total
interest-earning
assets
2014
Average Average rate balance
2015
Interest Average Average Interest expense rate balance expense
0.05% 0 66
0.08% ¥102,854,486 ¥ 65,358 0.57 30.453,791 161,297
(in millions, except percentages)
0.06% ¥106,841,661 ¥ 53,818 0 53 37,361,232 246,874
35,030 28,793
0.22 0.36
0.12 0.20
28,703 17,467
26,637 21,944
22,087,439 11,226,775
33,314,214
18,576,215 9,871.891
28.448.106
212,067 0.17 133,308,277 226,655 0 17 144,202,893 300,692 0.21
0.15
48,581 0.15
63.823 0.26
0.18
504 0.09
665 0.11
506,466
560,251
46,170 0.16
34,379 23,122
28,958 31,494
10,177,337 4,332,788
14,510,125
0.34 0.53
57,501 0.40
35,928 0.35 16,414 0.52
52,342 0.39
9,026,889 5,397,526
14,424,415
519 0.10
0.32
0.58
9,763,504 126.686 1.30 2,876,831 103,441 3.60
12,640,335 230,127 1.82
60,452 0.42
13,482;605 131,952 0.98 4,116,970 121,003 2.94
284,626 271,792
0.21 0.73
0.16 0.73
141,878,008 47,535,301
255,645 305,327
0.18 0.64
241,869 421,315
17,599.575 252,955 1.44
151,998,845 58.102,503
54,453,190 13,002,955
556,418 0.32 189,413,309 560,972 0.30 210.101,348 663,184 0.32
¥277,557,493
47,633,337 10,683,098
¥1.961,311 0.89%
¥247,729,744
0.97%
0.92%
¥2,231,461 0.90%
0.94%
- The percentage-of average total assets attributable to foreign activities was 31.5%, 36.5% and -37.9%, respectively, for the fiscal years ended March 31, 2013, 2014 and 2015.
The percentage of average total liabilities attributable to foreign activities was 32.1%, 37.2% and 38.4%, respectively, for the fiscal years ended March 31, 2013, 2014 and 2015.
A-3
Analysis of Net Interest Income
The following table shows changes in our net interest income by changes in volume and by changes in interest rate for the fiscal year ended March 31, 2014 compared lo the fiscal year ended March 31, 2013, and the fiscal year ended March 31, 2015 compared to the fiscal year ended March 31, 2014.
Fiscal year ended March 31, 2013 Fiscal year ended March 31, 2014
versus versus
fiscal year ended March 31, 2014 fiscal year ended March 31, 2015
Increase(decrease) Increase(decrease)
due to changes in due to changes in
Volume1" Katei" Net change Volume1" Rate1" Net change
(in millions)
Interest income:
Interest-earning deposits in other banks:
Domestic ¥ 8,148 ¥ (1,122) ¥ 7,026 ¥ 11,079 ¥ (851) ¥ 10,228
Foreign 15,488 (2,762) 12,726 10,117 (3,131) 6,986
Total 23,636 (3,884) 19,752 21,196 (3,982) 17,214
Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions:
Domestic (3,505) 2,555 (950) 2,185 (165) 2,020
Foreign 16,524 (10,673) 5,851 8,137 (6,551) 1,586
Total 13,019 (8,118) 4,901 10,322 (6,716) 3,606
Trading account assets:
Domestic (4,382) (941) (5,323) 12,264 (6,079) 6,185
Foreign 74,236 (56,286) 17,950 (32,160) 18,580 (13,580)
Total 69,854 (57,227) 12,627 (19,896) 12,501 (7,395)
Investment securities'2':
Domestic (27,473) (9,303) (36,776) (13,072) 26,713 13,641
Foreign 12,836 (4,550) 8,286 28,038 (274) 27,764
Total (14,637) (13,853) (28,490) 14,966 26,439 41,405
Loans:
Domestic 22,481 (86,427) (63,946) 8,991 (60,233) (51,242)
Foreign 184,593 (34,675) 149,918 268,580 100,194 368,774
Total 207,074 (121,102) 85,972 277,571 39,961 317,532
Total interest income:
Domestic (4,731) (95,238) (99,969) 21,447 (40,615) (19,168)
Foreign.' 303,677 (108,946) 194,731 282,712 108,818 391,530
Total ¥298,946 ¥(204,184) ¥ 94,762 ¥304,159 ¥ 68,203 ¥372,362
Notes:
Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate lo the total "net change."
Tax-exempt income of tax-exempt investment securities has not been calculated on a lax equivalent basis because the effect of such calculation would not he material.
A-4
Fiscal year ended March 31, 2013 Fiscal year ended March 31, 2014
versus versus
fiscal year ended March 31, 2014 fiscal year ended March 31, 2015
Increase (decrease) Increase (decrease)
due Lo changes in due to changes in
Volume'" Rate"' Net change Volume'" Rate'" Net change
(in millions)
Interest expense:
Deposits:
Domestic ¥ 2,252 ¥ (14,602) ¥(12,350) ¥ 2,451 ¥(13,991) ¥(11,540)
Foreign 37,786 (10,848) 26,938 40,916 44,661 85,577
Total 40,038 (25,450) 14,588 43,367 30,670 74,037
Call money, funds purchased, and
payables under repurchase agreements
and securities lending transactions:
Domestic 4,468 (10,795) (6,327) 4,874 (6,940) (2,066)
Foreign 5,824 (17,150) (11,326) 2,540 1,937 4,477
Total 10,292 (27,945) (17,653) 7,414 (5,003) 2,411
Due to trust account—Domestic (89) (57) (146) 52 (67) (15)
-Other short-term borrowings and trading- - - - - - - -
account liabilities:
Domestic (245) (1,304) (1,549) (3,751) (1,670) (5,421)
Foreign 6,285 423 6,708 6,067 2,305 8,372
Total 6,040 (881) 5,159 2,316 635 2,951
Long-term debt:
Domestic 11,337 (19,946) (8,609) 41,049 (35,783) 5,266
Foreign (310) 11,525 11,215 38,872 (21,310) 17,562
Total : 11,027 (8,421) 2,606 79,921 (57,093) 22,828
Total interest expense:
Domestic 17,723 (46,704) (28,981) 44,675 (58,451) (13,776)
Foreign 49,585 (16,050) 33,535 88,395 27,593 115,988
Total ¥ 67,308 ¥ (62,754) ¥ 4,554 ¥133,070 ¥(30,858) ¥102,212
Net interest income:
Domestic ¥(22,455) ¥ (48,533) ¥(70,988) ¥(23,228) ¥ 17,836 ¥ (5,392)
Foreign 254,092 (92,896) 161,196 194,317 81,225 275,542
Total ¥231,637 ¥(141,429) ¥ 90,208 ¥171,089 ¥ 99,061 ¥270,150
Note:
(1) Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total "net change."
A-5
II. Investment Portfolio
The following table shows information as to the value of our Available-for-sale securities and Held-to-maturity securities at March 31, 2013, 2014 and 2015:
At March 31,
2013 2014 2015 •
Net Net Net
unrealized unrealized unrealized
Amortized gains Amortized gains Amortized gains
cost Fair value (losses) cost Fair value (losses) cost Fair value (losses)
(in millions)
A vailable-for-sale securities:
Domestic:
Japanese national government and Japanese
government agency
bonds ¥49,159,827 ¥49,479,954 ¥ 320,127 ¥41,388,592 ¥41,589,009 ¥ 200,417 ¥35,079,893 ¥35,405,632 ¥ 325,739
Corporate bonds .... 1,644,555 1,696,529 51,974 1,229,167 1,264,960 35,793 982,427 1,008,982 26,555
Marketable equity
securities 2,220,507 4,092,121 1,871,614 2,434,946 4,812,596 2,377,650 2,546,386 6,358,658 3,812,272
Other securities 551,447 561,082 . 9,635 592,682 600,471 7,789 684,645 692,187 7.542
Total domestic ... . 53,576,336 55,829,686 2,253,350 45,645,387 48,267,036 2,621,649 39,293,351 43,465,459 4,172,108
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds .. 204,330 207,871 3,541 485,565 480,470 (5,095) 675,623 683,513 7,890 Other governments and official institutions
bonds 497,174 508,425 11,251 786,616 790,951 4,335 985,663 998,991 13,328
Mortgage-backed
securities 1,426,238 1,455,246 29,008 1,205,344 1,165,948 (39,396) 1,149,968 1,139,202 (10,766)
Other securities 844,092 842,841 (1,251) 1,178,728 1,181,247 2,519 1,203,676 1,203,239 (437)
Total foreign 2,971,834 3,014,383 42,549 3,656,253 3,618,616 (37,637) 4,014,930 4,024,945 10,015
Total ¥56,548,170 ¥58,844,069 ¥2,295,899 ¥49,301,640 ¥51,885,652 ¥2,584,012 ¥43,308,281 ¥47,490,404 ¥4,182,123
Held-to-maturity securities: Domestic:
Japanese national government and Japanese
government agency .
bonds ¥ 232,881 ¥ 234,764 ¥ 1,883 ¥ 214,968 ¥ 215,838 ¥ 870 ¥ 1,126,212 ¥ 1,140,768 ¥ 14,556
Other securiues 600 600 — 400 400 — 300 300 —-
Total domestic .. 233,481 235,364 1,883 215,368 216,238 870 1,126,512 1,141,068 14,556
Foreign:
U.S. Treasury and other
U.S. government
agencies bonds .. 40,414 41,808 1,394 3,166 4,265 1,099 62,209 63,765 1,556
Other governments and official institutions
bonds 243,901 244,916 1,015 18,925 18,925 — 15,278 15,278 —
Other securities 1,613,368 1,665,982 52,614 2,469,523 2,495,699 26,176 2,926,452 2,964,028 37,576
Total foreign 1,897,683 1,952,706 55,023 2,491,614 2,518.889 27,275 3,003,939 3,043,071 39,132
Total ¥ 2,131.164 ¥ 2,188.070 ¥ 56.906 ¥ 2.706,982 ¥ 2.735.127 Y 28,145 ¥ 4,130.451 ¥ 4,184.139 ¥ 53,688
A-6
Nonmarketable equity securities presented in Other investment securities in the accompanying consolidated financial statements were primarily carried at cost of ¥864,052 million, ¥711,416 million and ¥564,582 million, at March 31, 2013, 2014 and 2015, respectively. The corresponding fair values at those dates were not readily determinable. Investment securities held by certain subsidiaries subject to specialized industry accounting principles for investment companies and brokers and dealers presented in Other investment securities were carried at fair value of ¥25,900 million, ¥26,201 million and ¥22,537 million, at March 31, 2013, 2014 and 2015, respectively.
The following table presents the book values, maturities and weighted average yields of Available-for-sale securities and Held-to-maturity securities, excluding equity securities, at March 31, 2015. Weighted average yields are calculated based on amortized cost. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect of such calculation would not be material:
Maturities after Maturities after
Maturities within one year but five years but Maturities after
one year within five years within ten years ten years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(in millions, except percentages)
Available-for-sale securities: Domestic. Japanese national government and Japanese government
"agency"^onds~. .77. .7.77 Vi 2,992;854 ''0.15%¥r4T203,967" d74T%¥4787T;6ld~ 0M%¥3,337,206 "Tj7%M5,405T63'r"0[45%"
Corporate bonds 151,714 0.82 678,738 0.72 165,968 0.58 12,562 1.43 1,008,982 0.72
Other securities 255,575 0.45 191,925 1.09 174,035 0.47 70,653 0.37 692,188 0.62
Total domestic 13,400,143 0.17 15,074,624 0.44 5,211.613 0.62 3,420,421 1.55 37.106,801 0.46
Foreign:
U.S. Treasury and other U.S. government agencies
bonds 84,740 1.40 422,477 1.19 174,120 2.13 2,160 3.25 683,497 1.46
Other governments and official institutions
bonds 388,900 1.54 462,582 2.58 142,045 2.57 5,480 4.70 999,007 2.18
Mortgage-backed
securities — — 2,101 3.22 59,628 1.94 1,077,488 2.45 1,139,217 2.42
Other securities 299,829 1.91 437,486 2.21 171,642 2.04 268,349 1.91 1,177,306 2.04
Total foreign 773,469 1.67 1,324,646 2.01 547,435 2.19 1,353,477 2.35 3,999,027 2.09
Total ¥14,173,612 0.25%¥16,399,270 0.56% ¥5,759,048 0.77%¥4,773,898 1.78% ¥41,105,828 0.62%
Held-to-maturity securities:
Domestic:
Japanese national government and Japanese government
agency bonds ¥ 24,978 0.48%¥ 25 —%¥l, 101,209 0.5I%¥ — —7o¥ 1,126,212 0.51%
Other securities — — 300 1.00 — — — — 300 1.00
Total domestic 24,978 0.48 325 0.92 1,101,209 0.51 — — 1,126,512 0.51
Foreign: U.S. Treasury and other U.S. government agencies
bonds — — 61,124 1.97 1,085 8 57 — — 62,209 2.08
Other governments and official institutions
bonds 209 — 3,014 1.99 12,055 2.52 — — 15,278 2.38
Other securities 73,317 . 0.97 1,353,734 .1.25 ... 1,499,401 . 1.89 2,926,452 1.57
Total foreign 209 _— 137,455 1.44 1,366,874 1.26 1,499,401 1.89 3,003,939 1.58
Total ¥ 25,187 0.48%¥ 137,780 1.43%¥2,468,083 0.93%¥1,499,401 1.89%¥ 4,130,451 1.29%
Excluding U.S. Treasury and other U.S. government agencies bonds and Japanese national government bonds, none ofthe individual issuers held in our investment securities portfolio exceeded 10% of the consolidated total Mitsubishi UFJ Financial Group shareholders' equity at March 31, 2015.
A-7
III. Loan Portfolio
The following table shows our loans outstanding, before deduction of allowance for credit losses, by domicile and industry of the borrower at March 31 of each ofthe five fiscal years ended March 31, 2015. Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of Japan for regulatory reporting purposes and is not necessarily based on the use of proceeds:
At March 31,
2011 2012 2013 2014 2015
(in millions)
Domestic:
Manufacturing ¥11,248,033 ¥11,451,720 ¥11,767,352 ¥ 11,540,753 ¥11,703,428
Construction 1,280,899 1,155,926 1,056,276 980,877 977,892
Realestate 11,660,798 11,035,029 11,143,777 10,989,562 10,911,240
Services 3,417,689 3,239,688 2,881,666 2,693,561 2,684,355
Wholesale and retail 8,443,580 8,492,234 8,330,553 8,475,143 8,345,481
Banks and other financial
institutions") 3,421,419 3,511,055 3,622,021 3,985,106 4,329,964
Communication and
information services 1,249,272 1,284,585 1,314,505 1,443,466 1,527,811
Other industries 8,410,092 10,390,191 12,191,566 13,496,763 12,674,004
Consumer 18,420,864 17,636,553 17,132,396 16,921,352 16,720,590
Total domestic 67,552,646 68,196,981 69,440,112 70,526,583 69,874,765
Foreign:
Governments and official
institutions 516,637 554,933 673,548 811,475 1,052,051
Banks and other financial
institutions") 4,466,126 5,871,731 7,258,978 9,792,255 11,973,021
Commercial and industrial . 13,134,725 15,693,487 18,738,731 24,533,816 29,593,255
Other 1,934,712 2,072,194 2,601,338 4,872,372 6,065,782
Total foreign 20,052,200 24,192,345 29,272,595 40,009,918 48,684,109
Total 87,604,846 92,389,326 98,712,707 110,536,501 118,558,874
Unearned income, unamortized premiums—net and deferred loan
fees—net (102,871) (91,083) (122,478) (260,090) (293,672)
Totals ¥87,501,975 ¥92,298,243 ¥98,590,229 ¥110,276,411 ¥118,265,202
Notes:
Loans to so-called non-bank finance companies arc generally included in "Banks and other financial institutions." Non-bank Finance companies arc primarily engaged in consumer lending, factoring and credit card businesses.
The above table includes loans held for sale of ¥65,162 million, ¥46,634 million, ¥35,261 million, ¥46,635 million and ¥88,927 million at March 31, 2011, 2012, 2013, 2014 and 2015, respectively, which are carried at the lower of cost or fair value.
A-8
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the maturities of our loan portfolio at March 31, 2015:
Maturity
One year or less One to five years Over five years Total
(in millions)
Domestic:
Manufacturing ¥ 6,657,909 ¥ 3,873,099 ¥ 1,172,420 ¥ 11,703,428
Construction 609,814 297,576 70,502 977,892
Real estate 2,402,596 4,362,164 4,146,480 10,911,240
Services 1,232,741 1,019,367 432,247 2,684,355
Wholesale and retail 5,611,143 2,157,951 576,387 8,345,481
Banks and other financial institutions 2,412,496 1,606,622 310,846 4,329,964
Communication and information
services 411,720 605,692 510,399 1,527,811
Other industries 9,032,619 2,193,748 1,447,637 12,674,004
Consumer 2,282,935 3,396,899 11,040,756 16,720,590
Total Domestic 30,653,973 19,513,118 19,707,674 69,874,765
Foreign 18,005,804 1.9,781,761 10,896,544 48,684,109
Total ¥48,659,777 ¥39,294,879 ¥30,604,218 ¥118,558,874
The above loans due after one year which had predetermined interest rates and floating or adjustable interest rates at March 31, 2015 are shown below:
Domestic Foreign Total
(in millions)
Predetermined rate.1 ¥12,319,605 ¥ 3,669,590 ¥15,989,195
Floating or adjustable rate 26,901,187 27,008,715 53,909,902
Total ¥39,220,792 ¥30,678,305 ¥69,899,097
Nonaccrual, Past Due and Restructured Loans
We generally discontinue the accrual of interest income on loans when substantial doubt exists as to the full and timely collection of either principal or interest, when principal or interest is contractually past due one month or more with respect to loans within all classes of the Commercial segment, three months or more with respect to loans within the Card, MUAH, and Krungsri segments, and six months or more with respect to loans within the Residential segment.
Generally, accruing loans that are modified in a troubled debt restructuring ("TDR") remain as accruing loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been restructured as a TDR, the borrower is not delinquent under the restructured terms, and demonstrates that its financial condition has improved, we may reclassify the loan to accrual status. This determination is generally performed at least once a year through a detailed internal credit rating review process. Once a liohaccrual loan is deemed fo be a TDR, we will continue"to designate the loan as a TDR eveh if the loan is reclassified to accrual status.
A-9
The following table shows the distribution of our nonaccrual loans, restructured loans and.accruing loans
which are contractually past due 90 days or more as to principal or interest payments at March 31 of each of the
five fiscal years ended March 31, 2015, based on the domicile and type of industry of the borrowers:
At March 31,
2011 2012 2013 2014 2015
(in millions)
Nonaccrual loans: Domestic:
Manufacturing ¥ 137,987 ¥ 200,074 ¥ 213,181 ¥ 167,962 ¥ 119,052
Construction 48,479 40,098 37,530 30,202 20,150
Real estate 152,317 127,824 205,959 154,766 85,625
Services 76,597 86,015 87,103 72,851 54,801
Wholesale and retail 172,712 237,977 250,241 212,356 158,454
Banks and other financial institutions 7,238 7,802 13,993 7,234 5,715
Communication and information services ... 33,198 33,418 32,125 24,956 23,204
Other industries 37,335 49,212 43,585 36,861 19,094
Consumer 321,823 288,402 269,641 227,476 199,665
Total domestic 987,686 1,070,822 1,153,358 934,664 685,760
Foreign:
Governments and official institutions 62,683 93 66 43 40
Banks and other financial institutions 21,452 20.18S 21,814 24,091 7,372
Commercial and industrial 73,707 72,750 87,628 87,808 144,609
Other 23,651 25,982 32,247 68,840 75,916
Total foreign 181,493 119,013 141,755 180,782 227,937
Total ¥1,169,179 ¥1,189,835 ¥1,295,113 ¥1,115,446 ¥ 913,697
Restructured loans:
Domestic ¥ 800,620 ¥ 830,853 ¥ 847,728 ¥ 718,027 ¥ 735,348
Foreign 38,930 92,276 138,119 153,204 144,089
Total ¥ 839,550 ¥ 923,129 ¥ 985,847 ¥ 871,231 ¥ 879,437
Accruing loans contractually past due 90 days or more:
Domestic ¥ 55,549 ¥ 65,446 ¥ 41,216 ¥ 47,759 ¥ 48,050
Foreign" > 199 131 328 961 360
Total ¥ 55,748 ¥ 65,577 ¥ 41,544 ¥ 48,720 ¥ 48,410
Total") ¥2,064,477 ¥2,178,541 ¥2,322,504 ¥2,035,397 ¥1,841,544
Notes:
Foreign accruing loans contractually past due 90 days or more do not include ¥25,425 million, ¥12,827 million, ¥10,736 million, ¥13,068 million and ¥5,666 million of Federal Deposit Insurance Corporation ("FDIC") covered loans held by MUAH which arc subject to the guidance on loans and debt securities acquired with deteriorated credit quality at March 31, 2011, 2012, 2013. 2014 and 2015, respectively.
The sum of nonaccrual and restructured loans and accruing loans contractually past due 90 days or more includes large groups of smaller-balance homogenous loans that have not been modified and are collectively evaluated for impairment, and accruing loans contractually past due 90 days or more. However, these loans are excluded from the impaired loan balances of¥l,86l,027 million and ¥1,686,806 million, at March 31, 2014 and 2015, respectively, disclosed in Note 4 to our consolidated financial statements included elsewhere in this Annual Report.
Gross interest income which would have been accrued at the original terms on domestic nonaccrual and restructured loans outstanding during the fiscal year ended March 31, 2015 was approximately ¥61.3 billion, of which ¥31.3 billion was included in the results of operations for the fiscal year. Gross interest income which would have been accrued at the original terms on foreign nonaccrual and restructured loans outstanding for the fiscal year ended March 31, 2015 was approximately ¥25.1 billion, of which ¥12.5 billion was included in the results of operations for the fiscal year.
A-10
Potential Problem Loans
We do not have potential problem loans where known information about possible credit problems of borrowers causes management to have serious doubts as to the borrowers' ability to comply with the present loan repayment terms that are not disclosed as nonaccrual, restructured loans and accruing loans past due 90 clays or more.
Foreign Loans Outstanding
We had no cross-border outstandings to borrowers domiciled in a foreign country which in total exceeded 0.75% of consolidated total assets at March 31, 2013, 2014 and 2015. Cross-border outstandings are defined, for this purpose, as loans (including accrued interest), acceptances, interest-earning deposits with other banks, other interest-earning investments and any other monetary assets denominated in Japanese yen or other non-local currencies. Material local currency loans outstanding which are neither hedged nor funded by local currency borrowings are included in cross-border outstandings.
Guarantees of outstandings to borrowers domiciled in other countries are considered to be outstandings of the guarantor. Loans made to, or deposits placed with, a branch of a foreign bank located outside the foreign bank's home country arc considered to be loans to, or deposits with, the foreign bank. Outstandings of a country do not include principal or interest amounts which are supported by written, legally enforceable guarantees by "Yuafahtofs df 'other to
collateral held and realizable by BTMU, MUTB and their subsidiaries outside the country in which they operate.
In addition to credit risk, cross-border outstandings are subject to country risk that as a result of political or economic conditions in a country, borrowers may be unable or unwilling to pay principal and interest according to contractual terms. Other risks related to cross-border outstandings include the possibility of insufficient foreign exchange and restrictions on its availability.
In order to manage country risk, we establish various risk management measures internally. Among other things, we regularly monitor economic conditions and other factors globally and assess country risk in each country where we have cross-border exposure. For the purposes of monitoring and controlling the amount of credit exposed to country risk, we set a country limit, the maximum amount of credit exposure for an individual country, in consideration of the level of country risk and our ability to bear such potential risk. We also determine our credit policy for each country in accordance with our country risk level and our business plan with regard to the country. The assessment of country risk, establishment of country limits, and determination of country credit policies are subject to review and approval by our senior management and are updated periodically.
Loan Concentrations
At March 31, 2015, there were no concentrations of loans to a single industry group of borrowers, as defined by the Bank of Japan industry segment loan classifications, which exceeded 10% of our consolidated total loans, except for loans in a category disclosed in the table of loans outstanding above.
Credit Risk Management
We have a credit rating system, under which borrowers and transactions are graded on a worldwide basis. We. calculate probability of default by statistical means and manage our credit portfolio based on this credit rating system. For a detailed description of this system and other elements of our risk management structure, see "Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management."
A-11
IV. Summary of Loan Loss Experience
The following table shows an analysis of our loan loss experience by industry ofthe borrower for each of the five fiscal years ended March 31, 2015:
Fiscal years ended Marcli 31,
2013
Allowance for credit losses at beginning of fiscal
year ¥1,315,615
Provision (credit) for credit losses 292,035
Charge-offs:
Domestic:
Manufacturing 32,162
Construction 7,414
Real estate 14,453
Services 22,112
Wholesale and retail 54,498
Banks and other financial institutions 608
Communication and information services 36,871
Other industries 62,711
Consumer 107,473
Total domestic 338,302
Total foreign 47,468
Total 385,770
Recoveries:
Domestic 34,653
Foreign 9,017
Total V 43,670
Net charge-offs 342,100
Others*" (25,094)
Allowance for credit losses at end of fiscal year ¥1,240,456
Allowance for credit losses applicable to foreign activities:
Balance at beginning of fiscal year ¥ 327,568
Balance at end of fiscal year ¥ 185,871
Provision (credit) for credit losses ¥ (86,674)
Ratio of net charge-offs during the fiscal year to
average loans outstanding during the fiscal year 0.39%
Note:
(1) Others principally include losses (gains) from foreign exchange translation.
(in millions, except percentages)
35,577 11,034 7,001 10,526 39,676 377 8,754 1,778 67,969
28,413 2,066 8,571 9,447
37,477 745 3,668 3,158
27,148
52,579 2,985 17,124 13,555 39,218 243 5,061 3,312 27,888
¥1,240,456 ¥1,285,507 ¥1,335,987 ¥1,094,420 223,809 144,542 (106,371) 86,998
21,510 7,378 4,413 5,404
28,902 160 3,100 2,984
123,798 20,739
144,537
120,693 56,468
177,161
161,965 29,133
191,098
49,947
182,692 34,107
23,310 8,365
31,675
112,862 18,800
27,105 10,245
37,350
153,748 18,552
22,083 4,412
26,495
150,666 24,727
216,799
37,002 6,427
43,429
173,370 (5,388)
¥1,285,507 ¥1,335,987 ¥1,094,420 ¥1,055,479
¥ 185,871 ¥ 170,812 ¥ 207,111 ¥ 184,460 ¥ 170,812 ¥ 207,111 ¥ 184,460 ¥ 267,293
0.20%
0.15%
¥ 17,108 ¥ 30,859 ¥ (21,727) ¥ 110,494
0.12%
A-12
The following table shows an allocation of our allowance for credit losses at March 31 of each of the five fiscal years ended March 31, 2015:
At March 31,
2014
% of loans in
each category to total
loans
% of loans in
each category to total
loans
% of loans in
each category to total
loans
% of loans in
each category to total
loans
% of loans in
each category to total
loans
Domestic:
Manufacturing ... .¥ 202,505
Construction 41,012
Real estate 98,873
Services 92,336
Wholesale and
retail 197.296
Banks and other
financial
institutions 26,505
Communication and information
services 32,570
Other industries _. 58,53?_
" Consumer 280,665
Foreign:
Governments and official
institutions 28,406
Banks and other financial
institutions 26,853
Commercial and
industrial 114,352
Other 16,260
Unallocated 24,284
Total ,¥1,240,456
Allowance as a
percentage of loans 1.42% Allowance as a
percentage of
nonaccrual and
restructured loans and
accruing loans
contractually past due
90 days or more 60.09%
12 84%¥ 252,397 1.46 29,663
12 40%¥ 296,798 1 25 32,396
9.87%. 0.82 9.20 2.26
240,013 17,318 70,423 51,760
10.44%; 1 0.89 9.94 2.44
7.67
(in millions, except percentages)
11.92 3.51
81,685 69,511
11.29
2.92
13.31 3.90
9.64
91,195 92,921
245,101
11.92% ¥ 239,461 1 07 25,447
164,729 7.04
9 19
207,281
91,046 82,220
258,161
30,597
3.65
21,110 3.61
3.91
23,928
3 83
8.44
1.43 9.60 21.02
28,795 70,112 270,088
1.31 12.20 15.30
20,130 64,443 126,362
1.29 10.69 14.11
1.39 11.25 19.08
20,196 59,770 i 177,384
28,895 3.67
30,377
25,136
0.68
0.89
0.59
26,800
0.60
27,775 1.33 68,530 12.35 233,531 17.36
26,869 7.35
18,325 10.10
5.10
6.36
24,454
107,899 11,659 10,495
28,599 0.73
8.86
14.99 2.21
22.20 4.41
16.98 2.24
18.98 2.64
24.96 5.12
137,780 12,085 9,524
176,823 47,009 2,411
26,921
119,204 9,736 8,115
1.39%
0.89%
1.36%
100.00% ¥1,285,507 100.00% ¥1,335,987 100.00% ¥1,094,420 100.00% ¥1,055,479 100.00%
59.01%
57.52%
57.31%
0.99%
53.77%
While the allowance for credit losses contains amounts allocated to components of specifically identified loans as well as a group on a portfolio of loans, the allowance for credit losses covers the credit losses of the entire loan portfolio and the allocations shown above are not intended to be restricted to the specific loan category. Accordingly, as the evaluation of credit risks changes, allocations of the allowance will be adjusted to reflect current conditions and various other factors.
A-13
V. Deposits
The following table shows the average amount of, and the average rate paid on, the following deposit categories for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2014 2015
Average Average Average Average Average Average
amount rate amount rate amount rate
(in millions, except percentages)
Domestic offices:
Non-interest-bearing demand
deposits ¥ 14,184,561 —%¥ 14,806,715 — %¥ 15,678,066 —%
Interest-bearing demand deposits .. 51,319,383 0.02 54,341,944 0.02 58,571,378 0.03
Deposits at notice 1,224,245 0.02 1,165,323 0.03 1,169,001 0.03
Time deposits 41,664,771 0.14 41,571,358 0.12 40,773,580 0.08
Certificates of deposit 5,675,633 0.13 5,775,861 0.10 6,327,702 0.09
Foreign offices:
Non-interest-bearing demand
deposits 2,794,262 — 3,832,932 — 4,704,588 —
Interest-bearing deposits, principally time deposits and certificates of
deposit 23,436,714 0.57 30,453,791 0.53 37,361,232 0.66
Total ¥140,299,569 ¥151,947,924 ¥164,585,547
Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or more days notice in advance of withdrawal.
The average amounts of total deposits by foreign depositors included in domestic offices for the fiscal years ended March 31, 2013, 2014 and 2015 were ¥785,562 million, ¥558,229 million and ¥625,859 million, respectively.
At March 31, 2015, tlie balances and remaining maturities of time deposits and certificates of deposit issued by domestic offices in amounts of ¥10 million (approximately U.S.$83 thousand at the Federal Reserve Bank of New York's noon buying rate on March 31, 2015) or more and total foreign deposits issued in amounts of U.S.$100,000 or more are shown in the following table:
Time Certificates of
deposits deposit Total
(in millions)
Domestic offices:
Three months or less ¥ 7,463,584 ¥4,535,243 ¥11,998,827
Over three months through six months 4,933,752 581,937 5,515,689
Over six months through twelve months 4,396,936 486,939 4,883,875
Over twelve months 4,243,662 98,985 4,342,647
Total ¥21,037,934 ¥5,703,104 ¥26,741,038
Foreign offices r ¥27,056,193
A-J4
VI. Short-Term Borrowings
The following table shows certain additional information with respect to our short-term borrowings for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2013 2(114 2U15
(in millions, except percentages)
Call money, funds purchased, and payables under repurchase agreements and securities lending transactions:
Average balance outstanding during tlie fiscal year ¥24,232,422 ¥28,448,106 ¥33,314,214
Maximum balance outstanding at any month-end during the
fiscal year 25,868,941 33,513,3.17 39,210,296
Balance at end of fiscal year 23,703,926 30,206,245 32,602,540
Weighted average interest rate during the fiscal year 0.26% 0.16% 0.15%
Weighted average interest rate on balance at end of fiscal
year 0.18% 0.11% 0.10%
Due to trust account:
Average balance outstanding during the fiscal year ¥ 590,150 ¥ 506,466 ¥ 560,251
Maximum balance outstanding at any month-end during the
- —-fiscal year -, . , -661,633 - 7-50,2-10 1,610,992
Balance at end of fiscal year 633,029 750,210 1,610,992
Weighted average interest rate during the fiscal year 0.11% 0.10% 0.09%
Weighted average interest rate on balance at end of fiscal
year 0.09% 0.08% 0.05%
Other short-term borrowings:
Average balance outstanding during the fiscal year ¥10,540,612 ¥11,897,255 ¥11,315,050
Maximum balance outstanding at any month-end during the
fiscal year .: 11,608,598 12,264,988 11,669,175
Balance at end of fiscal year 11,608,598 11,106,071 11,545,807
Weighted average interest rate during tlie fiscal year 0.21% 0.19% 0.26%
Weighted average interest rate on balance at end of fiscal
year 0.20% 0.25% 0.21%
A-J5
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Page
Report of Independent Registered Public Accounting Firm F-3
Consolidated Balance Sheets as of March 31, 2014 and 2015 F-4
Consolidated Statements of Income for the Fiscal Years ended March 31, 2013, 2014 and 2015 F-6
Consolidated Statements of Comprehensive Income for the Fiscal Years ended March 31, 2013, 2014
and 2015 F-8
Consolidated Statements of Equity for the Fiscal Years ended March 31, 2013, 2014 and 2015 F-9
Consolidated Statements of Cash Rows for the Fiscal Years ended March 31, 2013, 2014 and 2015 F-11
Notes to Consolidated Financial Statements F-13
Basis of Financial Statements and Summary of Significant Accounting Policies F-13
Business Developments F-29
investment Securities F-31
Loans and Allowance for Credit Losses F-39
Premises and Equipment F-57
Goodwill and Other Intangible Assets F-58
Income Taxes F-60
Pledged Assets and Collateral F-65
Deposits F-67
Call Money and Funds Purchased F-68
Due to Trust Account F-68
Short-term Borrowings and Long-term Debt F-68
Severance Indemnities and Pension Plans F-72
Other Assets and Liabilities F-85
Offsetting of Derivatives, Repurchase Agreements, and Securities Lending Transactions F-86
Preferred Stock F-88
Common Stock and Capital Surplus F-90
Retained Earnings, Legal Reserve and Dividends F-91
Accumulated Other Comprehensive Income (Loss) F-93
Noncontrolling Interests F-98
Regulatory Capital Requirements F-98
Earnings per Common Share Applicable to Common Shareholders of MUFG F-105
Derivative Financial Instruments F-106
Obligations Under Guarantees and Other Off-balance Sheet Instruments F-112
Variable Interest Entities F-116
Commitments and Contingent Liabilities F-127
Fees and Commissions Income F-128
Trading Account Profits and Losses F-129
Business'Segments F-130
Foreign Activities F-133
Fair Value F-135
Stock-based Compensation F-157
Parent Company Only Financial Information F-160
SEC Registered Funding Vehicles Issuing Non-dilutive Preferred Securities F-I63
Subsequent Events F-164
F-1
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F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Mitsubishi UF.I Financial Group, Inc.
(Kabushiki Kaisha Mitsubishi UFJ Financial Group)
We have audited the accompanying consolidated balance sheets of Mitsubishi UFJ Financial Group, Inc. (Kabushiki Kaisha Mitsubishi UFJ Financial Group) ("MUFG") and subsidiaries (together, the "MUFG Group") as of March 31, 2014 and 2015, and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended March 31, 2015 (all expressed in Japanese Yen). These financial statements are the responsibility ofthe MUFG Group's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether tlie financial statements arc free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating . the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MUFG and subsidiaries as of March 31, 2014 and 2015, and the results of their operations and their cash flows for each ofthe three years in the period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the MUFG Group's internal control over financial reporting as of March 31, 2015, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 27, 2015 expressed an unqualified opinion on the MUFG Group's internal control over financial reporting.
Isl Deloitte Touche Tohmatsu LLC
Tokyo, Japan July 27, 2015
F-3
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2014 AND 2015
(in millions) 2014 2015
ASSETS
Cash and due from banks (Note 8) ¥ 3,689,228 ¥ 3,353,236
Interest-earning deposits in other banks (Notes 8 and 31) 20,500,676 37,364,698
Call loans and funds sold (Note 10) 919,132 660,416
Receivables under resale agreements (Notes 15 and 31) 7,300,037 7,273,008
Receivables under securities borrowing transactions (Note 15) 4,210,057 4,659,545
Trading account assets (including assets pledged that secured parties are
permitted to sell or repledge of ¥12,984,404 and ¥13,371,696 in 2014 and
2015) (including ¥18,251,847 and ¥19,911,092 measured at fair value under
fair value option in 2014 and 2015) (Notes 8, 15, 23 and 31) 40,646,275 46,904,903
Investment securities (Notes 3, 8 and 31):
Available-for-sale securities—carried at fair value (including assets pledged that secured parties are permitted to sell or repledge of ¥3,053,872 and
¥7,297,945 in 2014 and 2015) 51,885,652 47,490,404
Held-to-maturity securities—carried at amortized cost (including assets
pledged that secured parties are pcrmitted to sell or "repledge Of ¥110,100~~""" " "
and ¥210,106 in 2014 and 2015) (fair value of ¥2,735,127 and ¥4,184,139
in 2014 and 2015) 2,706,982 4,130,451
Other investment securities 737,617 587,119
Total investment securities 55,330,251 52.207,974
Loans, net of unearned income, unamortized premiums and deferred loan fees (including assets pledged that secured parties are permitted.to sell or repledge
of ¥1,608,498 and ¥1,418,642 in 2014 and 2015) (Notes 4 and 8) 110,276,411 118,265,202
Allowance for credit losses (Note 4) (1,094,420) (1,055,479)
Net loans 109,181,991 117,209,723
Premises and equipment—net (Note 5) 1,236,648 982,205
Accrued interest 277,222 323,496
Customers'acceptance liability 126,838 205,384
Intangible assets—net (Notes 2 and 6) 1,133,354 1,160,164
Goodwill (Notes 2 and 6) 728,515 807,610
Deferred tax assets (Notes 7 and 14) 362,267 90,674
Other assets (including ¥2,000 and ¥1,007 measured at fair value under fair
value option in 2014 and 2015) (Notes 8, 13, 14 and 31) 8,018,586 7,683,290
Total assets ¥253,661,077 ¥280,886,326
Assels of consolidated VIEs included in total assets above that can be used only to settle obligations of consolidated VIEs (Note 25)
Cash and due from banks ¥ 3,167 ¥ 1,240
Interest-earning deposits in other banks 33,158 51,136
Trading account assets 2,219,754 3,069,297
Investment securities 867,779 1,077,274
Loans 7,019,653 7,115,889
All other assets 236,131 326,307
Total assets of consolidated VIEs ¥ 10,379,642 ¥ 11,641,143
F-4
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS—(Continued) AS OF MARCH 31, 2014 AND 2015
(in millions, except shares) 2014 2015
LIABILITIES AND EQUITY
Deposits (Notes 8 and 9): Domestic offices:
Non-interest-bearing . ¥ 16,644,469 ¥ 17,829,620
Interest-bearing 104,860,603 107,968,674
Overseas offices:
Non-interest-bearing 4,478,271 5,616,266
Interest-bearing 36,534,443 40,576,707
Total deposits 162,517,786 171,991,267
Call money and funds purchased (Notes 8 and 10) 3,417,455 3,668,986
Payables under repurchase agreements (Notes 8 and 15) 21,268,072 20,728,205
Payables under securities lending transactions (Notes 8 and 15) 5,520,718 8,205,349
Due to trust account (Note 11) 750,210 1,610,992
Other short-term borrowings (including ¥28,875 and ¥156,703 measured at fair
value under fair value option in 2014 and 2015) (Notes 8, 12 and 31) 11,106,071 11,545,807
Trading account liabilities (Notes 15, 23 and 31) 11,981,978 17,029,385
Obligations to return securities received as collateral (Notes 15 and 31) 3,971,454 2,651,151
Bank acceptances outstanding 126,838 205,384
Accrued interest 143,362 132,330
Long-term debt (including ¥687,927 and ¥584,630 measured at fair value
under fair value option in 2014 and 2015) (Notes 8, 12 and 31) 14,498,678 19,968,735
Other liabilities (Notes 1, 7, 8, 13, 14 and 26) 5,607,011 7,867,394
Total liabilities 240,909,633 265,604,985
Commitments and contingent liabilities (Notes 24 and 26) Mitsubishi UFJ Financial Group shareholders' equity (Note 21):
Capital stock (Notes 16 and 17)—common stock authorized, 33,000,000,000 shares; common stock issued, 14,164,026,420 shares and 14,168,853,820
shares in 2014 and 2015, with no stated value 2,089,245 2,090,270
Capital surplus (Note 17) 6,363,413 5,959,626
Retained earnings (Notes 18 and 35):
Appropriated for legal reserve 239,571 239,571
Unappropriated retained earnings 2,157,639 3,424,864
Accumulated other comprehensive income, net of taxes (Note 19) 1,357,682 3,067,255
Treasury stock, at cost—3,389,416 common shares and 151,647,230 common
shares in 2014 and 2015 (2,510) (102,521)
Total Mitsubishi UFJ Financial Group shareholders'equity 12,205,040 14,679,065
Noncontrolling interests (Note 20) . . 546,404 602,276
Total equity 12,751,444 15,281,341
Total liabilities and equity ¥253,661,077 ¥280,886,326
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Mitsubishi UFJ Financial Group (Note 25)
Other short-term borrowings ¥ 44,221 ¥ 49,594
Long-term debt 966,838 793,333
All other liabilities 259,404 402,858
Total liabilities of consolidated VIEs ¥ 1,270,463 ¥ 1,245,785
See the accompanying notes to Consolidated Financial Statements.
F-5
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions) 2013 2014 2015
Interest income:
Loans, including fees (Note 4) ¥1,577,770 ¥1,663,742 ¥1,981,274
Deposits in other banks 27,304 47,056 64,270
Investment secunties:
Interest 266,640 229,732 252,149
Dividends 104,187 112,605 131,593
Trading account assets 394,788 407,415 400,020
Call loans and funds sold 7,046 10,074 11,181
Receivables under resale agreements and securities borrowing
transactions 49,786 51,659 54,158
Total 2,427,521 2,522,283 2,894,645
Interest expense:
Deposits 212,067 226,655 300,692
Call money and funds purchased 6,961 6,841 7,287
Payables under repurchase agreements and securities lending _
""transactions 7.7. ~...."~ . . 56,862 39,329 41,294
Due to trust account 665 519 504
Other short-term borrowings and trading account liabilities 52,342 57,501 60,452
Long-term debt 227,521 230,127 252,955
Total 556,418 560,972 663,184
Net interest income 1,871,103 1,961,311 2,231,461
Provision (credit) for credit losses (Note 4) 144,542 (106,371) 86,998
Net interest income after provision (credit) for credit losses 1,726,561 2,067,682 2,144,463
Non-interest income:
Fees and commissions income (Note 27) 1,160,874 1,294,116 1,400,980
Foreign exchange losses—net (Note 28) (38,955) (61,755) (113,073)
Trading account profits (losses)—net (Notes 28 and 31) 570,276 (33,886) 1,148,661
Investment securities gains—net (Note 3)"> 155,957 303,520 154,687
Equity in earnings of equity method investees—net (Notes 2 and 26) . 60,210 110,520 172,946
Gains on sales of loans (Note 4) 14,773 17,680 15,027
Government grant for transfer of substitutional portion of Employees'
Pension Fund Plans (Note 13) — 115,210 —
Other non-interest income (Note 20) 144,774 75,676 65,850
Total 2,067,909 1,821,081 2,845,078
Non-interest expense:
Salaries and employee benefits (Note 13) 932,399 1,029,580 1,097,452
Occupancy expenses—net (Notes 5 and 26) 151,138 158,393 168,780
Fees and commission expenses 209,782 222,038 248,136
Outsourcing expenses, including data processing 198,134 216,737 .241,650
Depreciation of premises and equipment (Note 5) 94,035 103,714 108,659
Amortization of intangible assets (Note 6) 207,568 198,147 222,353
Impairment of intangible assets (Note 6) 3,378 312 677
Insurance premiums, including deposit insurance 98,711 101,135 115,451
Communications 47,095 50,868 54,712
Taxes and public charges 66,862 69,457 96,627
Other non-interest expenses (Notes 2, 4, 5, 6, 20 and 26) 369,497. 317,939 372,388
Total 2,378,599 2,468,320 2,726,885
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions, except per share amount) 2013 2014 2015
Income before income tax expense 1,415,871 1,420,443 '2,262,656
Income tax expense (Note 7) . . 296,020 337,917 666,020
Net income before attribution of noncontrolling interests 1,119,851 1,082,526 1,596,636
Net income attributable to noncontrolling interests 50,727 67,133 65,509
Net income attributable to Mitsubishi UFJ Financial Group ¥1,069,124 ¥1,015,393 ¥1,531,127
Income allocated to preferred shareholders:
Cash dividends paid ¥ 17,940 ¥ 17,940 ¥ 8,970
Changes in a foreign affiliated company's interests in its subsidiary .. — 3,301 —
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group ¥1,051,184 ¥ 994,152 ¥1,522,157
Earnings per common share applicable to common shareholders of
Mitsubishi UFJ Financial Group (Notes 18 and 22): Basic earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group ¥ 74.30 ¥ 70.21 ¥ 107.81
Diluted earnings per common share—Earnings applicable to common
shareholders of Mitsubishi UFJ Financial Group 74.16 69.98 107.50
Cash dividend per common share 12.00 14.00 18.00
Weighted average common shares outstanding 14,148 14,159 14,118
Weighted average diluted common shares outstanding 14,169 14,180 14,138
(1) The following credit losses arc included in Investment securities gains—net:
(in millions) 2013 2014 2015
Decline in fair value ¥ 7,457 ¥ 2,321 ¥ 3,429
Other comprehensive income—net 872 284 84
Total credit losses ¥ 8,329 ¥ 2,605 ¥ 3,513
See the accompanying notes to Consolidated Financial Statements.
F-7
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STA TEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions) 2013 2014 2015
Net income before attribution of noncontrolling interests ¥1,119,851 ¥1.082,526 ¥1,596,636
Other comprehensive income, net of tax (Note 19):
Net unrealized gains on investment securities'1) 628,470 141,519 999,817
Net unrealized gains (losses) on derivatives qualifying for cash
flow hedges 3,423 (361) 899
Defined benefit plans 79,997 117,648 18,927
Foreign currency translation adjustments 467,259 508,130 688,518
Total 1,179,149 766,936 1,708,161
Comprehensive income 2,299,000 1,849,462 3,304,797
Net income attributable to noncontrolling interests 50,727 67,133 65,509
Other comprehensive income (loss) attributable to noncontrolling
interests 8,402 (16,399) (1,412)
Comprehensive income attributable to Mitsubishi UFJ Financial
- Group-.:: : v -. vt:t: :t.\ ;::.:;... v :v ::. :vv. :t:tvt. :t: :¥2,239,871 ¥1,798,728 ¥3,240,700"
(1) Includes unrealized gains of V555 million, ¥183 million and ¥56 million, net of tax, related to debt securities with credit component realized in earnings for the fiscal years ended March 31, 2013, 2014 and 2015, respectively.
Sec the accompanying notes to Consolidated Financial Statements.
F-8
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions, except per share amount) 2013 2014 2015
Capital stock (Notes 16 and 17):
Balance at beginning of fiscal year ¥2,087,244 ¥2,088,135 ¥2,089,245
Issuance of new shares of common stock by way of exercise of stock
acquisition rights 89_I_ 1,110 1,025
Balance at end of fiscal year ¥2,088,135 ¥2,089,245 ¥2,090,270
Capital surplus (Note 17):
Balance at beginning of fiscal year ¥6,378,619 ¥6,348,133 ¥6,363,413
Stock-based compensation (Note 32) 1,233 129 (46)
Issuance of new shares of common stock by way of exercise of the
stock acquisition rights 889 1,108 1,024
Purchase of shares of Mitsubishi UFJ Merrill Lynch PB Securities
Co., Ltd. from noncontrolling interest shareholders (30,655) — —
Changes in a foreign affiliated company's interests in its subsidiary ... . (1,816) — —
Reorganization of Mitsubishi UFJ Morgan Stanley PB Securities
Co., Ltd. (Note 2) - 13,839 —
Integration of BTMU's Bangkok Branch with Krungsri (Note 2) — — (15,269)
Retirement of Class 5 and 11 Preferred stock (Note 16) — — (390,001)
Other—net (137) 204 505
Balance at end of fiscal year ¥6,348,133 ¥6,363,413 ¥5,959,626
Retained earnings appropriated for legal reserve (Note 18):
Balance at beginning of fiscal year ¥ 239,571 ¥ 239,571 ¥ 239,571
Balance at end of fiscal year ¥ 239,571 ¥ 239,571 ¥ 239,571
Unappropriated retained earnings (Note 18):
Balance at beginning of fiscal year ¥ 482,535 ¥1,361,620 ¥2,157,639
Net income attributable to Mitsubishi UFJ Financial Group 1,069,124 1,015,393 1,531,127
Cash dividends:
Common stock—¥12.00 per share in 2013, ¥14.00 per share in
2014 and ¥18.00 per share in 2015 (169,819) (198,191) (254,932)
Preferred stock (Class 5)—¥115.00 per share in 2013 and 2014 and
¥57.50 per share in 2015 (17,940) (17,940) (8,970)
Gains (losses) on sales of shares of treasury stock (2,280) 58 —
Changes in a foreign affiliated company's interests in its subsidiary .. — (3,301) —
Balance at end of fiscal year (Note 35) ¥1,361,620 ¥2,157,639 ¥3,424,864
F-9
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions) 2013 2014 2015 _
Accumulated other comprehensive income (loss), net of taxes:
Balance at beginning of fiscal year ¥ (596,400) ¥ 574,347 ¥1,357,682
Net change during the fiscal year ... .¦ 1,170,747 783,335 1,709,573
Balance at end of fiscal year ¥ 574,347 ¥ 1,357,682 ¥ 3,067,255
Treasury stock, at cost:
Balance at beginning of fiscal year ¥ (8,411) ¥ (3,011) ¥ (2,510)
Purchases of shares of treasury stock (Notes 16 and 17) (19) (74) (490,076)
Sales of shares of treasury stock 4,888 753 2
Retirement of Class 5 and 11 Preferred stock — — 390,001
Net decrease (increase) resulting from changes in interests in consolidated subsidiaries, consolidated variable interest entities,
and affiliated companies 531 (178) 62
Balance at end of fiscal year ¥ (3,011) ¥ (2,510) ¥ (102,521)
Total Mitsubishi UFJ Financial Group shareholders' equity .. ¥10,608,795 ¥12,205,040 ¥14.679,065
Noncontrolling interests:
Balance at beginning of fiscal year ¥ 275,289 ¥ 333,185 ¥ 546,404
Initial subscriptions of noncontrolling interests (Note 2) 30,009 237,307 30,374
Transactions between the consolidated subsidiaries and the related
noncontrolling interest shareholders (3,262) 2,117 (7,790)
Decrease in noncontrolling interests related to deconsolidation of
subsidiaries (8,090) (48,524) (15,661)
Decrease in noncontrolling interests related to disposition of
subsidiaries (2,327) (139) —
Purchase of shares of Mitsubishi UFJ Merrill Lynch PB Securities
Co., Ltd. from noncontrolling interest shareholders (8,345) — —
Integration of BTMU's Bangkok Branch with Krungsri (Note 2) ... — — 15,269
Net income attributable to noncontrolling interests 50,727 67,133 65,509
Dividends paid to noncontrolling interests (9,243) (14,347) (30,715)
Reorganization of Mitsubishi UFJ Morgan Stanley PB Securities
Co., Ltd. (Note 2) — (13,839) —
Other comprehensive income (loss), net of taxes 8,402 (16,399) (J.412)
Other—net 25 (90) 298
Balance at end of fiscal year ¥ 333,185 ¥ 546,404 ¥ 602,276
Total equity ¥10,941,980 ¥12,751,444 ¥15,281,341
See the accompanying notes to Consolidated Financial Statements.
F-10
MITSUBISHI UF.1 FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions) 2013 2014 2015
Cash flows from operating activities:
Net income before attribution of noncontrolling interests ¥ 1,119.851V 1.082,526 Y 1,596.636
Adjustments to reconcile net income before attribution of noncontrolling interests to net cash provided by (used in) operating activities:
Depreciation and amortization 301,603 301,861 331,012
Impairment of intangible assets (Note 6) 3,378 312 677
Provision (credit) for credit losses (Note 4) 144,542 (106,371) 86,998
Employee benefit cost for severance indemnities and pension plans (Note 13) 64,970 79,036 19,881
Government grant for transfer of substitutional portion of Employees' Pension Fund
Plans(Notc 13) — (115,210) —
Investment secunties gains—net (155,957) (303,520) (154,687)
Amortization of premiums on investment securities 91,252 115,980 121,459
Changes in financial instruments measured at fair value under fair value option,
excluding trading account securities—net (Note 31) (21,734) (91,410) (3,403)
Foreign exchange losses (gains)—nel (1,059,276) (1,090,193) 966,676
Equity in earnings of equity method investees—net (Note 2) (60,210) (110,520) (172,946)
Provision for deferred income tax expense (benefit) 133,054 (8,047) 252,512
Decrease (increase) in trading account assets, excluding foreign exchange
contracts (3,269,053) 2,894,475 (1,383,251)
Increase (decrease) in trading account liabilities, excluding foreign exchange
contracts 796,656 (2,622,957) 985,687
Increase (decrease) in unearned income, unamortized premiums and deferred loan
fees (13) 5,214 (1,243)
Increase in accrued interest receivable and other receivables (82,575) (95,966) (3,901)
Increase (decrease) in accrued interest payable and other payables 4,162 100,760 (49,882)
Net increase (decrease) in accrued income taxes and decrease (increase) in income
tax receivables (125,309) 158,268 (85,406)
Decrease in allowance for repayment of excess interest (21,777) (23,503) (17,760)
Net decrease (increase) in collateral for derivative transactions (179,028) 528,901 (213,599)
Partial withdrawal of assets from employee retirement benefit trusts (Note 13) 44,851 — —
Other—net 105,703 209,812 109,130
Net cash provided by (used in) operating activities (2,164,910) 909,448 2,384,590
Cash flows from investing activities:
Proceeds from sales of Available-for-sale securities (including proceeds from
securities under fair value option) (Note 3) 149,910,832 105,488,089 108,558,436
Proceeds from maturities of Available-for-sale securities (including proceeds from
securities under fair value option) (Note 3) 15,343,140 33,894,330 35,252,780
Purchases of Available-for-sale securities (including purchases of securities under
fair value option) (Note 3) (163,273,113) (132,922,207) (136,034,106)
Proceeds from maturities of Hcld-to-maturily securities 811,024 626,109 743,850
Purchases of Held-to-maturity secunties (442,016) (473,345) (1,808,379)
Proceeds from sales of Other investment secunties 31,094 228,983 184,714
Purchases of Other investment securities (8,034) (18,767) (9,851)
MUB's acquisition of PB Capital Corporation's institutional commercial real estate
lending division (Note 2) — (358,040) —
Purchase of common slock investment in VielinBank, an affiliated company of
BTMU (Note 2) : — (75,136) —
Acquisition of Mitsubishi UFJ Fund Services Holdings Limited (formerly
Butterfield Fulcrum Group), a subsidiary of MUTB (Note 2) — (30,191) —
Acquisition of Krungsri, a subsidiary of BTMU, net of cash acquired (Note 2) — (398,841) —
Net increase in loans (2,543,816) (4,426,839) (2,460,836)
Net increase in inlcrest-caming deposits in other banks (1,706,642) (11,738,061) (15,763,663)
Net decrease (increase) in call loans, funds sold, and receivables under resale
agreements and securities borrowing transactions 106,337 (2,062,236) 643,792
Proceeds from sales of premises and equipment 36,015 30,420 10,138
Capital expenditures for premises and equipment (139,756) (158,492) (162,785)
Purchases of intangible assets (161,090) (211,942) (210,851)
Proceeds from sales and dispositions of investments in equity method investees .. ¦ 78,983 34,424 46,872
Proceeds from sales of consolidated VIEs and subsidiaries—net 20,951 164,674 102,593
Proceeds from a repayment of deposits wilh Government-led Loan Restructuring
Program (Note 4) 204,956 — —
Other—net (69.120) 5,241 (68,383)
Net cash used in investing activities (1,800,255) (12,401,827) (10,975,679)
F-11
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2013, 2014 AND 2015
(in millions) 2013 2014 2015
Cash flows from financing activities:
Net increase in deposits 4,491,412 7,056,761 3,951,886
Nel increase (decrease) in call money, funds purchased, and payables under repurchase
agreements and securities lending transactions 448,370 4,074,607 (366,760)
Net increase in due to trust account 5,698 1 17,181 860,782
Nel increase (decrease) in other short-term borrowings 429.163 (1,031.642) (231,787)
Proceeds from issuance of long-term debt 2,187,511 4,036,415 7,805,572
Repayment of long-term debt (3,025,310) (2.540,895) (3,072,630)
Proceeds from sales of treasury stock 22 845|910|Payments lor acquisition of treasury slock (Note 17) (19) (74) (100,076)
Payments for acquisition of preferred stock (Note 16) — — (390,000)
Payments for acquisition of shares of certain subsidiaries from noncontrolling interest
shareholders (39,000) — (29,464)
Dividends paid ; (187,720) (216,054) (263,920)
Dividends paid to noncontrolling interests (9,243) (14,347) (30,715)
Olher—nel (9,351) (7,702) 50,358
Net cash provided by financing activities 4,291,533 11,475,095 8,183,248
Effect of exchange rate changes on cash and cash equivalents 62,476 87,259 71,849
Net increase (decrease) in cashjind cash equivalents .. ... 388.844 69,9_75_ (335,992)
Cash and cash equivalents at beginning of fiscal year 3.230,409 3,619,253 3,689.228
Cash and cash equivalents at end of fiscal year ¥ 3,619,253 ¥ 3,689,228 ¥ 3,353,236
Supplemental disclosure of cash flow information: Cash paid during the fiscal year for:
Interest ¥ 605,608 ¥ 601,626 ¥ 729,403
Income taxes, net of refunds 288,275 187,696 498,914
Non-cash investing and financing activities:
Assets acquired under capital lease arrangements 7,584 4,211 3,087
MUB's acquisitions (Note 2):
Fairvalueof assets acquired 626,921 416,059 —
Fair value of liabilities assumed 502,437 58,019 —
Acquisition of Krungsri, a subsidiary of BTMU (Note 2):
Fair value of assets acquired, excluding cash and cash equivalents — 3,997,518 —
Fair value of liabilities assumed — 3,396,454 —
Fair value of noncontrolling interests — 202,223 —
Transfer to Held-to-maturity securities from Available-for-sale securities (Note 3) 12,356 411,535 —
See the accompanying notes to Consolidated Financial Statements.
F-12
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Mitsubishi UFJ Financial Group, Inc. ("MUFG") is a holding company for The Bank of Tokyo-Mitsubishi UFJ, Ltd. ("BTMU"), Mitsubishi UFJ Trust and Banking Corporation ("MUTB"), Mitsubishi UFJ Securities Holdings Co., Ltd. ("MUSHD"), Mitsubishi UFJ NICOS Co., Ltd. ("Mitsubishi UFJ NICOS"), and other subsidiaries. MUSHD is an intermediate holding company for Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. ("MUMSS"). Through its subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including commercial banking, investment banking, trust banking and asset management services, securities businesses, and credit card businesses, and it provides related services to individual and corporate customers. See Note 29 for more information by business segment.
Effective July 1, 2014, BTMU's operations in the Americas region were integrated with UnionBanCal Corporation ("UNBC"), an indirect wholly-owned subsidiary in the United States, and UNBC was renamed MUFG Americas Holdings Corporation ("MUAH"). Also effective July 1, 2014, the principal subsidiary of UNBC, Union Bank, N.A. ("Union Bank") was renamed MUFG Union Bank, N.A. ("MUB"). Throughout these consolidated financial statements, the new corporate names, MUAH and MUB are used in place of UNBC and Union Bank, respectively.
Basis of Financial Statements
The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which MUFG is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America ("U.S. GAAP"). In certain respects, the accompanying consolidated financial statements reflect adjustments which are not included in the consolidated financial statements issued by MUFG and certain of its subsidiaries in accordance wiui applicable statutory requirements and accounting practices in their respective countries of incorporation. The major adjustments include those relating to (1) investment securities, (2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation, (6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension liabilities, (9) goodwill and other intangible assets and (10) lease transactions.
Fiscal years of certain subsidiaries, which end on December 31, and MUFG's fiscal year, which ends on March 31, have been treated as coterminous. For the fiscal years ended March 31, 2013, 2014 and 2015, the effect of recording intervening events for the three-month periods ended March 31 on MUFG's proportionate equity in net income of subsidiaries with fiscal years ended on December 31, would have resulted in an increase of ¥1.48 billion, an increase of ¥6.79 billion, and an increase of ¥6.15 billion to net income attributable to Mitsubishi UFJ Financial Group, respectively. No intervening events occurred during each of the three-month periods ended March 31, 2013, 2014 and 2015 which, if recorded, would have had material effects on consolidated total assets, loans, total liabilities, deposits or total equity as of March 31, 2013, 2014 and 2015.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS—(Continued)
estimates that are particularly susceptible to management judgment primarily relate to the allowance for credit-losses, the valuation allowances of deferred tax assets, recognition and measurement of uncertain tax positions, the valuation of financial instruments, the accounting for goodwill and intangible assets, impairment of investment securities, the allowances for repayment of excess interest and accrued severance indemnities and pension liabilities.
Summary of Significant Accounting Policies
Significant accounting policies applied in the accompanying consolidated financial statements are summarized below:
Consolidation—The accompanying consolidated financial statements include the accounts of MUFG, its subsidiaries and certain variable interest entities ("VTE"s) (together, the "MUFG Group"). In situations in which the MUFG Group has a controlling financial interest in other entities, including certain VIEs, such entities are consolidated and noncontrolling interests, if any, are recorded in Total equity. Intercompany items have been eliminated. Investments in affiliated companies (companies over which the MUFG Group has the ability to exercise significant influence) are accounted for by the equity method of accounting and are reported in Other assets. The MUFG Group's equity interest in the earnings of these equity investees and other-than-temporary impairment are reported in Equity in earnings of equity method investees-net. The MUFG Group recognizes an impairment loss on investments in equity method investees that is other-than-temporary. The MUFG Group determines whether loss on investments is other-than-temporary, through consideration of various factors, such as the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the investees, and the intent and ability to retain its investment in the investees for a period of time sufficient to allow for any anticipated recovery in tlie fair value. The MUFG Group also evaluates additional factors, such as the condition and trend of the economic cycle, and trends in the general market.
The MUFG Group consolidates VIEs if it has the power to direct the activities of a VIE which most significantly impact the VIE's economic performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity, except certain VIEs that are deemed as investment companies. For VIEs that are considered investment companies, the MUFG Group determines whether it is the primary beneficiary by evaluation of whether it absorbs a majority of expected losses, receives a majority of expected residual returns or both.
Assets that the MUFG Group holds in an agency, fiduciary or trust capacity are not assets of the MUFG Group and, accordingly, are not included in the accompanying consolidated balance sheets.
Cash Flows—For the purposes of reporting cash flows, cash and cash equivalents are defined as those amounts included in the accompanying consolidated balance sheets under the caption Cash and due from banks with original maturities of 90 days or less. Cash flows from qualified hedging activities are classified in the same category as the items being hedged.
Translation of Foreign Currency Financial Statements and Foreign Currency Transactions—Financial statements of overseas entities are translated into Japanese yen using the respective fiscal year-end exchange rates for assets and liabilities. Income and expense items are translated at average rates of exchange for the respective fiscal years.
Foreign currency translation gains and losses related to the financial statements of overseas entities of the MUFG Group, net of related income tax effects, arc credited or charged directly to Foreign currency translation
F-14
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
adjustments, a component of Accumulated other comprehensive income ("Accumulated 00"). Tax effects of gains and losses on foreign currency translation of the financial statements of overseas entities are not recognized unless it is apparent that the temporary differences will reverse in the foreseeable future.
Foreign currency-denominated assets and liabilities are translated into the functional currencies of the individual entities included in consolidation at the respective fiscal year-end foreign exchange rates. Foreign currency-denominated income and expenses arc translated using average rates of exchange for the respective fiscal years. Gains and losses from such translation are included in Foreign exchange losses—net, as appropriate.
Repurchase Agreements, Securities Lending and Other Secured Financing Transactions—Securities sold with agreements to repurchase ("repurchase agreements"), securities purchased with agreements to resell ("resale agreements") and securities lending and borrowing transactions are accounted for as secured financing or lending transactions, if the transferor has not surrendered control over the securities. If they meet the relevant conditions for the surrender of control, they arc accounted for as sales of securities with related off-balance sheet forward repurchase commitments or purchases of securities with related off-balance sheet forward resale commitments. For the fiscal years ended March 31, 2013, 2014 and 2015, there were no such transactions accounted for as sales or purchases.
Collateral—For secured lending transactions, including resale agreements, securities borrowing transactions, commercial lending and derivative transactions, the MUFG Group, as a secured party, generally has the right to require the counterparties to provide collateral, including letters of credit, cash, securities and other financial assets. For most secured lending transactions, the MUFG Group maintains strict levels of collateralization governed by a daily mark-to-market analysis. Financial assets pledged as collateral are generally negotiable financial instruments and are permitted to be sold or repledged by secured parties. If tlie MUFG Group sells these financial assets received as collateral, it recognizes the proceeds from the sale and its obligation to return the collateral. For secured borrowing transactions, principally repurchase agreements and securities lending transactions and derivative transactions, where the secured party has the right to sell or repledge financial assets pledged as collateral, the MUFG Group separately discloses those financial assets pledged as collateral in the accompanying consolidated balance sheets.
Trading Account Securities—Securities and money market instruments held in anticipation of short-term market movements and for resale to customers are included in Trading account assets, and short trading positions of these instruments are included in Trading account liabilities. Trading positions are carried at fair value in the accompanying consolidated balance sheets and recorded on a trade date basis. Changes in the fair value of trading positions are recognized currently in Trading account profits—net, as appropriate. The MUFG Group has elected the fair value option for certain foreign securities. See Note 31 for a further discussion of fair value option.
Investment Securities—Debt securities for which the MUFG Group has both the ability and positive intent to hold to maturity are classified as Held-to-maturity securities and are carried at amortized cost. Debt securities that the MUFG Group may not hold to maturity and marketable equity securities, other than those classified as Trading account securities, are classified as Available-for-sale securities, and are carried at their fair values, with unrealized gains and losses reported on a net-of-tax basis within Accumulated OCI, net of taxes, which is a component of equity. Other investment securities include nonmarketable equity securities carried at their acquisition cost and investment securities held by subsidiaries that are investment companies or brokers and dealers. Such securities held by those subsidiaries are subject to the specialized industry accounting principles for investment companies and brokers and dealers applicable for those subsidiaries. Securities of those subsidiaries are carried at their fair values.
F-15
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For marketable equity securities, an other-than-temporary impairment is recognized in earnings when a decline in fair value below the cost is deemed olher than temporary. For debt securities, an other-than-temporary impairment is recognized in earnings for a security if the MUFG Group has intent to sell such a debt security or if it is more likely than not the MUFG Group will be required to sell such a debt security before recovery of its amortized cost basis. If not, the credit component of an other-than-temporary impairment is recognized in earnings, but the noncredit component is recognized in Accumulated OCI. In determining other-than-temporary declines in fair value to be recognized as an impairment loss on investment securities, the MUFG Group generally considers factors such as the ability and positive intent to hold the investments for a period of time sufficient to allow for anticipated recovery in fair value, the financial condition ofthe issuer, the extent of decline in fair value, and the length of time that the decline in fair value below cost has existed. Interest and dividends on investment securities are reported in Interest income. Dividends are recognized when the shareholder right to receive the dividend is established. Gains and losses on disposition of investment securities are computed using the average cost method and are recognized on the trade date.
Derivative Financial Instruments—The MUFG Group engages in derivative activities involving swaps, forwards, futures, options, and other types of derivative contracts. Derivatives are used in trading activities to ... _. -generate trading revenues and fee income for its own account and to respond to the customers'financial needs: -Derivatives are also used to manage counterparty credit risk and market risk exposures to fluctuations in interest and foreign exchange rates, equity and commodity prices.
Derivatives entered into for trading purposes are carried at fair value and are reported as Trading account assets or Trading account liabilities, as appropriate. The fair values of derivative contracts executed with the same counterparty under legally enforceable master netting agreements are presented on a gross basis. Changes in the fair value of such contracts are recognized currently in Foreign exchange losses—net with respect to foreign exchange contracts and in Trading account profits (losses)—net with respect to interest rate contracts and other types of contracts.
Embedded features that are not clearly and closely related to the host contracts and meet the definition of derivatives are separated from the host contracts and measured at fair value unless the contracts embedding the derivatives are measured at fair value in their entirety.
Derivatives are also used to manage exposures to fluctuations in interest and'foreign exchange rates arising from mismatches of asset and liability positions. Certain of those derivatives are designated as hedging instruments and qualify for hedge accounting. The MUFG Group designates a derivative as a hedging instrument at the inception ofeach such hedge relationship, and it documents, for such individual hedging relationships, the risk management objective and strategy, including the item being hedged, the specific risk being hedged and the method used to assess the hedge effectiveness. In order for a hedging relationship to qualify for hedge accounting, the changes in the fair value ofthe derivative instruments must be highly effective in achieving offsetting changes in fair values or variable cash flows of the hedged items attributable to the risk being hedged. Any ineffectiveness, which arises during the hedging relationship, is recognized in Non-interest income or expense in the period in which it arises. All qualifying hedging derivatives are valued at fair value and included in Other assets or Other liabilities, as appropriate. For'cash flow hedges, the unrealized changes in fair value to the extent effective are recognized in Accumulated OCI: Amounts realized on cash flow hedges related to variable rate loans are recognized in Net interest income in the period when the cash flow from the hedged item is realized. The fair value of cash flow hedges related to forecasted transactions, if any, is recognized in Non-interest income or expense in the period when the forecasted transaction occurs. Any difference that arises from gains or losses on hedging derivatives offsetting corresponding gains or losses on the hedged items, and gains and losses on derivatives attributable to the risks excluded from the assessment of hedge effectiveness are recognized in Non-interest income or expense.
F-16
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Loans—Loans originated by the MUFG Group ("originated loans") are carried at the principal amount outstanding, adjusted for unearned income and deferred net nonrefundable loan fees and costs. Originated loans held and intended for dispositions or sales in secondary markets are transferred to the held-for-sale classification and carried at the lower of cost or estimated fair value generally on an individual loan basis. Loan origination fees, net of certain direct originalion costs, are defened and recognized over the contractual life of the loan as an adjustment to yield using a method that approximates the interest method. Interest income on loans that are not impaired is accrued and credited to interest income as it is earned. Unearned income and discounts or premiums on purchased loans are deferred and recognized over the remaining contractual terms of the loans using a method that approximates the interest method when such purchased loans arc outside the scope of the guidance on loans and debt securities acquired with deteriorated credit quality as described below.
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial, Residential, Card. MUAH, and Bank of Ayudhya Public Company Limited ("Krungsri") based on the grouping used by the MUFG Group to determine the allowance for credit losses. The MUFG Group further classifies the Commercial segment into classes based on initial measurement attributes, risk characteristics, and its method of monitoring and assessing credit risk.
Originated loans are considered impaired when, based on current information and events, it is probable that the MUFG Group will be unable to collect all the scheduled payments of principal or interest when due according to the contractual terms ofthe loan agreement. Past due status is determined based on the contractual terms of the loan and the actual number of days since the last payment date, and is considered in determining impairment. Originated loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is generally evaluated on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral if tlie loan is collateral dependent.
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and timely collection of either principal or interest, specifically when principal or interest is contractually past due one month or more with respect to loans within all classes of the Commercial segment, three months or more with respect to loans within the Card, MUAH, and Krungsri segments, and six months or more with respect to loans within the Residential segment. A nonaccrual loan may be restored to an accrual status when interest and principal payments become current and management expects that the borrower will make future contractual payments as scheduled. When a loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income. Cash receipts on nonaccrual loans, for which the ultimate collectibility of principal is uncertain, are applied as principal reductions; otherwise, such collections are credited to income.
The MUFG Group modifies certain loans in conjunction with its loss-mitigation activities. Through these modifications, concessions are granted to a borrower who is experiencing financial difficulty, generally in order to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize payments received from the borrower. The concessions granted vary by portfolio segment, by program, and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals, and partial principal forgiveness. Loan modifications that represent concessions made to borrowers who are experiencing financial difficulties arc identified as troubled debt restructurings ("TDRs").
Generally, accruing loans that are modified in a TDR remain as accruing loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been restructured as
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
a TDR, ihe borrower is not delinquent under the restructured terms, and demonstrates that its financial condition has improved, the MUFG Group may reclassify the loan to accrual status. This determination is generally performed at least once a year through a detailed internal credit rating review process. Once a nonaccrual loan is deemed to be a TDR, the MUFG Group will continue to designate the loan as a TDR even if the loan is reclassified to accrual status.
A loan lhat has been modified into a TDR is considered to be impaired until it matures, is repaid, or is otherwise liquidated, regardless of whether the borrower performs under the modified terms. Because loans modified in TDRs are considered to be impaired, these loans are measured for impairment using the MUFG Group's established asset-specific allowance methodology, which considers the expected default rates for the modified loans. See "Allowance for Credit Losses" for a discussion for each portfolio segment.
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality, impaired loans acquired for which it is probable that the MUFG Group will be unable to collect all contractual receivables are initially recorded at the present value of amounts expected to be received. For these impaired loans, the related valuation allowances are not carried over or created initially. Accrctable yield is limited to the excess oQhe investor's; estimate of undiscounted cash.flows jpver the investor's^^initijd inye_stm_entjn.the loan. Subsequent increases in cash flows expected to-be collected are recognized prospectively through adjustment of the loan's yield over its remaining life after reduction of any remaining allowance for credit losses for the loan established after its acquisition, if any, while any decrease in such cash flows below those initially expected at acquisition plus additional cash flows expected to be collected arising from changes in estimate after acquisition is recognized as an impairment.
Loan Securitization—The MUFG Group securitizes and services commercial, industrial, and residential loans in the normal course of business. The MUFG Group accounts for a transfer of loans in a securitization transaction as a sale if it meets relevant conditions for the surrender of control. Otherwise, the transfer is accounted for as a collateralized borrowing transaction. When a securitization is accounted for as a sale, the proceeds from a sale of financial assets consist of the cash and any other assets obtained, including beneficial interests and separately recognized servicing assets, in the transfer less any liabilities incurred, including separately recognized servicing liabilities. All proceeds and reductions of proceeds from a sale shall be initially measured at fair value.
Allowance for Credit Losses—The MUFG Group maintains an allowance for credit losses to absorb probable losses inherent in the loan portfolio. Actual credit losses (amounts deemed uncollectible, in whole or in part), net of recoveries, are generally determined based oh detailed loan reviews and a credit assessment by management at each balance sheet date, and are deducted from the allowance for credit losses as net charge-offs. The MUFG Group generally applies its charge-off policy to all loans in its portfolio regardless of the type of borrower. Management believes that the provision for credit losses is adequate and the allowance is at the appropriate amount to absorb probable losses inherent in the loan portfolio. During the fiscal year ended March 31, 2015, the MUFG Group did not make any significant changes to the methodologies or policies used to determine its allowance for credit losses.
Key elements relating to the policies and discipline used in determining the allowance for credit losses are credit classification and the related borrower categorization process. Tlie categorization is based' oh'conditions that may affect the ability of borrowers to service their debt, taking into consideration current financial information, historical payment experience, credit documentation, public information, analyses of relevant industry segments or existing economic conditions. In determining the appropriate level of the allowance, the MUFG Group evaluates the probable loss by collateral value, historical loss experience, probability of insolvency and category of loan based on its type and characteristics. The MUFG Group updates these conditions and probable loss on a regular basis and upon the occurrence of unexpected change in the economic environment.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The methodologies used to estimate the allowance and the charge-off policy for each portfolio segment arc as follows:
Commercial segment
In the Commercial segment, the methodology for assessing the appropriateness of the allowance consists of several key elements, which include the allocated allowance for loans individually evaluated for impairment, the formula allowance, the allocated allowance for country risk exposure, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment represents the impairment allowance determined in accordance with the guidance on accounting by creditors for the impairment of a loan. The factors considered by management in determining impairment are the internal credit rating assigned to each borrower which represents the borrower's creditworthiness determined based on payment status, the number of delinquencies, and the probability of collecting principal and interest payments when due. The impairment of a loan is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent.
The formula allowance is applied to loans that are categorized as Normal or Close Watch, excluding loans identified as a TDR, based on the internal credit rating and historical loss factors which are based on the loss experience. See Note 4 for the information on loans to borrowers categorized based on the internal borrower rating. Estimated losses inherent in the loans at the balance sheet date are calculated by multiplying the default ratio by the nonrecoverable ratio (determined as a complement of the recovery ratio). The default ratio is determined by each internal credit rating, taking into account the historical number of defaults of borrowers within each internal credit rating divided by the total number of borrowers. The recovery ratio is mainly determined by the historical experience of collections against loans in default. The default ratio, the recovery ratio and other indicators are continually reviewed to determine the appropriate level of tlie allowance. Because the evaluation of inherent loss for these loans involves a high degree of uncertainty, subjectivity and judgment, the estimation of the formula allowance is back-tested by comparing the allowance with the actual results subsequent to the balance sheet date. The results of such back-testing are evaluated by management to determine whether the manner and level of the formula allowance needs to be changed in subsequent years.
The allocated allowance for country risk exposure is a country-specific allowance for Normal and Close Watch loans, excluding loans identified as a TDR. The allowance is established to supplement the formula allowance for these loans, based on an estimate of probable losses relating to the exposure to countries that are identified by management to have a high degree of transfer risk. The measurement is based on a function of default probability and the recovery ratio with reference to external credit ratings. For the allowance for cross-border loans individually evaluated for impairment, the MUFG Group incorporates transfer risk in its determination of the related allowance.
The allocated allowance for large groups of smaller-balance homogeneous loans is established through a process that begins with estimates of probable losses inherent in the portfolio. These estimates are based upon various analyses, including historical delinquency and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined by discounting the estimated future cash flows using the effective interest rate ofthe loans prior to modification.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In relation to loans categorized as Legally/Virtually Bankrupt, the carrying amount of loans less estimated value ofthe collateral and guaranteed amount is generally considered uncollectible, and is charged off.
Residential segment
In the Residential segment, the loans are comprised of smaller-balance homogeneous loans that are pooled by their internal credit ratings based on the number of delinquencies. The loans in this segment are generally secured by collateral. Collateral values are based on internal valuation sources, and the allowance is determined for unsecured amounts. The allowance for the nondeliquent group of loans is determined based on historical loss experience. For delinquent groups of loans, the MUFG Group determines the allowance based on the probability of insolvency by the number of actual delinquencies and historical loss experience.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair value of the collateral. For TDRs accounted for as accruing loans,' the allowance for credit losses is determined by discounting the estimated future cash flows using tlie effective interest rate of the loans prior to modification.
In relation to loans that arc in past due status over a certain period of time and deemed uncollectible, the carrying amount of loans less estimated value ofthe collateral and guaranteed amount is generally considered uncollectible and charged off.
Card segment
In the Card, segment, the loans are smaller-balance homogeneous loans that are pooled by their internal credit rating based on the number of delinquencies. The allowance for loans in this segment is generally determined based on the probability of insolvency by the number of actual delinquencies and historical loss experience. For calculating the allocated allowance for loans specifically identified for evaluation, impaired loans are aggregated for the purpose of measuring impairment using historical loss factors.
Loans that have been modified into a TDR are treated as impaired loans, and the allowance for credit losses is determined using the discounted cash flow method whereby tlie estimated future cash flows are discounted using the effective interest rate of the loans prior to modification.
In relation to loans that are in past due status over a certain period of time and deemed uncollectible, the amount of loans is generally fully charged off.
MUAH segment
In the MUAH segment, the methodology for assessing the appropriateness of the allowance consists of several key elements, which include the allocated allowance for loans individually evaluated for impairment, the formula allowance, the allocated allowance for large groups of smaller-balance homogeneous loans, and the unallocated allowance.
The allocated allowance for loans individually evaluated for impairment is established for loans when management determines that the MUFG Group will be unable to collect all amounts due according to the contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of the recorded investment in the loan, the present value of expected future cash flows discounted at the loan's effective rate, the loan's observable market price, or the fair value of the collateral, if the loan is collateral dependent.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss factors are based on the historical loss experience and may be adjusted for significant factors that, in management's judgment, affect the collectibility of the portfolio as of the balance sheet date.
The allocated allowance for large groups of smaller-balance homogeneous loans is established for consumer loans as well as for smaller balance commercial loans. These loans are managed on a pool basis, and loss factors are based on expected net charge-off ranges.
The unallocated allowance represents an estimate of additional losses inherent in the loan portfolio and is composed of attribution factors, which are based upon management's evaluation of various conditions that are not directly measured in the determination ofthe allocated allowance. The conditions used for consideration of the unallocated allowance at each balance sheet date include factors, such as existing general economic and business-conditions affecting the key lending areas and products of the MUFG Group, credit quality trends and risk identification, collateral values, loan volumes, underwriting standards and concentrations, specific industry conditions, recent loss experience and the duration of the current business cycle. The MUFG Group reviews these conditions and has an internal discussion with senior credit officers on a quarterly basis.
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined by using the discounted cash flow method whereby the estimated future cash flows are discounted using the effective interest rate ofthe loans prior to modification.
Commercial loans are generally considered uncollectible based on an evaluation of the financial condition of a borrower as well as the value of any collateral and, when considered to be uncollectible, loans arc charged off in whole or in part. Consumer loans are generally considered uncollectible based on past due status and the value of any collateral and, when considered to be uncollectible, loans are charged off in whole or in part.
Krungsri segment
In the Krungsri segment, the methodology for assessing the appropriateness of tlie allowance consists of several key elements, which include the allocated allowance for loans individually evaluated for impairment, the formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans.
The allocated allowance for loans individually evaluated for impairment is established for loans when management determines that the MUFG Group will be unable to collect all amounts due according to the contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of the recorded investment in the loan, the present value of expected future cash flows discounted at the loan's effective rate, the loan's observable market price, or the fair value of the collateral, if the loan is collateral dependent.
The formula allowance is calculated by applying historical loss factors to outstanding loans. Historical loss factors are based on the historical loss experience and may be adjusted for significant factors that, in management's judgment, affect the collectibility of the portfolio as of the balance sheet date.
The allocated allowance for large groups of smaller-balance homogeneous loans is established for smaller balance loans such as housing loans, credit card loans, and personal loans. These loans are managed on a pool basis, and loss factors are based on expected net charge-off ranges.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined by using the discounted cash flow method whereby the estimated future cash flows are discounted using the effective interest rale of the loans prior to modification.
Loans to customers are charged off when they are determined to be uncollectible considering the financial condition of a borrower.
Allowance for Off-Balance Sheet Credit Instruments—The MUFG Group maintains an allowance for credit losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is recorded as a liability in Other liabilities. The MUFG Group adopts the same methodology used in determining the allowance for credit losses on loans. Potential credit losses related to derivatives are considered in the fair value of the derivatives.
Net changes in the allowance for off-balance sheet credit instruments are accounted for as Other non-
" " interest expenses". '"' " " "~ " ~ " ~ " ~"
Premises and Equipment—Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is charged to operations over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. MUFG, BTMU and MUTB apply the declining-balance method in depreciating their premises and equipment, while other subsidiaries mainly apply the straight-line method, at rates principally based on the following estimated useful lives:
Years
Buildings
Equipment and furniture Leasehold improvements
15 to 50 2 to 20 10 to 39
Maintenance, repairs and minor improvements are charged to operations as incurred. Major improvements are capitalized. Net gains or losses on dispositions of premises and equipment are included in Other non-interest income or expense, as appropriate.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison ofthe carrying amount to future undiscounted net cash flows expected to be generated by the asset. If an asset is considered to be impaired, tlie impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value. For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level with independent and identifiable cash flows. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less estimated cost to sell.
Asset retirement obligations related to restoration of certain leased properties upon lease termination are recorded in Other liabilities with a corresponding increase ill leasehold improvements. The amounts represent the present value of expected future cash flows associated with returning such leased properties to their original condition. The difference between the gross and present value of expected future cash flows is accreted over the life of the related leases as a non-interest expense.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Goodwill—Tlie MUFG Group recognizes goodwill, as of the acquisition date, measured as the excess of the purchase price over the fair value ofthe net assets acquired. Goodwill related to investments in equity method investees is included in Other assets as a part ofthe carrying amount ofinvestments in equity method investees.
Goodwill arising from a business combination is not amortized but is tested at least annually for impairment. Goodwill is recorded at a designated reporting unit level for the puqiose of assessing impairment. A reporting unit is an operating segment, or an identified business unit one level below an operating segment. An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.
Intangible assets—Intangible assets consist of software, core deposit intangibles, customer relationships, trade names and other intangible assets. These are amortized over their estimated useful lives unless they have indefinite useful lives. Amortization of intangible assets is computed in a manner that best reflects the economic benefits ofthe intangible assets as follows:
Useful lives
(years) Amortization method
Software 2 to 10 Straight-line
Core deposit intangibles 10 to 19 Declining-balance
Customer relationships 7 to 27 Straight-line, Declining-balance
Trade names 9 to 40 Straight-line
Intangible assets having indefinite useful lives are not amortized but are subject to annual impairment tests. An impairment exists if the carrying value of an indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible asset.
The MUFG Group capitalizes certain costs associated with the acquisition or development of intemal-use software. Costs subject to capitalization are salaries and employee benefits for employees who arc directly associated with and who devote time to the internal-use computer software project, to the extent of time spent directly on the project. Once the software is ready for its intended use, the MUFG Group begins to amortize capitalized costs on a straight-line basis.
Accrued Severance and Pension Liabilities—The MUFG Group has defined benefit pension plans and other postretirement benefit plans, including severance indemnities plans. The liabilities related to these plans are computed and recognized based on actuarial computations. Net actuarial gains and losses that arise from differences between actual experience and assumptions are generally amortized over the average remaining service period of participating employees if it exceeds the corridor, which is defined as the greater of 10% of plan assets or the projected benefit obligation. Under the guidance related to employers' accounting for defined benefit pension and other postretirement plans, the MUFG Group recognizes a net liability or asset to report the funded status of its defined benefit pension and other postretirement plans in the accompanying consolidated balance sheets and mainly recognizes changes in the funded status of defined benefit pension and other postretirement plans in the year in which the changes occur in Accumulated OCI. The costs of the plans, based on actuarial computations of current and future employee benefits, are charged to Salaries and employee benefits. The MUFG Group measures plan assets and benefit obligations as ofthe date ofthe consolidated balance sheets.
Long-Term Debt—Premiums, discounts and issuance costs of long-term debt are amortized based on the method that approximates the interest method over the term of the long-term debt.
Obligations under Guarantees—The MUFG Group provides customers with a variety of guarantees and similar arrangements, including standby letters of credit, financial and performance guarantees, credit protection,
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
and liquidity facilities. The MUFG Group recognizes guarantee fee income over the guarantee period based on the contractual terms ofthe guarantee contracts. It is the MUFG Group's business practice to receive a guarantee fee at the inception of the guarantee, which approximates market value of the guarantee and is initially recorded as a liability, which is then recognized as guarantee fee income over the guarantee period.
Allowance for Repayment of Excess Interest—The MUFG Group maintains an allowance for repayment of excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers' profile, recent trend of borrowers' claims for reimbursement, and management's future forecasts. The allowance is recorded as a liability in Other liabilities.
Fees and Commissions—Revenue recognition of major components of fees and commissions is as follows:
Fees and commissions on deposits, fees and commissions on remittances and transfers, fees and
commissions on foreign trading business, fees and commissions on security-related services, fees and
commissions on administration and management service for investment funds, insurance commissions,
fees and commissions on real estate business and fees and commissions from other services are
generally recognized as revenue when the related services are performed or recognized over the period
that the service is provided. — ~ - - — "
Fees from trade-related financing services are recognized over the period of the financing.
Tmst fees are recognized on an accrual basis, generally based on the volume of trust assets under management and/or the operating performance for the accounting period ofeach trust account. With respect to the trust accounts with guarantee of trust principal, trust fees are determined based on the profits earned by individual trust accounts during the trust accounting period, less deductions, including provision for reserve, impairment for individual investments and dividends paid to beneficiary certificate holders. The trust fees for these trust accounts are accrued based on the amounts expected to be earned during the accounting period of each trust account.
Annual fees and royalty and other service charges related to credit card business are recorded on a straight-line basis as services are provided.
Interchange income from the credit card business is recognized as billed.
Guarantee fees are generally recognized over the contractual periods of the respective guarantees. Amounts initially recorded as a liability corresponding to the obligations at fair value are generally recognized as revenue over the terms ofthe guarantees as the MUFG Group is deemed to be released from the risk under guarantees.
Income Taxes—The MUFG Group accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the accompanying consolidated financial statements. Under this method, deferred tax assets and deferred tax liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and deferred tax liabilities is recognized in income in the period that includes the enactment date.
The MUFG Group records net deferred tax assets to the extent these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the MUFG Group were to determine that it would be able to realize deferred tax assets in the future in excess of their net recorded amount, the MUFG Group would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Uncertain tax positions are recorded on the basis of a two-step process whereby (1) it is determined whether it is more likely,than not that the tax position will be sustained on the basis of its technical merits, and (2) for those tax positions that meet tlie more-likcly-than-not recognition threshold, the MUFG Group recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The MUFG Group recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within Other liabilities.
Free Distributions of Common Shares—As permitted by the Company Law of Japan (the "Company Law"), Japanese companies, upon approval by the Board of Directors, may make a free distribution of shares, in the form of a "stock split" as defined, to-shareholders. In accordance with generally accepted accounting practice in Japan, such distribution does not give rise to any change in capital stock or capital surplus accounts. Common shares distributed are recorded as shares issued on the distribution date. See Note 17 for further information.
Earnings per Common Share—Basic earnings per share ("EPS") excludes dilutive effects of potential common shares and is computed by dividing earnings applicable to common stock shareholders by the weighted average number of common shares outstanding for the period, while diluted EPS gives effect to all dilutive potential common shares that were outstanding during the period. See Note 22 for the computation of basic and diluted EPS.
Treasury Stock—The MUFG Group presents its treasury stock, including shares of MUFG owned by its subsidiaries and affiliated companies, as a reduction of equity on the accompanying consolidated balance sheets at cost and accounts for treasury stock transactions under an average cost method. Gains (losses) on sales of treasury stock are charged to capital surplus and unappropriated retained earnings.
Comprehensive Income—Comprehensive income includes net income before attribution to noncontrolling interests and other comprehensive income ("OCI"). All changes in unrealized gains and losses on investment securities, unrealized gains and losses on derivatives qualifying for cash flow hedges, defined benefit plans and foreign currency translation adjustments constitute OCI and are presented, with related income tax effects, in the accompanying consolidated statements of comprehensive income.
Stock-Based Compensation—MUFG and certain of its subsidiaries have stock-based compensation plans. Stock-based compensation expenses are recognized based on the grant date fair value of stock-based compensation over the period during which an employee is required to provide service in accordance with the terms of the plans. See Note 32 for further discussion of stock-based compensation plans.
Reclassifications
Certain reclassifications and format changes have been made to the consolidated financial statements for the fiscal year ended March 31, 2013 and 2014 to conform to the presentation for the fiscal year ended March 31, 2015. These reclassifications and format changes include the combined presentation of "Preferred stock" and "Common stock" into "Capital stock." These reclassifications and format changes did not result in a change to the previously reported financial positions and results of operations.
Accounting Changes
Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date—In February 2013, the Financial Accounting Standards Board ("FASB") issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The MUFG Group adopted this guidance on April 1, 2014, and there was no material impact on its financial position and results of operations.
Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity—In March 2013, the FASB issued new guidance which requires the release of an entity's cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The MUFG Group adopted this guidance on April 1, 2014, and there was no material impact on its financial position and results of operations.
Amendments to the Scope, Measurement, and Disclosure Requirements for Investment Companies—In June 2013, the FASB issued guidance that changed the approach for determining whether an entity is an investment company tinder U.S. GAAP, and set forth certain measurement and disclosure requirements. This guidance-changes the approach-to the investment company- assessment clarifies the characteristics of an investment company, and provides comprehensive guidance for assessing whether an entity is an investment company. In addition, this guidance requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. Also, this guidance requires additional disclosures about an entity's status as an investment company and financial support provided or contractually required to be provided by an investment company to its investees. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption of this guidance is prohibited. The MUFG Group adopted this guidance on April 1, 2014, and there was no material impact on its financial position and results of operations.
Recently Issued Accounting Pronouncements
Accounting for Investments in Qualified Affordable Housing Projects—In January 2014, the FASB issued guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The guidance permits reporting'entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of tlie investment in proportion to tlie tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an equity method investment or a cost-method investment. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014 and should be applied retrospectively to all periods presented. The MUFG Group does not expect that the adoption of the guidance will have a material impact on its financial position and results of operations.
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure—In January 2014, the FASB issued guidance that clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosures of both the amount of
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
foreclosed residential real estate property held by the creditor and the recorded investment in-consumcr mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements ofthe applicable jurisdiction. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption of this guidance is permitted. The MUFG Group does not expect that the adoption ofthe guidance will have a material impact on its financial position and results of operations.
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity—In April 2014, the FASB issued new guidance that changes the requirements for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component of an entity or group of components of an entity meets certain criteria to be classified as held for sale or is disposed of. This guidance requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position and additional disclosures about discontinued operations. Also, this guidance requires an entity to provide disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. This guidance is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years and all businesses that, on acquisition, arc classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The MUFG Group does not expect that the adoption of the guidance will have a material impact on its financial position and results of operations. In cases there will be discontinued operations, the MUFG Group will provide related disclosures as required in this guidance.
Revenue from Contracts with Customers—-In May 2014, the FASB issued new guidance which supersedes the current revenue recognition requirements, including most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfers of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments, and assets recognized from the costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The MUFG Group is currently evaluating what effect this guidance will have on its financial position and results of operations. In July, 2015, the FASB voted to approve a one-year deferral of the effective date ofthe new guidance on revenue from contracts with customers. Early adoption is permitted, but not before the original effective date.
Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures—In June 2014, the FASB issued new guidance which changes the accounting for both repurchase-to-maturity transactions and repurchase financing arrangements. The guidance also requires an entity to disclose information about certain transactions • accounted for as a sale in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets through an agreement with the same counterparty, and information about repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings. This guidance is effective for interim and annual periods beginning after December 15, 2014, except for the disclosure requirement about repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings, that is effective for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. Tlie MUFG Group is currently evaluating what effect this guidance will have on its financial position and results of operations.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity—In August 2014, the FASB issued new guidance that clarifies the measurement ofthe financial assets and financial liabilities of a consolidated collateralized financing entity. A reporting entity that consolidates a collateralized financing entity within the scope of this guidance may elect to measure the financial assets and the financial liabilities of that collateralized financing entity using either the measurement alternative included in this guidance or existing guidance on fair value measurement. When a reporting entity elects the measurement alternative included in this guidance for a collateralized financing entity, the reporting entity should measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption of this guidance is permitted as of the beginning of an annual period. The MUFG Group does not expect that the adoption of the guidance will have a material impact on its financial position and results of operations.
Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure—:In August 2014, the FASB issued new guidance which requires that a mortgage loan be derecognized and that a separate other — reccivable-be-rccognized upon foreclosure if thc-following conditions are met:-(1) The loan has a-government - - -guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The MUFG Group does not expect that the adoption of the guidance will have a material impact on its financial position and results of operations.
Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity—-In November 2014, the FASB issued new guidance which clarifies that an entity should consider all relevant terms and features including the embedded derivative feature being evaluated for bifurcation when evaluating the nature of a host contract in a hybrid financial instrument that is issued in the form of a share, and ho single term or feature would necessarily determine the economic characteristics and risks of the host contract. The guidance also clarifies that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (tfiat is, the relative strcngui of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The MUFG Group is currently evaluating what effect this guidance will have on its financial position and results of operations.
Amendments to the Consolidation Analysis—In February 2015, the FASB issued new guidance which amends the consolidation analysis under the current consolidation guidance. The amendments change the VIE analysis for limited partnerships and similar legal entities, the criteria for evaluating whether fees paid to a decision maker or a service provider are a variable interest, the effect of fee arrangements and related parties on the primary'beneficiary'detennination. and the consolidation evaluation for ceffaih investment funds. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early application is permitted. The MUFG Group is currently evaluating what effect this guidance will have on its financial position and results of operations.
Simplifying the Presentation of Debt Issuance Costs—In April 2015, the FASB issued new guidance which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of this guidance is permitted for financial statements that have not been previously issued. The MUFG Group docs not expect that the adoption ofthe guidance will have a material impact on its financial position and results of operations.
Customer's Accounting for Fees Paid in a Cloud Computing Arrangement—In April 2015, the FASB issued new guidance which simplifies the accounting for cloud computing arrangements by requiring that if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance does not change customer's accounting for service contracts. This guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption of this guidance is permitted. The MUFG Group is currently evaluating what effect this guidance will have on its financial position and results of operations.
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)—In May 2015, the FASB issued new guidance which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Instead, a reporting entity is required to provide the amount measured using that practical expedient to permit reconciliation of the fair value of investments included in the fair value hierarchy to the line items presented in the balance sheet. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted. This new guidance will only affect the MUFG Group's disclosures about the fair value hierarchy, and will not affect the MUFG Group's financial position and results of operations.
2. BUSINESS DEVELOPMENTS MUAH
On June 24, 2013, MUB acquired PB Capital Corporation's institutional commercial real estate ("CRE") lending division for ¥358,040 million in cash. The purpose of this transaction was to expand MUAH's CRE presence in the U.S., and provide both geographic and asset class diversification. The assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date, and measurement period adjustments were applied to the acquisition date fair values, which resulted in recording goodwill of ¥23,115 million as of March 31, 2014. During the fiscal year ended March 31, 2015, no measurement period adjustments were applied to the acquisition date fair values, resulting in no change in goodwill.
Reorganization of Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
On March 20, 2014, MUMSS acquired 75% ownership of Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd., of which 51% and 24% of ownership was acquired from MUSHD and BTMU, respectively, resulting in BTMU holding the remaining 25% ownership. 40% of the difference between the cash paid by MUMSS and the cost basis of assets and liabilities was ¥13,839 million, which was allocated as a reduction in Noncontrolling interests wilh a corresponding increase in Capital surplus. The purpose of the reorganization is to leverage MUFG's broad customer base, utilize Morgan Stanley's global and high quality insight, and further its
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
collaborations with other group companies by strengthening its coordination with MUMSS. In connection with the reorganization, Mitsubishi UFJ Merrill Lynch PB Securities Co., Ltd. entered into a new service agreement with Morgan Stanley, and changed its name to Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd.
MUTB's Acquisition of Butlerfield Fulcrum Group
On September 20, 2013, MUTB acquired 100% ownership of FGL Lux Holdings, S.a r.l., a holding company of Butterfield Fulcrum Group, a global alternative fund administrator, headquartered in Bermuda for ¥30,191 million in cash. MUTB has focused on strengthening its global trust banking business based on its medium-term management plan, and conducted several strategic investments in overseas asset managers. The puipose of this transaction, through the investment in a fund administration company, was to expand MUTB's overseas asset administration capabilities. The assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date, and measurement period adjustments were applied to the acquisition date fair values, which resulted in recording goodwill of ¥14,443 million and intangible assets of ¥21,646 million as of March 31, 2014. During the fiscal year ended March 31, 2015, no measurement period adjustments were applied to the acquisition date fair values. Upon conclusion of the acquisition, Butterfield Fulcrum Group was renamed Mitsubishi UFJ Fund Services Holdings Limited.
BTMU's Acquisition of Vietnam Joint Stock Commercial Bank for Industry and Trade
In May 2013, BTMU acquired approximately 20% of the ordinary shares of Vietnam Joint Stock Commercial Bank for Industry and Trade ("VietinBank") for ¥75,136 million. VietinBank is one ofthe major Vietnamese state-owned commercial banks in terms of assets. Considering both BTMU's ownership of the common stock and representation on the board of directors, the MUFG Group has determined that BTMU has the ability to exercise significant influence over the operating and financial policies of VietinBank and applied the equity method of accounting for its investment.
BTMU's Acquisition of Bank of Ayudhya Public Company Limited
On December 18, 2013, BTMU completed a Voluntary Tender Offer ("VTO") for Krungsri shares at Thai baht 39 per share. Upon tlie completion of the VTO, BTMU purchased 72.01% of Krungsri's total outstanding shares for ¥545,840 million in cash. As a result ofthe acquisition of a majority stake in Krungsri by BTMU, Krungsri became a subsidiary of BTMU. The MUFG Group recorded goodwill of ¥217,386 million and intangible assets of ¥214,607 million at the acquisition date. The MUFG Group also recorded'noncontrolling interests of ¥202,223 million at fair value determined by the quoted market price as of the acquisition date.
Krungsri is a commercial bank with deep market knowledge in Thailand offering diversified financial services to a wide ranging client base. Hence, the investment in Krungsri is part of BTMU's strategy to establish a full-fledged commercial banking platform in Asia. The purpose of the acquisition is to strengthen the business foundation in Asia, providing comprehensive financial services to various local and multinational coiporate customers.
On January 5, 2015, BTMU integrated the former BTMU Bangkok Branch with Krungsri through the contribution in kind of the former BTMU Bangkok Branch business to Krungsri, which was treated as a common control transaction. In exchange for the contribution in kind, Krungsri issued 1,281,618,026 common shares at Thai baht 40.49 per share to BTMU. After the integration, BTMU holds 5,655,332,146 common shares in Krungsri, and the percentage of Krungsri's shares held by BTMU is 76.88%.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The change in noncontrolling ownership interests of Krungsri including the contribution in kind ofthe former BTMU Bangkok Branch was ¥15,269 million, resulting in a corresponding increase in Noncontrolling interests and a decrease in Capital surplus.
3. INVESTMENT SECURITIES
The table below presents the amortized cost, gross unrealized gains and losses and fair value of Available-for-sale securities and Held-to-maturity securities at March 31, 2014 and 2015:
Amortized cost
Gross unrealized gains
Gross unrealized losses
Available-for-sale securities: Debt securities:
Japanese national government and Japanese
government agency bonds ¥41,388,592
Japanese prefectural and municipal bonds 195,176
Foreign governments and official institutions
bonds 1,272,181
Corporate bonds 1,523,026
Residential mortgage-backed securities 1,011,644
Commercial mortgage-backed securities 208,690
Asset-backed securities 1,060,844
Other debt securities") 184,495
Marketable equity securities 2,456,992
Total ¥49,301,640
Held-to-maturity securities: Debt securities:
Japanese national government and Japanese
government agency bonds ¥ 214,968
Foreign governments and official institutions
bonds 22,091
Corporate bonds 5,548
Residential mortgage-backed securities 526,431
Commercial mortgage-backed securities 159,532
Asset-backed securities 1,778,412
Total ¥ 2,706,982
¥ 201,539 7,979
13,460 38,920 665 826 2,747 3,650 2,384,949
¥ 1,122 24
14,220 817
31,714 9,370 5,547 3,199 4,710
¥41,589,009 203,131
1,271,421
1,561,129 980,595 200,146
1,058,044 184,946
4,837,231
¥2,654,735 ¥70,723 ¥51,885,652
1,099 7
883<2> 343 35,908
870 ¥ — ¥ 215,838
7,304(3) 1,282(3) 2,379
23,190 5,555 520,010 158,593 1,811,941
¥ 39,110 ¥10,965 ¥ 2,735,127
Notes:
Other debt securities in lhc table above include¥182,613 million of private placement debt conduit bonds.
The MUFG Group reclassified residential mortgage-backed securities, which totaled ¥12,356 million at fair value, from Available-for-sale securities lo Held-lo-matunly securities during the fiscal year ended March 31, 2013. As a result ofthe reclassification, the unrealized gains before taxes at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥355 million at March 31, 2014 and nol included in the table above.
MUAH reclassified residential mortgage-backed secunties and commercial mortgage-backed securities, which were carried al fair value of ¥273,195 million and ¥138,340 million, respectively, from Available-for-sale securities to Held-to-maturity securities during the fiscal year ended March 31, 2014. As a result of the reclassification, the unrealized losses before taxes ai the dale of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥7,702 million and ¥9,663 million, respectively, at
March 31, 2014 and not included in the table above.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Amortized
At March 31, 2015: cost
Available-for-sale securities: Debt securities:
Japanese national government and Japanese
government agency bonds ¥35,079,893
Japanese prcfectural and municipal bonds 186,872
Foreign governments and official institutions
bonds 1,661,286
Coiporate bonds 1,226,314
Residential mortgage-backed securities 942,256
Commercial mortgage-backed securities ...... 207,534
Asset-backed securities 1,255,920
Other debt securities'1 > 179,915
Marketable equity securities 2,568,291
Total ¥43,308,281
Held-to-maturity securities: Debt securities:
Japanese national government and Japanese
government agency bonds ¥ 1,126,212
Foreign governments and official institutions
bonds 77,487
Corporate bonds 300
Residential mortgage-backed securities 716,296
Commercial mortgage-backed securities 209,517
Asset-backed securities 2,000,639
Total ¥ 4,130,451
Fair value
184 67
¥ 327,023 7,610
23,590 30,438 640 1,848 559 5,537 3,823,020
(in millions)
¥ 1,
2,372 1,128
11,168 1,800
10,439 3,149 6,735
¥35,405,632 194,415
1,682,504 1,255,624 931,728 207,582 1,246,040 182,303
6,384,576
¥4,220,265 ¥38,142 ¥47,490,404
16,091 ¥ 1,535 ¥ 1,140,768
1,556
9,206<2> 6,438
649« 778(3)
79,043 300 724,853 215,177 2,023,998
25,746 2,387
¥ 59,037 ¥ 5,349 ¥ 4,184,139
Notes-
Other debt securities in the table above include ¥182,303 million of private placement debt conduit bonds.
The MUFG Group reclassified residential mortgage-backed securities from Available-for-sale securities to Held-to-maturity securities during the fiscal year ended March 31, 2013. As a result of the reclassification of residential mortgage-backed securities, the unrealized gains before taxes at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥320 million at March 31. 2015 and not included in the table above.
MUAH reclassified residential mortgage-backed securities and commercial mortgage-backed securities from Available-for-sale securities lo Hcld-to-maiurily securities during the fiscal year ended March 31, 2014. As a result of the reclassification of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥7,545 million and ¥9,909 million, respectively, at
March 31, 2015 and are not included in the table above.
Other Securities
Investment securities other than Available-for-sale securities or Held-to-maturity securities (i.e., nonmarketable equity securities presented in Other investment securities) were primarily earned at cost of ¥711,416 million and ¥564,582 million at March 31, 2014 and 2015, respectively, because their fair values were not readily determinable.
The remaining balances were investment securities held by certain subsidiaries subject to specialized industry accounting principles for investment companies and broker-dealers and carried at fair value of ¥26,201 million and ¥22,537 million at March 31, 2014 and 2015, respectively. See Note 31 for the valuation techniques and inputs used to estimate the fair values.
F-32
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
With respect to cost-method investments of ¥159,556 million and ¥152,350 million at March 31, 2014 and 2015, respectively, the MUFG Group has estimated a fair value using commonly accepted valuation techniques to determine whether the investment is impaired in each reporting period. See Note 31 for the details of these commonly accepted valuation techniques. If the fair value ofthe investment is less than the cost ofthe investment, the MUFG Group proceeds to evaluate whether the impairment is other-than-temporary.
With respect to cost-method investments of ¥551,860 million and ¥412,232 million at March 31, 2014 and 2015, respectively, the MUFG Group performed a test to determine whether any impairment indicator existed for each investment in each reporting period. If an impairment indicator exists, the MUFG Group estimates the fair value of the cost-method investment. If the fair value of the investment is less than the cost of the investment, the MUFG Group performs an evaluation of whether the impairment is other-than-temporary. The primary method the MUFG Group uses to identify impairment indicators is a comparison of the MUFG Group's share in an investee's net assets to the cost ofthe MUFG Group's investment in the investee. The MUFG Group also considers whether significant adverse changes in the regulatory, economic or technological environment have occurred with respect to the investee. The MUFG Group periodically monitors the status ofeach investee including the credit rating, which is generally updated once a year based on the annual financial statements of the issuer. In addition, if an event that could impact the credit rating of an investee occurs, the MUFG Group reassesses the appropriateness of the credit rating assigned to the issuer in order to maintain an updated credit rating. The MUFG Group did not estimate the fair value of these cost-method investments, which had aggregated costs of ¥548,679 million and ¥409,892 million at March 31, 2014 and 2015, respectively, since it was not practical and the MUFG Group identified no impairment indicators.
Based on the procedures described above, the MUFG Group recognized other-than-temporary impairment losses on the cost-method investments of ¥2,364 million, ¥3,628 million and ¥ 1,821 million for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. Each impairment loss was recognized based on the specific circumstances of each individual company. No impairment loss was individually material.
Contractual Maturities
The amortized cost and fair values of Held-to-maturity debt securities and the fair values of Available-for-sale debt securities at March 31, 2015 by contractual maturity are shown below. Expected maturities may be shorter than contractual maturities because issuers of debt securities may have the right to call or prepay obligations with or without penalties. Debt securities not due at a single maturity date and securities embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below based on their contractual maturities.
Available-for-sale debt securities
Fair value
¥14,173,612 16,399,270 5,759,048 4,773,898
Fair value (in millions)
£ 25,241 140,262 2,507,463 1,511,173
Held-to-maturity debt securities
Amortized cost
Due in one year or less ¥ 25,187
Due from one year to five years 137,780
Due from five years to ten years 2,468,083
Due after ten years 1,499,401
Total ¥4,130,451 ¥4,184,139 ¥41,105,828
F-33
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Realized Gains and Losses and Transfers of Investment Securities
For the fiscal years ended March 31, 2013, 2014 and 2015, gross realized gains on sales of Available-for-sale securities were¥282,609 million, ¥261,384 million and¥l95,272 million, respectively, and gross realized losses on sales of Available-for-sale securities were ¥31,906 million, ¥54,921 million and¥ 53,628 million, respectively.
For the fiscal year ended March 31, 2013, the MUFG Group determined that it no longer had the intent to hold certain securities, which had a carrying value of ¥47,566 million, to maturity in response to a significant deterioration in the issuers' creditworthiness. As a result, the MUFG Group transferred these securities from Held-to-maturity securities to Available-for-sale securities. These securities were sold and the MUFG Group recorded a loss of ¥1,518 million for the fiscal year ended March 31, 2013.
On September 30, 2012, MUAH transferred certain collateralized loan obligations ("CLOs") with a carrying amount of ¥88,799 million from Held-to-maturity securities to Available-for-sale securities, due to a significant increase in the risk weighting of debt securities used for regulatory capital purposes under rules proposed by the U.S. federal banking agencies in June 2012. The Notices of Proposed Rulemaking ("NPRs") would revise regulatory capital rules for U.S. Banking organizations and align them with the Basel III capital framework issued by the Basel Committee on Banking Supervision. Although the NPRs had not been formally adopted, MUAH was required to include in its 2013 annual capital plan certain capital projections pursuant to the NPRs that adversely affected the risk weighting of the transferred CLOs. These regulatory capital changes were not foreseeable when MUAH initially transferred the CLOs from Available-for-sale securities to Held-to-maturity securities during the fiscal year ended March 31, 2010. Accordingly, MUAH no longer intended to hold these securities to maturity. The carrying-amount of the CLOs immediately prior to the transfer on September 30, 2012, totaled ¥88,799 million, which included ¥24,026 million of unrealized losses in unamortized OCI. Following the transfer, the securities were recorded at fair value, with an unrealized loss of ¥4,949 million recorded in OCI.
The MUFG Group transferred Available-for-sale securities of ¥12,356 million to Held-to-maturity securities during the fiscal year ended March 31, 2013. The MUFG Group has asserted the positive intent and ability to hold these securities to maturity.
For the fiscal year ended March 31, 2014, MUAH transferred certain residential mortgage-backed securities and commercial mortgage-backed securities of ¥411,535 million from Available-for-sale securities to Held-to-maturity securities to reduce the impact of price volatility on Accumulated OCI and in consideration of changes to regulatory capital requirements under U.S. Basel III rules.
Other-than-temporary Impairments of Investment Securities
For the fiscal years ended March 31, 2013, 2014 and 2015, losses resulting from impairment of investment securities to reflect the decline in value considered to be other-than-temporary were ¥124,172 million, ¥6,534 million and¥ 5,919 million, respectively, which were included in Investment securities gains—net in the accompanying consolidated statements of income. The losses of ¥ 124,172 million for the fiscal year ended March 31, 2013 included I osses of ¥8,329 million from Available-for-sale debt securities mainly classified as corporate bonds and ¥113,479 million from marketable equity securities. The losses of ¥6,534 million for the fiscal year ended March 31, 2014 included losses of ¥2,605 million from Available-for-sale debt securities mainly classified as corporate bonds, and ¥3,628 million from nonmarketable equity securities. The losses of ¥5,919 million for the fiscal year ended March 31, 2015 included losses of ¥ 3,513 million from Available-for-sale debt securities mainly classified as corporate bonds, and ¥ 1,821 million from nonmarketable equity securities.
F-34
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gross Unrealized Losses and Fair Value
The following tables show the gross unrealized losses and fair values of Available-for-sale securities and Held-to-maturity securities at March 31, 2014 and 2015 by length of time that individual securities in each category have been in a continuous loss position:
Less than 12 months 12 months or more Total
Gross Gross Gross
unrealized unrealized unrealized Number of
At March 31,2014: Fair value losses Fair value losses Fair value losses securities
(in millions, except number of securities)
Available-for-sale securities: Debt securities:
Japanese national government and Japanese government
agency bonds ¥10,469,832 ¥1,122 ¥ — ¥ — ¥10,469,832 ¥1,122 49
Japanese prefectural and
municipal bonds 12,555 24 — — 12,555 24 6
Foreign governments and official institutions
bonds 527,706 9,084 110,015 5,136 637,721 14,220 150
Corporate bonds 136,296 709 29,242 108 165,538 817 815
Residential mortgage-backed
securities 904,239 31,094 28,406 620 932,645 31,714 431
Commercial mortgage-
backed securities 135,014 8,427 8,235 943 143,249 9,370 155
Asset-backed securities 213,683 5,518 1,078 29 214,761 5,547 103
Other debt securities 46,835 1,203 68,630 1,996 115,465 3.199 51
Marketable equity securities 175,884 4,692 1^ 18 . 175,885 4,710 42
Total ¥12,622,044 ¥61,873 ¥245,607 ¥8,850 ¥12,867,651 ¥70,723 1,802
Held-to-maturity securities: Debt securities:
Residential mortgage-backed
securities ¥ 408,244 ¥7,187 ¥ 5,681 ¥ 117 ¥ 413,925 ¥ 7,304 198
Commercial mortgage-
backed securities 107,048 1,033 51,545 249 158,593 1,282 28
Asset-backed securities 500,695 2,379 —- — 500,695 2,379 22
Total ¥1,015,987 ¥10,599 ¥ 57,226 ¥ 366 ¥ 1,073,213 ¥10,965 248
F-3 5
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Less (liun 12 months 12 months or more Total
Gross Gross Gross
unrealized unrealized unrealized Number or
At March 31,2015: Fair value losses Fair value losses Fair value losses securities
(in millions, except number of securities)
Available-for-sale securities: Debt securities:
Japanese national government and Japanese government
agency bonds ¥6,858,282 ¥1,284 ¥ — ¥ — ¥6,858,282 ¥1,284 35
Japanese prefectural and
municipal bonds 12,943 67 — — 12,943 67 8
Foreign governments and
official institutions bonds . . 308,929 1,161 139,795 1,211 448,724 2,372 74
Corporate bonds 181,030 882 65,506 246 246,536 1,128 490
Residential mortgage-backed
securities 74,782 213 760,354 10,955 835,136 11,168 329
Commercial mortgage-backed
securities 17,290 50 104,223 1,750 121,513 1,800 128
Asset-backed securities . 109,186 - 873 1847172- -9,566 293,358 10,439 - -1-25-
Other debt securities .9,086 318 112,972 2,831 122,058 3,149 50
Marketable equity securities 104,102 6,714 616 21 104,718 6,735 65
Total ¥7,675,630 ¥11,562 ¥1,367,638 ¥26,580 ¥9,043,268 ¥38,142 1,304
Held-to-maturity securities: Debt securities:
Japanese national government and Japanese government
agency bonds ¥ 198,580 ¥ 1,535 ¥ — ¥ — ¥ 198,580 ¥ 1,535 1
Residential mortgage-backed
securities 48,068 189 282,193 460 330,261 649 151
Commercial mortgage-backed
securities 16,155 35 187,059 743 203,214 778 31
Asset-backed securities 141,347 598 439,391 1,789 580,738 2,387 22
Total ¥ 404,150 ¥ 2,357 ¥ 908,643 ¥ 2,992 ¥1,312,793 ¥ 5,349 205
Evaluating Investment Securities for Other-than-temporary Impairments
The following describes the nature of the MUFG Group's investments and the conclusions reached in determining whether the unrealized losses were temporary or other-than-temporary.
Japanese national government and Japanese government agency bonds, and Foreign governments and official institutions bonds
As of March 31, 2015, unrealized losses associated with these securities were deemed to be attributable to changes in market interest rates rather than a deterioration in the creditworthiness ofthe underlying obligor. The MUFG Group expects to recover the entire amortized cost basis of these securities. Accordingly, such changes are considered to be temporary and no impairment loss has been recorded.
Residential and commercial mortgage-backed securities
As of March 31, 2015, unrealized losses associated with these securities were deemed to be attributable to changes in market interest rates rather than a deterioration in the creditworthiness ofthe underlying obligor.
F-36
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire amortized cost basis of these securities. Accordingly, such changes are considered to be temporary and no impairment loss has been recorded.
Asset-backed securities
As of March 31, 2015, unrealized losses on these securities are primarily driven by certain CLOs, highly illiquid securities for which fair values are difficult to determine. Unrealized losses arise from widening credit spreads, deterioration of the credit quality of the underlying collateral, uncertainty regarding the valuation of such securities and the market's view of the performance of the fund managers. When the fair value of a security is lower than its amortized cost or when any security is subject to a deterioration in credit rating, the MUFG Group undertakes a cash flow analysis of the underlying collateral to estimate the other-than-temporary impairment. Based on the analysis performed, no other-than-temporary impairment was identified as of March 31, 2015 and no impairment loss has been recorded.
Corporate bonds
As of March 31, 2015, the unrealized losses associated with corporate bonds are primarily related to private placement bonds issued by Japanese non-public companies. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining terms ofthe bonds as estimated using the MUFG Group's cash flow projections. The key assumptions include probability of default based on credit ratings of the bond issuers and a loss given default.
The following table presents a roll-forward of the credit loss component recognized in earnings. The balance at the beginning of each fiscal year represents the credit loss component for which an other-than-temporary impairment occurred on debt securities in prior periods. The additions represent the first time a debt security was credit impaired or when subsequent credit impairment has occurred. The credit loss component is reduced when the corporate bonds mature or are sold. Additionally, the credit loss component is reduced if the MUFG Group receives or expects to receive cash flows in excess of what the MUFG Group previously expected to receive over the remaining life of the credit impaired debt securities.
2013 2014 2015
(in millions)
Balance at beginning of fiscal year ¥ 30,066 ¥ 24,525 ¥12,556
Additions:
Initial credit impairments 5,347 1,466 2,728
Subsequent credit impairments 2,982 1,139 785
Reductions:
Securities sold or matured (13,870) (14,574) (7,255)
Balance at end of fiscal year ¥ 24,525 ¥ 12,556 ¥8,814
The cumulative decline in fair value of the credit impaired debt securities, which were mainly corporate bonds, held at March 31, 2014 and 2015 was ¥4,933 million and ¥4,602 million, respectively. Of which, the credit loss component recognized in earnings was ¥12,556 million and ¥8,814 million, and the remaining amount related to all other factors recognized in Accumulated OCI before taxes was ¥7,625 million and ¥4,212 million at March 31, 2014 and 2015, respectively.
F-37
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other debt securities
As of March 31, 2015, other debt securities primarily consist of private placement debt conduit bonds, which are not rated by external credit rating agencies. The unrealized losses on these bonds resulted from a higher return on capital expected by the secondary market compared with the return on capital required at the time of origination when the bonds were purchased. The MUFG Group estimated loss projections for each security by assessing the underlying collateral of each security. The MUFG Group estimates the portion of loss attributable to credit based on the expected cash flows of the underlying collateral using estimates of current key assumptions such as probability of default and loss severity. Cash flow analysis of the underlying collateral provides an estimate of other-than-temporary impairment, which is performed when the fair value of a security is lower than its amortized cost and potential impairment is identified. Based on the analysis, no other-than-temporary impairment loss was recorded in the accompanying consolidated statements of income.
Marketable equity securities
The MUFG Group determines whether unrealized losses on marketable equity securities are temporary
based on its ability.and.positiye.intent to hold the investments for a .period of time sufficient.to allow.for.any _.
anticipated recovery and the results of its review conducted to identify and evaluate investments that have indications of possible impairment. Impairment is evaluated considering various factors, and their relative significance varies from case to case. The MUFG Group's review includes, but is not limited to, consideration of the following factors:
The length of time that the fair value of the investment has been below cost—The MUFG Group generally deems a continued decline of fair value below cost for six months or more to be other-than-temporary.
The extent to which the fair value of investments has been below cost as of the end ofthe reporting period—The MUFG Group's investment portfolio is exposed to volatile equity prices affected by many factors including investors' perspectives as to future economic prospects and the issuers' performance. The MUFG Group generally deems the decline in fair value below cost of 20% or more as an indicator of an other-than-temporary decline in fair value.
The financial condition and near-term prospects of the issuer—The MUFG Group considers the financial condition and near-term prospects of the issuer primarily based on the credit standing of the issuers as determined by its credit rating system.
At March 31, 2015, unrealized losses on marketable equity securities which have been in a continuous loss position are considered temporary based on the evaluation as described above, and the fact that die MUFG Group primarily makes these investments for strategic purposes to maintain long-term relationships with its customers.
F-38
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans at March 31, 2014 and 2015 by domicile arid industry of the borrower are summarized below. Classification of loans by industry is based on the industry segment loan classifications as defined by the Bank of Japan.
2014 2015
(in millions)
Domestic:
Manufacturing ¥ 11,540,753 ¥ 11,703,428
Construction 980,877 977,892
Real estate 10,989,562 10,911,240
Services 2,693,561 2,684,355
Wholesale and retail 8,475,143 8,345,481
Banks and other financial instiiutions'" 3,985,106 4,329,964
Communication and information services 1,443,466 1,527,811
Other industries 13,496,763 12,674,004
Consumer 16,921,352 16,720,590
Total domestic 70,526,583 69,874,765
Foreign:
Governments and official institutions 811,475 1,052,051
Banks and other financial institutions^ 9,792,255 11,973,021
Commercial and industrial 24,533,816 29,593,255
Other 4,872,372 6,065,782
Total foreign 40,009,918 48,684,109
Unearned income, unamortized premiums—net and deferred loan fees—net .. (260,090) (293,672)
TotaF) ¥110,276,411 ¥118,265,202
Notes:
Loans to so-called non-bank finance companies are generally included in the "Banks and other financial institutions" category. Non-bank finance companies are primarily engaged in consumer lending, factoring and credit card businesses.
The above table includes loans held for sale of ¥46,635 million and ¥88,927 million at March 31, 2014 and 2015, respectively, which are carried al the lower of cost or estimated fair value.
Nonaccrual Loans
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and timely collection of either principal or interest, when principal or interest is contractually past due one month or more with respect to loans within all classes ofthe Commercial segment, three months or more with respect to loans within the Card, MUAH, and Krungsri segments, and six months or more with respect to loans within the Residential segment. See Note 1 for further information.
F-39
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The nonaccrual status of loans by class at March 31, 2014 and 2015 is shown below:
2014 2015
(ill millions)
Commercial
Domestic ¥ 737,896 ¥514,026
Manufacturing 167,859 118,956
Construction 30,093 20,108
Real estate 141,974 76,969
Services 72,059 54,189
Wholesale and retail 211,770 157,964
Banks and other financial institutions 7,234 5,715
Communication and information services 24,956 23,204
Other industries 35,959 18,562
Consumer 45,992 38,359
Foreign-excluding MUAH and Krungsri 82,617 96,899
Residential 111,252 95,645
Card 72,483 66,979
MUAH 46,574 45,173
Krungsri..... 25,973 68,103
Total'7) .7. .77. . 7.7.... ¥1,076,795 ¥886,825
Note:
(1) The above table does not include loans held for sale of nil and ¥624 million at March 31, 2014 and 2015, respectively, and loans acquired with deteriorated credit quality of ¥38,651 million and ¥26,248 million at March 31, 2014 and 2015, respectively.
Impaired Loans
The MUFG Group's impaired loans primarily include nonaccrual loans and TDRs. The following table shows information about impaired loans by class at March 31, 2014 and 2015:
Recorded Loan Balance
Requiring an Allowance for Credit Losses
Not Requiring an Allowance for Credit Losses") Total'*'
Unpaid Principal Balance
Related Allowance for Credit Losses
Commercial
Domestic ¥1,006,333
Manufacturing 368,866
Construction 30,537
Real estate 141,225
Services 101,969
Wholesale and retail 248,932
Banks and other financial
institutions 8,295
Communication and information
services 25.443
Other industries 36,821
Consumer 44,245
Foreign-excluding MUAH and
Krungsri 193,360
Loans acquired with deteriorated
credit quality 18,787
Residential 203,600
Card 102,852
MUAH 39.552
Krungsri'3' —
Total"' ¥1,564,484
¥257,215 55,003 13,298 63,625 27,342 58,633
94
11,509 9.634 18.077
2.360
186 11,563
762 24,457
¥296,543
(in millions)
¥1,263,548 423,869 43,835 204,850 129,311 307,565
8,389
36,952 46,455 62,322
- 195,720
18,973 215,163 103,614
64,009
¥1,861,027 ¥1,982,989
¥544,224 181,389 18,731 52,814 54,469 169,523
6,954
16,473 26,903 16,968
96,218
6,111 70,393 29,244
4,131
¥750,321
F-40
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Recorded Loan Balance
Requiring an Allowance for Credit Losses
Not Requiring an Allowance for Credit Losses"1
Unpaid Principal Balance
Related Allowance for Credit Losses
Commercial
Domestic ¥ 890,900
Manufacturing 420,860
Construction 20,997
Real estate 90,735
Services 74,459
Wholesale and retail 205,414
Banks and other financial
institutions 5,935
Communication and information
services 21,374
Other industries 20,482
Consumer 30,644
Foreign-excluding MUAH and
Krungsri 192,263
Loans acquired with deteriorated credit
quality 12,057
Residential 160,382
Card 90,101
MUAH 39,510
Krungsri 24,122
Total'") ¥1,409,335
¥1,174,925 478,453 33,900 150,029 105,429 277,119
¥424,537 178,867 11,515 32,314 38,107 120,945
¥234,171 46,876 12,018 49.697 24,766 61,048
472
11,406 7,621 20,267
(in millions)
¥1,125,071 467.736 33,015 140,432 99,225 266,462
6,407
6,773 5,052
32,780 34,094 13,886
28,103 29,962 12,626
173
192,436 192,436
50,911 59,166 11,225
91,579
9,429 604 21,216 11,878
12,057 23,798 3,302
169,811 208,969 49,985
90,705 102,142 25,726
60,726 70,457 4,146
36,000 43,185 8,012
¥277,471 ¥1,686,806 ¥1,815,912 ,¥607,287
Notes:
These loans do not require an allowance for credit losses because the fair values of the impaired loans equal or exceed the recorded investments in the loans.
Included in impaired loans at March 31, 2014 and 2015 are accrual TDRs as follows: ¥642,408 million and ¥708,414 million— Commercial; ¥99,359 million and ¥71,454 million—Residential;¥51,834 million and ¥44,661 million—Card;¥38,666 million and ¥34,106 million—MUAH; and nil and ¥8,455 million—Krungsri, respectively.
For the Krungsri segment, the acquired loans were recorded al iheir fair values as of the acquisition date, and there were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no impaired loans were stated at March 31, 2014 in the above table.
In addition to impaired loans presented in the above table, there were loans held for sale that were impaired of nil and ¥624 million at March 31, 2014 and 2015, respectively.
F-41
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows information regarding the average recorded loan balance and recognized interest income on impaired loans for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal vcars ended March 31,
2014
Average Recognized Average Recognized Average Recognized
Recorded Loan Interest Recorded Loan Interest Recorded Loan Interest
Balance Income Balance Income Balance Income
(in millions)
Commercial
Domestic ¥1,414,309 ¥24,051 ¥1,359,635 ¥23,283 ¥1,181,941
Manufacturing 418,402 7,017 430,415 6,954 440,258
Construction 54,687 1,174 47,818 982 38,888
Real estate 198,102 2,747 228,045 3,472 170,549
Services 170,025 3,214 140,627 2,806 115,384
Wholesale and retail 376,001 6,215 339,619 5,857 283,213
Banks and other financial
institutions 11,506 162 10,719 170 7,230
Communication and ._. _ _
information services 51,897 1,061 44,417 945 35,249
Other industries 58,081 1,271 49,612 985 35,208
Consumer 75,608 1,190 68,363 1,112 55,962
Foreign-excluding MUAH and
Krungsri 172,471 2,487 187,656 2,848 183,671
Loans acquired with deteriorated
credit'quality 32,964 2,028 30,101 1,659 14,758
Residential 320,183 6,006 264,277 5,153 187,642
Card 135,581 6,504 113,993 5,218 97,159
MUAH 46,957 1,720 60,943 3,468 59,711
Krungsri — — — — 18,764
Total ¥2,122,465 ¥42,796 ¥2,016,605 ¥41,629 ¥1,743,646
¥23,216 8,333 863 3,163 2,704 5,358
132
837 745 1,081
, 3,161
697 4,241 4,154 2,040
609
¥38,118
Interest income on nonaccrual loans for all classes was recognized on a cash basis when ultimate collectibility of principal was certain. Otherwise, cash receipts were applied as principal reductions. Interest income on accruing impaired loans, including TDRs, was recognized on an accrual basis to the extent that tlie collectibility of interest income was reasonably certain based on management's assessment.
F-42
MITSUBISHI UF.J FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows a roll-forward of accrual TDRs and olher impaired loans (including nonaccrual TDRs) for the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal vcars ended March 31,
2013 2014 2015
(in millions)
Accrual TDRs:
Balance at beginning of fiscal year ¥ 892,823 ¥ 945,623 ¥ 832,267
Additions (new accrual TDR status)"' 302,267 231,063 364,445
Transfers to other impaired loans (including nonaccnial TDRs) . . . (56,064) (48,295) (28,001)
Loans sold (49) (7,698) (223)
Principal payments and other (193,354) (288,426) (301,398)
Balance at end of fiscal year") ¥ 945,623 ¥ 832,267 ¥ 867,090
Other impaired loans (including nonaccrual TDRs):
Balance at beginning of fiscal year ¥1,139,045 ¥1,255,143 ¥1,028,760
Additions (new other impaired loans (including nonaccrual TDRs)
status)")") 500,063 313,086 281,456
Charge-off (46,835) (123,037) (79,684)
Transfers to accrual TDRs (28,474) (63,828) (48,176)
Loans sold (18,618) (39,879) (14,448)
Principal payments and other (290,038) (312,725) (348,192)
Balance at end of fiscal year") ¥1,255,143 ¥1,028,760 ¥ 819,716
Notes:
In the above table, lease receivables of ¥4,437 million and ¥924 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans, respectively, for the fiscal year ended March 31, 2015, and the related ending balances of such TDRs amounting to ¥4,333 million and ¥1,629 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2015.
Included in additions of other impaired loans for the fiscal years ended March 31, 2013, 2014 and 2015 are nonaccnial TDRs as follows: ¥16,903 million, ¥11,054 million and ¥12,756 million—Card; ¥17,513 million, ¥16,228 million and ¥13.278 million—MUAH; and nil, nil and ¥4,009 million—Krungsri, respectively.
F-43
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Troubled Debt Restructurings
The following tables summarize the MUFG Group's TDRs by class during the fiscal years ended March 31, 2013, 2014 and 2015:
Fiscal years ended March 31,
2015
Troubled Debt Restructurings
I're- Post-
Modification Modification
Outstanding Outstanding
Recorded Recorded
Investment Investment
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Pre- Post-
Modification Modification
Outstanding Outstanding
Recorded Recorded
Investment Investment
(in millions)
Commercial'1)'3'
Domestic ¥222,125 ¥222,125 ¥175,011 ¥151,505 ¥324,055 ¥312,215
Manufacturing 131,105 131,105 93,968 70,462 239,793 227,953
Construction 3,921 3,921 3,435 3,435 5,053 5,053
Real estate 17,409 17,409 21,977 21,977 13,555 " 13,555
Services 12,564 12,564 13,149 13,149 16,024 16,024
Wholesale and retail 42,061 42,061 32,458 32,458 43,643 43,643
Banks and other financial
institutions 889 889|99|I 12 12
Communication and
information services . . . 8,442 8,442 1,802 1,802 2,434 ' 2,434
Other industries 1,927 1,927 4,414 4,414 2,005 2,005
Consumer 3,807 3,807 3,807 3,807 1,536 1,536
Foreign-excluding MUAH and
Krungsri 10,142 10,142 20,175 20,175 3,090 2,927
Loans acquired with
deteriorated credit quality . 524 524 7,616 7,616 1,594 1,594
Residential")'3) 50,005 50,005 32,777 32,777 26,073 ' 26,073
Card'W) 26,409 26,055 17,141 16,869 19,275 19,015
MUAH'21'3) 30,091 27,832 29,945 29,403 . 18,624 18,258
Krungsri'«<3) — — — — 19,796 19,767
Total ¥339,296 ¥336,683 ¥282,665 ¥258,345 ¥412,507 ¥399,849
F-44
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fiscal years curled March 31,
2013 2014 2015
Troubled Debt Restructurings That Subsequently defaulted
Recorded Investment
(in millions)
Commercial'1"3'
Domestic ¥ 6,741 ¥22,503 ¥ 5,234
Manufacturing 2,729 11,644 1,769
Construction — 86 322
Real estate 1,444 1,174 119
Services 295 1,481 452
Wholesale and retail 1,024 5,834 2,044
Banks and other financial institutions 330 — —
Communication and information services 434 1,639 264
Other industries 415 152 149
Consumer 70 493 115
Foreign-excluding MUAH and Krungsri 419 — —
Loans acquired with deteriorated credit quality 509 — —
Residential'1)'3) 349 474 345
Card'2)'3' .' 4,507 4,015 4,793
MUAH'2"3) 2,155 2,912 2,839
Krungsri'2"3) — — 1,455
Total' ¥14,680 ¥29,904 ¥14,666
Notes:
TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual loans with concessions granted.
TDRs for the Card, MUAH and Krungsri segments include accrual and nonaccrual loans.
For the fiscal years ended March 31, 2013 and 2014, extension ofthe stated'maturity date of loans was the primary concession type in Ihe Commercial and Residential segments, whereas reduction in the staled rale and payment deferrals were the primary concession types in lhc Card and MUAH segments, respectively. For the fiscal year ended March 31, 2015, extension of the stated maturity date of loans was the primary concession type in the Commercial, Residential and Krungsri segments, reduction in the stated rate was the primary concession type in the Card segment and payment deferrals was the primary concession type in the MUAH segment.
F-45
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes outstanding recorded investment balances of TDRs by class at March 31, 2014 and 2015:
2014 20IS
(in millions)
Commercial'1'
Domestic ¥528,133 ¥611,382
Manufacturing 257,049 348,981
Construction 13,751 12,915
Real estate 64,028 63,462
Services 57,480 45,158
Wholesale and retail 95,809 108,504
Banks and other financial institutions 1,156 691
Communication and information services 11,996 9,576
Other industries 10,496 9,545
Consumer 16,368 12,550
Foreign-excluding MUAH and Krungsri 114,275 97,032
Residential'') . ". 99359 71,454
Card'2' 103,614 90,705
MUAH'2' 62,363 56,299
Krungsri'2)'3' — 19,924
Total ¥907,744 ¥946,796
\_ r==—
Notes:
TDRs for the Commercial and Residential segments include accruing loans with concessions granted, and do not include nonaccrual loans with concessions granted.
TDRs for the Card, MUAH and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding recorded investment balances as of March 31, 2014 and 2015 arc nonaccrual TDRs as follows: ¥51,780 million and ¥46,044 million—Card; ¥23,697 million and¥22,193 million—MUAH; and nil and ¥7,136 million—Krungsri, respectively.
For the Krungsri segment, the acquired loans were recorded at their fair values as of the acquisition date, and there were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no TDRs were stated at March 31, 2014 in the above table.
A modification of terms of a loan under a TDR mainly involves: (i) a reduction in the stated interest rate applicable to the loan, (ii) an extension of the stated maturity date of the loan, (iii) a partial forgiveness of the principal of the loan, or (iv) a combination of all of these. Those loans are also considered impaired loans, and hence the allowance for credit losses is separately established for each loan. As a result, the amount of allowance for credit losses increases in many cases upon classification as a TDR loan. The amount of pre-modification outstanding recorded investment and post-modification outstanding recorded investment may differ due to writeoffs made as part of the concession. The impact of write-offs associated with TDRs on the MUFG Group's results of operations for the fiscal years ended March 31, 2013, 2014 and 2015 was not material.
TDRs for the Commercial and Residential segments in the above tables include accruing loans with concessions granted, and do not include nonaccrual loans with concessions granted. Once a loan is classified as a nonaccrual loan, a modification would have little likelihood of resulting in the recovery of the loan in view of the severity ofthe financial difficulty ofthe borrower. Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual loan. The vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates, typically for periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan at the extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is immaterial, and the vast majority of nonaccrual TDRs have subsequently defaulted.
F-4 6
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
TDRs that subsequently defaulted in the Commercial and Residential segments of the above tabic includes those accruing loans that became past due one month or more within the Commercial segment and six months or more within the Residential segment, and those accruing loans reclassified to nonaccnial loans due to financial difficulties even without delinquencies. This ts because classification as a nonaccnial loan is regarded as default under the MUFG Group's credit policy. Also, the MUFG Group defines default as payment default for the purpose of the disclosure.
Regarding the Card, MUAH and Krungsri segments, the TDRs in the above table represent modified • nonaccrual and accruing loans, and the defaulted loans in the above table represent nonaccruing and accruing loans that became past due one month or more within the Card segment, 60 days or more within the MUAH segment, and six months or more within the Kningsri segment.
Historical payment defaults are one of the factors considered when projecting future cash flows in determining the allowance for credit losses for each segment.
The MUFG Group provided commitments to extend credit to customers with TDRs. The amounts of such commitments were ¥44,116 million and ¥24,332 million at March 31, 2014 and 2015, respectively. See Note 24 for further discussion of commitments to extend credit.
Credit Quality Indicator
Credit quality indicators of loans by class at March 31, 2014 and 2015 are shown below:
At March 31, 2014:
Likely to become
Bankrupt or
Close Legally/Virtually
Normal Watch Bankrupt Total")
Commercial
Domestic
Manufacturing
Construction
Real estate
Services
Wholesale and retail
Banks and other financial institutions
Communication and information
services
Other industries
Consumer
Foreign-excluding MUAH and Krungsri
Loans acquired with deteriorated credit
quality
Total
(in millions)
¥50,608,911 ¥3,549,135 ¥737,692 ¥54,895,738
10,032,892 1,329,356 167,859 11,530,107
786,640 163,313 30,093 980,046
9,747,076 716,302 141,774 10,605,152
2,279,379 328,142 72,059 2,679,580
7,582,548 651,659 211,770 8,445,977
3,959,266 ' 18,494 7,234 3,984,994
1,349,217 68,863 24,956 1,443,036
13,274,021 182,727 36,054 13,492,802
1,597,872 90,279 45,893 1,734,044
28,399,163 1,132,038 84,849 29,616,050
32,430 33,100 10,210 75,740
¥79,040,504 ¥4,714,273 ¥832,751 ¥84,587,528
Accrual Nonaccrual Total")
(in millions)
Residential ¥14,864,856 ¥113,449 ¥14,978,305
Card ¥ 535,511 ¥ 73,110 ¥ 608,621
^ F-47
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit Quality Based on Credit Quality Based on
the Number of Delinquencies Internal Credit Ratings
Special
Accrual Nonaccrual Pass , Mention Classified
(in millions)
MUAH ¥ 3,003,826 ¥ 34,989 ¥ 3,946,961 ¥ 98,645 ¥ 95,167 ¥
Substandard or
Doubtful or
Special Doubtful
Normal Mention of Loss
(in millions)
Krungsri ¥ 2,923,087 ¥ 101,184 ¥ 51,590 ¥
Likely to become
Bankrupt or Legally/Virtually
At March 31,2015: Normal Close Watch Bankrupt
(in millions)
Commercial
Domestic ¥51,408,556 ¥ 2,782,394 ¥ 514,023 ¥
Manufacturing r. ... . . . .:10,522,968 1,049,399 118,956
Construction 887,030 69,953 20,108
Real estate 10,101,657 559,144 76,852
Services 2,383,133 235,506 54,189
Wholesale and retail 7,582,985 582,992 157,964
Banks and other financial institutions ... . 4,313,416 10,539 5,715
Communication and information
services 1,449,687 54,515 23,204
Other industries 12,504,635 147,477 18,668
Consumer 1,663,045 72,869 38,367
Foreign-excluding MUAH and Krungsri 34,355,619 990,519 99,546
Loans acquired with deteriorated credit
quality 20,939 28,398 6,694 _
Total ¥85,785,114 ¥ 3,801,311 ¥ 620,263 ¥
Total">'2>
7,179,588
Total")
3,075,861
Total")
54,704,973 11,6917323 977;091 10,737,653 2,672,828 8,323,941 4,329,670
1,527,406 12,670,780
1,774,281 35,445,684
56,031
90,206,688
Residential
Card
Accrual Nonaccrual Total")
(in millions)
¥14,449,091 ¥ 97,471. ¥ 14,546,562
¥ 497,017 ¥ 67,589 ¥ 564,606
Credit Quality Based on Credit Quality Based on
the Number of Delinquencies Internal Credit Ratings
Special
Accrual ' Nonaccrual Pass Mention Classified Total")'2)
(in millions)
MUAH ¥ 3,820,953 ¥ 32,669 ¥ 5,229,700 ¥ 76,670 ¥ 80,889 ¥ 9,240,881
Substandard or
Doubtful or
Special Doubtful
Normal Mention ¦¦ -of Loss ¦ Total")-
(in millions)
Krungsri ¥ 3,653,931 ¥ 118,164 ¥ 85,231 ¥ 3,857,326
Notes:
Total loans in Ihe above table do not include loans held for sale.
Total loans of MUAH do nol include FDIC covered loans and small business loans which arc not individually rated totaling ¥59.963 million and ¥53,884 million as of March 31, 2014 and 2015, respectively. The MUFG Group will be reimbursed for a substantial portion of any future losses on FDIC covered loans under the terms of lhc FDIC loss share agreements.
F-48
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group classifies loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, historical and current financial information, historical and current payment experience, credit documentation, public and non-public information about borrowers and current economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes ofthe Commercial segment is the internal credit rating assigned to each borrower based on the MUFG Group's internal borrower ratings of 1 through 15, with the rating of 1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a boiTower, the MUFG Group evaluates the borrower's expected debt-service capability based on various information, including financial and operating information of the borrower as well as information on the industry in which the borrower operates, and the borrower's business profile, management and compliance system. In evaluating a borrower's debt-service capability, the MUFG Group also conducts an assessment of the level of earnings and an analysis ofthe borrower's net worth. Based on the internal borrower rating, loans within the Commercial segment are categorized as Normal (internal borrower ratings of 1 through 9), Close Watch (internal borrower ratings of 10 through 12), and Likely to become Bankrupt or Legally/Virtually Bankrupt (internal borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectibility issues.
Loans to borrowers categorized as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of serious concern with respect to its business performance and financial condition, including business problems requiring long-term solutions, or the borrower's loans are TDRs or loans contractually past due 90 days or more for special reasons.
Loans to borrowers categorized as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card segment and consumer loans within the MUAH segment. The accrual status of these loans is determined based on the number of delinquent payments. See Note 1 for further details of categorization of Accrual and Nonaccrual.
Commercial loans within the MUAH segment are categorized as either pass or criticized based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment ofthe loan and result in further downgrade. Classified credits are those that are internally risk graded as Substandard or Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions.
Loans within the Krungsri segment are categorized as Normal, Special Mention, Substandard, Doubtful, and Doubtful of Loss primarily based on their delinquency status. Loans categorized as Special Mention generally
F-49
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
represent those that have the overdue principal or interest payments for a cumulative period exceeding one month commencing from the contractual due date. Loans categorized as Substandard, Doubtful or Doubtful of Loss generally represent those that have the overdue principal or interest payments for a cumulative period exceeding three months commencing from the contractual due date.
For the Commercial, Residential and Card segments, credit quality indicators are based on information as of March 31. For the MUAH and Krungsri segment, credit quality indicators are generally based on information as of December 31.
Past Due Analysis
Ages of past due loans by class at March 31, 2014 and 2015 are shown below:
Greater
1-3 months Than Total Total
At March 31, 2014: Past Due 3 months Past Due Current Loans""2' -
(in millions)
Commercial
Domestic ¥ 26,210 ¥ 53,632 ¥ 79,842 ¥ 54,815,896 ¥ 54,895,738
Manufacturing 5,363 7,192 12,555 11,517,552 11,530,107
Construction 718 664 1,382 978,664 ,980,046
Real estate 4,859 9,689 14,548 .10,590,604 10,605,152
Services 4,315 2,781 7,096 2,672,484 2,679,580
Wholesale and retail 4,624 22,829 27,453 8,418,524 8',445,977
Banks and other financial
institutions |99|52 53 3,984,941 3,984,994
Communication and
information services 680 1,37! 2,051 1,440,985 1,443,036
Other industries 667 1,554 2,221 13,490,581 13,492,802
Consumer 4,983 7,500 12,483 1,721,561 1,734,044
Foreign-excluding MUAH
and Krungsri 3,283 7,109 10,392 29,605,658 29,616,050
Residential 85,549 54,462 140,011 14,822,995 14,963,006
Card 21,653 33,381 55,034 540,886 595,920
MUAH 30,036 14,333 44,369 7,078,621 7,122,990
Krungsri 66,871 22,121 88,992 2,936,194 3,025,186
Total... ¥233,602 ¥185,038 ¥418,640 ¥109,800,250 ¥110,218,890
Recorded Investment 90 Days and -Accruing
¥ 6,543 1
2,233 10|1010|
4,296
357 40,500
527 ¥47,927
F-50
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
1-3 months Past Due
Greater
Than 3 months
Total Past Due
Total
Loans'"'2)
Recorded Invcslincnt> 90 Days and
Accruing
(in millions)
Commercial
Domestic ¥ 14,136 ¥ 22,786 ¥ 36,922 ¥ 54,668,051 ¥ 54,704,973
Manufacturing 1,561 2,545 4,106 11,687,217 11,691,323
Construction 192 446 638" 976,453 977,091
Real estate 3,142 5,707 8,849 10,728,804 10,737,653
Services 1,046 1,336 2,382 2,670,446 2,672,828
Wholesale and retail 2,741 4,237 6.97S 8,316,963 8,323,941
Banks and other financial
institutions |99|506 513 4,329,157 4,329,670
Communication and
information services 520 414 934 1,526,472 1,527,406
Other industries 303 277 580 12,670,200 12,670,780
Consumer 4,624 7,318 11,942 1,762,339 1,774,281
Foreign-excluding MUAH
and Krungsri 9,390 2,126 11,516 35,434,168 35,445,684
Residential 82,871 53,680 136,551 14,396,635 14,533,186
Card 18,694 32,097 50,791 501,758 552,549
MUAH 20,976 11,091 32,067 9,199,435 9,231,502
Krungsri 88,144 57,894 146,038 3,674,796 3,820,834
Total ¥234,211 ¥179,674 ¥413,885 ¥117,874,843 ¥118,288,728
¥ 5,574 222
922 57 47
29 4,297
41,801 362
¥47,737
Notes:
Total loans in the above table do not include loans held for sale and loans acquired with deteriorated credit quality.
Total loans of MUAH do not include ¥1,600 million and ¥1,116 million of FDIC covered loans at March 31, 2014 and 2015, respectively, which arc not subject to the guidance on loans and debt securities acquired with deteriorated credit quality.
Allowance for Credit Losses
Changes in the allowance for credit losses by portfolio segment for the fiscal years ended March 31, 2013,
2014 and 2015 are shown below:
Fiscal year ended March 31,2013: Commercial Residential Card MUAH Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year ¥ 984,308 ¥171,837 ¥68,903 ¥60,459 ¥1,285,507
Provision for credit losses 127,874 1,302 12;379 2,987 144,542
Charge-offs 80,534 16,283 32,135 15,585 144,537
Recoveries 23,410 353 2,723 5,189 31,675
Net charge-offs 57,124 15,930 29,412 10,396 112,862
Others") 13,405 — — 5,395 18,800
Balance at end of fiscal year ¥1,068,463 ¥157,209 ¥51,870 ¥58,445 ¥1,335,987
F-51
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fiscal year ended March 31,2014: Commercial Residential Card MUAH Krungsri'1' Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year ¥1,068,463 ¥157,209 ¥51,870 ¥58,445 ¥ — ¥1,335,987
Provision (credit) for credit losses (70,091) (35,952) 5,617 (5,945) — (106,371)
Charge-offs 158,875 4,577 20,125 7,521 — 191,098.
Recoveries 29,478 230 3,264 4,378 — 37,350
Net charge-offs 129,397 4,347 16,861 3,143 — 153.74S
Others") 7,882 3 — 10,667 — 18,552
Balance at end of fiscal year ¥ 876,857 ¥116,913 ¥40,626 ¥60,024 ¥ — ¥1,094,420
Fiscal year ended March 31,2015: Commercial Residential Card MUAH Krungsri Total
(in millions)
Allowance for credit losses:
Balance at beginning of fiscal year ¥876,857 ¥116,913 ¥40,626 ¥60,024 ¥ — ¥1,094,420
Provision (credit) for credit losses 22,621 (30,858) 2,561 (1,883) 94,557 86,998
Charge-offs 119,160 13,894 10,785 5,349 27,973 177,161
Recoveries 18,995 205 3,268 4,027 — 26,495
Net charge-offs 100,165 13,689 7,517 1,322 27,973 150,666
Others") 8,403 — — 7,950 8,374 24,727
Balance at end of fiscal year ¥807,716 ¥ 72,366 ¥35,670 ¥64,769 ¥74,958 ¥1,055,479
Notes:
Others are principally comprised of gains or losses from foreign exchange translation
For the Krungsri segment, the acquired loans were recorded at their fair values as of the acquisition date, and there were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no allowance for credit loss was stated at March 31, 2014 in the above table.
F-52
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Allowance for credit losses and recorded investment in loans by portfolio segment at March 31, 2014 and 2015 are shown below:
At March 31,2014: Commercial Residential Card MUAH Krungsri Total
(in millions)
Allowance for credit losses: Individually evaluated for
impairment ¥ 640,442 ¥ 69,613 ¥ 29,244 ¥ 4,131 ¥ — ¥ 743,430
Collectively evaluated for
impairment 209,117 45,355 11,312 55,777 — 321,561
Loans acquired with deteriorated
credit quality 27,298 1,945 70 116 — 29,429
Total ¥ 876,857 ¥ 116,913 ¥ 40,626 ¥ 60,024 ¥ — ¥ 1,094,420
Loans:
Individually evaluated for
impairment ¥ 1,459,268 ¥ 211,802 ¥102,930 ¥ 64,009 ¥ — ¥ 1,838,009
Collectively evaluated for
impairment 83,052,520 14,751,204 492,990 7,060,581 3,025,186 108,382,481
Loans acquired with deteriorated
credit quality 75,740 15,299 12,701 114,961 50,675 269,376
Total") ¥84,587,528 ¥14,978,305 ¥608,621 ¥7,239,551 ¥3,075,861 ¥110,489,866
At March 31,2015: Commercial Residential Card MUAH Krungsri Total
(in millions)
Allowance for credit losses: Individually evaluated for
impairment ¥ 516,116 ¥ 49,317 ¥ 25,726 ¥ 4,146 ¥ 7,537 ¥ 602,842
Collectively evaluated for
impairment 269,289 21,255 9,921 60,214 66,913 427,592
Loans acquired wiuh deteriorated
credit quality 22,311 1,794 23 409 508 25,045
Total ¥ 807,716 ¥ 72,366 ¥ 35,670 ¥ 64,769 ¥ 74,958 ¥ 1,055,479
Loans:
Individually evaluated for
impairment ¥ 1,317,507 ¥ 167,099 ¥ 90,069 ¥ 60,726 ¥ 31,936 ¥ 1,667,337
Collectively evaluated for
impairment 88,833,150 14,366,087 462,480 9,171,892 3,788,898 116,622,507
Loans acquired with deteriorated
credit quality 56,031 13,376 12,057 62,147 36,492 180,103
Total") ¥90,206,688 ¥14,546,562 ¥564,606 ¥9,294,765 ¥3,857,326 ¥118,469,947
Notes:
Total loans in the above table do not include loans held for sale and represent balances without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
For the Krungsri segment, the acquired loans were recorded at their fair values as of the acquisition date, and there were no indications that an allowance for credit loss was necessary for these loans for the fiscal year ended March 31, 2014. Therefore, no allowance for credit loss was staled al March 31, 2014 in lhc above table.
Nonperforming loans were actively disposed of by sales during recent years. The allocated allowance for credit losses for such loans was removed from the allowance for credit losses and transferred to the valuation allowance for loans held for sale upon a decision to sell. Net charge-offs in the above table include a decrease in the allowance for credit losses due lo loan disposal activity amounting to ¥0.4 billion, ¥16.2 billion and ¥3.5 billion for the fiscal years ended March 31, 2013, 2014 and 2015, respectively.
F-5 3
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group sold ¥884 billion, ¥906 billion and ¥748 billion of loans within the Commercial segment during the fiscal years ended March 31, 2013, 2014 and 2015, respectively.
The MUFG Group purchased ¥337 billion of loans within the MUAH segment during the fiscal year ended March 31, 2014. See Note 2 for MUB's acquisition of PB Capital Corporation's institutional CRE lending division.
Loans Acquired in a Transfer
In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality, the following table sets forth information regarding loans acquired in connection with mergers, for which it is probable, at acquisition, that the MUFG Group will be unable to collect all contractually required payments receivable.
2014 2015
(in millions)
Loans acquired during the fiscal year:- - - - - • — -
Contractually required payments receivable at acquisitions ¥186,268 ¥ 10,048
Cash flows expected to be collected at acquisitions 116,218 548
Fair value of loans at acquisition 93,845 548
Accretable yield for loans within the scope ofthe guidance on loans and debt securities acquired with deteriorated credit quality:
Balance at beginning of fiscal year ¥ 95,178 ¥ 93,621
Additions 22,373 —
Accretion (49,155) (46,487)
Disposals — (641)
Reclassifications from nonaccrctable difference 15,760 21,070
Foreign currency translation adjustments 9,465 6,062
Balance at end of fiscal year ¥ 93,621 ¥ 73,625
Loans within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality:
Outstanding balance at beginning of fiscal year ¥497,265 ¥531,327
Outstanding balance at end of fiscal year 531,327 399,736
Carrying amount at beginning of fiscal year 232,334 269,376
Carrying amount at end of fiscal year 269,376 180,103
Nonaccruing loans within the scope ofthe guidance on loans and debt securities acquired with deteriorated credit quality:
Carrying amount at acquisition date during fiscal year ¥ 25,952 ¥ 548
Carrying amount at end of fiscal year 38,651 26,248
Allowance for credit losses within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality:
Balance of allowance for credit losses at beginning of fiscal year . ¥ 37,381 ¥ 29,429
Additional provisions during fiscal year 4,982 2,533
Reductions of allowance during fiscal year 1,129 456
Balance of allowance for credit losses at end of fiscal year 29,429 25,045
The MUFG Group considered prepayments in the determination of contractual cash flows and cash flows expected to be collected based on historical results.
F-54
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Lease Receivables
As part of its financing activities, the MUFG Group enters into leasing arrangements wilh customers. The MUFG Group's leasing operations are conducted through leasing subsidiaries and consist principally of direct financing leases involving various types of data processing equipment, office equipment and transportation equipment.
As of March 31, 2014 and 2015, the components ofthe investment in direct financing leases were as follows:
2014 2015 (in millions)
Minimum lease payments receivable ¥1,498,755 ¥1,729,901
Estimated residual values of leased property 18,261 25,329
Less—unearned income (202,755) (228,416)
Net investment in direct financing leases ¥1,314,261 ¥1,526,814
Future minimum lease payment receivables under noncancelable leasing agreements as of March 31, 2015 were as follows:
Direct Financing Leases
(in millions)
Fiscal year ending March 31:
2016 ¥ 476,750
2017 , 412,787
2018 324,715
2019 '. 198,082
2020 131,749
2021 and thereafter 185,818
Total minimum lease payment receivables ¥1,729,901
Government-led Loan Restructuring Program
Under the legislation enacted by the Japanese Diet in June 1996, which incoiporates the restructuring program for the loans of seven failed housing-loan companies (the "Jusen"), tlie Deposit Insurance Corporation ("DIC") established a Housing Loan Administration Corporation ("HLAC") to collect and dispose of the loans of the liquidated Jusen. In 1999, HLAC merged with the Resolution and Collection Bank Limited to create the Resolution and Collection Corporation ("RCC"), which is wholly-owned by the DIC.
Financial institutions, including the MUFG Group, waived the repayment of substantial amounts of the loans to the Jusen and transferred the remaining balances to HLAC. Financial institutions were requested to make loans to HLAC to finance its collection activities, and in the fiscal year ended March 31, 1997, the MUFG Group made loans of ¥407,078 million with an original maturity term of 15 years. The 15-year term loans to HLAC, which were guaranteed by the DIC under the legislation and the loan agreements, matured in 2011 and earned interest at TIBOR (Tokyo Interbank Offered Rate) plus 0.125%. On October 1, 2005, the MUFG Group acquired, at fair value, loans of the UFJ Holdings Group to HLAC in connection with the merger with UFJ Holdings.
F-55
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Under this restructuring program, a Financial Stabilization Fund (the "Special Fund") was established within the DIC, and the Bank of Japan and other financial institutions established another fund (the "New Fund"). These funds were principally invested in Japanese government bonds. The MUFG Group made non-intcrcst-earning deposits of ¥176,089 million with the Special Fund and the New Fund in the fiscal year ended. March 31, 1997, and expected all collection activities to be completed by December 2011, after 15 years of collection activities of the Jusen loans by RCC.
As the end of RCC's operations was approaching, the amount of the loss (so-called "stage two loss"), which might have ultimately been incurred through the collection activities, became clearer. In May 2011, the Japanese Diet enacted a law to partially revise the Deposit Insurance Act. Although it had already been decided that the loss should be shared equally between the Japanese government and private financial institutions, the revised law clarified the details of how the Japanese government would absorb its half of the loss. The other half of the loss, which had to be absorbed by private financial institutions, would be covered by the investment income earned by the Special Fund during the 15 years.
In September 2011, the deposits of ¥161,435 million with the New Fund were fully collected according to their terms. In June 2012, the entire deposits of ¥204,956 million with the Special Fund were fully collected as well.
Sales of Loans
The MUFG Group originates various types of loans to corporate and individual borrowers in Japan and overseas in the normal course of business. In order to improve its loan quality, BTMU and MUTB actively disposed of nonperforming loans. Most ofthe nonperforming loans were disposed of by sales to third parties without any continuing involvement. Management of BTMU and MUTB generally approves disposals after significant sales terms, including prices, are negotiated. As such, loans are disposed of by sales shortly after the loans are transferred to the held-for-sale classification. The net gains on the sales of loans were ¥14,274 million, ¥18,984 million and ¥15,257 million for die fiscal years ended March 31, 2013, 2014 and 2015, respectively.
Related Party Loans
In some cases, the banking subsidiaries of MUFG make loans to related parties, including their directors and executive officers, in the course of their normal commercial banking business. At March 31, 2014 and 2015, outstanding loans to such related parties were not material.
In the opinion of management, these related party loans were made on substantially the same terms, including interest rates and collateral requirements, as those terms prevailing at the date these loans were made. For the fiscal years ended March 31, 2013, 2014 and 2015, there were no loans to related parties that were charged-off. Additionally, at March 31, 2013, 2014, and 2015, there were no loans to related parties that were impaired.
F-56
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. PREMISES AND EQUIPMENT
Premises and equipment at March 31, 2014 and 2015 consisted ofthe following:
• ' 2014 2015
(in millions)
Land ¥ 403,184 ¥ 409,271
Buildings 747,998 760,974
Equipment and furniture 929,939 615,540
Leasehold improvements 251,875 282,179
Construction in progress 27,606 35,773
Total 2,360,602 2,103,737
Less accumulated depreciation 1,123,954 1,121,532
Premises and equipment-net ¥1,236,648 ¥ 982,205
Premises and equipment include capitalized leases, principally related to data processing equipment, which amounted to ¥41,907 million and ¥36,678 million at March 31, 2014 and 2015, respectively. Accumulated depreciation on such capitalized leases at March 31, 2014 and 2015 amounted to ¥29,769 million and ¥26,249 million, respectively.
BTMU has entered into sales agreements to sell its buildings and land and, under separate agreements, leased those properties back for its business operations, including bank branches. BTMU either provided nonrecourse financings to the buyers for the sales proceeds or invested in the equities of the buyers. As a result, BTMU was considered to have continuing involvement with the properties. For accounting and reporting purposes, these transactions were accounted for under the financing method with the sales proceeds recognized as a financing obligation. The properties were reported on the accompanying consolidated balance sheets and depreciated. The financing obligation at March 31, 2014 and 2015 was ¥46,339 million and ¥45,256 million, respectively.
For the fiscal years ended March 31, 2013, 2014 and 2015, the MUFG Group recognized ¥3,975 million, ¥13,850 million and ¥6,057 million, respectively, of impairment losses for long-lived assets, primarily real estate which was either formerly used for its banking operations and is no longer used or real estate that is being used where recovery of the carrying amount is doubtful. In addition, ¥1,932 million, ¥226 million and ¥176 million of impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. These losses are included in Other non-interest expenses. In computing the amount of impairment losses, fair value was determined primarily based on market prices, if available, or the estimated price based on an appraisal.
F-57
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill
The table below presents the movement in the carrying amount of goodwill by business segment during the
fiscal years ended March 31, 2014 and 2015:
Integrated Integrated Integrated In(„r.„H rinl.al Business Integrated
Retail Corporate Trust Inltgratul Global Business G|oba,
Banking Banking Assets Group Markets
Business Business Business Other than Business
Group Group Group MUAH MUAH Total Krungsri Group Total
(in millions)
Balance at March 31, 2013:
Goodwill ¥ 840,055 ¥ 885,234 ¥ 22,527 ¥152,203 ¥256,193 ¥408,396 ¥ — ¥2,300 ¥2,158,512
Accumulated impairment
losses (840,055) (885,234) (14,735) (532) — (532) — — (1,740,556)
— 7,792 151,671 256,193 407,864 — 2,300 417,956
Goodwill acquired during the
fiscal yearW . • — — 14,443 — 26,181 26,181 217,386 — 258,010
Impairment loss .-. — - — (7,792) -—- —= —• — - — - (7,792)
Foreign currency translation
adjustments and other — — 825 — 59,516 59,516 — — 60,341
Balance at March 31, 2014:
Goodwill 840,055 885,234 37,795 152,203 341,890 494,093 217,386 2,300 2,476,863
Accumulated impairment
losses (840,055) (885,234) (22,527) (532) — (532) — — (1,748,348)
— 15,268 151,671 341,890 493,561 217,386 2,300 728,515
Impairment loss — — (3,432) — — — — — (3,432)
Foreign currency translation
adjustments and other — — 2,196 — 48,402 48,402 31,929 — 82,527
Balance at March 31, 2015:
Goodwill 840,055 885,234 39,991 152,203 390,292 542,495 249,315 2,300 2,559,390
Accumulated impairment
losses (840,055) (885,234) (25,959) (532) — (532) — — (1,751,780)
¥ — ¥ — ¥14,032 ¥151,671 ¥390,292 ¥541,963 ¥249,315 ¥2,300 ¥ 807,610
Notes:
See Note 29 for tlie business segment information of the MUFG Group.
See Note 2 for tlie goodwill acquired in connection with principal acquisitions.
There were no impairment losses recognized for the fiscal year ended March 31, 2013.
For the fiscal years ended March 31, 2014 and 2015, the MUFG Group recognized ¥7,792 million and ¥3,432 million, respectively, in impairment of goodwill relating to various reporting units in the Integrated Trust Assets Business Group segment. The MUFG Group readjusted its future cash flow projection of the reporting units in this segment, considering the subsidiaries' recent business performance. As a result, the fair values of these reporting units, which were based on discounted future cash flows, fell below the carrying amounts of the reporting units, and the impairment losses were recognized on the related goodwill. The impairment losses were included in Other non-interest expenses in the accompanying consolidated statements of income.
F-58
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other Intangible Assets
The table below presents the gross carrying amount, accumulated amortization and net carrying amount, in total and by major class of intangible assets at March 31, 2014 and 2015:
2014 2015
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
amount amortization amount amount amortization amount
(in millions)
Intangible assets subject to amortization:
Software ¥1,858,371 ¥1,245,657 ¥ 612,714 ¥2,032,617 ¥1,372,238 ¥ 660,379
Core deposit intangibles 712,188 497,219 214,969 712,878 519,587 193,291
Customer relationships 380,674 147,774 232,900 403,652 171,920 231,732
Tradenames 72,788 16,995 55,793 77,175 20,693 56,482
Other 8,754 2,562 6,192 10,537 3,350 7,187
Total ¥3,032,775 ¥1,910,207 1,122,568 ¥3,236,859 ¥2,087,788 1,149,071
Intangible assets not subject to amortization:
Indefinite-lived trade names ... 3,037 3,037
Other 7,749 8,056
Total 10,786 11,093
Total ¥1,133,354 ¥1,160,164
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2014 amounted to ¥455,843 million, which primarily consisted of ¥225,108 million of software, ¥61,629 million of core deposit intangibles, ¥145,936 million of customer relationships and ¥18,083 million of trade names. The weighted average amortization period for these assets is 5 years, 11 years, 13 years and 22 years, respectively. There is no significant residual value estimated for these assets. Intangible assets not subject to amortization acquired during the fiscal year ended March 31, 2014 amounted to ¥289 million. See Note 2 for further details of acquired intangible assets.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2015 amounted to ¥209,278 million, which primarily consisted of ¥207,062 million of software. The weighted average amortization period for these assets is 5 years. There is no significant residual value estimated for these assets. Intangible assets not subject to amortization acquired during the fiscal year ended March 31, 2015 amounted to ¥265 million.
For the fiscal years ended March 31, 2013, 2014 and 2015, the MUFG Group recognized ¥3,378 million, ¥312 million and ¥677 million, respectively, of impairment losses for intangible assets whose carrying amounts exceeded their fair value. In computing the amount of impairment losses, fair value was determined primarily based on the present value of expected future cash flows, the estimated value based on appraisals, or market prices.
F-59
MITSUBISHI. UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as follows:
(in millions)
Fiscal year ending March 31:
2016 ¥244,323
215,092
180,038
139,297
99,588
7. INCOME TAXES
Income before Income Tax Expense
Income before income tax expense by jurisdiction for the fiscal years ended March 31, 2013, 2014 and 2015 was as follows:
2013 2014 2015
(in millions)
Domestic income ¥ 898,596 ¥1,012,551 ¥1,545,510
Foreign income 517,275 407,892 717,146
Total ¥1,415,871 ¥1,420,443 ¥2,262,656
Income Tax Expense (Benefit)
The detail of current and deferred income lax expense (benefit) for the fiscal years ended March 31, 2013, 2014 and 2015 was as follows:
2013 2014 2015
(in millions)
Current:
Domestic ¥102,357 ¥243,648 ¥ 300,905
Foreign 60,609 102,316 112,603
Total 162,966 345,964 413,508
Deferred:
Domestic 122,804 (5,523) 240,293
Foreign 10,250 ' (2,524) 12,219
Total 133,054 (8,047) 252,512
Income tax expense 296,020 337,917 666,020
Income tax expense (benefit) reported in Accumulated OCI relating to:
Investment securities 336,531 96,422 578,161
Derivatives qualifying for cash flow hedges 2,217 (235) 591
Defined benefit plans 43,213 69,515 5,965
Foreign currency translation adjustments '. 18,537 51,414 95,335
Total 400,498 217,116 680,052
Total ¥696,518 ¥555,033 ¥1,346,072
F-60
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On November 30, 2011, the Japanese Diet enacted two tax related laws: "Amendment to the 2011 Tax Reform" and "Special Measures to Secure the Financial Resources to Implement the Restoration from The Great East Japan Earthquake." The changes under the new laws include a limitation on the use of net operating loss carryforwards to 80% of taxable income, a two-year increase in the carryforward period of certain net operating loss carryforwards to a nine-year period, and an approximately 5% reduction in the effective statutory rate of corporate income tax from 40.6% to 35.6%. While the reduction in the effective statutory rate was effective for fiscal years beginning on or after April 1, 2012, a temporary surtax levied on corporate income taxes to fund the earthquake recovery efforts caused the effective statutory rate of corporate income tax to be approximately 38.0% for the three year period between April 1, 2012 and March 31, 2015. However, on March 20, 2014, the Japanese Diet enacted the "2014 Tax Reform" which terminated the temporary surtax levied on corporate income taxes one year earlier than the change in tax law on November 30, 2011. As a result, the effective statutory rate of corporate income tax for the fiscal year ending March 31, 2015 was set at approximately 35.6%. The change in tax law resulted in an increase of ¥16,687 million in income tax expense for the fiscal year ended March 31, 2014.
The MUFG Group has changed to filing on a consolidated basis for corporate income taxes within Japan beginning with the fiscal year ended March 31, 2015. A consolidated basis for coiporate income taxes results in the reporting of taxable income or loss based upon the combined profits or losses of the parent company and its wholly-owned domestic subsidiaries.
On March 31, 2015, the Japanese Diet enacted the "2015 Tax Reform" which includes changes in the limitation on the use of net operating loss carryforwards from 80% to 65% of taxable income for the two-year period between April 1, 2015 and March 31, 2017, and from 65% to 50% for the fiscal years beginning on or after April 1, 2017, respectively, and one-year increase in the carryforward period of certain net operating loss carryforwards from nine-year period to ten-year period for the fiscal years beginning on or after April 1, 2017, as well as reduction in the effective statutory rate of corporate income tax from approximately 35.6% to 33.9% for the fiscal year beginning on or after April 1, 2015. The change in tax law resulted in a decrease of ¥39,966 million in income tax expense for the fiscal year ended March 31, 2015.
Reconciliation of Effective Income Tax Rate
Income taxes in Japan applicable to the MUFG Group are imposed by the national, prefectural and municipal governments, and in the aggregate resulted in a normal effective statutory rate of approximately 38.0% for the fiscal years ended March 31, 2013 and 2014, and approximately 35.6% for the fiscal year ended March 31, 2015. Foreign subsidiaries are subject to income taxes ofthe countries in which they operate.
F-61
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation ofthe effective income tax rates reflected in the accompanying consolidated statements of income to the combined normal effective statutory tax rates for the fiscal years ended March 31, 2013, 2014 and
2015 is as follows:
2013 2014 201S
Combined normal effective statutory tax rate 38.0% 38.0% 35.6%
Nondeductible expenses 0.1 0.2 0.1
Foreign tax credit and payments (0.8) (0.6) (1.0)
Lower tax rates applicable to income of subsidiaries (0.5) (0.4) (0.1)
Change in valuation allowance (7.3) (12.4) (1.3)
Realization of previously unrecognized tax effects of subsidiaries (10.7)"' (0.1) —
Nontaxable dividends received (2.3) (3.3) (1.6)
Undistributed earnings of subsidiaries 1.5 0.5 0.1
Tax and interest expense for uncertainty in income taxes (0.1) — (0.2)
Expiration of loss carryforward 2.1 — —
Effect of changes in tax laws — 1.2 (1.7)
. Others-net 0.9 . . .0.7 (0.5) _
Effective income tax rate 20.9% 23.8% 29.4%
Note:
(I) In April 2012, one of tlie wholly-owned subsidiaries of BTMU was liquidated. The liquidation resulted in the realization of tax benefits that were not previously recognized as deferred tax assels, resulting in a ¥151,309 million reduction of income lax expense and a 10 7% reduction in the effective tax rate for the fiscal year ended March 31, 2013.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are computed for each tax jurisdiction using currently enacted tax rates applicable to periods when the temporary differences are expected to reverse. The tax effects of the items comprising the MUFG Group's net deferred tax assets at March 31, 2014 and 2015 were as follows:
2014 2015
(in millions)
Deferred tax assets:
Allowance for credit losses ¥ 650,069 ¥ 570,049
Operating loss carryforwards 102,260 110,211
Loans 7,632 13,295
Accrued liabilities and other 309,327 172,959
Premises and equipment, including sale-and-leaseback transactions 94,652 86,461
Derivative financial instruments 94,514 95,593
Accrued severance indemnities and pension plans 44,810 17,286
Valuation allowance (308,561) (274,010)
Total deferred tax assets 994,703 791,844
Deferred tax liabilities:
Investment securities (including trading account assets at fair value under fair
value option) 574,807 1,321,462
Intangible assets 159,330 147,173
Lease transactions 77,542 74,605
Other 74,471 70,352
Total dcfciTcd tax liabilities 886,150 1,613,592
Net defened tax assets (liabilities) ¥ 108,553 ¥(821,748)
F-62
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The valuation allowance was provided primarily against defened tax assets recorded at MUFG and its subsidiaries with operating loss carryforwards. The valuation allowance is determined to reduce the measurement of deferred tax assets not expected to be realized. Management considers all available evidence, both positive and negative, to determine whether the valuation allowance is necessary based on the weight of that evidence. Management determines the amount ofthe valuation allowance based on future reversals of existing taxable temporary differences and future taxable income exclusive of reversing temporary differences. Future taxable income is developed from forecasted operating results, based on recent historical trends and approved business plans,'the eligible carryforward periods and other relevant factors.
For the fiscal year ended March 31, 2014, the MUFG Group recorded a valuation allowance release, on the basis of management's reassessment ofthe amount of its deferred tax assets that were more likely than not to be realized. As of March 31, 2014, management considered new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets.
Among others, a release of valuation allowance of ¥91,070 million was due to the application of the consolidated corporate-tax system beginning with the fiscal year ended March 31, 2015. This is because MUFG would be able to utilize income in more profitable subsidiaries to realize the benefit of net operating loss carryforwards and existing deductible temporary differences recorded at MUFG. Management believes that the net operating loss carryforwards related to Japanese corporate taxes will be fully utilized by the application of the consolidated corporate-tax system.
Among others, a release of valuation allowance of ¥45,922 million was due to the profitability improvement of a certain subsidiary. Management considered various factors, including the improved operating performance and cumulative operating results over the prior several years of the subsidiary as well as the outlook regarding prospective operating performance ofthe subsidiary, and determined that sufficient positive evidence exists as of March 31, 2014, to conclude that it is more likely than not that additional deferred tax assets would be realizable.
For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in. recent years, a valuation allowance was recognized against the deferred tax assets as of March 31, 2014 and 2015 to the extent that it is more likely than not that they will not be realized.
Income taxes are not provided on undistributed earnings of certain foreign subsidiaries that are considered to be indefinitely reinvested in the operations of such subsidiaries. At March 31, 2014 and 2015, the undistributed earnings of such foreign subsidiaries amounted to approximately ¥37,498 million and ¥22,741 million, respectively. Determination of the amount of unrecognized deferred tax liabilities with respect to these undistributed earnings is not practicable because of the complexity associated with its hypothetical calculation including foreign withholding taxes and foreign tax credits. MUFG has neither plans nor the intention to dispose of investments in such foreign subsidiaries and, accordingly, does not expect to record capital gains or losses, or otherwise monetize the undistributed earnings of such foreign subsidiaries.
Furthermore, under the Japanese tax law, 95% of a dividend received from a foreign company in which a domestic company has held generally at least 25% of the outstanding shares for a continuous period of six months or more ending on the date on which the dividend is declared can be excluded from the domestic company's taxable income. Therefore, if undistributed earnings of certain foreign subsidiaries are repatriated through dividends, only 5% ofthe amount of dividends will be included in the taxable income.
F-63
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Operating Loss and Tax Credit Carryforwards
At March 31, 2015, the MUFG Group had operating loss carryforwards for corporate lax of ¥321,829 million and tax credit carryforwards of ¥8,973 million for tax purposes. Such carryforwards, if not utilized, are scheduled to expire as follows:
Operating loss Tax credit
carryforwards carryforwards
(in millions)
Fiscal year ending March 31:
2016 ¥ 3 ¥ 857
— 409 -
25,908 89
5,242 87
35,453 88
2021 8,184 68
2022 and thereafter 222,425 5,264
No definite expiration date . .". ."..'.~ 24,6142,111
Total ¥321,829 ¥8,973
Uncertainty in Income Tax
The following is a roll-forward ofthe MUFG Group's unrecognized tax benefits for tlie fiscal years ended March 31, 2013, 2014 and 2015:
2013 2014 2015
(in millions)
Balance at beginning of fiscal year ¥ 58,588 ¥ 30,956 ¥13,993
Gross amount of increases for current year's tax positions 366 439 606
Gross amount of decreases for current year's tax positions (49) — —
Gross amount of increases for prior years'tax positions 2,765 333 3,361
Gross amount of decreases for prior years'tax positions (35,119),n (25,3I8)'2' (6,561)
Net amount of changes relating to settlements with tax authorities 760 (244) (809)
Decreases due to lapse of applicable statutes of limitations — — (1,452)
Foreign exchange translation and others 3,645 7,827 1,802
Balance at end of fiscal year ¥ 30,956 ¥ 13,993 ¥10,940
Notes:
The decrease was primarily because, during the fiscal year ended March 31, 2013, the MUFG Group closed an examination with U.S. tax authorities on issues related to prior years' tax positions.
The decrease related to prior year tax positions is primarily from the resolution of uncertain tax positions in the U.S. for both federal income taxes and California stale tax.
The total amounts of unrecognized tax benefits at March 31, 2013, 2014 and 2015 that, if recognized, would affect the effective tax rate are ¥9,632 million, ¥3,570 million and ¥1,485 million, respectively. The remainder of the uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.
The MUFG Group classifies interest and penalties, if applicable, related to income taxes as Income tax expense. Accrued interest and penalties (not included in the "unrecognized tax benefits" above) arc a component
F-64
MrTSUBISFII UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS—(Continued)
of Other liabilities. The following is a roll-forward ofthe interest and penalties recognized in the accompanying consolidated financial statements for the fiscal years ended March 31, 2013, 2014 and 2015.
2013 2014 2015
(in millions)
Balance at beginning of fiscal year ¥ 6,934 ¥4,528 ¥5,946
Total interest and penalties in the consolidated statements of income (2,975) (698) (1,468)
Total cash settlements, foreign exchange translation and others 569 2,116 398
Balance at end of fiscal year ¥ 4,528 ¥5,946 ¥4,876
The MUFG Group is subject to ongoing tax examinations by the tax authorities of the various jurisdictions in which it operates. The following are tlie major lax jurisdictions in which the MUFG Group operates and the status of years under audit or open to examination:
Jurisdiction Tax years
Japan 2014 and forward
United States—Federal 2010 and forward
United States—California .' 2009 and forward
Thailand 2010 and forward
United Kingdom 2013 and forward
The MUFG Group is currently under continuous examinations by the tax authorities in various domestic and foreign jurisdictions and many of these examinations are resolved every year. The unrecognized tax benefits will decrease since resolved items will be removed from the balance regardless of whether their resolution results in payment or recognition. It is reasonably possible that the unrecognized tax benefits will decrease by an amount not exceeding ¥1 billion during the next twelve months.
8. PLEDGED ASSETS AND COLLATERAL Pledged Assets
Al March 31, 2015, assets mortgaged, pledged, or otherwise subject to lien were as follows:
2015
(in millions)
Trading account securities ¥14,248,931
Investment securities 11,202,736
Loans 9,390,280
Other 33,832
Total : ¥34,875,779
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The above pledged assets were classified by type of liabilities to which they related as follows:
2015 (in millions)
Deposits ¥ 849,356
Call money and funds purchased, 803,117
Payables under repurchase agreements and securities lending transactions 19,315,760
Other short-term borrowings and long-term debt 13,612,057
Other 295,489
Total ¥34,875,779
In addition, at March 31, 2015, certain investment securities, principally Japanese national government and Japanese government agency bonds,-loans, and other assets aggregating to ¥21,040,317 million were pledged as collateral for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and the Tokyo Bankers Association, for derivative transactions and for certain other purposes.
The MUFG Group engages in on-balance sheet securitizations. These securitizations of mortgage and apartment loans, which do not qualify for sales treatment, are accounted for as secured borrowings. The amount of loans in the table above represents the carrying amount of these transactions with the carrying amount of the associated liabilities included in Other short-term borrowings and Long-term debt.
Under Japanese law, Japanese banks are required to maintain certain reserves on deposit with the Bank of Japan based on the amount of deposit balances and certain other factors. There are similar reserve deposit requirements for foreign offices engaged in banking businesses in foreign countries. At March 31, 2014 and 2015 the reserve funds maintained by the MUFG Group, which are included in Cash and due from banks and Interest-earning deposits in other banks, were ¥13,007,902 million and ¥30,482,570 million, respectively. Average reserves during the fiscal years ended March 31, 2014 and 2015 were ¥12,313,722 million and ¥22,853,187 million, respectively.
Collateral
The MUFG Group accepts and provides financial assets as collateral for transactions, principally commercial loans, repurchase agreements and securities lending transactions, call money, and derivatives. Financial assets eligible for such collateral include, among others, marketable equity securities, trade and notes receivable and certificates of deposit.
Secured parties, including creditors and counterparties to certain transactions with the MUFG Group, may ' sell or repledge financial assets provided as collateral. Certain contracts, however, may not be specific about the secured party's right to sell or repledge collateral under the applicable statutes and, therefore, whether or not the secured party is permitted to sell or repledge collateral would differ depending on the interpretations of specific provisions of the existing statutes, contract or certain market practices. If the MUFG Group determines, based on available information, that a financial asset provided as collateral might not be sold or replcdged by the secured parties, such collateral is not separately reported in the accompanying consolidated balance sheets. If a secured party is permitted to sell or repledge financial assets provided as collateral by contract or custom under the existing statutes, the MUFG Group reports such pledged financial assets separately on the face of the accompanying consolidated balance sheets. At March 31, 2015, the MUFG Group pledged ¥33,584 billion of assets that may not be sold or repledged by the secured parties.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Certain banking subsidiaries accept collateral for commercial loans and certain banking transactions under a standardized agreement with customers, which provides that these banking subsidiaries may require the customers to provide collateral or guarantees with respect to the loans and other banking transactions. Financial assets pledged as collateral are generally negotiable and transferable instruments, and such negotiability and transferability are authorized by applicable legislation. In principle, Japanese legislation permits these banking subsidiaries to repledge financial assets accepted as collateral unless otherwise prohibited by contract or relevant statutes. Nevertheless, the MUFG Group did not sell or repledge nor does it plan to sell or repledge such collateral accepted in connection with commercial loans before a debtor's default or other credit events specified in the agreements as it is not customary within the banking industry in Japan to dispose of collateral before a debtor's default and other specified credit events. Derivative agreements commonly used in the marketplace do not prohibit a secured party's disposition of financial assets received as collateral, and in resale agreements and securities borrowing transactions, securities accepted as collateral may be sold or repledged by the secured parties. At March 31, 2014 and 2015, the fair value of the collateral accepted by the MUFG Group that is permitted to be sold or repledged was ¥18,637 billion and ¥19,756 billion, respectively, of which ¥14,011 billion and ¥14,496 billion, respectively, was sold or repledged.
At March 31, 2014 and 2015, the cash collateral pledged for derivative transactions, which is included in Other assets, was ¥1,045,851 million and ¥1,716,302 million, respectively, and the cash collateral received for derivative transactions, which is included in Other liabilities, was ¥454,506 million and ¥906,456 million, respectively.
9. DEPOSITS
The balances of time deposits, including certificates of deposit ("CDs"), issued in amounts of ¥10 million (approximately U.S.S83 thousand at the Federal Reserve Bank of New York's noon buying rate on March 31, 2015) or more with respect to domestic deposits and issued in amounts of U.S.$100,000 or more with respect to foreign deposits were ¥27,555,387 million and ¥26,026,728 million, respectively, at March 31, 2014, and ¥26,741,038 million and ¥27,056,193 million, respectively, at March 31, 2015.
The maturity information at March 31, 2015 for domestic and foreign time deposits, including CDs, is summarized as follows:
Domestic Foreign
(in millions)
Due in one year or less ¥34,047,044 ¥26,948,519
Due after one year through two years 6,233,412 411,797
Due after two years through three years 2,844,050 253,167
Due after three years through four years 780,820 124,840
Due after four years through five years 1,023,960 219,350
Due after five years 687,084 23,807
Total ¥45,616,370 ¥27,981,480
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
CALL MONEY AND FUNDS PURCHASED
A summary of funds transactions for the fiscal years ended March 31, 2014 and 2015 is as follows:
2014 2015
(in millions, except percentages and days)
Outstanding at end of fiscal year:
Amount ¥ 3,417,455 ¥ 3,668,986
Principal range of maturities 1 day to 30 days 1 clay to 30 days
Weighted average interest rate 0.18% 0.17%
DUE TO TRUST ACCOUNT
MUTB holds assets on behalf of its customers in an agent, fiduciary or trust capacity. Such trust account assets are not the MUFG Group's proprietary assets and are managed and accounted for separately.
However, excess cash funds of individual trust accounts are often placed with MUTB which manages the funds together with its own funds in its proprietary account. Due to trust account reflects a temporary placement of the excess funds from individual tmst accounts and, in view of the MUFG Group's funding, due to tmst account is similar to short-term funding, including demand deposits and other overnight funds purchased. The balance changes in response to the day-to-day changes in the excess funds placed by the trust accounts. A summary of due to trust account transactions at March 31, 2014 and 2015 is as follows:
2014 2015
(in millions, except percentages)
Amount outstanding at end of fiscal year ¥750,210 ¥ 1,610,992
Weighted average interest rate on outstanding balance at end of fiscal year 0.08% 0.05%
12. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
At March 31, 2014 and 2015, the MUFG Group had unused lines of credit for short-term financing amounting to ¥ 10,750,175 million and ¥8,486,059 million, respectively. The amounts principally consist of non-interest bearing collateralized intraday overdraft lines and collateralized overnight loans on bills at the official discount rate granted by the Bank of Japan, which are used to cover shortages in the Bank of Japan account and to meet liquidity needs. The MUFG Group may borrow from the Bank of Japan on demand up to the total amount of collateral eligible for credit extension.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings at March 31, 2014 and 2015 were comprised of the following:
2014 2015
(in millions, except percentages)
Domestic offices:
Commercial paper ¥ 1,235,525 ¥ 1,579,550
Borrowings from the Bank of Japan 5,888,541 4,809,950
Borrowings from other financial institutions 224,676 271,413
Other 59,501 54,509
Total domestic offices 7,408,243 6,715,422
Foreign offices:
Commercial paper 3,091,977 4,363,937
Borrowings from other financial institutions 333,116 137,764
Short-term debentures 119,837 148,644
Other 153,074 180,281
Total foreign offices 3,698,004 4,830,626
Total 11,106,247 11,546,048
Less unamortized discount 176 241
Other short-term borrowings—net ¥11,106,071 ¥11,545,807
Weighted average interest rate on outstanding balance at end of fiscal year 0.25% 0.21 %
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long-term debt (with original maturities of more than one year) at March 31, 2014 and 2015 was comprised ofthe following:
2014 2015
(in millions)
MUFG-
Obligations under capital leases ¥ 78 ¥ 57
Subordinated debt'":
Fixed rate bonds, payable in Japanese yen, due 2024-2025, principally 0.72%-0.94% — 63.000
Adjustable rate bonds, payable in Japanese yen, due 2024-2025, principally 0.58%-0 66% — 27,000
Adjustable rale bonds, payable in Japanese yen, no stated maturity, principally 2.70%-4.42% 380,500 350.500
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally 3.42%-4.78% .. 1,500 1,500
Adjustable rate borrowings, payable in US dollars, no stated maturity, principally 6.25% 515 601
Adjustable rate borrowings, payable in F.uro, no staled maturity, principally 4.75%-5.17% 1,416 1,303
Adjustable rate borrowings, payable in other currencies excluding Japanese yen, US dollars. Euro, no
stated maturity, principally 6.20%<2> 514 534
Total 384,523 444,495
BTMU:
Obligations under-capital leases ... :-.-.¥ 12,260 ¥ 8,582
Obligation under salc-and-leaseback transactions 46,339 45,256
Unsubordinated debt"':
Fixed rate bonds, payable in Japanese yen, due 2015-2027, principally 0.15%-2.69% 1,311,801 1,021,100
Fixed rate bonds, payable in US dollars, due 20) 5-2045, principally 0.00%-4.70% 1,109,470 1,990,175
Fixed rate bonds, payable in Euro, due 2022, principally 0.88% — 96,842
Fixed rate bonds, payable in other currencies excluding Japanese yen, US dollars, Euro, due 2016-2017,
principally 4.05%-4.91%i2> 71,439 32,013
Fixed rate borrowings, payable in Japanese yen, due 2015-2028, principally 0.10%-0.50% 1,163,291 4,456,619
Fixed rate borrowings, payable in US dollars, due 2018, principally 7.49% 342 311
Fixedrateborrowings,payableinEuro,due20I6-2018,principally0.15% — 75,071
Adjustable rate bonds, payable in US dollars, due 2030, principally 3.00% — 1,202
Floating rale bonds, payable in US dollars, due 2016-2018, principally 0.57%-0.87% 226,424 360,510
Floating rale bonds, payable in olher currencies excluding Japanese yen, US dollars, Euro, due 2017,
principally 3.37%<2> 90,431 59,839
Floating rate borrowings, payable in US dollars, due 2015-2031, principally 0.32%-0.65% 942,215 770,804
Floating rate borrowings, payable in Euro, due 2021, principally 0.21 %-0.24% 7,497 15,276
Toial 4,922,910 8,879,762
Subordinated debt"):
Fixed rate bonds, payable in Japanese yen, due 2015-2031, principally 0.93%-2.91% 1,336,892 1,206,806
Fixed rate borrowings, payable in Japanese yen, due 2016-2035, principally 0.50%-2.24% 233,400 233,400
Adjustable rate bonds, payable in Japanese yen, due 2019, principally 1.20% 31,000 —
Adjustable rate borrowings, payable in Japanese yen, due 2017-2028, principally 0.20%-2.86% 245,800 212,300
Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally 0.91 %-4.78% .. 845,400 659,200
Adjustable rale borrowings, payable in US dollars, no staled maturity, principally 6.25% 241,862 282,400
Adjustable rale borrowings, payable in Euro, no slated maturity, principally 4.75%-5.17% 186,270 171,371
Adjustable rale borrowings, payable in olher currencies excluding Japanese yen, US dollars, Euro, no
slated maturity, principally 6.2()%i2) 96,790 100,610
Floating rale borrowings, payable in Japanese yen, due 2020-2027, principally 0.31 %-0.81 % 41,900 41,900
Total 3,259,314 2,907,987
Obligations under loan securitization transaction accounted for as secured borrowings due 2015-2044,
principally 0.18%-5.90% 1,146,638 900,442
Payable under repurchase agreements due 2016-2018, principally 0.54%-l.48% 360,220 1,175,858
Total 9,747,681 13,917,887
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2014 2015
(in millions)
Olher subsidiaries:
Obligations under capital leases V 7,781 7,512
Unsubordinated debt"1.
Fixed rate borrowings, bonds and nolcs, payable in Japanese yen, due 2015-2044, principally
0.00%-10.10% 915,357 1,938,560
Fixed rate borrowings, bonds and nores, payable in US dollars, due 2015-2037, principally
0 50%-8.67% 396,704 779,847
Fixed rate bonds and notes, payable in Euro, due 2018, principally 4 21% 6,514 —
Fixed rale bonds and notes, payable in Thai baht, due 2015-2019, principally 0.01%-4 80% 269,219 223,718
Fixed rate borrowings, bonds and notes, payable in other currencies excluding Japanese yen, US dollars,
Euro, Thai baht, due 2015-2037, principally 0.50%-18.76%'2' 35,011 80,941
Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2015-2045,
principally 0.00%-24.50% 1,426,933 1,368,947
Floating/Adjustable rate borrowings, bonds and notes, payable in US dollars, due 2015-2038,
principally 0.00%-7.30% 276,402 233,858
Floating rale bonds and notes, payable in Euro, due 2018, principally 1.04% 34,281 834
Floating rale bonds and notes, payable in Thai baht, due 2015, principally 3.82% — 1,204
Floating rale borrowings, bonds and notes, payable in other currencies excluding Japanese yen,
USdollars,Euro,Thaibaht,due2015-2019,principallyO.OO%-l.85%<2) 2,055 15,956
Total 3,362,476 4,643,865
Subordinated debt'":
Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2015-2030, principally
0.65%-2.98% 484,194 430,377
Fixed rate bonds and notes, payable in US dollars, due 2016, principally 5.95% 77,330 85,413
Fixed rate bonds and notes, payable in Thai baht, due 2022, principally 4.70% Ill ,682 54,521
Adjustable rale borrowings, bonds and notes, payable in Japanese yen, due 2020, principally 1.76% ... 5,000 5,000
Adjustable rate borrowings, bonds and notes, payable in Japanese yen, no stated maturity, principally
1.93%-3.50% 105,667 105,817
Floating rate borrowings, bonds and notes, payable in Japanese yen, due 2015-2021, principally
0.49%-0.92% 204,926 194,055
Floating rate borrowings, bonds and notes, payable in US dollars, due 2033-2036, principally
1.94%-3.35% 6,972 6,334
Floating rate borrowings, bonds and notes, payable in Thai baht, due 2020, principally 4.75% — 73,459
Total 995,771 954,976
Obligations under loan securitization transaction accounted for as secured borrowings due 2014-2018,
principally 0.95%-2.71% 446 —
Total 4,366,474 5,606,353
Total 14,498,678 19,968,735
Notes:
Adjustable rate debts are debts where interest rates are resel in accordance with the terms of the debt agreements, and floating rate debts are debts where interest rates are repriced in accordance with movements of markets indices.
Minor currencies, such as Australian dollars, British pounds, Indonesian rupiah, Brazilian real, Russian ruble, etc, have been summarized into the "other currencies" classification.
The MUFG Group uses derivative financial instruments to manage its interest rate and currency exposures for certain debts. The derivative financial instruments include swaps, forwards, options and other types of derivatives. As a result of these derivative instruments, the effective rates reflected in the table above may differ from the coupon rates. The interest rates for the adjustable and floating rate debt shown in the above table are those in effect at March 31, 2014 and 2015.
Certain debt agreements permit the MUFG Group to redeem the related debt, in whole or in part, prior to maturity at the option ofthe issuer on terms specified in the respective agreements.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is a summary of maturities of long-term debt subsequent to March 31, 2015:
Other
MUFG BTMU subsidiaries Total
(in millions)
Fiscal year ending March 31:
¥ 10 ¥ 1,041,375 ¥ 551,776 ¥ 1,593,161
14 2,388,730 872,421 3,261,165
9 1,947,332 605,908 2,553,249
2019 |99|3,863,004 1,581,510 5,444,519
2020 |99|580,123 389,154 969,280
2021 and thereafter 444,454 4,097,323 1,605,584 6,147,361
Total ¥444,495 ¥13,917,887 ¥5,606,353 ¥19,968,735
13. SEVERANCE INDEMNITIES AND PENSION PLANS
. Defined Benefit Pension Plans _ _
The MUFG Group has funded contributory and non-contributory defined benefit pension plans ("pension benefits"), which cover substantially all of its employees and mainly provide for lifetime annuity payments commencing at age 65 based on eligible compensation at the time of severance, rank, years of service and olher factors.
BTMU and certain domestic subsidiaries, MUSHD, Mitsubishi UFJ NICOS and some subsidiaries of MUFG have non-contributory Corporate Defined Benefit Pension plans ("CDBPs") which provide benefits to all their domestic employees. In addition, MUTB had a contributory CDBP similar to these non-contributory CDBPs until a transfer of its remaining corporate portion into a non-contributory CDBP subsequent to the separation process as described below.
In December 2011, in accordance with the Defined Benefit Corporate Pension Plan Act, which permits each employer and employees' pension fund plan to separate the substitutional portion of the employees' pension fund from the rest of the fund and transfer the related obligation and assets to the Japanese government, MUTB obtained an approval from the Minister of Health, Labor and Welfare for an exemption from the obligation to pay benefits for future employee services related to the substitutional portion of the governmental welfare pension program. In January 2013, MUTB also obtained an approval for an exemption from the obligation to pay benefits for past employee services related to the substitutional portion. To complete the separation process, the substitutional obligation and the related plan assets were transferred to the Japanese government on February 17, 2014. In accordance with the guidance, which addresses the accounting for the transfer to the Japanese government of a substitutional portion of employee pension fund liabilities, MUTB accounted for the entire separation process, upon completion of transfer of the plan assets to the government, as a single settlement transaction. During the fiscal year ended March 31, 2014, MUTB recognized (1) the difference of ¥115,210 million between the accumulated benefit obligations settled and the assets transferred lo the Japanese government as a government subsidy, which was recognized as a gain in the accompanying consolidated statements of income, (2) the proportionate amount of the net unrealized loss of ¥42,435 million for the ' substitutional portion as settlement loss, and (3) the difference of ¥1,770 million between the projected benefit obligations and the accumulated benefit obligations related to the substitutional portion, as gain on derecognition of previously accrued salary progression. The settlement loss and gain on derecognition of previously accrued salary progression were included in Salaries and employee benefits in the accompanying consolidated statements of income. The remaining portion ofthe employees' pension fund (lhat is, the coiporate portion) continued lo exist as a CDBP, although, from a legal regulatory perspective, it is deemed to have been dissolved and a CDBP
F-72
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
is deemed newly established when the separation process is completed. Subsequent to the separation process, MUTB transferred the remaining corporate portion ofthe employees' pension fund into a non-contributory CDBP.
The MUFG Group also offers qualified and nonqualified defined benefit pension plans in foreign offices and subsidiaries for their employees. The qualified plans are non-contributory defined pension plans, which provide benefits upon retirement based on years of service and average compensation and cover substantially all of the employees of such foreign offices and subsidiaries. With respect to the offices and subsidiaries in the United States of America, the qualified plans are funded on a current basis in compliance with the requirement of the Employee Retirement Income Security Act ofthe United States of America. The nonqualified plans are non-contributory defined benefit pension plans, under which certain employees earn pay and interest credits on compensation amounts above the maximum stipulated by applicable laws under the qualified plans.
Severance Indemnities Plans
The MUFG Group has severance indemnities plans ("SIPs") under which their employees in Japan, other than those who are directors, are entitled, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of employment, to lump-sum severance indemnities based on eligible compensation at the time of severance, rank, years of service and other factors. Under SIPs, benefit payments in the form of a lump-sum cash payment with no option to receive annuity payments, upon mandatory retirement at normal retirement age or earlier termination of employment, are provided. When a benefit is paid in a single payment to a benefit payee under the plans, the payment represents final relief of the obligation.
Other Postretirement Plans
The MUFG Group's foreign offices and subsidiaries, primarily in the United States of America, provide' their employees with certain postretirement medical and life insurance benefits ("other benefits").
Net periodic cost of pension benefits and other benefits for the fiscal years ended March 31, 2013, 2014 and 2015 include the following components:
Domestic subsidiaries Foreign offices and subsidiaries
2013 2014 2015 2013 2014 2015
Pension Pension Pension
benefits benefits benefits Pension Other Pension Other Pension Other
and SIP and SIP and SIP benefits benefits benefits benefits benefits benefits
(in millions)
Service cost—benefits earned
during the fiscal year ¥ 38,840 ¥ 39,309 ¥ 37,540 ¥ 8,098 ¥ 1,114 ¥ 12,215 ¥1,526 ¥13,095 ¥1,222
Interest cost on projected
benefit obligation 26,648 22,464 19,794 10,716 1,135 13,467 1,352 15,966 1,501
Expected return on plan
assets (48,106) (54,222) (55,082) (14,169) (1,030) (19,928) (1,423) (24,945) (1,937)
Amortization of net actuarial
loss 42,496 23,941 13,900 8,030 715 9,808 776 11,890 273
Amortization of prior service
cost (12,309) (11,793) (8,933) 54 (59) 157 (69) (1,189) (560)
Amortization of net obligation
at transition — — — — 105 — — — —
Loss (gain) on settlements and
curtailment 2,600 41,456 (2,742) 95 (3) — — 88 —
Net periodic benefit cost ¥ 50,169 ¥ 61,155 ¥ 4,477 ¥ 12,824 ¥ 1,977 ¥ 15,719 ¥2,162 ¥14,905 ¥ 499
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the assumptions used in computing the present value of the projected benefit obligations and the net periodic benefit cost:
Domestic subsidiaries Foreign offices and subsidiaries
2013 2014 2015~ 2013 2014 2015
Pension Pension Pension
benefits bcncfiLs benefits Pension Other Pension Other Pension Other and SIP and SIP and SIP benefits benefits benefits benefits benefits benefits
Weighted-average assumptions used: Discount rates in determining
expense 1.55% 1.25% 1.23% 4.73% 4.70% 4.25% 4.01% 4.87% 4.63%
Discount rates in determining benefit
obligation 1.25 1.23 0.93 4.25 4.01 4.87 4.63 3.87 3.83
Rates of increase in future
compensation level for
determiningexpen.se 3.31 3.07 3.36 4.60 — 4.58 '— 4.64 —
Rales of increase in future compensation level for
determining benefit obligation . 3.07 3.36 3.23 4.58 — 4.64 — 4.65 — Expected rates of return on plan
assets 2.78 2.83 2.76 6.92 7.50 6.98 7.50 7.06 7.50
The following tables present tlie assumed health care cost trend rates for foreign offices and subsidiaries, which are used to measure tlie expected cost of benefits for the next year, and the effect'of a one-percentage-point change in the assumed health care cost trend rate:
MUAH Other than MUAH
2014") 2015"' 2014") 2015")
Initial trend rate 7.71% 7.53% 8.00% 7.50%
Ultimate trend rate 4.50% 4.50% 5.00% 5.00%
Year the rate reaches the ultimate trend rate 2021 2021 2019 2020
MUAH Other than MUAH
One-percentage- One-percentage- One-percentage- Onc-pcrcentage-point increase point decrease point increase point decrease
(in millions)
Effect on total of service and interest cost
components ¥ 241 ¥ (241) ¥ 111 ¥ (85)
Effect on postretirement benefit obligation . 2,290 (2,652) 2,445 (1,839)
Note:
(1) Fiscal years of MUAH and foreign subsidiaries end on December 31. Therefore, the above tables present the rates and amounts at December 31, 2013 and 2014, respectively.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the combined funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2014 and 2015:
Foreign offices and subsidiaries
2014
Non-contributory Contributory Non-contributory
pension benefits pension pension benefits
and SO" benefits and SIP
Pension benefits
Other benefits
Pension benefits
Other benefits
Change in benefit obligation:
Benefit obligation at beginning of fiscal
year Yl.433,16!
Service cost 36,147
Interest cost 17,448
Plan participants' conUibutions —
Acquisitions/ Divestitures (807)
Amendments (32)
Actuarial loss (gain) 26,417
Benefits paid (55,608)
Lump-sum payment (14,313)
Translation adjustments and other 224,238")
Benefit obligation at end of fiscal year 1,666,651
Change in plan assets:
Fair value of plan assets at beginning of fiscal
year 1,462,406
Actual return on plan assets 124,355
Employer contributions 31,640
Acquisitions/Divestitures 176
Plan participants' contributions —
Benefits paid (55,608)
Translation adjustments and other 441,360'"
Fair value of plan assets at end of fiscal year 2,004,329
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost ¥ 357,817
Accrued benefit cost (20,139)
Net amount recognized ¥ 337,678
1,526 1,352 648
37,540 19,794
(40) 39
180,682 (66,820) (15,623)
12,215 13,467 5
9,359 980 (24,716) (9,851) (158) 61,356
1,222 1,501 782
(3.104) 6,776 (2.493)
5,561
¥1,666,651 ¥283,224 ¥30,002 ¥345,881 Y 34.346
(2,966) (2,136)
5,920
13,095 15,966 6
(18.093) 82,807
(12,221) .(578) 53,372
2,004,329 326,753 • 40,774 57
1,503 1,549
782 (2,493) 3,904
43,561 41,423|1010|(9,851) 59,876
3,611 1,313
648 (2,136) 4,224
345,881 34,346 480,235 44,591
233,081 18,185 368,095 25,845
29,045 16,842|1010|(66,820)
(12,221) 50,226
368,095 25,845 451,993 31,090
¥ 498,504 ¥ 54,600 ¥ — ¥ 16,373 ¥ — (15,634) (32,386) (8,501) (44,615) (13,501)
¥ 482,870 ¥ 22,214 ¥(8,501) ¥(28,242) ¥(13,501)
Note:
(1) MUTB separated the substitutional portion of its contributory CDBP and transferred the related obligation and assets to the Japanese government. The transferred obligation and assets to the Japanese government were¥169,951 million and ¥52,971 million, respectively. Subsequent to the separation process, MUTB transferred the remaining corporate portion of its contributory CDBP into a non-contributory CDBP. The transferred obligation and assets to the non-contributory CDBP were¥224,238 million and¥441,313 million, respectively.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The aggregated accumulated benefit obligations of these plans at March 31, 2014 and 2015 were as follows
Domestic Foreign offices
subsidiaries and subsidiaries
2014 2015 2014 2015
(in millions)
Aggregated accumulated benefit obligations ¥1,639,563 ¥1,784,570 ¥318,971 ¥458,662
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the plans with accumulated benefit obligations in excess of plan assets at March 31, 2014 and 2015 were as follows:
Domestic Foreign offices
subsidiaries and subsidiaries
2014 2015 2014 2015
(in millions)
Projected benefit obligations- ¥55,684 ¥20,236 ¥57,972 ¥110,315
Accumulated benefit obligations 52,578 18,706 54,499 101,053
Fair value of plan assets ,, . .. 37,033 5,475 25,812 65,879
BTMU, MUTB, MUSHD, Mitsubishi UFJ NICOS and other subsidiaries paid special lump-sum termination benefits which are not a part of pension plans to certain early-terminated employees. The amounts charged to operations for such early termination benefits for the fiscal years ended March'31, 2013, 2014 and 2015 were ¥11,234 million, ¥7,358 million and ¥9,285 million, respectively.
The following table presents the amounts recognized in Accumulated OCI of the MUFG Group at March 31, 2014 and 2015:
2015
Foreign offices and subsidiaries 2014
Pension benefits and SIP
Other benefits
Pension benefits
Other benefits
Pension benefits
Pension benefits and SIP
(in millions)
Net actuarial loss ¥ 336,312 ¥ 234,190 ¥ 57,474 ¥3,585 ¥141,359 ¥11,891
Prior service cost (34,787) (25,814) 1,129 (41) (17,762) (2,941)
Gross amount recognized in Accumulated
OCI 301,525 208,376 58,603 3,544 123,597 8,950
Taxes (133,606) (100,391) (23,063) (767) (48,325) (2,726)
Net amount recognized in Accumulated
OCI ¥ 167,919 ¥ 107,985 ¥ 35,540 ¥2,777 ¥ 75,272 ¥ 6,224
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents OCI for the fiscal years ended March 31, 2014 and 2015:
Foreign offices and subsidiaries
2015
Pension benefits and SIP
Pension benefits and SIP
Pension Other Pension Other benefits benefits benefits benefiLs
Net actuarial loss (gain) arising during the
year ¥ (87,227)
Prior service cost arising during the year .. —
Losses (gains) due to amortization:
Net actuarial loss (23,941)
Prior service cost 11,793
Curtailment and settlement (41,456)
Foreign currency translation adjustments .. —
Total changes in Accumulated OCI ¥(140,831)
¥(90,964) 40
(13,900) 8,933 2,742
(in millions)
(273) 560
1,057
¥(47,687) ¥(5,130) ¥ 78,667 ¥7,166 862 ' — (18,014) (3,104)
(9,808) (776) (11,890)
(157) 69 1,189
— — (88)
15,130
16,353 1,167
¥(93,149) ¥(40,437) ¥(4,670) ¥ 64,994 ¥ 5,406
The following table presents the expected amounts that will be amortized from Accumulated OCI as components of net periodic benefit cost, before taxes, for the fiscal year ending March 31, 2016:
Domestic Foreign offices
subsidiaries and subsidiaries
Pension
benefits Pension Olher and SIP benefits benefits
(in millions)
Net actuarial loss ¥ 6,543 ¥14,090 ¥1,003
Prior service cost (8,009) (2,272) (919)
Total ¥(1,466) ¥11,818 ¥ 84
Investment policies
MUFG's investment policy for plan assets is based on an asset liability matching strategy which is intended to maintain adequate liquidity for benefit payments and to achieve a stable increase in the plan assets in the medium and long term through proper risk control and return maximization. As a general rule, investment policies for plan assets are reviewed periodically for some plans and in the following situations for all plans: (1) large fluctuations in pension plan liabilities caused by modifications to pension plans, or (2) changes in the market environment. The plan assets allocation strategies are the principal determinant in achieving expected investment returns on the plan assets. Actual asset allocations may fluctuate within acceptable ranges due to market value variability. Plan assets are managed by a combination of internal and external asset management companies and are rebalanced when market fluctuations cause an asset category to fall outside of its strategic asset allocation range. Performance of each plan asset category is compared against established indices and similar plan asset groups to evaluate whether the risk associated with the portfolio is appropriate for the level of return.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The weighted-average target asset allocation of plan assets for the pension benefits and olher benefits at March 31, 2015 was as follows:
Domestic Foreign offices subsidiaries and subsidiaries
Pension
benefits Pension Other
Asset category and SIP benefits benefits
Japanese equity securities 40.7% 0.4% —%
Japanese debt securities 37.4 — — j
Non-Japanese equity securities 11.2 57.7 70.0 j
Non-Japanese debt securities 4.5 28.4 30.0 !
Real estate — 9.7 —
Short-term assets 6.2 3.8 —
Total 100.0% 100.0% 100.0%
Basis and procedure for estimating long-term return of each asset category
MUFG's expected long-term rate of return on plan assets for domestic defined benefit pension plans and SIPs is based on a building-block methodology, which calculates the total long-term rate of return of the plan assets by aggregating the weighted rate of return derived from both long-term historical performance and forward-looking return expectations from each asset category.
MUFG has determined the expected long-term rate of return for each asset category as follows:
Japanese equity securities: the rate for Japanese debt securities plus a premium for the risk associated with Japanese equity securities
Japanese debt securities: economic growth rate of Japan
Non-Japanese equity securities: the rate for non-Japanese debt securities plus a premium for tlie risk associated with non-Japanese equity securities
Non-Japanese debt securities: global economic growth rate
Foreign offices and subsidiaries periodically reconsider the expected long-term rate of return for their plan assets. They evaluate the investment return volatility of different asset categories and compare the liability structure of their pension and other benefits to those of other companies, while considering their funding policy to maintain a funded status sufficient to meet participants' benefit obligations, and reduce long-term funding requirements and pension costs. Based on this information, foreign offices and subsidiaries update the expected long-term rate of return.
Cash flows
- The MUFG Group expects to contribute to tlie plan assets for the fiscal year ending March 31; 2016 based upon its current funded status and expected asset return assumptions as follows:
For the pension benefits of domestic subsidiaries
For the pension benefits of foreign offices and subsidiaries For the other benefits of foreign offices and subsidiaries .
¥53.7 billion 26.9 billion 2.8 billion
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Estimated future benefit payments
The following table presents benefit payments expected to be paid, which include the effect of expected future service for the fiscal years indicated:
Domestic subsidiaries
Pension benefits and SIP
Other benefits
Foreign offices and subsidiaries
Pension benefits
(in millions)
f 2,102 2,221 2,364 2,479 2,603 14,324
Fiscal year ending March 31:
2016 ¥ 81,587 ¥ 14,707
82,692 16,378
82,909 18,082
82,698 19,654
83,347 21,403
Thereafter (2021-2025) 418,026 135,939
Fair value measurement ofthe plan assets
The following is a description of the valuation methodologies used for plan assets measured at fair value as well as the classification ofthe plan assets pursuant to the fair value hierarchy described in Note 31:
Government bonds and other debt securities
When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure the fair value of securities and such securities are classified in Level 1 of the fair value hierarchy. Level 1 securities include Japanese government bonds, most non-Japanese government bonds and certain corporate bonds. When quoted prices are available but not traded actively, such securities are classified in Level 2 of the fair value hierarchy. When quoted prices are not available, the MUFG Group generally estimates fair values by using non-binding prices obtained from independent pricing vendors. Such securities are generally classified in Level 2 of the fair value hierarchy. Level 2 securities include certain non-Japanese government bonds, official institutions bonds and corporate bonds. When there is lack of liquidity for securities or significant inputs adopted to the fair value measurements are unobservable, such securities are classified in Level 3 of the fair value hierarchy. Such Level 3 securities mainly consist of non-Japanese corporate bonds.
Marketable equity securities
When quoted prices arc available in an active market, the MUFG Group adopts the quoted prices to measure the fair value of marketable equity securities and such securities arc classified in Level 1 of the fair value hierarchy. When quoted prices are available but not traded actively, such securities are classified in Level 2 of the fair value hierarchy
Japanese pooled funds
Japanese pooled funds are investment fund vehicles designed for Japanese pension plan investments under Japanese pension trust fund regulations. Based upon the nature of the funds' investments, Japanese pooled funds are categorized into four major fund types: Japanese marketable equity securities type, Japanese debt securities type, Non-Japanese marketable equity securities type and Non-Japanese debt securities type. The other types of funds invest in short-term financial instruments or loans receivable. Japanese pooled funds are generally readily
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
redeemable at their net asset values. The fair values of Japanese pooled funds are measured at their net asset values and generally classified in Level 2 ofthe fair value hierarchy. Japanese pooled funds classified in Level 3 ofthe fair value hierarchy have underlying investments in non-Japanese debt securities and loans receivable whose fair values are measured by using significant unobservable inputs and there is inherent lack of the funds' liquidity.
Other investment funds
Other investment funds include mutual funds, private investments funds, common collective funds, private equity funds and real estate funds. The listed investment funds or mutual funds are valued at quoted prices and classified in Level I or Level 2 of the fair value hierarchy. When there is no available market quotation, the fair values are generally determined at net asset values. The funds for which the fair values are measured at their net asset value are classified either in Level 2 or Level 3 depending on the nature of any restrictions on the investor's ability to redeem its investments at the measurement date or in the near future. Other investment funds classified in Level 3 of the fair value hierarchy mainly consist of certain private investment funds and real estate funds whose fair values are not measured at their net asset values but by using significant unobservable inputs and there is inherent lack of the funds'liquidity.
Japanese general accounts of life insurance companies
These instruments are contracts with life insurance companies that guarantee return of a certain level of fixed income, which are mainly invested in assets with low market risk such as Japanese debt securities. They are measured at conversion value and classified in Level 2 of the fair value hierarchy.
Other investments
Other investments mainly consist of call loans and the rest consist of miscellaneous accounts such as deposits with banks and short term investments. These instruments are generally classified in Level 1 or Level 2 ofthe fair value hierarchy depending on observability of the inputs to measure their fair values.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the fair value ofeach major category of plan assets as of March 31, 2014 and 2015:
Pension benefits and SIP Investments:
At March 31, 2014 Domestic subsidiaries Foreign offices and subsidiaries
Assets category Level 1 Level 2 Level 3 Total Level 1 ' Level 2 Level 3 Total
(in millions)
Japanese government bonds . . ¥ 65,309 ¥ — ¥ — ¥ 65,309 ¥ —¥ —¥ — ¥ —
Non-Japanese government
bonds 19,799 2,041 — 21,840 — 13,443 — 13,443
Other debt securities") 523 11,798 5,983 18,304 — 52,463 — 52,463
Japanese marketable equity
securities^ 713,152 127 — 713,279 — — — —
Non-Japanese marketable
equity securities 12,166 1,122 — 13,288 24,515 — — 24,515
Japanese pooled funds: Japanese marketable
equity securities'2' — 26,792 — 26,792 _____
Japanese debt
securities'" — 400,132 — 400,132 — — — —
Non-Japanese marketable
equity securities — 176,710 — 176,710 — — — —
Non-Japanese debt
securities — 91,642 7,342 98,984 — — — —
Other — 13,026 — 13,026 — — —¦ —
Total pooled funds — 708,302 7,342 715,644 —- — — —
Other investment funds — 132,105 43,446 175,551 155,637 87,103 26,740 269,480'")
Japanese general account of life insurance
companies'3) — 173,398 — 173,398 — — — —
Other investments 2,038 105,678 — 107,716 620 4,673 2,901 8,194
Total ¥812,987 ¥1,134,571 ¥56,771 ¥2,004,329 ¥180,772 ¥157,682 ¥29,641 ¥368,095
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2015 Domestic subsidiaries Foreign offices and subsidiaries
Assets category Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)
Japanese government
bonds " ¥ 66,766 ¥ — ¥ — ¥ 66,766 ¥ — ¥ —¥ —¥ —
Non-Japanese government
bonds 23,315 3,602 — 26,917 — 18,918 — 18,918
Other debt securities") 461 12,766 5,948 19,175 — 69,991 — 69,991
Japanese marketable equity
securities'2) 879,042 16 — 879,058 — — — —
Non-Japanese marketable
equity securities 14,500 1,325 — 15,825 35,539 755 — 36,294
Japanese pooled funds: Japanese marketable
equity securities'2) ... — 69,260 — 69,260 — — — —
Japanese debt
securities") — 349,937 — 349,937 — — — ¦¦ ¦ —
Non-Japanese marketable equity
securities — 201,539 — 201,539 — — — —
Non-Japanese debt
securities — 104,576 8,603 113,179 — — — —
Other — 88,212 — 88,212 — — ^ — — ¦
Total pooled funds — 813,524 8,603 822,127 — — — —
Other investment funds — 143,063 44,684 187,747 176,983 100,468 34,137 311,588'"'
Japanese general account of life insurance
companies'3) — 169,776 — 169,776 — — — —
Other investments 1,992 115,710 — 117,702 2,946 7,948- 4,308 15,202
Total ¥986,076 ¥1,259,782 ¥59,235 ¥2,305,093 ¥215,468 ¥198,080 ¥38,445 ¥451,993
Notes:
These debt securities include debt securities issued by the MUFG Group in the amount of ¥401 million (0.02% of plan assets) and ¥784 million (0.03% of plan assets) to the pension benefits and SIPs at March 31, 2014 and 2015, respectively.
Japanese marketable equity securities include common stocks issued by the MUFG Group in the amount of ¥7,354 million (0.31 % of plan assets) and ¥4,457 million (0.16% of plan assets) to the pension benefits and SIPs at March 31, 2014 and 2015, respectively.
"Japanese general accounts of life insurance companies" is a contract with life insurance companies that guarantees a return of approximately 1.24% from April 1, 2013 to March 31, 2014 and 1 24% from April 1, 2014 to March 31, 2015.
Olher investment funds ofthe foreign offices and subsidiaries are mainly comprised of ¥148,360 million of mutual funds and ¥25,486 million of real estate funds, and of ¥171,395 million of mutual funds and ¥32,554 million of real estate funds, which were held by MUAH at December 31, 2013 and 2014, respectively.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other post retirement plan investments:
Foreign offices and subsidiaries
March 31, 2014 March 31, 2015
Assets category Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)
Other debt securities ¥ —¥ 5,548 ¥ — ¥ 5,548 ¥ — ¥ 7,321 ¥ — ¥ 7,321
Non-Japanese marketable equity
securities — — — — — 58 — 58
Other investment funds'" 13,531 — — 13,531 15,762 — — 15,762
Other investments — 6,766 — 6,766 — 7,949 — 7,949
Total ¥13,531 ¥12,314 ¥ — ¥25,845 ¥15,762 ¥15,328 ¥ — ¥31,090
Note:
(1) Other investment funds mainly consist of mutual funds and common collective funds.
The following tables present a reconciliation of plan assets measured at fair value using significant unobservable inputs (Level 3) during the fiscal years ended March 31, 2014 and 2015:
Pension benefits and SIP Investments:
Domestic subsidiaries
Realized Unrealized Purchase, Transfer Transfer
March 31, gains gains sales and into out of March 31,
Assets category 2013 (losses) (losses) settlements Level 3 Level 3 2014
(in millions)
Other debt securities ¥ 6,134 ¥ (4) ¥ (85) ¥ (12) ¥ — ¥ (50)¥ 5,983
Japanese pooled funds:
Non-Japanese debt securities 6,846 — 483 13 — — 7,342
Total pooled funds 6,846 — 483 13 — — 7,342
Other investment funds 48,631 (2,616) 1,381 (3,950) — — 43,446
Total ¥61,611 ¥(2,620) ¥1,779 ¥(3,949) ¥ — ¥ (50) ¥56,771
Foreign offices and subsidiaries
Realized Unrealized Purchase, Transfer Transfer
March 31, gains gains sales and into out of March 31,
Assets category .2013 (losses) (losses) settlements Level 3 Level 3 2014
(in millions)
Other investment funds ¥14,486 ¥ — ¥6,688 ¥ 5,566 ¥ — ¥ —¥26,740
Other investments 1,983 11 864 43 — — 2,901
Total ¥16,469 ¥ 11 ¥7,552 ¥ 5,609 ¥ — ¥ —¥29,641
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Domestic subsidiaries
Realized Unrealized Purchase, Transfer Transfer
March 31, gains gains sales and inlo out of March 31,
Assels category 2014 (losses) (losses) settlements Level 3 Level 3 2015
(in millions)
Other debt securities ¥ 5,983 ¥ (2) ¥ 92 ¥ (85) ¥ — ¥ (40) ¥ 5,948
Japanese pooled funds:
Non-Japanese debt securities 7,342 — 1,020 241 — — 8,603
Total pooled funds 7,342 — 1,020 241 — —- 8,603
Other investment funds 43,446 (609) 3,696 (2,592) 743 — 44,684
Total ¥56,771 ¥ (611) ¥4,808 ¥(2,436) ¥ 743 ¥ (40) ¥59,235
Foreign offices and subsidiaries
Realized Unrealized Purchase, Transfer Transfer
March 31, gains gains sales and into out of March 31,
Assets category 2014 (losses) (losses) settlements Level 3 Level 3 2015
_ ... (in millions)
Other investment funds ¥26,740 ¥ — ¥7,343 ¥ 54 ¥ — ¥ —¥34,137
Other investments 2,901 158 1,135 114 — — 4,308
Total ¥29,641 ¥ 158 ¥8,478 ¥ 168 ¥ — ¥ — ¥38,445
Defined Contribution Plans
The MUFG Group maintains several qualified defined contribution plans in its domestic and foreign offices and subsidiaries, all of which are administered in accordance with applicable local laws and regulations. Each office and subsidiary matches eligible employee contributions up to a certain percentage of benefits-eligible compensation per pay period, subject to plan and legal limits. Terms of the plan, including matching percentage and vesting periods, are individually determined by each office and subsidiary.
The cost of these defined contribution plans charged to operations for the fiscal years ended March 31, 2013, 2014 and 2015 was ¥6,396 million, ¥8,443 million and ¥12,041 million, respectively.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. OTHER ASSETS AND LIABILITIES
Major components of other assets and liabilities at March 31, 2014 and 2015 were as follows:
2014 2015
(in millions)
Other assets:
Accounts receivable:
Receivables from brokers, dealers and customers for securities
transactions ¥2,073,499 ¥ 358,302
Other 1,135,009 1,146,057
Investments in equity method investees : 1,620,168 2,048,581
Prepaid benefit cost (Note 13) 412,417 514,877
Cash collateral pledged (Note 8) 1,045,851 1,716,302
Other 1,731,642 1,899,171
Total ¥8,018,586 ¥7,683,290
Other liabilities:
Accounts payable:
Payables to brokers, dealers and customers for securities transactions ¥ 583,845 ¥1,500,429
Other 1,499,191 1,420,680
Deferred tax liabilities 253,714 912,422
Allowance for off-balance sheet credit instruments 69,871 73,329
Accrued benefit cost (Note 13) 61,026 73,750
Guarantees and indemnifications' 44,824 45,268
Cash collateral received (Note 8) 454,506 906,456
Accrued and other liabilities 2,640,034 2,935,060
Total ¥5,607,011 ¥7,867,394
Investments in equity method investees include marketable equity securities carried at ¥1,033,806 million and ¥1,375,791 million at March 31, 2014 and 2015, respectively. Corresponding aggregated market values were ¥1,789,053 million and ¥2,348,395 million, respectively. Marketable equity securities include Morgan Stanley's common stocks carried at¥825,385 million and¥l,123,683 million at March 31, 2014 and 2015, respectively. As of March 31, 2015, the MUFG Group held approximately 21.9% of its common stock. Investments in equity method investees also include investments in Morgan Stanley MUFG Securities, Co., Ltd. at ¥163,520 million and ¥159,851 million at March 31, 2014 and 2015, respectively.
The MUFG Group periodically evaluates whether a loss in value of investments in equity method investees is other-than-temporary. As a result of evaluations, the MUFG Group recognized other-than-temporary declines in the value of an investment and recorded impairment losses related to certain affiliated companies of ¥14,635 million, ¥32,824 million and ¥102 million for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. The impairment losses are included in Equity in earnings of equity method investees—nel in the accompanying consolidated statements of income.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Summarized Financial Information of the MUFG Group's equity method investees
Summarized financial information of Morgan Stanley, the largest portion ofthe MUFG Group's equity method investees, as of March 31, 2014 and 2015, and for each of the three years ended March 31, 2015 is as follows:
2014 2015
(in billions)
Trading assets ¥26,712 ¥31,143
Securities purchased under agreements to resell 11,072 10,963
Securities borrowed 15,190 18,069
Total assets ¦. 85,566 99,633
Trading liabilities 11,485 15,028
Securities sold under agreements to repurchase and Securities loaned 15,083 10,457
Long-term borrowings 15,785 18,692
Total liabilities 78,334 90,564
Nonrcdcemable noncontrolling interests 329 157
2013 . 2014 . 2015 (in billions)
Net revenues ¥2,271 ¥3,333 ¥3,875
Total non-interest expenses '. 2,105 2,812 3,449
Income from continuing operations before income taxes 166 521 426
Net income applicable to Morgan Stanley 100 349 459
Summarized financial information of the MUFG Group's equity method investees, other than Morgan Stanley as of March 31, 2014 and 2015, and for each of the three years ended March 31, 2015 is as follows:
2014 2015
(in billions)
Net loans ¥ 9,493 ¥10,082
Total assets 16,277 18,063
Deposits 4,674 5,475
Total liabilities 12,247 13,766
Noncontrolling interests 457 581
2013 2014 2015
(in billions)
Total interest income ¥444 ¥543 ¥590
Total interest expense 92 165 198
Net interest income 352 378 392
Provision for credit losses 55 59 73
Income before income tax expense 163 214 248
Net income 124 159 194
15. OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES LENDING TRANSACTIONS
The following tables present, as of March 31, 2014 and 2015, the gross and net of the derivatives, resale and repurchase agreements, and securities borrowing and lending transactions, including the related gross amount subject to an enforceable master netting arrangement or similar agreement not offset in the consolidated balance
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
sheet. The MUFG Group primarily enters into International Swaps and Derivatives Association master netting agreements, master repurchase agreements and master securities lending agreements or similar agreements for derivative contracts, resale and repurchase agreements, and securities borrowing and lending transactions. In the event of default on or termination of any one contract, these agreements provide the contracting parties with the right to net a counterparty's rights and obligations and to liquidate and setoff collateral against any net amount owed by the counterparty. Generally, as the MUFG Group has elected to present such amounts on a gross basis, the amounts subject to these agreements are included in "Gross amounts not offset in the consolidated balance sheet" column in the tabular disclosure below. For certain transactions where a legal opinion with respect to the enforceability of netting has not been sought or obtained, the related amounts are not subject to enforceable master netting agreements and not included in "Gross amounts not offset in the consolidated balance sheet" column in the tabular disclosure below.
At March 31, 2014
Financial assets:
Derivative assets ¥11,810
Receivables under resale
agreements 10,346
Receivables under
securities borrowing
transactions 4,210
Total ¥26,366
Financial liabilities:
Derivative liabilities ¥11,765
Payables under repurchase
agreements"' 24,674
Payables under securities
lending transactions . . . 5,521 Obligations to return
securities received as
collateral 3,971
Total ¥45,931
4,210
¥ — ¥11,810 ¥(9,552) ¥(360)
(3,046) 7,300 (6,502) (7)
(3,614)
¥ — (3,046)
¥1,344 278 717
3,751 ¥6,090
¥(3,046) ¥23,320 ¥(19,668) ¥(367) ¥3,285
21,628 (21,345) 5,521 (4,795)
¥11,765 ¥ (9,437) ¥(984)
(5)
3,971
(9)
(220)
¥(3,046) ¥42,885 ¥(35,797) ¥(998)
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gross amounts Net amounts Gross amounts of offset in the presented in the
recognized consolidated consolidated Financial Cash collateral assets/ liabilities balance sheet balance sheet instruments received/pledged Net amounts
(in billions)
Financial assets:
Derivative assets ¥16,723 ¥ — ¥16,723 ¥(13,145) ¥ (732) ¥2,846
Receivables under resale
agreements 10,184 (2,911) 7,273 (6,137) — 1,136
Receivables under securities borrowing
transactions 4,660 — 4,660 (4,227) — 433
Total ¥31,567 ¥(2,911) ¥28,656 ¥(23,509) ¥ (732) ¥4,415
Financial liabilities:
Derivative liabilities ¥16,924 ¥ — ¥16,924 ¥(12,930) ¥(1,475) ¥2,519
Payables under
repurchase "
agreements") 24,815 (2,911) 21,904 (21,710) (3) 191
Payables under securities
lending transactions 8,205 — 8,205 (5,808) (16) 2,381
Obligations to return securities received as
collateral 2,651 — 2,651 (273) — 2,378
Total ¥52,595 ¥(2,911) ¥49,684 ¥(40,721) ¥(1,494) ¥7,469
Note:
(1) Payables under repurchase agreements in the above table include those under long-term repurchase agreements of ¥360,220 million and ¥1,175,858 million al March 31, 2014 and 2015, respectively, which are included in Long-term debt in the accompanying consolidated balance sheets.
16. PREFERRED STOCK
Pursuant to the Articles of Incorporation, MUFG had been authorized to issue 400,000,000 shares of Class 5 Preferred Stock, 200,000,000 shares of Class 6 Preferred Stock, 200,000,000 shares of Class 7 Preferred Stock and 1,000 shares of Class 11 Preferred Stock without par value as of March 31, 2015.
All classes of preferred stock are non-voting and have preference over common stock for the payment of dividends and the distribution of assets in the event of a liquidation or dissolution of MUFG. They are all non-cumulative and non-participating with respect to dividend payments. Shareholders of Class 5 and 11 Preferred Stock have the right to receive a liquidation distribution at ¥2,500 and ¥1,000 per share, respectively, and do not have the right to participate in any further liquidation distributions.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The number of shares of preferred stock issued and outstanding at March 3), 2013, 2014 and 2015 was as follows:
Outstanding at Outstanding at Outstanding at
March 31, 2013 Net change March 31, 2014 Net change March 31, 2015
(number of shares)
Preferred stock:
Class 5 156,000,000 — 156,000,000 (156,000,000) —
Class 11 1,000 — 1,000 (1,000) —
Total 156,001,000 — 156,001,000 (156,001,000) —
None of the Class 6 and 7 Preferred Stock has been issued.
The aggregate liquidation preference of preferred stock issued and outstanding at March 31, 2013, 2014 and 2015 was as follows:
Aggregate amount at Aggregate amount at Aggregate amount at
March 31, 2013 Net change March 31, 2014 Net change March 31, 2015
(in millions)
Preferred stock:
Class 5 ¥390,000 ¥ — ¥390,000 ¥(390,000) ¥ —
Class 11 _2 — |99| (1) —
Total ¥390,001 ¥ — ¥390,001 ¥(390,001) ¥ —
On June 27, 2013, amendments to the Articles of Incorporation were made with respect to Class 3 Preferred Stock. As a result, the aggregate number of shares authorized to be issued by MUFG was reduced from 120,000,000 shares to nil and the authority to issue Class 3 Preferred Shares was removed.
The portion of proceeds from the sale of shares that is designated as capital stock is determined by resolution of the Board of Directors of MUFG, however, at least 50% of the issue price of newly issued shares is required to be designated as capital stock at the time of incorporation or share issuance under the Company Law. Proceeds in excess of amounts designated as capital stock are designated as capital surplus. However, these provisions are not applied in a company reorganization, such as a merger, company split and share exchange. Preferred Stock Classes 8 through 12 were issued in exchange for UFJ Holdings' preferred slock and recorded in Capital surplus.
Class 5 Preferred Stock
Class 5 Preferred Stock is redeemable at the option of MUFG. At the time of issuance, the Board of Directors determines an issue price, an annual dividend (not to exceed ¥250 per share), and redemption terms, including a redemption price.
Class 5 Preferred Stock was issued by means of a third-party allocation to Nippon Life Insurance Company, Meiji Yasuda Life Insurance Company, TAIYO LIFE INSURANCE COMPANY, DAIDO LIFE INSURANCE COMPANY, Tokio Marine & Nichido Fire Insurance Co., Ltd., NIPPONKOA Insurance Company, Limited and Aioi Nissay Dowa Insurance Company, Limited. The preferred stock does not have voting rights at any general meetings of shareholders, unless otherwise provided by applicable laws and regulations. Preferred dividends are set to be ¥115 per share annually, except as of March 31, 2009'. Preferred dividends were ¥43 per share as of March 31, 2009.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On April 1, 2014, MUFG acquired all ofthe First Series of Class 5 Preferred Stock, and canceled all ofthe acquired shares. The acquisition price was ¥2,500 per share, totaling ¥390,000 million.
Class 11 Preferred Stock
Class 11 preferred stockholders are entitled to receive annual non-cumulative dividends of ¥5.30 per share with priority over common stockholders.
Class 11 Preferred Stock is convertible into fully paid shares of MUFG common stock at the election of holders from establishment of MUFG to July 31, 2014, except during certain excluded periods, at an initial conversion price of ¥918.70 per share of common stock, subject to anti-dilution adjustments. The conversion price was subject to reset annually on July 15 from 2006 to 2013 to the average market price of the common stock for the 30 trading day period, if the average market price was less than the conversion price prior to the reset but not less than ¥918.70 per share. The acquisition price and the acquisition floor price of Class 11 Preferred Stock were adjusted as ¥889.60 per share on December 15, 2008, ¥888.40 per share on January 14, 2009, ¥867.60 per share on December 21, 2009, and ¥865.90 per share on December 25, 2009, in accordance with the provisions relating to the adjustment of the acquisition price set forth in the terms and conditions of Class 11 Preferred Stock.
On August 1, 2014, 1,000 shares of Class 11 Preferred Stock were acquired in exchange for 1,245 shares of common stock, and those Preferred Stock had been recorded as Treasury stock.
On August 29, 2014, 1,000 shares of Class 11 Preferred Stock were retired.
These retirements of Class 5 and Class 11 Preferred Stock were accounted for by decreasing Capital surplus by ¥390,001 million. As of March 31, 2015, there was no preferred stock outstanding and the entire amount of Capital stock on the consolidated balance sheet consisted of only common stock.
17. COMMON STOCK AND CAPITAL SURPLUS
The changes in the number of issued shares of common stock during the fiscal years ended March 31, 2013, 2014 and 2015 were as follows:
2013 2014 2015
(shares)
Balance at beginning of fiscal year 14,154,534,220 14,158,585,720 14,164,026,420
Issuance of new shares of common stock by way of
exercise of the stock acquisition rights 4,051,500 5,440,700 4,827,400
Balance at end of fiscal year 14,158,585,720 14,164,026,420 14,168,853,820
Under the Company Law, issuances of common stock, including conversions of bonds and notes, are required to be credited to the common stock account for af least 50% of the proceeds and to the legal capital surplus account ("legal capital surplus") for the remaining amounts.
The Company Law permits Japanese companies, upon approval by the Board of Directors, to issue shares in the form of a "stock split," as defined in the Company Law. Also, prior to April 1, 1991, Japanese companies were permitted to issue free share distributions. BTMU and MUTB from time to time made free share distributions. These free distributions usually ranged from 5% to 10% of outstanding common stock and
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
publicly-owned corporations in the United States issuing shares in similar transactions would be required to account for them as stock dividends as ofthe shareholders' record date by reducing retained earnings and increasing the appropriate capital accounts by an amount equal to the fair value of the shares issued. The application of such U.S. accounting practices to the cumulative free distributions made by BTMU and MUTB at March 31, 2015, would have increased capital accounts by ¥1,910,106 million with a corresponding decrease in unappropriated retained earnings.
The Company Law permits that common stock, legal reserve, additional paid-in capital, and other capital surplus and retained earnings can be transferred among these accounts under certain conditions upon the approval of a shareholders' meeting. The Company Law limits the increase of paid in capital in case disposition of treasury stock and issuance of common stock are performed at the same time.
As for Capital surplus, the fee retained by MUFG's subsidiary as underwriting compensation, net of stock issuance expense, was included in the total Capital surplus balance.
Treasury Stock
The Company Law permits Japanese companies to effect purchases of their own shares pursuant to a resolution by the shareholders at an annual general meeting until the conclusion of the following ordinary general meeting of shareholders, and to hold such shares as their treasury stock indefinitely regardless of purpose. However, the Company Law requires the amount of treasury stock purchased should be within the amount of retained earnings available for dividends. Disposition of treasury stock is subject to the approval ofthe Board of Directors and is to follow the procedures similar to a public offering of shares for subscription.
From November 17, 2014 to December 18, 2014, MUFG repurchased 148,595,500 shares of MUFG's common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 14, 2014. The repurchase plan, as authorized by the Board of Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 180,000,000 shares, which represents the equivalent of 1.27% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies.
Parent Company Shares Held by Subsidiaries and Affiliated Companies
At March 31, 2015, certain subsidiaries and affiliated companies owned shares of common stock of MUFG. Such shares are included in treasury stock in the accompanying consolidated balance sheets and deducted from the MUFG's shareholders' equity.
18. RETAINED EARNINGS, LEGAL RESERVE AND DIVIDENDS
In addition to the Company Law, Japanese banks, including BTMU and MUTB, are required to comply with the Banking Law of Japan (the "Banking Law").
Legal Reserve Set Aside as Appropriation of Retained Earnings and Legal Capital Surplus Under the Company Law
The Company Law provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period shall be
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside, as an appropriation of retained earnings and the legal capital surplus equals 25% of stated capital as defined in the Company Law.
Under the Banking Law
The Banking Law provides that an amount at least equal to 20% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal year shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as appropriation of retained earnings and the legal capital surplus equals 100% of stated capital as defined in the Company Law.
Transfer of Legal Reserve Under the Company Law
Under the Company Law, Japanese companies, including MUFG, were permitted, pursuant to a resolution by the shareholders at a general meeting,.to.make legal reserve set.asidc as appropriation of retained earnings and legal capital surplus available for dividends until the aggregate.amount of the legal reserve and legal capital surplus equals 25% of stated capital as defined in the Company Law.
Under the Company Law, Japanese companies, including MUFG, BTMU and MUTB, are permitted, primarily pursuant to a resolution by the shareholders at a general meeting, to transfer legal capital surplus-and legal reserve to stated capital and/or retained earnings without limitations of thresholds, Uiereby effectively removing the thresholds provided for in the Company Law and Banking Law at the company's discretion.
Under the Banking Law
Under the Banking Law, Japanese banks, including BTMU and MUTB, were permitted, pursuant to a resolution by the shareholders at a general meeting, to make legal reserve set aside as an appropriation of retained earnings and legal capital surplus available for dividends until die aggregate amount of the legal reserve and legal capital surplus equals 100% of stated capital as defined in the Company Law.
Unappropriated Retained Earnings and Dividends
In addition to the provision that requires an appropriation for legal reserve as described above, the Company Law and the Banking Law impose certain limitations oh the amount available for dividends.
Under the Company Law, the amount available for dividends is based on the amount recorded in MUFG's general books of account maintained in accordance with accounting principles generally accepted in Japan ("Japanese GAAP"). The adjustments included in the accompanying consolidated financial statements but not recorded in MUFG's general books of account, as explained in Note 1, have no effect on the determination of retained earnings available for dividends under the Company Law. Under the Banking Law, MUFG, BTMU and MUTB have to meet the minimum capital adequacy requirements and distributions of retained earnings of MUFG, BTMU and MUTB, which are otherwise distributable to shareholders, are restricted in order to maintain the minimum capital requirements.
MUFG was established on April 2, 2001 with common stock of ¥924,400 million, preferred stock of ¥222,100 million, legal capital surplus of ¥2,838,693 million and no retained earnings in accordance with the Commercial Code of Japan ("the Code"), which was replaced by the Company Law, and Japanese GAAP.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On October 1, 2005, MUFG started with common slock and preferred stock of ¥1,383,052 million, legal capital surplus of ¥3,577,570 million and retained earnings of ¥757,458 million in accordance with the Code and Japanese GAAP.
MUFG's amount available for dividends, at March 31, 2015, was ¥4,202,1 16 million, which is based on the amount recorded in MUFG's general books of account under Japanese GAAP.
Annual dividends, including those for preferred stock, are approved by the shareholders at an annual general meeting held subsequent to the fiscal year to which the dividends are applicable. In addition, a semi-annual interim dividend payment may be made by resolution of the Board of Directors, subject to limitations imposed by the Company Law and the Banking Law.
In the accompanying consolidated statements of equity, dividends and appropriations to legal reserve shown for each fiscal year represent dividends approved and paid during the fiscal year and the related appropriation to legal reserve.
19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the changes in Accumulated OCI, net of tax and net of noncontrolling interests, for the fiscal years ended March 31, 2013, 2014 and 2015:
2013 2014 2015
(ill millions)
Accumulated other comprehensive income (loss), net of taxes:
Net unrealized gains on investment securities:
Balance at beginning of fiscal year ¥ 482,434 ¥1,106,316 ¥1,272,723
Net change during the fiscal year 623,882 166,407 1,031,832
Balance at end of fiscal year ¥1,106,316 ¥1,272,723 ¥2,304,555
Net unrealized gains (losses) on derivatives qualifying for cash flow hedges:
Balance at beginning of fiscal year ¥ (1,253) ¥ 2,170 ¥ 1,809
Net change during the fiscal year 3,423 (361) 899
Balance at end of fiscal year ¥ 2,170 ¥ 1,809 ¥ 2,708
Defined benefit plans:
Balance at beginning of fiscal year ¥(401,923) ¥(322,537) ¥(206,336)
Net change during the fiscal year 79,386 116,201 18,696
Balance at end of fiscal year ¥ (322,537) ¥ (206,336) ¥(187,640)
Foreign currency translation adjustments:
Balance at beginning of fiscal year ¥(675,658) ¥(211,602) ¥ 289,486
Net change during the fiscal year 464,056 501,088 658,146
Balance at end of fiscal year ¥ (211,602) ¥ 289,486 ¥ 947,632
Balance at end of fiscal year ¥ 574,347 ¥1,357,682 ¥3,067,255
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the before tax and net of tax changes in each component of Accumulated OCI for the fiscal years ended March 31, 2013, 2014 and 2015:
2013 2014 2015
Tax Tax Tax
(expense) (expense) (expense)
Before tax or benefit Net of tax Before tax or benefit Net of tax Before tax or benefit Net of tax
(in millions)
Net unrealized gains (losses) on inveslment securities: Net unrealized gains on
investment securities ... ¥1,108,665 ¥(390,387) ¥ 718,278 ¥ 453,494 ¥(178,200) ¥ 275,294 ¥1,721,877 ¥(625,204) ¥1,096,673 Reclassification adjustment for gains included in net income before attribution of noncontrolling
interests (143,664) 53,856 (89,808) (215,553) 81,778 (133,775) (143,899) 47,043 (96,856)
Nclchange 965,001 (336,531) 628,470 237,941 (96,422) 141,519 1,577,978 (578,161) 999,817
Net unrealized gains (losses) on inveslment securities attributable to noncontrolling
interests.: 4,588 (24,888) (32,015)
Net unrealized gains on investment securities attributable to Mitsubishi UFJ
Financial Group 623,882 166,407 1,031,832
Net unrealized gains (losses) on derivatives qualifying for cash flow hedges:
Nel unrealized gains on derivatives qualifying
for cash flow hedges... 6,850' (2,693) 4,157 3,615 (1,419) 2,196 13,853 (5,448) 8,405 Reclassification adjustment for gains included in net income before attribution of noncontrolling
interests (1,210) 476 (734) (4,211) 1,654 (2,557) (12,363) 4,857 (7,506)
Netchange... 5,640 (2.217) 3,423 (596) 235 (361) 1,490 (591) 899
Net unrealized gains on derivatives qualifying for cash flow hedges attributable (o noncontrolling
interests — — —
Net unrealized gains (losses) on derivatives qualifying for cash llow hedges attributable to Mitsubishi UFJ
Financial Group 3,423 (361) 899
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2013 2014 2015
Tax Tax Tax
(expense) (expense) (expense)
Before tax or benefit Net of tax Before tax or benefit Net of tax Before tax or benefit Net of lax
(in millions)
Defined benefit plans
Defined benefit plans ... 81,568 (27,506) 54,062 122,644 (45,709) 76,935 " 12,176 (2,052) 10,124 , Reclassification
adjustment for losses included in net income before attribution of noncontrolling
interests 41,642 (15,707) 25,935 64,519 (23,806) 40,713 12,716 (3,913) 8,803
Net change 123,210 (43,213) 79,997 187,163 (69,515) 117,648 24,892 (5,965) 18,927
Defined benefit plans attributable to noncontrolling
interests 611 1,447 231
Defined benefit plans attributable to Mitsubishi UFJ
Financial Group 79,386 116,201 18,696
Foreign currency translation adjustments:
Foreign currency translation
adjustments 437,485 406 437,891 557,941 (50,516) 507,425 782,744 (94,616) 688,128
Reclassification
adjustment for losses included in net income before attribution of noncontrolling
interests 48,311 (18,943) .29,368 1,603 (898) 705 1,109 (719) 390
Netchange 485,796 (18,537) 467,259 559,544 (51,414) 508,130 783,853 (95,335) 688,518
Foreign currency
translation adjustments
attributable to noncontrolling
interests 3,203 7,042 30,372
Foreign currency
translation adjustments attributable to Mitsubishi UFJ
Financial Group 464,056 501,088 658,146
Other comprehensive income attributable to Mitsubishi
UFJ Financial Group ¥1,170,747 ¥ 783,335 ¥1,709,573
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tabic presents the effect of the reclassification of significant items out of Accumulated OCI on the respective line items ofthe accompanying consolidated statements of income for the fiscal years ended March 31, 2014 and 2015:
Fiscal year ended March 31, 2014 Details of Accumulated OCI components
Net unrealized losses (gains) on investment securities
Net gains on sales and redemptions of Available-for-sale
securities
Impairment losses on investment
securities
Other
Amount reclassified out of Accumulated OCI
(in millions)
¥(218,150)
2,622
(25)
(215,553) 81,778
¥(133,775)
Line items in the consolidated statements of income
Investment securities gains—net Investment securities gains—net
Total before tax Income tax expense
Net of tax
Net unrealized losses (gains) on derivatives qualifying for cash flow hedges
Interest rate contracts
Other
¥ (4,289)
78
(4,211) 1,654
¥ (2,557)
Interest income on Loans, including fees
Total before tax Income tax expense
Net of tax
Defined benefit plans
Net actuarial loss
Prior service cost Loss on settlements and curtailment, and other
Foreign currency translation
adjustments
¥ 34,525") (-1-1,-705)0)
41,699")
64,519 (23,806)
¥ 40,713
¥ 1,603
1,603 (898)
705
Total before tax Income tax expense
Net of tax
Other non-interest expenses
Total before tax Income lax expense
Net of tax
¥(153,642) 58,728
¥ (94,914)
Total before tax Income tax expense
Net of tax
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MITSUBISHI UFJ FINANCIAL GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STA
Fiscal year ended March 31, 2015 Amount reclassified out
Details of Accumulated OCI components Accumulated OCI
(in millions)
Net unrealized losses (gains) on investment securities
Net gains on sales and redemptions of Available-for-sale
securities ¥(147,702)
Impairment losses on investment
securities 4,014
Other (211)
(143,899) 47,043
¥ (96,856)
Net unrealized losses (gains) on derivatives qualifying for cash flow hedges
Interest rate contracts ¥ (12,117)
Other '(246)
(12,363) 4,857
¥ (7,506)
of
AND SUBSIDIARIES TEMENTS—(Continued)
Line items in the consolidated statements of income
Investment securities gains—net Investment securities gains—net
Total before tax Income tax expense
Net of tax
Interest income on Loans, including fees
Total before tax Income tax expense
Net of tax
Defined benefit plans
Net actuarial loss
Prior service cost
Loss (gain) on settlements and
curtailment, and other
¥ 26,0630 (10,682)0
(2,665)0
Foreign currency translation
adjustments
12,716 (3,913)
8,803
1,109
1,109 (719)
390
Total before lax Income tax expense
Net of tax
Other non-interest expenses
Total before tax Income tax expense
Net of tax
¥(142,437) 47,268
¥ (95,169)
Total before tax Income tax expense
Net of tax
Note:
(I) These Accumulated OCI components arc included in the compulation of net periodic benefit cost. See Nolc 13 for more information.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
20. NONCONTROLLING INTERESTS
Deconsolidation of Subsidiaries
The gains and losses due to deconsolidation of subsidiaries were recognized under "Other non-interest income" and "Other non-interest expenses," respectively, in the accompanying consolidated statements of income. The amount of net losses was ¥17,585 million for the fiscal year ended March 31, 2013, the amount of net gains was ¥3,142 million for the fiscal year ended March 31, 2014 and the amount of net losses was ¥22,736 million for the fiscal year ended March 31, 2015, respectively.
Changes in MUFG's Ownership Interests in Subsidiaries
The following table presents the effect on MUFG's shareholders' equity from changes in ownership of subsidiaries resulting from transactions wilh the noncontrolling interest shareholders during the fiscal years ended March 31, 2013, 2014 and 2015:
2013 2014 2015
(in millions)
Net income attributable to Mitsubishi UFJ Financial Group ¥i;069,124 ¥1,015,393 ¥1,531,127
Transactions between Mitsubishi UFJ Financial Group and the noncontrolling interest shareholders:
Purchase of shares of Mitsubishi UFJ Merrill Lynch PB Securities
Co., Ltd. from noncontrolling interest shareholders (Note 2) .. (30,655) — —
Reorganization of Mitsubishi UFJ Morgan Stanley PB Securities
Co., Ltd. (Note 2) — 13,839 —
Integration of BTMU's Bangkok Branch with Krungsri (Note 2) — — (15,269)
Other (412) 204 484
Net transfers from (to) the noncontrolling interest shareholders (31,067) 14,043 (14,785)
Change from net income attributable to Mitsubishi UFJ Financial Group and transactions between Mitsubishi UFJ Financial Group and the
noncontrolling interest shareholders ¥1,038,057 ¥1,029,436 ¥1,516,342
21. REGULATORY CAPITAL REQUIREMENTS Japan
MUFG, BTMU, MUTB and MUSHD are subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in which they operate. Failure to meet minimum capital requirements will initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on MUFG's consolidated financial statements.
In Japan, MUFG, BTMU, and MUTB are subject to regulatory capital requirements promulgated by ihe Financial Services Agency of Japan ("FSA") in accordance with the provisions of the Banking Law and related regulations. A banking institution is subject to the minimum capital requirements both on a consolidated basis and a sland-alone basis, and is required to maintain the minimum capital irrespective of whether it operates independently or as a subsidiary under the control of another company. When a bank holding company manages operations of its banking subsidiaries, it is required to maintain the minimum capital adequacy ratio on a consolidated basis in the same manner as its subsidiary banks. The FSA provides two sets of capital adequacy guidelines. One is a set of guidelines applicable to Japanese banks and bank holding companies with their foreign offices conducting international operations, as defined, and the other is applicable to Japanese banks and bank holding companies that are not engaged in international operations conducted by their foreign offices.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Under the capital adequacy guidelines applicable to a Japanese banking institution with international operations conducted by its foreign offices, from March 31, 2014 until March 30, 2015, the required minimum capital ratio is 4.0% for Common Equity Tier 1, 5.5% for Tier 1, and 8.0% for total capital, from March 31, 2015 until March 30, 2016, the required minimum capital ratio is 4.5% for Common Equity Tier 1, 6.0% for Tier 1, and 8.0% for total capital, and the requirement will be raised progressively over time.
The Basel Committee on Banking Supervision ("BCBS") ofthe Bank for International Settlements ("BIS") sets capital adequacy standards for all internationally active banks to ensure minimum levels of capital.
The Basel Committee revised the 1988 Accord ("Basel I") in June 2004 and released "International Convergence of Capital Measurement and Capital Standards: A Revised Framework" ("Basel II"). In addition, the Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global regulatory framework, which has been referred to as "Basel HI," in July and September 2010. In December 2010, the Basel Committee agreed on the details of the Basel III rules. Effective as of March 31, 2013, Basel III was adopted by the FSA with transitional measures for Japanese banking institutions with international operations conducted by their foreign offices. MUFG calculated capital ratios as of March 31, 2014 and 2015 in accordance with Basel III.
Capital Ratios
Basel III, the same as Basel II, is based on "three pillars": (1) minimum capital requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market discipline through the disclosure of information. The framework of the 1988 Accord, Basel I is improved and expanded to be included in "minimum capital requirements" as the first pillar of Basel II and Basel III.
As for the denominator ofthe capital ratio, the Basel framework provides the following risk based approaches and a range of options for determining risk-weighted assets.
"Credit Risk"
The Basel framework provides options for determining the risk-weighted assets for credit risk to allow banks to select approaches that are most appropriate for their level of risk assessment. Banks choose one of three approaches: "Standardized Approach," "Foundation Internal Ratings-Based Approach" or "Advanced Internal Ratings-Based Approach ("AIRE")."
"Market Risk"
In the "Amendment to the Capital Accord to incorporate market risks" of the year 1996, a choice between two methodologies "the Standardized Measurement Method" and "Internal Models Approach" is permitted. "Combination of Internal Models Approach and the Standardized Measurement Method" is also allowed under certain conditions. This is unchanged in Basel III.
"Operational Risk"
Operational risk, which is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, is newly added in Basel II. The Basel framework presents three methods for calculating operational risk capital charges: (i) the Basic Indicator Approach; (ii) the Standardized Approach; or (iii) Advanced Measurement Approaches ("AMA"). Banks adopt one of the three approaches to determine the risk-weighted assets for operational risk.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Banks need to obtain approval from their supervisors prior to adopting the following approaches to calculate capital requirements for each risk:
the Internal Ratings-Based Approach for credit risk
the Internal Models Approach for market risk
the Standardized Approach and AMA for operational risk
MUFG and most of its major subsidiaries adopt AIRB to calculate capital requirements for credit risk, adopt the AMA to calculate capital requirements for operational risk, as for market risk, adopt the Internal Models Approach mainly to calculate general market risk and adopt the Standardized Measurement Method to calculate specific risk.
The MUFG Group's proprietary assets do not include trust assets under management and administration in a capacity of agent or fiduciary and, accordingly trust account assets are generally not included in the capital measure. However, guarantees for trust principal are counted as off-balance sheet items requiring a capital charge in accordance with the capital adequacy guidelines.
Under Basel III, as adopted by the FSA, MUFG's risk-weighted assets increased, largely reflecting the new capital charge of the credit valuation adjustment (CVA), the credit risk related to asset value correlation multiplier for large financial institutions, and the 250% risk-weighted threshold items not deducted from Common Equity Tier 1 capital, as well as the conversion of certain Base! II capita! deductions to risk-weighted assets, such as securitizations.
On the other hand, as for the numerator ofthe capital ratio, there are three primary regulatory capital ratios used to assess capital adequacy, Common Equity Tier 1, Tier 1 and Total capital ratios, which are determined by dividing applicable capital components by risk-weighted assets. Tier 1 capital is redefined, and consists of Common Equity Tier 1 capital and Additional Tier 1 capital. Common Equity Tier 1 capital is a new category of capital primarily consisting of common stocks, capital surplus, retained earnings, and Accumulated OCI. Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined-benefit pension -fund-assets-will be-deducted from Common-Equity Tier- l . -The amount of adjustments to'be deducted will increase progressively over time. Additional Tier 1 capital generally consists of Basel III compliant preferred securities, other capital that meets Tier I requirements under Basel II standards, and net of regulatory adjustments. Subject to transitional measures, adjustments are made to Additional Tier 1 capital for items including intangible fixed assets, such as goodwill, and foreign currency translation adjustments, with the amounts of such adjustments to Additional Tier 1 capital progressively decreasing over time. Tier 2 capital generally consists of Basel III compliant deferred obligations, such as subordinated debts, capital that meet Tier II requirements under Basel II standards, certain allowances for credit losses and noncontrolling interests in subsidiaries' Tier 2 instruments. Subject to transitional measures, certain items including 45% of unrealized profit on Available-for-sale securities and revaluation of land are deducted from Tier 2 capital with the deduction amounts progressively decreasing over time. Total capital is defined as the sum of Tier 1 and Tier 2 capital.
Basel III will be adopted in accordance with transition arrangements. Examples of these transition arrangements include initially lower capita] adequacy ratios that will increase progressively up to the Basel 111 adequacy levels as issued by BCBS. In addition, individual elements of capital will be phased out progressively over the same period of time to arrive at a capital base that is consistent with that defined by BCBS in Basel III.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The risk-adjusted capital amounts and ratios of MUFG, BTMU and MUTB presented in the following table are based on amounts calculated in accordance with Japanese GAAP as required by the FSA.
For capital
Actual adequacy purposes
Amount Ratio Amount Ratio
(in millions, except percentages)
Consolidated:
At March 31, 2014:
Total capital (to risk-weighted assets):
MUFG ¥15,394,342 15.53% ¥7,926,746 8.00%
BTMU 12,256,176 15.57 6,294,248 8.00
MUTB 2,057,338 18.38 895,051 8.00
Tierl capital (to risk-weighted assets):
MUFG 12,341,870 12.45 5,449,638 5.50
BTMU 9,611,553 12.21 4,327,295 5.50
MUTB 1,652,410 14.76 615,347 5.50
Common Equity Tierl capital (to risk-weighted assets):
MUFG 11,153,032 11.25 3,963,373 4.00
BTMU 8,696,589 11.05 3,147,124 4.00
MUTB 1,590,690 14.21 447,525 4.00
At March 31, 2015:
Total capital (to risk-weighted assets):
MUFG ¥17,552,332 15.68% ¥8,952,125 8.00%
BTMU 13,730,706 15.61 7,034,576 8.00
MUTB 2,336,773 19.15 975,763 8.00
Tierl capital (to risk-weighted assets):
MUFG 14,130,341 12.62 6,714,094 6.00
BTMU 10,848,856 12.33 5,275,932 6.00
MUTB 1,861,451 15.26 731,822 6.00
Common Equity Tierl capital (to risk-weighted assets):
MUFG 12,466,619 11.14 5,035,570 4.50
BTMU 9,571,860 10.88 3,956,949 4.50
MUTB 1,793,578 14.70 548,867 4.50
Stand-alone:
At March 31,2014:
Total capital (to risk-weighted assets):
BTMU ¥11,582,199 17.52% ¥5,287,273 8.00%
MUTB 2,068,948 18.51 893,909 8.00
Tierl capital (to risk-weighted assets):
BTMU 9,087,335 13.74 3,635,000 5.50
MUTB 1,606,684 14.37 614,563 5.50
Common Equity Tierl capital (to risk-weighted assets):
BTMU 7,854,651 11.88 2,643,636 4^00
MUTB 1,533,733 13.72 446,955 4.00
At March 31,2015:
Total capital (to risk-weighted assets):
BTMU ¥12,466,987 17.23% ¥5,785,339 8.00%
MUTB 2,318,909 19.16 967,936 8.00
Tierl capital (to risk-weighted assets):
BTMU 9,791,887 13.54 4,339,004 6.00
MUTB 1,803,581 14.90 725,952 6.00
Common Equity Tierl capital (to risk-weighted assets):
BTMU 8,611,200 11.90 3,254,253 4.50
MUTB 1.736,419 14.35 544,464 4.50
MUMSS and other securities subsidiaries in Japan and overseas are also subject to regulatory capital requirements ofthe countries or jurisdictions in which they operate. In Japan, the Financial Instruments and
F-101
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Exchange Law and related ordinance require financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assels, as determined in accordance with Japanese GAAP, against amounts equivalent io market, counterparty credit and operations risks. Specific guidelines are issued as a ministerial ordinance which details the definition of essential components ofthe capital ratios, including capital, deductible fixed asset items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than 140% will call for regulatory reporting and a capital ratio of less than 100% may lead to a suspension of all or part of the business for a period of time and cancellation of a registration.
At March 31, 2014, MUMSS's capital accounts less certain fixed assets of ¥377,325 million on a standalone basis and ¥400,570 million on a consolidated basis, were 291.5% and 293.7% of the total amounts equivalent to market, counterparty credit and operations risks, respectively. At March 31, 2015, its capital accounts less certain fixed assets of.¥398,244 million on a stand-alone basis and ¥426,091 million on a consolidated basis, were 299.9% and 302.0% of the total amounts equivalent to market, counterparty credit and operations risks, respectively. During the fiscal year ended March 31, 2014, Mitsubishi UFJ Morgan Stanley PB Securities Co., Ltd. became MUMSS's consolidated subsidiary, and therefore was included in the calculation of the amounts and the ratios'oh a consolidated basis at March 31, 2014 and 2015.
Management believes, as of March 31, 2015, that MUFG, BTMU, MUTB and other regulated securities subsidiaries met all capital adequacy requirements to which they are subject.
Note:
MUMSS's capital ratio calculated as a percentage of capital accounts less certain fixed assets against amounts equivalent to market, counterparty credit and operations risks at March 31, 2014 has been restated from 292.9% to 291.5% on a stand-alone basis, and from 295.0% to 293.7% on a consolidated basis.
United States of America
In. the United States of America, MUAH and its banking subsidiary MUB, BTMU's largest subsidiaries operating outside Japan, are subject to various regulatory capital requirements administered by the U. S. Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary; actions-by regulators that, if-undertaken, could have a-material-effect on-MUAH's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, MUAH and MUB must meet specific capital guidelines that involve quantitative measures of MUAH's and MUB's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. MUAH's capital amounts and MUB's prompt corrective action classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies such as MUAH. MUB is subject to laws and regulations that limit the amount of dividends MUB can pay to MUAH.
Quantitative measures established by regulation to help ensure capital adequacy require MUAH and MUB to maintain minimum amounts and ratios (set forth in the tables below) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to quarterly average assets (as defined).
In July 2013, the Board of Governors of the Federal Reserve System and the other U.S. Federal banking agencies adopted final rules making significant changes to the U.S. regulatory capital framework for U.S. banking organizations (U.S. Basel III). The final rules are intended to conform this framework to the BCBS' current international regulatory capital accord (Basel III). These rules replace the U.S. Federal banking agencies' general risk-based capital rules (commonly known as "Basel I"), advanced approaches rules (commonly known
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
as "Basel II") that arc applicable to certain large banking organizations (including MUB), and leverage rules, and are subject to certain transition provisions. Among other requirements, the U.S. Basel III rules revise the definition of capital, increase minimum capital ratios, and introduce a minimum Common Equity Tier 1 capital ratio of 4.5% and a capital conservation buffer of 2.5% (for a total minimum Common Equity Tier 1 capital ratio of 7.0%) and a potential countercyclical buffer of up to 2.5%, which would be imposed by regulators at their discretion if it is determined that a period of excessive credit growth is contributing to an increase in financial institution systemic risk; mandate a Tier 1 leverage ratio of 4% and introduce, for large and internationally active bank holding companies, a Tier 1 Supplementary Leverage Ratio that is currently set at 3% and which incorporates off-balance sheet exposures; revise Basel I rules for calculating risk-weighted assets under a standardized approach; modify the existing Basel II advanced approaches rules for calculating risk-weighted assets under U.S. Basel III; and eliminate, for advanced approaches institutions, over a four-year phase-in period beginning on January 1, 2014, the Accumulated OCI or loss exclusion that had applied under Basel I and Basel II rules.
As of December 2014, MUAH received approval from the Board of Governors of the Federal Reserve System to opt-out of the advanced approaches rules for the holding company. MUAH is required to comply with the final U.S. Basel III capital rules beginning January 2015, with certain provisions subject to a phase-in period, while MUB continues to be subject to the final U.S. Basel III capital rules which became effective for advanced approaches institutions on January 1, 2014. The U.S. Basel ITT capital rules are scheduled to be substantially phased in by January 1, 2019. As the rules were only recently finalized, the interpretations and assumptions MUAH uses in estimating its calculations may change as it continues its review and interacts with the U.S. Federal banking agencies.
The figures on the tables below are calculated according to Basel I as MUAH does not meet the criteria in the new U.S. rules which would make adoption of the new Basel III rules mandatory. MUAH's and the MUB's actual capital amounts and ratios are presented as follows:
For capital
Actual adequacy purposes
Ratio Amount Ratio
(in millions, except percentages)
At December 31, 2013 (U.S. Basel I):
Total capital (to risk-weighted assets) Tier I capital (to risk-weighted assets)
Tier I capital (to quarterly average assets)(1)
At December 31, 2014 (U.S. Basel I):
Total capital (to risk-weighted assets) Tier I capital (to risk-weighted assets)
Tier I capital (to quarterly average assets)* '>
$13,499 14.61% $7,393 8.00% 11,471 12.41 3,696 4.00 11,471 11.27 4,073 4.00
$14,246 14.74% $7,733 8.00% 12,367 12.79 3,867 4.00 12,367 11.25 4,396 4.00
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Ratios OCC
For capital requires to be
Actual adequacy purposes "well capitalized"
Amount Ratio Amount Ratio Amount Ratio
(in millions, except percentages)
MUB:
At December 31, 2013 (U.S. Basel I):
Total capital (to risk-weighted assets) $12,990 14.91% $6,970 8.00% $8,713 10.00%
Tier I capital (to risk-weighted assels) 11,274 12.94 3,485 4.00 5,228 6.00
Tier I capital (to quarterly average
assets)") 11,274 11.13 4,051 4.00 5,063 5.00
At December 31, 2014 (U.S. Basel III):
Total capital (to risk-weighted assets) $13,656 14.78% $7,389 8.00% $9,237 10.00%
Tier I capital (to risk-weighted assets) 12,088 13.09 5,080 5.50 5,542 6.00
Tier I capital (to quarterly average
assets)") 12,088 11.09 4,361 4.00 5,452 5.00
Common Equity Tier I capital (to risk-
weighted assets) ... 12,087 13.09 n/a n/a n/a n/a
Note:
(1) Excludes certain intangible assets.
Management believes, as of December 3!, 2014, that ML'AH and ML'B met al! capital adenuacv requirements to which they are subject.
As of December 31, 2013 and 2014, the notification from the U.S. Office of the Comptroller of the Currency ("OCC") categorized MUB as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well capitalized," MUB must maintain a minimum total risk-based capital ratio of 10%, a Tier I risk-based capital ratio of 6%, and a Tier I capital, to quarterly average assets of 5% as set forth in the table. There are no conditions or events since that notification that management believes have changed MUB's category.
F-104
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. EARNINGS PER COMMON SHARE APPLICABLE TO COMMON SHAREHOLDERS OF MUFG
Reconciliations of net income and weighted average number of common shares outstanding used for the computation of basic EPS to the adjusted amounts for the computation of diluted EPS for the fiscal years ended March 31, 2013, 2014 and 2015 are as follows:
2013 2014 2015
(in millions)
Income (Numerator):
Net income attributable to Mitsubishi UFJ Financial Group ¥1,069,124 ¥ 1,015,393 ¥1,531,127
Income allocable to preferred shareholders:
Cash dividends paid (17,940) (17,940) (8,970)
Changes in a foreign affiliated company's interests in its
subsidiary — (3,301) —
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group 1,051,184 994,152 1,522,157
Effect of dilutive instruments:
Stock options and restricted stock units—Morgan Stanley .. (336) (1,875) (2,360)
Earnings applicable to common shareholders of Mitsubishi UFJ
Financial Group and assumed conversions ¥ 1,050,848 ¥ 992,277 ¥ 1,519,797
2013 2014 2015
(thousands of shares)
Shares (Denominator):
Weighted average common shares outstanding 14,148,060 14,158,698 14,118,469
Effect of dilutive instruments:
Convertible preferred stock |99|1 1
Stock options ' 21,019 21,381 19,175
Weighted average common shares for diluted computation 14,169,080 14,180,080 14,137,645
2013 2014 2015 •
(in yen) /
Earnings per common share applicable to common shareholders
of Mitsubishi UFJ Financial Group: Basic earnings per common share:
Earnings applicable to common shareholders of Mitsubislii
UFJ Financial Group ¥ 74.30 ¥ 70.21 ¥ 107.81
Diluted earnings per common share:
Earnings applicable to common shareholders of Mitsubishi
UFJ Financial Group ¥ 74.16 ¥ 69.98 ¥ 107.50
In computing the number of the potentially dilutive common shares for the fiscal years ended March 31, 2013 and 2014, Class 11 Preferred Stock has been based on the conversion price of ¥865.9. On August 1, 2014, all outstanding Class 11 Preferred Stock were mandatorily converted into shares of common stock at a conversion price of ¥802.6. The impact of the mandatory conversion of Class 11 Preferred Stock was reflected in computations of EPS and diluted EPS for the fiscal year ended March 31, 2015.
F-105
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
23. DERIVATIVE FINANCIAL INSTRUMENTS
The MUFG Group uses various derivative financial instruments both for trading purposes and for purposes other than trading (primarily risk management purposes) in the normal course of business to meet the financial needs of its customers, as a source of revenue and to manage its exposures to a variety of risks.
Market risk is the possibility that future changes in market indices make the financial instruments less valuable. The MUFG Group is a party to derivative financial instalments, including swaps, forwards, options and other types of derivatives, dealing primarily with market risk associated with interest rates, foreign currencies, equity and commodity prices, and credit risk associated with counterparty's nonperformance of transactions.
Credit risk is the possibility that a loss may result from a counterparty's failure to perform according to the terms and conditions ofthe contract, which may exceed the value of underlying collateral. To reduce credit risk, the MUFG Group may require collateral or guarantees based on a casc-by-case assessment of creditworthiness of each customer and evaluation of the instrument. The MUFG Group also uses master netting agreements in order to mitigate overall counterparty credit risk.
Trading Activities
The MUFG Group's trading activities include dealing and customer accommodation activities. As part of its trading activities, tlie MUFG Group offers a variety of derivative financial instruments for managing interest rate and foreign exchange risk to its domestic and foreign corporate and financial institution customers. The MUFG Group also enters into other types of derivative transactions, including equity and credit-related contracts, for its own account.
Risk Management Activities
As part of the MUFG Group's risk management activities, asset and liability management is viewed as one of the methods for the MUFG Group to manage its interest rate exposures on interest-bearing assets and liabilities. The MUFG Group uses certain derivative financial instalments in order to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. For example, an increase or a decrease in interest income and interest expense on hedged variable rate assets and liabilities as a result of interest rate fluctuations are expected to substantially offset the variability in earnings by gains and losses on the derivative instruments that are linked to these hedged assets and liabilities.
The MUFG Group enters into interest rate swaps and other contracts primarily to manage the interest rate risk of its loans, investment securities and deposit liabilities. Interest rate contracts, which are generally non-leveraged generic interest rate and basis swaps, options and futures, allow the MUFG Group to effectively manage its interest rate risk position. Option contracts primarily consist of caps, floors, swaptions and options on index futures. Futures contracts used for asset and liability management activities are primarily index futures providing for cash payments based upon the movement of an underlying rate index.
The MUFG Group enters into forward exchange contracts, currency swaps and other contracts in response to currency exposures resulting from on-balance sheet assets and liabilities denominated in foreign currencies in ¦ order to limit the net foreign exchange position by currency to an appropriate level.
Derivatives Designated as Hedges
The MUFG Group adopts hedging strategics and applies hedge accounting to certain derivative transactions entered by MUAH whose fiscal period ends on December 31.
F-106
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS—(Continued)
Cash Flow Hedges
MUAH used interest rate swaps with a notional amount of ¥1,175.4 billion at December 31, 2014 to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate on the London Interbank Offered Rate ("LIBOR") indexed loans. To the extent effective, payments received (or paid) under the swap contract offset fluctuations in interest income on loans caused by changes in the relevant LIBOR index. At December 31, 2014, the weighted average remaining life ofthe current cash flow hedges was approximately 3.37 years.
For cash flow hedges, the effective portion ofthe gain or loss on the hedging instruments is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged cash flows are recognized in net interest income. Gains and losses representing hedge ineffectiveness are recognized in earnings in the period in which they arise. At December 31, 2014, MUAH expects lo reclassify approximately ¥10.9 billion of income from Accumulated OCI to net interest income during the year ending December 31, 2015. This amount could differ from amounts actually realized due to changes in interest rates, hedge terminations or the addition of olher hedges subsequent to December 31, 2014.
Fair Value Hedges
MUAH engages in an interest rate hedging strategy in which one or more interest rate swaps are associated with a specified interest bearing liability, in order to convert the liability from a fixed rate to a floating rate instrument. This strategy mitigates the changes in fair value of the hedged liability caused by changes in the designated benchmark interest rate, U.S. dollar LIBOR.
For fair value hedges, any ineffectiveness is recognized in noninterest expense in the period in which it arises. The change in the fair value of the hedged item and the hedging instrument, to the extent completely effective, offsets with no impact on earnings. For the fiscal year ended December 31, 2014, MUAH recorded gains on the hedging instruments and losses on the hedged liability, both of which were less than¥l billion.
Notional Amounts of Derivative Contracts
The following table summarizes the notional amounts of derivative contracts at March 31, 2014 and 2015:
Notional amounts'" 2014 2015 (in trillions)
Interest rate contracts ¥ 962.5 ¥1,131.4
Foreign exchange contracts 169.5 193.1
Equity contracts 3.1 4.1
Commodity contracts 2.5 1.0
Credit derivatives " 7.1 6.8
Others 2/7 3T
Total ¥1,147.4 ¥1,339.5
Note:
(1) Includes both written and purchased positions.
F-107
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impact of Derivatives' on the Consolidated Balance Sheets
The following table summarizes fair value information on derivative instruments that are recorded on the MUFG Group's consolidated balance sheets at March 31, 2014 and 2015:
Fair value uf derivative instruments
March 31, 2015"»s'
Not designated Designated Total Not designated Designated Total as hedges'21 as hedges'31 derivalives'41 as hedges'2' as hedges1-1' derivatives'4'
Derivative assets:
Interest rate contracts ¥ 8,616
Foreign exchange contracts 2,916
Equity contracts 149
Commodity contracts 69
Credit derivatives 57
Others'6' |910|Total derivative assets ¥11,809
Derivative liabilities:
Interest rate contracts ¥ 8,522
Foreign exchange contracts 2,999
Equity contracts 144
v-vmi"iOuity i*Gima\.\z> w
Credit derivatives 62
Others'6) (23)
Total derivative liabilities ¥11,764
(in billions)
¥11,435 4,867 250 94 70
|910|¥16,719
62 (23)
¥11,341 5,176 245
•72 (6)
¥16,924
¥11,439 4,867 250 94 70
|910|¥16,723
¥11,341 5,176 245
72 (6)
¥16,924
Notes:
The fair value of derivative instruments is presented on a gross basis even-when derivative instruments are subject to master netting agreements. Cash collateral payable and receivable associated wilh derivative instruments are nol added lo or netted against the fair value amounts.
The derivative instruments which are not designated as a hedging instrument are held for trading and risk management purposes, and are presented in Trading account assets/liabilities except for (6).'
The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered into by MUAH. The derivative instruments which are designated as hedging instruments arc presented in Other assets or Other liabilities on the accompanying consolidated balance sheets.
This table does not include contracts with embedded derivatives for which the fair value option has been elected.
For more information about fair value measurement and assumptions used to measure the fair value of derivatives, see Note 31.
Others include mainly bifurcated embedded derivatives carried at fair value, which are presented in Deposits and Long-term debt.
F-108
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS—(Continued)
Impact of Derivatives and Hedged Items on the Consolidated Statements of Income and Accumulated OCI
The following tables provide more detailed information regarding the derivative-related impact on the accompanying consolidated statements of income and Accumulated OCI by accounting designation for the fiscal years ended March 31, 2013, 2014 and 2015:
Gains and losses for trading and risk management derivatives (not designated as hedging instruments)
Trading and risk management derivatives gains and losses (Not designated as hedging instruments)
Fiscal year ended March 31, 2013 Fiscal year ended March 31, 2014 Fiscal year ended March 31, 2015
Foreign Trading Foreign Trading Foreign Trading
exchange account exchange account exchange account
gains (losses) profits (losses) gains (losses) profits (losses) gains (losses) profits (losses)
—net —net Total —net —net Total —net —net Total
(in billions)
Interest rate
contracts ¥— ¥121 ¥121 ¥— ¥ 30 ¥ 30 ¥ — ¥262 ¥262
Foreign exchange
contracts (92) — (92) (51) — (51) (217) — (217)
Equity
contracts — (138) (138) — (105) (105) — (255) (255)
Commodity
contracts —|99|4 —|99|3 — (6) (6)
Credit
derivatives ... — (11) (11) — (6) (6) — 5 5
Others _J2) (59) (61) (2) (6) (8) (J) J43) (44)
Total ¥(94) ¥ (83) ¥(177) ¥(53) ¥ (84) ¥(137) ¥(218) ¥(37) ¥(255)
Gains and losses for derivatives designated as cash flow hedges
For the fiscal year ended March 31,
2013 2014 2015
(in billions)
Gains recognized in Accumulated OCI on derivative instruments (Effective portion)
Interest rate contracts ¥|99|¥|99|¥ 13
Total ¥ 7 ¥ 3 ¥ 13
Gains reclassified from Accumulated OCI into income (Effective portion)
Interest rate contracts'0 ¥ 1 ¥ 4 ¥ 12
Total ¥ 1 ¥ 4 ¥ 12
Note:
(1) Included in Interest income.
F-109
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Embedded Derivatives
Features embedded in other non-derivative hybrid contracts are separated from the host contracts and measured at fair value when they are not clearly and closely related to the host contracts and meet the definition of a derivative. The change in the fair value of such an embedded derivative is recognized currently in earnings, unless it qualifies as a hedge. The fair value ofthe embedded derivative is presented in the accompanying consolidated balance sheets with the host contract. The MUFG Group accounts for credit-linked notes as host contracts with embedded derivatives and measures the entire contracts at fair value.
Credit Derivatives
The MUFG Group enters into credit derivatives to manage its credit risk exposure, to facilitate client transactions, and for proprietary trading purposes, under which they provide the counterparty protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. Types of such credit derivatives primarily include single name credit default swaps, index and basket credit default swaps and credit-linked notes. The MUFG Group will have to perform under a credit derivative if a credit event as defined under the contract occurs. Such credit events include bankruptcy, dissolution or insolvency of the referenced entity, default and restructuring of the obligations of the referenced entity. The MUFG Group's counterparties are banks, broker-dealers, insurance and other financial institutions. The contractual or notional amounts of these credit derivatives represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held or pledged. The table below summarizes certain information regarding protection sold through credit default swaps and credit-linked notes as of March 31, 2014 and 2015:
Protection sold
1 year or less
At March 31,2014:
1-5 years
Maximum potential/Notional amount by expiration period
Over 5 years
(in millions)
¥1,952,552 ¥ 78,741 ¥2,454,284 ¥(30,634)
180,168 2,750 232,497 1,326
4,221 — 5,353 (74)
2,136,941 81,491 2,692,134 (29,382)
Single name credit default swaps:
Investment grade'2) ¥422,991
Non-investment grade 49,579
Not rated 1,132
Total 473,702
83,816 166,629 251,385 (3,316)
Index and basket credit default swaps held by BTMU:
Investment grade'2' 940
83,816 166,629 251,385 (3,316)
Non-investment grade —
Total 940
1,000
463,443 7,407 51,527
339,606 7,407 51,527
398,540
Index and basket credit default swaps held by MUSHD:
Investment grade'2' 122,837
Non-investment grade —
i;ooo
522,377 (6,786)
Not rated —
Total 122,837
482,356 167,629 773,762 (10,102)
Total index and basket credit default swaps
¥2,619,297 ¥249,120 ¥3,465,896 ¥(39,484)
sold 123,777
¥ 4,546 ¥ 4,546 ¥ (4,368)
Total credit default swaps sold ¥597,479
Credit-linked notes'3) ¥ — ¥
F-110
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Protection sold
Maximum potential/Notional amount by expiration period
1 year Over
At March 31,2015: or less 1-5 years 5 years Total
(in millions)
Single name credit default swaps:
Investment graded ¥488,541 ¥1,743,295 ¥ 63,291 ¥2,295,127
Non-investment grade 52,903 226,666 5,300 284,869
Not rated 2,731 439 — 3,170
Total 544,175 1,970,400 68,591 2,583,166
Index and basket credit default swaps held by BTMU:
Investment graded — 195,481 109,409 304,890
Non-investment grade — 2,880 — 2,880
Total — 198,361 109,409 307,770
Index and basket credit default swaps held by MUSHD:
Investment grade'2) 55,856 273,097 5,000 333,953
Non-investment grade 56,349 — — 56,349
Not rated 16,383 76,682 — 93,065
Total 128,588 349,779 5,000 483,367
Total index and basket credit default swaps
sold 128,588 548,140 114,409 791,137
Total credit default swaps sold ¥672,763 ¥2,518,540 ¥183,000 ¥3,374,303
Credit-linked notes'3) ¥ — ¥ — ¥ — ¥ —
Notes:
Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.
The MUFG Group considers ratings of Baa3/BBB- or higher to meet the definition of investment grade.
Fair value amounts shown represent the fair value of the hybrid instruments.
Fair value
(Asset)/ Liability'"
¥(34,573) 8,017
(45)
(26,601)
(6,387)
(9)
(6,396)
(5,225) (180) (3,877)
(9,282)
(15,678) ¥(42,279) ¥ —
Single name credit default swaps—A credit default swap protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a premium to the MUFG Group and is protected for the period of the credit default swap. As the seller of protection, the MUFG Group in turn will have to perform under a credit default swap if a credit event as defined under the contracts occurs. In order to provide an indication of the current payment/performance risk of the credit default swaps, the external credit ratings, primarily those provided by Moody's and Standard & Poor's ("S&P"), of the underlying reference entity of the credit default swaps are disclosed.
Index and basket credit default swaps—Index and basket credit default swaps are credit default swaps that reference multiple'names through underlying baskets or portfolios of single name credit default swaps. Typically, in the event of a default on one ofthe underlying names, the MUFG Group, as the seller of protection, will have to pay a pro rata portion of the total notional amount of the credit default index or basket contract. In order to provide an indication of the current payment/performance risk of these credit default swaps, BTMU and MUSHD rating scale based upon the entity's internal ratings, which generally correspond to ratings defined by primarily Moody's and S&P, of the underlying reference entities comprising the basket or index were calculated and disclosed.
F-111
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Credit-linked notes ("CLNs")—The MUFG Group has invested in CLNs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuers of the notes. If there is a credit event ofthe reference entity underlying the CLN, the principal balance of the note may not be repaid in full to the MUFG Group. As part of its financing activities, MUSHD and other securities subsidiaries in Japan and overseas issue CLNs.
The MUFG Group may economically hedge its exposure to credit derivatives by entering into offsetting derivative contracts. The carrying value and notional amounts of credit protection sold in which the MUFG Group held purchased protection with identical underlying referenced entities were approximately ¥35 billion and ¥3,048 billion, respectively, at March 31, 2014, and approximately ¥35 billion and ¥2,928 billion, respectively, at March 31, 2015.
Collateral is held by the MUFG Group in relation to these instruments. Collateral requirements are determined at the counterparty level and cover numerous transactions and products as opposed to individual contracts.
Credit Risk, Liquidity Risk and Credit-risk-related Contingent Features
Certain ofthe MUFG Group's derivative instruments contain provisions that require the MUFG Group's debt to maintain an investment grade credit rating from each of the major credit rating agencies. If the MUFG Group's debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request payments on early termination or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position at March 31, 2014 and 2015 was approximately ¥2.5 trillion and ¥2.2 trillion, respectively, for which the MUFG Group has posted collateral of approximately ¥253 billion and ¥299 billion, respectively, in the normal course of business. The amount of additional collateral and early termination amount which could be requested if the MUFG Group's debt falls below investment grade was ¥125 billion and ¥43 billion, respectively, as of March 31, 2014 and¥132 billion and¥125 billion, respectively, as of March 31, 2015.
24. OBLIGATIONS UNDER GUARANTEES AND OTHER OFF-BALANCE SHEET INSTRUMENTS
Obligations under Guarantees
The MUFG Group provides customers with a variety of guarantees and similar arrangements, including standby letters of credit, financial and performance guarantees, credit protection, liquidity facilities, other off-balance sheet credit-related support and similar instruments, in order to meet the customers' financial and business needs. The tables below present the contractual or notional amounts of such guarantees at March 31, 2014 and 2015. The contractual or notional amounts of these instruments represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held or pledged.
For certain types of derivatives, such as written interest rate options and written currency options, the maximum potential future payments arc unlimited. Accordingly, it is impracticable to estimate the maximum potential amount of future payments. As such, the notional amounts of the related contracts, other than the maximum potential payments, are included in the table.
The MUFG Group mitigates its credit risk exposure resulting from guarantees by utilizing various techniques, including collateralization in the form of cash, securities, and real estate properties based on management's credit assessment ofthe guaranteed parties and the related credit profile. In order to manage the
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
credit risk exposure, tlie MUFG Group also enters into sub-participation contracts with third parties who will fund a portion of the credit facility and bear its share of the loss to be incurred in the event that the borrower fails to fulfill its obligations. The following table includes guarantees of ¥183.7 billion and ¥263.3 billion at March 31, 2014 and 2015, respectively, which are syndicated out to third parties. The contractual or notional amounts summarized in the following table do not necessarily bear any direct relationship to the future actual credit exposure, primarily because of risk management techniques of the MUFG Group.
Maximum potential/ Contractual or Notional amount
At March 31, 2014:
Standby letter of credit'and financial guarantees ¥ 3,774
Performance guarantees 2,571
Derivative instruments'1' 68,811
Liabilities of trust accounts 7,751
Total ¥82,907
Over 5 years
¥ 576
78 9,098 828
Amount by expiration period
1 year
or less 1-5 years (in billions)
1,766 33,281 6,580
¥ 2,082 ¥ 1,116
727 26,432 343
¥43,709 ¥28,618 ¥10,580
Maximum
potential/ . . . ... . .
Contractual Amount by expiration penod
or Notional 1 year Over
At March 31,2015: amount or less 1-5 years 5 years
(in billions)
Standby letter of credit and financial guarantees ¥ 4,550 ¥ 2,567 ¥ 1,440 ¥ 543
Performance guarantees 2,891 1,939 848 104
Derivative instruments'1' 60,935 30,345 21,781 8,809
Liabilities of trust accounts 8,291 6,854 555 882
Total ¥76,667 ¥41,705 ¥24,624 ¥10,338
Note:
(1) Credit derivatives sold by the MUFG Group arc excluded from this presentation
Nature of Guarantee Contracts
Standby letters of credit and financial guarantees generally include an obligation of an issuer or a designated third-party to guarantee the performance of the customer to the beneficiary under the terms of contracts such as lending contracts and other similar financial transactions. The MUFG Group is required to make payments to the guaranteed parties in the event that the customers fail to fulfill the obligations under the contracts. The guarantees whose contractual maturities are over 5 years arc mainly comprised of guarantees of housing loans.
Performance guarantees are contracts that contingently require the MUFG Group to make payments to the guaranteed party based on another patty's failure to perform under an obligating agreement, except financial obligation. For example, performance guarantees include guarantees of completion of construction projects.
Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in the guidance on guarantees include certain written options and credit default swaps. In order for the MUFG Group to determine if those derivative instruments meet the definition of guarantees as prescribed in the guidance on guarantees, the MUFG Group has to track whether the counterparties are actually exposed to losses that will result from the adverse change in the underlyings. Accordingly, the MUFG Group has disclosed information on
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
all credit default swaps and certain written options for which there is a possibility of meeting the definition of guarantees as'prescribed in the guidance on guarantees, regardless of whether the counteiparties have assets or liabilities related to the underlyings ofthe derivatives. However, credii derivatives sold by the MUFG Group at March 31, 2014 and 2015 are excluded from this presentation, as they are disclosed in Note 23.
Liabilities of trust accounts represent the trustee's potential responsibility for temporary payments to creditors of liabilities of trust accounts making use of funds of the MUFG Group, unless there are the certain agreements with trust creditors that have provisions limiting the MUFG Group's responsibility as a trustee to the tmst account assets. A trust may incur external liabilities to obtain certain services during the terms ofthe trust arrangement. While, in principle, any liabilities of a trust arc payable by the trust account and its beneficiaries, a trustee's responsibility may be interpreted to encompass temporary payments for the trust account liabilities when tlie trust account does not maintain sufficient liquidity available for such liabilities unless the agreement with trust creditors limits the tnistee's responsibility to the trust account assets. At March 31, 2014 and 2015, there were liabilities of ¥7,751 billion and ¥8,291 billion, respectively, in tlie segregated records of trust accounts including the amounts related to liabilities with provisions limiting trustee responsibility. Liabilities of trust accounts principally included obligations to refum collateral under security lending transactions. The MUFG Group has experienced no significant losses on such responsibilities and its exposure to the risk associated with the temporary payments is judged to be remote because trust account liabilities are generally covered by the corresponding trust account assets; the MUFG Group continuously monitors the liabilities of trust accounts and assesses the trust account's ability to perform its obligations to prevent any unfavorable outcomes; and the MUFG Group claims its recourse for its temporary payments against the trust account assets and tlie beneficiaries.
Carrying Amount
At March 31, 2014 and 2015, the carrying amounts of the liabilities related to guarantees and similar instruments set forth above were ¥1,441,092 million and ¥1,846,712 million, respectively, which are included in Other liabilities and Trading account liabilities. The guarantees and similar instruments comprising the largest components ofthe total were options sold in the amount of ¥1,396,178 million and ¥1,801,305 million as of March 31, 2014 and 2015, respectively. Credit derivatives sold by the MUFG Group at March 31, 2014 and 2015 are excluded 'from this presentation, as they are "disclosed in Note 23. In addition, Other liabilities also include an allowance for off-balance sheet instruments of ¥35,457 million and ¥46,751 million at March 31, 2014 and 2015, respectively, related to these transactions.
Performance Risk
The MUFG Group monitors performance risk of its guarantees using the same credit rating system utilized for estimating probabilities of default with its loan portfolio. The MUFG Group's credit rating system is consistent with both the method of evaluating credit risk under Basel III and those of third-party credit rating agencies. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the "Not rated" category in the following tables.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Presented in tlie tables below is the maximum potential amount of future payments classified based upon internal credit ratings as of March 31, 2014 and 2015. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts do not represent the anticipated losses, if any, on these guarantees.
Maximum potential/ Contractual or Notional amount
At March 31, 2014:
Standby letters of credit and financial guarantees ¥3,774
Performance guarantees 2,571
Total ¥6,345
Amount by borrower grade
Likely to become Bankrupt or Legally/ Virtually Bankrupt'2)
Close Normal Watch")
(in billions)
¥ 9
¥17
¥3,500 ¥171 2,493 53
¥5,993 ¥224
Not rated
¥ 94
17
¥111
Maximum potential/ Contractual or Notional amount
Amount by borrower grade
Likely to become Bankrupt or Legally/ Virtually Bankrupt'2)
Close Watch")
Not rated
Standby letters of credit and financial guarantees ¥4,550
Performance guarantees 2,891
Total ¥7,441
(in billions)
¥4,391 ¥146 2,816 46
¥7,207 ¥192
¥ 7 7
¥14
¥ 6 22
¥ 28
Notes:
Borrowers classified as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of serious concern wilh respect to its business performance and financial condition, including business problems requiring long-term solutions, or the borrower's loans are TDRs or loans contractually past due 90 days or more for special reasons.
Borrowers classified as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
The guarantees the MUFG Group does not classify based upon internal credit ratings are as follows.
The MUFG Group records all derivative contracts at fair value. Aggregate market risk limits have been established, and market risk measures are routinely monitored against these limits. The MUFG Group also manages its exposure to these derivative contracts through a variety of risk mitigation strategies, including, but not limited to, offsetting economic hedge positions. The MUFG Group expects the risk of loss to be remote and believes that the notional amounts of the derivative contracts generally exceed its exposure.
Liabilities of trust accounts represent the trustee's potential responsibility for temporary payments to creditors of liabilities of trust accounts making use of funds of the MUFG Group. The MUFG Group has experienced no significant losses on such responsibilities and its exposure to the risk associated with the temporary payments is judged to be remote because trust account liabilities are generally covered by the corresponding trust account assets.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The MUFG Group conducts securities lending transactions for institutional customers as a fully disclosed agent. At limes, securities lending indemnifications are issued to guarantee that a security lending customer will be made whole in the event the borrower does not return ihe security subject to the lending agreement and collateral held is insufficient to cover the market value ofthe security. All lending transactions are collateralized, primarily by cash. At March 31, 2015, the MUFG Group had no exposure that would require it to pay under this securities lending indemnification, since the collateral market value exceeds the fair value of securities lent.
Other Off-balance Sheet Instruments
In addition to obligations under guarantees and similar arrangements set forth above, the MUFG Group issues other off-balance sheet instruments to meet the financial needs of its customers and for purposes other than trading. Such off-balance sheet instruments consist of lending-related commitments, including commitments to extend credit and commercial letters of credit that the MUFG Group provides to meet the financing needs of its customers. Once the MUFG Group issues these financial instruments, the MUFG Group is required to extend credit to or make certain payments to the customers or beneficiaries specified pursuant to the underlying contracts unless otherwise provided in the contracts. Since many of these commitments expire without being drawn upon, tlie total commitment amounts do not necessarily represent future cash requirements. At March 31, 2015, approximately 65% of these commitments will expire within one year, 32% from one year to five years and 3% after five years. The table below presents the contractual amounts with regard to such instruments at March 31, 2014 and 2015:
2014 2015
(in billions)
Commitments to extend credit ¥72,240 ¥78,737
Commercial letters of credit 855 • 995
Commitments to make investments 81 62
Other 21 21
Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are legally binding agreements to lend to customers. Commitments are different from guarantees in that the comrnitments are generally revocable or have provisions that enable the MUFG Group to^void'pa^ments in the event of violations of any conditions of the contracts and certain deterioration of the potential borrowers' financial condition.
Commercial letters of credit, generally used for trade transactions, are typically secured by the underlying goods. The MUFG Group continually monitors the type and amount of collateral and other securities, and requires counterparties to provide additional collateral or guarantors as necessary.
Commitments to make investments are legally binding contracts to make additional contributions to corporate recovery or private equity investment funds in accordance with limited partnership agreements. Some of these funds, in which the MUFG Group has significant variable interests, are described in Note 25.
25. VARIABLE INTEREST ENTITIES
In the normal course of business, the MUFG Group has financial interests and other contractual obligations in various entities which may be deemed to be VIEs such as asset-backed conduits, various investment funds, special puipose entities created for structured financing, repackaged instruments, entities created for the securitization of the MUFG Group's assets, and trust arrangements.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Tlie following tables present the assets and liabilities of consolidated VIEs recorded on the accompanying consolidated balance sheets at March 31, 2014 and 2015:
Consolidated VIEs Consolidated assets
Cash and Interest-earning Trading
, due from deposits in account Investment All other
At March 31,2014: Total banks other banks assets securities Loans assets
(in millions)
Asset-backed conduits .. ¥ 6,202,924' ¥ 30,484 ¥ 117,116 ¥ 1,783 ¥762,103 ¥ 5,277,749 ¥ 13,689
Investment funds 2,433,575 46,198 36,076 2,190,419 10,270 — 150,612
Special purpose entities created for structured
financing 257,874 1,840 2,794 — — 236,115 17,125
Repackaged instruments . . . 29,296 — — 29,296 — — —
Securitization of the MUFG
Group's assets 1,473,901 — —- — — 1,439,002 34,899
Trust arrangements 1,325,602 — 1,528 139 95,339 1,226,221 2,375
Others 84,882 342 680 — 73 48,914 34,873
Total consolidated assets
before elimination 11,808,054 78,864 158,194 2,221,637 867,785 8,228,001 253,573
The amounts eliminated in
consolidation (1,428,412) (75,697) (125,036) (1,883) (6) (1,208,348) (17,442)
Total consolidated assets ¥10,379,642 ¥ 3,167 ¥ 33,158 ¥2,219,754 ¥867,779 ¥ 7,019,653 ¥236,131
Consolidated liabilities
Other short-term Long-term All other
Total Deposits borrowings debt liabilities
(in millions)
Asset-backed conduits ¥ 6,227,784 ¥ — ¥ 5,239,304 ¥ 467,005 ¥ 521,475
Investment funds 87,702 — — 422 87,280
Special purpose entities created for structured
financing 174,055 —- 1,993 169,231 2,831
Repackaged instruments 29,181 — — 29,000 181
Securitization of the MUFG Group's
assets 1,452,857 — 23,800 1,428,202 855
Trust arrangements 1,322,103 1,320,209 — — 1,894
Others 84,527 — 48,368 36,025 134
Total consolidated liabilities before
elimination 9,378,209 1,320,209 5,313,465 2,129,885 614,650
The amounts eliminated in consolidation (4,196,910) — (2,988,582) (1,163,047) (45,281)
The amount of liabilities with recourse to the
general credit of the MUFG Group (3,910,836) (1,320,209) (2,280,662) — (309,965)
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of
the MUFG Group ¥ 1,270,463 ¥ — ¥ 44,221 ¥ 966,838 ¥ 259,404
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidated VIEs Consolidated assets
Cash and Interest-earning Trading
due from deposits in account Investment All other
At March 31,2015: Total hanks oilier banks assets securities Loans assets
(in millions)
Asset-backed conduits ¥ 6,684,623 ¥ 42,049 ¥ 145,671 ¥ 7,524 ¥ 941,477 ¥ 5,537,704 ¥ 10,198
Investment funds 3,436,571 1.198 183,401 3,033,831 13,481 — 204,660
Special purpose entities created for structured
financing 235,840 — 3,752 — — 206,652 25,436
Repackaged instruments ... 52,664 — — 37,664 — — 15,000
Securitization of the MUFG
Group's assets ......... 1,351,762 — — — — 1,320,562 31,200
Trust arrangements 1,760,389 — 8,591 752 130,960 1,600,302 19,784
Others 58,924 260 692 — 62 31,801 26,109
Total consolidated assets
before elimination 13,580,773 43,507 342,107 3,079,771 1,085,980 8,697,021 332,387
The amounts eliminated in
consolidation (1,939,630) (42,267) (290,971) (10,474) (8,706) (1,581,132) (6,080)
Total consolidated assets ... ¥11,641,143 ¥ 1,240 ¥ 51,136 ¥3,069,297 ¥1,077,274 ¥ 7,115,889 ¥326,307
consouuaieu uauinues
Other short-term Long-term All other
Total Deposits borrowings debt liabilities
(in millions)
Asset-backed conduits ¥ 6,742,899 ¥ — ¥ 5,523,847 ¥ 698,500 ¥ 520,552
Investment funds 251,932 — — — 251,932
Special purpose entities created for structured
financing 133,220 — 373 123,203 9,644
Repackaged instniments 52,561 — — 51,246 1,315
Securitization of the MUFG Group's
assets 1,327,025 — 22,600 1,303,665 760
Trust arrangements 1,753,476 1,734,749 — — 18,727
Others 58,162 — 29,791 28,316 55
Total consolidated liabilities before
elimination 10,319,275 1,734,749 5,576,611 2,204,930 802,985
The amounts eliminated in consolidation (4,118,306) — (2,685,675) (1,411,562) (21,069)
The amount of liabilities with recourse to the
general credit of the MUFG Group (4,955,184) (1,734,749) (2,841,342) (35) (379,058)
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of
the MUFG Group ¥ 1,245,785 ¥ — ¥ 49,594 ¥ 793,333 ¥ 402,858
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse only to the assets of those VIEs of which they are creditors or beneficial interest holders, and do not have recourse to other assets ofthe MUFG Group, except where the MUFG Group is also contractually required to provide credit enhancement or program-wide liquidity.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present the total assets of non-consolidated VIEs, the maximum exposure to loss resulting from the MUFG Group's involvement with non-consolidated VIEs and the assets and liabilities which relate to the MUFG's variable interests in non-consolidated VIEs at March 31, 2014 and 2015:
On-balance slieel
Non-consolidated VIEs Oil-balance sheet assets liabilities
Trading All
Maximum account Investment other All other
At March 31,2014: Total assets exposure Total assets securities Loans assets Total liabilities
(in millions)
Asset-backed
conduits ¥ 16,114,320 ¥ 3,826,653 ¥ 2,879,545 ¥ 1,851 ¥ 512,835 ¥2,364,858 ¥ 1 ¥ 217 ¥ 217
Investment funds . . 24,216,292 844,762 735,423 100,099 300,295 326,860 8,169 — — Special purpose
entities created
for structured
financing 27,811,920 3,305,869 2,586,162 138,023 84,964 2,361,243 1,932 1,788 1,788
Repackaged
instruments 9,106,418 2,132,268 2,034,180 202,209 1,536,859 295,112 — — —
Trust
arrangements ... 26,795 23,680 22,940 — — 22,940 — 5,471 5,471
Others 50,444,297 2,720,245 2.113,300 129,020 100,000 1,884,280 — 125 125
Total ¥127,720,042 ¥12,853,477 ¥10,371,550 ¥ 571,202 ¥2,534,953 ¥7,255,293 ¥10,102 ¥7,601 ¥7,601
On-balance sheet
Non-consolidated VIEs On-balance sheet assets liabilities
Trading All
Maximum account Investment other All oUier
At March 31,2015: Total assets exposure Total assets securities Loans assets Total liabilities
(in millions)
Asset-backed
conduits ¥ 22,827,459 ¥ 4,459,028 ¥ 3,332,345 ¥ 2,942 ¥ 642,804 ¥2,686,599 ¥ — ¥ 15 ¥ 15
Investment funds 49,772,806 1,353,062 1,216,788 174,845 513,659 517,094 11,190 — — Special purpose
entities created
for structured
financing 39,438,674 4,528,826 3,337,220 343,966 100,428 2,867,265 25,561 13 13
Repackaged
instruments 11,793,462 2,756,196 2,544,899 360,937 1,821,302 362,660 — — —
Others 48,391,273 3,415,733 2,549,718 140,185 114,720 2,294,813 — 269 269
Total ¥172,223,674 ¥16,512,845 ¥12,980,970 ¥1,022,875 ¥3,192,913 ¥8,728,431 ¥36,751 ¥ 297 ¥ 297
Maximum exposure to loss on each type of entity is determined based on the carrying amount of any on-balance sheet assets and any off-balance sheet liabilities held, net of any recourse liabilities. Therefore, the maximum exposure to loss represents the maximum loss the MUFG Group could possibly incur at each balance sheet date and does not reflect the likelihood of such a loss being incurred. The difference between the amount of on-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn commitments.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Analysis of Each Transaction Category Asset-Backed Conduits
This category primarily comprises the following:
Multi-Seller Conduits (MUFG-sponsored Asset-Backed Commercial Paper ( "ABCP") Conduits and Other ABCP Conduits)
The MUFG Group administers several conduits under asset-backed financing programs under which the conduits purchase financial assets, primarily trade accounts receivable, from the MUFG Group's customers by issuing short-term financing instruments, primarily commercial paper, to third-party investors. Under the asset-backed financing programs, the MUFG Group acts as an agent for the conduits, which enter into agreements with the MUFG Group's customers where the customers transfer financial assets to the conduits in exchange for monetary consideration. The MUFG Group also underwrites commercial paper for the conduits that is secured by the assets held by them and provides program-wide liquidity and credit enhancement facilities to the conduits. The MUFG Group receives fees related to the services it provides to the conduits and the program-wide liquidity and credit enhancement. The MUFG Group considers itself to be the primary beneficiary ofthe multi-seller conduits because, as an agent and sponsor, the MUFG Group has the power to direct activities of the conduits that most significantly impact the conduits' economic performance and also has the obligation to absorb losses of the conduits that could potentially be significant to tlie conduits through the program-wide liquidity and credit enhancement. Consequently, the MUFG Group consolidates the conduits.
In addition to the entities described above, the MUFG Group participates as a provider of financing to several conduits that are administered by third parties. Most of these conduits are established under a multi-seller asset-backed financing program and the MUFG Group provides financing along with other financial institutions. With respect to these conduits, the MUFG Group is not considered as the primary beneficiary because the MUFG Group's participation in the conduits is only to provide financing along with other third-party financial institutions and it does not have the power to direct the activities of the conduits. Consequently, the MUFG Group does not consolidate the conduits.
Asset-Backed Conduits (MUFG-sponsored Asset-Backed Loan ("ABL") Programs and Other Programs)
The MUFG Group administers several conduits under asset-backed financing programs Where the MUFG Group provides financing to fund the conduits' purchases of financial assets, comprising primarily trade accounts receivable, from its customers. The MUFG Group acts as an agent and sponsor for the conduits, which enter into agreements with the MUFG Group's customers where the customers transfer assets to the conduits in exchange for monetary consideration. In most cases the MUFG Group is the sole provider of financing that is secured by the assets held by the conduits. The MUFG Group considers itself to be the primary beneficiary of the conduits because, as an agent and sponsor for the conduits, the MUFG Group has the power to direct activities of the conduits, such as selection ofthe assets to be purchased and condition for purchases, and debt collection from the original obligors, that most significantly impact the conduits' economic performance, and also has the obligation to absorb losses ofthe conduits that could potentially be significant to the conduits through financing it provides. Consequently, the MUFG Group consolidates the conduits.
In addition, the MUFG Group is involved with entities, which take in most cases the form of a trust, where originators of financial assets, which primarily comprise lease receivables, entrust the assets with trust banks and receive beneficial certificates of trusts in exchange. The originators then transfer the beneficiary certificates to the MUFG Group in exchange for cash. The originators of the financial assets entrusted continue to be involved
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMEN TS—(Continued)
in the assets as servicers. Because the originators are deemed to have the power to direct activities ofthe entities that most significantly impact the entities' economic performance through their role as a servicer, the MUFG Group is not considered as the primary beneficiary of these entities. Consequently, the MUFG Group does not consolidate these entities.
The MUFG Group also participates as a provider of financing to the ABL programs that are managed by third parties. The MUFG Group is not considered as the primary beneficiary of the entities used in these programs as the MUFG Group's participation in the entities is only lo provide financing along with other third parties and it does not have lhc power to direct the activities ofthe conduits. Consequently, the MUFG Group does not consolidate the entities used in these programs.
Investment Funds
In February 2010, the FASB issued an accounting standards update that indefinitely defers the application of the current guidance for consolidation of VIEs on entities that are deemed as investment companies, which include most of corporate recovery funds, private equity funds, and investment trusts. For VIEs that arc considered investment companies, the MUFG Group determines whether it is the primary beneficiary by evaluation of whether it absorbs a majority of expected losses, receives a majority of expected residual returns, or both.
This category primarily comprises the following:
Corporate Recovery Funds
These entities are established by fund managers, which are unrelated to the MUFG Group, for the purpose of investing in debt or equity instruments issued by distresscd companies. After investment, the fund managers work closely with the management of the issuers and attempt to enhance corporate value by various means including corporate restructuring and reorganization. Their exit strategies include, among others, sales to others and initial public offerings.
Typically, these entities take the form of a limited partnership which is entirely funded by general and limited partner interests. In some cases, the general partners of the partnerships are entities that have no substantive decision making ability. Tlie fund managers that establish these partnerships assume investment management and day-to-day operation by entering into asset management contracts with the general partners. These partnerships are, therefore, financing vehicles and as such arc considered as VIEs. In other cases, the general partners have substantive decision making ability but the partnerships are considered as VIEs when the general partners' equity investments in the partnerships are considered as non-substantive, usually based on the percentage interest held, and they do not have substantive limited partner interests.
The MUFG Group mostly serves as a limited partner in corporate recovery funds. While the MUFG Group's share in partnership interest is generally insignificant, in certain cases, the MUFG Group is the only limited partner and it consolidates these partnerships as the primary beneficiary.
Private Equity Funds
The MUFG Group is involved in venture capital funds that are established by either the MUFG Group's entities or fund managers unrelated to the MUFG Group. These entities have specific investment objectives in connection with their acquisition of equity interests, such as providing financing and other support to start-up businesses, medium and small entities in a particular geographical area, and to companies with certain technology or companies in a high-growth industry.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
These entities typically take the form of a limited partnership and usually are entirely funded by general and limited partner interests. The general partners ofthe partnerships in some cases are entities that have no substantive decision making ability. The fund managers that establish these partnerships assume investment management and day-to-day operation by entering into asset management contracts with the general partners. These partnerships arc, therefore, financing vehicles and as such are considered as VIEs. In other cases, the general partners have substantive decision making ability but the partnerships are considered VIEs because the general partners' equity investments in the partnerships are disproportionate to their voting rights and the limited partners have the majority ofthe economics without any voting rights. The MUFG Group consolidates the private equity funds when it owns a majority ofthe interests issued by the private equity funds.
The MUFG Group participates in these partnerships as a general partner or limited partner. While the MUFG Group's share in partnership interests is generally limited, in certain cases, the MUFG Group provides most ofthe financing to the partnership. The MUFG Group consolidates these funds as the primary beneficiary because it absorbs a majority of the expected losses or receives a majority of the expected residual returns.
Investment Trusts
The MUFG Group invests in investment trusts that are professionally managed collective investment schemes which pool money from many investors and invest in, among others, equity and debt securities. Most of these funds take the fonn of a trust where there is a separation in investment decisions, which is assumed by an investment manager who has no investment in a trust, and ownership through'beneficiary interests issued by a trust are owned by investors. Therefore, these investment trusts are considered as VTF.S. Based on the deferral requirements of the current guidance, the MUFG Group consolidates investment trusts when it absorbs a majority of the expected losses or receives a majority of the expected residual returns.
Buy-out Financing Vehicles
The MUFG Group provides financing to buy-out vehicles. The buy-out vehicles are established by equity investments from, among others, private equity funds or the management of target companies for the purpose of purchasing the equity shares of target companies. Along with other financial institutions, the MUFG Group provides financing to the buy-out vehicles in the form of loans. While the buy-out vehicles' equity is normally substantive in its amount and" the rights arid obligations associated" wim it, in some'cases, the "vehicles" have equity that is insufficient to absorb expected variability primarily because the amount provided by equity investors is nominal in nature. These vehicles engage in non-investment activities, and are considered as VIEs. Assessment as to whether the MUFG Group is the primary beneficiary is required under the current guidance. In most cases, the MUFG Group's participation in these vehicles is only to provide financing to the vehicles, and the power to direct the activities that most significantly impact the economic performance of the vehicles is held by the management of target companies. As a result, the MUFG Group is not considered as the primary beneficiary of these vehicles and does not consolidate them.
Other Investment Funds
The MUFG Group's investments in VIEs through MUAH primarily consist of equity investments in low income housing credit ("LIHC") structures, designed to generate a return primarily through the realization of federal tax credits. MUAH considers itself as the primary beneficiary of certain types of LIHC investments.
LIHC Unguaranteed Syndicated Investment Funds
MUAH creates the investment funds, serves as the managing investor member, and sells limited investor member interests to third parties. MUAH receives benefits through income from the structuring of these funds,
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
servicing fees for managing the funds and, as an investor member, tax benefits and tax credits to reduce the MUAH tax liability. MUAH considers itself to be the primary beneficiary and consolidates them upon adoption of the current guidance because, as a sponsor and managing member of the funds, it has the power to direct activities that most significantly impact the funds' economic performance and also has the obligation to absorb losses ofthe funds that could potentially be significant to the funds.
LIHC Guaranteed Syndicated Investment Funds
MUAH also forms limited liability companies, which in turn invest in LIHC operating partnerships, to create LIHC guaranteed syndicated investment funds. Interests in these funds are sold to third parties who pay a premium for a guaranteed return. MUAH earns structuring fees from the sale of these funds and asset management fees. MUAH serves as the funds' sponsor and non-member asset manager, and also guarantees a minimum rate of return throughout the investment term, therefore, it directs the activities that most significantly impact the funds' economic performance and also has an obligation to absorb losses pertaining to its minimum rate of return guarantee to investors. Therefore, the MUFG Group is considered as the primary beneficiary of these funds and consolidates them.
Special Purpose Entities Created for Structured Financing This category primarily comprises the following:
Leveraged Leasing Vehicles
These entities are established to raise funds to purchase or build equipment and machinery including, among others, commercial vessels, passenger and cargo aircraft, and production equipment for the purpose of leasing them to lessees who use the equipment and machinery as part of their business operations. These entities typically take the form of a limited partnership or a special purpose company where they fund their purchases of equipment and machinery via senior and subordinate financing. In some cases, the entities are funded only by senior financing or there is a guarantee provided to the senior financing by parties unrelated to those providing the senior financing. In most cases, the MUFG Group participates in the senior financing and does not participate in the subordinate financing or provide guarantees. Generally, because tlie MUFG Group's participation in these entities is only to provide financing, it does not have the power to direct the activities of the entities that most significantly impact the economic performance of the entities. Therefore, the MUFG Group does not consider itself to be the primary beneficiary of these entities and does not consolidate them, except for limited circumstances where the MUFG Group is directly involved with the structuring of the transaction and has the power to direct the activities of the entities that most significantly impact the economic performance of the entities.
Project Financing Vehicles
These entities are established to raise funds in connection with, among others, production of natural resources, construction and development of urban infrastructure (including power plants and grids, highways and ports), and the development of real estate properties or complexes. These projects typically involve special purpose companies which issue senior and subordinate financing to raise funds in connection with the various projects. The subordinate financing is usually provided by parties that will ultimately make use of the assets constructed or developed. By contrast, the senior financing is typically provided by financial institutions, including the MUFG Group. Because the MUFG Group's participation in these entities is only to provide financing, it does not have the power to direct the activities that most significantly impact the economic performance of these entities. Therefore, the MUFG Group is not considered as the primary beneficiary of these entities and does not consolidate them.
F-1.23
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Sale and Leaseback Vehicles
The MUFG Group is involved with vehicles that acquire assets, primarily real estate, from the MUFG Group's clients and other unrelated parlies where the sellers ofthe assets continue to use the assets through leaseback agreements. These vehicles typically take the form of a limited partnership where the general partner effectively has no power to direct the activities that most significantly impact the economic performance because an equity holder of Ihe general partner serves a perfunctory role. Therefore, these vehicles are considered as VIEs. The subordinated financing of these vehicles is usually provided by the sellers ofthe assets, with the MUFG Group providing senior financing for the vehicles. Because the MUFG Group's participation in these vehicles is only to provide financing, it docs not have the power to direct the activities that most significantly impact the economic performance of these entities. Therefore, the MUFG Group is not considered as the primary beneficiary and does not consolidate them.
Securitization of Client Real Estate Properties
These entities are established for the purpose of securitizing real estate properties held by the MUFG Group's customers. In most cases, these entities take the form of a limited partnership or a special purpose company. These entities are designed to have non-substantive power to direct the activities that most significantly impact the economic performance because the general partner or an equity holder serves a perfunctory role. The entities are typically funded by senior and subordinated financing where the original owners of the properties provide the subordinated financing, primarily in the form of partnership interests or subordinated notes, and financial institutions, including the MUFG Group, provide senior financing in the form of senior loans. Because the MUFG Group's participation m these vehicles is.only to provide financing, it docs not have the power to direct the activities that most significantly impact the economic performance of these entities. Therefore, the MUFG Group is not considered as die primary beneficiary and does not consolidate these entities.
Repackaged Instruments
This category primarily comprises the following:
Investments in Financially-Engineered Products
The MUFG Group is involved in special purpose entities that have been established to issue financial products through the engineering and repackaging of existing financial instruments, such as CDOs and synthetic CDOs. These special purpose entities are considered as VIEs because the holders of the equity investment at risk do not have the power to direct the activities that most significantly impact the economic performance. These special purpose entities are generally arranged and managed by parties that are not related to the MUFG Group. The MUFG Group's involvement with the entities arranged and managed by third parties is for investment purposes. In these cases, tlie MUFG Group participates as one of many other investors and the MUFG Group typically holds investments in senior tranches or tranches with high credit ratings. Therefore, the MUFG Group does not have the power to direct activities of the entities that most significantly impact the entities' economic performance, and thus is not considered as the primary beneficiary of these entities and does not consolidate these entities.
In certain instances, special purpose entities have been established and are managed by the MUFG Group. The MUFG Group's involvement includes establishing and arranging the transaction and underwriting securities issued by the entities to general investors. For these entities, the MUFG Group has the power to direct activities that most significantly impact the economic performance and it has the obligation to absorb losses or receive benefits that could potentially be significant to the entities. As such, the MUFG Group considers itself as the primary beneficiary of these entities and consolidates them.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL S TATEMENTS—(Continued)
Investments in Secuhtized Financial Instruments
The MUFG Group holds investments in special purpose entities that issue securitizcd financial products. The assets held by the special purpose entities include credit card receivables and residential mortgage loans. These entities are established and managed by parties that are unrelated to the MUFG Group and the MUFG Group's involvement with these entities is for its own investment purposes. In all cases, the MUFG Group participates as one of many olher investors and the MUFG Group does not have the power to direct activities of the entities that most significantly impact the entities' economic performance. Therefore, the MUFG Group is not considered as the primary beneficiary of these entities and does not consolidate them.
Securitization ofthe MUFG Group's Assets
The MUFG Group establishes entities to securitize its own financial assets that include, among others, corporate and retail loans and lease receivables. The entities used for securitization, which typically take the form of a special purpose company or a trust, arc established by the MUFG Group and, in most cases, issue senior and subordinate interests or financing. After securitization, the MUFG Group typically continues to service securitizcd assets as a servicer. The MUFG Group may also retain subordinate interests or financing or other interests. The MUFG Group is considered as the primary beneficiary and consolidates the entities used for securitization since it has the obligation to absorb losses through subordinate interests, and also has the power for determining and implementing policies as servicer that give it the ability to manage the entities' assets that become delinquent or are in default in order to improve the economic performance of the entities.
Trust Arrangements
The MUFG Group offers, primarily through its wholly-owned trust banking subsidiary, MUTB, a variety of trust products and services including securities investment trusts, pension trusts and trusts used as securitization vehicles. In a typical trust arrangement, however, the MUFG Group manages and administers assets on behalf of the customers in an agency, fiduciary and trust capacity and does not assume risks associated with the entrusted assets. The trusts are generally considered as VIEs because the trust beneficiaries, who provide all of the equity at risk, usually do not have power to direct the activities that most significantly impact its economic performance in the arrangements. The MUFG Group, however, is not considered as the primary beneficiary, except for the case mentioned below, because it merely receives fees for compensation for its services on terms Lhat are customary for these activities and the fees are insignificant relative to the total amount of the entities' economic performance and variability. Therefore, the MUFG Group does not consolidate these entities.
With respect to the jointly operated designated money in trusts, MUTB pools money from investors or trust beneficiaries and determines how best to invest it. MUTB typically invests in high-quality financial assets, including government bonds, corporate bonds and corporate loans including loans to MUTB and receives fees as compensation for services. In this role as a sponsor of these products, MUTB provides guarantees under which it is required to compensate a loss on the stated principal of the trust beneficial interests. MUTB is considered as the primary beneficiary of these products because it is exposed to a potentially significant amount of losses and also has the power to direct activities of these products that most significantly impact the economic performance. Upon consolidation of the jointly operated designated money in trusts, the certificates issued to the trust beneficiaries are accounted for as deposit liabilities as the products are structured and marketed to customers similar to MUTB's term deposit products.
MUTB considers the likelihood of incurring losses on the face value guarantee to be highly remote. In the trusts' operational history that extends over decades, the face value guarantee has never been called upon The
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
variability in fair value ofthe net assets of jointly operated designated money in trusts has been primarily affected by the fluctuations in interest rates, and the majority of such variability has been absorbed by general investors.
Others
This category primarily comprises the following:
Financing Vehicles ofthe MUFG Group's Customers
The MUFG Group is involved with several entities that are established by the MUFG Group's customers. These entities borrow funds from financial institutions and extend loans to their group entities. These entities effectively work as fund-raising vehicles for their respective group companies and enable the groups to achieve efficient financing by integrating their financing activities into a single entity. In all cases the MUFG Group is not considered as the primary beneficiary because the MUFG Group's participation in these entities is only to provide financing, and the customers effectively hold the power to direct activities of these entities that most significantly impact the economic performance of the entities. Consequently, the MUFG Group does not consolidate these entities.
Funding Vehicles
The MUFG Group has established several wholly-owned, off-shore vehicles which issue securities, typically preferred stock that is fully guaranteed by the MU.FG Group, to investors unrelated to the MUFG Group to fund purchases of debt instruments issued by the MUFG Group. These entities are considered as VIEs because the MUFG Group's investment in the vehicles' equity is not considered at risk and substantive as the entire amount raised.by the vehicles was used to purchase debt instruments issued by the MUFG Group. Because the MUFG Group does not have variable interests in these financing vehicles, these financing vehicles are not considered as the MUFG Group's subsidiaries.
Troubled Borrowers
During the normal course of business, the borrowers from the MUFG Group may experience financial difficulties and sometimes enter into certain transactions that require the MUFG Group to assess whether they would be considered as VIEs due to their difficult financial position. While in most cases such borrowers are not considered as VIEs when the transactions take place, in limited circumstances they are considered as VIEs due to insufficient equity investment at risk. In all cases, however, the MUFG Group is not considered as the primary beneficiary because the power to direct activities that most significantly impact the economic performance of the troubled borrowers resides with management of the troubled borrowers, and the MUFG Group, as a lender, does not have power over or assume any role in management. Therefore, the MUFG Group does not consolidate these troubled borrowers.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
26. COMMITMENTS AND CONTINGENT LIABILITIES
Lease Commitments
The MUFG Group leases certain technology systems, office space and equipment under noncancelable agreements expiring through the fiscal year 2046.
Future minimum rental commitments for noncancelable leases at March 31, 2015 were as follows:
Capitalized Operating
leases leases
(in millions)
Fiscal year ending March 31:
¥ 5,485 ¥ 92,284
4,088 80,334
2,442 70,076
1,394 60,003
794 55,445
2021 and thereafter 4,559 403,058
Total minimum lease payments ¥18,762 ¥761,200'"
Amount representing interest (2,611)
Present value of minimum lease payments ¥16,151
Note:
(I) One of MUFG's subsidiaries has entered into non-cancelable operating lease agreements which will commence in April, 2016. The total minimum lease payments of ¥31,810 million under these commitments have been included in the above.
Total rental expense for the fiscal years ended March 31, 2013, 2014 and 2015 was ¥99,817 million, ¥103,754 million and ¥108,792 million, respectively.
Repayment of Excess Interest
The Japanese government implemented regulatory reforms affecting the consumer lending industry. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates from 29.2% per annum to 20% per annum. The reduction in interest rates was implemented in June 2010. The regulatory reforms also included amendments to the Money Lending Business Act which, effective June 18, 2010, abolished the so-called "gray-zone interest." Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Under the regulatory reforms, all interest rates for loans originated after this reform are subject to the lower limits imposed by the Interest Rate Restriction Act. Furthermore, the new regulations require stringent review procedures for consumer finance companies before lending, and with the exception of certain provisions, one of those new regulations introduces a limit on aggregate credit extensions to one-third of the borrower's annual income.
Formerly, consumer finance companies were able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Act so long as the payment was made voluntarily by the borrowers, and the lender complied with various notice and other requirements. Accordingly, MUFG's consumer finance subsidiaries and equity method investees offered loans at interest rates above the Interest Rate Restriction Act. Upon the implementation of the regulatory reforms in June 2010, they lowered the interest rates for loans originated after this reform to below the Interest Rate Restriction Act.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In 2006, the Supreme Court of Japan passed decisions in a manner more favorable to borrowers requiring reimbursement of previously paid interest exceeding the limits stipulated by the Interest Rate Restriction Act in certain circumstances. Borrowers' claims for reimbursement of excess interest arose after such decisions and other regulatory changes. The MUFG Group maintains an allowance for repayment of excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers' profile, recent trend of borrowers' claims for reimbursement, and management future forecasts. Management believes lhat the provision for repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse effect on the MUFG Group's financial position and results of operations. The allowance for repayment of excess interest established by MUFG's consumer finance subsidiaries, which was included in Other liabilities, was ¥54,068 million and ¥36,292 million as of March 31, 2014 and 2015, respectively. Provision (reversal) related to the allowance is included in Other non-interest expenses in the accompanying consolidated statements of income. For the fiscal years ended March 31, 2013, 2014 and 2015, there was a negative impact of ¥17,014 million, ¥18,014 million and ¥19,743 million, respectively, on Equity in earnings of equity method investees—net in the accompanying consolidated statements of income.
Litigation
The MUFG Group is subject to various litigation matters. Basedupon the current-knowledge and the results of consultation with counsel, liabilities for losses from litigation matters are recorded when they are determined to be both probable in their occurrences and can be reasonably estimated. Management believes that the eventual outcome of such litigation matters will not have a material adverse effect on the MUFG Group's financial position, results of operations or cash flows.
27. FEES AND COMMISSIONS INCOME
Details of fees and commissions income for the fiscal years ended March 31, 2013, 2014 and 2015 were as follows:
2015
Fees and commissions on deposits ¥ 39,626
Fees and commissions on remittances and transfers 155,192
Fees and commissions oh foreign trading business 58,905
Fees and commissions on credit card business 149,671
Fees and commissions on security-related services 217,985
Fees and commissions on administration and management services for
investment funds 117,141
Trust fees 92,525
Guarantee fees 55,427
Insurance commissions 33,472
Fees and commissions on real estate business 28,041
Other fees and commissions 212,889
Total ¥1,160,874
57,138 168,124
71,487 179,669 285,728
141,050 106,943 52,982 63,344 36,364 238,151
(in millions)
¥ 46,146 158,786 68,273 157,227 300,050
126,707 105,721 52,634 39,669 34,715 204,188
¥1,294,116 ¥1,400,980
Note:
()) The table above reflects changes that were made lo the components of fees and commissions in the fiscal year ended March 31, 2015. The following components have been redefined in 2015 and certain reclassifications were made between the components: Tees and commissions on deposits. Fees and commissions on remittances and transfers. Fees and commissions on security-related services. Fees and commissions on administration and management services for investment funds and Other fees and commissions. The amounts for the fiscal years ended March 31, 2013 and 2014 have been reclassified to conform to the presentation for the fiscal year ended March 31, 2015'
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fees and commissions on deposits consist of fees and commissions charged for deposits transactions such as checking account deposits, deposit and withdrawal services, using automated teller machines, and so on. Fees and commissions on remittances and transfers consist of fees and commissions charged for settlement transactions such as domestic fund remittances, including transactions used by electronic banking, and so on. Fees and commissions on foreign trading business consist of fees and commissions charged for fund collection and trade-related financing services related to foreign trading business. Fees and commissions on credit card business consist of fees and commissions related lo credit card business such as interchange income, annual fees, royalty and other service charges from franchisees. Fees and commissions on securities-related services primarily consist of fees and commissions for sales and transfers of securities including investment funds, underwriting, brokerage and advisory services, arrangement fees on securitizations, and agency services for the calculation and payment of dividends. Fees and commissions on administration and management services for investment funds primarily consist of fees and commissions earned from managing investment funds on behalf of the clients. Trust fees consist primarily of fees canted by fiduciary asset management and administration services for corporate pension plans, investment funds, and so on. Guarantee fees consist of fees related to guarantee business such as providing guarantees on residential mortgage loans and other loans. Insurance commissions consist of commissions camed by acting as agent for insurance companies to sell insurance products. Fees and commissions on real estate business primarily consist of fees from real estate agent services. Other fees and commissions include various fees and commissions mainly such as arrangement fees and agent fees excluding the fees mentioned above.
28. TRADING ACCOUNT PROFITS AND LOSSES
The MUFG Group performs trading activities through market-making, sales and arbitrage, while maintaining risk levels within appropriate limits in accordance with its risk management policy.
The MUFG Group has trading account securities and trading derivative assets and liabilities for this purpose. In addition,'the trading account securities include foreign currency-denominated debt securities such as foreign government or official institution bonds, coiporate bonds and mortgage-backed securities, which are mainly comprised of securities measured at fair value under the fair value option.
Net trading gains (losses) for the fiscal years ended March 31, 2013, 2014 and 2015 were comprised ofthe following:
2013 2014 2015
(in millions)
Interest rate and other derivative contracts ¥(82,684) ¥(84,408) ¥ (37,486)
Trading account securities, excluding derivatives 652,960 50,522 1,186,147
Trading account profits (losses)—net 570,276 (33,886) 1,148,661
Foreign exchange derivative contracts'1' ' (94,223) (52,737) (217,524)
Net trading gains (losses) ¥476,053 ¥(86,623) ¥ 931,137
Note:
(1) Losses on foreign exchange derivative contracts are included in Foreign exchange losses—nel in the accompanying consolidated statements of income. Foreign exchange losses—net in the accompanying consolidated statements of income are also comprised of foreign exchange gains (losses) other than derivative contracts and foreign exchange gains (losses) related to the fair value option.
For further information on the methodologies and assumptions used to estimate fair value, see Note 31, which also shows fair values of trading account securities by major category. Note 23 discloses further information regarding the derivative-related impact on Trading account profits (losses)—net by major category.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
29. BUSINESS SEGMENTS
The business segment information, set forth below, is derived from the internal management reporting system used by management to measure the performance ofthe MUFG Group's business segments. In addition, the business segment information is primarily based on the financial information prepared in accordance with accounting principles generally accepted in Japan as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information are not consistent with the accompanying consolidated financial statements prepared on the basis of U.S. GAAP. A reconciliation is provided for the total amounts of segments' operating profit with income before income tax expense under U.S. GAAP.
Sec Note 30 for financial information relating to the MUFG Group's operations by geographic area. The geographic financial information is consistent with the basis of the accompanying consolidated financial statements.
The following is a brief explanation of the MUFG Group's business segments:
Integrated Retail Banking Business Group—Covers all domestic retail businesses, including commercial banking, trust banking and securities businesses. This business group integrates the retail business of BTMU, MUTB, MUMSS, Mitsubishi UFJ NICOS and other subsidiaries as well as retail product development, promotion and marketing in a single management structure. At the same time, the business group has developed and implemented ML1FG Plaza, a one-stop, comprehensive financial services concept that provides integrated banking, trust and securities services.
Integrated Corporate Banking Business Group—Covers all domestic corporate businesses, including commercial banking, investment banking, trust banking and securities business. Through the integration of these business lines, diverse financial products and services are provided to the MUFG Group's-corporate clients. The business group has clarified strategic domains, sales channels and methods to match the different growth stages and financial needs of the MUFG Group's corporate clients.
.. Integrated Trust Assets Business Group—Covers asset management and administration services for products such as pension trusts and security trusts by integrating the trust banking expertise of MUTB and the global network of BTMU. The business group provides a full range of services to corporate and other pension funds, including stable and secure pension fund management and administration, advice on pension schemes, and payment of benefits to scheme members.
Integrated Global Business Group—Covers businesses outside Japan, including commercial banking such as loans, deposits and cash management services, investment banking, retail banking, trust banking and securities businesses (with the retail banking and trust assets businesses being conducted through MUB), through a global network of more than 500 offices outside Japan to provide customers with financial products and services that meet their increasingly diverse and sophisticated financing needs. MUB is one of the largest commercial banks in California by both total assets and total deposits. MUB provides a wide range of financial services to consumers, small businesses, middle market companies and major corporations, primarily in California, Oregon and Washington and also nationally and internationally. MUB's parent company is MUAH, which is a bank holding company in the United States.
Krungsri—Covers businesses conducted mainly in Thailand by Krungsri. Krungsri provides a comprehensive range of banking, consumer finance, investment, asset management, and other financial products and services to individual consumers, small and medium enterprises, and large corporations mainly in Thailand.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In addition, Krungsri's consolidated subsidiaries include the major credit card issuer in Thailand as well as a major automobile financing service provider, an asset management company, and a microfinance service provider in Thailand.
Integrated Global Markets Business Group—Covers asset and liability management and strategic investment of BTMU and MUTB, and sales and trading of financial products of BTMU, MUTB and MUSHD.
Other—Consists mainly of the corporate centers of MUFG, BTMU, MUTB and MUMSS. The elimination of duplicated amounts of net revenue among business segments is also reflected in Other.
Management does not use information on segments' total assets to allocate resources and assess performance. Accordingly, business segment information on total assets is not presented.
Effective April 1, 2014 and October 1, 2014, in order to further streamline and integrate managerial accounting methodologies on a group-wide basis, the MUFG Group made modifications to such methodologies, which mainly affected the Integrated Retail Banking Business Group and the Integrated Global Markets Business Group. These modifications had no impact on total operating profit for the fiscal year ended March 31, 2013 and 2014, but affected net revenue and operating expenses allocations among business segments.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The table set forth below has.been reclassified to enable comparisons between the relevant amounts for the
fiscal years ended March 31, 2013, 2014 and 2015, respectively:
, . .it. . i r . .i Integrated Global Business . . . .
Integrated Integrated Integrated b r Integrated
Retail Corporate Trust ""p Global
Banking Banking Assets Other Markets
Business Business Business than Business
Group Group Group MUAH MUAH Total Krungsri Group Other Total
(in billions)
Fiscal vear ended March 31, 2013:
Net revenue: ¥1,211.2 ¥863.2 ¥139.6 ¥465.4 ¥288.5 ¥ 753.9 ¥ — ¥759.9 ¥ (10.9) ¥3,716.9
BTMU and
MUTB: 564.5 767.1 56 1 358.4 — 358.4 — 652.7 (8.5) 2,390.3
Net interest
income 431.1 382 6 — 181.8 v — 181.8 — 259 0 63.5 1,318.0
Netfees 124.8 304.3 56.1 141.6 — 141.6 — (19.2) (25 2) 582.4
Other 8.6 80.2 — 35.0 — 35.0 — 412.9 (46.8) 489.9
Other than BTMU
and MUTB'1'. 646.7 96.1 83.5 107.0 288.5 395.5 — 107.2 (2.4) 1,326.6
Operating expenses ....... 917,3 .434 3 88.8 246.8 205.4 452.2 — 142.5 174.2 2,209.3
Operating profit (loss) ¥ 293.9 ¥428.9 ¥50.8 ¥218.6 ¥83.1 ¥ 301.7 ¥ — ¥617.4 ¥(185.1) ¥1,507.6
Fiscal year ended March 31, 2014:
Net revenue: ¥1,296.3 ¥924.0 ¥159.7 ¥567.9 ¥375.9 ¥ 943.8 ¥ — ¥563.2 ¥ (13.6) ¥3,873.4
BTMU and
MUTB: 575.3 800.5 66.0 443.1 — 443.1 — 406.2 (4.4) 2,286.7
Net interest
income 403.5 371.1 — 236.0 — 236.0 — 214.1 83.1 1,307.8
Netfees 163.5 331 9 66.0 164.7 — 164.7 — (23.1) (56.9) 646.1
Other 8.3 97.5 — 42.4 — 42.4 — 215.2 (30.6) 332.8
Other than BTMU
andMUTB'D 721.0 123.5 93.7 124.8 375.9 500.7 — 157.0 (9.2) 1,586.7
Operating expenses 961.9 438.5 94.8 299.9 266.9 566.8 — 176.5 171.8 2,410.3
Operating profit (loss) .. ¥ 334.4 ¥485.5 ¥64.9 ¥268.0 ¥109.0 ¥ 377.0 ¥ — ¥386.7 ¥(185.4) ¥1,463.1
Fiscal year ended March 31,2015:
Netrevenue: ¥1,311.3 ¥965.2 ¥172.2 ¥668.6 ¥442.4 ¥1,111.0 ¥240.3 ¥609.4 ¥ (22.5) ¥4,386.9
BTMU and.
MUTB: 579.4 834.3 70.8 511.3 — 511.3 — 457.0 21.7 2,474.5
Net interest
income 375.0 360.7 — 265.6 — '265.6 — 241.0 158.7 1,401.0
Netfees 192.6 369.3 70.8 190.6 — 190.6 — (34.7) (90.7) 697.9
Olher 11.8 104.3 — 55.1 — 55.1 — 250.7 (46.3) 375.6
Other than BTMU
andMUTB»> 731.9 130.9 101.4 157.3 442.4 599.7 240.3 152.4 (44.2) 1,912.4
Operating expenses 964.2 448.1 102.1 341.0 298.1 639.1 123.7 191.3 243.0 2,711.5
Operating profit (loss) .. ¥ 347.1 ¥517.1 ¥70.1 ¥327.6 ¥144.3 ¥ 471.9 ¥116.6 ¥418.1 ¥(265.5) ¥1,675.4
Note:
(1) Includes MUFG and its subsidiaries other than BTMU and MUTB.
Reconciliation
As set forth above, the measurement bases and the income and expense items of the internal management reporting system are different from the accompanying consolidated statements of income. Therefore, it is impracticable to present reconciliations of all of the business segments' information, other than operating profit, to corresponding items in the accompanying consolidated statements of income.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of operating profit under the internal management reporting system for the fiscal years ended March 31, 2013, 2014 and 2015 above to income before income tax expense shown in the accompanying consolidated statements of income is as follows:
2013 2014 2015
(in billions)
Operating profit: ¥1,508 ¥1,463 ¥1,675
Credit (provision) for credit losses (145) 106 (87)
Trading account profits (losses)—net 285 (394) 636
Equity investment securities gains (losses)—net (22) 170 90
Debt inveslment securities losses—net (153) (6) (45)
Foreign exchange losses—net (53) (48) (117)
Equity in earnings of equity method investees—net 60 111 173
Impairment of goodwill — (8) (3)
Impairment of intangible assets (3) — (1)
Other—net (61) 26 (58)
Income before income tax expense ¥1,416 ¥1,420 ¥2,263
30. FOREIGN ACTIVITIES
Foreign operations include the business conducted by overseas offices, as well as international business conducted from domestic offices, principally several international banking-related divisions of BTMU's and MUTB's head office in Tokyo, and involve various transactions with debtors and customers residing outside Japan. Close integration of the MUFG Group's foreign and domestic activities makes precise estimates of the amounts of assets, liabilities, income and expenses attributable to foreign operations difficult and necessarily subjective. Assets, income and expenses attributable to foreign operations are allocated to geographical areas based on the domicile of the debtors and customers.
F-I33
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Generally, interest rates with respect to funds borrowed and loaned between domestic and foreign operations are based on prevailing money market rates appropriate for the transactions. In general, the MUFG Group has allocated all direct expenses and a proportionate share of general and administrative expenses to income derived from foreign loans and other transactions by the MUFG Group's foreign operations. The following table sets forth estimated total assets at March 31, 2013, 2014 and 2015, and estimated total revenue, total expense, income (loss) before income tax expense (benefit) and net income (loss) attributable to Mitsubishi UFJ Financial Group for the respective fiscal years then ended:
Domestic Foreign Total
United Asia/Oceania
States of excluding Other
Japan America Europe Japan areas"1
(in millions)
Fiscal year ended March 31, 2013:
Total revenue'2' ¥ 3,016,008 ¥ 426,377 ¥ 256,495 ¥ 585,474 ¥ 211,076 ¥ 4,495,430
Total expense'3' 2,248,856 327,565 160,061 268,349 74,728 3,079,559
Income before income tax
expense 767,152 98,812 96,434 317,125 136,348 1,415,871
Net income attributable to Mitsubishi UFJ Financial
Group 499,125 95,565 78,442 274,951 121,041 1,069,124
Total assets at end of fiscal
year 151,999,696 30,730,705 23,224,502 15,938,673 8,665,700 230,559,276
Fiscal vear ended March 31- 2014:
Total revenue'2' .' ¥ 3,110,050 ¥ 218,953 ¥ 155,022 ¥ 569,018 ¥ 290,321 ¥ 4,343,364
Total expense'3' 1,952,250 426,084 143,417 315,203 85,967 2,922,921
Income (loss) before income tax
expense (benefit) 1,157,800 (207,131) 11,605 253,815 204,354 1,420,443
Net income (loss) attributable to
Mitsubishi UFJ Financial
Group 859,846 (131,566) 6,484 149,417 131,212 1,015,393
Total assets at end of fiscal
year 158,809,701 40,625,000 22,352,446 22,312,805 9,561,125 253,661,077
Fiscal year ended March 31, 2015:
Total revenue'2' ¥ 3,016,375 ¥ 715,461 ¥ 521,440 ¥ 1,087,444 ¥ 399*003 ¥ 5,739,723
Total expense'3' 2,013,032 515,290 166,892 673,066 108,787 3,477,067
Income before income tax
expense 1,003,343 200,171 354,548 414,378 290,216 2,262,656
Net income attributable to Mitsubishi UFJ Financial
Group 410,671 187,354 309,808 358,627 264,667 1,531,127
Total assets at end of fiscal
year 169,280,635 46,327,668 27,718,111 26,193,776 11,366,136 280,886,326
Notes-
Other areas primarily include Canada, Latin America, the Caribbean and Ihe Middle East.
Total revenue is comprised of Interest income and Non-interest income.
Total expense is comprised of Interest expense. Provision (credit) for credit losses and Non-inicrcst expense.
F-134
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following is an analysis of certain asset and liability accounts related to foreign activities at March 31,
2014 and 2015:
2014 2015
(in millions)
Cash and due from banks ¥ 804,617 ¥ 773,580
Interest-earning deposits in other banks 9,020,949 8,591,461
Total ¥ 9,825,566 ¥ 9.365,041
Trading account assets ¥28,319,251 ¥32,992,334
Investment securities ¥ 4,749,265 ¥ 7,467,951
Loans—net of unearned income, unamortized premiums and deferred loan fees ... ¥39,763,643 ¥48,404,292
Deposits ¥40,648,813 ¥46,024,124
Funds boiTOwed:
Call money, funds purchased ¥ 201,606 ¥ 315,156
Payables under repurchase agreements 8,995,939 9,228,209
Payables under securities lending transactions 96,202 47,852
Other short-term borrowings 3,698,004 4,830,626
Long-term debt 3,376,761 3,577,497
Total ¥16,368,512 ¥17,999,340
Trading account liabilities ¥ 5,876,702 ¥ 8,169,332
31. FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance on fair value measurements also specifies a fair value hierarchy that prioritizes tJhe inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable inputs, for example, the reporting entity's own data. Based on the observability ofthe inputs used in the valuation techniques, the following three-level hierarchy is specified by the guidance:
Level 1—Unadjusted quoted prices for identical instniments in active markets.
Level 2—Observable inputs other than Level 1 prices for substantially the full term of the instruments, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; other inputs that are observable; or market-corroborated inputs.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the instruments.
A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The MUFG Group has an established and documented process for determining fair values in accordance with the guidance. When available, quoted prices are used to determine fair value. If quoted prices are not
F-I35
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
available, fair value is based upon valuation techniques that use observable or unobservable inputs. The fair values of liabilities arc determined by discounting future cash flows at a rate which incorporates the MUFG Group's own creditworthiness. In addition, valuation adjustments may be made to ensure the financial instruments are recorded at fair value. These adjustments include, but are not limited to, amounts that reflect countcqiarly credit quality, liquidity risk and model risk.
The following section describes the valuation techniques used by the MUFG Group to measure fair values of certain financial instruments. The discussion includes the general classification of such financial instruments in accordance with the fair value hierarchy, a brief explanation of the valuation techniques, the significant inputs to those valuation techniques, and any additional significant assumptions.
Interest-earning Deposits in Other Banks
Cash flows are estimated based on the terms of the contracts and discounted using the market interest rates applicable to the maturity of the contracts, which are adjusted to reflect credit risks on counterparties. As the inputs into the valuation techniques are readily observable, these deposits are classified in Level 2 of the fair value hierarchy.
Receivables Under Resale Agreements
Certain receivables under resale agreements are measured at fair value upon election of the fair value option and fair value is measured using discounted cash flows. Cash flows are estimated based on the terms of the contracts and discounted using the market interest rates applicable to the maturity of the contracts, which arc adjusted to reflect credit risks on counterparties. These receivables are classified in Level 2 of the fair value hierarchy.
Trading Account Assets and Liabilities—Trading Account Securities
When quoted prices are available in an active market, the MUFG Group uses quoted prices to measure tlie fair values of securities and such securities are classified in Level 1 of the fair value hierarchy. Examples of Level 1 securities include certain Japanese and foreign government bonds, and marketable equity securities.
When quoted prices are available but the securities are not traded in active markets, such securities are classified in Level 2 of the fair value hierarchy. These securities include certain Japanese government agency bonds, Japanese prefectural and municipal bonds, foreign governments and official institutions bonds, corporate bonds, residential mortgage-backed securities and equity securities.
When quoted prices are not available, the MUFG Group estimates fair values by using internal valuation techniques, quoted prices of securities with similar characteristics or non-binding prices obtained from independent pricing vendors. Such securities include certain commercial paper, corporate bonds, asset-backed securities and residential mortgage-backed securities. For commercial paper, the MUFG Group estimates fair value using discounted cash flows. The cash flows are estimated in accordance with the terms of contracts and discounted using a discount rate based on the yield curve estimated from market interest rates appropriate to the securities. Commercial paper is generally classified in Level 2 of the fair value hierarchy. For corporate bonds, the MUFG Group estimates fair value by using internal valuation techniques. Key inputs to the internal valuation techniques include estimated cash flows based on the terms of the contracts, yield curves based on market interest rates and volatilities. Corporate bonds which are valued using internal valuation techniques are generally classified in Level 2 of the fair value hierarchy. If any such key inputs are unobservable, they are classified in Level 3 of the fair value hierarchy. Certain investments in funds valued at net assets value are classified in Level 2 if they can be redeemed at their net asset value at the measurement date.
F-136
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STA TEMENTS—(Continued)
When there is less liquidity for securities or significant inputs used in the fair value measurements are unobservable, such securities are classified in Level 3 of the fair value hierarchy. Examples of such Level 3 securities include CLOs backed by general corporate loans, which are classified in asset-backed securities. The fair value of CLOs is measured by weighing the estimated fair value amounts from internal valuation techniques and the non-binding quotes from the independent broker-dealers. The weight of the quotes from independent broker-dealer is determined based on the result of inquiries with the broker-dealers to understand their basis of fair value calculation with consideration given to transaction volume. Key inputs to the internal valuation techniques include projected cash flows through an analysis of underlying loans, probability of default which incorporates market indices such as LCDX (which is an index of loan credit default swaps), repayment rates and discount rates reflecting liquidity premiums based on historical market data.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives valued using quoted prices are classified in Level 1 of the fair value hierarchy. Examples of Level 1 derivatives include stock futures index and interest rate futures. However, the majority of the derivative contracts entered into by the MUFG Group are traded over-the-counter and valued using valuation techniques as there are no quoted prices for such derivatives. The valuation techniques and inputs vary depending on the types and contractual terms of the derivatives. The principal'valuation techniques used to value derivatives include discounted cash flows, the Black-Scholes model and the Hull-White model. The key inputs include interest rate yield curve, foreign currency exchange rate, volatility, credit quality ofthe counterparty or the MUFG Group and spot price ofthe underlying. These models are commonly accepted in the financial industry and key inputs to the models are generally readily observable in an active market. Derivatives valued using such valuation techniques and inputs are generally classified in Level 2 of the fair value hierarchy. Examples of such Level 2 derivatives include plain-vanilla interest rate swaps, foreign currency forward contracts and currency option contracts.
Derivatives that are valued using valuation techniques with significant unobservable inputs are classified in Level 3 of the fair value hierarchy. Examples of Level 3 derivatives include long-term interest rate or currency swaps and certain credit derivatives, where significant inputs such as volatility, credit curves and correlation of such inputs are unobservable.
Investment Securities
Investment securities include Available-for-sale debt and equity securities, whose fair values are measured using the same valuation techniques as the trading account securities described above except for certain private placement bonds issued by Japanese non-public companies. Fair values of private placement bonds issued by Japanese non-public companies are measured based on discounted cash flow method using discount rates applicable lo the maturity of the bonds, which are adjusted to reflect credit risk of issuers. Credit risk of issuers is reflected in the future cash flows being discounted by the interest rates applicable to the maturity of the bonds. The private placement bonds are generally utilized to finance medium or small size non-public companies. These bonds are classified in either Level 2 or Level 3 of the fair value hierarchy, depending on the significance of the adjustments for unobservable input of credit worthiness. Investment securities also include investments in nonmarketable equity securities which are subject to specialized industry accounting principles. The valuation of such nonmarketable equity securities involves significant management judgment due to the absence of quoted prices, lack of liquidity and the long term nature of these investments. Further, there may be restriction on transfers of nonmarketable equity securities. The MUFG Group values such securities initially at transaction price and subsequently adjusts such valuations, considering evidence such as current sales transactions of similar securities, initial public offerings, recent equity issuances and change in financial condition of the investee company. Nonmarketable equity securities are included in Level 3 ofthe fair value hierarchy.
F-137
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other Assets
Other assets measured at fair value mainly consist of securities received as collateral that may be sold or repledged under securities lending transactions, money in tmst for segregating cash deposited by customers on security transactions and derivatives designated as hedging instruments. The securities received as collateral under lending transactions mainly consist of certain Japanese and foreign government bonds which arc valued using the valuation techniques previously described in the section entitled "Trading Accounts Assets and Liabilities—Trading Account Securities" above.
Money in trust for segregating cash deposited by customers on security transactions mainly consists of certain Japanese government bonds which are valued using the valuation techniques described in the "Trading Account Assets and Liabilities—Trading Account Securities" above and is included in Level 1 or Level 2 of the fair value hierarchy depending on the component assets.
The fair values of derivatives designated as hedging instruments are measured using the valuation techniques described in the "Trading Account Assets and Liabilities—Derivatives" above.
Obligations to Return Securities Received as Collateral
Obligations to return securities received as collateral under securities lending transactions are measured at the fair values of the securities received as collateral. The securities received as collateral consist primarily of certain Japanese and foreign government bonds, Whose fair values are measured using the valuation techniques described in the "Trading Account Assets and Liabilities—Trading Account Securities" above.
Other Short-term Borrowings and Long-term Debt
Certain short-term borrowings and long-term debt are measured at fair value due to the election of the fair value option. The fair value of these instruments are measured principally based on the discounted cash flows. Where the inputs into the valuation techniques are mainly based on observable inputs, these instruments are classified in Level 2 of the fair value hierarchy. Where significant inputs are unobservable, they are classified in Level 3 of the fair value hierarchy.
Market Valuation Adjustments
Counterparty credit risk adjustments are made to certain financial assets such as over-the-counter derivatives. As not all counterparties have the same credit rating, it is necessary to take into account the actual credit rating of a counterparty to arrive at the fair value. In addition, the counterparty credit risk adjustment takes into account the effect of credit risk mitigation such as pledged collateral and the legal right of offset with the counterparty.
For own credit risk adjustments, the MUFG Group takes into consideration all the facts and circumstances, including its own credit rating, the difference between its funding rate and market interest rate, and the existence of collateralization or netting agreements. As a result of these analyses; the MUFG Group considered that own credit risk adjustments for financial liabilities were nol material.
Liquidity adjustments are applied mainly to the instruments classified in Level 3 of the fair value hierarchy when recent prices of such instruments are unobservable or traded in inactive or less active markets. The liquidity adjustments are based on the facts and circumstances of the markets including the availability of external quotes and the time since the latest available quote.
F-138
MITSUBISHI UF.I FINANCIAL GROUP. INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Model valuation adjustments such as unobservable parameter valuation adjustments may be provided when the fair values of instruments are determined based on internally developed valuation techniques. Examples of such adjustments include adjustments to the model price of certain derivatives where parameters such as correlation are unobservable. Unobservable parameter valuation adjustments are applied to mitigate the possibility of error in the model-based estimated value.
Investments in Certain Entities That Calculate Nel Asset Value per Share
The MUFG Group has interests in investment funds mainly hedge funds, private equity funds, and real estate funds that are measured at fair value on a recurring or nonrecurring basis.
Hedge funds are primarily multi-disciplinary hedge funds that employ a fundamental bottom-up investment approach across various asset classes and strategies. The MUFG Group's investments in hedge funds are generally redeemable on a monthly-quarterly basis with 30-90 days advance notice.
Private equity funds have specific investment objectives in connection with their acquisition of equity interests, such as providing financing and other support to start-up businesses, medium and small entities in a particular geographical area, and to companies with certain technology or companies in a high-growth industry. Generally, these investments cannot be redeemed with the funds, and the return of invested capital and its gains are derived from distributions received upon the liquidation of the underlying assets of the fund. It is estimated that tlie underlying assets of the fund would be liquidated within a ten-year period.
Real estate funds invest globally and primarily in real estate companies, debt recapitalizations and direct property. These investments arc generally not redeemable with the funds. Distributions from each fund will be received as the underlying investments of the funds arc liquidated. It is estimated that the underlying assets ofthe funds would be liquidated within a four-year period.
F-139
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assels and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the financial instruments carried at fair value by level within the fair value hierarchy as of March 31, 2014 and 2015:
March 31, 2014 '
Level 1 Level 2 Level 3 Fair Value
(in millions)
Assets
Trading account assets:
Trading securities'" ¥20,102.994 ¥8,075,408 ¥ 658.917 ¥28,837,319
Debt securities
Japanese national government and Japanese government
agency bonds 5,688,374 235,944 — 5,924,318
Japanese prefectural and municipal bonds — 89,017 — 89,017
Foreign governments and official institutions bonds 13,133,023 1,784,478 15,450 14,932,951
Corporate bonds — 3,160,057 132,518 3,292,575
Residential mortgage-backed securities — 1,483,547 11,601 1,495,148
Asset-backed securities — 215,686 439,664 655,350
Other deblsecunties '. ' — 20,285 32,565 52,850
Commercial paper — 794,868 — 794,868
Equity securities'1' 1,281,597 291,526 27,119 1,600,242
Trading derivative assets 90,740 11,640,992 77,224 11,808,956
Interest rate contracts 22,677 8,565,213 28,202 8,616,092
Foreign exchange contracts 507 2,909,201 6,471 2,916,179
Equity contracts 50,425 65,827 32,434 148,686
Commodity contracts 17,131 43,826 10,102 71,059
Credit derivatives — 56,925 15 56,940
Investment securities:
Available-for-sale securities 45,302,514 6,038,450 544,688 51,885,652
Debt securities
Japanese national government and Japanese government
agency bonds 39,852,612 1,736,397 — 41,589.009
Japanese prefectural and municipal bonds — 203,131 — 203,131
Foreign governments and official institutions bonds 794,822 324,952 151,647 1,271,421
Corporate bonds — 1,485,280 75,849 1,561,129
Raidentiannortgage-backed securilies — 961,337 19,258 980,595
Commercial mortgage-backed securities — 197,034 3,112 200,146
Asset-backed securities — 948,168 109,876 1,058,044
Other debt securities — — 184,946 184,946
Marketable equity securities 4,655,080 182,151 — 4,837,231
Olher investment securities — — 26,201 26,201
Others'5"4' 489,356 28,169 5,598 523,123
Total ¥65,985,604 ¥25,783,019 ¥1,312,628 ¥93,081,251
Liabilities
Trading account liabilities:
Trading securities sold, not yet purchased ¥ 189,524 ¥ 4,719 ¥ — ¥ 194,243
Trading derivative liabilities 108,059 11,611,316 68,360 11,787,735
Interest rate contracts 25,293 8.481,947 14.526 8,521.766
Foreign exchange contracts 3,997 2,981,272 13,509 2,998,778
Equity contracts 57,464 57,892 28,239 143.595
Commodity contracts 21,305 30,029 10,724 62,058
Credit derivatives — 60,176 1,362 61,538
Obligation to return securities received as collateral 3,914,441 57,013 — 3,971,454
Others'*' — 612,124 92,867 704,991
Total ¥ 4,212,024 ¥12,285,172 ¥ 161,227 ¥16,658,423
F-140
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2015
Level 1
Assets
Trading account assets:
Trading securilies"' ¥19,812,037
Dcbl securilies
Japanese national government and Japanese government agency
bonds 3,801,877
Japanese prefectural and municipal bonds —
Foreign governments and official institutions bonds 14,674,376
Corporate bonds —
Residential mortgage-backed securities —
Asset-backed securilies —
Other debt secunties —
Commercial paper —
Equity securities'2' 1,335,784
Trading derivative assets 151,217
Interest rate contracts 50,492
Foreign exchange contracts 3,317
Equity contracts 97,408
Commodity contracts —
Credit derivatives —
Investment securilies.
Available-for-sale securities 39,455,720
Dcbl securities
Japanese national government and Japanese government agency
bonds 32,214,231
Japanese prefectural and municipal bonds —
Foreign governments and official institutions bonds 1,126,729
Corporate bonds —
Residential mortgage-backed securities —
Commercial mortgage-backed securities —
Asset-backed securities —
Other debt securilies —
Marketable equity securities 6 114 760
Other investment securities —
Others'1"" 327,360
Total ¥59,746,334
Liabilities
Trading account liabilities:
Trading securilies sold, nol yet purchased ¥ 82,743
Trading derivative liabilities 154,767
Interest rate contracts 42,790
Foreign exchange contracts 2,930
Equity contracts 109,047
Commodity contracts ; —
Credit derivatives —
Obligation to return securities received as collateral 2,476,588
Others'1' —
Total ¥ 2,714,098
Level 2
Level 3
Fair Value
(in millions)
4,037,052 141,390 16.402,532 4,041,779 1,717.865 819,782 51,181 1,194,922 1,779,616 16,718,784 11,435,263 4,866,564 250,450 96.283 70,224
¥ 9.513,664 ¥ 860,418 ¥30,186,119
66,197 96,918 38,730 586,635 37,812
34,126 121,045 42,373 12,884 51,830 13,819 139
235,175 141,390 1,661,959 3,944,861 1,679,135 233,147 13,369 1,194,922 409,706 16,446,522 11,342,398 4,850,363 101,212 82,464 70,085
7,632,847
3,191,401 194,415 526,126
1,236,340 931,635 203,797
1.079,317
269,816 14,036
401.837 47,490,404
29,649 19,284 93 3,785 166,723 182,303
22,537 4,540
35,405,632 194,415
1,682,504
1,255,624 931,728 207,582
1,246,040 182,303
6,384,576 22,537 345,936
¥ 98,463 16.930,922 11,340,961 5,175,613 245,256 97,470 71,622 2,651,151 747,348
81,795 13,299
4,483 45,924 14,752
3,337
36,293
¥33,607,069 ¥1,410,377 ¥94,763,780
¥ 15,720 ¥ 16,694,360 11,284,872 5,168,200 90,285 82.718 68,285 174,563 711,055
¥17,595,698 ¥ 118,088 ¥20,427.884
Notes:
Includes securities measured under the fair value option.
Includes investments valued at net asset value of ¥28,922 million and ¥27,266 million at March 31, 2014 and 2015, respectively. The unfunded commitments related to ihcsc investments at March 31, 2014 and 2015 wcrc¥l 1,373 million and¥7,206 million, respectively. These investments were mainly hedge funds.
Mainly comprises securilies received as collateral lhal may be sold or repledged under securilies lending transactions, money in trusi for segregating cash deposited by customers on security transactions and derivative assets designated as hedging instruments.
Includes investments valued al nel asset value of real estate funds, hedge funds and private equily funds, whose fair values al March 31, 2014 were ¥1.669 million. ¥1.232 million and ¥2,441 million, respectively, and those al March 31, 2015 were ¥1,740 million, nil and ¥1,883 million, respectively The amounts of unfunded commitments related to these real estate funds, hedge funds and private equity funds al March 31, 2014 were nil, ¥104 million and ¥1,871 million, respectively, and those al March 31, 2015 were nil, nil and ¥1,790 million, respectively
Includes olher shorl-ierm borrowings, long-lerm dehl, bifurcated embedded derivatives carried al fair value and derivative liabilities designated as hedging instruments.
F-I41
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Transfers Between Level 1 and Level 2
During the fiscal years ended March 31, 2014 and 2015, (he transfers between Level I and Level 2 were as follows:
Fiscal years ended March 31,
2014 2015
Transfers out of Transfers out of Transfers out of Transfers out of
Level 1 Level 2 Level 1 Level 2
into Level 2<'> into Level 1<" into Level 2"> into Level 1"'
(in millions)
Assets
Trading account assets: Trading securities Debt securities
Japanese national
government and Japanese government agency
bonds ¥ 7,420 ¥ — ¥ — ¥ —
Equity securities 13,762 — — 3,605
Investment securities:
Available-for-sale securities
Japanese national government and Japanese government
agency bonds — — 1,694,554 —
Marketable equity securities 19,011 13,252 9,528 9,705
Liabilities
Obligation to return securities received as
collateral — — 106,197 —
Note:
(I) All transfers between Level 1 and Level 2 were assumed lo have occurred at the beginning of the first-half or the second-half of the fiscal
—year. ~ - ¦ .......
In general, the transfers from Level 1 into Level 2 represented securities whose fair values were measured at quoted prices in active markets at die beginning of the period but such quoted prices were not available at the end of the period. The transfers from Level 2 into Level 1 represented securities for which quoted prices in active markets became available at the end ofthe period even though such quoted prices were not available at the beginning of the period.
For the fiscal year ended March 31, 2015, certain Japanese national government bonds, which are accounted for as Available-for-sale securities, were transferred from Level 1 to Level 2 based on an analysis of the current market activity.
F-I42
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Level 3 Recurring Fair Value Measurements
The following tables present a reconciliation of the assets and liabilities measured al fair value on a recurring basis using significant unobservable inputs (Level 3) during the fiscal years ended March 31, 2014 and 2015. The determination to classify a financial instrument within Level 3 is based upon the significance ofthe unobservable inpuls to overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 input, observable inputs (that is, inputs that arc actively quoted and can be validated to external sources). Accordingly, the gains and losses in the tables below include changes in fair value due in part to observable inputs used in the valuation techniques.
Tola! gains (losses) tor the period
Included included in other March 31, in comprehensive 2013 earnings income
Assets Trading account assets
Trading securities"'. V 631,113 V 50,809™ Y — Debt securilies
Foreign governments and official institutions
bonds 96,255 4,905 —
Corporate bonds 77,089 4,916 —
Residential morlgagc-
backed
securities 9,881 1,187 —
Asset-backed
sccuriucs 396.071 32.794 —
Other dcBi
secunties 29,526 3,039 —
Equity securilies 22,291 3,968 —
Trading
denvatives—net .. (20,466) 30,791™ (3,463) Interest rate contracts—
net (2,250) 19.554 714
Foreign exchange
contracts—net (16,806) 9,615 (3,835)
Equity contracts—nel . . 1,381 4,125 34
Commodity contracts—
nel (804) 109 (10)
Credit
derivatives—net (1,987) (2,612) (366)
Investment securities-Available-for-sale
securities 472,127 3.950"' 51,538
Debt secunties
Foreign governments and oflicial institutions
bonds 148,722 — 3,393
Corporate bonds ... 92.846 4.059 (51) Residential mortgage-backed
secunties 21,492 3 83
Commercial
mortgage-backed
securities 39 — (1531
Asset-backed
securities 102,250 (120) 17,636
Olher debt
securities 106,714 _ 30.630
Marketable cquily
securities 64 8 —
Olher investment
securilies 24,795 l,75l'-" 14
Others 8.418 432"' —
Total ¥1.115,987 ¥ 87.733 ¥ 48,089
Liabilities
OUicrs ... 121.932 (19.(197)"' (24,145)
Tolal ¥ 121.932 ¥( 19,(197) ¥(24,145)
Purchases Issues Sales
Transfers Transfers
into out ot March 31, Settlements Level 3>5> Level 3™ 2014
¥499.143 ¥
(in millions)
(32,354) (7,242)
232 4,922
65.828 100,011
83,179 245,342
¥(302,363) ¥(173.816) ¥12,574 ¥(58,543)¥ 658.917 ¥ 36,144™
(72,059) (43,326)
2,414 (49,539) 15,450
(81,698) (948) (101,271) (133,272)
702
27,252
3,039 (3)
15,146™
14,695
460 202
809
(1.020)
- (869)«)
10,074"> (9,004)") 132.518
86 15,116 6,712 8,432
(28)
32,565 27,119
8,864
13.676
(7,038) 4.195
(622)
0,347)
— 11,601
— 439,664
(10,705) (7.170) (3,568)
33
(2,252)
(4,762)
(431) (1,345)
668
3,618
4,783 — (4,009)
4,732 (4,889) —
878 — —
770 (1,215) —
1,323 (1,323) —
1,761 (2,351) —
5,574 5.046
. (6,042) (14.772)
(873)
(1.367) (609)
256,776 — (10,961) (218,806) 4,744 (14,680) 544,688
— — 151,647
— ' 19,258
— 3,112
109,876
184,946
3,015 —
3,265 —
178,735 —
61,118 —
23 —
2,879 —
336 —
4,744«> (14,656)1" 75,849
(4,726) —
(39) —
(24) (1,110)
(8.751) (179.874)
(195) (13,321)
26,201 5,598
- (71)
(2,126) (2)
(3,588) —
1.258"' 163"'
— (28.498)
(10.707)"
¥763,866 ¥(4,889) ¥(319.038) ¥(394,876) ¥32.434 ¥(85,03S) ¥1,244,268 ¥51,842
¥ (28,498) ¥ (10) ¥(44,I01)¥ 92.867 ¥(10,707)
(10) (44.101) 92.867
¥ 302 ¥
F-143
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total gains (losses) for the period
Included
Included in other Transfers Transfers-
March 31, iu comprehensive into out or March 31
2014 earnings income Purchases Issues Sales Settlements Level 3'5' Level 3|5» 2015
Change in unrealized gains (losses) included in cumings Tor assets and liabilities still held at March 31. 2015
(in millions)
Assels
Trading account assets1
Trading securities'" . ¥ 658,917 VI 13,2471" ¥ — ¥ 765,670 ¥ — Y(46l,312) ¥(169,549) ¥ 97,159 ¥(143,714)Y 860,418 Debt securities Foreign
(62,758) (69,405) 51,849 (1,036) 66,197 (3.207) (8,252) 45,300<«> (141.855)'" 96,918
119,117 66.604
216,367 349,105
governments and oriici.ll institutions
bonds 15,450 12.980 —
Corporate
— (823)
(188,947) (7,323)
(197.526) (84,569)
38,730
'586,635
37,812 34,126
39,250
29,074
8,401
5,906
(933)
(3,198)
bonds .. 132.518 5.810 — Residential mortgage-backed
securities. 11,601 7.855 — Asset-backed
— (8,874)
10 9,026 2,780 6,246
14,477
5.745 (3,929)
37 (23)
4.358 (2,009)
449 (449)
901 (1,448)
272,001 —
securities . . 439,664 79,961 — Other dcbl
securities 32,565 5,247 —
(6,956) (4,864) (2,495)
403
(3,851) (349) (984)
(3,487) 233 736
Equity securities . 27,1 19 1,394 — Trading derivatives—
net 8,864 29,689"' 662
Interest rate
contracts—nel 13,676 17,473 344 Foreign exchange
contracts—net . (7.038) 10,164 159
Equity coniracts—
net 4,195 4,924 274
Commodity
contracts—net (622) (484) 84
Credit derivatives—
net (1,347) (2,388) (199)
(23.691) (294.201) 1,969 (146,239) 401,837 (2,946)")
Investment securities: Available-for-sale
securities 544,688 (2,958)'» 50,268
Debt securities Foreign
1.942 9,231
— (2,241) — (127.168) 29,649
(6,053) (41,778) 1.969'6' (19.071)'6) 19.284
governments ' and official institutions
bonds 151.647 — 5,469
Corporate
bonds 75,849 (551) (312)
— — . (17,638) (1,730)
— 93
— 3,785
166,723
182.303
Residential mortgage-backed
secunties 19,258 1 1 192
— (74)
— (203,412)
— (44,966)
Commercial mortgage-backed
242,349 18,479
securities 3,112 — 747
Asscl-backed
securities ... 109,876 (2,418) 20,328 Other debt
securities . . . . 184.946 — 23,844
Marketable equity
2,298 — "485 —
(15,788) (2.999)
— 22,537
— 4.540
securities .. — — —
(305)
Olher investment
secunties 26,201 9,826"' —
Others 5.598 1.761"' —
Total ¥1,244,268 ¥151,565 ¥50,930 ¥1,046,199 ¥(3,929) ¥(503,790) ¥(467,906) ¥108,154 ¥(296,9()9)V1.328,582
— V (305) V — ¥ — ¥ —
— (41,834) 8,423 (76.025) 36.293
¥ — (13,945)"
— ¥ (42,139) ¥ 8.423 ¥ (76.025)¥ 36,293 ¥(13,945)
305 ¥ — ¥ — 554
305 ¥ 554 ¥
Liabilities Obligation lo return securilies received as
collateral V — ¥ — ¥ —
Others 92.867 (48.852)"" (3.-156)
Tolal ¥ 92 867 ¥(48.852) ¥(3.456)
F-1 44
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notes:
Includes Trading securilies under lair value option.
Included in Trading accounl profits (losses)—net and in Foreign exchange losses—net.
Included in Inveslment securilies gains—nel.
Included in Trading account profits (losses)—net.
All transfers out of Level 3 or into Level 3 were assumed to have occurred at the beginning of the first-half or the second-half of the fiscal year
Transfers out of and transfers into Level 3 for corporate bonds were due principally to changes in the impact of unobservable creditworthiness inputs of the private placement bonds.
Quantitative Information about Level 3 Fair Value Measurements
The following tables present information on the valuation techniques, significant unobservable inputs and their ranges for each major category of assets and liabilities measured at fair value on a recurring basis and classified in Level 3:
March 31, 2014
Assets
Trading securities and
Investment securities:
Foreign governments
and official
institutions
bonds
Corporate bonds
Residential
mortgage-backed
securities.
Commercial
mortgage-backed
securities and
Asset-backed
securities
Olher dcbl securities .
Fair value'0 Valuation technique Significant unobservable inputs (in millions)
¥ 6,876 Monte Carlo method Correlation between interest rate and
foreign exchange rate Correlation between interest rates 23,983 Return on equity method Probability of default
Recovery rate
Market-required return on capital 126,101 Discounted cash flow Probability of default
Recovery rate
269 Monte Carlo method Correlation between interest rate and
foreign exchange rate
Correlation between interest rates
9,064 Internal model Liquidity premium
90,420 Discounted cash tlow
430,386 Internal model
32.565 Discounted cash flow 182,613 Return on equity method
Probability of default Recovery rate Asset correlations Discount factor Prepayment rate Probability of default Recovery rale
Liquidity premium Probability of default
Recovery rate
Market-required return on capital
Range
32.6%-48.3% 42.1%~59.8%
0.3%~1.9% 60.0%~80.0%
8.0%~10.0% O.I%~14.0% 14.0%~68.4%
32.6%~44.6% 52.2%~59.8% 1.5%~2.5%
4.6%~5 1% 65 0%~76.0% 11.0%~I4.0%
1.5%~5.8% 4.5%~44.8% 0.0%~88.8% 54.5%-79.2%
0.6%~0.8% 0.0%-25.0%
25.0%~90.0% 8 0%~l().()%
Weighted Average'21
37.3%
58.1% 0.9%
73.0% 9.4% 0.9%
40.7%
36.9% 59.5% 2.3%
5.0% 68.0% 13.7%
1.9% 40.9%
oi
77.7%
0.8% 0 7%
66.9% 9 7%
F-145
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2014
Trading derivatives—net:
Interest rate contracts—net
Foreign exchange contracts-
net
Equity contracts—net Credit derivative contracts—net . . .
Significant unobservable inputs
Fair value'" Valuation technique (in millions)
12,366 Option model Probability of default
Correlation between interest rales Correlation between interest tale and
foreign exchange rale Recovery rate Volatility
(7,038) Option model Probability of default
Correlation between interest rates Correlation between interest rale and
foreign exchange rate Correlation between underlying assets Recovery rale
4,548 Option model Correlation between interest rale and equity
(1,347) Option model Recovery rate
Correlation between underlying assets
Range
0.0%~14.0% 22 8%-99.4%
31.2%-48.3% 40 0%-47.0% 27.1 %-39 5%
0 1%-14.0% 38 8%.~78.7%
31.2%-58.7% 49 9%-85.0% 40.0%~47.0% 24.9%-49.0%
37.0%-37.0% 11.4%~87.3%
March 31, 2015
Assets
Trading securilies and
Investment securities: ".
Foreign governments and
official institutions
bonds
Corporate bonds
Residential mortgage-
backed securities,
Commercial mortgage-
backed securities and
Asset-backed
securilies
Olher debt securities .
¥ 5,290 Monte Carlo method
29.649
11,018 Discounted cash flow
171 Monte Carlo method
150,588 Discounted cash flow
560,800 Internal model
37,812 Discounted cash flow 180,239 Return on equity method
Probability of default Recovery rale Asset correlations Discount factor Prepayment rate Probability of default Recovery rate Liquidity premium Probability of default Recovery rate
Markcl-rcquircd return on capital
Range
25.9%~52.9%
37.5%~54.0% 0.0%~0.9%
60.0%-80.0% 8.0%~10.0% 5.096-13.4%
17:4%~67:6%
2.8% 60.0%
11.0% 1.5%.
5.3%-
0.0%-49.0%
0.6%
0.0%-40.0%
8.0%-
25.9%~52.9% 45.9%~54.0%
¦5.3% ¦76.0% 15.0% -7.3%. -25.9% -83.7%. -69.5% -0.8% ¦25.0% -90.0% 10.0%
Weighted Average'2'
41.4%
51.6%. 0.2%
72.0%. 9.8% 7.0%
51.6%.
42.8% 52.7%
4.4% 64 8% 14.7%
I 8%. 24.6%
68.5% 0.8% 0 5% 68.9% 10.0%
F-146
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2015
Trading derivatives—net:
Interest rale contracts—net
Foreign exchange contracts-
net
Equity contracts—net
Credit derivative contracts—net
Fair value'" Valuation technique Significant unobservable inputs (in millions)
27,962 Option model Probability of default
Correlation between interest rates Correlation between interest rale and
foreign exchange rate Recovery rate Volatility
8,405 Option model Probability of default
Correlation between interest rates Correlation between interest rate and
foreign exchange rate Correlation between underlying assets Recovery rate
5,976 Option model Correlation between interest rale and
equity Volatility
(3,198) Option model Recovery rate
Correlation between underlying assets
Range
0 0%~I3.4% 10 3%~99.0%
25 9%~52.9% 41 0%~46.0% 38 2%~63 0%
0.1%~I3.4% 54.0%~80.7%
32.9%~58 4% 52 6%~73.2% 41 0%~46.0%
5.7%-59.6% 0.0%~70 0%
37.2%~37.2% 6.4%~100.0%
Notes.
The fair value as of March 31, 2014 and 2015 excludes the fair value of investments valued using vendor prices.
Weighted averages are calculated by weighing each input by the relative fair value ofthe respective financial instruments.
See "Probability of default" in "Sensitivity to and range of unobservable inputs.".
Sensitivity to and range of unobservable inputs
Probability of default—Probability of default is an estimate of the likelihood that the default event will occur and the MUFG Group will be unable to collect the contractual amounts. A significant increase (decrease) in the default rate would result in a significant decrease (increase) in a fair value through a decrease (increase) in the estimated cash flows. Probability of default used in Internal model of Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities represents that of underlying assets, whereas probability of default used in other valuation techniques represents the counterparty default risks, determined through the MUFG Group's credit rating system.
The wide range of probability of default used in Internal model of Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities is mainly caused by Asset-backed securities. Asset-backed securities have a large number of underlying loans, mainly corporate loans, in several industries. The MUFG Group primarily makes investments in the senior tranches of such securities, with no investments in the equity portion. Thus, the MUFG Group's investments have higher priority of payments than mezzanine and equity and even if some of underlying loans become default status, the MUFG Group may still be able to receive the full contractual payments.
For derivative contracts, the MUFG Group holds positions with a large number of counterparties with various credit quality, which results in wider range of probability of default. However, the majority of counterparties have higher ratings, categorized as "Normal" in the internal credit rating system, the inputs used to estimate fair value of derivative contracts arc concentrated in the lower end of the range.
Discount factor and Liquidity premium—Discount factor and liquidity premium are adjustments to discount rates to reflect uncertainty of cash flows and liquidity of the instruments. When recent prices of similar
F-147
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
instruments are unobservable in inactive or less active markets, discount rates are adjusted based on facts and circumstances ofthe markets including the availability of quotes and the time since the latest available quotes. A significant increase (decrease) in discount rate would result in a significant decrease (increase) in a fair value.
Recovery rate and Prepayment rate—Recovery rate is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market input for recovery, but indications of recovery levels are available from third-party pricing services. The assumed recovery of a security may differ from its actual recovery that will be observable in the future. Prepayment rate represents the proportion of principal that is expected to be paid prematurely in each period on a security or pool of securities. Prepayment rates change the future cash flows for the investor and thereby change the fair value ofthe security. Recovery rate and prepayment rate would affect estimation of future cash flows to a certain extent and changes in these inputs could result in a significant increase or decrease in fair value.
Volatility-—Volatility is a measure of the speed and severity of market price changes and is a key factor in pricing. Typically, instruments can become more expensive if volatility increases. A significant increase (decrease) in volatility would result in a significant increase (decrease) in fair value through a significant increase (decrease) in the value of an option.
The level of volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities-for certain combinations of tenor and strike are not observable. The volatility inputs used to estimate fair value of interest rate contracts are distributed throughout the range.
Correlation—Correlation is a measure of the co-movement between two variables. A variety of correlation-related assumptions are required for a wide range of instruments including foreign governments and official institutions bonds, asset-backed securities, corporate bonds, derivatives and certain other instruments.Th most cases, correlations used are not observable in the market and must be estimated using historical information. Changes in correlation inputs can have a major impact, favorable or unfavorable, on the value of an instrument, depending on its nature. In addition, the wide range of correlation inputs are primarily due to the complex and unique nature of these instruments. There are many different types of correlation inputs, including cross-asset correlation (such as'correlation between interest rate and equity), and same-asset correlation (such as correlation between interest rates). Correlation levels are highly dependent on market conditions and could have a relatively wide range of levels within or across asset classes.
For interest rate contracts and foreign exchange contracts, the diversity in the portfolio held by the MUFG Group is reflected in wide ranges of correlation, as the fair values of transactions with a variety of currencies and tenors are determined using several foreign exchange and interest rate curves. For equity derivative contracts, the wide range of correlation between interest rate and equity is'primarily due to the large number of correlation pairs with different maturities of contracts. For credit derivative contracts, the wide range of correlation between underlying assets is primarily due to factors such as reference assets with different maturities, capital structure subordinations, and credit quality.
Valuation Process for Level 3 Fair Value Measurements
The MUFG Group establishes valuation policies and procedures for measuring fair value, for which the risk management departments ensure that the valuation techniques used are logical, appropriate and consistent with market information. The financial accounting offices ensure that the valuation techniques are consistent with the accounting policies.
F-148
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In accordance with tlie valuation policies and procedures, fair value is determined by the risk management departments or similar sections that are independent ofthe front offices in order to ensure objectivity and validity of measuring fair value. An analysis performed on the determined fair value is periodically reported to the management.
When valuation techniques are used to measure fair value, the valuation techniques are required to be pre-approved by the risk management departments. If the risk management departments determine that the techniques are not consistent with market practice, the valuation techniques are modified as necessary.
Fair value measurements arc verified for reasonableness by the risk management departments which are responsible to perform an analytical review of the fair value measurements which includes a comparison with market trends and information.
For broker-dealer quotes, internal price verification procedures are performed by die risk management departments. Such verification procedures include an analytical review of periodic price changes, a comparison analysis between periodic price changes and changes of indices such as a credit default swap index, or inquiries regarding the underlying inputs and assumptions used by the broker-dealers such as probability of default, prepayment rate and discount margin.
Unobservable inputs used in a Level 3 fair value measurement are internally estimated by the risk management departments based upon the market information such as observable inputs. The reasonableness of the inputs is validated by other risk management departments by a comparison analysis between the market value of financial instruments using such Level 3 inputs and the internally estimated fair value, to the extent necessary.
F-149
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities may be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets arc subject to fair value adjustments that result, from the application ofthe lower of cost or fair value accounting or write-downs of individual assets. The following tabic presents the carrying value of assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2014 and 2015:
March 31, 2014 March 31, 2015
Total Total
Level 1 Level 2 Level 3 carrying value Level 1 Level 2 Level 3 carrying value
(in millions)
Assets
Investment securities!1) ...¥ — ¥ — ¥ 5,469 ¥ 5,469 ¥ — ¥ — ¥ 2,489 ¥ 2,489
Loans 11,510 15,834 303,757 331,101 6,452 8,830 268,977 284,259
Loans held for sale . — 549 6,890 7,439 — 50 2,179 2,229
Collateral dependent
loans 11,510 15,285 296,867 323,662 6,452 8,780 266,798 282,030
Premises and equipment . . — — 6,264 6,264 — — 6,072 6,072
Intangible assets — — 228 228 — ' — 200 200
Goodwill — — — — — — 14,032 14,032
Other assets 15,138 60,833 10,161 86,132 — — 9,783 9,783
Investments in equity method
investees^ 15,138 60,833 7,902 83,873 — — 1,379 1,379
Other — — 2,259 2,259 — — 8,404 8,404
Total ¥26,648 ¥76,667 ¥325,879 ¥429,194 ¥6,452 ¥8,830 ¥301,553 ¥316,835
Note:
(1) Includes investments valued at net asset value of ¥3,483 million and ¥2,130 million at March 31, 2014 and 2015, respectively. The
unfunded commitments related to these investments arc ¥864 million and ¥868 million at March 31, 2014 and 2015, respectively. These investments are private equity funds.
The following table presents losses recorded as a result of nonrecurring changes in fair value for the fiscal years ended March 31, 2014 and 2015:
Losses for the fiscal year ended March 31,
2014 2015
(in millions)
Investment securities ¥ 4,113 ¥ 1,324
Loans 58,660 63,698
Loans held for sale 106|910|Collateral dependent loans 58,554 63,692
Premises and equipment 13,899 6,055
Intangible assets 312 677
Goodwill 7,792 3,432
Other assets 33,905 1,629
Investments in equity method investees 32,824 102
.Other 1,081 1.527
Total ¥118,681 ¥76,815
F-150
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment securities primarily include impaired cost-method investments which were written down to fair value during the period. The fair values are determined based on recent nel asset value and projected future cash flows of investees.
Loans include loans held for sale and collateral dependent loans. Loans held for sale arc recorded at the lower of cost or estimated fair value. The fair value of the loans held for sale is based on secondary market prices, recent transactions or discounted cash flows. These loans arc principally classified in Level 3 of the fair value hierarchy, and when quoted prices are available but not traded actively, such loans held for sale are classified in Level 2 ofthe fair value hierarchy. Collateral dependent loans are measured at fair value ofthe underlying collateral. Collateral is comprised mainly of real estate and exchange-traded equity securities. The MUFG Group maintains an established process for internally determining the fair value of real estate, using the following valuation techniques and assumptions. Collateral dependent loans that are measured based on underlying real estate collateral are classified in Level 3 of the fair value hierarchy.
Replacement cost approach. The replacement cost approach is primarily used for buildings and the land they are built on. This approach calculates the fair value of the collateral using the replacement cost of the property as of the valuation date. Replacement cost tables and useful life tables used for this approach are developed by subsidiaries of MUFG.
Sales comparison approach. The sales comparison approach is mainly used for land. The fair value of the collateral is based on Japanese government official land prices and standard land prices, considering the results of comparison analysis between the official roadside value which is used for tax purposes and the related government official land and standard land prices.
Income approach. The income approach is, as a general rule, applied to all rental properties based on the highest and best use concept. This approach calculates the fair value of the collateral using expected future cash flows. In this approach, the expected annual net operating income is discounted using the related capitalization yield. The significant assumptions within the income approach are the expected annual net operating income and capitalization yield. The expected annual net operating income is estimated based on rental income of the property. The capitalization yield is determined based on the location and use of the property by subsidiaries of MUFG. The capitalization yield may be adjusted to reflect the trends in locations, occupancy rates and rent level and other factors.
Premises and equipment consist of those assets which were written down to fair value. The fair values are determined based on prices obtained from an appraiser or discounted cash flows. These impaired premises and equipment are classified as Level 3 of the fair value hierarchy.
Intangible assets consist of those assets which were written down to fair value. The fair values are determined based on discounted cash flows. These impaired intangible assets are classified as Level 3 of the fair value hierarchy.
Other assets mainly consist of investments in equity method investees which were written down to fair value due to impairment. The MUFG Group records impairment losses when a decline in fair value below cost is other-than-temporary. The impairment losses are included in Equity in earnings of equity method investees—net in the accompanying consolidated statements of income. When investments in equity method investees are marketable equity securities, the fair values are determined based on quoted prices. Impaired investments in equity method investees which are marketable equity securities are classified in either Level 1 or Level 2 ofthe fair value hierarchy. When investments in equity method investees are nonmarketable equity securities, the fair values are determined using the same methodologies as those for impaired nonmarketable equity securities described above. Impaired investments in equity method investees which are nonmarketable equity securities are classified in Level 3 ofthe fair value hierarchy.
F-151
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Option
The MUFG Group elected the fair value option for foreign currency-denominated debt securities and equity securities held by BTMU and MUTB. The election was made to mitigate accounting mismatches related to fluctuations of foreign exchange rates by allowing the gains and losses on translation of these securities to be included in current earnings. Had the fair value option not been elected, the gains and losses on translation of these securities would have been reflected in OCI, while the gains and losses on translation of foreign currency-denominated financial liabilities would have been included in current earnings.
The MUFG Group also elected the fair value option for certain financial instruments held by MUSHD's foreign subsidiaries because those financial instruments are managed on a fair value basis, and these exposures are considered to be trading-related positions. These financial assets are included in Other assets. These financial liabilities are mainly included in Other short-term borrowings and Long-term debt. Unrealized gains and losses on such financial instruments are recognized in the accompanying consolidated statements of income.
The following table presents the gains or losses recorded tor the fiscal years ended March 31, 2013, 2014 and 2015 related to the eligible instruments for which the MUFG Group elected the fair value option:
For the fiscal years ended March 31,
2013 2014 2015
Trading Foreign Total Trading Foreign Tolal Trading Foreign Total
account exchange changes in account exchange changes tn account exchange changes in profits (losses) gains (losses) .fair.value profits (losses) -gains (losses) talr value .profits (losses) gains (losses) fair value
(in millions)
Financial assets:
Receivables under resale
agreements") ¥ (1,436) ¥ — ¥ (1,436) ¥ — ¥ — ¥ _¥—¥—¥ —
Trading account
securities 311,827 2,185,903 2,497,730 (225,985) 2,017,311 1,791.326 689,420 966,636 1,656,056
Other assets (469) — (469) (531) — (531) (564) — (564)
Total ¥309,922 ¥2,185,903 ¥2,495,825 ¥(226,516) ¥2,017,311 ¥1,790,795 ¥688,856 ¥966,636 ¥1,655,492
Financial liabilities. Other short-term
borrowings!» ¥ 1,542 ¥ — ¥ 1,542 ¥ 4,064 ¥ — ¥ 4,064 ¥ 5,515 ¥ — ¥ 5,515
Long-term
debt<" 22,097 — 22,097 87,877 — 87,877 (1,549) — (1,549)
Total ¥ 23,639 ¥ — ¥ 23,639 ¥ 91,941 ¥ — ¥ 91,941 ¥ 3,966 ¥ — ¥ 3,966
Note:
(1) Change in value attnbutable to the instrument-specific credit risk related to those financial assets and liabilities are not material.
F-152
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the differences between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of March 31, 2014 and 2015 for long-term receivables and debt instruments for which the fair value option has been elected:
2015
Remaining aggregate contractual
amounts outstanding
Financial assets:
Olher assets ¥ 2,000
Total ¥ 2,000
Financial liabilities:
Long-term debt ¥728,385
Total ¥728,385
Fair value over (under) remaining aggregate contractual
amounts outstanding
Remaining aggregate
contractual amounts
outstanding
Fair value
Fair value over (under) remaining aggregate contractual
amounts outstanding
Fair value
(in millions)
¥ 2,000 ¥ — ¥ 1,000 ¥ 1,007
¥ 2,000 ¥ — ¥ 1,000 ¥ 1,007
¥687,927 ¥(40,458) ¥585,694 ¥584,630 ¥(1,064) ¥687,927 ¥(40,458) ¥585,694 ¥584,630 ¥(1,064)
Interest income and expense and dividend income related to the assets and liabilities for which the fair value option is elected are measured based on the contractual rates and reported in the accompanying consolidated statements of income as either interest income or expense, depending on the nature of the related asset or liability.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Estimated Fair Value of Financial Instruments
The following is a summary of carrying amounts and estimated fair values by level within the fair value hierarchy of financial instalments which are not carried at fair value in the accompanying consolidated balance sheets as of March 31, 2014 and 2015:
March 31, 2014
Estimatcil fair value
Carrying
amount Total Level 1 Level 2 Level 3
(in billions)
Financial assets:
Cash and due from banks ¥ 3,689 ¥ 3,689 ¥3,689 ¥ — ¥ —
Interest-earning deposits in other banks 20,501 20,501 — 20,501 —
Call loans and funds sold 919 919 — 919 —
Receivables under resale agreements 7,300 7,300 — 7,300 —
Receivables under securities borrowing
transactions 4,210 4,210 — 4,210 —
Investment securities!1'!2) 2,870 2,908 220 701 1,987
Loans, net of allowance for credit losses!3' 109,182 110,577 11 307 110,259
Other financial assets'4) 5,832 5,832 — 5,832 —
Financial liabilities: Deposits
Non-interest-bearing ¥21,123 ¥21,123 ¥ — ¥21,123 ¥ —
Interest-bearing 141,406 141,447 — 141,447 —
Total deposits 162,529 162,570 — 162,570 —
Call money and funds purchased 3,417 3,417 — 3,417 —
Payables under repurchase agreements 21,268 21,268 — 21,268 —
Payables under securities lending transactions .. 5,521 5,521 -— 5,521 —
Due to trust account 750 750 — 750 —
Other short-term borrowings 11,077 11,077 — 11,077 —
Long-term debt 13,823 14,118 — 14,118 —
Other financial liabilities 5,123 5,123 — 5,123 —
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2015
,, Estimated fair value
Carrying
amount Total Level 1 Level 2 Level 3
(in billions)
Financial assets:
Cash and due from banks ¥ 3,353 ¥ 3,353 ¥3,353 ¥ — ¥ —
Interest-earning deposits in other banks 37,365 37,365 — 37,365 —
Call loans and funds sold 660 660 — 660 —
Receivables under resale agreements 7,273 7,273 — 7,273 —
Receivables under securities borrowing
transactions 4,660 4,660 — 4,660 —
Investment securities!')'2) 4,285 4,369 1,145 1,034 2,190
Loans, net of allowance for credit losses") 117,210 118,720 6 290 118,424
Other financial assets'") 5,272 5,272 — 5,272 —
Financial liabilities: Deposits
Non-interest-bearing ¥ 23,446 ¥ 23,446 ¥ — ¥ 23,446 ¥ —
Interest-bearing :. 148,543 148,574 — 148,574 —
Total deposits 171,989 172,020 — 172,020 —
Call money and funds purchased 3,669 3,669 — 3,669 —
Payables under repurchase agreements 20,728 20,728 — 20,728 —
Payables under securities lending transactions .. 8,205 8,205 — 8,205 —
Due to trust account 1,611 1,611 — 1,611 —
Other short-term borrowings 11,389 11,389 — 11,389 —
Long-term debt 19,394 19,672 — 19,672 —
Other financial liabilities 7,682 7,682 — 7,682 ' —
Notes:
Includes impaired securities measured at fair value on a nonrecurring basis. Refer to "Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis" for the details of the level classification.
Excludes cost-method investments of¥549 billion and ¥410 billion at March 31, 2014 and 2015, respectively, of which the MUFG Group did not estimate the fair value since il was not practical and no impairment indicators were identified. See Note 3 for the details of these cost-method investments.
Includes loans held for sale and collateral dependent loans measured at fair value on a nonrecurring basis. Refer to "Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis" for the details of the level classification
Excludes investments in equity method investees of ¥1,620 billion and ¥2,049 billion at March 31, 2014 and 2015, respectively.
The following section describes the valuation techniques adopted by the MUFG Group to estimate fair values of financial instruments that are not recorded at fair value in the accompanying consolidated balance sheets.
Cash and due from banks, Interest-earning deposits in other banks, Call loans and funds sold, Receivables under resale agreements and Receivable under securities borrowing transactions—For cash and due from banks, interest-earning deposits in other banks, call loans and funds sold, receivables under resale agreements and receivable under securities borrowing transactions, the carrying amounts are a reasonable estimate of the fair values because of their short-term nature and limited credit risk.
Investment securities—The fair values of investment securities other than those classified as Available-for-sale or Held-to-maturity (i.e., nonmarketable equity securities) are not readily determinable as they do not have readily available quoted prices or secondary market prices. The fair values of certain nonmarketable equity securities, such as preferred stock convertible to marketable common slock issued by public companies arc
F-155
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
determined by utilizing commonly accepted valuation techniques to derive a fair value using the present value of dividend cash flows and option prices. For option prices, the Trinomial Tree Method determines possible paths of future stock prices using a forward rate for a common stock, and the price is calculated by multiplying the possible paths of future stock prices by the expected cash flows generated from the probability of exercising options or upon exercising of the options. Lnputs used in the valuation include but are not limited lo stock price, volatility and credit spread. The valuation is performed on a quarterly basis. At the time of any sale, the MUFG Group generally separately calculates a valuation to be used in sales price negotiations wilh the counterparty. The price agreed between the MUFG Group and a counterparty is also used as a reference for validating the appropriateness of previous valuations ofthe investment. The MUFG Group performs periodic validation of the valuation techniques. Specifically, the sensitivity and appropriateness ofthe inputs are verified by using different valuation techniques employed by the MUFG Group. Il is not practicable for the MUFG Group to estimate the fair value of other nonmarketable securities issued by non-public companies for which a quoted price is not available. For these securities, the MUFG Group is unable lo estimate fair value without incurring undue cost because they comprise investments in numerous non-public companies and each investment represents an insignificant percentage relative to each company. Therefore, the above summary docs not include the carrying amounts of such investment securities. The carrying amounts not included in the above summary arc ¥549 billion and ¥410 billion at March 31, 2014 and 2015, respectively.
Loans—The fair value of loans is estimated by discounting expected future cash flows based on types of loans, internal ratings and possibility of prepayment using the discount rates which include adjustments to reflect the expectations about possible variations to the current market rates. For certain residential loans with variable interest rates'provided io individual home owners, tlie carrying amount is presented as the fair value since such carrying amount approximates tlie fair value, unless the creditworthiness of the borrower has changed significantly since the loan origination. Where quoted prices or estimated fair values are available, primarily for loans to refinancing countries, loans held for sales and certain other foreign loans, the fair values are based on such market prices and estimated fair values, including secondary market prices. For receivables from bankrupt, virtually bankrupt, and likely to become bankrupt borrowers, credit loss is estimated based mainly on the expected amount to be collected from collateral and guarantees. The carrying amount is presented as the fair value since the fair value approximates such carrying amount.
Other financial assets—-The estimated fair, values of other financial assets, which primariLy include accrued interest receivable, customers' acceptance liabilities and accounts receivable, approximate their carrying amounts. The above summary does not include the carrying amounts of investments in equity method investees amounting to¥l,620 billion and¥2,049 billion at March 31, 2014 and 2015, respectively.
Non-interest-bearing deposits, Call money and funds purchased, Payables under repurchase agreements and Payable under securities lending transactions—For non-interest-bearing deposits, the amount payable on demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered to be the fair value. For call money and funds purchased, payables under repurchase agreements and payable under securities lending transactions, the carrying amounts are reasonable estimate of the fair value because of their short-term nature and limited credit risk.
Interest-bearing deposits—For variable rate time deposits, the carrying amount is presented as the fair value because the market interest rate is reflected in such deposits within a short time period. Fixed rate time deposits are grouped by certain maturity lengths. The fair value of such deposits is estimated by discounting expected future cash flows using the discount rates that would be applied to newly accepted deposits.
Due to trust account—Since these are cash deposits with no maturity, the carrying amount is presented as the fair value as the fair value approximates such carrying amount.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings—For most other short-term borrowings, tlie carrying amount is presented as the fair value since such carrying amount approximates the fair value because of their short-term nature and limited credit risk.
Long-term debt—The fair value of corporate bonds issued by the MUFG Group is determined based on quoted prices of those corporate bonds. The fair value of fixed rate corporate bonds without quoted prices is the present value of expected future cash flows from these borrowings, which is discounted at an interest rate generally applicable to similar borrowings reflecting premium applicable to the MUFG Group. For variable rate corporate bonds without quoted prices, the carrying amount of such bonds, is presented as the fair value since such carrying amount approximates the fair value. This is on the basis that the market interest rate is reflected in the fair value of such corporate bonds because such bond terms were set within a short time period and that there has been no significant impact on the fair value of those bonds.
Other financial liabilities—The estimated fair values of other financial liabilities, which primarily include accrued interest payable, bank acceptances, accounts payable and obligations under standby letters of credit and guarantees, approximate their carrying amounts. The fair values of obligations under standby letters of credit and guarantees are based on fees received or receivable by the MUFG Group.
The fair values of certain off-balance sheet financial instruments held for purposes other than trading, including commitments to extend credit and commercial letters of credit, are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the credit quality. The aggregate fair value of such instruments at March 31, 2014 and 2015 was not material.
The fair value estimates presented herein are based on pertinent information available to management at March 31, 2014 and 2015. These amounts have not been comprehensively reevaluated since that date, and therefore, current estimates of fair values may have changed significantly from the amounts presented herein.
32. STOCK-BASED COMPENSATION
The following describes the stock-based compensation plans of MUFG, BTMU, MUTB, MUSHD, MUMSS and MUAH.
MUFG, BTMU, MUTB, MUSHD and MUMSS
MUFG, BTMU, MUTB, MUSHD and MUMSS have a stock-based compensation plan for directors, executive officers, corporate auditors and senior fellows ("officers").
The awards under the stock-based compensation plan are a type of stock option (referred to as "Stock Acquisition Rights") to officers of MUFG, BTMU, MUTB, MUSHD and MUMSS. The Stock Acquisition Rights were normally issued and granted to these officers once a year until the fiscal year ended March 31, 2013. They are normally issued and granted to these officers except for coiporate auditors once a year from the fiscal year ended March 31, 2014.
The class of shares to be issued or transferred on exercise of the Stock Acquisition Rights is common stock of MUFG. The number of shares to be issued or transferred on exercise of each Stock Acquisition Right ("number of granted shares") is 100 shares. In the event of a stock split or stock merger of common stock of MUFG, the number of granted shares shall be adjusted in accordance with the ratio of the stock split or stock merger. If any events occur that require the adjustment to the number of granted shares (e.g., mergers, consolidations, corporate separations or capital reductions of MUFG), MUFG shall appropriately adjust the number of granted shares to a reasonable extent.
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The contractual term ofthe Stock Acquisition Rights is approximately 30 years from the date of grant. Some ofthe Stock Acquisition Rights vest on the date of grant and the rest of the rights granted vest depending on the holders' service periods as officers. The Stock Acquisition Rights are only exercisable after the date on which the following conditions are met: (1) holder as a director or an executive officer loses the status of both director and executive officer, and (2) holder as a corporate auditor loses the status of a corporate auditor, and (3) holder as a senior fellow loses the status of a senior fellow. The exercise price is ¥1 per share.
The following is a summary ofthe Stock Acquisition Rights transactions of MUFG, BTMU, MUTB, MUSHD and MUMSS for the fiscal year ended March 31, 2015:
Fiscal year ended March 31, 2015
Number of shares
Outstanding, beginning of fiscal year 21,039,900
Granted 3,019,400
Exercised (4,827,400)
Forfeited or Expired (61,500)
Outstanding, end of fiscal year 19,170,400
Exercisable, end of fiscal year —
Weighted average exercise price
Weighted average
remaining contractual term
(in years)
26.89
Aggregate intrinsic value
(in millions)
¥14,238 ¥ —
The fair value of the Stock Acquisition Rights is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions described in the following table. The risk-free rate is based on the Japanese government bonds yield curve in effect at the date of grant based on the expected term. The expected volatility is based on the historical data from traded common stock of MUFG. The expected term is based on the average service period of officers of MUFG, BTMU, MUTB, MUSHD and MUMSS, which represents the expected outstanding period of the Stock Acquisition Rights granted. The expected dividend yield is based on the dividend rate of common stock of MUFG at tlie date of grant.
Fiscal years ended March 31,
2013 2014 2015
Risk-free interest rate 0.11% 0.22% 0.11 %
Expected volatility 40.48% 30.16% 28.74%
Expected term 4 years 4 years 4 years
Expected dividend yield 3.18% 1.96% 2.67%
The weighted-average grant date fair value of the Stock Acquisition Rights granted for the fiscal years ended March 31, 2013, 2014 and 2015 was ¥33,100, ¥61,100 and ¥53,900 per 100 shares, respectively.
The MUFG Group recognized ¥2,862 million, ¥2,069 million and ¥1,594 million of compensation costs related to the Stock Acquisition Rights with ¥1,088 million, ¥737 million and ¥540 million ofthe corresponding tax benefit for the fiscal years ended March 31, 2013, 2014 and 2015, respectively. As of March 31, 2015, the total unrecognized compensation cost related to the Stock Acquisition Rights was ¥248 million and it is expected to be recognized over 3 months.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash received from the exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2013,
and 2015 was ¥4 million, ¥5 million and ¥5 million, respectively. The actual tax benefit realized for the tax deductions from exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2013, 2014 and
was ¥675 million, ¥789 million and ¥728 million, respectively.
MUAH
In April 2010, MUAH adopted the UnionBanCal Plan ("UNBC Plan"). Under the UNBC Plan, MUAH grants restricted stock units settled in American Depositary Receipts ("ADRs") representing shares of common stock of MUAH's indirect parent company, MUFG, to key employees at the discretion of the Executive Compensation and Benefits Committee of the Board of Directors ("the Committee"). The Committee determines the number of shares, vesting requirements and other features and conditions of the restricted stock units. Under the UNBC Plan, MUFG ADRs are purchased in the open market upon the vesting of the restricted stock units, through a revocable trust. There is no amount authorized to be issued under the UNBC Plan since all shares are purchased in the open market. These awards generally vest pro-rata on each anniversary of the grant date and become fully vested three years from the grant date, provided that the employee has completed the specified continuous service requirement. Generally, the grants vest earlier if the employee dies, is permanently and totally disabled, retires under certain grant, age and service conditions, or terminates employment under certain conditions.
Under the UNBC Plan, the restricted stock unit participants do not have dividend rights, voting rights or other stockholder rights. The grant date fair value of these awards is equal to the closing price of the MUFG ADRs on date of grant.
Effective July 1, 2014, the U.S. branch banking operations of BTMU were integrated under MUB's operations and MUAH assumed the Obligations of the stock bonus plan established by BTMU Headquarters for the Americas ("HQA Plan"). The HQA Plan is substantially similar to the UNBC Plan; however, participants in the HQA Plan are entitled to "dividend equivalent credits" on their unvested restricted stock units when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the participants would have received on the shares had the shares been issued to the participants when the restricted stock units were granted. Accumulated dividend equivalents are paid to participants in cash on an annual basis.
The following table is a summary of the UNBC Plan and the HQA Plan, which together are presented as the "Stock Bonus Plans":
Units Fair Value Vesting Pro-rata
Grant Date Granted of Stock Duration Vesting Date
April 15,2012 4,816,795 $4.78 3 years April 15
July 15,2012 74,175 4.72 3 years July 15
April 15,2013 3,656,340 6.66 3 years April 15
July 15,2013 78,725 6.67 3 years July 15
April 15,2014 9,135,710 5.40 3 years April 15
July 10,2014 56,056 5.91 3 years July 10
September 15,2014 46,552 5.80 3 years September 15
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table is a roll-forward ofthe restricted stock units under the Stock Bonus Plans for the fiscal years ended December 31, 2013 and 2014:
Restricted Stock Units
2013 2014
Units outstanding, beginning of fiscal year 8,857,884 7,851,017
Activity during the year:
HQA Plan units outstanding as of July 1, 2014 — 3,315,313
Granted 3,735,065 9,238,318
Vested (4,325,661) (4,351,084)
Forfeited (416,271) (952,075)
Units outstanding, end of fiscal year 7,851,017 15,101,489
The following table is a summary of MUAH's compensation costs, the corresponding tax benefit for the fiscal years ended December 31, 2012, 2013 and 2014, and unrecognized compensation costs as of December 31, 2012, 2013 and 2014:
December 31, 2012 2013 2014 (in millions)
Compensation costs ¥1,437 ¥2,051. ¥3,599
Tax benefit '55? 781 1,376
Unrecognized compensation costs 2,251 2,846 5,063
33. PARENT COMPANY ONLY FINANCIAL INFORMATION
Distributions of retained earnings of BTMU and MUTB are restricted in order to meet the minimum capital adequacy requirements under the Banking Law. Also, retained earnings of these banking subsidiaries are restricted, except for approximately ¥5,512 billion and ¥5,340 billion, in accordance with.the statutory reserve .requirern.ents.under.the Company Law .at March 31, 20I4.and 2015, respectively See Notes 18 and 21 for further information.
The Banking Law and related regulations restricts the ability of these banking subsidiaries to extend credit to the parent company. Such loans to the parent company are generally limited to 15% of the banking subsidiary's consolidated total capital, as determined by the capital adequacy guidelines.
At March 31, 2014 and 2015, approximately ¥3,928 billion and ¥6,023 billion, respectively, of net assets of consolidated subsidiaries may be restricted as to payment of cash dividends and loans to the parent company.
F-160
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the parent company only financial information of MUFG: Condensed Balance Sheets
As of March 31,
(in millions)
Assets:
Cash and interest-earning deposits with banking subsidiaries ¥ 130,338 ¥ 71,675
Investments in subsidiaries and affiliated companies 14,439,803 16,651,467
Banking subsidiaries 11,104,470 12,653,292
Non-banking subsidiaries and affiliated companies 3,335,333 3,998,175
Loans to subsidiaries — 190,000
Banking subsidiaries — 150,000
Non-banking subsidiaries — 40,000
Other assets 64,808 167,628
Total assets ¥14,634,949 ¥17,080,770
Liabilities and Shareholders' equity:
Short-term borrowings from banking subsidiaries ¥ 1,917,647 ¥ 1,824,448
Long-term debt from non-banking subsidiaries and affiliated companies 384,445 254,438
Long-term debt 78 190,057
Other liabilities 127,739 132,762
Total liabilities 2,429,909 2,401,705
Total shareholders' equity 12,205,040 14,679,065
Total liabilities and shareholders' equity '. ¥14,634,949 ¥17,080,770
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Income
Fiscal years ended March 31,
2013 2014 2015
(in millions)
Income:
Dividends from subsidiaries and affiliated companies ¥ 220,050 ¥ 255,175 ¥ 579,180
Banking subsidiaries 184,462 207,771 457,159
Non-banking subsidiaries and affiliated companies 35,588 47,404 122,021
Management fees from subsidiaries 17,154 18,922 22,059
Interest income 77 73 450
Foreign exchange losses—net (59,375) (44,544) (86,038)
Other income 634 294 906
Total income 178,540 229,920 516,557
Expense:
Operating expenses 15,952 18,304 20,791
Interest expense to subsidiaries and affiliated companies 30,501 28,897 28,929
Interest expense 1,122 1,121 387
Other expense 2,620 591 1,019
Total expense 50,195 48,913 51,126
Equity in undistributed net income of subsidiaries and affiliated
companies—net 937,673 793,548 1,036,350
Income before income tax benefit 1,066,018 974,555 1,501,781
. Income tax benefit (3,106) (40,838) (29,346)
Net income ¥1,069,124 ¥1,015,393 ¥1,531,127
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MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NO TES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Condensed Statements of Cash Flows
Fiscal years ended March 31,
2013 2014 2015
(in millions)
Operating activities:
Net income ¥1,069,124 ¥1,015,393 ¥1,531,127
Adjustments and other ' (858,288) (790,050) (980,631)
Net cash provided by operating activities 210,836 225,343 550,496
Investing activities:
Proceeds from sales of other investment securities — — 130,000
Proceeds from sales of investment in subsidiaries and affiliated
companies 21,160 — 390,000
Purchases of investment in subsidiaries and affiliated
companies (3,838) — —
Net increase in loans to subsidiaries — — (190,000)
Net decrease in interest-earning deposits with banks 8,996 1,494 111,295
Other—net (10,623) (2,788) (60,140)
Net cash provided by (used in) investing activities 15,695 (1,294) 381,155
Financing activities:
Net decrease in short-term borrowings from subsidiaries (34,989) (4) (179,380)
Proceeds from issuance of long-term debt — — 190,000
Repayment of long-term debt (20) (16) (20)
Repayment of long-term debt to subsidiaries and affiliated
companies — — (130,000)
Proceeds from sales of treasury stock |99910|Payments for acquisition of preferred stock • — — (390,000)
Payments for acquisition of treasury stock (16) (46) (100,045)
Dividends paid (187,778) (216,117) (263,978)
Other—net (212) (2,988) (5,598)
Net cash used in financing activities (223,014) (219,169) (879,019)
Net increase in cash and cash equivalents 3,517 4,880 52,632
Cash and cash equivalents at beginning of fiscal year 10,622 14,139 19,019
Cash and cash equivalents at end of fiscal year ¥ 14,139 ¥ 19,019 ¥ 71,651
34. SEC REGISTERED FUNDING VEHICLES ISSUING NON-DILUTIVE PREFERRED SECURITIES
In February 2006, MUFG established MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited, wholly-owned funding vehicles in the Cayman Islands, for the issuance of preferred securities to enhance the flexibility of its capital management.
On March 17, 2006, MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited registered with the SEC and issued $2,300,000,000 in 6.346% non-cumulative preferred securities, €750,000,000 in 4.850% non-cumulative preferred securities and ¥120,000,000,000 in 2.680% non-cumulative preferred securities (collectively, the "Preferred Securities"), respectively. Total net proceeds before expenses were approximately $4.17 billion. All of the ordinary shares of MUFG Capital
F-163
MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited are owned by MUFG. MUFG fully and unconditionally guarantees the payment of dividends and payments on liquidation or redemption of the obligations under the Preferred Securities.
The Preferred Securities entitle holders to receive a non-cumulative preferential cash dividend starting on July 25, 2006 and on January 25 and July 25 of each year thereafter. These funding vehicles will not be obligated to pay dividends on the Preferred Securities upon the occurrence of certain events relating to the financial condition of MUFG. From July 25, 2016, dividends on the Preferred Securities will be re-calculated at a floating rate per annum.
The dollar-denominated and euro-denominated preferred securities are subject to redemption on any dividend payment date on or after July 25, 2016. All the Preferred Securities are subject to redemption in whole (but not in part) at any time upon the occurrence of specified events, in each case at the option of each of the funding vehicles and subject to necessary government approvals.
The Preferred Securities are non-dilutive and not convertible into MUFG's common shares. The Preferred Securities were included as part of MUFG's Tier 1 capital at March 31, 2014 and 2015 under its capital adequacy requirements.
These funding vehicles are not consolidated as the MUFG Group's subsidiaries. See Note 25 for discussion. The funds raised through such funding vehicles are primarily loaned to the MUFG Group and presented as Long-term debt in. the accompanying consolidated balance sheet at March 31, 2014 and 2015.
On July 25, 2011, MUFG redeemed a total of ¥120,000,000,000 of non-cumulative and non-dilutive perpetual preferred securities issued by MUFG Capital Finance 3 Limited.
35. SUBSEQUENT EVENTS
Repurchase of own shares
From May 18, 2015 to June 16, 2015, MUFG repurchased 111,151,800 shares of MUFG's common stock by marker purchases based on" the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 15, 2015. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 160,000,000 shares, which represents the equivalent of 1.14% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of tlie repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies.
Approval of Dividends
On June 25, 2015, die shareholders approved the payment of cash dividends to the shareholders of record on March 31, 2015, of ¥9 per share of Common stock, totaling ¥126,179 million.
Partial Amendment to the Articles of Incorporation
On June 25, 2015, amendments to the Articles of Incorporation were made with respect to the First Series of Class 5 and Class 11 Preferred Stock. As a result, the aggregate number of shares authorized to be issued by MUFG was decreased by 1,000 shares, and the aggregate number ofthe First Series of Class 5 and Class 11 Preferred Shares authorized to be issued was removed.
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MITSUBISHI UF.I FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock Acquisition Rights
On July 14, 2015, MUFG allotted the directors (excluding outside directors), executive officers and senior fellows of MUFG, BTMU, MUTB, MUSHD and MUMSS stock acquisition rights to acquire an aggregate amount of 2,058,600 shares of MUFG's common stock. The stock acquisition rights have an exercise price of ¥1 per common share, and are exercisable until July 13, 2045.
*****
F-165
Signature
The registrant hereby certifies that it meets all ofthe requirements for filing on Form 20-F and that il has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
MITSUBISHI UFJ FINANCIAL GROUP, INC.
By: /s/ Nobuyuki Hirano
Niimc: Nobuyuki Hirano
Title: President & Group Chief Executive Officer
Date: July 27, 2015
EXHIBIT INDEX
Description
I (a) Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on June 25,
2015. (English translation)
1(b) Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015. (English translation)
1(c) Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on
June 25, 2015. (English translation)
1(d) Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27,
2013. (English Translation)*
2(a) Form of American Depositary Receipt.**
2(b) Form of Deposit Agreement, amended and restated as of December 22, 2004, among Mitsubishi
Tokyo Financial Group, Inc. (subsequently renamed Mitsubishi UFJ Financial Group, Inc.), The Bank of New York Mellon and the holders from time to time of American Depositary Receipts issued thereunder.**|109|Subsidiaries ofthe Company—see "Item 4.C. Information on the Company—Organizational
Structure."
II Principles of Ethics and Conduct, Compliance Rules, Compliance Manual, and Rules of
Employment of Mitsubishi UFJ Financial Group, Inc. applicable to its principal executive
officer, principal financial officer, principal accounting officer and persons performing similar
functions. (English translation of relevant sections)
Certifications required by Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-14(a) (17CFR240.15d-14(a)).
Certifications required by Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule 15d-14(b)
(17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
15 Consent of independent registered public accounting firm
101.INS XBRL Instance Document
101.SCH XBRL Schema Document
101 .CAL XBRL Calculation Linkbase Document
101 .DEF XBRL Definition Linkbase Document
101.LAB XBRL Label Linkbase Document
Notes:
* Incorporated by reference to our registration statement on Form S-8 (File No. 333-204845) filed on June 10, 2015. ** Incorporated by reference to our annual report on Form 20-F (File No. 000-54189) field on July 23, 2012.
Exhibit 1(a)
[Translation]
ARTICLES OF INCORPORATION OF
MITSUBISHI UFJ FINANCIAL GROUP, INC. CHAPTER I. GENERAL PROVISIONS
(Trade Name) Article 1.
The Company shall be called "Kabushiki Kaisha Mitsubishi UFJ Financial Group" and shall be called in English "Mitsubishi UFJ Financial Group, Inc.'' (hereinafter referred to as the "Company").
(Purpose) Article 2.
The purpose ofthe Company shall be to engage in tlie following businesses as a bank holding company:
1. Administration of management of banks, trust banks, specialized securities companies, insurance
companies or other companies which the Company may own as its subsidiaries under the Banking
Law; and
2, Any other businesses incidental to the foregoing businesses mentioned in the preceding item.
(Location of Head Office) Article 3.
The Company shall have its head office in Chiyoda-ku, Tokyo.
(Organization) Article 4.
The Company, being a company with three committees, shall establish the following organizations in addition to the general meeting of shareholders and the Directors:
The Board of Directors;
The Nominating and Governance Committee (which constitutes a Nominating Committee defined in the Corporation Act), the Audit Committee, and the Compensation Committee;
Executive Officers; and
An Accounting Auditor.
(Method of Public Notice) Article 5.
Public notices ofthe Company shall be given by way of electronic public notice.
In cases where the Company is unable to give an electronic public notice due to unavoidable circumstances, public notices ofthe Company shall be given in the manner ofthe publication in the Nihon Keizai Shimbun.
!
CHAPTER II.
SHARES
(Total Number of Shares Authorized to be Issued) Article 6.
The aggregate number of shares authorized to be issued by the Company shall be thirty-three billion eight hundred million (33,800,000,000) shares, and the aggregate number ofeach class shares authorized to be issued shall be as set forth below; provided, however, that the aggregate number of shares authorized to be issued with respect to the Second to the Fourth Series of Class 5 Preferred Shares shall not exceed four hundred million (400,000,000) in total, the aggregate number of shares authorized to be issued with respect to the First to the Fourth Series of Class 6 Preferred Shares shall not exceed two hundred million (200,000,000) in total, and the aggregate number of shares authorized to be issued with respect to the First to the Fourth Series of Class 7 Preferred Shares shall not exceed two hundred million (200,000,000) in total.
Ordinary Shares:
thirty-three billion (33,000,000,000) shares Tlie Second Scries of Class 5 Preferred Shares:
four hundred million (400,000,000) shares The Third Series of Class 5 Preferred Shares:
four hundred million (400,000,000) shares The Fourth Series of Class 5 Preferred Shares:
four hundred million (400,000,000) shares The First Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares The Second Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares The Third Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares The Fourth Series of Class 6 Preferred Shares:
two hundred million (200,000,000) shares The First Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares The Second Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares The Third Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares The Fourth Series of Class 7 Preferred Shares:
two hundred million (200,000,000) shares
(Number of Shares Constituting One (1) Unit of Shares) Article 7.
The number of shares constituting one (1) unit of shares ofthe Company shall be one hundred (100) with respect to Ordinary Shares and each class of Preferred Shares, respectively.|1010|
(Rights Pertaining to Fractional Unit Shares) Article 8.
A Shareholder of the Company may not exercise any rights with respect to fractional unit shares held by such shareholder, except for the following:
The rights provided for in each item of Article 189, Paragraph 2 of the Company Law;
The right to make a request pursuant to Article 166, Paragraph 1 ofthe Company Law;
The right to receive an allotment of offered shares and offered stock acquisition rights in proportion to the number of shares held by such shareholder; and
The right to make a request provided for in die following Article.
(Request for Sale of Fractional Unit Shares) Article 9.
A shareholder ofthe Company may request the Company to sell to the shareholder such number of shares which will, when combined with the fractional unit shares already held by such shareholder, constitute one (1) full unit of shares pursuant to die-Share Handling Regulations.
(Record Date) Article 10.
The Company shall deem the shareholders whose names have been entered or recorded in the latest register of shareholders as of March 31 of each year to be the shareholders who are entitled to exercise their rights at the ordinary general meeting of shareholders for the relevant business year.
The provision of the preceding paragraph shall apply mutatis mutandis to the record date for voting rights at general meetings of class shareholders, where there is a matter to be resolved at an ordinary general meeting of shareholders that requires, in addition to such resolution, a resolution by the relevant general meeting of class shareholders.
In addition to the preceding two paragraphs of this article, whenever necessary, the Company may, upon giving prior public notice, fix a date as a record date and may deem the shareholders or registered share pledgees whose names have been entered or recorded in the latest register of shareholders as of such date as the shareholders or the registered share pledgees entitled to exercise their rights.
(Transfer Agent) Article 11.
Tlie Company shall have a share transfer agent.
The share transfer agent and the handling office thereof shall be designated by resolution of the Board of Directors, and public notice thereof shall be given.
The establishment and retention of the register of shareholders and the register of stock acquisition rights of the Company and any other businesses with respect to the register of shareholders and the register of stock acquisition rights of the Company shall be handled by the share transfer agent, not by the Company.
(Share Handling Regulations) Article 12.
The registration of transfers of shares, the registration of pledges on shares, the entries or records in the register of shareholders and in the register of stock acquisition rights, and any other handling with respect to shares and stock acquisition rights as well as the fees therefor shall be governed by the Share Handling Regulations established by the Board of Directors.
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CHAPTER III
PREFERRED SHARES
(Preferred Dividends) Article 13.
The Company shall distribute cash dividends from surplus on Preferred Shares (hereinafter referred to as the "Preferred Dividends") in such respective amount as prescribed below to the holders of Preferred Shares (hereinafter referred to as the "Preferred Shareholders") or registered share pledgees who hold pledges over Preferred Shares (hereinafter referred to as the "Registered Preferred Share Pledgees"), whose names have been entered or recorded in the latest register of shareholders as of March 31 of each year, with priority over the holders of Ordinary Shares (hereinafter referred to as the "Ordinary Shareholders") or registered share pledgees who hold pledges over Ordinary Shares (hereinafter referred to as the "Registered Ordinary Share Pledgees"); provided, however, that in the event that the Preferred Interim Dividends provided for in Article 14 hereof have been paid in the relevant business year, the amount so paid shall be deducted accordingly from the amount of the Preferred Dividends set forth below for each relevant class of Preferred Shares.
The Second to the Fourth Scries of Class 5 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance of the Class 5 Preferred Shares, up to two hundred fifty (250) yen per share per year
The First to the Fourth Series of Class 6 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance of the Class 6 Preferred Shares, up to one hundred twenty-five (125) yen per share per year
The First to the Fourth Scries of Class 7 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance of the Class 7 Preferred Shares, up to one hundred twenty-five (125) yen per . share per year
If the aggregate amount paid to a Preferred Shareholder or Registered Preferred Share Pledgee as cash dividends from surplus in any particular business year is less than the prescribed amount ofthe relevant Preferred Dividends, the unpaid amount shall not be carried over to nor cumulated in subsequent business years.
The Company shall not distribute any dividends from surplus to any Preferred Shareholder or Registered Preferred Share Pledgee in excess of the prescribed amount of the relevant Preferred Dividends except for the distribution from surplus in the process ofthe corporate split (kyushu-bunkatsu) pursuant to Article 758, Item 8 (b) or Article 760, Item 7 (b) of the Corporation Act, or the distribution from surplus in the process of the corporate split (sliinsetsu-bunkatsu) pursuant to Article 763, Item 12 (b) or Article 765 Paragraph 1, Item 8 (b) of the said act.
(Preferred Interim Dividends) Article 14.
In the event of payment of Interim Dividends provided for in Article 46 of these Articles (hereinafter referred to as the "Preferred Interim Dividends"), the Company shall make a cash distribution from surplus in|1010|
such respective amount as prescribed below for each class of Preferred Shares to the Preferred Shareholders or Registered Preferred Share Pledgees with priority over the Ordinary Shareholders or Registered Ordinary Share Pledgees.
The Second lo the Fourth Series of Class 5 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance of the Class 5 Preferred Shares, up to one hundred twenty-five (125) yen per share
The First to the Fourth Series of Class 6 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance ofthe Class 6 Preferred Shares, up to sixty-two and fifty hundredths (62.50) yen per share
The First to the Fourth Series of Class 7 Preferred Shares:
Amount to be determined by resolution of the Board of Directors adopted at the time of issuance of the Class 7 Preferred Shares, up to sixty-two and fifty hundredths (62.50) yen per share
(Distribution of Residual Assets) Article 15.
If the Company distributes its residual assets in cash upon liquidation, the Company shall pay cash to the Preferred Shareholders or Registered Preferred Share Pledgees with priority over the Ordinary Shareholders or Registered Ordinary Share Pledgees in such respective amount as prescribed below:
The Second to the Fourth Series of Class 5 Preferred Shares: ¦
Two thousand five hundred (2,500) yen per share
The First to the Fourth Series of Class 6 Preferred Shares:
Two thousand five hundred (2,500) yen per share
The First to the Fourth Series of Class 7 Preferred Shares:
Two thousand five hundred (2,500) yen per share
The Company shall not make a distribution of residual assets other than as provided for in the preceding paragraph to the Preferred Shareholders or Registered Preferred Share Pledgees.
(Voting Rights) Article 16.
Unless otherwise provided for by laws or regulations, the Preferred Shareholders shall not have voting rights at any general meeting of shareholders; provided, however, that the Preferred Shareholders shall have voting rights from (i) the commencement of an ordinary general meeting of shareholders in the event that no proposal for declaration of the Preferred Dividends be paid to the Preferred Shareholders is submitted to such ordinary general meeting of shareholders or (ii) the close of an ordinary general meeting of shareholders in the event that such proposal is rejected at such ordinary general meeting of shareholders, until, in either case, a proposal for declaration of the Preferred Dividends be paid to the Preferred Shareholders is approved at an ordinary general meeting of shareholders.
(Consolidation or Split of Preferred Shares and Rights to Be Allotted Shares, etc.) Article 17.
Unless otherwise provided for by laws or regulations, the Company shall not consolidate or split any Preferred Shares.
The Company shall not grant the Preferred Shareholders any rights to be allotted shares or stock acquisition rights.
The Company shall not grant the Preferred Shareholders any rights for the free allotment of shares or stock acquisition rights.
( Provisions for A cquisition ) Article 18.
In respect ofthe Second to the Fourth Series of Class 5 Preferred Shares and/or the First to the Fourth Series of Class 6 Preferred Shares, the Company may, after issuance of the respective Preferred Shares and after the lapse of the period designated by resolution of the Board of Directors adopted at the time of the issuance of respective Preferred Shares, acquire such Preferred Shares, in whole or in part, in exchange for the amount of cash as deemed appropriate as the acquisition price giving due consideration to the prevailing market conditions, as determined by such resolution ofthe Board of Directors, on a certain date as separately determined by the Company by a resolution of tlie Board of Directors after the issue of the relevant Preferred Shares.
Partial acquisition shall be effected pro rata or in lot.
(Right to Request Acquisition) Article 19.
Any holder of the First to the Fourth Series of Class 6 or the First to the Fourth Series of Class 7 Preferred Shares may request acquisition of such Preferred Shares during the period in which such Preferred Shareholder is entitled to request acquisition as determined by resolution of the Board of Directors adopted at the time of issuance of such Preferred Shares, in exchange for Ordinary Shares of the Company in the number as is calculated by the formula designated by such resolution.
(Mandatory Acquisition) Article 20.
1. The Company shall mandatorily acquire any of the First to the Fourth Series of Class 6 Preferred Shares or the First to the Fourth Series of Class 7 Preferred Shares for which no request for acquisition is made during the period in which the holders of such Preferred Shares are entitled to request acquisition on the day immediately following the last day of such period in exchange for Ordinary Shares in the number as is obtained by dividing an amount equivalent to the subscription price per each relevant Preferred Share by the average daily closing price (including closing bids or offered prices) of Ordinary Shares of the Company (in regular trading) as reported by the Tokyo Stock Exchange for the thirty (30) consecutive trading days (excluding a trading day or days on which no closing price or closing bid or offered price is reported) commencing on the forty-fifth (45th) trading day prior to such date; provided, however, that such calculation shall be made to the second decimal place denominated in yen, and rounded up to one decimal place when the fraction beyond it is equal to or more than 0.05 yen, discarding amounts less than 0.05 yen. If the relevant average price is less than the amount determined by resolution ofthe Board of Directors adopted at the time of issuance of respective Preferred Shares, the relevant Preferred Shares shall be acquired in exchange for Ordinal"}' Shares in the number as is obtained by dividing an amount equivalent to the subscription price per each relevant Preferred Shares by an amount so determined by such resolution of the Board of Directors.
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After issuance ofthe Second to tlie Fourth Series of Class 5 Preferred Shares, the First to the Fourth Series of Class 6 Preferred Shares and/or the First to the Fourth Scries of Class 7 Preferred Shares, upon the occurrence of a certain event that requires the acquisition ofthe relevant Preferred Shares pursuant to the capital adequacy requirements applicable to the Company and which event shall be determined by resolution of the Board of Directors adopted at the time of the issuance of the relevant Preferred Shares, the Company shall mandatorily acquire the relevant Preferred Shares in whole on an acquisition date which falls after the occurrence of the certain event. The acquisition date shall be either of a certain date which falls after the occurrence of the relevant certain event and which date shall be determined by such resolution of the Board of Directors, giving due consideration to such capital adequacy requirements and other factors, or a dale separately determined by tlie Company by resolution of the Board of Directors adopted after the occurrence of the relevant certain event. The Company shall mandatorily acquire the relevant Preferred Shares in exchange for Ordinary Shares or free of consideration, and whether such acquisition shall be made in exchange for Ordinary Shares or free of consideration shall be determined by resolution of the Board of Directors adopted at the time of issuance of the relevant Preferred Shares, giving due consideration to the market conditions and other factors. The formula for calculating the number of Ordinary Shares in case where the relevant Preferred Shares shall be acquired in exchange for Ordinary Shares shall be determined by resolution of the Board of Directors adopted at the time of issuance of the relevant Preferred Shares, giving due consideration to the market price of Ordinary Shares, the subscription price ofthe relevant Preferred Shares and other factors.
In the calculation ofthe number, of Ordinary Shares provided for in the preceding two paragraphs of this article, if any number less than one (1) share is yielded, such fractions shall be handled by the method provided for in Article 234 of the Corporation Act.
C Order of Priority) Article 21.
All classes of Preferred Shares shall rank pari passu with each other in respect of the payment of Preferred Dividends and Preferred Interim Dividends and the distribution of residual assets.
(Prescription Period) Article 22.
The provisions set forth in Article 47 of these Articles shall apply mutatis mutandis to the payment of Preferred Dividends and Preferred Interim Dividends.
CHAPTER IV. GENERAL MEETING OF SHAREHOLDERS
(Convocation) Article 23.
An ordinary general meeting of shareholders shall be convened within three (3) months from the last day of each business year.
An extraordinary genera! meeting of shareholders shall be convened whenever necessary.
( Chairman ) Article 24.
1. The Director concurrently serving as President and Group Chief Executive Officer shall act as chairman of general meetings of shareholders.
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2. If the Director concurrently serving as President and Group Chief Executive Officer is unable to act as such, one of the other Directors shall act as chairman in accordance with the order of priority determined in advance by the Board of Directors.
(Disclosure via Internet and Deemed Delivery of Reference Documents, etc for General Meetings of Shareholders)
Article 25.
Upon convening a general meeting of shareholders, the Company may deem lhat the information required to be described or indicated in the reference documents for the general meeting of shareholders, business reports, financial statements and consolidated financial statements shall have been provided to the shareholders when such information is disclosed, pursuant to the Ministry of Justice Ordinances, through a method lhat uses the Internet.
(Method of Resolution) Article 26.
Unless otherwise provided for by law or regulation or these Articles of Incorporation, resolutions of a general meeting of shareholders shall be adopted by an affirmative vote of a majority of the voting rights of the shareholders in attendance who are entitled to vote.
Resolutions of a general meeting of shareholders provided for in Article 309, Paragraph 2 of the Corporation Act and resolutions of a general meeting of shareholders for which the method of resolution provided for in the said Paragraph shall be applied mutatis mutandis pursuant to the Corporation Act and other laws and regulations shall be adopted by an affirmative vote of two-thirds (2/3) or more of the voting rights of the shareholders in attendance who hold in the aggregate not less than one-third (1/3) ofthe total number of voting rights of all shareholders who are entitled to vote.
(Voting by Proxy) Article 27.
Shareholders may exercise their voting rights at a general meeting of shareholders by appointing one (1) proxy who is one (1) shareholder ofthe Company entitled to exercise its own voting rights at such meeting.
In the case of the preceding paragraph, the shareholder or the proxy thereof shall submit to the Company a document evidencing authority of the proxy to act as such at each general meeting of shareholders.
(Minutes) Article 28.
The proceedings of general meetings of shareholders shall be stated or recorded in the minutes pursuant to laws and regulations.
(General Meetings of Holders of Classes of Shares) Article 29.
The provisions of Articles 24, 25, 27 and 28 of these Articles shall apply mutatis mutandis to general meetings of class shareholders.
The provisions of Article 26, Paragraph 1 of these Articles shall apply mutatis mutandis to the resolutions of general meetings of class shareholders made pursuant to Article 324, Paragraph 1 ofthe Corporation Act.
The provisions of Article 26, Paragraph 2 of these Articles shall apply mutatis mutandis to the resolutions of general meetings of class shareholders made pursuant to Article 324. Paragraph 2 of the Coq)oration Act.
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CHAPTER V.
DIRECTORS AND BOARD OF DIRECTORS
(Number of Directors and Method of Election) Article 30.
The Company shall have not mote than twenty (20) Directors, who shall be elected at a general meeting of shareholders.
A resolution for the election of Directors shall be adopted at a general meeting of shareholders by an affirmative vote of a majority of the voting rights of the shareholders in attendance who hold voting rights representing in the aggregate one-third (1/3) or more of the total number of voting rights of all shareholders who are entitled to vote.
Resolutions for the election of Directors shall not be made by cumulative voting.
(Term of Office) Article 31.
The term of office of Directors shall expire at the close of the ordinary general meeting of shareholders held in respect of the last business year ending within one (1) year after their election.
(Board of Directors) Article 32.
The Board of Directors shall decide the business execution of the Company and oversee the performance of duties of Executive Officers and Directors.
Unless otherwise provided for by laws and regulations, the Board of Directors may delegate decisions on the business execution of the Company to Executive Officers.
Unless otherwise provided for by laws and regulations, the Director determined in advance by the Board of Directors shall convene meetings of the Board of Directors and act as chairman. If the Director determined in advance by the Board of Directors is unable to act as such, one of the other Directors shall act as Chairman and Director in accordance with the order of priority determined in advance by the Board of Directors.
Notice to convene a meeting of the Board of Directors shall be given to each Director at least three (3) days prior to the date of such meeting; provided, however, that the foregoing shall not apply in cases of emergency.
Unless otherwise provided for by law or regulation, resolutions of a meeting of the Board of Directors shall be adopted by an affirmative vote of a majority of the Directors present who constitute in number a majority of all the Directors ofthe Company.
With respect to the matters to be resolved by the Board of Directors, the Company shall deem that such matters were approved by a resolution ofthe Board of Directors when all the Directors express their agreement in writing or by an electromagnetic device.
The proceedings of meetings of the Board of Directors shall, pursuant to laws and regulations, be stated or recorded in the minutes, to which the Directors present shall put their names and affix their seals or electronic signatures.
|10 10|
(Exemption from Liability of Directors) Article 33.
In accordance with the provisions of Article 426-, Paragraph 1 of the Corporation Act, the Company may, by a resolution of the Board of Directors, exempt Directors (including former Directors) from their liabilities provided for in Article 423, Paragraph 1 ofthe Corporation Act within the limits stipulated by laws and regulations provided that such Director has acted in good faith and without gross negligence.
(Limited Liability Agreement with Directors) Article 34.
Pursuant to the provisions of Article 427, Paragraph 1 of the Coqjoration Act, the Company may execute agreements with Directors other than Executive Directors etc., which limit the liability of such Directors provided for in Article 423, Paragraph 1 of the Corporation Act; provided, however, that the limit of the liability under such agreements shall be the greater of an amount determined in advance which shall not be less than ten million (10,000,000) yen or the minimum liability amount prescribed by laws or regulations.
CHAPTER VI. Committees
(Method of Appointment of Committee Members) Article 35.
The members ofthe Nominating and Governance Committee (which constitutes a Nominating Committee defined in the Corporation Act), the Audit Committee, and the Compensation Committee shall be appointed from among the Directors by the resolution of the Board of Directors.
(Authority etc. of Committees) Article 36.
Matters concerning the Nominating and Governance Committee (which constitutes a Nominating Committee defined in the Corporation Act), the Audit Committee, and the Compensation Committee shall be governed by the Regulations thereof established by each Committee, as well as by applicable laws and regulations, these Articles of Incorporation, or resolutions ofthe Board of Directors.
CHAPTER VII. Executive Officers
(Method of Election) Article 37.
Executive Officers shall be elected by the Board of Directors.
(Term of Office) Article 38.
The term of office of Executive Officers shall expire at the close of the first meeting ofthe Board of Directors convened after the close ofthe ordinary general meeting of shareholders held in respect of the last business year ending within one (1) year after their election.
10
(Representative Executive Officer and Executive Officer with Executive Power) Article 39.
The Board of Directors shall, by its resolution, elect Representative Executive Officer(s) from among the Executive Officers.
The Board of Directors may, by its resolution, appoint Ihe President and Group Chief Executive Officer, Chairman and Executive Officer, Deputy Chairman and Executive Officer(s), Deputy President and Group Chief Operating Officcr(s), Senior Managing Executive Officer(s) and Managing Executive Officer(s).
(Exemption from Liability of Executive Officers) Article 40.
In accordance with the provisions of Article 426, Paragraph 1 of the Corporation Act, the Company may, by a resolution of the Board of Directors, exempt Executive Officers (including former Executive Officers) from their liabilities provided for in Article 423, Paragraph 1 of (he Corporation Act within the limits stipulated by laws and regulations provided that such Executive Officer has acted in good faith and without gross negligence.
CHAPTER VIII. ACCOUNTING AUDITOR
(Method of Election) Article 41.
The Accounting Auditor shall be elected at a general meeting of shareholders.
(Term of Office) Article 42.
The term of office of the Accounting Auditor shall expire al tlie close of the ordinary general meeting of shareholders held in respect of the last business year ending within one (1) year after his/her assumption of office.
The Accounting Auditor shall be deemed to be reappointed at a general meeting of shareholders provided that there is no resolution to the contrary.
CHAPTER IX. ACCOUNTS
(Business Year) Article 43.
The business year of the Company shall commence on April I of each year and end on March 31 of the following year.
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(Acquisition of Own Shares) Article 44.
Unless otherwise provided for by laws or regulations, the company may determine by a resolution of the Board of Directors to acquire its own shares by obtaining consent ofthe shareholders as provided for in Article 459, Paragraph 1, Item 1 ofthe Corporation Law.
(Year-End Dividends) Article 45.
The Company shall distribute cash dividends from surplus (referred to as the "Year-End Dividends" in these Articles of Incorporation) to the shareholders or registered share pledgees whose names have been entered or recorded in the latest register of shareholders as of March 31 of each year.
(Interim Dividends) Article 46.
By resolution of the Board of Directors, the Company may distribute cash dividends from surplus pursuant to Article 454, Paragraph 5 ofthe Corporation Act (referred to as the "Interim Dividends" in these Articles of Incorporation) to the shareholders or registered share pledgees whose names have been entered or recorded in the latest register of shareholders as of September 30 of each year.
(Prescription Period for Payment of Dividends) Article 47.
In the event that tlie dividends from surplus are to be paid in cash, the Company shall be released from the obligation to distribute dividends from surplus if such distribution has not been accepted after the lapse of five (5) full years from the date of commencement of payment thereof. Year-End Dividends and Interim Dividends of the Company shall bear no interest.
Additional Rule
(Transitional Measure Regarding Exemption from Liability of Corporate Auditors) Article 1.
In accordance with the provisions of Article 426, Paragraph 1 of the Corporation Act, the Company may, by a resolution of the Board of Directors, exempt Corporate Auditors (including former Corporate Auditors) from their liabilities provided for in Article 423, Paragraph 1 of the Corporation Act in relation to the acts conducted before the close of the 10th Ordinary General Meeting of Shareholders within the limits stipulated by laws and regulations provided that such Corporate Auditor has acted in good faith and without gross negligence.
- End -
12
Date of Establishment
April 2, 2001
Date of Amendment
June 27, 2002 June 27, 2003 June 29, 2004 June 29, 2005
October 1, 2005 (However, the Amendments to Articles of 5, 11, 12 (except for the amendment to Article 12
changing the reference to Article 37 into that to Article 38), 13,17, 18 and 39 shall be effective' from October 3, 2005.)
June 29, 2006
June 28, 2007 (However, the Amendments to Article 6, Article 8 through Article 16, Article 19, Article 21, Article 50 and Article 51 (except for the deletions in the Articles of Incorporation pertaining to Class 9 Preferred Shares and Class 10 Preferred Shares) shall be effective from September 30, 2007.)
June 26, 2009 June 27, 2013 June 25, 2015
Exhibit 1(b)
[Translation]
BOARD OF DIRECTORS REGULATIONS
Article 1. Purpose
The purpose of these Regulations is to enable the proper and smooth operation of MUFG's Board of Directors.
Article 2. Amendment or Abolishment
The amendment or abolishment of these Regulations shall be decided through a resolution by the Board of Directors.
Article 3. Organization
The Board of Directors shall be composed of all the directors.
Article 4. Authority
The Board of Directors shall decide key management policies and other matters of business execution by MUFG and oversee the execution of duties by directors and corporate executive officers.
Article 5. Delegation to Corporate Executive Officers
The Board of Directors shall delegate decisions on business execution to corporate executive officers in principle, excluding matters mandatorily required to be decided by the Board of Directors under the Companies Act; provided, however, that decisions on particularly important matters of business execution shall be made by the Board of Directors.
"Decisions on particularly important matters of business execution" refers to decisions on matters diat are particularly important and fundamental to MUFG, such as the following.
Matters that would have a particularly material effect on key management policies
Matters that would have a particularly material effect on the establishment of the internal control system
Matters that would have a particularly material effect on the Group's creditworthiness and reputation
Matters that would have a particularly material effect on the Group's business performance
Article 6. Meetings
Meetings of the Board of Directors shall be held at least once every three months in principle; provided, however, that extraordinary meetings ofthe Board of Directors may also be held in cases of emergency.
Article 7. Convener
A meeting of the Board of Directors shall be convened by the director who concurrently serves as Chairman.
If the director who concurrently serves as Chairman is unable to act as such or if no director who concurrently serves as Chairman has been designated, one of the other directors shall act as a substitute in accordance with the order predetermined by the Board of Directors.
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A director or corporate executive officer may request the convener to convene a meeting of the Board of Directors as necessary by submitting a document stating the agenda ofthe meeting.
A person appointed by each committee from among the committee members may convene a meeting of the Board of Directors in accordance with the provisions of laws and regulations.
Article 8. Convocation Notice
Notice of convocation of a meeting of the Board of Directors shall be issued to each Director at least
three (3) days prior to the date of the meeting; provided, however, that the foregoing shall not apply in cases of emergency.
If the unanimous consent ofthe directors is obtained, a meeting of the Board of Directors may be held without taking the convocation procedures.
Article 9. Chairman
The director who concurrently serves as Chairman shall act as the Chairman of the Board of Directors.
If the director who concurrently serves as Chairman is unable to act as such or if no director who concurrently serves as Chairman has been designated, one of the other directors shall act as a substitute in accordance with the order predetermined by the Board of Directors.
Article 10. Committees
MUFG shall establish a Nominating and Governance CommitteeEach committee shall exercise its legal authority, deliberate on specified matters, and make recommendations to the Board of Directors.
The Board of Directors may establish optional committees in addition to the three committees specified in Paragraph 1.
Note: A "nominating committee" as defined under the Companies Act
Article 11. Resolutions
Unless otherwise provided for by law or regulation, resolutions by the Board of Directors shall be adopted by the affirmative vote of a majority of the directors present who constitute in number a, majority of all the directors entitled to vote.
Directors with special interests in a matter to be resolved as set out in the preceding paragraph may not participate in the resolution regarding that matter.
In the case where a director proposes a matter for resolution and the directors entitled to vote regarding that manner unanimously consent to that proposal in writing or electronically, the Board of Directors shall be deemed to have approved that proposal.
Article 12. Matters for Resolution
I. Each ofthe following items shall be decided through resolutions by the Board of Directors. The Group's management strategy, capital policy, and resource allocation Business management framework and risk management policy
Oversight of status of business execution and progress of business performance (approval of financial statements)
Appointments
Corporate culture
Conflicts of interest (matters concerning the approval of competing transactions or self-dealings by directors or corporate executive officers)
Other decisions on business execution (decisions on matters definitively specified as matters that may not be delegated to corporate executive officers and other particularly important matters of business execution)
Article 13. Reports
Each corporate executive officer shall report on the status of business execution lo the Board of Directors; provided, however, that such a report may be made on his or her behalf by other corporate executive officers.
Directors and corporate executive officers who have conducted competing transactions or self-dealings shall report mateiial facts concerning such transactions to the Board of Directors.
In the case where a director, accounting auditor, or coiporate executive officer has notified all directors of a matter to be reported to the Board of Directors, reporting of that matter to the Board of Directors shall not be required.
Article 14. Minutes
Minutes of the Board of Directors shall be prepared in writing, shall have the names and the seals of the directors present affixed, and shall be kept at the head office for ten years, in accordance with laws and regulations.
Supplementary Provisions
1. These Regulations shall be effective from October 1, 2005.
Revisions
Amended as of May 1, 2006 Amended as of June 29, 2006 Amended as of December 24, 2010 Amended as of June 25, 2015
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Exhibit 1(c)
[Translation]
CORPORATION MEETINGS REGULATIONS
Chapter I. General Provisions
Article 1. General Provisions
These Rules shall govern the structure and operation of both the Executive Committee (as provided for in Article 11 of the Office Organization Rules) and Committees (as provided for in Article 12 ofthe Office Organization Rules).
Corporate Policy Meetings shall be held to help in the discussion and decision making of the Executive Committee. These Rules shall govern the structure and operation of Corporate Policy Meetings.
Article 2. Amendment and Abolition
The amendment and abolition of these Rules shall be determined by resolution of the Executive Committee.
Article 3. Jurisdiction
The Corporate Planning Division has jurisdiction over these Rules.
Chapter II. Executive Committee
Article 4. Members and Attendees
The Executive Committee shall consist of all Representative Executive Officers, as well as Executive Officers and Corporate Officers nominated by the President & CEO of the Company ("Committee Members").
The President & CEO may, if they deem necessary, require any senior Group officers and Business Group Chief Executives to attend meetings of the Executive Committee as members.
The President & CEO may, if they deem it necessary, require any of the Directors other than the Committee Members, the Executive Officers and the Directors of relevant subsidiaries of the Company, etc., to attend meetings of the Executive Committee.
Members of the Audit Committee may attend meetings of the Executive Committee. Article 5. Chairman
The President & CEO shall convene meetings of the Executive Committee and shall preside over the meetings.
If the President & CEO is unable to act as such, one of the other members shall act in their place, in accordance with the order of priority previously determined by the Executive Committee.
Article 6. Meeting Dates
Meetings of the Executive Committee shall be held, in principle, once every two (2) weeks; however, they may be held at any time if the need arises.
Article 7. Matters to be Discussed and Determined
1. The Executive Committee shall, in principle, discuss and determine the following general important matters concerning management of the Company pursuant to the basic policies determined by the Board of Directors:
Matters entrusted by the Board of Directors;
Matters concerning execution of policies concerning general management and control ofthe Company;
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Matters concerning company financial results;
Matters concerning company shares, etc.;
Matters concerning nominations, compensation, etc.;
Matters concerning important matters concerning the subsidiaries of the Company, etc.;
Matters concerning important matters concerning the administration and management of the subsidiaries of the Company, etc.;
Matters concerning the establishment of, amendment to and abolition of rules, etc.;
Matters concerning regulatory compliance and risk management;
Matters required to be submitted to the Executive Committee by provisions stipulated in various rules and regulations; and
Any other matters requiring executive action.
2. The matters to be discussed and determined set forth in the preceding paragraph shall be submitted by any of the Committee Members in control of such matters, or senior Group officers and Business Group Chief Executives pursuant to Article 4 Paragraph 2, or any of the Directors other than the Committee Members or the Executive Officers pursuant to Article 4 Paragraph 3.
Article 8. Method of Discussion and Determination
The proceedings of a meeting of the Executive Committee shall be determined by the President & CEO with the unanimous consent of all the Committee Members present who shall constitute in number a majority of the Committee Members.
If unanimous consent is not given by the Committee Members present at a meeting, the President & CEO shall determine the relevant items of business with consideration to the opinions of all Members present, upon consultation with the Executive Chairman, or in the event a Deputy Executive Chairman is appointed, with the Executive Chairman and the Deputy Executive Chairman.
Article 9. Discussion and Determination in Writing
Notwithstanding the provisions of Article 7, in special circumstances, the circulation of a written resolution drafted by the person making such proposal may be substituted for the holding of a meeting of the Executive Committee.
In the case of the preceding paragraph, the person making such proposal must report to the next Executive Committee meeting on the matters discussed and determined.
Article 10. Emergency Procedures
In case of emergency, such as a natural disaster, etc., if there is no time for discussion at the Executive Committee or for circulation of a written resolution, irrespective of the provisions set forth in Article 7, the President & CEO may take any and all expedient steps as may be necessary as matters of urgency.
In the case of the preceding paragraph, the President & CEO shall immediately report on such steps to the Executive Committee.
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Article 11. Reporting and Exchange of Information
Each of the Committee Members or senior Group officers and Business Group Chief Executives pursuant to Article 4 Paragraph 2, or any of the Directors other than the Committee Members or the Executive Officers pursuant to Article 4 Paragraph 3 shall, at meetings of the Executive Committee, report on the state of execution of their duties and shall also exchange general information with one another.
Article 12. Meeting Minutes
The Corporate Administration Division shall record a summary of the proceedings of meetings of the Executive Committee and the results thereof in the minutes, and the President & CEO shall sign their name or affix their seal to such minutes, which shall then be kept at the Company Head Office for ten (10) years.
Article 13. Communication
The matters resolved by the Executive Committee shall be rapidly communicated to the relevant Executive Officers and General Managers, etc.
Chapter III. Committees Article 14. Purpose and Matters to be Deliberated
1. A committee shall arrange, examine and deliberate on the following matters upon a mandate given by the President & CEO in order to contribute to the discussions and decision-making of the Executive Committee.
Matters concerning management policies of tlie entire group;
Matters concerning management plans of the entire group;
Matters concerning risk management of the entire group;
Matters concerning the setting up of management and execution policies among the subsidiaries of the Company; and
5. Any other specified matters necessary for deliberation by the Executive Committee.
Article 15. Establishment and Membership
The Executive Committee shall establish a committee, which shall consist of several members appointed by the President & CEO.
The President & CEO may appoint Directors with Executive Power, etc. of the subsidiaries of the Company to be members, as described in the preceding paragraph.
Article 16. Chairman
Each committee shall have a chairman.
The chairman of the committee shall preside over the committee.
The committee may have a vice-chairman if necessary.
The President & CEO shall appoint a chairman and a vice-chairman ofthe committee from among its members.
If the chairman ofthe committee is prevented from acting as such, the vice-chairman or any other member appointed by the President & CEO shall act on the chairman's behalf.
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Article 17. Secretariat
Each committee shall have a secretariat.
The secretariat shall be under the direction of the chairman of the committee and shall be responsible for committee administrative matters.
Article 18. Convocation
The chairman of the committee shall convene meetings of the committee.
Article 19. Deliberation
Committee members must make efforts lo attend meetings of their committees where they shall carefully and actively discuss matters from the viewpoint of the Group as a whole, so that the deliberations of the committee can be completed in a timely manner.
If a member is to be absent from a meeting, they may submit their written opinions to the chairman of the committee in advance.
If necessary, the committee may require persons concerned to attend a meeting of the committee so that the committee may hear their opinions.
If necessary, the committee may require a division or subsidiary ofthe Company, etc. to submit materials or to make other cooperative efforts.
Article 20. Submissions and Reports
The chairman of the committee or a member of the committee nominated by tlie chairman shall, from time to time, submit or report on important matters deliberated at the committee to the Executive Committee.
In reports set forth in the preceding paragraph the minority opinions of the committee must be included.
If a long period of time is required for the deliberations in Article 20 Paragraph 1 the chairman of the committee or a member of the committee nominated by the chairman must provide interim reports to the Executive Committee about the state of the deliberations.
Article 21. Working Groups
A committee may establish working groups to ensure smooth deliberation.
' Chapter IV. Corporate Policy Meetings
Article 22. Purpose and Matters to be Deliberated
The purpose of Corporate Policy Meetings is to exchange views from a wide range of perspectives and discuss the basic direction of important matters with regard to the management and administration of the Company Group on a consolidated basis, to contribute to decision-making at the Executive Committee.
Article 23. Composition
Corporate Policy Meetings shall consist of relevant Executive Committee Members, relevant Directors, Executive Officers, Coiporate Officers and General Managers, and Directors, etc. of relevant subsidiaries ofthe Company.|1010|
Article 24. Meeting Dates
Corporate Policy Meetings shall be held whenever required.
Article 25. Secretariat
The secretariat of Corporate Policy Meetings shall share jurisdiction with the Corporate Planning Division over matters to be deliberated.
Article 26. Submissions and Reports
In principle, matters to be deliberated at Corporate Policy Meetings shall be submitted or reported to the Executive Committee.
Chapter V. Business Group Management Meetings
Article 27. Purpose and Matters to be Deliberated
Business Group Management Meetings shall be established in each Business Group under Article 6 ofthe Office Organization Rules to deliberate and exchange views from a wide range of perspectives regarding the management ofthe Business Group, and to contribute to the management of the Business Group.
Article 28. Composition
Business Group Management Meetings shall consist of the Business Group Chief Executive, relevant Executive Committee Members, relevant Directors, Executive Officers, Corporate Officers and General Managers, and Directors, etc. of relevant subsidiaries of the Company.
Article 29. Holding of meetings
Business Group Management Meetings shall be held in each Business Group, in principle two (2) times a
year.
Article 30. Secretariat
The Corporate Planning Division and the division in charge of planning in each Business Group shall jointly be responsible for being the secretariat of Business Group Management Meetings.
Supplementary Provisions 1. These Rules shall become effective as from October 1, 2005.
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Amendment History
July 31, 2006 Amendment to Article 4 Paragraph 2
December 24, 2010 Changes to layout by chapters.
April 1, 2013 Amendment to Article 4
May 14, 2014 Amendment to Article 3, Article 4
March 31, 2015 Amendment to Article 22, Article 24, Article 25
Addition of Chapter V. (Article 27, Article 28, Article 29)
April 1, 2015 Rules in effect
June 23, 2015 Addition to Article 3, number of other Articles moved down. Amendment to Article 2,
Article 4, Article 5, Article 7, Article 8, Article 10, Article 11, Article 12, Article 14, Article 15, Article 16, Article 23, Article 28
June 25, 2015 Rules in effect
July 3, 2015 Amendment to Article 4, Article 7, Article 11, Article 27, Article 28, Article 29, Article 30
Rules in effect
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Exhibit 11
Principles of Ethics and Conduct (English Translation)
Introduction
These principles of Ethics and Conduct establish clear and consistent standards for all MUFG employees to guide decisions and actions. They reflect and support the MUFG Corporate Vision.
The principles are organized in three sections. Chapter 1 presents the attitude that we adopt with our customers, to act with honesty and integrity and pursue their best interests, which is a core component of our business practices.
Chapter 2 presents a set of standards to help us fulfill our responsibilities as a good corporate citizen. MUFG's reputation depends upon the tmst and confidence of our customers and other stakeholders, including local communities, and we are responsible to society on a global level.
Chapter 3 describes the actions and mindset that will create a stimulating and supportive working environment as MUFG continues to grow. Our success depends on building and maintaining a dynamic workplace where all employees can reach their full potential in ways that support our customers and contribute to society as a whole.
Outline/Overview
Chapter 1 Customer Focus
We place our diverse customers at the center of all our activities and always act in their best interests. MUFG is able to thrive today because of the trust and confidence that customers have placed in us—the result of years of fair, transparent, and honorable dealings. Our business culture is not driven by the prospect of short-term, immediate gains. Instead, we place a premium on supporting long-term, sustainable relationships with our customers to help them meet their goals.
1-1. Acting with Honesty and Integrity
We always place our diverse customers at the center of all activities and act with honesty and integrity in all of our dealings with them. We protect customer assets, including their personal information, and strive at all times not to damage their interests.
1-2. Controlling Quality
In order to earn the lasting tmst and confidence of our customers, we maintain thorough quality control of our products and services in all aspects from product design and development to delivery, and continually improve our processes to provide accurate and secure transactions.
1-3. Exceeding Customer Expectations
We strive to satisfy the diverse needs of our customers worldwide and to exceed their expectations through the highest standards of professionalism and by effectively leveraging our global network and consolidated strength.
Chapter 2 Responsibility as a Corporate Citizen
As a member of MUFG with global operations, we act honorably, with honesty and integrity, and comply at all times with laws, regulations, rules, and internal policies globally. We strive to maintain stability and confidence in the global financial system and to contribute to the sound growth and development of society. Wc behave in a manner that supports and strengthens the trust and confidence that MUFG has built up over the years.
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2-1. Adherence to Laws and Regulations
We always judge and act with honesty and integrity, do what is right, and comply with both the letter and the spirit ofthe laws, regulations, and rules lhat apply to us. We avoid insider trading, do not engage tn anticompetitive conduct or any form of corrupt activity, and publicly disclose corporate information in an appropriate manner.
2-2. Combating Criminal Activity
We do not conduct business with criminal elements. We do not allow our financial products and services to be used for illegal or improper activities such as money laundering, fraud, or financing terrorist activities.
3. Commitment to Social Sustainability
We respect the history, culture, and customs of local communities and strive to contribute lo their development and the protection ofthe environment through our corporate activities and employee volunteer efforts.
Chapter 3 Ethical and Dynamic Workplace
We are committed to creating a working environment that fosters mutual respect among MUFG employees, supports the full expression of our individuality as professionals, promotes the power of teamwork, honors diversity, transcends differences, and embraces new challenges.
1. Stimulating Workplace
We strive to enhance our knowledge and expertise, focus on maximizing the value of teamwork, and view changes in the business environment as opportunities to launch new initiatives.
3-2. Ethical Workplace
Wc respect the diversity and human rights of all MUFG employees. We do not engage in or tolerate discrimination, harassment, intimidation, or any other behavior or activity that is inconsistent with these core beliefs. We report any violations of laws and rules, and we manage corporate assets appropriately.
Chapter with details
Chapter 1: Customer Focus
1-1. Acting with Honesty and Integrity
Acting with Honesty and Integrity
The work ofeach employee of MUFG is directly or indirectly related to MUFG customers. We always place our diverse customers at the center of all activities, act with honesty and integrity, and support customers from a long-term perspective.
Safeguarding Customer Assets
Customers rely upon us to be stewards of their financial assets and investments. The privacy of the information that customers also entrust to us is as valuable to them as their financial assets, and for that reason, maintaining customer confidentiality at all times is critical. The loss, misuse, leakage, or improper transfer of customer information nol only can damage customer interests but also can seriously undermine the trust and confidence that MUFG has earned over many years.
(3) Protecting Customer Interests
We act with honesty and integrity, and strive at all times not to damage the interests of our customers. MUFG is an integrated financial group comprising a wide variety of businesses. When conducting business with customers, we must be sensitive to the possibility of conflicts of interest that may exist between customers,of different MUFG companies and between a customer and an MUFG company. In all cases, we act appropriately and with integrity, good judgment, and discretion in accordance with our policies on conflicts of interest.
1-2. Controlling Quality
Products and Services that Match Customer Needs
Our customers place great faith in us when they entrust us with their business. To earn their trust and to build strong and lasting business relationships, it is important to maintain strong quality control practices at all stages, from planning, development, and proposal, to the delivery of our products and services. Quality control means that we improve our processes to help provide products and services that match customer needs, and carry out accurate and secure transactions. To this end, we always keep in mind the following principles:
When developing products and services, we clearly define our customers and their needs as known to us.
The structure and profile of products and services must be developed and described in a clear and understandable manner.
c Products and services proposed and provided to customers match their purposes, needs, knowledge, experience, financial capabilities, and other conditions as known to us.
d. We equip ourselves with the knowledge and skills needed to propose, provide, and manage our products and services.
We provide our customers with clear and accurate explanations of products and services so that they understand the risks associated with them, accept the risks, and are fully informed when they agree to retain our products and services.
In our interactions with customers, we are fair-minded, courteous, professional, and responsive.
We take customer comments, complaints, and concerns seriously and handle them fairly and promptly, sharing them with relevant divisions within MUFG appropriately.
Ongoing Efforts for Quality Improvement
We continually review and improve our products and services so that they serve the best interests of our customers.
1-3. Exceeding Customer Expectations
Quality Products and Services
Customer needs are becoming more sophisticated and more diverse, and their requirements are becoming increasingly demanding. To provide high-quality products and services, each of us strives to improve our own professional knowledge and skills.
Cooperation within MUFG
While MUFG consists of many diverse business entities, customers view us as a single, integrated company and have high expectations for our comprehensive capabilities. Our strength does not come from individual star performers, but from the collective contributions of the team. We continually strive to provide customers with a broad set of high-quality products and services by bringing our capabilities together and acting as a seamless and unified group.
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(3) Using Our Global Network
As customers become increasingly global in their business activities, they make decisions about financial products and services based on careful comparison with those available worldwide. We continue to be competitive by providing world-class products and services and making full use of MUFG's global network.
Chapter 2: Responsibility as a Corporate Citizen
2-1. Adherence to Laws and Regulations
We comply at all limes wilh both the letter and the spirit of the laws, regulations, and rules that apply to us, with particular attention to those that, if violated, would damage the financial system, hinder the economic development of society, or have a severe negative impact on our reputation. These areas include:
Insider Trading
The use of inside, non-public information for personal gain is illegal in many countries and is prohibited within MUFG, regardless of the amount of money involved. We do not engage in any activities that would lead to illegal profits, and we comply with strict information-barrier controls that we have put in place.
Anti-Competitive Conduct
We do not engage in any unlawful, anti-competitive conduct such as sharing pricing or marketing strategies with competitors. We do not abuse our market position by unlawfully applying conditions that are considered anti-competitive to the offer of our products and services. We comply with all fair-dealing and business laws and regulations, including the arm's-length principle requiring that all parties to a transaction be independent and on an equal footing.
Corrupt Activities
MUFG has zero tolerance for corrupt activities. Corruption is a significant global problem, and many countries have adopted strict laws that prohibit giving or taking bribes. We do not offer, promise, or grant anything of value to a government official, other person in a position of power, or private individual in any country for the purpose of obtaining or retaining business or for any other advantage.
Public Disclosure
To maintain MUFG's reputation and credibility, disclosure of our corporate information, including financial reports, must be timely, clear, and accurate so that it can be properly understood and evaluated. If we become aware of an inaccurate or misleading statement or nondisclosure of material information, we immediately consult with our supervisors to undertake appropriate measures and correct inaccuracies.
2-2. Combating Criminal Activity
No Relationships with Criminal Elements
It is a basic tenet of corporate responsibility that companies have no relationships with criminal elements, including organized crime groups. We work closely with police authorities, legal counsel, and other external organizations to terminate any connections with criminal elements that we discover and protect the safety of our employees. We do not hesitate to take necessary legal action, both civil and criminal, to protect our company and stakeholders.
Prevention of Money Laundering and Other Financial Crimes
The trust of our customers is based on their confidence that the financial products and services wc provide contribute to sound social and economic development. We remain alert to the fact that our products and services can be misused to commit or facilitate crimes such as money laundering, fraud, counterfeiting credit cards, and financing terrorist activities. We strive to prevent, detect, and report illicit or suspicious activity in accordance with all applicable laws and regulations.
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2- 3. Commitment to Social Sustainability
Giving Hack to Communities
As a good corporate citizen, MUFG promotes programs and initiatives that improve society for current and future generations. We actively encourage employee participation in various volunteer activities to enhance community development both locally and globally, and as a company, we make meaningful financial contributions to worthwhile causes and organizations.
Commitment to the Environment
We evaluate the environmental risk in our business activities, seek to minimize any negative impact on the environment, and endeavor to support customers' businesses that contribute to environmental conservation and protection.
Chapter 3: Ethical and Dynamic Workplace
3- 1. Stimulating Workplace
Personal Growth
As the needs and activities of our customers continue to evolve, we continue to grow professionally to provide the best possible service. We constantly improve our skills and individual abilities by taking advantage of training and educational opportunities, both inside and outside of MUFG.
Teamwork
MUFG employees share information, skills, and expertise with each olher. Working in learns, wc achieve goals that could not be accomplished by individuals working alone. We are committed to maximizing the power of teamwork.
Can-Do Attitude
MUFG has succeeded in part by developing an astute understanding of changes affecting our customers and society and by embracing new challenges. As the world changes more rapidly than ever, we make even stronger efforts to stay ahead of global trends and changes affecting our business environment and to embrace new challenges in the firm belief that change, equals opportunity.
3-2. Ethical Workplace
Respect for Diversity and Human Rights
As a global corporation, MUFG gains strength from the diversity of its employees. Wc value and respect differences, and do not tolerate any form of discrimination based on race, nationality, creed, religion, gender, sexual orientation, age, physical condition, or any other differentiating characteristic.
Open Communication
MUFG employees communicate in good faith, help each other succeed, and strive to create a workplace where everyone can exchange ideas freely and constructively.
Prohibition of Harassment ^
Harassment undermines respect for individuals. Because MUFG employees are entitled to feel safe and secure in the workplace, we neither engage in nor tolerate harassment or any threatening, hostile, or abusive behavior.|1010|
Protection of Corporate Assets
The tangible and intangible assets (such as money and our reputation) that MUFG has accumulated through its corporate activities play a valuable role in our business operations. We continue to contribute to the accumulation of corporate assets, properly protect and manage them, and do not engage in or condone their waste, abuse or unauthorized use.
Reporting Violations of Laws and Rules
Violations of laws and company rules can result in financial losses to MUFG, and can seriously damage the tmst and confidence that our customers and society place in us. Whenever we discover a violation, we will not hesitate to take immediate and decisive action to address the issue. As employees, if wc become aware of improprieties or breaches of laws or MUFG policy, we are expected to report the matter and consult the appropriate contacts, either through our supervisors or by using MUFG's anonymous internal hotline/reporting system. MUFG treats any information received as confidential and protects reporting employees from retaliation.
Excerpts from MUFG's Compliance Rules (English Translation)
(Objective) Article 1.
These rules prescribe basic matters relating to compliance with laws and regulations.
(Revision and abolition) Article 2.
These rules may be revised or abolished by decision of the Executive Committee.
(Definitions) Article 3.
In these rules, "laws and regulations" mean laws and government ordinances to be strictly observed by MUFG personnel when carrying out business operations, as well as MUFG's Articles of Incorporation, Code of Ethics, and other rules and regulations established according to the laws and government ordinances above.
In these rules, "compliance" means understanding the purpose and contents of laws and regulations properly, and behaving in an appropriate manner so as not to violate applicable laws and regulations.
In these rules, "affiliates" is a general term for MUFG's consolidated subsidiaries and affiliated companies accounted for by the equity-method.
In these rules, "MUFG Group" means MUFG and its affiliates.
(Fundamental Policy) Article 4.
The MUFG Ethical Framework and Code of Conduct are the foundations of compliance at MUFG.|1010|
(Responsibilities of Directors, Corporate Executive officers (Shikko Yaku), Executive officers (Shikko Yakuin) and Board of Directors)
Article 5.
In accordance with the "Ethical Framework and Code of Conduct", MUFG directors, corporate executive officers (shikko yaku) and executive officers (shikko yakuin) must carry out their responsibilities with the recognition that compliance is one ofthe most important objectives of management.
The board of directors must establish systems necessary for compliance and seek to achieve and maintain compliance.
(Responsibility of MUFG General Managers) Article 6.
General managers must implement compliance within their division.
(Responsibility of MUFG Employees) Article 7.
MUFG employees must ensure compliance while performing their duties, and act in accordance with the "Ethical Framework and Code of Conduct".
MUFG employees must strive to acquire adequate knowledge of the laws and regulations which are necessary to their business operations.
When a MUFG employee discovers problems or possible problems relating to compliance, they must report directly to the division compliance officer as stipulated in Article 13.
When a MUFG employee does not wish to report to the division compliance officer due to said officer being complicit in a violation of laws and regulations or the possibility thereof, they can report directly to the Compliance Division. In each business group, reports can be made to necessary parties other than those mentioned above, based on the instructions of the compliance officer responsible (defined in Article 11).
(Director in charge of the Compliance Division) Article 9.
The Director in charge ofthe Compliance Division must report matters concerning compliance to the Board of Directors or Executive Committee as necessary.
When there is a risk of an unavoidable conflict of interest with a different division that the director in charge ofthe Compliance Division is also in charge of, to insure the independence of the Compliance Division, the general manager of the Compliance Division shall report to the President and CEO. The President and CEO will report to the Board of Directors or Executive Committee as necessary. Appropriate action shall also be taken to avoid conflicts of interest in cases other than those mentioned above
(Office in Charge of Compliance) Article 10.
(1) The Compliance Division is in charge of overseeing the overall compliance framework.
. * * *
(5) When the Compliance Division receives reports of problems or possible problems relating to compliance, or
when it discovers such problems itself, it must take necessary actions.|1010|
Article 10. ii
The Global Compliance Division is in charge of overseeing all dunes concerning me compliance framework for the Global Business Group and the Global Markets Business Group, as well as Group management systems for preventing money laundering.
Article 10. iii
Global Financial Crimes Intelligence Division is in charge of BSA/AML measures concerning transactions affecting the Group's U.S. offices as well as management systems concerning OFAC regulations
(Compliance Officers Responsible) Article 11.
The head ofeach business group is the compliance officer responsible for that business group. The compliance officer responsible oversees their business group and is responsible for any compliance related planning and supervision within their jurisdiction.
(Group Chief Compliance Officer) Article 12.
(1) A Group Chief Compliance Officer (CCO) (primarily the responsibility of the Compliance Division) will be appointed based on Article 19 Paragraph 2 of the Organizational Regulations. When there is no appointed Group CCO, the director overseeing the compliance division will act as CCO.
, (2) The Group CCO (or in cases where there is no Group CCO, the CCO) shall oversee the coordination of division compliance officers (defined in Article 13), the chief compliance officer of each company in the MUFG Group, and any persons filling both those roles, as well as provide necessary guidance, advice and instruction based on the management agreement.
(3) The Group CCO (or in cases where there is no Group CCO, the CCO) can request reports on compliance matters from the specified compliance officers responsible (defined in Article 11).
(Division Compliance Officers) Article 13.
A chief manager in each division will serve as division compliance officer. Each general manager may appoint a person equivalent to a chief manager as division compliance officer. In such cases, the general manager should report to the Compliance Division in the Corporate Center, the compliance officer responsible for each business group (defined in Article 11), or the Compliance Division.
The division compliance officer is responsible for the strengthening of compliance in each division and for planning and supervising compliance related issues regarding business matters under their jurisdiction. Furthermore, the compliance officer will carry out duties including the management and compliance checking of documents, gathering information concerning the establishment and revision of laws relating to the duties ofeach division, working to improve general compliance conditions, and will play a central role in implementing compliance measures in each division.
(Responsibilities of General Managers) Article 14
When the general manager receives reports of problems or possible problems relating to compliance from the division compliance officer, or when they discover such problems themselves, they must consult with the general manager of the Compliance Division as well as provide orders and instructions to the division compliance officer. Furthermore, in each business group, they must report to the compliance officer responsible.
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(Compliance. Reporting System) Article 15.
When the compliance officers receive reports of or otherwise detect violations of laws and regulations, or possible violations, they must report directly to the Compliance Division and the general manager of their division.
In each business group, reports can be made to necessary parties other than those mentioned above, based on the instructions of the compliance officer responsible.
Excerpts from MUFG's Compliance Manual (English Translation)
I. Legal issues regarding Management
(3) Board of Directors
(4) Transactions involving a conflict of interest
When a Director engages in a transaction involving a conflict of interest, the Director must receive the approval of the Board of Directors.
LU. Specific issues
5. Conflicts of interest
When a conflict of interest arises in connection with an operation involving any of the MUFG Group companies, Directors or employees, on one hand, and a customer or other third-party, the Director or employee, the MUFG Group company to which such Director or employee belongs, or any other MUFG Group company, on the other,-the MUFG Group company, Director or employee must perform the operation in a proper manner.
Excerpts from MUFG's Rules of Employment (English Translation)
(Disciplinary Action) Article 40.
The company will take disciplinary action when employees take the following prohibited actions: (17) If an employee violated the rules of employment or any other applicable internal rules.
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Exhibit 12
CERTIFICATION
I, Nobuyuki Hirano, certify that:
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows ofthe company as of, and for, the periods presented in this report;
The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a- 15(f) and 15d- 15(f)) for the company and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness ofthe company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by tlie annual report diat has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.
July 27, 2015
/s/ Nobuyuki Hirano
Name: Nobuyuki Hirano
Title: President & Group Chief Executive Officer
CERTIFICATION
I, Muncaki Tokunari, certify that:
I have reviewed this annual report on Form 20-F of Mitsubishi UFJ Financial Group, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light ofthe circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in (his report, fairly present in all material respects the financial condition, results of operations and cash flows ofthe company as of, and for, the periods presented in this report;
The company's other certifying officer(s) and I arc responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules I3a-15(f) and 15d-15(f)) for the company and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally-accepted accounting principles;
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as ofthe end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company's internal control over financial reporting diat occurred during the period covered by tlie annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.
July 27, 2015
Isl Muneaki Tokunari
Name: Muneaki Tokunari
Title: Director and Group Chief Financial Officer
Exhibit 13
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY RULE 13a-14(b) OR RULE 15d- 14(b) AND 18 U.S.C. Section 1350
In connection with the Annual Report ol Mitsubishi UFJ Financial Group, Inc. (the "Company") on Form 20-F for the fiscal year ended March 31, 2015 as filed with the US Securities and Exchange Commission on the date hereof (the "Report"), I, Nobuyuki Hirano, President & Group Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350 that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company.
Dated: July 27, 2015
Isl Nobuyuki Hirano
Name: Nobuyuki Hirano
Title: President & Group Chief Executive Officer
MITSUBISHI UFJ FINANCIAL GROUP, INC.
CERTIFICATION REQUIRED BY RULE 13a-14(b) OR RULE 15d-14(b) AND 18 U.S.C. Section 1350
In connection with the Annual Report of Mitsubishi UFJ Financial Group, Inc. (the "Company") on Form 20-F for the fiscal year ended March 31, 2015 as filed with the US Securities and Exchange Commission on the date hereof (the "Report"), I, Muneaki Tokunari, Director and Group Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350 that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: July 27, 2015
Isl Muneaki Tokunari
Name: Muneaki Tokunari
Title: Director and Group Chief Financial Officer
Exhibit 15
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement No. 333-204845 on Form S-8 of our reports dated July 27, 2015, relating to the consolidated balance sheets of Mitsubishi UFJ Financial Group, Inc. ("MUFG") and subsidiaries (together, the "MUFG Group") as of March 31, 2014 and 2015, and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended March 31, 2015 and the effectiveness of the MUFG Group's internal control over financial reporting as of March 31, 2015, appearing in the Annual Report on Form 20-F of MUFG for the year ended March 31, 2015.
/s/ Deloitte Touche Tohmatsu LLC
Tokyo, Japan July 27, 2015
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I--GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable-Barclays Capital, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[x] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: Barclays capital, inc.
190 S LaSalle Street, 25th Floor Chicago IL 60603
Telephone: (312) 609-8520 pax; (646) 834-4640 Email:martha. linsley@barclays.com
Name of contact person: Martha e. Linsiey
Federal Employer Identification No. (if you have one):' '¦ \
I ;j II.. A
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 201G
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # ^ and Contract # ^
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
[x] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
! ] Limited partnership
; ] Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
. [ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
State of Incorporation is Connecticut
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[x] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See Attachment I
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Barclays Group US, Inc. 100 South West Street Wilmington DE 19801 100% Direct
Barclays US LLC 745 Seventh Avenue, New York, NY 10019
Barclays Bank PLC 745 Seventh Avenue, New York, NY 10019 100% Indirect
Barclays PLC 745 Seventh Avenue, New York, NY 10019 100% Indirect
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
N/A
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor; attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate .
retained or anticipated Address (subcontractor, attorney, paid or estimated.) in ^
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign. Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
From time to time, Barclays Capital Inc. ("BCI") is the subject of inquiries and investigations conducted by regulatory authorities, including but not limited to those by federal and state securities regulators. BCI routinely cooperates with such investigations. The firm is also involved, from time to time, in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its business. All current material proceedings in which there has been a final determination against BCI and all current material litigations involving Barclays have been reported on the firm's Statement of Financial Condition (Audited) as of December 31, 2015. Copies can be viewed at:
http: / /www. barcap.com/about-barclays-capital/our-firm/financial-information/barclays-capi tal-inc-financial-reporting.html.
Additionally, a FINRA BrokerCheck Report, detailing material proceedings the Firm has been involved in, is available at: . For additional information, please also see: .
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D. '
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale? s-
[ ] Yes [x] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
x 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
See Attachment II which reflects findings to this date.
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. 1. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
.fx] Yes []No If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[x] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[x] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[x] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to' the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Parly understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
D. . It is the City's policy to .make this document available to the public on its Internet site and/or upon
request. Some or all of the information provided on this EDS and any attachments to this EDS may be
made available to the public on the Internet, in response to a Freedom of Information Act request, or
otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible
rights or claims which it may have against the City in connection with the public release of information
contained in this EDS and also authorizes the City to verify the accuracy of any information submitted
in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the. Matter certifications equal in form and substance to those in F.l. and F.2. .above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F:i., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix. A (if applicable) on behalf of the Disclosing Party, and (2) warrants ;that all certificatjons.aiid statements contained in this EDS, and Appendix A (if applicable) are true, accurate and complete as -of the date furnished to the City.
Robert M Taylor
(Print br type name of person sighing)
Managing Director (Print or. type title of person signing)
Signed and sworn to before me on (date) _ at ^(W^fgZlc-- - County, fi/jU/^ffhk^
UJffi ANN STROCCHIA Notary Public • State of New York
NQ.01ST6247362 Qualified In Westchester.Coupty Wy Commission Expires 8|A
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ]Yes [x]No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the-Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [x]No [ ] Not Applicable
If yes to (1) or (2) above, please identify below the name ofthe person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Attachment I BARCLAYS CAPITAL INC. DIRECTORS & OFFICERS As of March 9, 2016
DIRECTORS
Joseph Busuttil
Monty Forrest
Thomas McGuire
FIRM TITLE
Chief Administrative Officer Americas
Chief Financial Officer Barclays Americas
Vice President & Tax Director
Theresa Riley
Linda Messinger William Cairncy
Alan Kaplan
Chief Compliance Officer - FCM Director Prime Svcs Compliance
Director
Chief Compliance Officer Investment Advisory
MP - Deputy General Counsel Americas
Director - Investment Banking Infrastructure
1517Z650V1
Attachment II
BARCLAYS CAPITAL, INC
(Certification Statement)
"Barclays Bank" was founded in 1690 by John Freame and Thomas Gould as a trading company under the name "Goldsmith" in London, England. Through the process of acquisitions, the trading company evolved into a bank. In 1736, James Barclay, the son-in-law of John Freame, became a partner in the business. Eventually, in the second half of the 18th century, David Barclay the Younger joined the partnership as well. Research of certain Applicant records, supplemented by the work of a newly-retained third-party historical research firm, shows that David Barclay the Younger acquired a plantation in payment for a debt in Jamaica and became the owner of thirty-two slaves. In anticipation of their emancipation, Mr. Barclay sent the slaves to Philadelphia, Pennsylvania, where they were given crafts training. A record ofthe names of twenty-eight ofthe freed slaves has been found and contained the following references:
London (age 40-45), Bacchus (age 20-25), Simon (age 24-26), John (age 30-35), Kingston (age 23-25), Mintas (age 32-36), Nancy (approximate age 24), Dido (age 24), Bathsheba (age 34-36), Patience (age 30-34), Amelia (age 26-30), Clarissa (approximate age 35), Nancy (age 26), Sabina (age 40), Juba (age 14), Phillis (age 22), Charles (age 15), Prince (age 14), Yano (age 14), Toby (age 14), Wiltshire (age 11), Sancho (age 10), Mingo (age 10), October (age 8), Quashie (age 7), Caesar (age 6), Charlotte (age 4), and Sukey (age 3).
There is also historical evidence that during the 1700s, David Barclay the Younger, a Quaker, formed a committee of London Quakers to oppose the slave trade and subsequently became involved with the committee in taking the Quaker anti-slave trade message rationale within the United Kingdom. In a 1795 manumission document the aforementioned slaves were "liberated, enfranchised, manumitted and forever set free".
In 1896, the company became Barclay and Company Limited which subsequently became Barclays Bank PLC. Barclays has been in existence for in excess of 318 years and thus, part of its existence would have been during the slavery era. In this historical context, entities acquired during this period may have had investments or profits from the slave industry. Slavery was a heinous period in the history of both the United States and United Kingdom and, indeed, the whole world. Without reservation, Barclays condemns this industry. A third party historical research firm has been hired to assist in record research. If additional records indicating the identities of entities or persons with whom predecessor entities or owners conducted slave related business in the United States are discovered by our historical consultant, a supplement to this Economic Disclosure Statement and Affidavit regarding such information will be filed.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Barclays Group US, Inc.
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Barclays capital, inc.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 100 south west street Wilmington, de i9rqi
Telephone: Ol2) 609-8520 Fax: (646) 834-4640 Email:martha. linsley®barclays . com
Name of contact person: Martha e. Linsley
Federal Employer Identification No. (if you have one):;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 2 016
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # h/a and Contract # n/a
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SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
y Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
[ 1 Trust [ ]
Limited liability company Limited liability partnership Joint venture Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
St-at-p nf TTirnrpnral-inn i g n»l nwa
For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes bJ No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See Attachment 1
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Barclays US LLC 745 Seventh Avenue, New York, NY 10019 100% Direct
Barclays'Bank PLC 745 Seventh Avenue, New York, NY 10019 100% Indirect
Barclays PLC 745 Seventh Avenue, New York, NY 10019 I00% Indirect
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes td No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
N/A
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business retained or anticipated Address to be retained)
Relationship to Disclosing Party (subcontractor, attorney, lobbyist, etc.)
Fees (indicate whether paid or estimated.) NOTE: "hourly rate" or "t.b.d." is nol an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[]Yes [JNo
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. I. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to. all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign. Assets Control of the U.S. Department of the. Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
From time to time, Barclays Group US and its affiliates (collectively, "Barclays") are the subject of inquiries and investigations conducted by regulatory authorities, including but not limited to those by federal and state securities regulators. Barclays routinely cooperates with such investigations. Barclays is also involved, from time to time, in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its business. All current material proceedings in which there has been a final determination against Barclays and all current material litigations involving Barclays have been reported on Barclays annual results filed with the Securities and Exchange Commission on Form 20-F as of December 31, 2015. Copies of this filing can be viewed at:
. For additional information, please also see: ustice. gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas .
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
NONE
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [x] No
If you checked "Yes" to Item D.L, provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection wilh the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
¦x 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
Sep Ar t-af-hropnr TT whirh rpflprrg finHingg t-n rhi g Hat-p
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section
501 (c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes y No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII-- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired iii connection with, the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under-penalty of perjury, the person ¦signing below: (1) warrants that he/she is, authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, arid (2) warrants'that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as af the date furnished to the;.City.
Robert M .Taylor
(Print or type name of person signing)
Managing Dixector
(Print or type title of-person signing)
Signed and sworn to before me on (date) *KlLvJt- I3i} cXfitta at ^Notary Public.
Commission expires:
f* f* tfi LORI ANN STROCCHIA Notary Public - State of New York
NO. 01ST6247362 Qualified in Westchester County. My Commission Expires ^1^4 j ff
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[]Yes LxJNo
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Attachment I BARCLAYS GROUP US INC. DIRECTORS & OFFICERS January 28,2016
DIRECTORS
Alan Kaplan
Thomas McGuire
BGUS TITLE
Thomas McGuire Stephen Barrett Matthew Larson Theresa Riley Alan B. Kaplan
President & Treasurer Vice President & Tax Director Vice President & Controller Vice President
Managing Director
Global Governance, Control & Resolution Managing Director
iSfe^BStjin^
Director - Tax
14712292v1
Attachment II
BARCLAYS GROUP US, INC
(Certification Statement)
"Barclays Bank" was founded in 1690 by John Freame and Thomas Could as a trading company under the name "Goldsmith" in London, England. Through the process of acquisitions, the trading company evolved into a bank. In 1736, James Barclay, the son-in-law of John Freame, became a partner in the business. Eventually, in the second half of the 18th century, David Barclay the Younger joined the partnership as well. Research of certain Applicant records, supplemented by the work of a newly-retained third-party historical research firm, shows that David Barclay the Younger acquired a plantation in payment for a debt in Jamaica and became the owner of thirty-two slaves. In anticipation of their emancipation, Mr. Barclay sent the slaves to Philadelphia, Pennsylvania, where they were given crafts training. A record ofthe names of twenty-eight ofthe freed slaves has been found and contained the following references:
London (age 40-45), Bacchus (age 20-25), Simon (age 24-26), John (age 30-35), Kingston (age 23-25), Mintas (age 32-36), Nancy (approximate age 24), Dido (age 24), Bathsheba (age 34-36), Patience (age 30-34), Amelia (age 26-30), Clarissa (approximate age 35), Nancy (age 26), Sabina (age 40), Juba (age 14), Phillis (age 22), Charles (age 15), Prince (age 14), Yano (age 14), Toby (age 14), Wiltshire (age 11), Sancho (age 10), Mingo (age 10), October (age 8), Quashie (age 7), Caesar (age 6), Charlotte (age 4), and Sukey (age 3).
There is also historical evidence that during the 1700s, David Barclay the Younger, a Quaker, formed a committee of London Quakers to oppose the slave trade and subsequently became involved with the committee in taking the Quaker anti-slave trade message rationale within the United Kingdom. In a 1795 manumission document the aforementioned slaves were "liberated, enfranchised, manumitted and forever set free".
In 1896, the company became Barclay and Company Limited which subsequently became Barclays Bank PLC. Barclays has been in existence for in excess of 318 years and thus, part of its existence would have been during the slavery era. In this historical context, entities acquired during this period may have had investments or profits from the slave industry. Slavery was a heinous period in the history of both the United States and United Kingdom and, indeed, the whole world. Without reservation, Barclays condemns this industry. A third party historical research firm has been hired to assist in record research. If additional records indicating the identities of entities or persons with whom predecessor entities or owners conducted slave related business in the United States are discovered by our historical consultant, a supplement to this Economic Disclosure Statement and Affidavit regarding such information will be filed.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Barclays US LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Barclays capital, inc.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address Of the Disclosing Party: 745 Seventh Avenue. New York NY 10019
c/o Public Finance at Barclays Capital
Telephone: Ol2) 609-8520 Fax: (646) B34-4640 Emaikmartha. linslev@barclavs .com
Name of contact person: Martha e. Linsiev
Federal Employer Identification No. (if you have one):.
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 2016
G. Which City agency or department is requesting this EDS? Department of. Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # n/a and Contract # k/a
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SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing P Person
Publicly registered business corporation Privately held business corporation Sole proprietorship General partnership Limited partnership
arty:
[x] Limited liability company [ ] Limited liability partnership [] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
State of Incorporation is Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See Attachment 1
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Barclays Bank PLC 745 Seventh Avenue, New York, NY 10019 100% Direct
Barclays PLC 745 Seventh Avenue, New York, NY 10019 100% Indirect
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes y No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or stale antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2^56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
From time to time, Barclays and its affiliates (collectively, "Barclays") are the subject of inquiries and investigations conducted by regulatory authorities, including but not limited to those by federal and state securities regulators. Barclays routinely cooperates with such investigations. Barclays is also involved, from time to time, in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its business. All current material proceedings in which there has been a final determination against Barclays and all current material litigations involving Barclays have been reported on Barclays annual results filed with the Securities and Exchange Commission on Form 20-F as of December 31, 2015. Copies of this filing can be viewed at:
. For additional information, please also see: .
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
NONE
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
y is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None,"'or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
k
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes y No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
y 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
Spp At-rar-hmpnr TT which rpflprt-s finrHnrjg rn This H^t"p
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes BJ No
If "Yes," answer the three questions below:
. 1. Have you developed and do you have on file .affirmative action programs pursuant to applicable
federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the Gity. This includes, but is not limited fo, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS,'):maintained by the'U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing. Party will obtain from aiiy contractors/subcontractors hired or fo be hired in connection with 'the Matter certifications equal in form and substance to those in F.l, and F.2, above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications.Or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F:L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty pf perjury, the person signing below: (1) warrants, that he/she is. authorized to execute this EDS and Appendix. A (ff applicable) on behalf of the Disolosing Pirty, and (2) warrants that all certifications.and statements contained in this EDS and Appendix A (if applicable) are true, accurate' and complete as ttf the date furnished to the City.
Barclays US LLC
RoBer't if 'Taylor, a's agent
(Print, or type .name of person sighing)
Managing director (Print or type title of person signing)
at rTQjjjflk.— County,j\^C|*ljfll.
Sighed and sworn fo before me oh (date) ^ WO l jo
' ^f(state)-
LOPI ANN STROCCHIA h Notary Public - State of New York, .
festchester County _ ' Expires SRs))*? '
KO.tJ1S.T6247362 Qualified to Westchester pjurit" ' My. Commission Expires "*
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[]Yes [x]No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
1. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ JYes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
' identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Attachment 1 BARCLAYS US LLC DIRECTORS & OFFICERS
DIRECTORS
Corcoran,Joseph
Gold, loseph Allen McGrath, Joseph Patrick
Director Director
OFFICER
Chief Financial Officer
Kaplan, Alan B LaRocca, Gerard Sebastian McGrath, Joseph Patrick McKay, Kevin J Riley, Theresa Slyne, Deborah
Officer Officer
Chief Executive Officer Chief Compliance Officer Officer
Assistant Secretary
14712292v1
Attachment II
Barclays US LLC
(Certification Statement)
"Barclays Bank" was founded in 1690 by John Freame and Thomas Could as a trading company under the name "Goldsmith" in London, England. Through the process of acquisitions, the trading company evolved into a bank. In 1736, James Barclay, the son-in-law of John Freame, became a partner in the business. Eventually, in the second half of the 18th century, David Barclay the Younger joined the partnership as well. Research of certain Applicant records, supplemented by the work of a newly-retained third-party historical research firm, shows that David Barclay the Younger acquired a plantation in payment for a debt in Jamaica and became the owner of thirty-two slaves. In anticipation of their emancipation; Mr. Barclay sent the slaves to Philadelphia, Pennsylvania, where they were given crafts training. A record ofthe names of twenty-eight ofthe freed slaves has been found and contained the following references:
London (age 40-45), Bacchus (age 20-25), Simon (age 24-26), John (age 30-35), Kingston (age 23-25), Mintas (age 32-36), Nancy (approximate age 24), Dido (age 24), Bathsheba (age 34-36), Patience (age 30-34), Amelia (age 26-30), Clarissa (approximate age 35), Nancy (age 26), Sabina (age 40), Juba (age 14), Phillis (age 22), Charles (age 15), Prince (age 14), Yano (age 14), Toby (age 14), Wiltshire (age 11), Sancho (age 10), Mingo (age 10), October (age 8), Quashie (age 7), Caesar (age 6), Charlotte (age 4), and Sukey (age 3).
There is also historical evidence that during the 1700s, David Barclay the Younger, a Quaker, formed a committee of London Quakers to oppose the slave trade and subsequently became involved with the committee in taking the Quaker anti-slave trade message rationale within the United Kingdom. In a 1795 manumission document the aforementioned slaves were "liberated, enfranchised, manumitted and forever set free".
In 1896, the company became Barclay and Company Limited which subsequently became Barclays Bank PLC. Barclays has been in existence for in excess of 318 years and thus, part of its existence would have been during the slavery era. In this historical context, entities acquired during this period may have had investments or profits from the slave industry. Slavery was a heinous period in the history of both the United States and United Kingdom and, indeed, the whole world. Without reservation, Barclays condemns this industry. A third party historical research firm has been hired to assist in record research. If additional records indicating the identities of entities or persons with whom predecessor entities or owners conducted slave related business in the United States are discovered by our historical consultant, a supplement to this Economic Disclosure Statement and Affidavit regarding such information will be filed.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Barclays Bank PLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Barclays capital, inc.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 745 seventh Avenue, New York ny 10019
c/o Public Finance at Barclays Capital
Telephone: (312) 609-8520 pax. (646) 834-4640 Email:martha.linsley@barclays.com
Name of contact person: Martha e. Linsley
Federal Employer Identification No. (if you have one): • '
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 2 016
G. Which City agency or department is requesting this EDS? Department of Finance .
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # ^ and Contract # n/a
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[x] Other (please specify)
Public Limited Company registered under England and Wales
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
See Al Above
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes [x]No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name - Title
See Attachment 1
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name " Business Address Percentage Interest in the
Disclosing Party
Barclays PLC 745 Seventh Avenue New York NY 10019 100% Direct
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-1 56 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
From time to time, Barclays Bank PLC and its affiliates (collectively, "Barclays") are the subject of inquiries and investigations conducted by regulatory authorities, including but not limited to those by federal and state securities regulators. Barclays routinely cooperates with such investigations. Barclays is also involved, from time to time, in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its business. All current material proceedings in which there has been a final determination against Barclays and all current material litigations involving Barclays have been reported on Barclays annual results filed with the Securities and Exchange Commission on Form 20-F as of December 31, 2015. Copies of this filing can be viewed at:
. For additional information, please also see: . gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City ofChicago (if none, indicate with "N/A" or "none").
None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
NONE
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that arc defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [x] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
x 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
See Attachment II which reflects findings to this date.
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
i
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) il is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [x] No
If "Yes," answer the three questions below:
Have you developed and do you have.on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[]Yes []No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
'[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any Fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges^ sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party arid its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS")maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any. contractors/subcontractors hired or to be hired in connection with-the Matter certifications equal in form and substance to those in F.l. and F.2. above and will.not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Parry has reason to believe has not provided, or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in Fll., F.2. or F.3. above, an explanatory statement must he attached to mis EDS.
CERTIFICATION
Under, penalty of perjury,, the person signing below; (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party > and (2) warrants ;that all certifications and statements contained in.this BDS and Appendix A (if applicable) are true, accurate, and complete asiof the date furnished to the City.
Robert M Taylor (Print of type name Of person signing)
Managing Director (Print or type title of person signing)
la;
Signed and sworn to beforc mc on (date) „ . _ at Aiv1^- - County, ^JUjCjffik^ ' (state).
Notary Public.
Commission expires:
Page 12 of 13
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LORI AWN iBTROCCHtA Notary Public - state of Hew York
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NO. 01ST6247362 Qualified In Westctie«ter,County My Commjsston Expires ¦%fe) )ii V Mif ''vi>ni)jisyii
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Attachment I
BARCLAYS BANK PLC
(Directors and Officers)
Ashley, Michael St John
Breedon, Timothy James
de Milhe de Saint Victor, Diane Marie Therese Helene
Gillies, Crawford Scott Jeffrey III, Reuben Lucas-Bull, Wendy Elizabeth Morzaria, Tushar Moyo, Dambisa Felicia Schueneman, Diane Lynn Thieke, Stephen Gerard Rake, Michael Derek Vaughan van Paasschen, Frits Dirk
Position
Director
Director Director Director
Director Director Director Director Director Director Director Director Director
Name
McFarlane, John Dickinson, Lawrence Charles Gonsalves, Patrick Anthony
Position
Chairman Joint Secretary Joint Secretary
Attachment II
BARCLAYS BANK PLC
(Certification Statement)
"Barclays Bank" was founded in 1690 by John Freame and Thomas Could as a trading company under the name "Goldsmith" in London, England. Through the process of acquisitions, the trading company evolved into a bank. In 1736, James Barclay, the son-in-law of John Freame, became a partner in the business. Eventually, in the second half of the 18th century, David Barclay the Younger joined the partnership as well. Research of certain Applicant records, supplemented by the work of a newly-retained third-party historical research firm, shows that David Barclay the Younger acquired a plantation in payment for a debt in Jamaica and became the owner of thirty-two slaves. In anticipation of their emancipation, Mr. Barclay sent the slaves to Philadelphia, Pennsylvania, where they were given crafts training. A record ofthe names of twenty-eight ofthe freed slaves has been found and contained the following references:
London (age 40-45), Bacchus (age 20-25), Simon (age 24-26), John (age 30-35), Kingston (age 23-25), Mintas (age 32-36), Nancy (approximate age 24), Dido (age 24), Bathsheba (age 34-36), Patience (age 30-34), Amelia (age 26-30), Clarissa (approximate age 35), Nancy (age 26), Sabina (age 40), Juba (age 14), Phillis (age 22), Charles (age 15), Prince (age 14), Yano (age 14), Toby (age 14), Wiltshire (age 11), Sancho (age 10), Mingo (age 10), October (age 8), Quashie (age 7), Caesar (age 6), Charlotte (age 4), and Sukey (age 3).
There is also historical evidence that during the 1700s, David Barclay the Younger, a Quaker, formed a committee of London Quakers to oppose the slave trade and subsequently became involved with the committee in taking the Quaker anti-slave trade message rationale within the United Kingdom. In a 1795 manumission document the aforementioned slaves were "liberated, enfranchised, manumitted and forever set free".
In 1896, the company became Barclay and Company Limited which subsequently became Barclays Bank PLC. Barclays has been in existence for in excess of 318 years and thus, part of its existence would have been during the slavery era. In this historical context, entities acquired during this period may have had investments or profits from the slave industry. Slavery was a heinous period in the history of both the United States and United Kingdom and, indeed, the whole world. Without reservation, Barclays condemns this industry. A third party historical research firm has been hired to assist in record research. If additional records indicating the identities of entities or persons with whom predecessor entities or owners conducted slave related business in the United States are discovered by our historical consultant, a supplement to this Economic Disclosure Statement and Affidavit regarding such information will be filed.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Barclays PLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Barclays capital, inc.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address Of the Disclosing Party: 745 Seventh Avenue. New York NY 10019
c/o Public Finance at Barclays Capital
Telephone: (312) 609-8520 Fax: (646) 834-4640 Emaikmartha. linsley@barclays . com
Name of contact person: Martha e. Linsiey
Federal Employer Identification No. (if you have one):, j
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 2 016
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # n/a and Contract # n/a
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Indicate the nature of the Disclosing Party:
Person [ ] Limited liability company
Publicly registered business corporation [ ] Limited liability partnership
Privately held business corporation [ ] Joint venture
Sole proprietorship [ ] Not-for-profit corporation
General partnership (Is the not-for-profit corporation also a 501(c)(3))'?
Limited partnership [ ] Yes [ ] No
Trust [x] Other (please specify)
Public Limited Company registered under England and Wales
For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
SPP Al—RhfWP
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes bJ No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
See Attachment 1
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address . Percentage Interest in the
Disclosing Party
NONE
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
N/A
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any. part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[J Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. I. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
arc not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of cither the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
From time to time, Barclays PLC and its affiliates (collectively, "Barclays") are the subject of inquiries and investigations conducted by regulatory authorities, including but not limited to those by federal and state securities regulators. Barclays routinely cooperates with such investigations. Barclays is also involved, from time to time, in civil legal proceedings and arbitration proceedings concerning matters arising in connection with the conduct of its business. All current material proceedings in which there has been a final determination against Barclays and all current material litigations involving Barclays have been reported on Barclays annual results filed with the Securities and Exchange Commission on Form 20-F as of December 31, 2015. Copies of this filing can be viewed at:
. For additional information, please also see: .
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
NONE
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
y is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of. 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes y No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check cither 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
x 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
iSPP At r ^r-hmpnr TT which rpflprr.q f inHinnq rn This Hat~p
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification al the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A. 1. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes bd No
If "Yes," answer the three questions below:
Have you developed and do you have on, file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public .on its Internet site and/or.upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrarits that he/she'is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) .are true, accurate, and complete as of the date furnished to the City.
Barclays PUC
Robert. M Taylor, as agent
(Print or type name of person signing)
Managing Director (Print or type title of person signing)
Signed and sworn to before me on (date) LVlX^ ) 3. t / , at ftfa*> l/»c6-— County, t^jijo^j^A Estate).
Notary Public.
LORI ANN STROCCHIA Notary' Public - Stats of New York
N0.Q1ST6247362 Qualified In Westchester Coun My Commission Expires.
Commission expires:.
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.|10 10|Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person . exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) tlie precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
. [ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Attachment I BARCLAYS PLC DIRECTORS & OFFICERS
DIRECTORS
Mike Ashley, Director
Reuben Jeffery III, Director Dambisa Moyo, Director
OFFICER
Lawrence Charles Dickinson, Secretary
14712292vl
Attachment II
BARCLAYS PLC
(Certification Statement)
"Barclays Bank" was founded in 1690 by John Freame and Thomas Could as a trading company under the name "Goldsmith" in London, England. Through the process of acquisitions, the trading company evolved into a bank. In 1736, James Barclay, the son-in-law of John Freame, became a partner in the business. Eventually, in the second half of the 18th century, David Barclay the Younger joined the partnership as well. Research of certain Applicant records, supplemented by the work of a newly-retained third-party historical research firm, shows that David Barclay the Younger acquired a plantation in payment for a debt in Jamaica and became the owner of thirty-two slaves. In anticipation of their emancipation, Mr. Barclay sent the slaves to Philadelphia, Pennsylvania, where they were given crafts training. A record ofthe names of twenty-eight ofthe freed slaves has been found and contained the following references:
London (age 40-45), Bacchus (age 20-25), Simon (age 24-26), John (age 30-35), Kingston (age 23-25), Mintas (age 32-36), Nancy (approximate age 24), Dido (age 24), Bathsheba (age 34-36), Patience (age 30-34), Amelia (age 26-30), Clarissa (approximate age 35), Nancy (age 26), Sabina (age 40), Juba (age 14), Phillis (age 22), Charles (age 15), Prince (age 14), Yano (age 14), Toby (age 14), Wiltshire (age 11), Sancho (age 10), Mingo (age 10), October (age 8), Quashie (age 7), Caesar (age 6), Charlotte (age 4), and Sukey (age 3).
There is also historical evidence that during the 1700s, David Barclay the Younger, a Quaker, formed a committee of London Quakers to oppose the slave trade and subsequently became involved with the committee in taking the Quaker anti-slave trade message rationale within the United Kingdom. In a 1795 manumission document the aforementioned slaves were "liberated, enfranchised, manumitted and forever set free".
In 1896, the company became Barclay and Company Limited which subsequently became Barclays Bank PLC. Barclays has been in existence for in excess of 318 years and thus, part of its existence would have been during the slavery era. In this historical context, entities acquired during this period may have had investments or profits from the slave industry. Slavery was a heinous period in the history of both the United States and United Kingdom and, indeed, the whole world. Without reservation, Barclays condemns this industry. A third party historical research firm has been hired to assist in record research. If additional records indicating the identities of entities or persons with whom predecessor entities or owners conducted slave related business in the United States are discovered by our historical consultant, a supplement to this Economic Disclosure Statement and Affidavit regarding such information will be filed.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Piper Jaffray & Co.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[x| the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 800 Nicollet Mall, Suite 1000
Minneapolis, MN 55402
Telephone: 312-267-5160 Fax: 312-277-3864 Email: barbara . e . eaman@pjc . com
Name of contact person: Barbara Eaman
Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[x] Publicly registered business corporation [ ]
[ ] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
[ ] Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
pq Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title See attached list (next page)
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
PIPER JAFFRAY & CO. LIST OF DIRECTORS AND PRINCIPAL OFFICERS
NAME
Andrew S. Duff
John W. Geelan
James Grant
Timothy L. Carter
Gregory J. Meyer
Dcbbra L. Schoneman
Mary B. Swanson
Chad R, Abraham
Francis E. Fairman IV
Jeffrey P. Klinefelter
R. Scott LaRue
Thomas P. Schnettler
M. Bradley Winges
TITLE
Chairman and Chief Executive Officer
General Counsel and Secretary Assistant Secretary Treasurer and Director Controller
Chief Financial Officer
Assistant Treasurer
Co-Head, Global Investment Banking and Capital Markets and Director
Head of Public Finance Services and Director
Head of Global Equities and Director
Co-Head, Global Investment Banking and Capital Markets and Director
Vice Chairman and Head of Merchant Banking
Chief Investment Officer, Head of Fixed Income Services and Director
BUSINESS ADDRESS
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address , Percentage Interest in the
Disclosing Party
Piper Jaffray Companies 800 Nicollet Mall, Suite 100 100%
Minneapolis, MN 55402
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [xj No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as ihe nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[ ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [3§ No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are nol presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of.Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
I certify the above to be true.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all current employees of the Disclosing Party who were, at any time during the 12-
month period preceding the execution date of this EDS, an employee, or elected or appointed official,
ofthe City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x| is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Parly understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/pr upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are;true, accurate and complete as of the date furnished to the City.
Piper Jaffray & Co. (Print or type name of Disclosing Party)
(Sign here) Brian R LePenske (Print or type name of person signing)
Vice President (Print or type title of person signing)
Signed and sworn to before me on (date) Jlciw
at Coi) k— County, __L-Z_ (state).
V^r*^
Commission ex
pires: \Jf* l^Z?,
OFFICIAL SEAL DEBRA E 2SIGRAY Notary Public • State of Illinois My Commission Expires Jul 27,2019 ,
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Piper Jaffray Companies
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Piper Jaffray & Co.
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 800 Nicollet Mall, Suite 1000
Minneapolis, MN 554 02
Telephone: 312-267-5160 Fax: 312-277-3864 Email: barbara. e . eaman@p-jc . com
Name of contact person: Barbara Eaman
Federal Employer Identification No. (if you have one):;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[x]Yes []No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers arid all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s). .
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title See attached list (next page)
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
PIPER JAFFRAY COMPANIES LIST OF DIRECTORS AND PRINCIPAL OFFICERS
NAME
Andrew S. Duff
BUSINESS ADDRESS
Chairman and Chief Executive 800 Nicollet Mall
Officer Minneapolis, MN 55402-7020.
Chief Financial Officer
General Counsel and Secretary
Co-Head, Global Investment Banking and Capital Markets
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
800 Nicollet Mall Minneapolis, MN 55402-7020
Francis E. Fairman IV Jeffrey P. Klinefelter R. Scott LaRuc Thomas P. Schnettler M. Bradley Winges William R. Fitzgerald Michael E. Frazier B. Kristine Johnson Addison L. Piper Sherry M. Smith Philip E. Soran Scott C. Taylor
Head of Public Finance
Head of Global Equities
Co-Head, Global Investment Banking and Capital Markets
Vice Chairman and Head of Merchant Banking
Head of Fixed Income Services
Director
Director
Director
Director
Director
Director
Director
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
800 Nicollet Mall Minneapolis, MN
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
BlackRock, Inc. 40 East 52nd Street, New York, NY 10022 '9.5%
(BlackRock, Inc. is a publicly traded company regulated by and required
to make periodic filings with the federal Securities and Exchange Commission
under the Securities Act. See attached 10-K dated fiscal year ending December
31, 2015t-)
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
fx] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No |xj No person directly, or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. 1. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or,local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
I certify the above to be true.
i
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all current employees of the Disclosing Party who were, at anytime during the 12-
month period preceding the execution date of this EDS, an employee, or elected or appointed official,
of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms lhat are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-1 10 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes [JNo
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or, employee of any agency, as defined by applicable federal, law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[]Yes [JNo
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the Cily in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor arc the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.I. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3.^above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are.true, accurate and complete as of the date furnished to the City.
Piper Jaffray Companies (Print or type name of Disclosing Party)
Bv: ^Z.^Z^^~ (Sign here)
Brian R. LePenske
(Print or type name of person signing)
Vice President
(Print or type title of person signing)
Signed and sworn to before me on (date) KIujLo tofto at itcWCL County, JgZ- (state).
Notary Public.
m m ' " f
i iii i i ' *
OFFICIAL SEAL DEBRA E ZSIGRAY Notary Public - State ot Illinois My Commission Expires Jul 27. 2019
Commission expires: *\[tLJUj. c^?t 2-AI 9
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section LLB.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7,5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [x]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
m ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015 or
? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-33099
BlackRock
BlackRock, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of .' Incorporation or Organization)
55 East 52nd Street, New York, NY 10055 (Address of Principal Executive Offices)
(212) 810-5300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
1.250% Notes due 2025 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known, seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ? No i Indicate by check mark if the registrant is not required to fie reports pursuant to Section 13 or Section 15(d) of the Act. Yes ? No El
Indicate by check mark whether the registrant (1) has filed at reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes EI No ?
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes E No ?
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. m
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer (HI Accelerated filer ?
Non-accelerated filer ? (Do not check if a smaller reporting company) Smaller reporting company ?
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No El
The aggregate market value of the voting common stock and nonvoting common stock equivalents held by nonaffiliates of the registrant as of June 30, 2015 was approximately $56.3 billion.
As of January 31, 2016, there were 163,941,835 shares of the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference herein.
Portions of the definitive Proxy Statement of BlackRock, Inc. to be filed pursuant to Regulation 14Aof the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2016 annual meeting of stockholders to be held on May 25, 2016 ("Proxy Statement") are incorporated by reference into Part III of this Form 10-K.
BlackRock, Inc. Table of Contents
PART I
Item 1 Business|910|Item 1A Risk Factors 18
Item 1B Unresolved Staff Comments 26
Item 2 Properties 26
Item 3 Legal Proceedings 26
Item 4 Mine Safety Disclosures 27
PART II
Item 5 Market for Registrant's Common Eguitv. Related Stockholder Matters and Issuer Purchases of Eguitv Securities 27
Item 6 Selected Financial Data 28
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 30
Item 7A Quantitative and Qualitative Disclosures About Market Risk 54
Item 8 Financial Statements and Supplemental Data 55
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ' 55
Item 9A Controls and Procedures 55
Item 9B Other Information 58
PART III
Item 10 Directors, Executive Officers and Corporate Governance 58
Item 11 Executive Compensation 58
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 58
Item 13 Certain Relationships and Related Transactions, and Director Independence 58
Item 14 Principal Accountant Fees and Services 58
PART IV
Item 15 Exhibits and Financial Statement Schedules 58
Signatures 61
PART I
Item 1. Business
OVERVIEW
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, "BlackRock" or the "Company") is a leading publicly traded investment management firm with $4,645 trillion of assets under management ("AUM") at December 31, 2015. With employees in more than 30 countries who serve clients in over 100 countries across the globe. BlackRock provides a broad range of investment and risk management services to institutional and retail clients worldwide.
Our diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Our product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, /Shares® exchange-traded funds ("ETFs"), separate accounts, collective investment funds and other pooled investment vehicles. We also offer our BlackRock Solutions® ("BRS") investment and risk management technology platform. Aladdin®, risk analytics and advisory services and solutions to a broad base of institutional investors. The Company is highly regulated and serves its clients as a fiduciary. We do not engage in proprietary trading activities that could conflict with the interests of our clients.
BlackRock serves a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments', official institutions, such as central banks, sovereign wealth funds, supranational and other government entities, taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors.
BlackRock maintains a significant global sales and marketing presence that is focused on establishing and maintaining retail and institutional investment management relationships by marketing its services to investors directly and through financial professionals and pension consultants, and establishing third-party distribution relationships.
BlackRock is an independent, publicly traded company, with no single majority shareholder and over two-thirds of its Board of Directors consisting of independent directors. At December 31, 2015, The PNC Financial Services Group, Inc. ("PNC") held 21.1% of BlackRock's voting common stock and 22.2% of BlackRock's capital stock, which includes outstanding common stock and nonvoting preferred stock.
Management seeks to achieve attractive returns for stockholders over time by, among other things, capitalizing on tho following factors:
the Company's focus on strong performance providing alpha for active products and limited or no tracking error for index products;
the Company's global reach and commitment to best practices around the world, with approximately 48% of employees outside the United States supporting loca! investment capabilities and serving clients, and approximately 42% of total AUM managed for clients domiciled outside the United States;
the Company's diversified active and index product offerings, which enhance its ability to offer a variety of traditional and alternative investment products across the risk spectrum and to tailor single- and multi-asset investment solutions to address specific client needs;
the Company's differentiated client relationships and fiduciary focus, which enable effective positioning toward changing client needs and macro trends including the secular shift to passive investing and ETFs, a focus on income and retirement, and barbelling of risk using index and active products, including alternatives; and
the Company's longstanding commitment to risk management and the continued development of, and increased interest in, BRS products and services.
BlackRock operates in a global marketplace characterized by a high degree of market volatility and economic uncertainty, factors that can significantly affect earnings and stockholder returns in any given period.
The Company's ability to increase revenue, earnings and stockholder value over time is predicated on its ability to generate new business, including business in BRS products and services. New business efforts depend on BlackRock's ability to achieve clients' investment objectives in a manner consistent with their risk preferences and to deliver excellent client service. All of these efforts require the commitment and contributions of BlackRock employees. Accordingly, the ability to attract, develop and retain talented professionals is critical to the Company's long-term success.
|1010|FINANCIAL HIGHLIGHTS
(in millions, except per share data)
Total revenue
Operating income
Operating margin
Nonoperating income (expense
Net income attributable to BlackRock, Inc.
Diluted earnings per common share
11,081 S
4,474 $
40.4%
(49) $
3.294 $
19.25 S
10,180 S
3,857 S
37.9%
97 S
2,932 S
16.87 $
9.337 3,524 37.7% (36) 2.458 13.79
(in millions, except per snsre data)
As adjusted(2):
Operating income
Operating margin(2)
Nonoperating income (cxpense)C)
Nel income attributable to BlackRock. Inc.(3)
Diluted earnings per common share(3)
4,563 $
42.9%
(56) $
3,310 $
19.34 $
4,024 $
41.4%|109|S
2,882 $
16.56 $
3,574 S
40.4%
(42) S
2,438 S
13.68 $
- not applicable
Net of net income (loss) attnbutable to noncontrolling interests ("NCI") (redeemable and nonredecmablc).
BlackRock reports its financial results in accordance with accounting pnnciples generally accepted in the United States ("GAAP'); however, management believes evaluating the Company's ongoing operating results may be enhanced if investors have additional non-GAAP financial measures.
See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures, for further information on non-GAAP financial measures and for as adjusted Items for 2015. 2014, and 2013. In 2012, operating income, as adjusted, included an adjustment related to estimated lease exit costs initially recorded in 2011 and the contnbution to certain of the Company's bank-managed short-term investment funds CSTIFs"). In 2011, operating income, as adjusted, included U.K. lease exit costs which represent costs to exit two locations in London and restructuring charges. In 2012 and 2011, the portion of compensation expense associated with certain long-term incentive plans ("LTIP") funded, or to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately did not impact BlackRock's book value. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded as returns on investments set aside for these plans, which substantially offset this expense, are reported in nonoperating income (expense).
Net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted exclude the after-tax impact of the Items listed above and also include the effect on deferred income tax expense resulting from certain income tax matters.
Percentage represents compounded annual growth rate ("CAGR") over a five-year penod (2010-2015).
ASSETS UNDER MANAGEMENT
The Company's AUM by product type for the years 2011 through 2015 is presented below.
(in millions}
Equity
Fixed income
Multi-asset
Altematives
Long-term
Cash management
Advisory
' Total
2011
1,560,106 1,247,722 225,170 104,948 3,137,946 254,665 120,070
5-Year CAGR(I)
7% 5% 15% 1% 7% 1% (42%) 5%
(1) Percentage represents CAGR over a five-year penod (2010-2015).
Component changes in AUM by product type for the five years ended December 31, 2015 are presented below.
(in millions)
Equity
Fixed income
Multi-asset
Alternatives
Long-teim
Cash management
Advisory
Total
Net Inflows (Outflows) $ 252.591 122,375 146,838 (6,541) 515,263 25,411 (134,686)
Adjustment/ Acqulsltions(t) $ (16,112) 2,968 6,442
21,345
14,643
3,131,116
14,643
279,175 150,677
t 3,560,968 $ 405,988 $
(1) Amounts include AUM acquired from Claymore Investments. Inc. ("Claymore") in March 2012. Swiss Re Private Equity Partners ("SRPEP") in September 2012, Credit Sutsse's ETF franchise ("Credit Suisse ETF Transaction") in July 2013 and MGPA in October 2013. Amounts also include AUM acquired in the acquisitions of certain assets of BlackRock Kelso Capital Advisors LLC ("BKCA") in March 2015, Infraestructura Institucional and FutureAdvisor in October 2015, and other reclassifications to conform to current period combined AUM policy and presentation. Amounts also include Barclays Global Investors merger-related outflows due to manager concentration considerations prior to the third quarter of 2011 and outflows from scientific active equity performance prior to the second quarter of 2011. As a result of
|1010|client investment manager concentration limits and the scientific active equity performance, outflows were expected to occur for a period of time subsequent to the close of the transaction (2) Percentage represents CAGR over a five-year period (2010-2015).
AUM represents the broad range of financial assets we manage for clients on a discretionary basis pursuant to investment management agreements that are expected to continue for at least 12 months. In general, reported AUM reflects the valuation methodology that corresponds to the basts used for billing (for example, net asset value). Reported AUM does not include assets for which we provide risk management or other forms of nondiscretionary advice, or assets lhat we are retained to manage on a short-term, temporary basis.
Investment management fees are typically expressed as a percentage of AUM. We also earn performance fees on certain portfolios relative to an agreed-upon benchmark or return hurdle. On some products, we also may earn securities lending revenue. In addition, BlackRock offers its proprietary Aladdin investment system as well as risk management, outsourcing and advisory services, to institutional investors under the BRS name. Revenue for these services may be based on several criteria including value of positions, number of users, accomplishment of specific deliverables or other objectives.
At December 31, 2015, total AUM was $4,645 trillion, representing a CAGR of 5% over the last five years. AUM growth during the period was achieved through the combination of net market valuation gains, net inflows and acquisitions, including Claymore and SRPEP, which collectively added S13.7 billion of AUM in 2012, Credit Suisse and MGPA, which collectively added $26.9 billion of AUM in 2013 and BKCA, Infraestructura Institucional and FutureAdvisor, which collectively added $2.2 billion of AUM in 2015. Our AUM mix encompasses a broadly diversified product range, as described below.
The Company considers the categorization of its AUM by client type, product type, investment style and client region useful to understanding its business. The following discussion ofthe Company's AUM will be organized as follows.
Client Type • Product Type Client Region
Retail ? Equity ? Amencas
/Shares ? Fixed Income ? Europe, the Middle East and Afnca ("EMEA")
Q Institutional ? Multi-asset Q Asia-Pacific
? Altematives
? Cash Management
CLIENT TYPE
Our organizational structure was designed to ensure that strong investment performance is our highest priority, and that we best align with our clients' needs to capitalize on broader industry trends. Furthermore, our structure facilitates strong teamwork globally across both functions and regions in order to enhance our ability to leverage best practices to serve our clients and continue to develop our talent. Specifically, our investments functions are split into distinct strategies: Active Equity and Fixed Income, Beta, Multi-Asset, Alternatives and Trading/Liquidity.
We serve a diverse mix of institutional and retail clients across the globe. Clients include tax-exempt institutions, such as defined benefit and defined contribution pension plans, charities, foundations and endowments; official institutions, such as central banks, sovereign wealth funds, supranational and other government entities; taxable institutions, including insurance companies, financial institutions, corporations and third-party fund sponsors, and retail investors. /Shares is presented as a separate client type below, with investments in iShares by institutions and retail clients excluded from figures and discussions in their respective sections below.
AUM by investment style and client typo at December 31, 2015 is presented below.
(in millions)
Active
Non-ETF Index iShams
Retail
BlackRock serves retail investors globally through a wide array of vehicles across the active and passive spectrum, including separate accounts, open-end and closed-end funds, unit trusts and private investment funds. Retail investors are served principally through intermediaries, including broker-dealers, banks, trust companies, insurance companies and independent financial advisors. Clients invest primarily in mutual funds, which totaled $446.4 billion, or B3%, of retail long-term AUM at year-end, with the remainder invested in private investment funds and separately managed accounts ("SMAs"). The majority (92%) of long-term retail AUM is invested in active products, although this is impacted by iShares being shown separately. Retail represented 13% of long-term AUM at December 31, 2015 and 35% of long-term base fees for 2015.|1010|Component changes in retail long-term AUM for 2015 are presented below.
(in millions)
Equity
Fixed income Multi-asset class Altematives
Total Retail
(1) Amounts represent $1.3 billion of AUM acquired in the BKCA acquisition in March 2015 and $3GG million of AUM acquired in the FutureAdvisor acquisition in October 2015 The FutureAdvisor acquisition amount docs not include AUM that was held in iShares holdings.
The retaS client base is diversified geographically, with 70% of long-term AUM managed for investors based in the Americas, 24% in EMEA and 6% in Asia-Pacific at year-end 2015.
US retail long-term net inflows of $18.7 billion, or 5% organic growth, were led by fixed income net inflows of S20.9 billion. Fixed income net inflows were diversrfied across exposures and products, with strong flows into our unconstrained, high yield and core bond offerings. Equity net inflows of $1.3 billion were driven by flows into our index mutual funds, and we continued to make progress on the reinvigoration and globalization of our fundamental active equity business. Multi-asset class net outflows of $2.5 billion were primarily due to a large single-client transition out of mutual funds into a series of iShares across asset classes.
International retail long-term net inflows of $19.8 billion, representing 12% organic growth, were positive across major regions and diversified across asset classes. Fixed income products generated net inflows of $10.3 billion, led by short duration and unconstrained strategies as investors looked to manage duration and generate yield in their portfolios. Multi-asset class net inflows of $1.2 billion were driven by flows into managed volatility strategies and the cross-border version of our Multi-Asset Income fund. Equity net inflows of $7.2 billion reflected strong flows into international equities. Alternatives net inflows totaled $1.2 billion, and we remain committed to broadening the distribution of alternatives funds to bring institutional quality alternatives to retail investors.
iShares
iShares is the leading ETF provider in the world, with $1.1 trillion of AUM at December 31, 2015 and was the top asset gatherer globally in 20151 w'rth $129.9 billion of net inflows for an organic; growth rate of 13%. Equity netjnflows of $78.4 billion were driven by flows into the Core Series and into funds with broad developed market equity exposures, partially offset by outflows from emerging market products. Record fixed income net inflows of $50.3 billion were "diversified across exposures arid product lines/led by flows into core, corporate and high yield bond funds. iShares multi-asset class and alternatives funds contributed a combined $1.2 billion of net inflows, primarily into core allocation funds. iShares represented 25% of long-term AUM at December 31, 2015 and 35% of long-term base fees for 2015.
Component changes in iShares AUM for 2015 are presented below.
(in millions)
Equity
Fixed income Multi-asset class Attematiyes(l)
Total iShares
(1) Amounts include commodity /Shares.
Our broad iShares product range offers investors a precise, transparent and efficient way to tap market returns and gain access to a full range of asset classes and global markets that have been difficult for many investors to access, as well as the liquidity required to make adjustments to their exposures quickly and cost-efficiently.
U S. iShares AUM ended 2015 at $811.4 billion with $97.2 bilion of net inflows driven by strong demand for the Core Series and broad developed market equities as well as a diverse range of fixed income products.2 In 2015, we saw increased investor focus on risk-aware, "smart beta" products, with our minimum volatility funds raising $8.3 billion.
International.iShares AUM ended 2015 at $281.1 billion with net inflows of $32.7 billion led by fixed income net inflows of $19.2 billion, primarily, into yield-focused categories ihcludirighigh yield and investment grade corporate debt.2 Our international Core Series ranges in Canada and Europe-demonstrated solid results in their second year, raising a combined $14.1 billion in net inflows as we continue to expand our international presence among buy-and-hold investors.
Institutional
BlackRock's institutional AUM is well diversified by both product and region, and we serve institutional investors on six continents in sub-categories including: pensions, endowments and foundations, official institutions, and financial institutions.
Source: BlackRock; Bloomberg
Regional IShares amounts based on jurisdiction of product, not underlying client|1010|Component changes in Institutional long-term AUM for 2015 are presented below
(in millions)
Active:
Equity
Fixed income Multi-asset class Altematives
Active subtotal Index:
Equity
Fixed income Multi-asset class Alternatives
Index subtotal
Total Institutional
(1) Amounts represent $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015.
Institutional active AUM ended 2015 at $962.9 billion, reflecting $26.8 billion of net inflows. Institutional active represented 22% of long-term AUM and 20% of long-term base fees. Growth in AUM reflected continued strength in multi-asset class products with net inflows of $18.4 billion reflecting ongoing demand for solutions offerings and the
®
LilePath target-dale suite. Our top-performing fixed income platform generated net inflows of $5.7 billion, diversified across exposures. Alternatives net inflows of $3.1 billion were led by inflows into infrastructure and alternatives solutions offerings. In addition, 2015 was another strong fundraising year for illiquid alternatives, and we raised over $5 billion in new commitments, which will be a source of future net inflows. Equity not outflows of 50.5 billion reflected fundamental net outflows of $2.2 billion, which were partially offset by scientific net inflows of $1.7 billion.
Institutional index AUM totaled $1,739 trillion at December 31, 2015, reflecting net outflows of $43.1 billion. Equity net outflows of $33.7 billion were primarily due to low-fee global and regional index equity outflows as clients looked to re-allocate, re-balance or meet their cash needs. Fixed income net outflows of $10.2 billion were concentrated in local currency mandates, linked to outflows from liability management strategies. Institutional index represented 40% of long-term AUM at December 31, 2015 and accounted for 10% of long-term base fees for 2015.
The Company's institutional clients consist ofthe following'
Pensions. Foundations and Endowments. BlackRock is among the world's largest managers of pension plan assets with $1,847 trillion, or 68%, of long-term institutional AUM managed for defined benefit, defined contribution and other pension plans for corporations, governments and unions at December 31, 2015. The market landscape is shifting from defined benefit to defined contribution, driving strong flows in our defined contribution channel, which had $36.2 billion of long-term net inflows for the year, or 6% organic growth, driven by continued demand for our LifePath target-date suite. Defined contribution represented $630.9 billion of total pension AUM, and we remain well positioned to capitalize on the on-going evolution of the defined contribution market and demand for outcome-oriented investments. An additional $52.8 billion, or 2% of long-term institutional AUM, was managed for other tax-exempt investors, including charities, foundations and endowments.
Official Institutions. We also managed $185.0 bHlion, or 7%, of long-term institutional AUM for official institutions, including central banks, sovereign wealth funds, supranational, multilateral entities and government ministries and agencies at year-end 2015. These clients often require specialized investment advice, the use of customized benchmarks and training support
Financial and Other Institutions. BlackRock is a top independent manager of assets for insurance companies, which accounted for $237.7 billion, or 9%, of institutional long-term AUM at year-end 2015. Assets managed for other taxable institutions, including corporations, banks and third-party fund sponsors for which we provide sub-advisory services, totaled $379.4 billion, or 14%, of long-term institutional AUM at year-end.|1010|PRODUCT TYPE
Component changes in AUM by product type and investment style for 2015 are presented below.
(in millions)
Equity
Active iShsr&s Non-ETF index
Equity subtotal
Fixed income: Active iShams Non-ETF index
Fixed income subtotal Multi-asset dass Alternatives: Core
Currency and commodities
Alternatives subtotal
Long-term
Cash management
Advisory
Total AUM
(1) Amounts represent $1.3 billion of AUM acquired in (he BKCA acquisition in March 2015, $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings
Long-term product offerings include active and index strategies. Our active strategies seek to earn attractive returns in excess of a market benchmark or-performance hurdle whBe maintaining an appropriate risk profile. We offer two types of active strategies: those that rely primarily on fundamental research and those that utilize primarily quantitative models to drive portfolio construction. In contrast, index strategies seek to closely track the returns of a corresponding index, generally by investing in substantially the same underlying securities within the index or in a subset of those securities selected to approximate a similar risk and return profile of the index. Index strategies include both our non-ETF index products and iShares ETFs.
Although many clients use both active and index strategies, the application of these strategies may differ. For example, clients may use index products to gain exposure to a market or asset class. In addition, institutional non-ETF index assignments tend to be very large (multi-billion dollars) and typically reflect low fee rates. This has the potential to exaggerate the significance of net flows in institutional index products on BlackRock's revenues and earnings.
Equity
Year-end 2015 equity AUM totaled $2,424 trillion, reflecting net inflows of $52.8 billion. Net inflows included $78.4 billion and $4.2 billion into iShares and active products, respectively. iShares net inflows were driven by the Core Series and flows into broad developed market equity exposures, and active net inflows reflected demand for international equities. iShares and active net inflows were partially offset by non-ETF index net outflows of $29.8 billion.
BlackRock's effective fee rates fluctuate due to changes in AUM mix. Approximately half of BlackRock's equity AUM is tied to international markets, including emerging markets, which tend to have higher fee rates than U.S. equity strategies. Accordingly, fluctuations in international equity markets, which do not consistently move in tandem with U.S. markets, may have a greater impact on BlackRock's effective equity fee rates and revenues.
Fixed Income
Fixed income AUM ended 2015 at $1.422 trillion, increasing $28.7 bBlion, or 2%, from December 31, 2014. The increase in AUM reflected $76.9 billion in net inflows, partially offset by $48.2 bflion in net market depreciation and foreign exchange movements. In 2015, active net inflows of $35.9 billion were diversified across fixed income offerings, with strong flows into our unconstrained, total return and high yield strategies. Flagship funds in these product areas include our unconstrained Strategic Income Opportunities and Fixed Income Strategies funds, with net inflows oif S7.0 billion and $3.7 billion, respectively; our Totai Return fund with net inflows of $2.7 billion; and our High YiekTBond fund with net inflows of $3.5 billion. Fixed income iShares net inflows of $50.3 billion were led by flows into core, corporate and high yield bond funds. Active and iShares net inflows were partiaBy offset by non-ETF index net outflows of $9.3 billion.
Multi-Asset Class
BlackRock's mufti-asset class team manages a variety of balanced funds and bespoke mandates for a diversified client base that leverages our broad investment expertise in global equities, bonds, currencies and commodities, and our extensive risk management capabilities. Investment solutions might include a combination of long-only portfolios and alternative investments as weU as tactical asset allocation overlays.|1010|Component changes in multi-asset class AUM for 2015 are presented below.
{in millions)
Asset allocation and balanced
Target date/nsk
Fiduciary
FutureAdvisor
Multi -asset
. December 31, 2014
$ 183,032 128,611 66,194
Net Inflows (Outflows) I 12,926 218 3,985
38
$ 17,167
Market Change
(6,731)
(1,308)
627
(1)
(7,413) i
December,31,'::
(3,391) (1,857) (6.373)
(11,621) tagn&reTwj;;
(1) Amounts represent $366 million of AUM acquired m the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM that was held in iShares holdings.
Multi-asset class net inflows reflected ongoing institutional demand for our solutions-based advice with $17.4 billion of net inflows coming from institutional clients. Defined contribution plans of institutional clients remained a significant driver of flows, and contributed $7.3 billion to institutional multi-asset class net new business in 2015, primarily into target date and target risk product offerings. Retail net outflows of $1.3 billion were primarily due to a large single-client transition out of mutual funds into a series of iShares across asset classes. Notwithstanding this transition, retail flows reflected demand for our Multi-Asset Income fund family, which raised $4.6 billion in 2015.
The Company's multi-asset class strategies include the following:
• Asset allocation and balanced products represented 49% of multi-asset class AUM at year-end, with growth in AUM driven by net new business of $12.9 billion. These strategies combine equity, fixed income and alternative components for investors seeking a tailored solution relative to a specific benchmark and within a risk budget. In certain cases, these strategies seek to minimize downside risk through diversification, derivatives strategies and tactical asset allocation decisions. Flagship products in this category include our Global Allocation and Multi-Asset Income suites.
Target date and target risk product flows were impacted by a large single-client transition out of mutual funds into a series of iShares across asset classes. Institutional investors represented 95% of target date and target risk AUM, with defined contribution plans accounting for over 88% of AUM. Flows were driven by defined contribution investments in our LifePath and LifePath Retirement Income® offerings. LifePath products utilize a proprietary asset allocation model that seeks to balance risk and return over an investment horizon based on the investor's expected retirement timing.
Fiduciary management services are complex mandates in which pension plan sponsors or endowments and foundations retain BlackRock to assume responsibility for some or all aspects of plan management. These customized services require strong partnership with the clients' investment staff and trustees in order to tailor investment strategies to meet client-specific risk budgets and return objectives.
FutureAdvisor is a leading digital wealth management platform, acquired by BlackRock in October 2015. FutureAdvisor operates as a service within BRS, providing financial institutions with high quality, technology-enabled advice capabilities to improve their clients' investment experience. As consumers increasingly engage with technology to invest, BlackRock and FutureAdvisor are positioned to empower distribution partners to better serve their clients by combining FutureAdvisor's high-quality technology-enabled advice with BlackRock's multi-asset investment capabilities, proprietary technology and risk analytics
Affemafn/os
BlackRock Alternative Investors ("BAI") focuses on sourcing and managing high-alpha investments with lower correlation to public markets and developing a holistic approach to address cPent needs in alternatives investing. Our alternatives products fall into two main categories — 1) core, and 2) currency and commodities. Core includes alternative solutions, direct hedge funds, hedge fund and private equity solutions (funds of funds), opportunistic private equity and credit, real estate and infrastructure offerings. The products offered under the BAI umbrella are described below.
In 2015, BlackRock returned $3.3 billion of capital to investors, which is included in outflows. In addition, we raised $5.7 billion of new commitments in 2015 across a variety of strategies, including private equity solutions, opportunistic credit, alternative solutions, real estate and infrastructure. At year-end, we had $10.9 billion of non-fee paying, unfunded commitments, which are expected to be deployed in future years; these commitments are not included in AUM until they are invested.
We believe that as alternatives become more conventional and investors adapt their asset allocation strategies, investors will further increase their use of alternative investments to complement core holdings. As a top ten alternative provider' our highly diversified $112.8 billion alternatives franchise is well positioned to meet growing demand from both institutional and retail investors.
3 Source: Towers Watson, July 2015
|1010|Component changes in alternatives AUM for 2015 are presented in the table below.
(in millions)
Core:
Alternative solutions Hedge funds
Direct hedge fund strategies
Hedge fund solutions
Hedge funds subtotal Illiquid and opportunistic
Pnvate equity solutions
Opportunistic pnvate equity and credit strategies
Illiquid and opportunistic subtotal
Real assets
Real estate
Infrastructure
Real assets subtotal
Core subtotal
Currency and commodities
Alternatives
88,006
111,240
December 31, 2014
Net Inflows (Outflows)
Market Change
FX Impact
cember^31*£: 2015 Sftwjij
Memo: Return of Capital^)
Amounts represent $1.3 billion of AUM acquired in the BKCA acquisition in March 2015 and $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015.
Return of capital is included in outflows.
Core
Alternative Solutions represent holistic, highly customized portfolios of alternative investments. In 2015,'alteVnative solutions portfolios* had"$1 !4'billi6h of net inflows."
Hedge Funds net inflows of $0.1 billion were led by net inflows of $0.5 bilSon into hedge fund solutions, our funds of hedge funds offering, partially offset by $0.4 billion of net outflows from direct hedge funds. Direct hedge fund AUM includes a variety of single- and multi-strategy offerings.
Hiou'id and Opportunistic AUM included $12.4 billion in private equity solutions and $2.4 billion in opportunistic private equity and credit offerings. Net inflows of $1.0 billon were predominantly into private equity solutions. Our acquisition of certain assets of BKCA further enhanced our credit platform through the addition of a middle market, private credit capability.
Real Assets AUM totaled $24.3 baton, up $1.5 billion, or 7%. Real assets, which include infrastructure and real estate, saw net inflows of $1.7 billion. In 2015, we continued to burkf our infrastructure capabilities through the acquisition of Infraestructura Institucional, a leading infrastructure investment business in Mexico. This acquisition advances our growth strategy in Mexico and Latin America and furthers our commitment to being a leader in infrastructure investing.
Currency and Commodities.
AUM in currency and commodities declined 11% from year-end 2014, reflecting portfolio valuation declines of $3.5 biKon. Currency and commodities products include a range of active and passive products. Our iShares commodities products represented $12.5 billion of AUM and are not eligible for performance fees.
Cash Management
Cash management AUM totaled $299.9 bition at December 31. 2015. up $3.5 billion, or 1%, from year-end 2014. Cash management products include taxable and tax-exempt money market funds and customized separate accounts. Portfolios are denominated in U.S. dollars, Canadian dollars, Australian dolars, Euros or British pounds. We generated net inflows of $7.5 bison during 2015, a period marked by a near zero interest rate environment. BlackRock is working to bring al U.S. money market funds into full compliance with new regulatory requirements in advance of the 2016 deadlines, and is actively repurposing and streamlining our product lineup to meet the future requirements of clients. In Europe, we continue to be a market leader highlighted by our implementation of the reversedistribution mechanism in our euro funds when faced with negative rates. In November 2015, BlackRock and Bank of America's asset management business, BofA Global Capital Management ("BACM") entered into an agreement to transfer to BlackRock investment management responsibilities for approximately $87 billion of AUM in cash products currently managed by BACM. The transaction is expected to close in the first half of 2016, subject to customary approvals and closing conditions.
CLIENT REGION
Our footprints in the Americas, EMEA and Asia-Pacific regions reflect strong relationships with intermediaries and an established ability to deliver our global investment expertise in funds and other products tailored to local regulations and requirements.|1010|AUM by product type and client region at December 31, 2015 is presented below.
(in millions}
Equity
Fixed income Multi-asset class Altematives
Long-term
Cash management Advisory
Sjfc^&:2;935;bT6^
Component changes in AUM by client region for 2015 are presented below.
(in millions)
Americas EMEA Asia-Pacific
Total
December 31, 2014
$ 2,867,353
1,413,441
371,101
4,651,895
Net Inflows
154,742 (2,912) (1.936)
149,894
Acquisitions(l) $ 2,219
2,219
FX Impact
(22,574) (73,000) (5,528)
(66,714) 10,631 (1.411)
De'eemMr,31*£i i&i'M5f026jl' b,SiS362;-226B
(57,494) j (101,102) Xgjg&tfffi&
(1) Amounts represent $1.3 billion of AUM acquired in the BKCA acquisition in March 2015. $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and S366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount does not include AUM lhat was held in iShares holdings.
Americas.
Long-term net new business of $144.6 billion was positive across all asset classes, with net inflows of $84.6 billion, $49.7 billion, $6.3 billion and $4.0 billion in equity, fixed income, multi-asset class and alternatives products, respectively. During the year, we served clients through offices in 31 states in the United States as well as Canada, Mexico, Brazil, Chile, Colombia and Spain.
EMEA.
During the year, clients awarded us long-term net new business of $8.7 billion, including inflows from investors in 23 countries across the region. EMEA net new business was led by fixed income net inflows of $10.8 billion, reflecting strong flows into iShares and unconstrained fixed income. Our offerings include fund families in the United Kingdom, the Netherlands, Luxembourg and Dublin and iShares listed on stock exchanges throughout Europe as wel as separate accounts and pooled investment products.
Asia-Pacific.
Clients in the Asia-Pacific region are served through offices in Japan, Australia. Hong Kong, Malaysia, Singapore, Taiwan, Korea, China, and India. Long-term net outflows of $1.3 bilion were due to equity net outflows of $20.2 billion, primarily from institutional index mandates. Fixed income, multi-asset class and alternatives saw net inflows of $16.5 billion, $2.3 billion and $0.1 billion, respectively.
INVESTMENT PERFORMANCE
Investment performance across active and passive products as of December 31, 2015 was as follows:
Fixed Income:
Actively managed AUM above benchmark or peer median
Taxable
Tax-exempt Index AUM within or above tolerance Equity:
Actively managed AUM above benchmark or peer median Fundamental Scientific
Index AUM within or above tolerance
One-year Three-year Five*year
period period period
69% 91% . 92%
47% 55% . 72%
94% 99% 99%
76% 60% 71%
65% 90% 95%
97% 96% 97%
Product Performance Notes. Past performance is not indicative of future results. Except as specified, the performance information shown is as of December 31, 2015 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including U.S. registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of November 30, 2015. The performance data does not include accounts terminated prior to December 31, 2015 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.
Performance comparisons shown are gross-of-fees for institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of December 31, 2015 for each account or fund in the|10 10|
asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions. Source of performance information and peer medians is BlackRock, Inc. and is based in part on data from Lipper Inc. for U.S. funds and Morningstar, Inc. for non-U.S. funds.
BLACKROCK SOLUTIONS
BRS offers investment management technology systems, risk management services and advisory services on a fee basis. Aladdin is our proprietary technology platform, which serves as the risk management system for both BlackRock and a growing number of sophisticated institutional investors around the world. BRS also offers comprehensive risk reporting capabilities via the Green Package® and risk management advisory services; interactive fixed income analytics through our web-based calculator, AnSer®; middle and back office outsourcing services; and investment accounting. BRS' Financial Markets Advisory ("FMA") group advises global financial institutions, regulators, and government entities on complex financial and risk issues though core competencies across capital markets, data analysis and modeling; strategic advice regarding regulatory compliance, risk management, business transformations and transaction support; and integrated project management. FutureAdvisor, acquired by BlackRock in 2015, is a digital wealth management platform operating within BRS that provides financial institutions with high quality, technology-enabled advice capabilities to improve their clients' investment experience.
BRS record revenues of $646 million were up 2% year-over-year. Aladdin, which represented 82% of BRS revenue for the year, continues to benefit from trends favoring global investment platform consolidation and multi-asset risk solutions. Aladdin assignments are typically long-term contracts that provide significant recurring revenue.
Our FMA group continued to post solid revenues, even as the business transitions from a "crisis management" emphasis to a more institutionalized advisory business model, with a strong focus on helping clients navigate and implement requirements for the evolving regulatory environment. Advisory AUM decreased to $10.2 billion, driven by $9.6 billion of planned client distributions reflecting our continued success in disposing of assets for clients at, or above, targeted levels.
At year-end, BRS served clients, including banks, insurance companies, official institutions, pension funds, asset managers and other institutional investors across North America, Europe, Asia and Australia.
SECURITIES LENDING
Securities lending is managed by a dedicated team, supported by quantitative analysis, proprietary technology and disciplined risk management. BlackRock receives both cash (primarily for U.S. domiciled portfolios) and noncash collateral under securities lending arrangements. The cash management team invests the cash we receive as collateral for securities on loan in other portfolios. Fees for securities lending for U.S. domiciled portfolios can be structured as a share of earnings, or as a management fee based on a percentage ofthe value ofthe cash collateral or both. The value of the securities on loan and the revenue earned are captured in the corresponding asset class being managed. The value of the collateral is not included in AUM.
Outstanding loan balances ended the year at approximately $218 billion, up from $187 billion at year-end 2014. Liability spreads were generally flat compared to 2014 levels.
BlackRock employs a conservative investment style for cash and securities lending collateral that emphasizes quality, liquidity and interest rate risk management. Disciplined risk management, Including a rigorous credit surveillance process, is an integral part ofthe investment process. 8lackRock's Cash Management Credit Committee has established risk limits, such as aggregate issuer exposure limits and maturity imits, across many ofthe products BlackRock manages, including over aO of its cash management products. In the ordinary course of our business, there may be Instances when a portfolio may exceed an internal risk limit or when an internal risk limit may be changed. No such instances, individually or in the aggregate, have been material to the Company. To the extent that daily evaluation and reporting of the profile of the portfolios identify that a limit has been exceeded, the relevant portfolio wiD be adjusted. To the extent a portfolio manager would like to obtain a temporary waiver of a risk limit, the portfolio manager must obtain approval from the credit research team, which is independent from the cash management portfolio managers. While a risk limit may be waived temporarily, such waivers are infrequent.
RISK & QUANTITATIVE ANALYSIS
Across all asset classes, in addition to the efforts of the portfolio management teams, the Risk & Quantitative Analysis ("RQA") group at BlackRock draws on extensive analytical systems and proprietary and third-party data to identify, measure and manage a wide range of risks. RQA provides risk management advice and independent risk oversight of the investment management processes, identifies and helps manage counterparty and operational risks, coordinates standards for firm wide investment performance measurement and determines risk management-related analytical and information requirements. Where appropriate, RQA wii work with portfolio managers and developers to facilitate the development or improvement of risk models and analytics.
COMPETITION
BlackRock competes with investment management firms, mutual fund complexes, insurance companies, banks, brokerage firms and other financial institutions that offer .products that are similar to, or alternatives, to, those offered by BlackRock. In order to grow its business, BlackRock must be able to compete effectively for AUM. Key competitive factors include investment performance track records/the efficient delivery of beta for index products, investment style and discipline, client service and brand name recognition. Historicaty, the Company has competed principaHy on the basis of its long-term investment performance track record, its investment process, its risk management and analytic capabilities and the quality of its client service.
10
GEOGRAPHIC INFORMATION
At December 31, 2015, BlackRock served clients in more than 100 countries across the globe, including the United Slates, the United Kingdom and Japan. See Note 22, Segment Information, contained in Part II, Item 8 of this filing for more information.
EMPLOYEES
At December 31, 2015, BlackRock had a total of approximately 13,000 employees, including approximately 6,200 located in offices outside the United States. Consistent with our commitment to continually expand and enhance our talent base to support our clients, we added approximately 800 employees during the year, including in strategic focus areas.
REGULATION
Virtually all aspects of BlackRock's business are subject to various laws and regulations around the world, some of which are summarized below. These laws and regulations are primarily intended to protect investment advisory clients, investors in registered and unregistered investment companies, trust customers of BlackRock Institutional Trust Company, N.A. ("BTC"), PNC and its bank subsidiaries and their customers and the financial system. Under these laws and regulations, agencies that regulate investment advisers, investment funds and bank holding companies and other individuals and entities have broad administrative powers, including the power to limit, restrict or prohibit the regulated entity or person from carrying on business if it fails to comply with such laws and regulations. Possible sanctions for significant compliance failures include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment adviser and other registrations, censures and fines both for individuals and BlackRock.
The rules governing the regulation of financial institutions and their holding companies and subsidiaries are very detailed and technical. Accordingly, the discussion below is general in nature, does not purport to be complete and is current only as of the date of this report.
GLOBAL REGULATORY REFORM
BlackRock is subject to numerous regulatory reform initiatives around the work). Any such initiative, or any new laws or regulations or changes in enforcement of existing laws or regulations, could materially and adversely impact the scope or profitability of BlackRock's business activities, lead to business disruptions, require BlackRock to alter its business or operating activities and expose BlackRock to additional costs (including compliance and legal costs) as well as reputational harm. BlackRock's profitability also could be materially and adversely affected by modification of the rules and regulations that impact the business and financial communities in general, including changes to the laws governing banking, taxation, antitrust regulation and electronic commerce.
Dodd-Frank Wall Street Reform and Consumer Protection Act
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "DFA") was signed into law in the U.S. The DFA is expansive in scope and requires the adoption of extensive regulations and numerous regulatory decisions, many of which have been adopted. BlackRock has commenced a conformance program to address certain regulations adopted under the DFA as well as financial reforms that have been introduced as part of the SEC's investment company modernization initiatives. The cost of these initial conformance activities have been absorbed by BlackRock; however, as the full extent of the DFA and other rules will only become evident over time, it is not yet possible to predict the ultimate effects that the DFA, or subsequent implementing regulations and decisions, will have upon BlackRock's business, financial condition, and operating activities.
Systemically Important Financial Institution Review
Both the Financial Stability Board ("FSB") working with the International Organization of Securities Commissions ("IOSCO") and the Financial Stability Oversight Council ("FSOC") are considering potential systemic risk related to asset management. In Jury 2014, the FSOC issued a statement indicating that their review would focus on products and activities, and FSOC subsequently released a request for information addressing: market liquidity and fund redemption risk, the use of leverage, operational risk, and the resolution of asset managers including the transition of client assets. In June 2015, IOSCO issued a statement indicating they also favored a products and activities approach in their review of asset managers, and in July 2015, the FSB made a similar announcement. In September 2015, the FSB released a statement indicating that their review would focus on: market liquidity and fund redemption risk, the use of leverage, securities lending practices, operational risk, and risks from pension funds and sovereign wealth funds.
Although FSOC, IOSCO and FSB have shifted from a focus on designating firms and/or funds as systemically important (i.e., G-SIFI or SIFI designations), the process is ongoing and may lead to designations in the future. In the event that BlackRock receives a SIFI designation, under the DFA the Board of Governors of the Federal Reserve System (the "Federal Reserve") is charged with establishing enhanced regulatory requirements for nonbank financial institutions and BlackRock could become subject to direct supervision by the Federal Reserve. If BlackRock was designated a SIFI or G-SIFI, it could become subject to enhanced prudential, capital, supervisory and other requirements, such as risk-based capital requirements, leverage limits, liquidity requirements, resolution plan and credit exposure report requirements, concentration limits, a contingent capital requirement, enhanced public disclosures, short-term debt limits and overall risk management requirements. Requirements such as these, which were designed to regulate banking institutions, would be extremely burdensome for BlackRock, unless they were modified to be applicable to an asset manager. No proposals have been made indicating how such measures would be adapted for asset managers, if at all.
Securities and Exchange Commission Review of Asset Managers
BlackRock's business may also be impacted by Securities and Exchange Commission ("SEC") regulatory initiatives. The SEC and its staff continue to engage in various initiatives and reviews that seek to improve and modernize the regulatory structure governing the asset management industry, and registered investment companies in particular. During 2015, the SEC proposed, among other things: enhanced reporting by investment advisors, enhanced reporting on registered mutual funds, new rules for liquidity risk management in registered funds, and new rules governing the use of derivatives and leverage by registered investment companies and business development companies. Furthermore, in June 2015, the SEC issued a request for comments regarding practices related to exchange-traded funds ("ETFs"), which is
11
widely expected to result in a future rulemaking. The SEC has also indicated an intention to propose new rules for the stress testing of registered investment companies and transition planning by asset managers, including the transfer of client assels. The SEC's focus has also been directed toward risk identification and controls in various areas, including the use of derivatives and other trading practices (as reflected in the SEC's late December 2015 rule proposal described more particularly under" - Regulation of Swaps and Derivatives below), cyber-securrty and the evaluation of systemic risks. While these proposals have yet to be finalized into new rules, any new rules, guidance or regulatory initiatives resulting from these efforts could expose BlackRock to additional compliance and reporting costs and may require the Company to change how it operates its business or manages funds.
Money Market Fund Reform
In July 2014, the SEC adopted new rules designed to reform the regulatory structure governing money market funds ("MMFs") and to address the perceived systemic risks that such funds present. The new rules, to which U.S. MMFs must conform by October 2016, require institutional prime and institutional municipal MMFs to employ a floating net asset value per share method of pricing, which aDows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. Retail MMFs may continue operating with a constant net asset value per share. The rules also provide for new tools for institutional and retail MMFs' boards designed to address market shocks, including liquidity fees and redemption gates. The new rules do not apply to government (non-municipal) MMFs, although such funds may "opt-in" to the new liquidity fee and redemption gate provisions if previously disclosed to investors. Implementation of these new rules requires the development of new or additional systems by BlackRock and the funds' service providers. BlackRock has commenced efforts to move its MMFs into compliance in advance of the deadline. The impact of the rules that affect the structure of the funds on BlackRock's business remains uncertain as clients must decide which products fit their investment needs. The new rules will, however, affect certain of BlackRock's funds' investment strategies, portfolio liquidity and return potential. The new rules will also result in changes to BlackRock's existing U.S. MMFs and may reduce the attractiveness of certain U.S. MMFs to investors.
Regulation of Swaps and Derivatives
The SEC, the Internal Revenue Service ("IRS") and the Commodity Futures Trading Commission ("CFTC") each continue to review practices and regulations relating to the use of futures, swaps and other derivatives. Such reviews could result in regulations lhat restrict or limit the use of such products by funds or accounts. If adopted, these limitations could require BlackRock to change certain business practices or implement new reporting or compliance processes, which could result in additional costs and/or restrictions, in December 2015, the SEC proposed a new rule governing the use of derivatives and other financial commitment transactions by investment companies that, if enacted, would represent a fundamental change in the nature of the SEC's regulations governing the use of derivatives and other financial commitment transactions by investment companies. This proposal has the potential to require BlackRock to change or restrict certain investment strategies or practices for some investment companies and incur additional costs. In some circumstances the proposed rule could make certain products less competitive with other investment options in the marketplace, which could negatively impact assets under management.
Further, the full implementation of regulations under the DFA and similar regulations in the European Union ("EU") arid'other global jurisdictions relating to regulation of swaps and derivatives could impact the manner in which BlackRock-advised funds and accounts use and trade swaps and other derivatives, increasing the costs of derivatives trading for BlackRock's clients. For example, various global rules and regulations applicable to the use of financial products by funds, accounts and counterparties that have been adopted or proposed wi require BlackRock to build and implement new compliance monitoring procedures to address the enhanced level of oversight to which it and its clients w] be subject These rules also introduce new requirements for centrally clearing certain swaps transactions and for executing certain swaps transactions on or through CFTC or SEC-registered trading venues (as opposed to over the phone or other execution methods).
Jurisdictions outside the U.S. in which BlackRock operates also have adopted and implemented, or are in the process of considering, adopting or implementing more pervasive regulation of many elements of the financial services industry, which could further impact BlackRock and the broader markets. This includes the implementation of mandated central clearing of swaps in the EU and the implementation of trade reporting, documentation, central clearing and other requirements in various jurisdictions globally.
In the United States, certain interest rate swaps and certain index credit default swaps are already subject to the DFA central clearing and electronic trading venue requirements, with additional products and asset classes potentially becoming subject to these requirements in 2016 and beyond. For swaps and security-based swaps that are not centrally cleared, U.S. bank regulators recently adopted rules that could require BlackRock-advised funds and accounts to post margin payments when trading with a swap dealer that is regulated by one of the U.S. bank regulators. The CFTC also recently adopted similar margin rules applicable when trading non-cleared swaps with swap dealers who are not regulated by one of the U.S. bank regulators. These rules have the potential to increase the complexity and cost of trading non-cleared derivatives for BlackRock's clients. In EMEA, central clearing requirements will be implemented in a phased manner and will apply to BlackRock funds and accounts beginning in the latter half of 2016. The new rules and regulations may produce regulatory inconsistencies in global derivatives trading rules and increase BlackRock's operational and legal risks.
Regulation of Exchange Traded Funds
As a result of recent market volatility, regulators globally are examining the potential risks in ETFs, including those related to transparency, liquidity and structural resiliency. BlackRock and other large issuers of ETFs are working with market participants and regulators to address certain of these issues but there can be no assurance that structural or regulatory reforms wig be implemented in a manner favorable to BlackRock. or at al. Depending on the outcome of this renewed regulatory analysis, or any associated structural reforms, ETF products may become subject to increased regulatory scrutiny or restrictions, which may require BlackRock to incur additional compliance and reporting expenses and adversely affect the Company's business.
Taxation
BlackRock's businesses may be affected by new tax legislation or regulations, or the modification of existing tax laws, regulations and rulings, by U.S. or non-U.S. authorities. In particular. BlackRock may be impacted by the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS") which have introduced new investor onboarding, withholding and reporting rules aimed at ensuring persons with financial assets outside of the their tax residence country pay appropriate taxes. FATCA and CRS rules wtt impact both U.S. and
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non-U.S. funds and sub|ect BlackRock to additional administrative burdens In many instances, bilateral Intergovernmental Agreements ("IGAs") between the U.S and the countries in which BlackRock does business will govern implementation of the new rules. While many of these IGAs have been put into place, others have yet to be concluded
The Organization for Economic Co-operation and Development ("OECD") has also launched a base erosion and profit shifting ("BEPS") proposal that aims to rationalize tax treatment across jurisdictions. In October 2015, the OECD released its final BEPS package in an effort to curb the use of certain tax regimes and elements of tax planning, primarily in a cross-border context. The final package was endorsed by the G20 and is subject to implementation. In addition, in January 2016, the European Commission announced an Anti-Tax Avoidance Package ("EU Package") for consideration by the European Parliament and Council, containing measures to regulate certain elements of tax planning and to boost tax transparency. Once implemented, the BEPS package and the EU Package could curtail the amount of investments channeled by, and have unintended taxation consequences for funds as well as BlackRock's overaO tax position, which could adversely affect BlackRock's financial condition and that of its clients.
In addition, certain EU Member States, such as France and Italy, have enacted financial transaction taxes ("FTTs") which impose taxation on a broad range of financial instruments and derivatives transactions. Several other Member States continue to discuss introducing FTTs. In general, any tax on securities and derivatives transactions would impact investors and would likely have a negative impact on the liquidity ofthe securities and derivatives markets, could diminish the attractiveness of certain types of products that BlackRock manages in those countries and could cause clients to shift assets away from such products. An FTT could significantly increase the operational costs of BlackRock entering into, on behalf of its clients, securities and derivatives transactions that would be subjected to an FTT, which could adversely impact BlackRock's financial results and clients' performance results.
Lastly, the application of tax regulations involves numerous uncertainties and, in the normal course of business, U.S. and non-U.S. tax authorities may review and challenge BlackRock's historical tax positions. These challenges may result in adjustments to BlackRock's tax position, or impact the timing or amount of taxable income, deductions or other tax allocations, which may adversely affect BlackRock's effective tax rate and overall financial condition.
Volcker Rule
Provisions of the DFA referred to as the "Volcker Rule" place limitations on the ability of banks and their subsidiaries to engage in proprietary trading and to invest in and transact with certain private investment funds, including hedge funds, private equity funds and funds of funds (collectively "covered funds"). Because the Federal Reserve currently treats BlackRock as a nonbank subsidiary of PNC, BlackRock may be required to conform its activities to the requirements of the Volcker Rule. On December 18, 2014, the Federal Reserve announced a second extension to the Volcker Rule conformance period, giving banking entities until July 21, 2016, to conform investments in and relationships with covered funds and foreign funds that were in place prior to December 31, 2013 ("legacy covered funds"). The Federal Reserve also announced its intention to grant banking entities an additional one-year extension of the conformance period until July 21, 2017, to conform ownership interests in and relationships with these legacy covered funds. The Volcker Rule's restrictions may, among other things, limit BlackRock's ability to invest in covered funds and require BlackRock to remove its name from the names of its covered funds, which could subject BlackRock to additional expense. The Volcker Rule may also require BlackRock to sell certain seed and co-investments that it holds in covered funds which may occur at a discount to existing carrying value, depending on market conditions. The Volcker Rule may also reduce the level of market making and liquidity activities of several of BlackRock's trading counterparties, which may adversely impact the liquidity and, in some cases, the pricing of various financial instruments in which BlackRock client accounts invest. For a further discussion of the Volcker Rule, see "Item 1A— Risk Factors — Legal and Regulatory Risks."
Revised Department of Labor ("DoL") Fiduciary Rule
In April 2015, the DoL proposed a new regulation defining the term "fiduciary" for purposes ofthe fiduciary responsibility provisions of Title I ofthe Employee Retirement Income Security Act of 1974 ("ERISA") and the prohibited transaction exercise tax provisions of the IRS. The rule has been highly criticized by industry participants, particularly retail intermediaries, and BlackRock is engaging with the DoL, trade associations and industry participants in an effort to affect revisions to the proposed rule. To the extent the rule is enacted as written, it win require BlackRock to re-paper a number of its distribution relationships, create compliance and operational challenges for BlackRock's distribution partners and may limit BlackRock's ability to provide certain useful services and education to its clients.
Markets in Financial Instruments Directives
BlackRock is also subject to numerous regulatory reform initiatives in Europe. For example, in the EU rules and regulations made under the current Markets in Financial Instruments Directive ("MiFID") regime (described more particularly under"— European Regulation" below) are in the process of being revised through implementation of the "MiFID II" package of measures made up of a recast Directive and a new Markets in Financial Instruments Regulation. MiFID ll, which was originally scheduled to come into effect in January 2017, but is now scheduled to come into effect in January 2018, will be implemented through a number of Implementing and Regulatory Technical Standards to be made through Delegated Acts made by the European Commission fotowing advice from the European Securities and Markets Authority ("ESMA"). MiFID II will build upon many of the measures introduced by MiFID, and wiB extend investor protection, trading transparency, clearing and trading venue access and reporting requirements. It is expected that MiFID II wii have significant and wide-ranging impacts on EU securities and derivatives markets. In particular, there win be (i) enhanced governance and investor protection standards, (ii) prescriptive rules on portfolio management firms' ability to receive and pay for investment research relating to all asset classes, (iii) enhanced regulation of algorithmic trading, (iv) the movement of trading in certain shares and derivatives on to regulated execution venues, (v) the extension of pre- and post-trade transparency requirements to wider categories of financial instruments, (vi) restrictions on the use of so-ca8ed dark pool trading, (vii) the creation of a new type of trading venue called the Organized Trading Facility for non-equity financial instruments, (viii) commodity derivative position limits and reporting requirements, (ix) amove away from vertical silos in execution, clearing and settlement, (x) an enhanced role for ESMA in supervising EU securities and derivatives markets and (xi) new requirements regarding non-EU investment firms' access to EU financial markets. Implementation of these measures wii have direct and indirect impacts on BlackRock and its subsidiaries and may require significant changes to client servicing models. A significant number of the impacts are yet to be determined because MiFID II contains a wide ranging and complex set of measures.
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Undertakings for Collective Investment in Transferable Securities
The EU has also adopted directives on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ("UCITS"). The latest initiative in this area, UCITS V seeks to align the UCITS depositary regime, UCITS remuneration rules and regulators' power to sanction for broaches of the UCITS Directive with the requirements of the Alternative Investment Fund Managers Directive ("AIFMD"). UCITS V is required to be adopted in the national law of each EU member state by March 18, 2016 though further implementing measures will only become effective in late 2016. Compliance with the updated UCITS directive will subject BlackRock to additional expenses associated with new depositary oversight and other organizational requirements.
Reform of European Retail Distribution
BlackRock must also comply with retail distribution rules aimed at enhancing consumer protections, overhauling mutual fund fee structures by banning the payment of commissions to distributors and increasing professionalism in the retail investment sector. The rules were originally introduced in the United Kingdom in 2012 and similar rules have since been introduced in other jurisdictions where BlackRock operates such as the Netherlands, and are under discussion elsewhere. Similarly, MiFID II will contain a ban on certain advisers recovering commissions and other nonmonetary benefits from fund managers. These rules wii load to greater fragmentation of distribution rules and may lead to changes to BlackRock's client servicing and distribution models, in particular affecting the fees BlackRock is able to charge to its clients and the commissions it is able to pay to its distribution partners.
EU Benchmarks Regulation
Political agreement on the EU Benchmarks Regulation was reached at the end of 2015. The Regulation provides the legislative framework to implement the 2013 IOSCO Principles for Financial Benchmarks. The scope of the Regulation is broad as it includes submission based benchmarks through to transaction based market indices. Proportionality is applied to create a stricter framework for the systemically relevant benchmarks such as LIBOR and EURIBOR. Although the Regulation creates a number of obligations on administrators of. and submitters to, benchmarks, it is less extensive as regards the obligations of users of benchmarks, such as asset managers. The Regulation formalizes due diligence procedures for users and implies other additional administrative requirements of users of third-party benchmarks. Managers using third-party and/or bespoke benchmarks to assess fund performance are also caught by the Regulation. It is expected that detailed rule-making underpinning the Regulation's framework will be developed during 2016 and implemented beginning in 2018. While it is not yet possible to assess the full effect of the Regulation on BlackRock's business, it may impose additional administrative and due diligence requirements on the Company, the burden of which is likely to increase as BlackRock makes additional enhancements to its indexing business.
Financial Crimes Enforcement Network ("FinCEN") Proposed Rulemaking for Registered Investment Advisers
FinCEN has issued a Nouce.of Proposed Rulemaking ("Proposed Rule") that.would extend to a.number.of BlackRock's subsidiaries, which are registered or required to be registered with the SEC under the Investment Advisers Act of 1940 (the "Advisers Act"), the requirement to establish anti-money laundering programs and report suspicious activity to FinCEN under the Bank Secrecy Act of 1970 (the "Bank Secrecy Act"). The Proposed Rule would extend to those BlackRock subsidiaries captured within the Bank Secrecy Act's definition of "financial institutions", which would require them to comply with the Bank Secrecy Act reporting and recordkeeping requirements. If enacted in its current form, the Proposed Rule would expose BlackRock to additional compliance costs.
Financial Conduct Authority ("FCA") Asset Management Market Survey
As part of its strategic priorities, the FCA is undertaking a market study into the asset management sector. The aim of this study is to understand whether competition is working effectively to enable both institutional and retail investors to get value for money when purchasing asset management services. The FCA is interested in understanding whether there are any barriers to innovation or technological advances which may be preventing new ways of doing business that could benefit investors (Fintech). If the FCA concludes that competition is not working well, the FCA may intervene through rule-making, introducing firm-specific remedies or enforcement action, publishing general guidance or proposing enhanced industry self-regulation. BlackRock is one of 40 firms included in the study and is currently responding to an information request that consists of qualitative and quantitative data. The FCA is aiming to engage with firms throughout 2016 with the proposal to issue a draft report to the industry in the summer of 2016. The FCA expect to publish their final report in early 2017.
EXISTING U.S. REGULATION - OVERVIEW
BlackRock and certain of its U.S. subsidiaries are currently subject to extensive regulation, primarily at the federal level, by the SEC, the DoL, the Federal Reserve, the Office of the Comptroller of the Currency ("OCC"), the Financial Industry Regulatory Authority ("FINRA"), the National Futures Association ("NFA"), the CFTC and other government agencies and regulatory bodies. Certain of BlackRock's U.S. subsidiaries are also subject to various anti-terrorist financing, privacy, anti-money laundering regulations and economic sanctions laws and regulations established by various agencies.
The Advisers Act imposes numerous obligations on registered investment advisers such as BlackRock, including record-keeping, operational and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. The Investment Company Act of 1940 (the "Investment Company Act") imposes stringent governance, compliance,' operational, disclosure and related obligations "on registered Investment companies and their investment advisers and distributors, such as BlackRock and its affiliated companies. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and the Investment Company Act, ranging from fines and censure lo termination of an investment adviser's registration. Investment advisers also are subject to certain state securities laws and regulations. Non-compliance wilh the Advisers Act, the Investment Company Act or other federal and state securities laws and regulations could result in investigations, sanctions, disgorgement, fines and reputational damage.
BlackRock's trading and investment activities for client accounts are regulated under the Securities Exchange Act of 1934 (the "Exchange Act"), as well as the rules of various securities exchanges and serf-regulatory organizations, including laws governing trading on inside information, market manipulation and a broad number of technical requirements (e.g., short sale limits, volume limitations and reporting obligations) and market regulation policies. Violation of any of these laws and regulations could result in restrictions on BlackRock's activities and damage its
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reputation. Furthermore, one of BlackRock's subsidiaries, BTC. was required to register as a municipal advisor (as that term is defined in the statute) with the SEC and Municipal Securities Rulemaking Board ("MSRB") as a result of SEC rules giving effect to a section of the DFA requiring such registration. The rules subject BTC to new and additional regulation by the SEC and MSRB.
BlackRock manages a variety of private pools of capital, including hedge funds, funds of hedge funds, private equity funds, collateralized debt obligations ("CDOs"), collateralized ban obligations ("CLOs"), real estate funds, collective investment trusts, managed futures funds and hybrid funds. Congress, regulators, tax authorities and others continue to explore, on their own and in response to demands from the investment community and the public, increased regulation related to private pools of capital, including changes with respect to investor eligibility, certain limitations on trading activities, record-keeping and reporting, the scope of anti-fraud protections, safekeeping of client assets and a variety of olher matters. BlackRock may be materially and adversely affected by new legislation, rule-making or changes in the interpretation or enforcement of existing rules and regulations imposed by various regulators in this area.
Certain BlackRock subsidiaries are subject to ERISA, and to regulations promulgated thereunder by the DoL, insofar as they act as a "fiduciary" under Title I of ERISA with respect to benefit plan clients. ERISA and applicable provisions of the Internal Revenue Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions involving ERISA plan clients and impose excise taxes for violations of these prohibitions, mandate certain required periodic reporting and disclosures and require certain BlackRock entities to carry bonds insuring against losses caused by fraud or dishonesty. ERISA also imposes additional compliance, reporting and operational requirements on BlackRock that otherwise are not applicable to non-benefit plan clients.
BlackRock has seven subsidiaries that are registered as commodity pool operators ("CPOs") and/or commodity trading advisors ("CTAs") with the CFTC and are members of the NFA. The CFTC and NFA each administer a comparable regulatory system covering futures contracts and various other financial instruments, including swaps as a result of the DFA, in which certain BlackRock clients may invest. Two of BlackRock's other subsidiaries, BlackRock Investments, LLC ("BRIL") and BlackRock Execution Services, are registered with the SEC as broker-dealers and are member-firms of FINRA Each broker-dealer has a membership agreement with FINRA that limits the scope of such broker-dealer's permitted activities. BRIL is also an approved person with the New York Stock Exchange ("NYSE") and a member of the MSRB, subject to MSRB rules.
U.S. Banking Regulation 7
PNC is a bank holding company and regulated as a "financial holding company" by the Federal Reserve under the Bank Holding Company Act of 1956 (the "BHC Act"). As described in "Item 1-Business", as of December 31, 2015 PNC owned approximately 22% of BlackRock's capital stock. Based on the Federal Reserve's interpretation of the BHC Act, the Federal Reserve currently takes the position that this ownership interest causes BlackRock to be treated as a nonbank subsidiary of PNC for purposes of the BHC Act, thereby subjecting BlackRock to banking regulation, including the supervision and regulation of the Federal Reserve and to most banking laws, regulations and orders that apply to PNC, including the Volcker Rule. The supervision and regulation of PNC and its subsidiaries under applicable banking laws are intended primarily for the protection of its banking subsidiaries, its depositors, the Deposit Insurance Fund of the Federal Deposit Insurance Corporation, and the financial system as a whole, rather than for the protection of stockholders, creditors or clients of PNC or BlackRock.
BlackRock generally may conduct only activities that are authorized for a financial holding company under the BHC Act. Investment management is an authorized activity, but must be conducted within applicable regulatory requirements, which in some cases are more restrictive than those BlackRock faces under applicable securities laws. BlackRock may also invest in investment companies and private investment funds to which it provides advisory, administrative or other services, only to the extent consistent with applicable law and regulatory interpretations. Based on the Federal Reserve's position that BlackRock is a nonbank subsidiary of PNC, the Federal Reserve has broad powers to approve, deny or refuse to act upon applications or notices for BlackRock to conduct new activities, acquire or divest businesses or assets, or reconfigure existing operations, and there are limits on the ability of bank subsidiaries of PNC to extend credit to or conduct other transactions with BlackRock or its funds. PNC and its subsidiaries are also subject to examination by various banking regulators, which results in examination reports and ratings that may adversely impact the conduct and growth of BlackRock's businesses. Furthermore, the Federal Reserve has broad enforcement authority over nonbank subsidiaries, including the power to prohibit them from conducting any activity that, in the Federal Reserve's opinion, is unauthorized or constitutes an unsafe or unsound practice. The Federal Reserve may also impose substantial fines and other penalties for violations of applicable banking laws, regulations and orders. The DFA strengthened the Federal Reserve's supervisory and enforcement authority over a bank holding company's nonbank subsidiaries.
Any failure of PNC to maintain its status as a financial holding company could result in substantial limitations on certain BlackRock activities and its growth. Such a change of status could be caused by any failure of PNC or one of PNC's bank subsidiaries to remain "wel capitalized" and "well managed," by any examination downgrade of one of PNC's bank subsidiaries, or by any failure of one of PNC's bank subsidiaries to maintain a satisfactory rating under the Community Reinvestment Act.
One of BlackRock's subsidiaries, BTC, is organized as a limited purpose national trust company that does not accept deposits or make commercial loans. BTC is a member of the Federal Reserve System. Accordingly, BTC is examined and supervised by the OCC and is subject to various banking laws and regulations enforced by the OCC, such as capital adequacy, regulations governing fiduciaries, conflicts of interest, self-dealing, and anti-money laundering laws and regulations. BTC is also subject to various Federal Reserve regulations applicable to member institutions, such as regulations restricting transactions with affiliates. Many of these laws and regulations are meant for the protection of BTC's customers and not BTC, BlackRock and its affiliates, or BlackRock's stockholders.
Regulation of Securities Lending Financing Transactions:
In its 2014 Annual Report, the FSOC identified securities lending indemnification by asset managers who act as lending agents as a potential systemic risk that required further review and monitoring. The Federal Reserve is also considering whether to impose specific margin or minimum haircut requirements for securities financing transactions ("SFTs"). In addition, in October 2015, the European Parliament adopted the European Commission's proposal for a European regulation on the reporting and transparency of SFTs. The SFT regulation aims to improve the transparency surrounding SFTs and limit the perceived risks of SFTs by, among other things, requiring central reporting of SFTs, requiring disclosure of SFTs to investors and imposing minimum requirements relating to the difference in prices at which a market maker can buy and sell a security in SFTs. If the recent scrutiny of SFTs results in additional regulatory requirements or reporting obligations, BlackRock may be
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required to introduce additional compliance measures, which will subject BlackRock to additional expenses and could lead to modifications in BlackRock's SFT activities, including potential adjustments to its activities as agent lender for its clients.
EXISTING INTERNATIONAL REGULATION — OVERVIEW
BlackRock's international operations are subject to the laws and regulations of a number of international jurisdictions, as well as oversight by numerous regulatory agencies and bodies in those jurisdictions. In some instances, these operations are also affected by U.S. laws and regulations that have extra-territorial application.
Below is a summary of certain international regulatory standards to which BlackRock is subject. It is not meant to be comprehensive as there are parallel legal and regulatory arrangements in force in many jurisdictions where BlackRock's subsidiaries conduct business.
Of note among the various other international regulations to which BlackRock is subject, are the extensive and complex regulatory reporting requirements that necessitate the monitoring and reporting of issuer exposure levels (thresholds) across the holdings of managed funds and accounts and those of the Company.
European Regulation
The FCA currently regulates certain BlackRock subsidiaries in the United Kingdom ("U.K."). It also regulates those U.K. subsidiaries' branches established in other European Union countries and the U.K. branches of certain of BlackRock's U.S. subsidiaries. In addition, the Prudential Regulation Authority ("PRA") regulates one BlackRock U.K. insurance subsidiary. Authorization by the FCA and (where relevant) the PRA is required to conduct certain financial services related business in the U.K. under the Financial Services and Markets Act 2000 (the "FSMA"). The FCA's rules adopted under the FSMA govern the majority of a firm's capital resources requirements, senior management arrangements, conduct of business, interaction with clients, and systems and controls, whereas the rules of the PRA focus solely on the prudential requirements that apply to BlackRock's U.K.-regulated insurance subsidiary. The FCA supervises BlackRock's U.K.-regulated subsidiaries through a combination of proactive engagement, event-driven and reactive supervision and thematic based reviews in order to monitor BlackRock's compliance with regulatory requirements. Breaches of the FCA's rules may result in a wide range of disciplinary actions against BlackRock's U.K.-regulated subsidiaries and/or its employees.
In addition, BlackRock's U.K.-regulated subsidiaries and other European subsidiaries and branches, must comply with the pan-European regulatory regime established by MiFID, which regulates the provision of investment services and activities throughout tho wider EEA. MiFID, the scope of which is being enhanced through MiFID II (which is described more particularly under"— Global Regulatory Reform" above)', sets out detailed requirements governing the organization and conduct of business of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity and non-equity markets and extensive transaction reporting requirements. Certain BlackRock European subsidiaries must also comply with the Consolidated Life Directive and Insurance Mediation Directive. In addition, relevant entities must comply with revised obligations on capital resources for banks and certain investment firms (the Capital Requirements Directive). These include requirements on capital, as well as matters of governance and remuneration. The obligations introduced through these directives wii have a direct effect on some of BlackRock's European operations.
BlackRock's EU-regulated subsidiaries are also subject to an EU regulation on OTC derivatives, central counterparties and trade repositories, which requires (i) the central clearing of standardized OTC derivatives, (ii) the application of risk-mitigation techniques to non-centrally cleared OTC derivatives and (iii) the reporting of all derivative contracts since February 2014.
Regulation in the Asia-Pacific Region
In Japan, a BlackRock subsidiary is subject to the Financial Instruments and Exchange Law ("FIEL") and the Law Concerning Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency ("JFSA"), which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements and conduct of business rules. The JFSA is empowered to conduct administrative proceedings that can result in censure, fines, the issuance of cease and desist orders or the suspension or revocation of registrations and licenses granted under the FIEL. This Japanese subsidiary also holds a license for real estate brokerage activity which subjects it to the regulations set forth in the Real Estate Brokerage Business Act.
In Australia, BlackRock's subsidiaries are subject to various Australian federal and state laws, and certain subsidiaries are regulated by the Australian Securities and Investments Commission ("ASIC"). ASIC regulates companies and financial services in Australia and is responsible for promoting investor, creditor and consumer protection. Failure to comply with applicable laws and regulations could result in the cancelation, suspension or variation of the regulated subsidiaries' licenses in Australia.
The activities of certain BlackRock subsidiaries in Hong Kong are subject to the Securities and Futures Ordinance ("SFO") which governs the securities and futures markets and regulates, among others, offers of investments to the public and provides for the icensing of intermediaries. The SFO is administered by the Securities and Futures Commission ("SFC"). The SFC is also empowered to establish standards for compliance as wel as codes and guidelines. The relevant BlackRock subsidiaries and the employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC. and are subject to the rules, codes and guidelines issued by the SFC. Failure to comply with the applicable laws, regulations, codes and guidelines issued by the SFC could result in the suspension or revocations of the licenses granted by the SFC.
BlackRock's operations' in Taiwan are regulated by the Taiwan Financial Supervisory Commission, which is responsible for regulating securities markets (including the Taiwan Stock Exchange and the Taiwan Futures Exchange), the banking industry and the insurance sector. Other financial regulators oversee BlackRock subsidiaries, branches, and representative offices across the Asia-Pacific region, including in Singapore and South Korea. Regulators in these jurisdictions have authority with respect to financial services including, among other things, the authority to grant or cancel required licenses or registrations. In addition, these regulators may subject certain BlackRock subsidiaries to net capital requirements.
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AVAILABLE INFORMATION
BlackRock files annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC. BlackRock makes available free-of-charge, on or through its website at , the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q. Current Reports on Form 8-K, proxy statements and all amendments to those filings, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The Company also makes available on its website the charters for the Audit Committee, Management Development and Compensation Committee, Nominating and Governance Committee and Risk Committee of the Board of Directors, its Code of Business Conduct and Ethics, its Code of Ethics for Chief Executive and Senior Financial Officers and its Corporate Governance Guidelines. Further, BlackRock will provide, without charge, upon written request, a copy of the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those filings as well as the committee charters, its Code of Business Conduct and Ethics, its Code of Ethics for Chief Executive and Senior Financial Officers and its Corporate Governance Guidelines. Requests for copies should be addressed to Investor Relations, BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. Investors may read and copy any document BlackRock files at the SEC's Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Reports, proxy statements and other information regarding issuers that file electronically with the SEC, including BlackRock's filings, are also available to the public from the SEC's website at .
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Item 1A. Risk Factors
As a leading investment management firm, risk is an inherent part of BlackRock's business. Global markets, by their nature, are prone to uncertainty and subject participants to a variety of risks. While BlackRock devotes significant resources across all of its operations to identify, measure, monitor, manage and analyze market, operating, legal, compliance, fiduciary and investment risks, BlackRock's business, financial condition, operating results and nonoperating results could be materially adversely affected and the Company's stock price could decline as a result of any of these risks and uncertainties, including the ones discussed below.
MARKET AND COMPETITION RISKS
Changes in the value levels of equity, debt, real estate, commodities, currency or other asset markets may cause assets under management ("AUM"), revenue and earnings to decline.
BlackRock's investment management revenue is primarily comprised of fees based on a percentage of Ihe value of AUM and, in some cases, performance fees which are normally expressed as a percentage of returns to the client. Numerous factors, including price movements in the equity, debt or currency markets, or in the price of reai estate, commodities or alternative investments in which BlackRock invests, could cause:
the value of AUM, or the returns BlackRock realizes on AUM, to decrease;
the withdrawal of funds from BlackRock's products in favor of products offered by competitors; ¦ the rebalancing or reaHocating of assets into BlackRock products that yield lower fees;
an impairment to the value of intangible assets and goodwill; or
a decrease in the value of seed or co-investment capital.
The occurrence of any of these events may cause the Company's AUM, revenue and earnings lo decline.
BlackRock's Investment advisory contracts may be terminated or may not be renewed by clients or fund boards on favorable terms and the liquidation of certain funds may be accelerated at the option of investors.
BlackRock derives a substantial portion of its revenue from its investment advisory business. The advisory or management contracts BlackRock has entered into with its clients, including the agreements that govern many of BlackRock's investment funds, provide investors or, in some cases, the independent directors of private inveslment funds, wilh significant latitude to terminate such contracts, withdraw funds or liquidate funds by simple majority vote with limited notice or penalty, or to remove BlackRock as a fund's investment advisor (or equivalent). BlackRock also manages its U.S. mutual funds, closed-end and exchange-traded funds under management contracts that must be renewed and approved annually by the funds' respective boards of directors, a majority of whom are independent from the Company. BlackRock's fee arrangements under any of its advisory or management contracts may be subject to reduction (including at the behest of a fund's board of directors). In addition, if a number of BlackRock's clients terminate their contracts, remove BlackRock from advisory roles, liquidate funds or fail to renew management contracts on favorable terms, the fees or carried interest BlackRock earns could be reduced which may cause BlackRock's AUM, revenue and earnings to decline.
Increased competition may cause BlackRock's AUM, revenue and earnings to decline.
The investment management industry is highly competitive and has relatively low barriers to entry. BlackRock competes based on a number of factors including: investment performance, the level of fees charged, the quality and diversity of services and products provided, name recognition and reputation, and the ability to develop new investment strategies and products to meet the changing needs of investors. Increased competition on the basis of any of these factors, including competition leading to fee reductions on existing or new business, may cause the Company's AUM, revenue and earnings to decline.
Failure to maintain Aladdin's competitive position in a dynamic market for risk analytics could lead to a loss of clients and could impede BlackRock's productivity and growth.
The sophisticated risk analytics that BlackRock provides via the Aladdin technology platform to support investment advisory and BlackRock Solutions clients are an important element of BlackRock's competitive success. Aladdin's competitive position is based in part on its ability to combine sophisticated risk analytics with comprehensive portfolio management, trading and operations tools on a single platform. Increased competition from risk analytics and investment management technology providers or a shift in client demand away to standalone or internally developed solutions, whether due to market-based or regulatory factors, may weaken Aladdin's competitive position and may cause the Company's revenue and earnings to decline. In addition, there can be no assurance that the Company wiH be able to effectively protect and enforce its intellectual property rights in Aladdin.
The Impairment or failure of other financial Institutions may cause BlackRock's AUM, revenue and earnings to decline.
BlackRock's investment management activities expose the products and accounts it manages to many different industries and counterparties, including brokers and dealers, commercial and investment banks, clearing organizations, mutual and hedge funds, and other institutional clents. Transactions with counterparties expose the products and accounts BlackRock manages to credit risk in the event the applicable counterparty defaults. Although BlackRock regularly assesses risks posed by its counterparties, such counterparties may be subject to sudden swings in the financial and credit markets that may impair their abiSty to perform or they may otherwise fail to meet their obligations. Any such impairment or failure could negatively impact the performance of products or accounts managed by BlackRock, which could lead to the loss of clients and may cause BlackRock's AUM, revenue and earnings to decline.
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The failure or negative performance of products offered by competitors may cause AUM in similar BlackRock products to decline irrespective of BlackRock's performance.
Many competitors offer similar products to those offered by BlackRock and the failure or negative performance of competitors' products could lead to a loss of confidence in similar BlackRock products, irrespective of the performance of such products. Any loss of confidence in a product type could lead to withdrawals, redemptions and liquidity issues in such products, which may cause the Company's AUM, revenue and earnings to decline.
Changes in the value of seed and co-investments that BlackRock owns could affect its nonoperating income and could increase the volatility of its earnings.
At December 31, 2015, BlackRock's net economic investment exposure of approximately $1.5 billion in its investments (see "Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations-Investments") primarily resulted from co-investments and seed investments in its sponsored investment funds. Movements in the equity, debt or currency markets, or in the price of real estate, commodities or alternative investments, could lower the value of these investments, increase the volatility of BlackRock's earnings and may cause earnings to decline.
Acts of terror and the continued threat of terrorism, as well as increased geopolitical unrest could adversely affect the global economy or specific international, regional and domestic markets, which may cause BlackRock's AUM, revenue and earnings to decline.
Terrorist activity and the continued threat of terrorism and acts of civil or international hostility, both within the Unrted States and abroad, as well as ongoing military and other actions and heightened security measures in response to these types of threats, may cause significant volatility and declines in the global markets, loss of life, property damage, disruptions to commerce and reduced economic activity. Acts of terror may also result in increased border security between countries which could adversely affect trade, impede growth and exacerbate refugee crises arising out of civil or international conflicts. Continued geopolitical unrest and terrorist activity that adversely affect the global economy or capital markets may cause BlackRock's AUM, revenue and earnings to decline.
RISKS RELATED TO INVESTMENT PERFORMANCE
Poor investment performance could lead to the loss of clients and may cause AUM, revenue and earnings to decline.
The Company's management believes that investment performance, including the efficient delivery of beta for passively managed products, is one of the most important factors for the growth and retention of AUM. Poor investment performance relative to applicable portfolio benchmarks or to competitors may cause AUM, revenue and earnings to decline as a result of.
client withdrawals in favor of better performing products;
client shifts from active to passive products which charge lower fees;
the diminishing ability to attract additional funds from existing and new clients;
the Company earning reduced, minimal or no performance fees;
an impairment to the value of intangible assets and goodwill; or
a decrease in investment returns on seed and co-investment capital.
Performance fees may increase volatility of both revenue and earnings.
A portion of BlackRock's revenue is derived from performance fees on investment advisory assignments. Performance fees represented $621 million, or 5%, of total revenue for the year ended December 31, 2015. Generally, the Company is entitled to a performance fee only if the agreement pursuant to which it is managing the assets provides for one and if returns on the related portfolio exceed agreed-upon periodic or cumulative return targets. If these targets are not exceeded, a performance fee for that period will not be earned and, if targets are based on cumulative returns, the Company may not earn performance fees in future periods, which may cause AUM, revenue and earnings to decline.
Failure to identify errors in the quantitative models BlackRock utilizes to manage Its business could adversely impact product performance and client relationships.
BlackRock employs various quantitative models to support its investment decisions and allocations, including those related to risk assessment, portfolio management, trading and hedging activities and product valuations. Any errors in the underlying models or model assumptions could have unanticipated and adverse consequences on BlackRock's business and reputation.
TECHNOLOGY AND OPERATIONAL RISKS
A failure in BlackRock's operational systems or infrastructure, Including business continuity plans, could disrupt operations, damage the Company's reputation and may cause BlackRock's AUM, revenue and earnings to decline.
BlackRock's infrastructure, including its technological capacity, data centers and office space, is vital to the competitiveness of its business. Moreover a significant portion of BlackRock's critical business operations are concentrated in a Sm'rted number of geographic areas, including San Francisco, New York, London and Gurgaon. The failure to maintain an infrastructure commensurate with the size and scope of BlackRock's business, or the occurrence of a business outage or event outside BlackRock's control, including a major earthquake, hurricane, fire, terrorist act, pandemic or other catastrophic event in any location at which BlackRock maintains a major presence, could materially impact operations, result in disruption to the business or impede its growth. Notwithstanding BlackRock's efforts to ensure business continuity, if it fails to keep business continuity plans up-to-date or if such plans, including secure back-up facilities and systems and the availability of back-up employees, are improperly implemented or deployed during a disruption, the Company's ability to operate could be adversely impacted which may cause AUM, revenue and earnings to decline or impact the Company's ability to comply with regulatory obligations leading to reputational harm, regulatory fines and/or sanctions.
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A cyber-attack or a failure to implement effective information and cyber security policies, procedures and capabilities could disrupt operations and cause financial losses that may cause BlackRock's AUM, revenue and earnings to decline.
BlackRock is dependent on the effectiveness of the information and cyber security policies, procedures and capabilities it maintains to protect its computer and telecommunications systems and the data that reside on or are transmitted through them. An externally caused information security incident, such as a hacker attack, virus, phishing scam or worm, or on internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information.
There have been a number of recent highly publicized cases involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information, as well as cyber-attacks involving the dissemination, theft and destruction of corporate information or other assets, as a result of failure to follow procedures by employees or contractors or as a result of actions by third parties, including actions by terrorist organizations and hostile foreign governments. BlackRock has been the target of attempted cyber-attacks, as wed as the co-opting of its brand to create fraudulent websites, and must continuously monitor and develop its systems to protect its technology infrastructure and data from misappropriation or corruption, as the failure to do so could disrupt BlackRock's operations and cause financial losses. In addition, aue to BiackRock's interconnectrviry with third-party vendors, centrai agents, exchanges, cieanng houses and other financial institutions, BlackRock may be adversely affected if any of them are subject to a successful cyber-attack or other information security event. Any information security incident or cyber-attack against BlackRock or third parties with whom it is connected could result in material financial loss, loss of competitive position, regulatory fines and/or sanctions, breach of client contracts, reputational harm or legal liability, which, in turn, may cause BlackRock's AUM, revenue and earnings to decline.
Failure or unavailability of third-party dependencies may adversely affect Aladdin operations and could lead to a loss of clients and could impede BlackRock's productivity and growth
BlackRock relies on its ability to maintain a robust and secure technological framework to maximize the benefit of the Aladdin platform. The analytical capabilities of Aladdin depend on the ability of a number of third parties to provide data and other information as inputs into Aladdin analytical calculations. The failure of these third parties to provide such data or information, or disruption of such information flows, could result in operational difficulties and adversely impact BlackRock's ability to provide services to its investment advisory and BlackRock Solutions clients.
Operating risks associated with BlackRock's securities lending program may result in client losses.
BlackRock lends securities to banks and broker-dealers on behalf of certain of its clients. In these securities lending transactions, the borrower is required to provide and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. BlackRock must manage this process and is charged with mitigating the associated operational risks. The failure of BlackRock's controls to mitigate such operational risks could result in financial losses for the Company's clients that participate in its securities lending programs (separate from the risks of collateral investments), and BlackRock may be held table for any failure to manage any such risks.
BlackRock indemnifies certain securities lending clients for specified losses as a result of a borrower default.
BlackRock provides borrower default indemnification to certain of its securities lending clients. In the event of a borrower default, BlackRock would use the collateral pledged by the borrower to repurchase securities out on loan in order to replace them in a client's account. Borrower default indemnification is limited to the shortfall that occurs in the event the collateral available at the time ofthe borrower's default is insufficient to repurchase those securities out on loan. BlackRock requires aO borrowers to mark to market their pledged collateral daily to levels in excess of the value of the securities on loan to mitigate the likelihood of the indemnity being triggered. Where the collateral is in the form of cash, the indemnities BlackRock provides do not guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which that cash coteteral is invested. The amount of securities on loan as of December 31,2015 and subject to indemnification was $169.3 billion. BlackRock held, as agent, cash and securities totaling $179.6 bUSon as collateral for indemnified securities on loan at December 31, 2015. Significant borrower defaults occurring simultaneously with rapid declines in the value of collateral pledged arid/or increases in the value of the securities loaned may create collateral shortfalls, which could result in material liabilities under these indemnities and may cause the Company's AUM, revenue and earnings to decline.
BlackRock's decision to provide support to particular products from time to time, or the Inability to provide support, may cause AUM, revenue and earnings to decline.
BlackRock may, at its option, from time to time support investment products through capital or other credit support Such support may utilize capital and liquidity that would otherwise be avajable for other corporate purposes. Losses on such support, as well as regulatory restrictions on the Company's ability to provide such support or the failure to have available or devote sufficient capital or liquidity to support products, may cause AUM, revenue and earnings to decline.
Failure to maintain adequate corporate and contingent liquidity may cause BlackRock's AUM, liquidity and earnings to decline, as well as harm its prospects for growth.
BlackRock's ability to meet anticipated cash needs depends upon a number of factors, including its ability to maintain and grow AUM, its creditworthiness and operating cash" flows. Failure to maintain adequate (quidity could lead to unanticipated costs and force BlackRock to revise existing strategic and business initiatives. BlackRock's access to equity and debt markets and its ability to issue public or private debt, or secure lines of credit or commercial paper back-up lines, on reasonable terms may be limited by adverse market conditions, a reduction in its long- or short-term credit ratings, or changes in government regulations, including tax and interest rates. Failure to obtain funds and/or financing, or any adverse change to the cost of obtaining such funds and/or financing, may cause BlackRock's AUM, revenue and earnings to decline, curtail its operations and limit or impede its prospects for growth.
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Fraud, or the circumvention of controls and risk management policies, could have an adverse effect on BlackRock's reputation, which may cause the Company's AUM, revenue and earnings to decline.
Although BlackRock has adopted a comprehensive risk management process and continues to enhance various controls, procedures, policies and systems to monitor and manage risks, it cannot assure that such controls, procedures, policies and systems wiB successfully identify and manage internal and external risks to its businesses. BlackRock is subject to the risk that its employees, contractors or other third parties may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with the Company's controls, policies and procedures. Persistent attempts to circumvent policies and controls or repeated incidents involving fraud, conflicts of interests or transgressions of policies and controls could have an adverse effect on BlackRock's reputation, which could cause costly regulatory inquiries, fines and/or sanctions and may cause the Company's AUM, revenue and earnings to decline.
BlackRock may be unable to develop new products and services and the development of new products and services may expose BlackRock to additional costs or operational risk.
BlackRock's financial performance depends, in part, on its ability to develop, market and manage new investment products and services. The development and introduction of new products and services require continued innovative efforts on the part of BlackRock and may require significant time and resources as well as ongoing support and investment. Substantial risk and uncertainties are associated with the introduction of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting client and market preferences, the introduction of competing products or services and compliance with regulatory requirements. A failure to continue to innovate to introduce new products and services or to successfully manage the risks associated with such products and services may cause BlackRock's costs to fluctuate, which may cause its AUM, revenue and earnings to decline.
The failure to recruit and retain employees and develop and implement effective executive succession could lead to the loss of clients and may cause AUM, revenue and earnings to decline.
BlackRock's success is largely dependent on the talents and efforts of its highly skilled workforce and the Company's ability to plan for the future long-term growth of the business by identifying and developing those employees who can ultimately transition into key roles within BlackRock. The market for qualified fund managers, investment analysts, technology and risk specialists and olher professionals is competitive, and factors that affect BlackRock's ability to attract and retain such employees include the Company's reputation, the compensation and benefits it provides, and its commitment to effectively managing executive succession, including the development and training of qualified individuals. BlackRock's ability to attract and retain talent may also be affected if European regulations instituting bonus caps or limiting the amount of compensation that asset managers can pay to certain employees are enacted in the varying formats in which they have been proposed.
In addition, a percentage of the deferred compensation that BlackRock pays to its employees is tied to the Company's share price. As such, if BlackRock's share price were to decrease materially, the retention value of such deferred compensation would decrease. There can be no assurance that the Company wiB continue to be successful in its efforts to recruit and retain employees and effectively manage executive succession. If BlackRock is unable to offer competitive compensation or otherwise attract and retain talented individuals, or if it fails to effectively manage executive succession, the Company's ability to compete effectively and retain its existing clients may be materiaBy impacted.
Future inorganic transactions may harm the Company's competitive or financial position if they are not successful.
BlackRock employs a variety of organic and inorganic strategies intended to enhance earnings, increase product offerings, access new clients, leverage advances in technology and expand into new geographies. Inorganic strategies have included hiring smafler-sized investment teams, and acquiring investment management businesses and other smaD and medium-sized companies. Inorganic transactions involve a number of financial, accounting, tax, regulatory, geographical and operational challenges and uncertainties, including in some cases the assumption of pre-existing liabilities. Any failure to identify and mitigate these risks through due diligence and indemnification provisions could adversely impact BlackRock's reputation, may cause its AUM, revenue and earnings to decline, and may harm the Company's competitive position in the investment management industry. Moreover, there can be no assurances that BlackRock will be able to successfully integrate or realize the intended benefits from future inorganic transactions.
Investments In real assets such as real estate, Infrastructure and energy assets may expose BlackRock and its funds and accounts to new or Increased risks and liabilities, as well as reputational harm.
Investments in real assets, including real estate, infrastructure and energy assets, may expose BlackRock and its funds and accounts to increased risks and liabilities that are inherent in the ownership and management of such assets. These may include:
construction risks, including labor disputes or work stoppages, shortages of material or interruptions to the availability of necessary equipment;
accidents, adverse weather, force majeure or catastrophic events, such as explosions, fires or terrorist activity beyond BlackRock's control;
personal injury or property damage;
failures on the part of third-party managers or sub-contractors appointed in connection with investments or projects to adequately perform their contractual duties or operate in accordance with applicable laws;
exposure to stringent and complex foreign, federal, state and local laws, ordinances and regulations, including those related to permits, government contracting, conservation, exploration and production, tenancy, occupational health and safety, foreign investment and environmental protection;
environmental hazards, such as natural gas leaks, product and waste spills, pipeline and tank ruptures, and unauthorized discharges of products, wastes and other pollutants;
changes to the supply and demand for properties and/or tenancies or fluctuations in the price of commodities;
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the financial resources of tenants; and
contingent liabilities on disposition of assets.
The above risks may expose BlackRock's funds and accounts to additional expenses and liabilities, including costs associated with delays or remediation costs, and increased legal or regulatory costs, all of which could impact the returns earned by BlackRock's clients. These risks could also result in direct liability for BlackRock by exposing BlackRock to regulatory sanction or litigation', including claims for compensatory or punitive damages. Similarly, market conditions may change during the course of developments or projects in which BlackRock invests that make such development or project less attractive than at the time it was commenced and potentially harm the investment returns of BlackRock's clients. The occurrence of any such events may expose BlackRock to reputational harm, divert management's time and attention away from BlackRock's business activities or cause AUM, revenue and earnings to decline.
Operating in international markets increases BlackRock's operational, political, regulatory and other risks.
As a result of BlackRock's extensive international operations, the Company faces associated operational, regulatory, reputational, political and foreign exchange rate risks, many of which are outside of the Company's control. The failure of the Company's systems of internal control to mitigate such risks, or of its operating infrastructure to support its global activities, could result in operational failures and regulatory fines and/or sanctions, which may cause the Company's AUM, revenue and earnings to decline.
RISKS RELATED TO KEY THIRD-PARTY RELATIONSHIPS
The failure of a key vendor to BlackRock to fulfill its obligations could have a material adverse effect on BlackRock's reputation or business, which may cause the Company's AUM, revenue and earnings to decline.
BlackRock depends on a number of key vendors for various fund administration, accounting, custody, risk analytics, market data, market indices and transfer agent roles and other distribution and operational needs. BlackRock performs focused diligence on its vendors in an effort to ensure they operate in accordance with expectations; however, to the extent any significant deficiencies are uncovered, there may be few, or no, feasible alternative vendors available to BlackRock in certain areas. The failure or inability of BlackRock to diversify its sources for key services or the failure of any key vendor to fulfill its obligations could lead to operational and regulatory issues for the Company, including with respect to certain of its products, which could result in reputational harm and may cause BlackRock's AUM, revenue and earnings to decline.
Any disruption to the Company's distribution channels may cause BlackRock's AUM, revenue and earnings to decline.
BlackRock relies on a number of third parties to provide distribution, portfolio administration and servicing for certain BlackRock investment management products and services through their various distribution channels. In particular, BlackRock entered into a global distribution agreement with Bank of America/Merril Lynch in 2006, which is subject to renegotiation at the end of 2016.BlackRock's ability to maintain strong relationships with its distributors is material to the Company's future performance. If BlackRock is unable to distribute its products and services successfully, if it experiences an increase in distribution-related costs, or if it is unable to replace or renew existing distribution arrangements, BlackRock's AUM, revenue and earnings may decline.
Disruption to the operations of third parties whose functions are integral to BlackRock's Exchange Traded Fund ("ETF") platform may adversely affect the prices at which ETFs trade, particularly during periods of market volatility.
BlackRock is the largest provider of ETFs globally. Shares of ETFs trade on stock exchanges al prices at, above or below the ETF's most recent net asset value ("NAV). The NAV of an ETF Is calculated at the end of each business day and fluctuates with changes in the market value of the ETF's holdings. The trading price of the ETF's shares fluctuates continuously throughout trading hours. While an ETF's creation/redemption feature and the arbitrage mechanism are designed to make it more likely that the ETF's shares normaly wiB trade at prices close to the ETF's NAV, exchange prices may deviate significantly from the ETF's NAV. ETF market prices are subject to numerous potential risks, including trading halts invoked by a stock exchange, inability or unwillingness of market markers, authorized participants, settlement systems or other market participants to perform functions necessary for an ETF's arbitrage mechanism to function effectively, or significant market volatility. Although BlackRock and other large issuers of ETFs are working with market participants to enhance U.S. equity market resBiency, there can be no assurance that structural reforms wB be implemented in a timely or effective fashion, or at al. Moreover, if market events lead to incidences where ETFs trade at prices that deviate significantly from an ETF's NAV, or trading halts are invoked by the relevant stock exchange or market, investors may lose confidence in ETF products and redeem their holdings, which may cause BlackRock's AUM, revenue and earnings to decline.
LEGAL AND REGULATORY RISKS
BlackRock is subject to extensive and pervasive regulation around the world:
BlackRock's business is subject to extensive regulation around the world. These regulations subject BlackRock's business activities to a pervasive array of increasingly detailed operational requirements, compliance with which is costly, time-consuming and complex. BlackRock may be adversely affected by its failure to comply with current laws and regulations or by changes in the interpretation or enforcement of existing laws and regulations. Challenges associated with interpreting regulations issued In'numerous, countries in a globally consistent manner may add to such risks, if regulators in different Jurisdictions have inconsistent views or provide only limited regulatory guidance. In particular, violation of applicable laws or regulations could result in fines and/or sanctions, temporary or permanent prohibition of certain activities, reputational harm and related client terminations, suspensions of employees or revocation of their licenses, suspension or termination of investment adviser, broker-dealer or other registrations, or suspension or termination of bank charter or other sanctions, which could have a material adverse effect on BlackRock's reputation or business and may cause the Company's AUM, revenue and earnings to decline. For a more extensive discussion ofthe laws, regulations and regulators to which BlackRock is subject, see "Item 1 — Business — Regulation."
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Regulatory reforms in the United States and internationally expose BlackRock and its clients to increasing regulatory scrutiny.
In recent years a number of proposals for regulatory reform have been introduced, and the level of regulatory scrutiny to which BlackRock is subject is expected to increase See "Item 1 - Business - Regulation." A number of regulatory reforms that have been proposed may require BlackRock to alter its business or operating activities, which could be time-consuming and costly and which may impede the Company's growth and may cause AUM, revenue and earnings to decline. Regulatory reform may also impact BlackRock's banking, insurance company and pension fund clients, which could cause them to change their investment strategics or allocations in manners that may be adverse to BlackRock. Key regulatory reforms that may impact the Company include.
Designation as a systemically important financial institution: Both the FSB, working wilh IOSCO, and FSOC are considering potential systemic risk related to asset management. In July 2014, the FSOC issued a statement indicating that their review would focus on products and activities, and FSOC subsequently released a request for information addressing, market liquidity and fund redemption risk, the use of leverage, operational risk, and the resolution of asset managers including the transition of client assets. In June 2015, IOSCO issued a statement indicating they also favored a products and activities approach in their review of asset managers, and in July 2015, the FSB made a similar announcement. In September 2015, the FSB released a statement indicating that their review would focus on market liquidity and fund redemption risk, the use of leverage, securities lending practices, operational risk, and risks from pension funds and sovereign wealth funds. Although FSOC, IOSCO and FSB have shifted from a focus on designating firms and/or funds as systemically important (i.e., G-SIFI or SIFI designations), the process is ongoing and may lead to designations in the future. In the event that BlackRock receives a SIFI designation, under the DFA, the Federal Reserve System is charged with establishing enhanced regulatory requirements for nonbank financial institutions and BlackRock could become subject to its direct supervision. If BlackRock were designated a SIFI or G-SIFI, K could become subject to enhanced prudential, capital, supervisory and other requirements, such as risk-based capital requirements, leverage limits, liquidity requirements, resolution plan and credit exposure report requirements, concentration limits, a contingent capital requirement, enhanced public disclosures, short-term debt limits and overall risk management requirements. Requirements such as these, which were designed to regulate banking institutions, would be extremely burdensome for BlackRock. unless they were modified to be applicable to an asset manager. No proposals have been made indicating how such measures would be adapted for asset managers, rf at ad.
The Volcker Rule: Provisions of the DFA referred to as the "Volcker Rule" created a new section of the BHC Act that places limitations on the ability of banks and their subsidiaries to engage in proprietary trading and to invest in and transact with certain private investment funds, including hedge funds, private equity funds and funds of funds (collectively "covered funds"). Conformance with the Volcker Rule's requirements may reduce the level of market making and liquidity activities of several of BlackRock's trading counterparties, which may adversely impact the liquidity and, in some cases, the pricing of various financial instruments in which BlackRock client accounts invest. Because the Federal Reserve currently treats BlackRock as a nonbank subsidiary of PNC, BlackRock may be required to conform its activities to the requirements ofthe Volcker Rule. On December 18, 2014, tho Federal Reserve announced a second extension to the Volcker Rule conformance period, giving banking
. entities until Jury 21, 2016, to conform investments in and relationships with covered funds and foreign funds that were in place prior to December 31, 2013 ("legacy covered funds"). The Federal Reserve also announced its intention to grant banking entities an additional one-year extension of the conformance period until July 21. 2017, to conform ownership interests in and relationships with these legacy covered funds. BlackRock has chosen to commence a conformance program for covered funds, including legacy covered funds. The Volcker Rule's restrictions may, among other things, limit BlackRock's ability to invest in covered funds and require BlackRock to remove its name from the names of its covered funds. The Volcker Rule may also require BlackRock to sell certain seed and co-investments that it holds in covered funds, which may occur at a discount to existing carrying value, depending on market conditions.
Money market mutual fund reform. Approximately 3% of BlackRock's AUM as of December 31, 2015, consisted of assets in U.S. MMFs, of which institutional prime or institutional municipal MMFs (including offshore funds that feed into such MMFs) comprised approximately 2%. In July 2014, the SEC adopted new rules designed to reform the regulatory structure governing MMFs and to address the perceived systemic risks that such funds present. The new rules, to which U.S.'MMFs must conform by October 2016, require institutional prime and institutional municipal MMFs to employ a floating net asset value per share method of pricing, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets. Retail MMFs may continue operating with a constant net asset value per share. The rules also provide for new tools for institutional and retail MMFs' boards designed to address market shocks, including liquidity fees and redemption gates. The new rules do not apply to government (non-municipal) MMFs, although such funds may "opt-in" to the new liquidity fee and redemption gate provisions if previously disclosed to investors. Implementation of these new rules requires the development of new or additional systems by BlackRock and the funds' service providers. BlackRock has commenced efforts to move its MMFs into compliance in advance of the deadline. The impact of the rules that affect the structure of the funds on BlackRock's business remains uncertain as clients must decide which products fit their investment needs. The new rules will, however, affect certain of BlackRock's funds' investment strategies, portfolio liquidity and return potential. The new rules will also result in changes to BlackRock's existing U.S. MMFs and may reduce the attractiveness of certain U.S. MMFs to investors.
Regulation of swaps and derivatives: The implementation of DFA regulations, similar regulations in the EU and other global jurisdictions relating to swaps and derivatives could impact the manner in which BlackRock-advised funds and accounts use and trade swaps and other derivatives, increasing the costs of derivatives trading for BlackRock's clients. Various global rules and regulations applicable to the use of financial products by funds, accounts and counterparties that have been adopted or proposed will require BlackRock to build and implement new compliance monitoring procedures to address the enhanced level of oversight to which it and its clients will be subject. These rules wii also introduce new central clearing requirements for certain swap transactions and will require that certain swaps be executed only on or through electronic trading venues (as opposed to over the phone or other execution methods), with which BlackRock win have to comply. In the United States, certain interest rate swaps and certain index credit default swaps are already subject to the DFA central clearing and electronic trading venue requirements, with additional products and asset classes potentially becoming subject to these requirements in 2016 and beyond. For swaps and security-based swaps that are not centrally cleared, U.S. bank regulators recently adopted rules that could require BlackRock-advised funds and accounts to post margin payments when trading with a swap dealer that is regulated by one of the U.S. bank regulators. The CFTC also recently adopted similar margin rules applicable when trading non-cleared swaps with swap dealers who are not regulated by one of the U.S. bank regulators. These rules have the potential to increase the complexity and cost of trading non-cleared derivatives for BlackRock's clients. In EMEA, central clearing requirements will be implemented
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in a phased manner and will apply lo BlackRock funds and accounts beginning in the latter half of 2016. The new rules and regulations may produce regulatory inconsistencies in global derivatives trading rules and increase BlackRock's operational and legal risks.
SEC asset management industry initiatives. The SEC and its staff continue to engage in various initiatives and reviews that seek to improve and modernize the regulatory structure governing the asset management industry, and registered investment companies in particular. During 2015, the SEC proposed, among other things: enhanced reporting by investment advisors, enhanced reporting on registered mutual funds, new rules for liquidity risk management in registered funds, and new rules governing the use of derivatives and leverage by registered investment companies and business development companies. Furthermore, in June 2015, tlie SEC issued a request for comments regarding practices related to ETFs, which is widely expected to result in a future rulemaking. The SEC has also indicated an intention to propose new rules for the stress testing of registered investment companies and transition planning by asset managers, including the transfer of client assets. The SEC's focus has also been directed toward risk identification and controls in various areas, including the use of derivatives and other trading practices (as reflected in the SEC's late December 2015 rule proposal referenced in "Item 1 - Business - Regulation - Regulation of Swaps and Derivatives" above), cyber-secunty and the evaluation of systemic risks. While these proposals have yet to be finalized into new rules, any new rules, guidance or regulatory initiatives resulting from these efforts could require BlackRock to alter its business or operating activities or fund management practices, or increase Its public reporting and disclosure requirements which could bo time-consuming and costly and which may impede BlackRock's growth and may cause AUM, revenue and earnings to decline.
Revised DoL Fiduciary Rule: In April 2015. the DoL proposed a new regulation defining the term "fiduciary" for purposes of the fiduciary responsibility provisions of Title I of ERISA and the prohibited transaction exercise tax provisions of the IRS. The rule has been highly criticized by industry participants, particularly retail intermediaries, and BlackRock is engaging with the DoL, trade associations and industry participants in an effort to affect revisions to the proposed rule. To the extent the rule is enacted as written, it will require BlackRock to re-paper a number of its distribution relationships, create compliance and operational challenges for BlackRock's distribution partners and may limit BlackRock's ability to provide certain useful services and education to its clients.
Increased internatbnal regulatory scrutiny: In addition to the extensive scrutiny BlackRock faces from U.S.-based regulators, the Company and its subsidiaries are also subject to the authority of numerous governmental and regulatory bodies globally, in particular in Europe and the Asia-Pacific region. These regulators have imposed numerous regulations, guidelines and standards on the activities of BlackRock and its subsidiaries covering a variety of areas, including capital resources requirements, marketing activities, client and investor protections, senior management arrangements, and system and control requirements. In the event that BlackRock or any of its subsidiaries fails to comply with these often complex guidelines, regulations and standards, the regulators have broad powers to suspend or revoke any licenses they may have granted and/or to impose fines and/or sanctions.
European Union Directives: In the aftermath ofthe financial crisis, the European Commission ("EC") initiated a plan for EU financial reform, including a number of consultations and initiatives intended to improve retail investor protections, which the EC reflected in new or updated Directives and regulations. The resulting review of MiFID. introduction of AIFMD, the introduction of MiFID II and the revision of the UCITS Directive have increased the compliance, disclosure and other obligations BlackRock faces in the European Economic Area. Once fuly implemented. these Directives will have significant and.wide-ranging impacts on EU securities and derivative markets, products and distribution, and internal governance arrangements, which will directly and indirectly impact BlackRock's EU regulated subsidiaries and other group companies.
Reform of European Retail Distribution: BlackRock must also comply with retail distribution rules aimed at enhancing consumer protections, overhauling mutual fund fee structures by banning the payment of commissions to distributors and increasing professionalism in the retail investment sector. The rules were originally introduced in the United Kingdom in 2012 and similar rules have since been introduced in other jurisdictions where BlackRock operates such as the Netherlands, and are under discussion elsewhere. Similarly, MiFID II wii contain a ban on certain advisers recovering commissions and other nonmonetary benefits from fund managers. These rules wit lead to greater fragmentation of distribution rules.and may lead to changes to BlackRock's client servicing and distribution models, in particular affecting the fees BlackRock is able to charge to its cfents and the commissions it is able to pay to its distribution partners.
Legal proceedings may cause the Company's AUM, revenue and earnings to decline.
BlackRock is subject to a number of sources of potential legal liability and the Company, certain of the investment funds K manages and certain of its subsidiaries and employees have been named as defendants in various legal actions, including arbitrations, class actions and other litigation arising in connection with BlackRock's activities. Certain of BlackRock's subsidiaries and employees are also subject to periodic examination, special inquiries and potential proceedings by regulatory authorities, including the SEC. Federal Reserve, OCC, DoL, CFTC and FCA. Similarly, from time to time. BlackRock receives subpoenas or other requests for information from various U.S. and non-U.S. governmental and regulatory authorities in connection with certain industry-wide, company-specific or other investigations or proceedings. These examinations, inquiries and proceedings, have in the past and could in the future, if compliance failures or ottier violations are found, cause the relevant regulator to institute proceedings and impose sanctions for violations. Any such action may also result in litigation by investors in BlackRock's funds, other BlackRock clients or by BlackRock's shareholders, which could harm the Company's reputation and may cause its AUM, revenue and earnings to decline, potentially harm the investment returns of the applicable fund, or result in the Company being liable for damages.
In addition, when clients retain BlackRock to manage their assets or provide them with products or services, they typically specify contractual requirements or guidelines that BlackRock must observe in the provision of its services. A failure to comply with these guidelines or requirements could expose BlackRock to lawsuits, harm its reputation or cause clients to withdraw assets or terminate contracts.
As BlackRock's business continues to grow, the Company must routinely address conflicts of interest, as well as the perception of conflicts of interest, between itself and its clients, employees or vendors. In addition, the SEC and other regulators have increased their scrutiny of potential conflicts. BlackRock has procedures and controls "m place that are designed to detect and address these Issues. However, appropriately dealing with conflicts of interest is complex and if the Company fails, or appears to fail, to appropriately deal with any conflict of interest, it may face reputational damage, litigation, regulatory proceedings, or penalties, fines and/or sanctions, any of which may cause BlackRock's AUM, revenue and earnings to decline.
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BlackRock is subject to banking regulations that may limit its business activities.
As described in "Item 1-Business-Regulation", PNC owns approximately 22% of BlackRock's caprtal stock. Based on the Federal Reserve's interpretation of the BHC Act, the Federal Reserve takes the position lhat this ownership interest causes BlackRock to be treated as a nonbank subsidiary of PNC for purposes of the BHC Act, thereby sub]ecting BlackRock to banking regulation, including the supervision and regulation ofthe Federal Reserve. Such banking regulation limits the activities and the typos of businesses that a nonbank subsidiary may conduct. The Federal Reserve has broad enforcement authority over nonbank subsidiaries, including the power to prohibit them from conducting any activrty that, in the Federal Reserve's opinion, is unauthorized or constitutes an unsafe or unsound practice, and to impose substantial fines and other penalties for violations. PNC is regulated as a "financial holding company" under tho BHC Act, which allows PNC and BlackRock to engage in a much broader set of activities than would otherwise be permitted under the BHC Act; any failure of PNC to maintain its status as a financial holding company could result in substantial limitations on certain BlackRock activities and (ts growth.
In addition, BlackRock's trust bank subsidiary, which is organized as a national bank, is separately subject to banking regulation by the OCC. The OCC has broad supervisory and enforcement authority over BlackRock's trust bank subsidiary and also subjects it to capital requirements. Being subject to banking regulation may put BlackRock al a competitive disadvantage because certain of its competitors are not subject to these limitations.
Failure to comply with ownership reporting requirements could result in harm to BlackRock's reputation and may cause its AUM, revenue and earnings to decline.
Of note among the various international regulations to which BlackRock is subject are the extensive and increasingly stringent regulatory reporting requirements that necessitate the monitoring and reporting of issuer exposure levels (thresholds) across the holdings of managed funds and accounts and those of the Company. The specific triggers and the reporting methods that these threshold filings entail vary significantly by regulator and across jurisdictions. BlackRock continues to invest in technology, training and its employees to enhance its monitoring and reporting functions and improve the timeliness and accuracy of its disclosures. Despite these investments, the complexity of the various threshold reporting requirements combined with the breadth ofthe assets managed by the Company and high volume of securities trading have caused errors and omissions to occur in the past, and pose a risk that errors or omissions will occasionally occur in the future. Any such errors may expose BlackRock to monetary penalties, which could have an adverse effect on BlackRock's reputation and may cause its AUM, revenue and earnings to decline.
New tax legislation or changes in U.S. and foreign tax laws, treaties and regulations or challenges to BlackRock's historical taxation practices may adversely affect BlackRock's effective tax rate, business and overall financial condition.
BlackRock's businesses may be affected by now tax legislation or regulations, or the modification of existing tax laws, regulations and rulings, by U.S. or non-U.S. authorities. In particular, FATCA and the CRS have introduced new investor onboarding, withholding and reporting rules aimed at ensuring persons with financial assets outside of their tax residence country pay appropriate taxes. FATCA and CRS will impact both U.S. and non-U.S. funds and subject BlackRock to additional administrative burdens. Similarly, certain EU Member States have enacted FTTs, which impose taxation on a broad range of financial instrument and derivatives transactions. Several other EU Member States continue to discuss introducing FTTs. If introduced as proposed. FTTs could have an adverse effect on BlackRock's financial results and on clients' performance results. In addition, in October 2015 the OECD released its final BEPS package in an effort to curb the use of certain tax regimes and elements of tax planning, primarily in a cross-border context. The final package was endorsed by the G20 and is subject to implementation. BEPS contains a number of provisions that may negatively impact cross-border investing using commingled investment vehicles. In addition, in January 2016, the European Commission announced an Anti-Tax Avoidance Package ("EU Package") for consideration by the European Parliament and Council containing measures to regulate certain elements of tax planning further and to boost tax transparency. Once implemented, the BEPS package and the EU Package could curtail the amount of investments channeled by, and have unintended taxation consequences for, funds as well as the BlackRock's overall tax position, which could adversely affect BlackRock's financial condition and that of its clients.
The Company also manages significant assets in products and accounts that have specific tax objectives, which could be adversely impacted by changes in tax law or policy, particularly with respect to U.S. municipal income, the U.S. individual income tax rate on qualified dividends and long-term capital gains and, globally, alternative products. The application of complex tax regulations involves numerous uncertainties and, in the normal course of business, U.S. and non-U.S. tax authorities may review and challenge BlackRock's historical tax positions. These challenges may result in adjustments to BlackRock's tax position, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect BlackRock's effective tax rate and overal financial condition.
RISKS RELATED TO BLACKROCK'S SIGNIFICANT SHAREHOLDER
PNC owns a large portion of BlackRock's capital stock. Future sales or distributions of BlackRock's common stock in the public market by the Company or PNC could adversely affect the trading price of BlackRock's common stock.
As of December 31, 2015, PNC owned 22% of the Company's caprtal stock. Sales or distributions of a substantial number of shares of BlackRock's common stock in the public market, or the perception that these sales or distributions might occur, may cause the market price of BlackRock's common stock to decline.
PNC has agreed to vote as a stockholder in accordance with the recommendation of BlackRock's Board of Directors, and certain actions will require special board approval or the prior approval of PNC.
As discussed in BlackRock's proxy statement, PNC has agreed to vote all of its voting shares in accordance with the recommendation of BlackRock's Board of Directors in accordance with the provisions of its stockholder agreement with BlackRock. As a consequence, if the shares held by PNC constitute a substantial portion of the outstanding voting shares, matters submitted to a stockholder vote that require a majority or a plurality of votes for approval, including elections of directors, will have a substantial number of shares voted in accordance with the determination ofthe BlackRock Board of Directors. This arrangement has the effect of concentrating a significant block of voting control over BlackRock in its Board of Directors, whether or not stockholders agree with any particular determination of the Board.
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As discussed in BlackRock's proxy statement, pursuant to BlackRock's stockholder agreement with PNC, the following may not be done without prior approval of all of the independent directors, or at least two-thirds of the directors, then in office:
appointment of a new Chief Executive Officer of BlackRock,
any merger, issuance of shares or similar transaction in which beneficial ownership of a majority of the total voting power of BlackRock capital stock would be held by persons different than those currently holding such majority of the total voting power, or any sale of all or substantially all assets of BlackRock;
any acquisition of any person or business which has a consolidated net income after taxes for its preceding fiscal year that equals or exceeds 20% of BlackRock's consolidated net income after taxes for its preceding fiscal year if such acquisition involves the current or potential issuance of BlackRock capital stock constituting more than 10% of the total voting power of BlackRock capital stock issued and outstanding immediately after completion of such acquisition;
any acquisition of any person or business constituting a line of business that is materially different from the lines of business BlackRock and its controlled affiliates are engaged in at that time if such acquisition involves consideration in excess of 10% of the total assets of BlackRock on a consolidated basis;
except for repurchases otherwise permitted under the stockholder agreement, any repurchase by BlackRock or any subsidiary of shares of BlackRock caprtal stock such that after giving effect to such repurchase BlackRock and its subsidiaries shall have repurchased more than 10% of the total voting power of BlackRock capital stock within the 12-month period ending on the date of such repurchase;
any amendment to BlackRock's certificate of incorporation or bylaws; or
¦ any matter requiring stockholder approval pursuant to the rules of the NYSE. Additionally, BlackRock may not enter into any of the following transactions without the prior approval of PNC'
any sale of any subsidiary of BlackRock, the annualized revenue of which, together with the annualized revenue of any other subsidiaries disposed of within the same year, are more than 20% of the annualized revenue of BlackRock for the preceding fiscal year on a consolidated basis;
for so long as BlackRock is a subsidiary of PNC for purposes of the BHC Act, entering into any business or activity that is prohibited for any such subsidiary under the BHC Act;
- any amendment of any provision of a stockholder agreement between BlackRock and any stockholder beneficially owning greater than 20% of BlackRock capital stock that would be viewed by a reasonable person as being adverse to PNC or materially more favorable to the rights of any stockholder beneficially owning greater than 20% of BlackRock capital stock than to PNC;
any amendment, modification, repeal or waiver of BlackRock's certificate of incorporation or bylaws that would be viewed by a reasonable person as being adverse to the rights of PNC or more favorable to the rights of any stockholder beneficially owning greater than 20% of BlackRock capital stock, or any settlement or consent in a regulatory enforcement matter that would be reasonably likely to cause PNC or any of its affiliates to suffer regulatory disqualification, suspension of registration or license or other material adverse regulatory consequences; or
a voluntary bankruptcy or similar filing by BlackRock.
Item 1B. Unresolved Staff Comments
The Company has no unresolved comments from the SEC staff relating to BlackRock's periodic or current reports filed wilh the SEC pursuant to the Exchange Act.
Item 2. Properties
BlackRock's principal office, which is leased, is located at 55 East 52nd Street, New York, New York. BlackRock leases additional office space in New York City at 40 East 52nd Street and throughout the world, including Boston, Chicago, Edinburgh, Gurgaon (India), Hong Kong, London, Melbourne, Munich, Princeton (New Jersey), San Francisco, Seattle, Singapore, Sydney, Taipei and Tokyo. The Company also owns an 84,500 square foot office building in Wilmington (Delaware).
Item 3. Legal Proceedings
From time to time, BlackRock receives subpoenas or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock's policy to cooperate fully with such inquiries. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock's activities. Additionally, BlackRock advised investment portfolios may be subject to lawsuits, any of which potentially could harm the investment returns ofthe applicable portfolio or result in the Company being liable to the portfolios for any resulting damages.
On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and tlie BlackRock Equity Dividend Fund (coltectively, the "Funds") filed a consoidated complaint (the "Consolidated Complaint") in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited (colectivery, the "Defendants") under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the Defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same
26
court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC. The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by Defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalf of the Funds all allegedly excessive advisory fees received by Defendants in the twelve month period preceding the start of each lawsuit, along with purported bst investment returns on those amounts, plus interest. On March 25, 2015, Defendants' motion to dismiss the Consolidated Complaint was denied. The Defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions.
Between November 12, 2015 and November 16, 2015. BlackRock, Inc., BlackRock Realty Advisors, Inc. ("BRA") and the BlackRock Granite Property Fund, Inc. ("Granite Fund"), along with certain other Granite Fund-related entities (collectively, the "BlackRock Parties") were named as defendants in thirteen separate lawsuits filed in the Superior Court of the State of California for the County of Alameda arising out of the June 16, 2015 collapse of a balcony al the Library Gardens apartment complex in Berkeley, California (the "Property"). The Property is indirectly owned by tho Granite Fund, which is managed by BRA The plaintiffs also named as defendants in the lawsuits Greystar, which is the property manager of the Property, and certain other entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property's balcony, and seek monetary, including punitive, damages. BlackRock believes the claims in the lawsuits are without merit and intends to vigorously defend the actions.
Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock's results of operations, financial position, or cash flows. However, there is no assurance as to whether any such pending or threatened matters will have a material effect on BlackRock's results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
BlackRock's common stock is listed on the NYSE and is traded under the symbol "BLK\ At the close of business on January 31, 2016, there were 272 common stockholders of record. Common stockholders include institutional or omnibus accounts that hold common stock for many underlying investors.
The following table sets forth for the periods indicated the high and low reported sale prices, perbd-end closing prices for the common stock and dividends declared per share for the common stock as reported on the NYSE:
2015
First Quarter Second Quarter Third Quarter Fourth Quarter
2014
First Quarter Second Quarter Third Quarter Fourth Quarter
Common Stock Price Ranges
323.89 $
319.85 $
336.47 i
364.40 t
286.39 %
293.71 $
301.10 t
303.91 $
Closing Price
314.48 %
319.60 $
328.32 $
357.56 t
Cash Dividend Declared
1.93 1.93 1.93 1.93
ISSUER PURCHASES OF EQUITY SECURITIES
During the three months ended December 31, 2015, the Company made the following purchases of its common stock, which is registered pursuant to Section 12(b) of the Exchange Act.
October 1, 2015 through October 31, 2015 November 1. 2015 through November 30. 2015 December 1. 2015 through Decembcr31, 2015
Total
Total Number of
Shares Purchased
Average Price Paid r Share
Total Number of Shares Purchased as Part of Publicly Announced Plans
r*r Or.
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1!
In January 2015, the Board of Directors approved an increase in the availability of shares that may be repurchased under the Company's existing share repurchase program to allow for the repurchase of up lo a total of 9.4 million additional shares of BlackRock common stock with no stated expiration date.
Includes purchases made by the Company primarily to satisfy income tax withholding obligations of employees and members of the Company's Board of Directors related to the vesting of certain restricted stock or restricted stock unit awards and purchases made by the Company as pan of the publicly announced share repurchase program.
Item 6. Selected Financial Data
The selected financial data presented below has been derived in part from, and should be read in conjunction with, the consolidated financial statements of BlackRock and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-K.
Year ended December 31,
(in millions, except per share data)
Income statement data: Revenue
Related partiesO)
Other third parties
Total revenue Expense
Restructuring charges
Other operating expenses
Total expenses Operating income
Totalinbnopcrating Income (expense)
Income before income taxes'
Income tax expense
Net income
Less- Net income (loss) attributable to noncontrolling interests
Net income attributable to BlackRock, Inc.
Per share data;f21 Basic earnings Diluted earnings Book value(3)
Cash dividends declared and paid per share
6,994 4,087
6.607
6.607 4.474 (79)
4.395 1.131
3,264 (30)
3.294 $
19.58 $
19.25 $
164.Q6 S
7.72 $
6,260 3,920
6,323
6,323 3,857 116
3.973 1,022
2,951 19
17.23 S
16.87 $
156.69 S
6.72 $
2012
5,501 3,836
9,337
5,813
5.813 3,524 (54)
3,470 1,030
2,440 (18)
2,458
14.03 $
13.79 $
148.20 . $
6.00 $
5,431 3,650
9,081
32 5,800
5,832 3.249 (114)
3,135 796
2,339 2
2.337
12.56 12.37 140.07 5.50
BlackRock's related party revenue includes fees for services provided to registered investment companies that it manages, which include mutual funds and exchange-traded funds, as a result of the Company's advisory relationship. In addition, equity method investments are considered related parties due to the Company's influence over the financial and operating policies of the investee. See Note 16. Related Party Transactions, to the consolidated financial statements for more information.
Participating preferred stock is considered to be a common stock equivalent for purpose's of earnings per share calculations.
Total BlackRock stockholders' equity, excluding appropriated retained earnings, divided by total common and preferred shares outstanding at December 31 of the respective year-end.
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December 31,
(in millions)
Balance sheet data:
Cash and cash equivalents Goodwill and intangible assets, net Total assets(i) Less:
Separate account assetsR) Collateral held under securities lending
agree ments(2) Consolidated investment vehicles(3)
Adjusted total assets
Short-term borrowings
Long-term borrowings
Total borrowings
Total BlackRock, Inc stockholders' equity Assets under management: Equity:
Active
/Shares
Non-ETF index
Equity subtotal
Fixed income. Active /Shares Non-ETF index
Fixed income subtotal
Multi-asset Altematives: Core
Currency and commodities(4)
Alternatives subtotal
Long-term
Cash management
Advisory(5)
Total
5.723 30,305 239,792
4,606 30,312 200,433
3,506 30,148 179.880
£225;26lS
33,654 3.787
23,021 2,813
20,918 2.006
4,390 30,481 219.859
39,831 $ 100 $
5,669
38,085 100 4.674
21,788 2,714
41,064
4,922 27.366
4.774 25.048
5.769 25,403
40,244 S — J 4,925
292.802 790,067 1.368,242
317,262 718,135 1,282,298
275,156 419,651 865.299
4,925 26,460
2,317,695
652,209 178,835 411,142
1,845,501
656,331 192,852 410,139
1,560,106
614,804 153,802 479,116
287,215 534,648 1,023.638
2,451,111
1.242,186 341,214
1,259,322 267,748
1,247,722 225,170
701,324 217,671 474,658
85,026 26,088
66,367 41,428
63,647 41,301
1,393,653 377,837
111.240
111.114
109,795
104,948
88.006 23,234
4,012,209
275,554 36,325
3,482,366
263,743 45,479
3,137,946
254,665 120.070
^Maj2.f839ST
4,333,841
296,353 21,701
tjg3E«r6H5'4t2:i $ 4,651,895 t 4,324,088 $ 3,791,588 $ 3,512,681
Includes separate account assets that are segregated funds held for purposes of funding Individual and group pension contracts and collateral held under secunties lending agreements related to these assets that have equal and offsetting amounts recorded in liabilities and ultimately do not impact BlackRock's stockholders' equity or cash flows.
Equal and offsetting amounts, related to separate account assets and collateral held under securities lending agreements, are recorded in [labilities.
Amounts include assets held by consolidated sponsored investment products. During 2015, the Company adopted new accounting guidance on consolidations effective January 1, 2015 using the modified retrospective method. As a result of the adoption, the Company's balance sheet at December 31, 2015 reflects the deconsolidation of the Company's previously consolidated collateralized loan obligations.
Amounts include commodity /Shores.
Advisory AUM represents long-term portfolio liquidation assignments.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report, and other statements that BlackRock may make, may contain forward-looking statements within the meaning ot the Private Securities Litigation Reform Act, with respect to BlackRock's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline." "believe," "comfortable." "expect," "anticipate," "current." "intention," "estimate," "position," "assume," "-outlook." "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" and similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materiaBy from those anticipated in forward-looking statements and future results could differ materially from historical performance.
in addition to risk factors previously disclosed in BlackRock's Securities and Exchange Commission ("SEC") reports and those identified elsewhere in this report, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance" (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management ("AUM"); (3) the relative and absolute investment performance of BlackRock's investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. ("PNC"); (10) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (11) the ability to attract and retain highly talented professionals; (12) fluctuations in the carrying value of BlackRock's economic investments, (13) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (14) BlackRock's success in maintaining the distribution of its products; (15) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (16) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
OVERVIEW
BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, "BlackRock" or the "Company") is a leading publicly traded investment management firm with $4,645 trillion of AUM at December 31, 2015. With approximately 13,000 employees in more than 30 countries, BlackRock provides a broad range of investment and risk management services to institutional and retail clients worldwide.
For further information see Note 1, Introduction and Basis of Presentation, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K.
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EXECUTIVE SUMMARY
(in millions, except per share data)
GAAP basis:
Total revenue
Total expense
Operating income Operating margin
Nonoperating income (expense), less net income (loss) attnbutable to noncontrolling intercsts(l)
Income tax expense
11,081 6,607
4,474 40.4 %
(49) 0.131)
10,180 6,323
3,857 37.9%
97 (1,022)
Net income attnbutable to BlackRock
Diluted earnings per common share Effective tax rate As adiustcdf2): Total revenue
Total expense
Operating income Operating margin
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests(l)
Income tax expense
*53l$<^^riSBr79:*i $
iffiiPI&t;^
19.25 25.6%
11,081 6.518
4,563 42.9%
(56) 0.197)
16.87 25.8%
10,180 6,156
4,024 41.4%|1010|(1,149)
Net income attributable to BlackRock
Diluted earnings per common share
Effective tax rate
Other:
Assets under management (end of period) Diluted weighted-average common shares outstanding{3) Common and preferred shares outstanding (end of period) Book value pershare(4)
Cash dividends declared and paid per share
3,310
19.34 26.6%
4,651,895 171,112,261 166,921,863 164.06 7.72
2,882
16.58 28.5%
4,324,088 173,828,902 168,724,763 156.69 6.72
Net of net income (toss) attnbutable to noncontrolling interests ("NCI') (redeemable and nonrcdeemable).
As adjusted items are described in more detail in Non-GAAP Financial Measures
Nonvoting participating preferred shares arc considered to be common stock equivalents for purposos of determining basic and diluted earnings per share calculations.
Total BlackRock stockholders' equity, excluding an appropriated retained deficit of $19 million for 2014 and appropnated retained earnings of $22 million for 2013, divided by total common and preferred shares outstanding at December 31 of the respective year-end.
2015 COMPARED WITH 2014
GAAP. Operating income of $4,664 million increased $190 million and operating margin of 40.9% increased 50 bps from 2014. Operating income reflected growth in base fees and performance fees, partially offset by higher expense. The Company's 2015 expense reflected higher revenue-related expense, including compensation, and distribution and servicing costs, partially offset by lower general and administration expense and lower amortization of intangible assets. In connection with the Barclays Global Investors ("BGI") acquisition, BlackRock recorded a S50 million indemnification asset for unrecognized tax benefits. Due to the resolution of outstanding tax matters in 2014, BlackRock recorded $50 million of general and administration expense in 2014 to reflect the reduction of the indemnification asset and an offsetting $50 million tax benefl Results for 2014 also included $11 miSon of closed-end fund launch costs. Nonoperating income (expense), less net income (loss) attributable to NCI, decreased $20 million from 2014 due to lower net gains on investments in 2015.
Income tax expense for 2015 included a $54 million net noncash benefit associated with the revaluation of certain deferred income tax liabilities, including the effect of tax legislation enacted in the United Kingdom and state and local income tax changes and benefited from $75 million of nonrecurring items. Income tax expense for 2014 included $94 million of tax benefits, including the $50 million tax benefit mentioned above, a $9 million net noncash benefit, primarily associated with the revaluation of certain deferred income tax liabilities as a result of domestic state and local tax changes, and a $73 million net tax benefit related to several favorable nonrecurring items.
Diluted earnings per common share rose $0.54, or 3%, compared with the prior year period, reflecting higher operating income and the benefit of share repurchases, partially offset by the impact of a higher 2015 effective tax rate and lower nonoperating income.
As Adjusted. Operating income of $4,695 milion increased $132 million from 2014 and the operating margin for both 2015 and 2014 was 42.9%. Income tax expense on an as adjusted basis for 2015 included a $75 million net benefit and excluded the net noncash benefit of $54 million described above. General and administration expense for 2014 excluded the $50 million related to the reduction of the indemnification asset described above. Income tax expense for 2014 included a $73 million net benefit and excluded a $50 million tax benefit associated with the reduction of the same indemnification asset and $9 million of net noncash benefits described above. Diluted earnings per common share rose $0.26, or 1%, from 2014.
2014 COMPARED WITH 2013
GAAP. Operating income of 54,474 million increased $617 million from 2013, reflecting growth in base fees and BlackRock Solutions ana advisory revenue, partialy offset by higher expense. The Company's 2014 expense reflected higher revenue-related expense, including compensation and direct fund expense. Expense for 2014 also included the previously mentioned $50 million general and administration expense related to the reduction of an indemnification asset and $11 million of closed-end fund launch costs. The 2013 expense included $124 million of expense related to the Charitable Contribution described below and $18 million of closed-end fund launch costs.
31
Nonoperating income (expense), less net income (loss) attributable to NCI, decreased $146 million from 2013. Expense for 2013 included a $39 million noncash, nonoperating pre-tax gain related to the carrying value of the Company's equity method investment as a result of an initial public offering of PennyMac Financial Services, Inc. (the "PennyMac IPO"). In addition, in 2013, the Company made a charitable contribution of approximately six million units of the Company's investment in PennyMac to a donor advised fund (the "Charitable Contribution"). In connection with tho Charitable Contribution, the Company also recorded a noncash, nonoperating pre-tax gain of $80 million related to the contributed investment. The decrease in nonoperating income (expense) also reflected net lower returns on the co-investment and seed portfolio and higher interest expense resulting from a long-term debt issuance in March 2014, partially offset by the positive impact of the monetization of a nonstrategic, opportunistic private equity investment during 2014.
Income tax expense of $1,131 million included $94 million of tax benefits, including the $50 miUion tax benefit mentioned above. Income tax expense for 2014 and 2013 reflected the revaluation of deferred income tax liabilities related to intangible assets and goodwill. Income tax expense for 2014 included a $9 million net noncash benefit arising primarily from state and local income tax changes and a $73 million net benefit related to several favorable nonrecurring items. Income tax expense for 2013 included a $69 million noncash benefit, primarily related to legislation enacted in the United Kingdom and stale and local income tax changes. In addition, 2013 income tax expense included a benefit of approximately $48 million recognized in connection with the Charitable Contribution, a benefit of approximately $29 million, primarily due to the realization of tax loss carryforwards, and benefits from certain nonrecurring Hems.
Diluted earnings per common share rose $2.38, or 14%, from 2013 due to higher net income and the benefit of share repurchases.
As Adjusted. Operating income of $4,563 million and operating margin of 42.9% increased $539 million and 150 basis points, respectively, from 2013. Results for 2014 excluded a $50 million general and administrative expense related to the reduction of an indemnification asset. The 2014 income tax expense included a $73 million net benefit and excluded a $50 million tax benefit associated with the reduction of the same indemnification asset and $9 million of net noncash benefits described above. The 2013 results excluded tho financial impact of the Charitable Contribution, but included the $39 million pre-tax nonoperating gain related to the PennyMac IPO. The 2013 income tax expense included a benefit of approximately $29 minion and benefits from certain nonrecurring items and excluded the $69 million net noncash benefit, described above. Diluted earnings per common share rose $2.76, or 17%, from 2013.
See Non-GAAP Financial Measures for further information on as adjusted items.
For further discussion of BlackRock's revenue, expense, nonoperating results and income tax expense, see Discussion of Financial Results herein. BUSINESS OUTLOOK
BlackRock's framework for long-term value creation is predicated on generating differentiated organic growth, leveraging scale to increase operating margins over time, and
returning capital to shareholders on a consistent basis: — BlackRock's diversified platform, in terms of style, product, client and geography, enables it to generate more stable
cash flows through market cycles, positioning BlackRock to invest for the long-term by striking an appropriate balance between investing for future growth and practical discretionary expense management.
BlackRock's highly diversified multi-product platform was created to meet the needs of its clients in al market environments. BlackRock is positioned to provide active and index investment solutions across asset classes and geographies and leverage BlackRock Solutions' world-class risk management, analytics and advisory capabilities on behalf of clients. BlackRock serves a diverse mix of institutional and retail clients across the globe, including investors in iShares ETFs, maintaining differentiated client relationships and a fiduciary focus.
BlackRock's Retal strategy is focused on an outcome-oriented approach to creating client solutions, including active, index and alternative products, and enhanced distribution. In the United States, BlackRock is leveraging its integrated wholesaler force to further penetrate wirehouse distribution platforms and gain share among registered investment advisors. Internationally, BlackRock continues to diversify the range of investment solutions available to clients, penetrate new distribution channels and capitalize on regulatory change impacting retrocession arrangements.
iShares growth strategy is centered on increasing global iShares market share and driving global market expansion. BlackRock intends to achieve these goals by pursuing global growth themes in client and product segments including core investments, fixed income, financial instruments and precision exposures.
BlackRock believes Institutional results wii be driven by strength in specialty areas, including Defined Contribution, Financial Institutions, Official Institutions and Foundations, Family Offices and Endowments; deepening client relationships through effective cross-selling efforts; enhancing BlackRock's solutions-oriented approach and leveraging BlackRock Solutions' analytical and risk management expertise.
NON-GAAP FINANCIAL MEASURES
BlackRock reports its financial results in accordance with GAAP; however, management believes evaluating the Company's ongoing operating results may be enhanced if investors"have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and^for the reasons described below, considers them to be effective indicators, for both management and investors, of BlackRock's financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include al of BlackRock's revenue and expense. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for. financial information prepared in accordance with GAAP.
Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock's financial performance. Adjustments to GAAP financial measures ("non-GAAP adjustments") include certain items management deems nonrecurring or occur infrequently, transactions that ultimately wiB not impact BlackRock's book value or certain tax items that do not impact cash flow.
32
Computations for all periods are derived from the consolidated statements of income as follows:
(1) Operating income, as adjusted, and operating margin, as adjusted
Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock's financial performance over time and, therefore, provide useful disclosure to investors.
(in millions)
Operating income, GAAP basis
Non-GAAP expense adjustments PNC LTIP funding obligation
Compensation expense related to appreciation (depreciation) on deferred
compensation plans Reduction of indemnification asset Chantable Contribution
Operating income, as adjusted
Product launch costs and commissions
4,474 32
7 50
4,563 11
33 10
4,024 18
Operating income used for operating margin measurement
Revenue, GAAP basis
Non-GAAP adjustments:
Distnbution and servicing costs Amortization of deferred sales commissions
11,081
(364) (56)
4,042
10.180
(353) (52)
Revenue used for operating margin measurement
Operating margin, GAAP basis
Operating margin, as adjusted
Operating income, as adjusted, includes non-GAAP expense adjustments. The portion of compensation expense associated with certain long-term incentive plans ("LTIP") funded, or to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately does not impact BlackRock's book value. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded as returns on investments set aside for these plans, which substantially offset this expense, are reported in nonoperating income (expense). In 2014, general and administration expense relating to the reduction of an indemnification asset has been excluded since it is directly offset by a tax benefit of the same amount and, consequently, does not impact BlackRock's book value. In 2013, the $124 million expense related to the Charitable Contribution was excluded from operating income, as adjusted, due to its nonrecurring nature and because the noncash, nonoperating pre-tax gain of $80 million directly related to the contributed PennyMac investment is reported in nonoperating income (expense).
Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. closed-end fund launch costs) and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenue associated with the expenditure of these costs wit not fully impact BlackRock's results until future periods.
Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to related parties and other third parties. Management believes the exclusion of such costs is useful because it creates consistency in the treatment for certain contracts for similar services, which due to the terms of the contracts, are accounted for under GAAP on a net basis within investment advisory, administration fees and securities lending revenue. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because such costs, over time, substantially offset distribution fee revenue the Company earns. For each of these items, BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to each of these items as a proxy for such offsetting revenue.
(2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted'
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, equals nonoperating income (expense), GAAP basis, less net income (loss) attributable to NCI, adjusted for compensation expense associated with (appreciation) depreciation on investments related to certain BlackRock deferred compensation plans. The compensation expense offset is recorded in operating income. This compensation expense has been included in nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, to offset returns on investments set aside for these plans, which are reported in nonoperating income (expense), GAAP basis.
During 2013, the noncash, nonoperating pre-tax gain of $80 milion related to the contributed PennyMac investment was excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted due to its nonrecurring nature and because the more than offsetting associated Charitable Contribution expense of $124 million is reported in operating income.
(in millions)
Nonoperating Income (expense), GAAP basis
Less: Net income (loss) attributable to NCI
Nonoperating income (expense), net of NCI Gain related to Charitable Contribution
Compensation expense related to (appreciation) depreciation on deferred
compensation plans
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted
(79) (30)
(49)
(7)
(56) $
116 19
97 (80)
(10)
33
(3) Net income attributable to BlackRock, as adjusted'
(tn millions, except per share data)
Net income attributable to BlackRock, GAAP basis
Non-GAAP adjustments
PNC LTIP funding obligation, net of tax
Income tax matters
Amount related to the Charitable Contnbution. net of tax
Net income attributable to BlackRock, as adjusted
Diluted weighted-average common shares outstanding^) Diluted earnings per common share, GAAP basis(4) Diluted earnings per common share, as adjusted!*)
3,294
25
(9)
3,310
171.1 19.25 19.34
$
$
$
s
2.932
23 (69) (4)
2,882
173.8 16.87 16.58
See the aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and the Charitable Contribution.
For each period presented, the non-GAAP adjustment related to the PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. Amounts for 2013 included a tax benefit of approximately $48 million recognized in connection with the Charitable Contribution. The tax benefit has been excluded from net income attributable to BlackRock, Inc., as adjusted due to the nonrecurring nature of the Charitable Contribution.
Non-GAAP income tax matters adjustments for 2015, 2014 and 2013 reflected the revaluation of deferred income tax liabilities. The amount for 2015 included a $54 million net noncash benefit, primarily related to the impact of legislation enacted in the United Kingdom and state and local income tax changes. The amount for 2014 included a $9 million net noncash tax benefit arising primarily from state and local income tax changes. The amount for 2013 included a $69 million noncash tax benefit, primarily related to the impact of legislation enacted in the United Kingdom and state and local income tax changes. Such amounts for 2015, 2014 and 2013 have been excluded from as adjusted results as they win not have a cash flow impact and to ensure comparability among periods presented.
(4) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.
34
Assets Under Management
AUM for reporting purposes generally is based upon how investment advisory and administration fees are calculated for each portfolio. Net asset values, tolal assets, committed assets or other measures may be used to determine portfolio AUM.
AUM and Net Inflows (Outflows) by Client Type
(in millions)
Retail
iShares
Institutional Active Index
Institutional subtotal
Long-term
Cash management
Advisoryfl)
AUM
2014
487,777 914,372
38,804 63,971
54.944 100,601
Net Inflows (Outflows)
2014
534,329 ,024,228
959,160 ,816,124
932,410 1,677,650
(10,420) 36,128
mm ran
B«aj962;852i
2,775,284
25,708
owe -*>v*-:t
181,253
2,610,060 &'t-Sr(16i35b)-
296.353 21,701
275.554 36.325
25,696 (13,173)
4,012,209 riMii'sirrii 4 ;i
tWRg(9f629):
i^4;S'5?ff2'jg t 4,651,895 t 4,324,088 jW&ifiW»Sl* * 193,776 $ 119,727
AUM and Net Inflows (Outflows) by Product Type
(in millions)
Equity
Fixed income Multi-asset Altematives Core
Currency and commodities(2)
Subtotal
jS3aoi5,!3?,SSii 2014
1&92 0S55, B20}7£4S
2,451,111 1,393,653 377,837
88,006 23,234
111,240
2013
2,317,695 1,242,186 341,214
85.026 26,088
Net Inflows (Outflows)
52.420 96,406 28,905
3,061 461
fflimm&ir, 2014
$fe«»52!778^
$cJ§p6.:944';-:
3,522
mm
69,257 11,508 42.298
2,703 (8,653)
(5,950)
Long-ten
Cash management
AdvisoryO)
Total
4,012,209 ^rsaa52jb'ftyi
181,253
117,113
296,353 21,701
275,554 36,325
MBaiaa5j3'tt3l 4,333,841
ff(9;629)-
25,696 (13,173)
t;ttft',645?fi2lii $ 4,651,895 t 4,324,088 $)&&ffl}M>te1 % 193,776 $ 119,727
AUM and Net Inflows (Outflows) by Investment Style
Net Inflows (Outflows)
(in millions) Active
Index & iShares
Long-term
Cash management
AdvisoryO)
Total
1,391,243 2,620,966
34.408 146.845
41,177
75,936
181,253
117,113
1.453,613 2,880,228
275,554 36,325
296,353 21,701
4,012,209 Rggtsyoifrg
25,696 (13,173)
Si^MS.MlZai $ 4,651,895 $ 4,324,088 fc6gAdvisory AUM represents long-term portfolio liquidation assignments.
Amounts include commodity iShares.
The following table presents the component changes in BlackRock's AUM for 2015, 2014 and 2013.
December 31,
(in millions)
Beginning assets under management Net inflows (outflows) Long-term Cash management
AdvisoryO)
Total net inflows (outflows) Acquisitions(2) Market change
FX impact(3)
2014
4,324,088 $
181,253 25,696 (13,173)
193,776
261,682 (127,651)
2013
3,791,588
117,113 10,056 (7,442)
119.727 26.932
398.707 (12.866)
Total change
Ending assets under management
Advisory AUM represents long-term portfolio liquidation assignments.
Amounts for 2015 represent $1.3 billion of AUM acquired in the acquisition of certain assels of BlackRock Kelso Capital Advisors LLC ("BKCA") in March 2015, $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October
35
2015 The FutureAdvisor acquisition amount does not include AUM lhat was held in /Shares holdings Amounts for 2013 represent $16 0 billion of AUM acquired in the Credit Suisse ETF franchise in July 2013 (ihe "Credit Suisse ETF Transaction") and S11.0 billion of AUM acquired in Ihe MGPA acquisition In October 2013
(3) Foreign exchange reflects the impact of translating non-U S. dollar denominated AUM into U.S. dollars for reporting purposes.
BlackRock has historically grown AUM through organic growth and acquisitions. Management believes that the Company will be able to continue to grow AUM organically by focusing on strong inveslment performance, efficient delivery of beta for index products, client service, developing new products and optimizing distribution capabilities.
Component Changes in AUM for 2015
The following table presents the component changes in AUM by client type and product type for 2015.
(in millions)
Retail:
Equity
Fixed income
Multi-asset
Alternatives
Retail subtotal iShares:
Equity
Fixed income
Multi-asset
Alternatives
iShares subtotal
Institutional: Active:
Equity
Fixed income
Multi-asset
Altematives
Active subtotal Index:
Equity
Fixed income
Multi-asset
Alternatives
Index subtotal
December 31, 2014
200,445 189,820 125,341 18,723
534,329
790,067 217,671 1,773 14,717
125,143 518,590 242,913 72,514
959,160
1,335,456 467,572 7.810 5,286
1.816,124
Net inflows (outflows)
8,543 31,114 (1,307) 162
38,512
78.408 50,309 1,074 61
129,852
(462)-5,690 18,409 3,109
26.746
(33,711) (10,169) (1,009) 1,793
(43,096)
Acquisitions(l)
— $
366 1,293
1,659
560
Market change
(10,040) S (5,691 ) (8,108) (177)
(24,016)
(32,349) (7,508) (90) (2,160)
(42,107)
960 (1.220) 1,074 (175)
639
6,157 2,317 (289) (924)
7,261
(9,359)
(19,412)
(22,483) (18,623) (254) 052)
(41,512)
FX impact(2)
Full Year Average-AUM(3)
199,474 205,919 125,019 19,351
549,763
810,836 239,164 1.924 14.268
1,066.192
125,410 523,536 254,781 73,683
977,410
1,333,159 466,494 7,305 5.907
Institutional subtotal
Long-term
Cash management
Advisory(4)
Total
4,333,841
296,353 21,701
152,014
7,510 (9,629)
(94,536)
Amounts represent $1.3 billion of AUM acquired in the acquisition of certain assets of BKCA in March 2015, $560 million of AUM acquired in tho Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquiredin the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount docs not include AUM that was held in iSharos holdings.
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of.the month-end spot AUM amounts for the trailing thirteen months.
(4) • Advisory AUM represents long-term portfolio liquidation assignments. • • «
36
The following table presents component changes in AUM by product type for 7015.
(in millions)
Equity
Active iShares Non-ETF index
Equity subtotal
Fixed income:
Active iShares Non-ETF index
Fixed income subtotal
Multi-asset Altematives:
Core
Currency and commodities(4)
Alternatives subtotal
December 31, 2014
292,802 790,067 1,368,242
2,451,111
701,324 217,671 474,658
1,393,653 377,837
88,006 23.234
Net inflows (outflows)
4,210 78,408 (29,840)
52.778
35,928 50,309 (9,293)
76,944 17,167
4,080 1,045
Acquisitions^)
366 1,853
1,853
Market change
$ (7,738) . (32,349) 4,815
(35,272)
(6,907) (7,508) 2,313
(12,102) (7,413)
(213) (3,223)
(3,436)
FX impact(Z)
(7,955 (12,970 (23,920
(44.845
(10,692 (6,282 (19,153
(36,127 (11,621
(1,641 (302
(1,943
December.3.1Sj
ft¥j2"i423;7j'Z{'(l 2,468.879
722,023 239,164 473.926
1,435,113 389,029
90,077 23,132
Sg3gri^839Ta 113,209
Long-term
Cash management
Advisory(5)
4,333,841
296,353 21,701
$ 4,651,895
152,014
7,510 (9,629)
(94,536
267 461
(58,223)
(4,246 (2,320
2,219 t (57,495) $ (101,102
Amounts represent $1.3 billion of AUM acquired in the acquisition of certain assets of BKCA in March 2015, $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in Octoher 2015. The FutureAdvisor acquisition amount does not include AUM that was held in rShares holdings.
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
Amounts include commodity iShares
Advisory AUM represents long-term portfolio liquidation assignments.
The following table presents component changes in AUM by investment style for 2015.
(in millions)
Active
Index & iShares
December 31, 2014
1,453,613 2,860,228
Net inflows (outflows)
60,510 91.504
Acqulsltions(l)
2,219 $ (22,026) $ (31,644) (36,197) (62,892)
Full Year Average AUM(3)
Long-term
Cash management
Advisory(4)
4,333,841
296,353 21,701
152,014
7,510 (9,629)
267 461
2,219 (58,223) (94,536) MMrfBSSiSiB $ 4,406,230
(4,246) (2,320)
2,219 $ (57,495) $ (101.102)
Amounts represent $1.3 billion of AUM acquired in the acquisition of certain assets of BKCA in March 2015, $560 million of AUM acquired in the Infraestructura Institucional acquisition in October 2015 and $366 million of AUM acquired in the FutureAdvisor acquisition in October 2015. The FutureAdvisor acquisition amount docs not include AUM that was held in iShares holdings.
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
Advisory AUM represents long-term portfolio liquidation assignments.
AUM decreased $6.5 billion to $4,645 trillion at December 31, 2015 from $4,652 trillion at December 31, 2014 driven largely by foreign exchange movements and net market depreciation that more than offset organic growth.
Net market depreciation of $57.5 billion was driven by $35.3 billion from equity products due to lower U.S. and global equity markets and $12.1 billion from fixed income products.
AUM decreased $101.1 billion due to the impact of foreign exchange movements, primarily resulting from the strengthening ofthe U.S. dollar against the euro, the British pound and the Canadian dollar.
For further discussion on AUM, see 'Item 1. Business — Assets Under Management".
37
Component Changes in AUM for 2014
The following table presents the component changes in AUM by client type and product type for 2014.
(in millions)
Retail
Equity
Fixed income
Multi-asset
Altematives
Retail subtotal iShares.
Equity
Fixed income
Multi-asset
Altematives
/Shares subtotal Institutional: Active"
Equity
Fixed income
Multi-asset
Alternatives
Active subtotal Index:
Equity
Fixed income
Multi-asset
Alternatives
December 31, 2013
203,035 151,475 117,054 16,213
487,777
718.135 178,835 1,310 16,092
914,372
138.726 505.109 215,276 73,299
932,410
1,257,799 406.767 7,574 5,510
Net
Inflows (outflows)
1,582 $ 36.995 13,366
3,001
54,944
59,626 40,007 439 529
100,601
(18.648) (6.943) 15.B35 (664)
(10,420)
9,860 26,347 (735) 656
Market change
1,831 3,698 (4.080) 152
1.601
26.517 4,905 37 (1,722)
29.737
9.935 34,062 23,435
1,494
68,926
102,549 56,086 1,652 (693)
FX impact(1)
(20,482)
(4,870) (13.638) (11,633)
(1.615)
(31,756)
(34.752) (21,628) (681) (187)
Full Year Average AUM(2)
207,280 170,490 123,619 18.487
519,876
751,830 199.410 1.535 16.453
969.228
131.779 515,411 233,729 73,075
953,994
1,305.930 440.047 7,001 6,061
(57,248) fS^gHtSWiH^ 1,759,039
Institutional subtotal
Long-term
Cash management
Advisory(3)
Total
(89,004)
2,610.060
228.520
(119,479)
275,554 36,325
715 1,109
(5,612) (2,560)
25,708
181,253
25,696 (13,173)
S 4,324,088 $ 193,776 S 261,682 S (127,651) ijEM6&iI"9"5g!
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
Advisory AUM represents long-term portfolio liquidation assignments.
The following table presents component changes in AUM by product type for 2014.
tin millions)
Equity:
Active iShares Non-ETF index
Equity subtotal
Fixed income: Active iShares Non-ETF index
Fixed income subtotal
Mutti-asset Alternatives: Core
Currency and commodities(3)
Alternatives subtotal
Long-term
Cash management
Advisory(4)
December 31, 2013
317,262 718135 1.2B2.298
2,317.695
652.209 178,835 411,142
1,242.186 341,214
85,026 26,088
111,114
4,012,209
275,554 36,325
Full Year Average AUM(2)
Market change
FX impact(1)
(24,882) 59,626 17,676
9,867 26,517 104.448
(9.445) (14,211) (36,180)
Net inflows (outflows)
52,420
27,694 40,007 28,705
140,832
36,942 4,905 56,904
(59,836)
(15,521) (6.076) (22,093)
310,551 75.1.830 1,334.438
2,396,819
98.751 21,044
1.808 (2,577)
96,406 ' 28,905
3,061 461
(43.690) (13,326)
(1.889) (73B)
680,078 199,410 445,870
1,325.358 365,884
114,076
(769)
87,689 26,387
(2,627) ggea^Tzpe
715 1.109
(5.612) (2,560)
181,253 259,858 (119 479) (EB^Wafftli * 4,202.137
25,696 (13,173)
(127,651) lasffiftyjggsis
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
Amounts include commodity iShares.
Advisory AUM represents long-term portfolio liquidation assignments.
38
The following table presents component changes in AUM by investment style for 2014.
(in millions)
Active
Index & iShares
Long-term
Cash management
Advisory(3)
Total
Full Year Average AUMI2)
December 31, 2013
Market change
FX impactQ)
34,408 146.845
67,816 192,042
Net inflows (outflows)
s (39-851) 81&4£!$j£l S 1-439-474
4,012,209
181,253
(79,628) iSiiiSS;880}2Z5SI 2,762,663
275,554 36,325
25.696 (13,173)
715 1,109
(119,479) 3^';333T8jttS t 4,202,137
560) a&.iagrMfao.l'.S
t 4,324,088 t 193,776 $ 261,682 $ (127,651) t;»fc4;653f89'5!ij
Foreign exchange reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months
Advisory AUM represents long-term portfolio liquidation assignments.
AUM increased $327.8 billion, or 8%, to $4,652 trillion at December 31, 2014 from $4,324 trillion at December 31, 2013. The increase in AUM was driven by net market appreciation of $261.7 billion and net inflows of $193.8 billion, partially offset by foreign exchange movements.
Net market appreciation of $261.7 billion included $140.8 billion of growth in equity products primarily duo to higher U.S. equity markets, and appreciation of $98.6 billion and $21.0 billion in fixed income and multi-asset products, respectively, across the majority of strategies.
AUM decreased $127.7 billion from foreign exchange movements, primarily resulting from the strengthening of the U.S. dollar against the euro, the British pound and the Japanese yen.
DISCUSSION OF FINANCIAL RESULTS Introduction
BlackRock derives a substantial portion of its revenue from investment advisory and administration fees, which are recognized as the services are performed. Such fees are primarily based on predetermined percentages ofthe market value of AUM or percentages of committed capital during investment periods of certain alternative products and are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. Net inflows or outflows represent the sum of new client assets, additional fundings from existing clients (including dividend reinvestment), withdrawals of assets from, and termination of, client accounts and distributions to investors representing return of caprtal and return on investments to investors. Market appreciation or depreciation includes current income earned on, and changes in the fair value of, securities held in client accounts. Foreign exchange translation reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
BlackRock also earns revenue by lending securities on behalf of clients to highly rated banks and broker-dealers. The securities loaned are secured by collateral in the form of cash or securities, with minimum collateral generally ranging from approximately 102% to 112% of the value of the loaned securities. Generally, the revenue earned is shared between BlackRock and the funds or accounts managed by the Company from which the securities are borrowed. Historically, securities lending revenue in the second quarter exceeds the other quarters during the year driven by higher seasonal demand.
Investment advisory agreements for certain separate accounts and investment funds provide for performance fees based upon relative and/or absolute investment performance, in addition to base fees based on AUM. Investment advisory performance fees generally are earned after a given period of time and when investment performance exceeds a contractual threshold. As such, the timing of recognition of performance fees may increase the volatility of BlackRock's revenue and earnings. The magnitude of performance fees can fluctuate quarterly due to the timing of carried interest recognition on alternative products; however, the third and fourth quarters have a greater number of nonatternative products with performance measurement periods that end on either September 30 or December 31.
BlackRock provides a variety of risk management, investment analytic and investment system and advisory services to financial institutions, pension funds, asset managers, foundations, consultants, mutual fund sponsors, real estate investment trusts and government agencies. These services are provided under the brand name BlackRock Solutions and include a wide array of risk management services, valuation services related to illiquid securities, disposition and workout assignments (including long-term portfolio liquidation assignments), strategic planning and execution, and enterprise investment system outsourcing to clients. The Company's Aladdin operating platform serves as the investment/risk solutions system for BlackRock and other institutional investors. Fees earned for BlackRock Solutions and advisory services are determined using some, or aD, of the following methods: (i) percentages of various attributes of advisory AUM or value of positions on the Aladdin platform, (ii) fixed fees and (iii) performance fees if contractual thresholds are met.
BlackRock builds upon its leadership position to meet the growing need for investment and risk management solutions. Through its scale and diversity of products, it is able to provide its clients with customized solutions including fiduciary outsourcing for tabiiity-driven investments and overlay strategies for pension plan sponsors, balance sheet management and related services for insurance companies and target date and target return funds, as well as asset allocation portfolios, for retail investors. BlackRock is also able to service these clients via its Aladdin platform to provide risk management and other outsourcing services for institutional investors and custom and tailored solutions to address complex risk exposures.
The Company earns fees for transition management services primarily comprised of commissions from acting as a broker-dealer in connection with buying and selling securities on behalf of its customers. Commissions related to transition management services are recorded on a trade-date basis as securities transactions occur.
The Company also earns revenue related to certain strategic investments accounted for as equity method investments.
39
Operating expense reflects employee compensation and benefits, distribution and servicing costs, amortization of deferred sales commissions, direct fund expense, general and administration expense and amortization of finite-lived intangible assets.
¦ Employee compensation and benefits expense includes salaries, commissions, temporary help, deferred and incentive compensation, employer payroll taxes, severance and related benefit costs
Distribution and servicing costs, which are primarily AUM driven, include payments made to Mernii Lynch-affiliated entities under a global distribution agreement, to PNC and Barclays, as well as olher third parties, primarily associated with obtaining and retaining client investments in certain BlackRock products.
Direct fund expense primarily consists of third-party nonadvisory expense incurred by BlackRock related to certain funds for the use of index trademarks, reference data for indices, custodial services, fund administration, fund accounting, transfer agent services, shareholder reporting services, legal expense, audit and tax services as well as other fund-related expense directly attributable to the nonadvisory operations of the fund. These expenses may vary over time with fluctuations in AUM, number of shareholder accounts, or other attributes directly related to volume of business.
General and administration expense includes marketing and promotional, occupancy and office-related costs, portfolio services (including clearing expense related to transition management services), technology, professional services, communications, closed-end fund launch costs and other general and administration expense, including the impact of foreign currency remeasurement. Foreign currency remeasurement (gams) bsses were $(8) million, $(11) million and $1 million for 2015, 2014 and 2013, respectively.
Approximately 75% of the Company's revenue is generated in U.S. dollars. The Company's revenue and expense generated in foreign currencies (primarily the euro and British pound) are impacted by foreign exchange rates. Any effect of foreign exchange rate change on revenue is partially offset by a change in expense driven by the Company's considerable non-dollar expense base related to its operations outside the Uniled States.
Nonoperating income (expense) includes the effect of changes in the valuations on investments (excluding available-for-sale investments) and earnings on equity method investments as well as interest and dividend income and interest expense. Other comprehensive income includes changes in valuations related to avaitable-for-sale. investments. BlackRock primarily holds seed and co-investments in sponsored investment products that invest in a variety of asset classes, including private equity, hedge funds and real estate. Investments generally are made for co-investment purposes, to establish a performance track record or for regutatory purposes, including Federal Reserve Bank stock. BlackRock does not engage in proprietary trading activities that could conflict with the interests of Ms clients.
In addition, nonoperating income (expense) includes the impact of changes in the valuations of consolidated sponsored investment funds. The portion of nonoperating income (expense) not attributable to BlackRock is allocated to NCI on the consolidated statements of income.
Revenue
The following tab(e presents the Company's revenue for 2015, 2014 and 2013.
(in millions) 2015 2014 2013
Investment advisory, administration fees and securities lending revenue: Equity: Active iShares Non-ETF index $ 1,844 $ 1,741 2,705 2,390 677 594
Equity subtotal Fixed income: Active /Shares Non-ETF index MB 5,226 4,725 1,396 1,269 484 464 260 238
Fixed income subtotal Mutt basset Altematives: Core Currency and commodities 2,140 1,971 1,204 1,039 638 576 89 107
" Altematives subtotal 727 683
Long-term Cash management 9,297 8,418 292 321
Total base fees Investment advisory performance fees: Equity Fixed income Mutti-asset Altematives 9,589 8.739 111 91 31 25 32 24 376 421
Total performance fees BlackRock Solutions and advisory gfifl Distribution fees RjSE Other revenue pSS 550 561 635 577 70 73 237 230
mSm
Total revenue l^i£58£^H9TCft $ 11,081 $ 10,180
40
The table below lists the asset type mix of investment advisory, administration fees and securities lending revenue (collectively "base fees") and mix of average AUM by product type.
Mix of Base Fees Mix of Average AUM by Asset Class(l)
!&&20:i5S!gjgS> 2014 2013 WBifSfSSSg 2014 2013
Equity i^S^jSS' Ac.™ i^B&pa 18% 20 * iShares 28% 26% Non-ETF index fe.feS$4«t^5S 7% 7% mMMM 7% 7% ffi«i%!SSl7,% 17% 16% iiite 30% 29%
Equity subtotal fiSg^'iiisS'ZiS 53% 53% Fixed income: PMp%!^ Active WBjnWsS2& 15% 15% 'Shares pg^B^rgS 5% 5% Non-ETF index feSji^§3-S3.V.' 3% 3% &#$P$j6,% 15% 16% ]-?i§l$i$8§$ 4% 5% si^i^i'o% 10% 10%
Fixed income subtotal i^^-j^lrnf-S 23 % 23 % Multi-asset 13% 12% Altematives: t^S^S^a^R5* Core S&l^^7^ 7% 7% Currency and commodities K3ra&iij5i&1,%* 1 % 1 % ;3K:rS3!63H;%i 29% 31% 8% 7% B^PS 2% 2%
Alternatives subtotal WS&SZk&ffilliB 8% 8% 3% 3%
Long-term E^J^r^^^ 97% 96% Cash management SSesSMiKMff 3% 4% 8Slr^§L9gy.: 94% 93% W&wjRfi'y} 6% 7%
Total excluding Advisory AUM ffiSS^^HToSfc' 100% 100% VS;i'ft;g'3lWlS 100% 100%
(1) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.
41
2015 Compared with 2014
Revenue increased $320 million, or 3%, from 2014, driven by higher base fees and growth in performance fees.
Investment advisory, administration fees and securities lending revenue of $9.B40 million for 2015 increased S251 million from $9,589 million in 2014 primarily driven by organic growth, despite the impact of foreign exchange and market volatility. Securities lending revenue increased $36 million from 2014 to $513 million in 2015. reflecting an increase in average balances of securities on loan.
Investment advisory performance fees were $621 million in 2015 compared with $550 million in 2014. The current year reflected higher fees from equity products and strong 2015 performance from a single hedge fund with an annual performance measurement period that ended in the third quarter of 2015. The prior year reflected a large fee associated with the liquidation of a closed-end mortgage fund in 2014
BlackRock Solutions and advisory revenue in 2015 totaled $646 million compared with $635 million in 2014. The current year reflected higher revenue from Aladdin mandates and lower revenue from disposition-related advisory assignments. BlackRock Solutions and advisory revenue included $526 miiiion in Aiaddin revenue compared with $474 million in 2014.
2014 Compared with 2013
Revenue increased $901 million, or 9%, from 2013, reflecting growth in markets, long-term net inflows and strength in BlackRock Solutions and advisory revenue.
Investment advisory, administration fees and securities lending revenue of $9,589 million for 2014 increased $850 million from $8,739 million in 2013 due to higher long-term average AUM, reflecting organic growth and market appreciation. Securities lending revenue increased $30 million from 2013 to $477 million in 2014.
BlackRock Solutions and advisory revenue in 2014 totaled $635 million compared with $577 million in 2013. The year ended 2014 reflected higher revenue from Aladdin mandates and higher revenue from advisory assignments. BlackRock Solutions and advisory revenue included $474 million in Aladdin revenue compared with $433 million in-2013.
Expense
The following table presents the Company's expense for 2015, 2014 and 2013.
(in millions)
Expense, GAAP:
Employee compensation and benefits Distribution and servicing costs Amortization of deferred sales commissions Direct fund expense General and administration:
Marketing and promotional
Occupancy and office related
Portfolio services
Technology
Professional services
Communications
Regulatory, filing and license fees
Closed-end fund launch costs
Charitable Contribution
Reduction of indemnification asset
Other general and administration
Total general and administration expense
Amortization of intangible assets
Total expense, GAAP
Less non-GAAP expense adjustments:
Employee compensation and benefits: PNC LTIP funding obligation
Compensation expense related to appreciation (depreciation) on deferred
compensation plans
Subtotal General and administration:
Reduction of indemnification asset
Charitable Contnbution
Subtotal
Total non-GAAP expense adjustments
Expense, as adjusted:
Employee compensation and benefits Distribution and servicing costs Amortization of deferred sales commissions Direct fund expense General and administration
Amortization of intangible assets
Total expense, as adjusted
42
2015 Compared with 2014
GAAP. Expense increased $130 million, or 2%, from 2014, primarily reflecting higher revenue-related expense, including compensation and benefits expense, and distribution and servicing costs, partially offset by lower general and administration expense and amortization of intangible assets. Expense for 2014 included an expense related to a S50 million reduction of an indemnification asset.
Employee compensation and benefits expense increased $176 million, or 5%, to $4,005 million in 2015 from $3,829 million in 2014, reflecting higher headcount, and higher incentive and deferred compensation, partially offset by the impact of foreign exchange movements. Employees at December 31, 2015 totaled approximately 13,000 compared with approximately 12,200 at December 31, 2014.
Distribution and servicing costs totaled $409 million in 2015 compared with $364 million in 2014. These costs included payments to Bank of America/Merrill Lynch under a global distribution agreement and payments to PNC, as well as other third parties, primarily associated with the distribution and servicing of client investments in certain BlackRock products. Distribution and servicing costs for 2015 and 2014 included $194 million and $183 million, respectively, attributable to Bank of America/Mernll Lynch.
General and administration expense decreased $73 million from 2014, primarily reflecting the previously mentioned S50 million reduction of an indemnification asset, lower marketing and promotional expense, and lower legal and regulatory expense, partially offset by the impact of transaction-related expense.
Amortization of intangible assets expense decreased S29 million, or 18%, to $128 million in 2015 from S157 million in 2014, reflecting certain finite-lived intangible assets becoming fully amortized.
As Adjusted. Expense, as adjusted, increased $188 million, or 3%. to $6,706 million in 2015 from $6,518 million in 2014. The increase in total expense, as adjusted, is primarily attributable to higher revenue-related expense, including compensation and benefits expense and distribution and servicing costs, partially offset by lower amortization of intangible assets and lower general and administration expense. Amounts related to the reduction of the indemnification asset in 2014 have been excluded from as adjusted results.
2014 Compared with 2013
GAAP. Expense increased S284 miHion, or 4%, from 2013, primarily reflecting higher revenue-related expenses, including compensation and direct fund expense and a $50 million reduction of an indemnification asset. Expense for 2013 included the $124 million expense related to the Charitable Contribution.
Employee compensation and benefits expense increased $269 million, or 8%, to $3,829 million in 2014 from $3,560 million "m 2013, reflecting higher headcount and higher incentive compensation driven by higher operating income. Employees at December 31, 2014 totaled approximately 12,200 compared with approximately 11,400 at December 31, 2013.
Distribution and servicing costs totaled $364 million in 2014 compared with $353 million in 2013. Distribution and servicing costs for 2014 and 2013 included $183 million and $184 million, respectively, attributable to Bank of America/Merrill Lynch.
Direct fund expense increased $91 mSlion, reflecting higher average AUM, primarily related to iShares, where BlackRock pays certain nonadvisory expense of the funds.
General and administration expense decreased $87 million, primarily due to the $124 million related to the Charitable Contribution incurred in 2013 and foreign currency remeasurement. partially offset by the $50 million reduction of an indemnification asset.
As Adjusted. Expense, as adjusted, increased $362 million, or 6%, to $6,518 million in 2014 from $6,156 million in 2013. The increase in total expense, as adjusted, is primarily attributable to higher employee compensation and benefits and direct fund expense. Amounts related to the reduction of the indemnification asset and the Charitable Contribution have been excluded from as adjusted results.
NONOPERATING RESULTS
Nonoperating income (expense), less net income (loss) attributable to NCI for 2015, 2014 and 2013 was as follows:
(in millions)
Nonoperating income (expense), GAAP basis Loss: Net income (loss) attributable to NCI(t)
Nonoperating income (expense){2)
Gain related to the Charitable Contribution
Compensation expense related to (appreciation) depreciation on deferred compensation
plans
Nonoperating income (expense), as adjusted(2)
(1) Amounts included a gain of $58 million and a loss of $41 million attributable to consolidated variable interest entities ("VIEs") for 2015 and 2014, respectively. During 2013, the Company did not record any nonoperating income (loss) or net income (loss) attributable to VIEs on the consolidated statements of income.
(2) Net of net income (loss) attnbutable to NCI.
43
The components of nonoperating income (expense), less net income (loss) attributable to NCI for 2015. 2014 and 2013 were as follows
(in millions)
Net gain (loss) on investments! 1) Private equity Real estate Other alternatives!^) Other investmcnts(3)
Subtotal
Other gainst)
Gain related to the PennyMac IPO
Gain related to the Charitable Contnbution
Investments related to deferred compensation plans
Total not gain (loss) on investments(l)
Interest and dividend income
Interest expense
Net interest expense
Total nonoperating income (expense)(1) Gain related to the Charitable Contribution
Compensation expense related to (appreciation) depreciation on deferred compensation
plans
Nonoperating income (expense), as adjusted(1)
69 16 55 7
154 29 (232)
(203)
(49)
(7)
(56)
52 24 65 16
39 80 10
286 22 (211)
(189)
97 (80)
(10)
Net of net income (loss) altnbutable to NCI. Amounts for 2015 also include net gain (loss) on consolidated VIEs.
Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions. The prior year periods also included net gains related to opportunistic credit strategies.
Amounts include net gains (losses) related to equity and fixed income investments, and BlackRock's seed capital hedging program.
The amount for 2015 pnmanly includes a gain related to the acquisition of certain assets of BKCA.
2015 Compared with 2014
BlackRock Kelso Capital Advisors LLC. On March 6, 2015. BlackRock acquired certain assets related to managing BlackRock Capital Investment Corporation (formerly known as BlackRock Kelso Capital Corporation) from BKCA. In connection with the acquisition, BlackRock recorded a noncash, nonoperating, pre-tax gain of $40 million related to the fair value of its pre-existing interest in BKCA See Note 9, Goodwill, and Note 10, Intangible Assets, for further discussion on the BKCA acquisition.
Net gains on investments of $109 million in 2015 decreased $45 million from 2014 due to lower net positive marks in 2015. Net gains on investments in 2015 included a $40 million gain related to the BKCA acquisition and a $35 million unrealized gain on a private equity investment. Net gains on investments in 2014 included the positive impact of the monetization of a nonstrategic, opportunistic private equity investment.
Interest expense decreased $28 million from 2014 primarily due to repayments of long-term borrowings in the fourth quarter of 2014.
2014 Compared with 2013
Net gains on investments of $154 million in 2014 decreased $132 million from 2013. Net gains on investments in 2013 included the noncash, nonoperating pre-tax gain of $80 mftion related to tho Charitable Contribution and the $39 miSion pre-tax gain related to the PennyMac IPO. Net gains on investments in 2014 included the positive impact ofthe monetization of a nonstrategic, opportunistic private equity investment.
Net interest expense increased $14 million from 2013 primarily due to higher interest expense resulting from a long-term debt issuance in March 2014. For further information on the Company's long-term debt, see Liquidity and Capital Resources herein.
Income Tax Expense
(in millions)
Income before income taxesO) Income tax expense Effective tax rate
(1) Net of net incomo (loss) attributable to NCI.
The Company's tax rate is affected by tax rates in foreign jurisdictions and the relative amount of income earned in those jurisdictions, which the Company expects to be fairly consistent in the near term. The significant foreign jurisdictions, which have lower statutory tax rates than the U.S. federal statutory rate of 35%, include the United Kingdom, Channel Islands, Canada and the Netherlands. U.S. income taxes were not provided for certain undistributed foreign earnings intended to be indefinitely reinvested outside the United States.
44
2015. Income tax expense (GAAP) reflected:
o a net noncash benefit of $54 million, primarily associated with the revaluation of certain deferred income tax liabilities; and
o a benefit from $75 million of nonrecurring items.
The as adjusted effective tax rate of 28.4% for 2015 excluded the net noncash benefit of $54 million mentioned above, as it will not have a cash flow impact and to ensure comparability among periods presented.
2014. Income tax expense (GAAP) reflected
o a $94 million tax benefit, primarily due to the resolution of certain outstanding tax matters related to the acquisition of BGI, including the previously mentioned $50 million tax benefit (see Executive Summary for more information);
o a $73 million net tax benefit related to several favorable nonrecurring items, and
o a net noncash benefit of $9 million associated with the revaluation of deferred income tax liabilities.
The as adjusted effective tax rate of 26.6% for 2014 excluded the S9 million net noncash benefit as it will not have a cash flow impact and to ensure comparability among periods presented and $50 million tax benefit mentioned above. The $50 million general and administrative expense and $50 million tax benefit have been excluded from as adjusted results as there is no impact on BlackRock's book value.
2013. Income tax expense (GAAP) reflected:
o a $69 million net noncash benefit primarily related to the revaluation of certain deferred income tax liabilities related to intangible assets and goodwil, including the effect of legislation enacted in the United Kingdom and domestic state and local income tax changes;
o a tax benefit of approximately $48 million recognized in connection with the Charitable Contribution; and
o a tax benefit of approximately $29 million, primarily due to the realization of tax loss carryforwards, and benefits from certain nonrecurring items.
The as adjusted effective tax rate of 28.5% for 2013 excluded the $69 million net noncash benefit and the $48 million tax benefit related to the Charitable Contribution mentioned above.
BALANCE SHEET OVERVIEW As Adjusted Balance Sheet
The following table presents a reconciliation of the consolidated statement of financial condition presented on a GAAP basis to the consolidated statement of financial condition, excluding the impact of separate account assets and separate account collateral held under securities lending agreements (directly related to lending separate account securities) and separate account liabilities and separate account collateral liabilities under securities lending agreements and consolidated sponsored investment funds, including consolidated VIEs.
The Company presents the as adjusted balance sheet as additional information to enable investors to exclude certain assets that have equal and offsetting liabilities or noncontrolling interests that ultimately do not have an impact on stockholders' equity or cash flows. Management views the as adjusted balance sheet, a non-GAAP financial measure, as an economic presentation of the Company's total assets and liabilities; however, it does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Separate Account Assets and Liabilities and Separate Account Collateral Held under Securities Lending Agreements
Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company, which is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. The Company records equal and offsetting separate account (abilities. The separate account assets are not available to creditors of the Company and the holders of the pension contracts have no recourse to the Company's assets. The net investment income attributable to separate account assets accrues directly to the contract owners and is not reported on the Company's consolidated statements of income. While BlackRock has no economic interest in these assets or liabilities, BlackRock earns an investment advisory fee for the service of managing these assets on behalf of its clients.
In addition, the Company records on its consolidated statements of financial condition the separate account collateral received under BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting separate account collateral liability for the obligation to return the collateral. The colateral is not available to creditors of the Company, and the borrowers under the securities lending arrangements have no recourse to the Company's assets.
Consolidated Sponsored Investment Funds
The Company consolidates certain sponsored investment funds accounted for as voting rights entities ("VREs') and VIEs, (collectively, "Consolidated Sponsored Investment Funds"). See Note 2, Significant Accounting Policies, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K for further information ofthe Company's consolidation policy.
45
The Company cannot readify access cash and cash equivalents or other assets held by Consolidated Sponsored Investment Funds to use in its operating activities. In addition, the Company cannot readily sell investments held by Consolidated Sponsored Investment Funds in order to obtain cash for use in the Company's operations.
December 31, 2015
(in millions)
Assets
Cash and cash equivalents Accounts receivable Investments
Assets of consolidated VIEs-Cash and cash equivalents Investments Other assets
Separate account assets and collateral held under secunties
lending agreements
Other assets(3)
Subtotal
Goodwill and intangible assets, net
GAAP Basis
Separate Account Assets/ Collateral*.!)
Consolidated Sponsored Investment Funds(2)
As Adjusted
Total assets
Liabilities
Accrued compensation and benefits Accounts payable and accrued liabilities Liabilities of consolidated VIEs Borrowings
Separate account liabilities and collateral liabilities under
Total liabilities Equity
Total stockholders' equity
Noncontrotting interests
Total equity
securities lending agreements Deferred income tax liabilities^) Other liabilities
Total liabilities and equity
Amounts represent segregated client assct& generating advisory fees in which BlackRock has no economic interest or liability.
Amounts represent the portion of assets and liabilities of Consolidated Sponsored Investment Funds attnbutable to NCI.
Amounts include property and equipment and other assets. > -
Amount includes approximately $5.6 billion of defened income tax liabilities related to goodwill and intangibles. See Note 20, Income Taxes, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K for more information.
The following discussion summarizes the significant changes in assets and liabilities on a GAAP basis. Please see the consolidated statements of financial condition as of December 31, 2015 and 2014 contained in Part II, Item 8 of this filing. The discussion does not include changes related to assets and liabilities that are equal and offsetting and have no impact on BlackRock's stockholders' equity.
Assels. Cash and cash equivalents at December 31, 2015 and 2014 included $100 million and $120 million, respectively, of cash held by consolidated sponsored investment funds (see Liquidity and Capital Resources tor details on the change in cash and cash equivalents during 2015).
Accounts receivable at December 31, 2015 increased $117 million from December 31, 2014 due to an increase in unit trust receivables (substantially offset by an increase in unit trust payables recorded within accounts payable and accrued liabilities) and higher performance fee receivables. Investments were $1,578 million at December 31, 2015 (for more information see Investments herein). Goodwill and intangible assets increased $190 million from December 31,2014, primarily due to the BKCA, Infraestructura Institucional and FutureAdvisor acquisitions, partially offset by $128 million of amortization of intangible assets. Other assets (including property, plant and equipment) increased $284 million from December 31, 2014, primarily related to an increase in property and equipment, higher earnings from certain strategic investments, and an increase in current taxes receivable.
Liabilities. Accrued compensation and benefits at December 31, 2015 increased $106 million from December 31, 2014, primarily due to 2015 incentive compensation accruals. Accounts payable and accrued liabilities at December 31, 2015 increased $33 million from December 31, 2014 due to higher unit trust payables (substantially offset by an increase in unit trust receivables recorded within accounts receivable) and increased accruals, partially offset by a decrease in current income taxes payable.
Net deferred income tax liabilities at December 31, 2015 decreased $138 million, primarily due to the effects of temporary differences associated with stock compensation, tho BKCA acquisition, realization of loss carryforwards, and goodwill and intangibles. Other liabilities increased $147 million from December 31, 2014, primarily resulting from an increase in uncertain tax positions and consolidated funds liabilities.
46
Investments and Investments of Consolidated VIEs
The Company's investments and investments of consolidated VIEs (collectively, "Total Investments") were $1,578 million and S 1,030 million, respectively, at December 31, 2015. Total Investments include consolidated investments held by sponsored investment funds accounted for as VREs and VIEs. Management reviews BlackRock's Tolal Investments on an "economic" basis, which eliminates the portion of Total Investments that does not impact BlackRock's book value or net income attributable to BlackRock. BlackRock's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
The Company presents Total Investments, as adjusted, to enable investors to understand the portion of its Total Investments that is owned by the Company, net of NCI, as a gauge to measure the impact of changes in net nonoperating income (expense) on investments to net income (loss) attributable to BlackRock.
The Company further presents net "economic" investment exposure, net of deferred compensation investments and hedged investments, to reflect another gauge for investors. The economic impact of Total Investments held pursuant to deferred compensation arrangements is substantially offset by a change in compensation expense. The impact of certain investments is substantially mitigated by swap hedges. Carried interest caprtal allocations are excluded as there is no impact to BlackRock's stockholders' equity until such amounts are realized as performance fees Finally, the Company's regulatory investment in Federal Reserve Bank stock, which is not subject to market or interest rate risk, is excluded from the Company's net economic investment exposure.
(in millions)
Investments, GAAP
Investments held by consolidated VIEs, GAAP(1)
Total Investments Investments held by consolidated VREs Investments held by consolidated VIEs Net interest in consolidated VREs Net interest in consolidated VIEs(2)
Total Investments, as adjuste'd
Federal Reserve Bank stock
Defened compensation investments
Hedged investments
Camed interest (VIEs/VREs)
December 31, 2014
1,921 3,320
5,241
(713) (3,320) 696
1,904 (92) (85) (323) (85)
Total "economic" investment exposure
Amounts represent investments held in sponsored investment funds that are consolidated in accordance with GAAP as either a VIE or VRE. See Note 2. Significant Accounting Policies, for further information on the Company's consolidation policy and the 2015 adoption of ASU 2015-02.
Amount includes $81 million of earned Interest (VIEs). which has no impact on tho Company's "economic" investment exposure.
Thefolowing table represents the carrying value of the Company's economic investment exposure, by asset type, at December 31, 2015 and 2014:
(in millions)
Private equity Real estate Other attematives(1) Other investments{2)
Total "economic" investment exposure
December 31, 2014
314 117 289 599
1.319
Other altematives include distressed credit/mortgage funds/opponunistic funds and hedge funds/funds of hedge funds.
Other investments pnmarily include seed investments in fixed income, equity and multi-asset mutual funds/strategics as well as U.K. government secunties, pnmanly held for regulatory purposes. As adjusted investment activity for 2015 was as follows:
(in millions) • ...
Total Investments, as adjusted, December 31,2014 $ 1,904
Purchases/capital contributions 1.300
Sales/maturities (847)
Distributions (1) (169)
Market appreciation(depreciation)/eamings from equity method investments 24
Carried interest capital allocations/distnbutions received 15
(1) Amounts include distnbutions representing return of capital and return on investments.
LIQUIDITY AND CAPITAL RESOURCES
BlackRock Cash Flows Excluding the Impact of Consolidated Sponsored Investment Funds
The consolidated statements of cash flows include the cash flows of the Consolidated Sponsored Investment Funds. The Company uses an adjusted cash flow statement, which excludes the impact of Consolidated Sponsored Investment Funds, as a supplemental non-GAAP measure to assess liquidity and capital requirements. The Company believes that its cash flows, excluding the impact of the Consolidated
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Sponsored Investment Funds, provide investors with useful information on the cash flows of BlackRock relating to its ability to fund additional operating, investing and financing activities. BlackRock's management does not advocate that investors consider such non-GAAP measures in isolation from, or as a substitute for, its cash flows presented in accordance with GAAP.
The following table presents a reconciliation of tho consolidated statements of cash flows presented on a GAAP basis to the consolidated statements of cash flows, excluding the impact of the cash flows of Consolidated Sponsored Investment Funds.
(in millions)
Cash and cash equivalents, December 31, 2013
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
GAAP Basis
4,390 3.087 239 (1.861) 032)
Impact on Cash Flows of Consolidated Sponsored Investment Funds
114
(534) (174) 714
Cash Flows Excluding Impact of Consolidated Sponsored Investment Funds
4,276 3.621
413 (2.575)
(132)
Net change in cash and cash equivalent:
Cash and cash equivalents, December 31, 2014
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, December 31, 2015
Sources of BlackRock's operating cash primariy include investment advisory, administration fees and securities lending revenue, performance fees, revenue from BlackRock Solutions and advisory products and services, other revenue and distribution fees. BlackRock uses its cash to pay all operating expense, interest and principal on borrowings, income taxes, dividends on BlackRock's capital stock, repurchases of the Company's stock, capital expenditures and purchases of co-investments and seed investments.
Cash flows from operating activities, excluding the impact of Consolidated Sponsored Investment Funds, primarily include the receipt of investment advisory and administration fees, securities lending revenue and other revenue offset by the payment of operating expenses incurred in the normal course of business, including year-end incentive compensation accrued for in the prior year.
Cash outflows from investing activities, excluding the impact of Consolidated Sponsored Investment Funds, for 2015 were $309 million and primariy reflected $412 milion of investment purchases, $221 milion of purchases of property and equipment and $273 million related to certain acquisitions, partially offset by $531 million of net proceeds from sales and maturities of certain investments.
Cash outflows from financing activities, excluding the impact of Consolidated Sponsored Investment Funds, for 2015 were $2,548 milion, primarily resulting from $1.3 billion of share repurchases, including $1.1 billion in open-market transactions and $231 million of employee tax withholdings related to employee stock transactions and $1.5 billion of cash dividend payments, partially offset by $126 milion of proceeds from stock options and $105 million of excess tax benefits from vested stock-based compensation awards.
The Company manages its financial condition and funding to maintain appropriate liquidity for the business. Liquidity resources at December 31, 2015 and 2014 were as follows:
(in millions)
Cash and cash equtvalents(l)
Cash and cash equivalents held by consolidated sponsored investment funds, excluding VIEs(2)
Subtotal
Credit facility — undrawn
Total liquidity resources(3)
December 31, 2014
5,723 (120)
5.603 3.990
9,593
The percentage of cash and cash equivalents held by the Company's U.S. subsidiaries was approximately 50% at both December 31, 2015 and 2014. See Net Capital Requirements herein for more information on net capital requirements in certain regulated subsidiaries.
The Company cannot readily access such cash to use in its operating activities.
Amounts do not reflect year-end incentive compensation accruals of approximately $1.5 billion and $1.4 billion for 2015 and 2014, respectively, which were paid in February of the following year.
Total liquidity resources increased $390 milion during 2015, primariy reflecting cash from operations, partialy offset by cash payments of 2014 year-end Incentive awards, share repurchases of $1.3 billion and cash dividend payments.
A significant portion of the Company's $2,227 million of Total Investments, as adjusted, is illiquid in nature and, as such, cannot be readily convertible to cash.
Share Repurchases. The Company repurchased 3.1 million common shares in open market-transactions under the share repurchase program for approximately $1.1 billion during 2015. At December 31,2015, there were 6.3 million shares still authorized to be repurchased.
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Net Capital Requirements. The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions, including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.
BlackRock Institutional Trust Company, N.A. ("BTC") is chartered as a national bank that does not accept client deposits and whose powers are limited to trust activities. BTC provides investment management services, including investment advisory and securities lending agency services, to institutional investors and other clients. BTC is subject to regulatory capital and liquid asset requirements administered by tho Office of the Comptroller of the Currency.
At both December 31, 2015 and 2014, the Company was required to maintain approximately $1.1 billion in net capital in certain regulated subsidiaries, including BTC. entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom, and the Company's broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.
Undistributed Earnings of Foreign Subsidiaries. As of December 31, 2015, the Company has not provided for U.S. federal and state income taxes on approximately $4.7 billion of undistributed earnings of its foreign subsidiaries. Such earnings are considered indefinitely reinvested outside the United States. The Company's current plans do not demonstrate a need to repatriate these funds.
Short-Term Borrowings
2015 Revolving Credit Facility. In April 2015, the Company's credit facility was further amended to extend the maturity date to March 2020 and to increase the amount of the aggregate commitment to $4.0 billion (the "2015 credit facility"). The 2015 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 2015 credit facility to an aggregate principal amount not to exceed $5.0 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 2015 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at December 31, 2015. The 2015 credit facility provides back-up liquidity to fund ongoing working caprtal for general corporate purposes and various investment opportunities. At December 31, 2015, the Company had no amount outstanding under the 2015 credit facility.
Commercial Paper Program. The maximum aggregate amount for which the Company could issue unsecured commercial paper notes (the "CP Notes") on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0 billion as amended in April 2015. The commercial paper program is currently supported by the 2015 credit facility. At December 31, 2015, BlackRock had no CP Notes outstanding.
Long-Term Borrowings.
The carrying value of long-term borrowings at December 31, 2015 included the following:
(in millions)
6.25% Notes 5.00% Notes 4.25% Notes 3.375% Notes 3.50% Notes 1.25% Notes
Maturity Amount
700 1,000
750
750 1.000
760
Carrying Value
699 997 745 744 992 753
Maturity
September 2017 December 2019 May 2021 June 2022 March 2024 May 2025
Total Long-term Borrowings
During 2015, the Company fully repaid $750 million of 1.375% notes at maturity. In May 2015, the Company issued £700 million of 1.25% senior unsecured notes maturing in May 2025. Upon conversion to U.S. dollars the Company designated the €700 milion debt offering as a net investment hedge to offset its currency exposure relating to its net investment in certain euro functional currency operations. For more information on Company's borrowings, see Note 12, Borrowings, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K.
Contractual Obligations, Commitments and Contingencies
The folowing table sets forth contractual obligations, commitments and contingencies by year of payment al December 31, 2015:
(in millions) ,
Contractual obligations and commitments:
Long-term borrowings:
Principal
Interest Operating leases Purchase obligations Investment commitments
Total contractual obligations and commitments
Contingent obligations:
Contingent distribution obligations
Contingent payments related to business acquisitions(l)
Total contractual obligations, commitments and
contingent obligations(2)
196 134 79 179
588
185 12
785
2017
700 196 133 50
1,079
1,087
— $ 152 131 2
285
21
1,000 $ 152 125
1,277
10
102 120
234
Thereafter
224 560
4,044
4,044
Total
4,960 1,022 1.203 131 179
7,495
185 63
7,743
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The amount ot contingent payments reflected for any year represents the expected payment amounts using foreign currency exchange rates as of December 31. 2015 under the terms of the business acquisrtion's agreement. The fair value of the contingent obligations is not significant to the consolidated statement of financial condition and IS recorded within other liabilities.
At December 31, 2015. the Company had approximately $350 million of net unrecognized tax benefits Due to the uncertainty of timing and amounts that wtli ultimately be paid, this amount has been excluded from the table above.
Operating Leases. The Company leases its primary office locations under agreements that expire on varying dates through 2035. In connection with certain lease agreements, the Company is responsible for escalation payments. The contractual obligations table above includes only guaranteed minimum lease payments for such leases and does not project potential escalation or other lease-related payments. These leases are classified as operating leases and, as such, are not recorded as liabilities on the consolidated statements of financial condition.
Purchase Obligations. In the ordinary course of business, BlackRock enters into contracts or purchase obligations with third parties whereby the third parties provide services to or on behalf of BlackRock. Purchase obligations included in the contractual obligations table above represent executory contracts, which are either noncancelable or cancelable with a penalty. At December 31, 20i5, the Company's obligations primarily reflected standard service contracts for portfolio services, market data, office-related . services and third-party marketing and promotional services, and obligations for equipment. Purchase obligations are recorded on the consolidated financial statements when services are provided and, as such, obligations for services and equipment not received are not included in the consolidated statement of financial condition at December 31, 2015.
Investment Commitments. At December 31, 2015, the Company had $179 million of various caprtal commitments to fund sponsored investment funds, including consolidated VIEs. These funds include private equity funds, real estate funds, infrastructure funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. In addition to the capital commitments of $179 million, the Company had approximately $38 million of contingent commitments for certain funds which have investment periods that have expired. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. Tho Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.
Contingent Distribution Obligations. In November 2010, BlackRock entered into a second amended and restated global distribution agreement with Merrill Lynch, which requires the Company .to make payments to Merrill Lynch contingent upon sales of products and level of AUM maintained in certain BlackRock products. The initial term of the agreement remained in effect until January 2014 and was renewed for one automatic three-year extension.
Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject .to the.acquired
businesses achieving specified performance targets over a certain period, subsequent to the applicable acquisition date.
The fair value of the remaining aggregate contingent payments at December 31, 2015 is included in other liabilities and is not significant to the consolidated statement of financial condition.
The following items have not been included in the contractual obligations, commitments and contingencies table:
Carried Interest Clawback. As a general partner in certain investment funds, including private equity partnerships and certain hedge funds, the Company may receive carried interest cash distributions from the partnerships in accordance with distribution provisions of the partnership agreements. The Company may. from time to time, be required to return all or a portion of such distributions to the limited partners in the event the limited partners do not achieve a return as specified in the various partnership agreements. Therefore. BlackRock records carried interest subject to such clawback provisions in Total Investments, or cash/cash of consoSdated VIEs to the extent that it is distributed, and as a deferred carried interest Eability/other liabilities of consolidated VIEs on its consolidated statements of financial condition. Carried interest is recorded as performance fees on BlackRock's consoidated statements of income upon the earlier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.
Indemnifications: In the ordinary course of business or in connection with certain acquisition agreements, BlackRock.enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote and, therefore, has not been included in the table above or recorded in the consolidated statement of financial condition at December 31, 2015. See further discussion in Note 13, Commitments and Contingencies, to the consoidated financial statements beginning on page F-1 of this Form 10-K.
On behalf of certain clients, the Company lends securities to highly rated banks and broker-dealers. In these securities lending transactions, the borrower is required to provide and maintain collateral at or above regulatory minimums. Securities on loan are marked to market daily to determine if the borrower is required to pledge additional collateral. BlackRock has issued certain indemnifications to certain securities lending clients against potential loss resulting from a borrower's failure to fuffiS its obigations under the securities lending agreement should the value.of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower's obligation under the securities lending agreement. At December 31, 2015, the Company indemnified certain of its clients for their securities lending loan balances of approximately $169.3 billion. The Company held, as agent, cash and securities totaling $179.6 billion as collateral for indemnified securities on loan at December 31, 2015. The fair value of these indemnifications was not material at December 31, 2015.
While the collateral pledged by a borrower is intended to be sufficient to offset the borrower's obligations to return securities borrowed and any other amounts owing to the lender under the relevant securities lending agreement, in the event of a borrower default, the Company can give no assurance that the collateral pledged by the borrower wii be sufficient to fulfill such obligations. If the amount of such pledged collateral is not sufficient to fulfill such obligations to a client for whom the Company has provided indemnification, BlackRock would be responsible for the amount of the shortfall. These indemnifications cover only the collateral shortfall described above, and do not in any way guarantee, assume or otherwise insure the investment performance or return of any cash collateral vehicle into which securities lending cash collateral is invested.
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Compensation and Benefit Obligations. The Company has various compensation and benefit obligations, including bonuses, commissions and incentive payments payable, defined contribution plan matching contribution obligations, and deferred compensation arrangements, that are excluded from the contractual obligations and commitments table above. Accrued compensation and benefits at December 31, 2015 totaled $1,971 million and included incentive compensation of $1,452 million, deferred compensation of S266 million and other compensation and benefits related obligations of $253 million. Substantially all of the incentive compensation liability was paid in the first quarter of 2016, while the deferred compensation obligations are generally payable over periods of up to five years.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ significantly from those estimates. Management considers the following critical accounting policies important to understanding the consolidated financial statements. For a summary of these and additional accounting policies see Note 2, Significant Accounting Policies, in the consolidated financial statements beginning on page F-1 of this Form 10-K.
Consolidation
In the normal course of business, the Company is the manager of various types of sponsored investment vehicles. The Company performs an analysis for investment products to determine if the product is a VIE or a VRE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis. Factors considered in this assessment include the entity's legal organization, the entity's capital structure and equity ownership, and any related party or de facto agent implications of the Company's involvement with the entity. Investments that are determined to be VREs are consolidated if the Company can exert control over the financial and operating policies of the investee, which generally exists if there is greater than 50% voting interest. See Note 4, Consolidated Voting Right Entities, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K for more information. Investments that are determined to be VIEs are consolidated if the Company is the primary beneficiary ("PB") ofthe entity.
At December 31, 2015, BlackRock was determined to bo the PB for certain investment products that were determined to be VIEs, which required BlackRock to consolidate them. BlackRock was deemed to be the PB because it has the power to direct the activities lhat most significantly impact the entities' economic performance and has the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. See Note 5, Variable Interest Entities, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K for more information.
See Note 2, Significant Accounting Policies — Accounting Pronouncements Adopted in 2015, in the notes to the consolidated financial statements beginning on page F-1 of this Form 10-K for more information on ASU 2015-02.
Investments
Equity Method Investments. For equity investments where BlackRock does not control the investee, and where it is not the PB of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of its investees requires significant judgment based on the facts and circumstances surrounding each individual investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms and structure of the investment agreement, including investor voting or other rights, the terms of BlackRock's advisory agreement or other agreements with the investee, any influence BlackRock may have on the governing board of the investee, the legal rights of other investors in the entity pursuant to the fund's operating documents and the relationship between BlackRock and other investors in the entity.
BlackRock's equity method investees that are investment companies record their underlying investments at fair value. Therefore, under the equity method of accounting, BlackRock's share of the investee's underlying net income predominantly represents fair value adjustments in the investments held by the equity method investees. BlackRock's share of the investee's underlying net income or loss is based upon the most currently available information and is recorded as nonoperating income (expense) for investments in investment companies, or as other revenue for certain strategic investments, which are recorded in other assets, since such investees are considered to be an extension of BlackRock's core business.
At December 31, 2015, the Company had $527 million and $265 million of equity method investments, including equity method investments held for deferred compensation, reflected within investments and other assets, respectively, and at December 31, 2014, the Company had $654 million and $208 million of equity method investees reflected in investments and other assets, respectively.
Impairments ofinvestments. Management periodically assesses equity method, available-for-sale, held-to-maturity and cost investments for other-than-temporary Impairment ("OTTI"). If an OTTI exists, an impairment charge is recorded in nonoperating income (expense) on the consolidated statements of the income.
For equity method, held-to-maturity and cost method investments, if circumstances indicate that an OTTI may exist, the investments are evaluated using market values, where avalable, or the expected future cash flows of Ihe investment. If the Company determines an OTTI exists, an impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.
For available-for-sale securities, when the fair value is lower than cost, the Company considers, among other factors, the length of time the security has been in a loss position, the extent to which the security's fair value is less than cost, the financial condition and near-term prospects of the security's issuer and the Company's ability and intent to hold the security for a length of time sufficient to allow for recovery of such unrealized losses. For equity securities, if the impairment is considered other-than-temporary, an impairment charge is recognized for the excess of the carrying amount of the investment over its fair value. For debt securities, the Company considers whether: (1) it has the intent to set! the security; (2) it is more likely than not that it will be required to sell the security before recovery; or (3) it expects to recover the entire amortized cost basis ofthe security. If the Company intends to sell the security or it is more likely than not that it will be required to sell the
51
security, the entire difference between the amortized cost and fair value must be recognized in earnings. If the Company does not intend to sell a security and it is not more likely than not that it will be required to sell the security but the security has suffered an impairment related to credit, the credit loss will be bifurcated from the total decline in value and recorded in earnings with the remaining portion recorded in accumulated other comprehensive income.
For the Company's investments in CLOs, the Company reviews cash flow estimates over the life of each CLO investment. On a quarterly basis, if the present value of the estimated future cash flows is lower than the carrying value of the investment and there is an adverse change in estimated cash flows, an impairment is considered to be other-than-temporary. An impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.
Evaluation of impairments involves significant assumptions and management judgments, which could differ from actual results, and these differences could have a material impact on the consolidated statements of income.
Fair Value Measurements
The Company's assessment ofthe significance of a particular input to the fair value measurement according to the fair value hierarchy (i.e Level 1, 2 and 3 inputs, as defined) in its entirety requires judgment and considers factors specific to the financial instrument. See Note 2, Significant Accounting Policies, in the consolidated financial statements beginning on page F-1 of this Form 10-K for more information on fair value measurements.
Changes in Valuation. Changes in value on $2,261 million of Total Investments will impact the Company's nonoperating income (expense), $44 million will impact accumulated other comprehensive income, $203 million are held at cost or amortized cost and the remaining $100 million relates to carried interest, which will not impact nonoperating income (expense). At December 31, 2015,' changes in fair value of approximately $1,649 million of such consolidated VIEsA/REs will impact BlackRock's net income (loss) attributable to noncontrolling interests on the consolidated statements of income. BlackRock's net exposure to changes in fair value of such consolidated sponsored investment funds was $1,268 million.
Goodwill and Intangible Assets
The value of advisory contracts acquired in business acquisitions to manage AUM in proprietary open-end investment funds as weR as collective trust funds without a specified termination date are classified as indefinite-lived intangible assets. The assignment of indefinite lives to such investment fund contracts is based upon the assumption there is no foreseeable Dmit on the contract period to manage these funds due to the likelihood of continued renewal at little or no cost. In addition, trade names/trademarks are considered indefinite-lived intangibles as they arc expected to generate cash flows indefinitely. Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. In accordance with the applicable provisions of ASC 350, Intangibles — Goodwill and Other ("ASC 350"), indefinite-lived intangible assets and goodwill are not amortized. Finite-lived management contracts, which relate to acquired separate accounts and funds with a specified termination date, are amortized over their remaining expected useful lives, which, at December 31, 2015, ranged from 1 to 9 years with a weighted-average remaining estimated useful life of 3.7 years.
Goodwill. The Company assesses its goodwl for impairment at least annually, considering such factors as the book value and the market capitalization ofthe Company. The impairment assessment performed as of Jury 31, 2015 indicated no impairment charge was required. The Company continues to monitor its book value per share compared with closing prices of its common stock for potential indicators of impairment. At December 31, 2015, the Company's common stock closed at $340.52, which exceeded its book value of approximately $172.12 per share.
Indefinite-lived and finite-lived intangibles. The Company performs assessments to determine if any intangible assets are impaired and whether the indefinite-life and finite-life classifications are still appropriate.
In evaluating whether it is more likely than not that the fair value of indefinite-lived intangibles is less than carrying value, BlackRock performed certain quantitative assessments and assessed various significant qualitative factors including AUM, revenue basis points, projected AUM growth rates, operating margins, tax rates and discount rates. In addition, the Company considered other factors including: (i) macroeconomic conditions'such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (ii) industry and market considerations such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for an entity's services, or regulatory, legal or political developments; and (iii) entity-specific events, such as a change in management or key personnel, overall financial performance and litigation that could affect significant inputs used to determine the fair value of the Indefinite-lived Intangible asset. If an indefinite-lived intangible is determined to be more likely than not impaired, then the fair value of the asset is compared with Its carrying value and any excess of the carrying value over the fair value would be recognized as an expense in the period in which the impairment occurs.
For finlte-lrved Intangible assets, tf potential Impairment circumstances are considered to exist, the Company win perform a recoverabirty test, using an undiscounted cash flow
analysis. Actual results could differ from these cash flow estimates, which could materially impact the impairment conclusion. If the carrying value of the asset is determined not
to be recoverable based on the undiscounted cash flow test, the difference between the book value'of the asset and its current fair value would be recognized as an expense in
the period In which the Impairment occurs. . . ¦ . -
In addition, management judgment is required to estimate the period over which finite-lived intangible assets win contribute to the Company's cash flows and the pattern in which these assets wiB be consumed. A change in the remaining useful life of any of these assets, or the reclassification of an indefinite-lived intangible asset to a finite-lived intangible asset, could have a significant impact on the Company's amortization expense, which was $128 million, $157 milion and $161 million for 2015, 2014 and 2013, respectively.
In 2015, 2014 and 2013, Ihe Company performed impairment tests, including evaluating various qualitative factors and performing certain quantitative assessments. The Company determined that no impairment charges were required, the classification of indefinite-lived versus
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finrte-lived intangibles was still appropriate and no changes to the expected lives of the finite-lived intangibles were required. The Company continuously monitors various factors, including AUM, for potential indicators of impairment.
Income Taxes
Deferred income tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using currently enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Significant management judgment is required in estimating the ranges of possible outcomes and determining the probability of favorable or unfavorable tax outcomes and potential interest and penalties related to such unfavorable outcomes. Actual future tax consequences relating to uncertain tax positions may be materially different than the Company's current estimates At December 31, 2015, BlackRock had $466 million of gross unrecognized tax benefits, of which $320 million, if recognized, would affect the effective tax rate. •
Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred income tax assets and assess deferred income tax liabilities based on enacted tax rates for the appropriate tax jurisdictions to determine the amount of such deferred income tax assets and liabilities. At December 31, 2015, the Company had deferred tax assets of $20 million and net deferred tax liabilities of approximately $4,851 million on the consolidated statement of financial condition. Changes in deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, changes in the anticipated timing of recognition of deferred tax assets and liabilities or changes in the structure or tax status of the Company.
The Company assesses whether a valuation allowance should be established against its deferred income tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. The assessment considers, among other matters, the nature, frequency and severity of recent losses, forecast of future profitability, the duration of statutory carry back and carry forward periods, the Company's experience with tax attributes expiring unused, and tax planning alternatives.
The Company records income taxes based upon its estimated income tax liability or benefit. The Company's actual tax liability or benefit may differ from the estimated income tax liability or benefit. The Company had current income taxes receivables of approximately $166 million and current income taxes payables of $79 million at December 31, 2015.
Revenue Recognition
Investment advisory and administration fees are recognized as the services are performed. Such fees are primarily based on pre-determined percentages of the market value of AUM or, in the case of certain real estate clients, net operating income generated by the underlying properties. Investment advisory and administration fees are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. Investment advisory and administration fees for investment funds are shown net of fees waived pursuant to contractual expense limitations of the funds or voluntary waivers.
The Company contracts with third parties and related parties for various fund distribution and shareholder servicing to be performed on behalf of certain funds the Company manages. Such arrangements generally are priced as a portion of the management fee paid by the fund. In certain cases, the fund takes on the primary responsibility for payment for services such that the Company bears no credit risk to the third-party. The Company accounts for such retrocession arrangements in accordance with ASC 605-45, Revenue Recognition — Principal Agent Considerations ("ASC 605-45"), and records its management fees net of retrocessions. Retrocessions for 2015, 2014 and 2013 were $870 million, $891 million and $785 million, respectively. The Company has additional contracts for similar services with third parties, which due to the terms of the contracts, are recorded as distribution and servicing costs and thus not netted on the consolidated statements of income.
The Company earns revenue by lending securities on behalf of clients to highly rated banks and broker-dealers. Revenue is accounted for on an accrual basis. The securities loaned are secured by collateral, generally ranging from 102% to 112% of the value of the loaned securities. Generally, the revenue earned is shared between the Company and the funds or accounts managed by the Company from which the securities are borrowed. For 2015,2014 and 2013, securities lending revenue earned by the Company totaled $513 million, $477 million and $447 million, respectively, and is recorded in investment advisory, administration fees and securities lending revenue on the consolidated statements of income. Investment advisory, administration fees and securities lending revenue are reported together as the fees for these services often are agreed upon with clients as a bundled fee.
The Company receives investment advisory performance fees or incentive allocations, from certain actively managed investment funds and certain SMAs. These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds. Such fees are recorded upon completion of the measurement period, which varies by product or account, and could be monthly, quarterly, annually or longer.
In addition, the Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. BlackRock may be required to reverse/return ad, or part, of such carried interest allocations depending upon future performance of these funds. Therefore, BlackRock records carried interest subject to such clawback provisions; in Total Investments or cash/cash of consolidated VIEs to the extent that it is distributed, on its consolidated statements of financial condition. Carried interest is recorded as performance fee revenue upon the eartier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.
The Company records a deferred carried interest liability to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. Al December 31, 2015 and 2014, the Company had $143 million and $105 million, respectively, of deferred carried interest recorded in other liabilities/other liabilities of consolidated VIEs on the consolidated statements of financial condition. A portion of the deferred carried interest liability will be paid to certain employees. The ultimate timing of the recognition of performance fee revenue, if any, for these products is unknown.
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The following table presents changes in the deferred carried interest liability (including the portion related to consolidated VIEs) for 2015 and 2014.
Beginning balance
Net increase (decrease)
Performance fee revenue recognized Ending balance
For 2015, 2014 and 2013, performance fee revenue totaled $621 million, $550 million and $561 million, respectively.
Fees earned for BlackRock Solutions, which include advisory services, are recorded as services are performed or when completed and are determined using some, or aP, of the following methods, (i) percentages of various attributes of advisory AUM cr value of positions on the Aladdin platform, (ii) fixed fees and (iii) performance fees if contractual thresholds are met. Revenue earned on advisory assignments was comprised of one-time advisory and portfolio structuring fees and ongoing fees based on AUM of the respective portfolio assignment. For 2015, 2014 and 2013, BlackRock Solutbns and advisory revenue totaled $646 million, $635 million and $577 million, respectively.
Adjustments to revenue arising from initial estimates recorded historically have been immaterial since the majority of BlackRock's investment advisory and administration revenue is calculated based on AUM and since the Company does not record performance revenue until performance thresholds have been exceeded and the likelihood of clawback is mathematically improbable.
RECENT DEVELOPMENTS
In November 2015, the Company announced that it had entered an agreement to assume investment management responsibilities of approximately $87 billion of cash assets under management from BofA® Global Capital Management, Bank of America's asset management business. The transaction is expected to close in the first half of 2016. subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company's consolidated financial condition or results of operations.
Accounting Developments
For accounting pronouncements that the Company adopted during 2015 and for recent accounting pronouncements not yet adopted, see Note 2, Significant Accounting Policies, in the consolidated financial statements beginning on page F-1 of this Form 10-K.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
AUM Market Price Risk. BlackRock's investment advisory and administration fees are primarily comprised of fees based on a percentage of the value of AUM and, in some cases, performance fees expressed as a percentage of the returns realized on AUM. At December 31, 2015, the majority of the Company's investment advisory and administration fees were based on average or period end AUM of the applicable investment funds or separate accounts. Movements In equity market prices, interest rates/credit spreads, foreign exchange rates or all three could cause the value of AUM to decline, which would result in lower investment advisory and administration fees.
Corporate Investments Portfolio Risks. As a leading investment management firm, BlackRock devotes significant resources across aO of its operations to identifying, measuring, monitoring, managing and analyzing market and operating risks, including the management and oversight of its own investment portfolio. The Board of Directors of the Company has adopted.guidelines for the review of investments to be made by the Company, requiring, among other things, that investments be reviewed by certain senior officers of the Company, and that certain investments may be referred to the Audit Committee or the Board of Directors, depending on the circumstances, for approval.
In the normal course of its business, BlackRock is exposed to equity market price risk, interest rate/credit spread risk and foreign exchange rate risk associated with its corporate investments.
BlackRock has investments primarily in sponsored investment products that invest in a variety of asset classes, including real estate, private equity and hedge funds. Investments generally are made for co-investment purposes, to establish a performance track record, to hedge exposure to certain deferred compensation plans or for regulatory purposes. Currently, the Company has a seed capital hedging program in which it enters into swaps to hedge market and interest rate exposure to certain investments. At December 31, 2015, the Company had outstanding total return swaps and interest rate swapswith an aggregate notional value of approximately $360 million and $46 million, respectively.
At December 31, 2015, approximately $1.7 billion of BlackRock's Total Investments were maintained in consolidated sponsored investment funds accounted for as VREs and VIEs. Excluding the impact of the Federal Reserve Bank stock, carried interest, investments made to hedge exposure to certain deferred compensation plans and certain investments that are hedged via the seed caprtal hedging program, the Company's economic exposure td its' investment portfolio is $1,548 million. See Balance Sheet Overview-Investments and Investments of Consolidated VIEs in Management's Discussion and Analysis of Financial Condition and Results of Operations for further information on the Company's Total Investments.
Equity Market Price Risk. At December 31, 2015, the Company's net exposure to equity market price risk in its investment portfolio was approximately $578 million of the Company's total economic investment exposure. Investments subject to market price risk include private equity and real estate investments, hedge funds and funds of funds as well as mutual funds. The Company estimates that a hypothetical 10% adverse change in market prices would result in a decrease of approximately $57.8 million in the carrying value of such investments.
Interest-Rate/Credit Spread Risk. At December 31, 2015, the Company was exposed to interest rate risk and credit spread risk as a result of approximately $970 million of Total Investments in debt securities and sponsored investment products that invest primarily in debt securities. Management considered a hypothetical 100 basis point fluctuation in interest rates or credit spreads and estimates that the impact of such a
54
fluctuation on these investments, in the aggregate, would result in a decrease, or increase, of approximately $14 6 million in the carrying value of such investments.
Foreign Exchange Rate Risk. As discussed above, the Company invests in sponsored investment products that invest in a variety of asset classes. The carrying value of the total economic investment exposure denominated in foreign currencies, primarily the pound sterling and euro, was $343 million at December 31, 2015. A 10% adverse change in the applicable foreign exchange rates would result in approximately a $34.3 million decline in the carrying value of such investments.
Other Market Risks. The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange risk movements. At December 31, 2015, the Company had outstanding forward foreign currency exchange contracts with an aggregate notional value of approximately $169 million.
Item 8. Financial Statements and Supplemental Data
The report of the independent registered public accounting firm and financial statements listed in the accompanying index are included in Item 15 of this report. See Index to the consolidated financial statements on page F-1 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no disagreements on accounting and financial disclosure matters. BlackRock has not changed accountants in the two most recent fiscal years.
Item 9a. Controls and Procedures
Disclosure Controls and Procedures. Under the direction of BlackRock's Chief Executive Officer and Chief Financial Officer, BlackRock evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end ofthe period covered by this annual report on Form 10-K. Based on this evaluation, BlackRock's Chief Executive Officer and Chief Financial Officer have concluded that BlackRock's disclosure controls and procedures were effective.
Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year ending December 31, 2015 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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Management's Report on Internal Control Over Financial Reporting
Management of BlackRock, Inc. (the "Company") is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and affected by tfie Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generaly accepted in the United Stales of America, and that receipts and expenditures of the Company are being made only in accordance with the authorizations of management and directors of the Company; and
¦ provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes m conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness ofthe Company's internal control over financial reporting as of December 31, 2015 based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2015, the Company's internal control over financial reporting is effective.
The Company's independent registered public accounting firm has issued an attestation report on the effectiveness of the Company's internal control over financial reporting. February 26. 2016
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BlackRock, Inc.:
We have audited the internal control over financial reporting of BlackRock, Inc. and subsidiaries (the "Company") as of December 31, 2015, based on criteria established in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31. 2015, based on the criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition as of December 31, 2015 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended of the Company and our report dated February 26, 2016 expressed an unqualified opinion on those consolidated financial statements.
Isl Deloitte & Touche LLP
New York, New York February 26, 2016
57
Item 9b. Other Information
The Company is furnishing no other information in this Form 10-K.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information regarding directors and executive officers set forth under tho captions "Item 1. Election of Directors - Information Concerning the Nominees and Directors" and "Item 1' Election of Directors - Other Executive Officers" of the Proxy Statement is incorporated herein by reference.
The information regarding compliance With Section 16(a) of the Exchange Act set forth under the caption "Item 1: Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy Statement is incorporated herein by reference.
The information regarding BlackRock's Code of Ethics for Chief Executive and Senior Financial Officers under the caption "Item 1: Corporate Governance Guidelines and Code of Business Conduct and Ethics" of the Proxy Statement is incorporated herein by reference.
Item 11. Executive Compensation
The information contained in the sections captioned "Item 1: Compensation of Executive Officers" and "Item 1: 2015 Director Compensation" ofthe Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information contained in the sections captioned "Item 1: Ownership of BlackRock Common and Preferred Stock" and "Equity Compensation Plan Information" of the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information contained in the sections captioned "Item 1: Certain Relationships and Related Transactions" and "Item 1: Director Independence" of the Proxy Statement is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information regarding BlackRock's independent auditor fees and services in the section captioned "Item 4: Ratification of Appointment of Independent Registered Public Accounting Firm" of the Proxy Statement is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
The Company's consolidated financial statements are included beginning on page F-1.
Financial Statement Schedules
Ratio of Earnings to Fixed Charges has been included as Exhibit 12.1. Ail other schedules have been omitted because they are not applicable, not required or the information
~"required is included in the Company's consolidated financial statements or notes thereto ~ .
Exhibit Index
As used in this exhibit list, "BlackRock" refers to BlackRock, Inc. (formerly named New BlackRock, Inc. and previously. New Boise, Inc.) (Commission File No. 001-33099) and "Old BlackRock" refers to BlackRock Holdco 2, Inc. (formerly named BlackRock, Inc.) (Commission Fie No. 001-15305), which is the predecessor of BlackRock. The foJowing exhibits are filed as part of this Annual Report on Form 10-K;
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Please note that the agreements included as exhibits to this Form 10-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about BlackRock or the olher parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit No. Description
3.1(1) Amended and Restated Certificate of Incorporation of BlackRock.
3.2(2) Certificate of Amendment lo the Amended and Restated Certificate of Incorporation of BlackRock, Inc.
3.3(3) Amended and Restated Bylaws of BlackRock.
3.4(1) Certificate of Designations of Series A Convertible Participating Preferred Stock of BlackRock.
3.5(4) Certificate of Designations of Series B Convertible Participating Preferred Stock of BlackRock.
3 6(4) Certificate of Designations of Series C Convertible Participating Preferred Stock of BlackRock.
3.7(5) Certificate of Designations of Series D Convertible Participating Preferred Stock of BlackRock.
4:1(6) Specimen of Common Stock Certificate.
4.2(7) Indenture, dated September 17, 2007, between BlackRock and The Bank of New York, as trustee, relating to senior debt securities.
4.3(8) Form of 6.25% Notes due 2017.
4.4(9) Form of 5.00% Notes due 2019.
4.5(10) Form of 4.25% Notes due 2021.
4.6( 11) Form of 3.375% Notes due 2022.
4.7(12) Form of 3.500% Notes due 2024.
4.8(13) Form of 1.250% Notes due 2025.
4.9(13) Officers' Certificate, dated May 6, 2015, for the 1.250% Notes due 2025 issued pursuant to the Indenture.
10.1 BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.*
10.2(14) Amended and Restated BlackRock, Inc. 1999 Annual Incentive Performance Plan.*
10.3(15) Amendment No. 1 to the BlackRock, Inc. Amended and Restated 1999 Annual Incentive Performance Plan.+
10.4(16) Form of Restricted Stock Unit Agreement under the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.+
10.5(16) Form of Performance-Based Restricted Stock Unit Agreement (BPIP) under the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and
Incentive Plan.+
10.6(1) Form of Stock Option Agreement expected to be used in connection with future grants of Stock Options under the BlackRock, Inc. Second Amended and
Restated 1999 Stock Award and Incentive Plan.*
10.7(1) Form of Restricted Stock Agreement expected to be used in connection with future grants of Restricted Stock under the BlackRock, Inc. Second Amended
and Restated 1999 Stock Award and Incentive Plan.*
10.8(1) Form of Directors' Restricted Stock Unit Agreement expected to be used in connection with future grants of Restricted Stock Units under the BlackRock,
Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.*
10.9 BlackRock, Inc. Amended and Restated Voluntary Deferred Compensation Ran, as amended and restated as of November 16, 2015.+
10.10(17) Share Surrender Agreement, dated October 10, 2002 (the "Share Surrender Agreement"), among Old BlackRock, PNC Asset Management, Inc. and The
PNC Financial Services Group, Inc.*
10.11(18) First Amendment, dated as of February 15, 2006, to the Share Surrender Agreement.*
10.12(19) Second Amendment, dated as of June 11, 2007, to the Share Surrender Agreement.*
10.13(4) Third Amendment, dated as of February 27, 2009, to the Share Surrender Agreement.*
10.14(20) Fourth Amendment, dated as of August 7, 2012, to the Share Surrender Agreement*
10.15(21) Five-Year Revolving Credit Agreement, dated as of March 10,2011, by and among BlackRock, Inc., certain of its subsidiaries, Wells Fargo Bank, National
Association, as administrative agent, swingline lender, issuing lender and L/C agent, Sumitomo Mitsui Banking-Corporation, as Japanese Yen lender, a group of lenders, Wells Fargo Securities, LLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital, J.P. Morgan Securities LLC and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners, Citibank, N A, as syndication agent and Bank of America, NA, Barclays Bank PLC, JPMorgan Chase Bank, NA and Morgan Stanley Senior Funding, Inc., as documentation agents.
10.16(22) Amendment No. 1, dated as of March 30, 2012, by and among BlackRock, Inc certain of its subsidiaries, Wells Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.17(23) Amendment No. 2, dated as of March 28, 2013. by and among BlackRock. Inc., certain of its subsidiaries, Wells Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and olher financial institutions referred to therein.
10.18(24) Amendment No. 3, dated as of March 28, 2014, by and among BlackRock, Inc., certain of its subsidiaries. Wells Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.19(25) Amendment No. 4, dated as of April 2, 2015, by and among BlackRock, Inc., certain of its subsidiaries, Wets Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.20(26)1 Second Amended and Restated Global Distribution Agreement, dated as of November 15, 2010, among BlackRock and Merrill Lynch & Co., Inc.
10.21(3) Amended and Restated Implementation and Stockholder Agreement, dated as of February 27, 2009, between The PNC Financial Services Group, Inc. and
BlackRock.
10.22(27) Amendment No. 1, dated as of J une 11, 2009, to the Amended and Restated Implementation and Stockholder Agreement between The PNC Financial
Services Group, Inc. and BlackRock.
10.23(28) Lease Agreement, dated as of February 17, 2010, among BlackRock Investment Management (UK) Limited and Mourant & Co Trustees Limited and
Mourant Property Trustees Limited as Trustees of the Drapers Gardens Unit Trust for the lease of Drapers Gardens, 12 Throgmorton Avenue, London, EC2, United Kingdom.
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10.24(29) Letter Agreement, dated February 12, 2013, between Gary S. Shedlin and BlackRock.+
10 25(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Barclays Capital Inc., dated as of December 23, 2014.
10 26(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Citigroup Global Markets Inc dated as of December 23, 2014.
10.27(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Mernil Lynch, Pierce, Fenner & Smith Incorporated, dated as of
January 6, 2015.
10-28(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Credit Suisse Securities (USA) LLC dated as of January 6, 2015.
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of Registrant.
23.1 Deloitte & Touche LLP Consent.
Section 302 Certification of Chief Executive Officer.
Section 302 Certification of Chief Financial Officer.
32-1 Section 906 Certification of Chief Executive Officer and Chief Financial Officer.
101JNS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on October 5, 2006.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 25, 2012.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on February 27, 2009.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on December 3, 2009.
(G) Incorporated by reference to BlackRock's Registration Statement on Form S-8 (Registration No 333-137708) filed on September 29, 2006
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31, 2007.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on September 17, 2007.
Incorporated by reference to BlackRock's Current Report on Fonn 8-K filed on December 10, 2009.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 25, 2011.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 31, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on March 18, 2014.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 6, 2015.
Incorporated by reference to Old BlackRock's Annual Report on Form 10-K for the year ended December 31, 2002.
Incorporated by reference to Old BlackRock's Current Report on Form 8-K filed on May 24, 2006.
Incorporated by reference to BlackRock's Quarterly Report on Form 10-Q for the quarter ended June 30. 2015
Incorporated by reference to Old BlackRock's Quarteriy Report on Form 10-Q for the quarter ended September 30, 2002.
Incorporated by reference to Old BlackRock's Current Report on Form 8-K filed on February 22, 2006.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on June 15, 2007.
Incorporated by reference to 8lackRock's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K/A filed on August 24, 2012.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on April 4, 2012.
Incorporated by.reference to BlackRock's Current Report on Form 8-K fiied on April 3, 2013.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on March 28, 2014.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on April 3, 2015.
Incorporated by reference to BlackRock's Current Report on Form B-K/A filed on August 24, 2012. . *
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on June 17, 2009.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31, 2009.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on February 19, 2013.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31. 2014.
+ Denotes compensatory plans or arrangements.
f Confidential treatment has been granted for certain portions o1 this exhibit, which portions have been omitted and filed separately with the Securities and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behatf by the undersigned, thereunto duly authorized.
BLACKROCK, INC.
Isl LAURENCE D. FINK
Laurence D. Fink Chairman, Chief Executive Officer and Director
February 26, 2016
Each of the officers and directors of BlackRock, Inc. whose signature appears below, in so signing, also makes, constitutes and appoints Laurence D. Fink, Gary S. Shedlin, Matthew J. Mallow, Christopher J. Meade. Daniel R. Waltcher and R. Andrew Dickson III, his or her true and lawful attorneys-in-fact, with full power and substitution, for him or her in any and all capacities, to execute and cause to be filed with the Securities and Exchange Commission any and all amendments to the Annual Report on Form 10-K, with exhibits thereto and other documents connected therewith and to perform any acts necessary to be done in order to file such documents, and hereby ratifies and confirms all that said attorney-in-fact or his or her substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
ISI LAURENCE D. FINK
Laurence D. Fink
IS/ GARY SHEDLIN
Gary S. Shedlin ISI JOSEPH FELICIANI, JR.
Joseph Feliciani, Jr. ISI ABDLATIF Y. AL-HAMAD
Abdlatif Y. Al-Hamad
ISI MATHIS CABIALLAVETTA
Mathis Cabiallavetta ISJ PAMELA DALEY
Pamela Daley ISI WILLIAM S. DEMCHAK
William S. Demchak ISI JESSICA EINHORN
Jessica Einhom ISI FABRIZIO FREDA
Fabrizio Freda ISI MURRY S. GERBER
Murry S. Gerber
ISI JAMES GROSFELD
James Grosfeld
/SI ROBERT S. KAPITO
Robert S. Kapito ISI DAVID H. KOMANSKY
David H. Komansky ISI SIR DERYCK MAUGHAN
Sir Deryck Maughan ISI CHERYL D. MILLS
Cheryl D. Mills
ISI GORDON M. NIXON
Gordon M. Nixon /SI THOMAS H. O'BRIEN
Thomas H. O'Brien ISI IVAN G. SEIDENBERG
Ivan G. Scidcnberg ISI MARCO ANTONIO SLIM DOMIT
Marco Antonio Slim Domit /S/JOHN S. VARLEY
John S. Vartey
ISI SUSAN L. WAGNER
Susan L. Wagner
Chairman, Chief Executive Officer and Director (Principal Executive Officer)
Senior Managing Director and Chief Financial Officer (Principal Financial Officer)
Managing Director and Chief Accounting Officer (Principal
Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 26, 2016
February 26, 2016
February 26. 2016 February 26, 2016
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February 26, 2016
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February 26, 2016
February 26. 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
February 26, 2016
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February 26, 2016
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INDEX TO FINANCIAL STATEMENTS
Report of independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BlackRock, Inc.:
We have audited the accompanying consolidated statements of financial condition of BlackRock, Inc. and subsidiaries (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United Stales). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of BlackRock, Inc. and subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015. in conformity with accounting principles generally accepted in tho United States of America.
We have also audited, in accordance with the standards ofthe Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.
Isl Deloitte & Touche LLP
New York, New York February 26, 2016
F-2
BlackRock, Inc.
Consolidated Statements of Financial Condition
5,723 2,120 1,921
278 3,320 32
161.287 33,654
467
17.344 12,961 685
(in millions, except shares and per share data) Assets
Cash and cash equivalents
Accounts receivable
Investments
Assets of consolidated variable interest entities
Cash and cash equivalents
Investments
Other assets Separate account assets
Separate account coBateral held under securities lending agreements
Property and equipment (net of accumulated depreciation of S570 and $587 at December 31,
2015 and 2014, respectively) Intangible assets (net of accumulated amortization of $745 and $1,040 at December 31,
85S><
239.792
2015 and 2014, respectively) Goodwin Other assets
1.865 1.035
3.389 245 4,922 161,287 33,654 4,989 886
Total assets
Liabilities
Accrued compensation and benefits Accounts payable and accrued liabilities Liabilities of consolidated variable interest entities:
Bono wings
Other liabilities Borrowings
Separate account liabilities
212,272
Separate account collateral liabilities under securities lending agreements Deferred income tax liabilities Other liabilities
Total liabilities
Commitments and contingencies (Note 13) Temporary equity
Redeemable noncontrolling interests Permanent Equity BlackRock, Inc. stockholders' equity Common stock. $ 0.01 par value;
Shares authorized: 500.000.000 at December31, 2015 and 2014; Shares issued: 171,252,185 at December31, 2015 and 2014;.Shares outstanding: 163,461,064 and 164,786.788 at December31, 2015 and 2014, respectively; Scries B nonvoting participating preferred stock, $0.01 par value;
Shares authorized: 150,000,000 at December31, 2015 and 2014; Shares issued and outstanding1 823,188 at December 31, 2015 and 2014; Series C nonvoting participating preferred stock, $0.01 par value;
19.386 10,164 (19) (273)
(1,694)
Shares authorized: 6,0.00^000 at.December.31, 2015.and 2014; Shares issued.and.outstanding: 1,311,887 at December 31, 2015'and 2014 Additional paid-in capital Retained earnings Appropriated retained earnings . Accumulated other comprehensive loss
27,366 119
Treasury stock, common, at cost (7,791,121 and 6,465,397 shares held at December 31, 2015 and
2014, respectively)
Total BlackRock, Inc. stockholders' equity Nonredeemable noncontroBing interests
Total permanent equity mmsssmmm 27,485
Total liabilities, temporary equity and permanent equity l WMtMWBl^flsW $ 239,792
See accompanying notes to consolidated financial statements.
BlackRock, Inc.
Consolidated Statements of Income
Year ended December 31,
(in millions, except shares and per share data)
Revenue
Investment advisory, administration fees and securities lending revenue: Related parties
Other third parties ^
Total investment advisory, administration fees and secunties lending revenue Investment advisory performance fees BlackRock Solutions and advisory Distnbution fees Other revenue
6.738 2,851
9,589 550 635 70 237
5,991 2.748
8.739 561 577 73 230
Total revenue
Expense
Employee compensation and benefits
Distribution and servicing costs
Amortization of deferred sales commissions
Direct fund expenses
General and administration
Amortization of intangible assets
3,829 364 56 748
1,453 157
3.560 353 52 657
1,540 161
Total expense
Operating income Nonoperating income (expense)
Net gain (loss) on investments
- Net gain (loss) on consolidated variable interest entities
Interest and dividend income
Interest expense
4,474
165 (41) 29 (232)
3.857
22 (211)
Total nonoperating income (expense)
Income before income taxes
Income tax expense
Net income Less:
Net income (loss) attnbutable to redeemable noncontrolling interests Net income (loss) attributable to nonredeemable noncontrolling interests
(79)
4,395 1,131
2 (32)
116
3,973 1.022
2,951
(1)
20
Net income attributable to BlackRock, Inc.
Earnings per share attributable to BlackRock, Inc. common stockholders:
Basic Diluted
Cash dividends declared and paid per share Weighted-average common shares outstanding:
Basic Diluted
3,294
19.58 $ 19.25 $ 7.72 S
168,225,154 171,112,261
17.23 16.87 6.72
170,185,870 173,828,902
See accompanying notes to consolidated financial statements.
BlackRock, Inc.
Consolidated Statements of Comprehensive Income
Year ended December 31,
(in millions)
Net income
Other comprehensive income
Change in net unrealized gams (losses) from available-for-sale investments, net of tax'
Unrealized holding gams (i05ses)(t)
Less reclassification adjustment included in net incomeO)
Net change from available-for-sale investments Benefit plans, net
Foreign currency translation adjustments^)
Other comprehensive income (loss)
Comprehensive income
Less Comprehensive income (loss) attnbutable to noncontrolling interests
Comprehensive income attributable to BlackRock, Inc.
3,264
(5) (2) (231)
(238)
3,026
(30)
3,056
2,951
4 13
(9)
10
23
24
2,975 19
2,956
The tax benefit (expense) was not material in 2015, 2014 and 2013.
Amount for the year ended December 31, 2015 includes gains from a net investment hedge of $19 million, net of tax of $11 million. See accompanying notes to consolidated financial statements.
F-5
BlackRock, Inc.
Consolidated Statements of Changes in Equity
(in millions)
December 31, 2012 Net income
Consolidation of a collateralized loan obligation
Allocation of gams (losses) of consolidated
collateralized loan obligations Dividends paid Stock-based compensation Issuance of common shares related to employee
stock transactions Employee tax withholdings related to employee
stock transactions Shares repurchased Net tax benefit (shortfall) from stock-based
compensation Subscriptions (redemptions/distributions)
— noncontrolling interest holders
Net consolidations (deconsolidations) of sponsored
investment funds
Other comprehensive income
(loss)
Additional
6,444 2,932
Paid-in Retained Capital(1) Earnings
$ 19,421 S
(429)
Appropriated Retained Earnings
29
(4)
(3)
Treasury
Stock Common
Accumulated Other Comprehensive Income (Loss)
(59) $ (432) S
(243) (1,000)
24
Nonredeemable Noncontrolling Interests
182 20
66
(115)
Total Permanent Equity
25,585 2,952
(4)
(1.168) 448
35
(243) (1.000)
36
66
(115)
24
Redeemable
Noncontrolling
Interests /
Temporary
Equity
32 (1)
137
(114)
19,475 $ 8,208 $ 22 S
Net income
Allocation of gains (losses) of consolidated
collateralized loan obligations Dividends paid Stock-based compensation Issuance of common shams related to employee
stock transactions Employee tax withholdings related to employee
stock transactions ' Shares repurchased Net tax benefit (shortfall) from stock-based
compensation Subscriptions (redemptions/distributions)
— noncontrolling interest holders
Net consolidations (deconsolidations) of
sponsored investment funds
Other comprehensive income
(loss)
December 31, 2014
3,294
(41)
— (1,338) 453 —
(646)
106
$ 19,388 $ 10,164 $ (19) $
3,294
(41) (1,338) 453
(344) (1,000)
660
(238)
(344) (1,000).
(238)
(273) $ (1,894) $ 27,366 $
(32)
3.262
(1,338) 453
(46)
(344) (1,000)
(46)
(238)
119 $ 27,485 $
(1) Amounts include $2 million ot common stock at December 31, 2014, 2013 and 2012. See acpompanying notes to consolidated financial statements.
BlackRock, Inc.
Consolidated Statements of Changes in Equity
Accumulated Total
(in millions)
December 31, 2014 Net income Net consolidation (deconsolidation) of VIEs due to adoption
of new accounting pronouncement Dividends paid Stock-based compensation Issuance of common shares related to employee stock
transactions Employee tax withholdings related to employee stock
transactions Shares repurchased Net tax benefit (shortfal) from stock-based compensation Subscriptions (redemptions/distributions)
— noncontrolling interest holders
Net consolidations (deconsolidations) of sponsored
investment funds Other comprehensive income (loss)
Additional Appropriated Other Treasury BlackRock Nonredeemable
10,164 3,345
Paid-in Retained Retained Comprehensive Stock Stockholders' Noncontrolling
S 19,388 $
(19) $
27,366 3,345
119 6
Capital(1) Earnings Earnings Income (Loss) Common Equity Interests
19 (1,476) 514
(273) S (1.894) $
(1,476)
(231) (1,100)
105
(600)
(6)
(175)
(231) (1,100)
(175)
l«fgm^3iTi^
(1) Amounts include $2 million of common stock at both December 31, 2015 and 2014. See accompanying notes to consob'dated financial statements.
35 1
Redeemable
Noncontrolling
Total Interests /
Permanent Temporary
Equity Equity
27,485 3,351
11 (1.476) 514
(231) (1.100)
105
(34)
(284)
(6) (175)
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BlackRock, Inc.
Consolidated Statements of Cash Flows
(in millions)
Cash flows from operating activities Net income
Adjustments to reconcile net income to cash flows from operating activities Depreciation and amortization Amortization of deferred sales commissions Stock-based compensation Deferred income tax expense (benefit) Other gains
Net (gams) losses on nontrading investments
Purchases of investments within consolidated sponsored investment funds
Proceeds from sales and maturities of investments within consolidated sponsored inveslment funds
Gain related to PennyMac initial public offenng
Gain related to the charitable contribution
Chantable contnbution
Assets and liabilities of consolidated VIEs: Change in cash and cash equivalents Net (gains) losses within consolidated VIEs Net (purchases) proceeds within consolidated VIEs
(Earnings) losses from equity method investees
Distributions of earnings from equity method investees
Other adjustments
Changes in operating assets and liabilities: Accounts receivable Investments, trading Other assets
Accrued compensation and benefits Accounts payable and accrued liabilities Other liabilities
Year ended December 31,
3,264
278 56 453 (104)
(37) (160)
168
41 (599) (158)
57 5
78 (416) 5 101 (69) (13)
2.951
291 52 448 (193)
(73) (195)
145
(39) (80) 124
143
142 (158) 80 10
14' (218) (92) 203 7 80
Cash flows from operating activities
Cash flows from Investing activities
Purchases of investments
Proceeds from sates and maturities of investments
Distributions of capital from equity method investees
Net consolidations (deconsolidations) of sponsored investment funds
Acquisitions, net of cash acquired
Purchases of property and equipment
(369) 654 143
(123)
(66)
(412) 2B6 83 (48) (298) (94)
Cash flows from investing activities
Cash flows from financing activities
Repayments of short-term borrowings Repayments of long4erm borrowings Proceeds from long-term bonowings Cash dividends paid Proceeds from stock options exercised Repurchases of common stock
Net proceeds from (repayments of) borrowings by consolidated VIEs
Net (redemptions/distributions paidVsubscriptions received from noncontrolling
interest holders
Excess tax benefit from stock-based compensation
Other financing activities
(1.000) 997 (1,338) 4
(1.344) 512
202 106
(100) (750)
(1.168) 28 (1,243) (410)
203 41 7
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and .cash equivalents
Cash and cash equivalents, beginning of year
(132)
1,333 4,390
17
(216) 4,606
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid for.
Interest
Interest on borrowings of consolidated VIEs Income taxes (net of refunds)
Supplemental schedule of noncash investing and financing transactions: Issuance of common stock
Increase (decrease) in noncontrolling interests due to net consolidation (deconsolidation) of
sponsored investment funds
Increase (decrease) in borrowings due to consolidation/deconsolidation of VIEs
216 142 1,227
(269) 585
202 102 1,064
429
(229) 363
See accompanying notes to consolidated financial statements.
BlackRock, Inc.
Notes to the Consolidated Financial Statements
Introduction and Basis of Presentation
Business. BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, "BlackRock" or the "Company") is a loading publicly traded investment management firm providing a broad range of investment and risk management services to institutional and retail clients worldwide.
BlackRock's diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares® exchange-traded funds ("ETFs"), separate accounts, collective investment funds and other pooled investment vehicles. BlackRock also offers the BlackRock Solutions® investment and risk management technology platform, Aladdin®, risk analytics and advisory services and solutions to a broad base of institutional investors.
At December 31, 2015, The PNC Financial Services Group, Inc. ("PNC") held 21.1% of the Company's voting common stock and 22.2% of the Company's capital stock, which includes outstanding common and nonvoting preferred stock.
Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include the accounts of the Company and its controlled subsidiaries. Noncontrolling interests on the consolidated statements of financial condition represents the portion of consolidated sponsored investment funds in which the Company does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.
Certain items previously reported have been reclassified to conform to the current year presentation.
Significant Accounting Policies . _ -
Accounting Pronouncements Adopted in 2015
Amendments to the Consolidation Analysis. In February 2015, the Financial Accounting Standards Board ("FASB") issued ASU 2015-02, Consolidation. Amendments to the Consolidation Analysis, ("ASU 2015-02") that requires companies to reevaluate all legal entities under revised consolidation guidance. The revised consolidation rules provide guidance for evaluating: i) limited partnerships arid similar entities for consolidation ii) how decision maker or service provider fees affect the consolidation analysis, iii) how interests held by related parties affect the consolidation analysis, and iv) the consolidation analysis required for certain investment funds. The consolidation guidance also provides a scope exception for reporting entities with'interests in legal entities that are required to comply with or operate in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.
The Company early adopted ASU 2015-02 using the modified retrospective method with an effective adoption date of January 1, 2015. The modified retrospective method did not require the restatement of prior year periods. In connection with the adoption of ASU 2015-02, the Company reevaluated aO of its investment products for consolidation. As of January 1, 2015, the Company deconsolidated all of its previously consolidated collateralized loan obligations ("CLOs") as its fee arrangements were no longer deemed to be variable interests and it held no other interests in these entities.
The adoption of the ASU also resulted in the consolidation of certain investment products that were not previously consolidated. Upon adoption, these products became consoidated variable interest entities ("VIEs") as the Company is considered the party wilh both (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.
The impact to the consolidated statement of financial condition upon adoption was primarily the deconsolidation of approximately $3.6 billion of assets and $3.6 billion of liabilities related to certain CLOs that the Company manages with an adjustment to appropriated retained earnings of $19 million. In addition, certain investment products'previpusfy accounted for as voting rights entities ("VREs") became VIEs under the new accounting guidance and were consolidated.
Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 requires debt — issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated-debt lability, consistent with the presentation of a debt discount. The Company early adopted ASU 2015-03 during 2015 on a'retrospective basis, which required the restatement of prior periods. The adoption of'ASU 2015-03 was not material to the consolidated financial statements.
Disclosures for Investments in Certain Entities that Calculate NAV per Share. In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) ("ASU 2015-07"). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy al investments for which fair value is measured using the net asset value ("NAV") per share practical expedient The Company early adopted ASU 2015-07 during 2015 on a retrospective basis, which required the restatement of prior periods. As a result of the adoption, $647 million and $692 million as of December 31, 2015 and 2014, respectively, of NAV investments are no longer included in Level 2 and 3 within the fair value hierarchy.
Cash and Cash Equivalents. Cash and cash equivalents primarily consists of cash, money market funds and short-term, highly liquid investments with original maturities of three months or less in which the Company is exposed to market and credit risk. Cash and cash
F-9
equivalent balances that are legally restricted from use by the Company are recorded in other assets on the consolidated statements of financial condition. Cash balances maintained by consolidated VREs are not considered legally restricted and are included in cash and cash equivalents on the consolidated statements of financial condition. Cash balances maintained by consolidated VIEs are included in assets of consolidated variable interest entities on the consolidated statements of financial condition.
Investments. Investments in Debt and Marketable Equity Securities BlackRock classifies debt and marketable equity investments as trading, available-for-sale, or held-to-maturity based on the Company's intent to sell the security or, for a debt security, the Company's intent and ability to hold the debt security to maturity.
Trading securities are those investments that are purchased principally for the purpose of selling them in the near term. Trading securilies are carried at fair value on the consolidated statements of financial condition with changes in fair value recorded in nonoperating income (expense) on the consolidated statements of income in the period of the change.
Held-to-maturity debt securities are purchased with the positive intent and ability to be held to maturity and are recorded at amortized cost on the consolidated statements of financial condition.
Available-for-sale securities are those securities that are not classified as trading or held-to-maturity. Available-for-sale securities are carried at fair value on the consolidated statements of financial condition with changes in fair value recorded in the accumulated other comprehensive income (loss) component of stockholders' equity in the period of the change. Upon the disposition of an available-for-sale security, the Company reclassifies the gain or loss on the security from accumulated other comprehensive income (loss) to nonoperating income (expense) on the consolidated statements of income.
Equity Method. For equity investments where BlackRock does not control the investee, and where it is not the primary beneficiary ("PB") of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. BlackRock's share of the investee's underlying net income or loss is recorded as net gain (loss) on investments within nonoperating income (expense) and as other revenue for certain strategic investments since such companies are considered to be an extension of BlackRock's core business. BlackRock's share of net income of the investee is recorded based upon the most current information available at the time, which may precede the date of the consolidated statement of financial condition. Distributions received from the investment reduce the Company's carrying value of the investee and the cost basis if deemed to be a return of capital.
Cost Method. For nonmarketable equity investments where BlackRock neither controls nor has significant influence over the investee, the investments are accounted for using the cost method of accounting. Dividends received from the investment are recorded as dividend income within nonoperating income (expense).
Impairments ofinvestments. Management periodically assesses equity method, available-for-sale, held-to-maturity and cost investments for other-than-temporary impairment ("OTTI"). If an OTTI exists, an impairment charge is recorded in nonoperating income (expense) on the consolidated statements of the income.
For equity method, held-to-maturity and cost method investments, if circumstances indicate that an OTTI may exist, the investments are evaluated using market values, where available, or the expected future cash flows of the investment. If the Company determines an OTTI exists, an impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.
For avalable-for-sale securities, when the fair value is lower than cost, the Company considers, among other factors, the length of time the security has been in a loss position, the extent to which the security's fair value is less than cost, the financial condition and near-term prospects of the security's issuer and the Company's ability and intent to hold the security for a length of time sufficient to allow for recovery of such unrealized losses. For equity securities, if the impairment is considered other-than-temporary, an impairment charge is recognized for the excess of the carrying amount of the investment over its fair value. For debt securities, the Company considers whether: (1) it has the intent to sell the security; (2) it is more likely than not that it will be required to sell the security before recovery; or (3) it expects to recover the entire amortized cost basis of the security. If the Company intends to sen the security or it is more likely than not that it wii be required to sell the security, the entire difference between the amortized cost and fair value must be recognized in earnings. If the Company does not intend to sell a security and it is not more likely than not that it will be required to sell the security but the security has suffered an impairment related to credit, the credit loss win be bifurcated from the total decline in value and recorded in earnings with the remaining portion recorded in accumulated olher comprehensive income.
For the Company's investments in CLOs, the Company reviews cash flow estimates over the life of each CLO investment. On a quarterly basis, if the present value of the estimated future cash flows is lower than the carrying value of the investment and there is an adverse change in estimated cash flows, an impairment is considered to be other-than-temporary. An impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.
Consolidation. The Company performs an analysis for investment products to determine if the product is a VIE or a VRE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis. Factors considered in this assessment include the entity's legal organization, the entity's capital structure and equity ownership, and any related party or de facto agent implications of the Company's involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company is the PB of the entity. VREs are typically consolidated if the Company holds the majority voting interest Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, or third parties, or amendments to the governing documents of the Company's investment products), management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VRE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE's PB that consolidates such entity.
Consolidation of Variable Interest Entities. Certain investment products for which a controlling financial interest is achieved through arrangements that do not involve or are not directly linked to voting interests are deemed VIEs. BlackRock reviews factors, including whether or not i) the entity has equity that is sufficient to permit the entity to finance its activities without additional subordinated support from other parties and ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of
F-10
the entity that most significantly impact the entity's economic performance, to determine if the investment product is a VIE. BlackRock re-evaluates such factors as facts and circumstances change.
Prior to the adoption of ASU 2015-02, the Company used two methods for determining whether it was the PB of a VIE depending on the nature and characteristics of the entity. For CLOs, the Company was deemed to be the PB if it had the power to direct activities of the entity that most significantly impacted the entity's economic performance and had the obligation to absorb losses or the right to receive benefits that potentially could be significant to the VIE. For certain sponsored investment funds, the Company was deemed to be the PB if it absorbed the majority of the entity's expected losses, received a majority of the entity's expected residual returns, or both.
Following the adoption of ASU 2015-02, all VIEs are evaluated for consolidation under a single method. The PB of a VIE is defined as the variable interest holder that has a controlling financial interest in the VIE. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation io absorb losses of the entity or the right to receive benefits from the entity that potentialy could be significant to the VIE. The consolidation analysis can generaBy be performed qualitatively, however, if it is not readily apparent that the Company is not the PB, a quantitative analysis may also be performed.
Consolidation of Voting Rights Entities. BlackRock is required to consolidate an investee to the extent that BlackRock can exert control over the financial and operating policies of the investee, which generally exists if there is a greater than 50% voting equity interest.
Retention of Specialized Investment Company Accounting Principles. Upon consolidation of sponsored investment funds, the Company retains the specialized investment company accounting principles of the underlying funds. ATI of the underlying investments held by such consolidated sponsored investment funds are carried at fair value with corresponding changes in the investments' fair values reflected in nonoperating income (expense) on the consolidated statements of income. When the Company no longer controls these funds due to reduced ownership percentage or other reasons, the funds are deconsolidated and accounted for as an equity method investment, available-for-sale security or trading investment if the Company stifl maintains an investment.
Money Market Fee Waivers. The Company is currently voluntarily waiving a portion of its management fees on certain money market funds to ensure that they maintain a minimum level of daify net investment income (the "Yield Support waivers"). During 2015, these waivers resulted m a reduction of management fees of approximately $137 million. Approximately 50% of Yield Support waivers were offset by a reduction of BlackRock's distribution and servicing costs paid to a financial intermediary. BlackRock has provided Yield Support waivers in prior periods and may increase or decrease the level of fee waivers in future periods.
Separate Account Assets and Liabilities. Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company, which is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. The life insurance company does not underwrite any insurance contracts that involve any insurance risk transfer from the insured to the life insurance company. The separate account assets primarily include equity securities, debt securities, money market funds and derivatives. The separate account assets are not subject to general claims of the creditors of BlackRock. These separate account assets and the related equal and offsetting liabilities are recorded as separate account assets and separate account liabilities on the consolidated statements of financial condition.
The net investment income attributable to separate account assets supporting individual and group pension contracts accrues directly to the contract owner and is not reported on the consolidated statements of income. While BlackRock has no economic interest in these separate account assets and liabilities, BlackRock earns policy administration and management fees associated with these products, which are included in investment advisory, administration fees and securities lending revenue on the consolidated statements of income.
Separate Account Collateral Assets Held and Liabilities Under Securities Lending Agreements. The Company facilitates securities lending arrangements whereby securities held by separate accounts maintained by BlackRock Life Limited are lent to third parties under global master securities lending agreements. In exchange, the Company receives legal title to the collateral with minimum values generally ranging from approximately 102% to 112% of the value of the securities lent in order to reduce counterparty risk. The required collateral value is calculated on a dairy basis. The global master securities lending agreements provide.the Company the right to request additional collateral or, in the event of borrower .default, the right to liquidate collateral. The securities lending transactions entered into by the Company are accompanied by an agreement that entitles the Company to request the borrower to return the securities at any time; therefore, these transactions are not reported as sales
The Company records on the consolidated statements of financial condition the cash and noncash collateral received under these BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting collateral lability for the obligation to return the collateral. During 2015 and 2014, the Company had not resold or repledged any ofthe collateral received under these arrangements. At December 31, 2015 and 2014, the fair value of loaned securities held by separate accounts was approximately $28.6 billion and $30.6 billion, respectively, and the fair value of the collateral held under these securities lending agreements was approximately $31.3 billion and $33.7 billon, respectively.
Property and Equipment. Property and equipment are recorded at cost less accumulated depreciation. Depreciation is generally determined by cost less any estimated
residual value using the straight-lino method over the estimated useful lives of the various classes of property and equipment. Leasehold improvements are amortized using the
straight-line memod over the shorter of the estimated useful life or the remaining lease term.— —
BlackRock develops a variety of risk management, investment analytic and investment system services for internal use, utilizing proprietary software that is hosted and maintained by BlackRock. The Company capitalizes certain costs incurred in connection with developing or obtaining software for internal use. Capitalized software costs are included within property and equipment on the consolidated statements of financial condition and are amortized, beginning when the software project is ready for its intended use, over the estimated useful life of the software of approximately three years.
Goodwill and Intangible Assets. Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. The Company has determined that it has one reporting unit for goodwill impairment testing purposes, the consolidated BlackRock single
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operating segment, which is consistent with internal management reporting and management's oversight of operations. In its assessment of goodwill for impairment, the Company considers such factors as the book value and market capitalization ofthe Company.
On a quarterly basis, the Company considers if triggering events have occurred that may indicate a potential goodwill impairment. If a triggering event has occurred, the Company performs assessments, which may include reviews of significant valuation assumptions, to determine if goodwill may be impaired. The Company performs an impairment assessment of its goodwill at least annually as of July 31st.
Intangible assets are comprised of indefinite-lived intangible assets and finite-lived intangible assets acquired in a business acquisition. The value of contracts to manage assets in proprietary open-end funds and coBective trust funds and certain other commingled products without a specified termination date is generally classified as indefinite-lived intangible assets. The assignment of indefinite lives to such contracts primarily is based upon the following: (i) the assumption that there is no foreseeable limit on the contract period to manage these products; (n) the Company expects to, and has the ability to, continue to operate these products indefinitely, (iii) the products have multiple investors and are not reliant on a single investor or small group of investors for their continued operation; (iv) current competitive factors and economic conditions do not indicate a finite life; and (v) there is a high likelihood of continued renewal based on historical experience. In addition, trade names/trademarks are considered indefinite-lived intangible assets when they are expected to generate cash flows indefinitely.
Indefinite-lived intangible assets and goodwill are not amortized. Finite-lived management contracts, which relate to acquired separate accounts and funds with a specified termination date, are amortized over their remaining useful lives.
The Company performs assessments to determine if any intangible assets are potentially impaired and whether tlie indefinite-lived and finite-lived classifications are still appropriate. The carrying value of finite-lived management contracts and their remaining useful lives are reviewed at least annually to determine if circumstances exist which may indicate a potential impairment or revisions to the amortization period. The Company performs impairment assessments of all of its intangible assets at least annually, as of July 31s'.
In evaluating whether it is more likely than not that the fair value of indefinite-lived intangibles is less than its carrying value, BlackRock assesses various significant qualitative factors, including assets under management ("AUM"), revenue basis points, projected AUM growth rates, operating margins, tax rates and discount rates. In addition, the Company considers other factors, including (i) macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (ii) industry and market considerations such as a deterioration in the environment in which the entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for an entity's services, or regulatory, legal or political developments; and (iii) entity-specific events, such as a chango in management or key personnel, overall financial performance and litigation that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset. If an indefinite-lived intangible is determined to be more likely than not impaired, then the fair value of the asset is compared with its carrying value and any excess of the carrying value over the fair value would be recognized as an expense in tho period in which the impairment occurs.
For finite-lived intangible assets, if potential impairment circumstances are considered to exist, the Company wiB perform a recoverability test using an undiscounted cash flow analysis. Actual results could differ from these cash flow estimates, which could materially impact the impairment conclusion. If tho carrying value of the asset is determined not to be recoverable based on the undiscounted cash flow test, the difference between the carrying value of the asset and its current fair value would be recognized as an expense in the period in which the impairment occurs.
Noncontrolling Interests. The Company reports noncontrolling interests as equity, separate from the parent's equity, on the consolidated statements of financial condition. In addition, the Company's consolidated net income on the consolidated statements of income includes the income (loss) attributable to noncontrolling interest holders of the Company's consolidated investment products. Income (loss) attributable to noncontrolling interests is not adjusted for income taxes for consolidated investment products that are treated as pass-through entities for tax purposes.
Classification and Measurement of Redeemable Securities. The Company includes redeemable noncontroling interests related to certain consolidated investment products in temporary equity on the consolidated statements of financial condition.
Treasury Stock. The Company records common stock purchased for treasury at cost At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the average cost method.
Revenue Recognition
Investment Advisory, Administration Fees and Securities Lending Revenue. Investment advisory and administration fees are recognized as the services are performed. Such fees are primariy based on pre-determined percentages of the market value of AUM or committed capital. Investment advisory and administration fees are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. Investment advisory and administration fees for investment funds are shown net of fees waived pursuant to contractual expense limitations ofthe funds or voluntary waivers.
The Company contracts with third parties and related parties for various mutual fund distribution and shareholder servicing to be performed on behalf of certain funds the Company manages. Such arrangements generally are priced as a portion of the management fee paid by the fund. In certain cases, the fund (primarily international funds) takes on the primary responsibility for payment for services such that the Company bears no credit risk to the third-party. The Company accounts for such retrocession arrangements in accordance with Accounting Standards Codification ("ASC") 605-45, Revenue Recognition - Principal Agent Considerations, and records its management fees net of retrocessions. Retrocessions for 2015, 2014 and 2013 were $870 million, $891 million and $785 million, respectively, and were reflected net in investment advisory, administration fees and securities lending revenue on the consolidated statements of income.
The Company also earns revenue by lending securities as an agent on behalf of clients, primarily to brokerage institutions. Revenue is accounted for on an accrual basis. The revenue earned is shared between the Company and the funds or other third-party accounts managed by the Company from which the securities are borrowed.
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Investment Advisory Performance Fees / Carried Interest. The Company receives investment advisory performance fees or incentive allocations from certain actively managed investment funds and certain separately managed accounts ("SMAs"). These performance fees are dependent upon exceeding specified relative or absolute investment return tnresnoids. 3ucn fees are recorded upon completion ofthe measurement period, which vanes by product or account, and couio De monthly, quarteriy, annually or longer.
In addition, the Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. BlackRock may be required to reverse/return all, or part, of such carried interest allocations depending upon future performance of those funds Therefore, BlackRock records carried interest subject to such clawback provisions in total investments or cash/cash of consolidated VIEs to the extent that it is distributed, on its consolidated statements of financial condition. Carried interest is recorded as performance fee revenue upon the earlier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable
The Company records a deferred carried interest liability to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. At December 31, 2015 and 2014, the Company had $143 million and $105 million, respectively, of deferred carried interest recorded in other liabilities/other liabilities of consolidated VIEs on the consolidated statements of financial condition. A portion of the deferred carried interest liability will be paid to certain employees. The ultimate timing of the recognition of performance fee revenue, if any, for these products is unknown.
BlackRock Solutions and Advisory. BlackRock provides a variety of risk management, investment analytic, enterprise investment system and financial markets advisory services to financial institutions, pension funds, asset managers, foundations, consultants, mutual fund sponsors, real estate investment trusts and government agencies. These services are provided under the brand name BlackRock Solutions and include a wide array of risk management services, valuation of illiquid securities, disposition and workout assignments (including long-term portfolio liquidation assignments), strategic planning and execution, and enterprise investment system outsourcing to clients. Fees earned for BlackRock Solutions and advisory services are recorded as services are performed and are determined Using some, or aB, of the following methods: (i) percentages of various attributes of advisory AUM or value of positrons on the Aladdin platform, (ii) fixed fees and (ui) performance fees if contractual thresholds are met. The fees earned for BlackRock Solutions and advisory services are recorded in BlackRock Solutions and advisory on the consolidated statements of income.
Other Revenue. The Company earns fees for transition management services comprised of commissions from acting as an introducing broker-dealer in buying and selling securities on behalf of the Company's customers. Commissions related to transition management services are recorded on a trade-date basis as securities transactions occur and are reflected in other revenue on the consolidated statements of income.
The Company earns commissions revenue upon the sale of unit trusts and Class A mutual funds. Revenue is recorded at the time of the sale of the product. Other revenue also includes equity method investment earnings related to certain strategic investments.
Stock-based Compensation. Entities are required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost is recognized over the period during which an employee is required to provide service (usually the vesting period) in exchange for the stock-based award.
The Company measures the grant-date fair value of restricted stock units ("RSUs") using the Company's share price on the date of grant. For employee share options and instruments with market conditions, the Company uses pricing models. If an equity award is modified after the grant-date, incremental compensation cost is recognized for an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. Awards under the Company's stock-based compensation plans vest over various periods. Compensation cost is recorded by the Company on a straight-line basis over the requisite service period for each separate vesting portion ofthe award as if the award is, 'm-substance, multiple awards. Compensation cost is reduced by the number of awards expected to be forfeited prior to vesting. Forfeiture estimates generally are derived using historical forfeiture information, where available, and are reviewed for reasonableness at least quarterly.
The Company amortizes the grant-date fair value of stock-based compensation awards made to retirement-eligible employees over the requisite service period. Upon notification of retirement, the Company accelerates the unamortized portion of the award over the contractually required retirement notification period.
Distribution and Servicing Costs. Distribution and servicing costs include payments to third parties, primarily associated with distribution and servicing of client investments in certain BlackRock products. Distribution and servicing costs are expensed when incurred.
Amortization of Deferred Sales Commissions. The Company holds the rights to receive certain cash flows from sponsored mutual funds sold without a front-end sales charge ("back-end load shares"). The carrying vakie of these deferred mutual fund commissions is recorded within other assets on the consolidated statements of financial condition and is being amortized over periods between one and six years. The Company receives distribution fees from these funds and contingent deferred sales commissions ("CDSCs") upon shareholder redemption of certain back-end load shares that are recorded within distribution fees on the consolidated statements of income. Upon receipt of CDSCs, the Company records revenue and the remaining unamortized deferred sales commission is expensed.
Direct Fund Expenses. Direct fund expenses, which are expensed as incurred, primariy consist "of third-party nonadvisory expenses incurred by BlackRock related to certain funds for the use of certain index trademarks, reference data for certain indices, custodial services, fund administration, fund accounting, transfer agent services, shareholder reporting services, audit and tax services as well as other fund-related expenses directly attributable to the nonadvisory operations of the fund.
Leases. The Company accounts for its office facilities leases as operating leases, which may include escalation clauses. The Company expenses the lease payments associated with operating leases evenly during the lease term (including rent-free periods) commencing when the Company obtains the right to control the use ofthe leased property.
Foreign Exchange. Foreign currency transactions are recorded at the exchange rates prevailing on the dates of the transactions. Monetary assets and liabilities that are denominated in foreign currencies are subsequently remeasured into the functional currencies of the Company's
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subsidiaries at the rates prevailing at each balance sheet date. Gains and losses arising on remeasurement are included in general and administration expense on the consolidated statements of income. Revenue and expenses are translated at average exchange rates during the period. Gains or losses resulting from translating foreign currency financial statements into U.S. dollars are included in accumulated other comprehensive income, a separate component of stockholders' equity, on the consolidated statements of financial condition.
Income Taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using currently enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized on the consolidated statements of income iri the period that includes the enactment date.
Management periodically assesses the recoverability of its deferred income tax assets based upon expected future earnings, taxable income in prior carryback years, future deductibility of the asset, changes in applicable tax laws and other factors. If management determines that it is not more likely than not that the deferred tax asset will be fully recoverable in the future, a valuation allowance win be established for the difference between the asset balance and the amount expected to be recoverable in the future. This allowance will result in additional income tax expense. Further, the Company records its income taxes receivable and payable based upon its estimated income tax position.
Excess tax benefits related to stock-based compensation are recognized as additional paid-in capital and are reflected as financing cash flows on the consolidated statements of cash flows. If the Company does not have additional paid-in capital credits (cumulative tax benefits recorded to additional paid-in capital), the Company will record an expense for any deficit, or shortfan, between the recorded tax benefit and tax return benefit. At December 31, 2015 and 2014, BlackRock had excess additional paid-in capital credits to absorb potential future deficits between recorded tax benefits and tax return benefits.
Earnings per Share ("EPS"). Basic EPS is calculated by dividing net income applicable to common shareholders by the weighted-average number of shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and common stock equivalents outstanding during the period. Diluted EPS is computed using the treasury stock method.
Due to the similarities in terms between BlackRock's nonvoting participating preferred stock and the Company's common stock, the Company considers its nonvoting participating preferred stock to be a common stock equivalent for purposes of EPS calculations. As such, the Company has included the outstanding nonvoting participating preferred stock in the calculation of average basic and diluted shares outstanding.
Business Segments. The Company's management directs BlackRock's operations as one business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10, Segment Reporting ("ASC 280-10").
Fair Value Measurements.
Hierarchy of Fair Value Inputs. The Company uses a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 Inputs'
Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.
Level 1 assets may include listed mutual funds, ETFs, listed equities and certain exchange-traded derivatives. Level 2 Inputs:
Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.
Level 2 assets may include debt securities, bank loans, short-term floating-rate notes, asset-backed securities, securities held within consolidated hedge funds, restricted public securities valued at a discount, as well as over-the-counter derivatives, including interest and inflation rate swaps and foreign currency exchange contracts that have inputs to the valuations that generaly can be corroborated by observable market data.
Level 3 Inputs:
Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes. Level 3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment or estimation.
Level 3 assets may include direct private equity investments held within consolidated funds, investments in CLOs, bank loans and bonds.
Level 3 liabilities include contingent liabilities related to acquisitions valued based upon discounted cash flow analysis using unobservable market data. Level 3 liabilities at December 31, 2014 also included borrowings of consolidated CLOs valued based upon nonbinding single-broker quotes.
Significance of Inputs. Tho Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
Valuation Techniques. The fair values of certain Level 3 assets and liabilities were determined using various methodologies as appropriate, including third-party pricing vendors, broker quotes and market and income approaches. Such quotes and modeled prices are evaluated for
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reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of the current market environment and other analytical procedures.
A significant number of inputs used to value equity, debt securities and bank loans is sourced from third-party pricing vendors. Generally, prices obtained from pricing vendors are categorized as Level 1 inputs for identical securities traded in active markets and as Level 2 for other similar securities if the vendor uses observable inputs in determining the price. Annually, BlackRock's internal valuation committee or other designated groups review both the valuation methodologies, including the general assumptions and methods used to value various asset classes, and operational processes with these vendors. On a quarterly basis, meetings are held with key vendors to identify any significant changes to the vendors' processes.
In addition, quotes obtained from brokers generally are nonbinding and categorized as Level 3 inputs. However, if the Company is able to determine that market participants have transacted for the asset in an orderly manner near the quoted price or if the Company can determine that the inputs used by the broker are observable, the quote is classified as a Level 2 input.
Investments Measured at Net Asset Values As a practical expedient, the Company uses NAV as the fair value for certain investments. The inputs to value these investments may include BlackRock capital accounts for its partnership interests in various alternative investments, including distressed credit hedge funds, opportunistic funds, real estate and private equity funds, which may be adjusted by using the returns of certain market indices. The various partnerships generally are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the fund to utilize pricingA/aluation information from third-party sources, including independent appraisals. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that may be used as an input to value these investments.
Derivative Instruments and Hedging Activities. The Company does not use derivative financial instruments for trading or speculative purposes. The Company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in foreign currency exchange rates of certain assets and liabilities, and market exposures for certain seed investments. The Company may also use derivatives within its separate account assets, which are segregated for purposes of funding individual and group pension contracts. In addition, certain consolidated sponsored investment funds may also invest in derivatives as a part of their investment strategy.
Changes in the fair value of the Company's derivative financial instruments are recognized in earnings and, where applicable, are offset by the corresponding gain or loss on the related foreign-denominated assets or liabilities or hedged investments, on the consolidated statements of income.
The Company may also use financial instruments designated as net investment hedges for accounting purposes to hedge net investments in international subsidiaries whose functional currency is different from the reporting currency of the parent company. The gain or loss from revaluing accounting hedges of net investments in foreign operations at the spot rate is deferred and reported within accumulated other comprehensive income on the consolidated statements of financial condition. The Company reassesses the effectiveness of its net investment hedge on a quarterly basis.
Recent Accounting Pronouncements Not Yet Adopted
Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The Company is currently evaluating the impact of adopting ASU 2014-09, which is effective for the Company on January 1, 2018.
Accounting for Measurement-Period Adjustments. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Penod Adjustments ("ASU 2015-16"). Under ASU 2015-16, an acquirer must recognize, upon determination, adjustments to the original amounts recorded for a business acquisition that are identified during the one-year period following the acquisition date. Previously prior period information was required to be revised. The Company adopted ASU 2015-16 prospectively on January 1, 2016 and wiH apply the ASU to any adjustments related to business acquisitions.
Recognition and Measurement of Financial Instruments. In January 2016, the FASBissued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 amends guidance on the classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. ASU 2016-01 aiso amends certain disclosure requirements associated with the fair value of financial instruments. The Company is currently evaluating the impact of adopting ASU 2016-01, which is effective for the Company on January 1, 2018.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02'). ASU 2016-02 requires lessees to recognize assets and liabilities arising from most operating leases on the statement of financial position. The Company is currently evaluating the impact of adopting ASU 2016-02, which is effective for the Comoanv on January 1,2019.
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3. Investments
A summary of the carrying value of total investments is as follows:
(in millions)
Available-for-sale investments
Held-to-maturity investments
Trading investments.
Consolidated sponsored investment funds Other equity and debt securities
Deferred compensation plan mutual funds
Total trading investments Other investments:
Consolidated sponsored investment funds
Equity method investments
Deferred compensation plan equity method investments Cost method investmentsO) Camed interest
December 31, 2014
201 79
44 3 29 64
536
270 633 21 96 85
Total other investments
Total investments
(1) Amounts pnmanly include Federal Reserve Bank ("FRB") Stock Availablcfor-Sale Investments
A summary of the cost and carrying value of investments classified as available-for-sale investments is as follows
(in millions)
Decomber31, 2015 December 31, 2014
Carrying Value
Cost
Gains
Gross Unrealized
Losses
$ 205 $ 5 S (9) $ 201
At December 31, 2015 available-for-sale investments primarily included investments in CLOs. At December 31, 2014, available-for-sale investments primarily included seed investment in BlackRock sponsored mutual funds.
A summary of sale activity of available-for-sale securities during 2015, 2014 and 2013 is shown below.
Year ended December 31,
(in millions)
Sales proceeds
Net realized gain (loss): Gross realized gains Gross realized losses
Net realized gain (loss)
155
14 (3)
139
20 (D
Held-to-Maturity Investments
The carrying value of held-to-maturity investments was $108 million and $79 million at December 31,2015 and 2014, respectively. Held-to-maturity investments included foreign government debt held primarily for regulatory purposes. The amortized cost (carrying value) of these investments approximated fair value. At December 31, 2015, $96 million of these investments mature in one year or less and $12 million mature after five years through ten years.
Trading Investments
A summary of the cost and carrying value of trading investments is as follows:
(in millions)
Trading investments:
Deferred compensation plan mutual funds Equity securities/multi-asset mutual funds Debt securities/fixed income mutual funds:
Corporate debt
Government debt
Asset/mortgage backed debt
Total trading investments
At December 31, 2015, trading investments included $437 million of debt securities and $263 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $65 million of certain deferred compensation plan mutual fund investments and $20 million of other equity and debt securities.
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At December 31, 2014, trading investments included $223 million of debt securities and S220 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $64 million of certain deferred compensation plan mutual fund investments and $29 million of other equity and debt securities.
Other Investments
A summary ofthe cost and carrying value of other investments is as follows:
ISSS^eiilffiiSIS^STs^^^^ December 31, 2014
(in millions) rtihar investments Consolidated sponsored investment funds accounted for as VREs Equity method Investments Defened compensation plan equity method investments Cost method investments" Federal Reserve Bank slock Other ^SHB^SiM^^'iSSsSffi Carrying b^lMgof^lkwIl^iy^lU^jiie^ Cost Value
ia^^^S^g$ME^|j|8^^i S 268 $ 270 rJj^^^^a^^^glffi^gS^^ 518 633
Total cost method investments Camed interest(l) illlli HM 96 85
Total other investments ^rW^^WSSSi^SS^gBS^BLW^Si $ 903 $ 1,105
(1) Camed interest related to VREs.
At December 31, 2014, consolidated sponsored investment funds accounted for as VREs include third-party private equity funds, direct investments in private companies and third-party hedge funds held by BlackRock sponsored investment funds.
Equity method investments primarily include BlackRock's direct investments in certain BlackRock sponsored investment funds. See Note 11, Other Assets, for more information on the Company's investment in PennyMac Financial Services, Inc. ("PennyMac"), which is included in other assets on the consolidated statements of financial condition.
Cost method investments include nonmarketable securities, primariy FRB stock, which is held for regulatory purposes and is restricted from sale. At December 31, 2015 and 2014, there were no indicators of impairment on these investments.
Carried interest represents allocations to BlackRock's general partner capital accounts from certain funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds.
4. Consolidated Voting Rights Entities
The Company consolidates certain sponsored investment funds accounted for as VREs because it is deemed to control such funds. The investments owned by these consolidated VREs are classified as trading or other investments. The following table presents the balances related to these consolidated VREs that were recorded on the consolidated statements of financial condition, including BlackRock's net interest in these funds:
Cash and cash equivalents )ftjJftH|^y^M«i^Kjp'rj$H $ 120
Noncontrolling interests _ |E!8HBBflM8Wl1.25)'l (139)
BlackRock's net Interests in consolidated VREs itaJBIgrSJStMWsTfja $ 696
BlackRock's total exposure to consolidated VREs represents the value of its economic ownership interest in these sponsored investment funds. Valuation changes associated with investments held at fair value by these consolidated VREs are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to noncontrolling interests for the portion not attributable to BlackRock.
In addition, at December 31, 2015 and 2014, certain consolidated sponsored investment funds, which were accounted for as VIEs, were excluded from the balances in the table above as the balances for these investment products are reported;separately on the consolidated statements of financial condition. See Note 5, Variable Interest Entities, for further discussion on these consolidated investment products. See Note 2, Significant Accounting Policies, for the Company's consolidation policy and for further information on the adoption of ASU 2015-02.
The Company cannot readily access cash and cash equivalents held by consolidated VREs to use in its operating activities. 5. Variable Interest Entities
In the normal course of business, the Company is the manager of various types of sponsored investment vehicles, which may be considered VIEs. The Company may from time to time own equity or debt securities or enter into derivatives with the vehicles, each of which are considered variable interests. The Company's involvement in financing the operations of the VIEs is generally limited to its investments in the entity. The Company consolidates entities when it is determined to be the PB. See Note 2. Significant Accounting Policies, for further information on the Company's accounting policy on consolidation.
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As a result of the adoption of ASU 2015-02, the Company deconsolidated all previously consolidated CLOs effective January 1, 2015 as its fees arc no longer deemed variable interests. The Company also consolidated certain investment products that were not previously consolidated. See Note 2. Significant Accounting Policies - Accounting Pronouncements Adopted in 2015, for further information on ASU 2015-02.
Consolidated VIEs. The Company's consolidated VIEs as of December 31, 2015 include certain sponsored investment funds in which BlackRock has an investment and as the investment manager, is deemed to have both the power to direct the most significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these sponsored investment funds. The assets of these VIEs are not available to creditors of the Company. In addition, the investors in these VIEs have no recourse to the credit of the Company.
The Company's consolidated VIEs under previous accounting guidance as of December 31, 2014 primarily included CLOs in which BlackRock did not have an investment; however, as the collateral manager, BlackRock was deemed to have both the power to direct the most significant activities of the CLOs and the right to receive benefits that could potentially be significant to the CLOs.
Consolidated VIE assets and liabilities are presented after intercompany eliminations at December 31, 2015 and 2014 in the following table
(in millions)
Assets of consolidated VIEs: Cash and cash equivalents
Investments
Other assets Total investments and other assets Liabilities of consolidated VIEs:
Bono wings
Other liabilities Appropriated retained earnings NoncontroHing interests of consolidated VIEs
BlackRock's net interests in consolidated VIEs
December 31, 2014
278 3,320 32
3.352
(3.389) (245) 19 (1S)
The Company recorded a $58 million nonoperating net gain for 2015 related to consolidated VIEs. Net income attributable to noncontrolling interests related to consolidated VIEs for 2015 was $6 million.
The Company recorded $41 million of nonoperating expense and an equal and offsetting loss attributable to noncontrolling interests related to consolidated VIEs for 2014. No gain or loss was recorded for 2013.
Non-Consolidated VIEs. At December 31, 2015 and 2014, the Company's carrying value of assets and liabilities included on the consolidated statements of financial condition pertaining to nonconsolidated VIEs and its maximum risk of loss related to VIEs for which it held a variable interest, but for which it was not the PB, was as follows:
(in millions)
At December 31, 2015
Sponsored investment products At December 31, 2014 CDOs/CLOs
Other sponsored investment funds: Collective trusts
Other
Total
Other Net
Assets (Liabilities)
Maximum Risk of LossOl
Advisory Fee Receivables
191 177
191 234
57 57
— $ 2 $ (5) $ 19
(3)
(8) $
(1) At December 31, 2015 and 2014, BlackRock's maximum risk of loss associated with these VIEs primarily related to collecting advisory fee receivables and BlackRock's investments.
The net assets of sponsored investment products that are nonconsolidated VIEs approximated $3 billion at December 31, 2015. Net assets of other sponsored investment funds approximated $1.7 trillion to $1.8 trilGon at December 31, 2014 and included approximately $1.4 trillion of collective trusts at December 31, 2014. Upon the adoption of ASU 2015-02, BlackRock no longer has a variable interest in collective trusts as BlackRock does not have any economic interest and earns at-market fees from these products.
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6. Fair Value Disclosures Fair Value Hierarchy
Assels and iiabilities measured at fair value on a recurring basis and other assets not held at fair value
December 31, 2015
(in millions)
Assets:
Investments Available-for-sale Held-to-maturity debt secunties Trading:
Deferred compensation plan mutual funds
Equity/Multi-asset mutual funds
Debt securities / fixed income mutual funds
Total trading Other investments:
Equity method
Equity and fixed income mutual funds Other
Total equity method
Deferred compensation plan equity method investments Cost method investments Camed interest
Quoted Prices in
Active Significant
Markets for Significant Other Unobservable Investments Other Assets
Identical Assets Observable Inputs Inputs Measured at Not Held at Fair
(Level 1) (Level 2) (Level 3) NAV(1) Value(2)
65 278 2
345
430 14
30 400
73
95 19
Total investments
Separate account assets
Separate account coEateral held under securities lending agreements:
Equity securities Debt securities
' Total separate account collateral held under securities lending agreements Investments of consolidated VIEs: Private / public equKy{3) Equity secunties Debt securities Other
Carried interest
Total investments of consolidated VIEs
Total
Liabilities:
Separate account collateral liabilities under securities
lending agreements
Other liabilities^)
Total
109.761
26,062
26,062|1010|298
304
136,564 $
26,062 $
26.062 S
440
40,152
5,274
5,274 4
242
46,112 %
5,274 $ 6
5.280 $
1*336 fc3jjg&tf390j
Amounts are comprised of-certain-investments measured at fair value using'NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy (see Note 2, Significant Accounting Policies, for more information on the adoption of ASU 20154)7).
Amounts are comprised of investments held at cost or amortized cost, carried interest and certain equity method investments, which include sponsored investment funds and other assets, which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company's investment in such equity method investees may not represent fair value.
Level 3 amounts include direct investments in private equity companies held by private equity funds.
Amounts include a derivative (see Note 7, Derivatives and Hedging, for more information) and recorded contingent liabilities related to certain acquisitions (see Note 13, Commitments and Contingencies, tor more information).
F-19
Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value
December 31, 2014
(in millions)
Assets:
Investments
Available-for-sale
Held-to-maturity debt secunties
Trading:
Defened compensation plan mutual funds
Equity/Multr-asset mutual funds
Debt securities / fixed income mutual funds
Total trading Other investments:
Consolidated sponsored investment funds
private / public equity(3) Equity method:
Fixed income mutual funds Other
Total equity method Deferred compensation plan equity method investments Cost method investments Carried interest
Quoted Prices in Active Markets for Identical Assets (Level 1)
64 239 11
314
29 98
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
— S
Investments Measured at NAV(1)
493
493 21
Other Assets Not Held at Fair Vatuc(2)
— I 79
13
13
96 85
Total investments
Separate account assets
Separate account collateral held under securities lending agreements:
Equity securities Debt securities
Total separate account collateral held under secunties lending agreements Assets of consolidated VIEs:
Bank loans and other assets Bonds
Private / public equity
236
46,866
3,267
3,267
2.958 29 3
80
302 18
1.921
161,287
30.387 3.267
3.292 47 13
Total assets of consolidated VIEs
Total
Liabilities:
Borrowings of consolidated VIEs
Separate account colateral liabilities under securities
lending agreements
Other liabilities^)
Total
$ 144,603 $
$ — $
30,387
$ 30.387 S
53,359 $
3,267 5
3,272 $
3,389
33,654 44 37,087
Amounts are compnsed of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy (see Note 2. Significant Accounting Policies, for more information on the adoption of ASU 2015-07).
Amounts are compnsed of investments held at cost or amortized cost, camed interest and certain equity method Investments, which include sponsored investment funds and other assets, which arc not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures, therefore, tho Company's invostmcnt in such equity method Investees may not represent fair valuo.
Level 3 amounts include direct investments in private equity companies held by pnvate equity funds.
Amounts include a derivative (sec Note 7, Derivatives and Hedging, for more information) and contingent liabilities related to certain acquisitions (see Note 13, Comm/rmenfs ano* Contingencies, for more information).
Level 3 Assets. Level 3 investments of consolidated VIEs of $196 million at December 31, 2015 and Level 3 investments of $80 million at December 31, 2014 related to direct investments in private equity companies held by private equity funds. Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization ("EBITDA") multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market comparable companies valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.
F-20
Level 3 assets may include bank loans, investments in CLOs, and bonds valued based on single-broker nonbinding quotes and direct private equity investments valued using the market approach or the income approach as described above.
Level 3 Liabilities. Level 3 borrowings of consolidated VIEs at December 31, 2014 include CLO borrowings valued based upon single-broker nonbinding quotes.
Level 3 other liabilities primarily include recorded contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2015(1)
(in millions)
Assets: Investments
Available-for-sale secunties(5)
Trading
Consolidated sponsored
investment funds' Pnvate
equity
Total investments Assets of consolidated VIEs. Private equity Bank loans Bonds
Total assets of consolidated VIEs
Total Level 3 assets
Liabilities:
Borrowings of consolidated
VIEs • Other liabilities
Total liabilities
Realized and Unrealized
Gains (Losses) in Earnings and OCI
December 31, 2014
37
37
302
320
400 $
3,389 39
3,428 $
Issuances
and
Other
Settlements (2)
_£i
— s
(80)
(80)
80 (302) (16)
(240)
(320) $
(3,389) $ 12
(3.377) $
Total Net Unrealized Gains (Losses) Included in Earnings'*)
37
Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to bo categorized within the fair value hierarchy. See Note 2. Significant Accounting Policies, for further information.
Amounts includo tho consolidation (deconsolidation) of VIEs due to the adoption of ASU 2015-02 effective January 1, 2015.
Other liabilities amount includes contingent liabilities and payments of contingent liabilities related to certain acquisitions.
Earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date.
Amounts include investments in CLCs.
F-21
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2014(1)
(m millions) Assets:
Investments
Consolidated sponsored investment funds. Hedge funds Pnvate equity Assets of consolidated VIEs
Bank loans Bonds
December 31, 2013
|1010|28
129 35
Realized and Unrealized
Gains (Losses) in Earnings and OCI
(8)
0)
Issuances
and Transfers
Sales and Other into
0) $
0)
Purchases Maturities Settlements(2) Level 3(3)
— S
(96) (17)
23
Transfers out of Level 3
(280)
Total Net Unrealized Gains (Losses) Included in Earnings(4)
— $
(8)
302 18
Total assets of consolidated VIEs
Total assets
Liabilities:
Borrowings of consolidated VIEs Other liabilities
Total liabilities
164
194 $
2,369 $ 42
2,411 $
(9)
(17) $
77 $ (1)
76 $
45 $
1,097 (4)
1,093 $
3.389 39
N/A - not applicable
Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to be categorized within the fair value hierarchy. See Note 2, Significant Accounting Policies, tor further information.
Amount pnmanly includes net proceeds from borrowings of consolidated VIEs.
Includes investments previously held at cost.
Earnings attributable to tho change in unrealized gains (losses) relating to assets still held at the reporting date.
The net gam (loss) on consolidated VIEs is solely attributable to noncontrolling interests on the consolidated statements of income.
Realized and Unrealized Gains (Losses) (or Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds are allocated to noncontrolling interests to reflect net income (loss) not attributable to the Company.
Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become obscrvable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.
Assets of Consolidated VIEs. During 2014, there were $280 million of transfers out of Level 3 to Level 2 related to bank loans. In addition, in 2014, there were $302 million of transfers into Level 3 from Level 2 related to bank loans. These transfers in and out of levels were primarily due to availability/unavailability of observable market inputs, including inputs from pricing vendors and brokers.
Significant Issuances and Other Settlements. During 2015, other settlements primarily included the impact of deconsolidating previously consolidated CLOs effective January 1, 2015 as a result of adopting ASU 2015-02. See Note 2, Significant Accounting Policies, for further information on ASU 2015-02.
In 2014, issuances and other settlements included $1,582 million of borrowings due to the consolidation of CLOs and $485 million of repayments of borrowings of consolidated CLOs. ..
Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At December 31, 2015 and 2014, the fair value ofthe Company's financial instruments not held at fair value are categorized in the table below.
(in millions)
Financial Assets:
Cash and cash equivalents Accounts receivable
Cash and cash equivalents of consolidated VIEs Financial Liabilities:
Accounts payable and accrued liabilities Long-term borrowings
5,723 2,120
278
1.035 4,922
5,723 2,120
278
1,035 5,309
Fair Value Hierarchy
(1).
Level 1 (2) Level 1 (3) (1).
(")
Level 1 (2)
Level 1 (3)
Level 2
F-22
Cash and cash equivalents arc earned at either cost or amortized cost, which approximates fair value due to their short-Icnn matunties.
Al December 31. 2015 and 2014, approximately $132 million and $100 million, respectively, of money market funds were recorded within cash and cash equivalents on the consolidated statements of financial condition In addition, at December 31, 2015, approximately S68 million of money market funds was recorded within cash and cash equivalents of consolidated VIEs. Money market funds are valued based on quoted market prices, or $1.00 per share, which generally is the NAV of the fund.
The carrying amounts of accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term nature
Long-term borrowings are recorded at amortized cost, net of debt issuance costs. The fair value of the long-term bonowings, including the current portion of long-term borrowings, IS estimated using market prices al the end of December 2015 and 2014, respectively. See Note 12. Borrowings, for the fair value of each of the Company's long-term borrowings.
Investments in Certain Entities that Calculate Net Asset Value Per Share
As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).
December 31, 2015
December 31, 2014
(in millions)
Consolidated VREs:
Private equity funds of funds
Equity method^D
Hedge funds/funds of hedge funds
Private equity funds Real estate funds
Deferred compensation plan investments Consolidated VIEs:
Pnvate equity fund of funds
Total
(a) $ . (b)
(c) (d)
(e)
¦(0
Fair Value
168 277
107 109
21
10 692
Total Unfunded Commitments
22 39
61 1
N/R 1 - 90 days
Redemption Redemption Frequency Notice Period
N/R
N/R 60 days
Daily/Monthly (29%) Quarterly (48%) ¦N/R (23%) N/R
N/R N/R
Quarterly (19%) N/R (81%) N/R
N/R
N/R - not redeemable
(1) Comprised of equity method investments, which include investment companies, which account for their financial assets and most financial liabilities under fair value measures; therefore, tho Company's investment in such equity method investees approximates fair value.
(a) This category includes the underiying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company's ownership Interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of tho investments in this category, the Company reduces its investment by distributions that are received through the realization of the underiying assets of the funds. It is estimated that the underiying assets of these funds will be liquidated over a weighted-average period of approximately five years and seven years at December 31, 2015 and 2014, respectively. The total remaining unfunded commitments to other third-party funds were $19 million and $22 million at December 31, 2015 and 2014, respectively. The Company had contractual obligations to the consolidated funds of $31 million at both December 31. 2015 and 2014.
F-23
This category includes hedge funds and funds of hedge funds lhat invest primarily in equities, fixed income securities, distressed credit, opportunistic and mortgage instruments and other third-party hedge funds. The fair values of the investments have been estimated using the NAV of the Company's ownership interest in partners' capital. It was estimated thai the investments in the funds that are not subject to redemption will be liquidated over a weighted-average penod of approximately one year and two years al December 31, 2015 and 2014, respectively
This category includes several private equity funds that initially invest in nonmarketable securities of pnvate companies, which ultimately may become public in the future. The fair values of these investments have been estimated using capital accounts representing the Company's ownership interest in the funds as well as other performance inputs The Company's investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underiying assets of the private equity funds. It was estimated that the investments m these funds will be liquidated over a weighted-average period of approximately four years at both December 31, 2015 and 2014.
This category includes several real estate funds that invest directly in real estate and real estate related assets. The fair values of the investments have been estimated using capital accounts representing the Company's ownership interest in the funds. A majonty of the Company's investments are not subject to redemption or are not currently redeemable and are normally returned through distributions as a result of the liquidation of the underiying assets of the real estate funds. It is estimated that the investments in these funds not subject to redemptions will be liquidated over a weighted-average penod of approximately six years and seven years at December 31, 2015 and 2014, respectively.
This category for 2015 pnmanly includes a multi-asset fund that is redeemable. The fair values of the investments have been estimated using capital accounts representing the Company's ownership interest in partners' capital. In addition, for both 2014 and 2015. this category includes investments in several real estate funds The fair values of the investments have been estimated using capital accounts representing the Company's ownership interest in partners' capital. The investments are not subject to redemption, however, distnbutions as a result of the liquidation of the underiying assets will be used to settle certain deferred compensation liabilities over time
This category includes the underiying third-party private equity funds within one consolidated BlackRock sponsored private equity fund of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company's ownership interest in each fund in the portfolio as well as other perfonnance inputs. These investments are not subject to redemption; however, for certain funds the Company may sell or transfer its interest, which may need approval by the general partner of the underlying third-party funds Due to the nature of the investments in this category, the Company reduces its investment by distnbutions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately one year at December 31, 2014.
Fair Value Option.
As of December 31, 2015, assets for which the fair value option was elected were not material to the consolidated financial statements.
The following table summarizes information at December 31, 2014 related to those assets and liabilities for which the fair value option was elected:
December 31,
(in millions) 2014
CLO Bank Loans:
Aggregate pnncipal amounts outstanding $ ( 3,338
Fair value ¦ 3,260
Aggregate unpaid pnncipal balance in excess of (less than) fair value $ 78
Unpaid principal balance of loans more than 90 days past due $ 6
Aggregate fair value of loans more than 90 days past duo 2_
Aggregate unpaid principal balance in excess of fair value for loans more than 90 days past due $ 4_
CLO Borrowings:
Aggregate principal amounts outstanding $ 3,508
Fair value $ 3,389
At December 31, 2014, the principal amounts outstanding of the borrowings issued by the CLOs mature between 2016 and 2027.
During 2014 and 2013, the change in fair value ofthe bank loans and bonds held by the CLOs resulted in a $69 million and $153 million gain, respectively, which were offset by a $65 million and $117 milion loss, respectively, from the change in fair value of the CLO borrowings. The net gains (losses) were recorded in net gain (loss) on consolidated VIEs on the consolidated statements of income.
The change in fair value of the assets and liabilities included interest income and expense, respectively.
Effective January 1, 2015, the Company no longer consolidates CLOs due to the adoption of ASU 2015-02. See Note 2, Significant Accounting Policies, for further information. 7. Derivatives and Hedging
The Company maintains a program to enter into swaps to hedge against market price and interest rate exposures with respect to certain seed investments in sponsored investment products. At December 31, 2015, the Company had outstanding total return swaps and interest rate swaps with aggregate notional values of approximately $360 million and $46 miflion, respectively. At December 31, 2014, the Company had outstanding total return swaps and interest rate swaps with aggregate notional values of approximately $238 million and $84 miflion, respectively.
The Company has entered into a derivative, providing credit protection to a counterparty of approximately $17 million, representing the Company's maximum risk of loss with respect to the provision of credit protection. The Company carries the derivative at fair value based on the expected discounted future cash flows under the arrangement.
The fair values ofthe outstanding derivatives mentioned above were not material to the consolidated statements of financial condition at December 31, 2015 and 2014.
The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange movements. At December 31, 2015 and 2014, the Company had outstanding forward foreign currency exchange contracts with aggregate notional values of
F-24
approximately $169 million and $201 million, respectively. The fair value of the forward foreign currency exchange contracts at December 31, 2015 and 2014 was not material to the consolidated statement of financial condition.
Gains (losses) on total return swaps are recorded in nonoperating income (expense) and were 511 million, S(26) million and S(15) million for 2015, 2014 and 2013, respectively.
Gains (losses) on the interest rate swaps are recorded in nonoperating income (expense) and were $(21) million for 2014. Gains (losses) were not material for 2015 and 2013.
Gains (losses) on forward foreign currency exchange contracts are recorded in other general and administration expense and were $(26) million for 2013 Gains (losses) were not material to the consolidated statements of income for 2015 and 2014.
The Company consolidates certain sponsored investment funds, which may utilize derivative instruments as a part of the funds' investment strategies. The fair value of such derivatives at December 31. 2015 and 2014 was not material. The change in fair value of such derivatives, which is recorded in nonoperating income (expense), was not material for 2015, 2014 and 2013.
See Note 12, Borrowings, for more information on the Company's net investment hedge.
8. Property and Equipment
Property and equipment consists of the following:
4 17 14 478 387 56 93 5
(in millions)
Property and equipment: Land Building
Building improvements
Leasehold improvements
Equipment and computer software
Other transportation equipment
Furniture and fixtures
Construction in progress
Total {jS Less' accumulated depreciation and amortization 1.054 587
Property and equipment, net t^^^^^^SSSKiSB^ $ 467
N/A - Not Applicable
Qualifying software costs of approximately $48 milion, $45 mBion and $35 million have been capitalized within equipment and computer software during 2015. 2014 and 2013, respectively, and are being amortized over an estimated useful life of three years.
Depreciation and amortization expense was $115 million, $117 million and $128 million for 2015, 2014 and 2013, respectively.
9. Goodwill
Goodwill activity during 2015 and 2014 was as follows:
(in millions)
Beginning of year balance Acquisitions(t)
12,961
GoodwiM adjustments related to Quellos and otherf2)
End of year balance
In 2015, amount represents $113 million of goodwill from the Company's acquisition of FutureAdvisor, which expanded the Company's digital wealth management capabilities, $49 million of goodwill from the Company's acquisition of Infraestructura Institucional, which expanded the Company's infrastructure capabilities in Mexico, and $19 million of goodwill from the Company's acquisition of certain assets related to BKCA. The total consideration paid for these acquisitions was approximately $300 million, including $27 million of contingent consideration at fair value at time of close.
The decrease in goodwill during both 2015 and 2014 primarily resulted from a decline related to tax benefits realized from tax-deductible goodwill in excess of book goodwill from the acquisition of the fund-of-funds business of Quellos Group. LLC in October 2007.(the 'Quellos Transaction"). Goodwill related to the Quellos Transaction will continue to be reduced in.future periods by the amount of lax benefits reaftzed from tax-deductible goodwill in excess of book goodwill from the Quellos Transaction. The balance of the Quellos tax-deductible goodwill in excess of book goodwill was approximately $231 million and $263 million at December 31, 2015 and 2014, respectively.
BlackRock assessed its goodwill for impairment as of Jury 31, 2015.2014 and 2013 and considered such factors as the book value and the market capitalization of the Company. The impairment assessment indicated no impairment charges were required. The Company continues to monitor its book value per share compared with closing prices of its common stock for potential indicators of impairment. At December 31, 2015, the Company's common stock closed at a market price of $340.52, which exceeded its book value of approximately $172.12 per share.
F-25
10. Intangible Assets
Intangible assets at December 31, 2015 and 2014 consisted of the following:
(in millions)
At December 31, 2015
Indefinite-lived intangible assets: Management contracts Trade names / trademarks License
Remaining Weighted-Average Estimated Useful Life
Gross Carrying Amount
Accumulated Amortization
Net Carrying Amount
Total indefinite-lived intangible assets
Finite-lived intangible assets:
Management contracts
Intellectual property
Total finite-iived intangible assets
Total intangible assets
At December 31, 2014
Indefinite-lived intangible assets: Management contracts Trade names / trademarks License
N/A N/A N/A
15,579 1,403 6
15.579 1.403 6
Total indefinite-lived intangible assets
Finite-lived intangible assets:
Management contracts
Intellectual property
3.8 3.6
16,988
1.390 6
1,036 4
16,988
354 2
Total finite-lived intangible assets
Total intangible assets
N/A — Not Applicable
The impairment tests performed for intangible assets as of July 31,2015, 2014 and 2013 indicated no impairment charges were required. Estimated amortization expense for finite-lived intangible assets for each of the five succeeding years is as follows:
(tn millions)
Year Amount
2016 $ 97
60
30
2019 28
2020 14
Indefinite-Lived Acquired Management Contracts
In March 2015, in connection with the BKCA acquisition, the Company acquired $120 million of indefinite-lived management contracts. Finite-Lived Acquired Management Contracts
In October 2015, in connection with the Infraestructura Institucional acquisition, the Company acquired $36 million of finite-lived management contracts with a weighted-average estimated useful life of approximately six years.
11. Other Assets
Al March 31, 2013, BlackRock held an approximately one-third economic equity interest in Private National Mortgage Acceptance Company, LLC ("PNMAG"), which is accounted for as an equity method investment and is included in other assets on the consolidated statements of financial condition. On May 8, 2013, PennyMac became the sole managing member of PNMAC in connection with an initial public offering of PennyMac (the "PennyMac IPO"). As a result of the 2013 PennyMac IPO, BlackRock recorded a noncash, nonoperating pre-tax gain of $39 million related to the carrying value of its equity method investment.
Subsequent to the PennyMac IPO, in 2013 the Company contributed 6.1 million units of its PennyMac investment to a new donor advised fund (the "Charitable Contribution"). The fair value of the Charitable Contribution was $124 million and is included in general and administration expense on the consolidated statements of income for 2013. In connection with the Charitable Contribution, the Company also recorded a noncash, nonoperating pre-tax gain of $80 million related to the contributed investment and a tax benefit of approximately $48 million.
The carrying value and fair value of the Company's interest (approximately 20% or 16 million shares and units) was approximately $222 million and $239 million, respectively, at December 31, 2015 and approximately $167 million and $269 million, respectively, at December 31, 2014. The fair value ofthe Company's interest reflected the PennyMac stock price at December 31, 2015 and 2014, respectively (a Level 1 input).
F-26
12. Borrowings Short-Term Borrowings
2015 Revolving Credit Facility, in March 2011, the Company entered into a five-year S3.5 biiiion unsecured revolving credii facility, which was amended in 2014, 2013 and 2012. In April 2015, the Company's credit facility was further amended to extend tlie maturity date to March 2020 and to increase the amount of the aggregate commitment to $4.0 billion (the "2015 credit facility"). The 2015 credit facility permits the Company to request up lo an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 2015 credit facility to an aggregate principal amount not to exceed $5.0 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 2015 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at Oecember 31, 2015. The 2015 credit facility provides back-up liquidity to fund ongoing working capital lor general corporate purposes and various investment opportunities. At December 31. 2015, the Company had no amount outstanding under the 2015 credit facility.
Commercial Paper Program. On October 14, 2009, BlackRock established a commercial paper program (the "CP Program") under which the Company could issue unsecured commercial paper notes (the "CP Notes") on a private placement basis up to a maximum aggregate amount outstanding at any time of S4.0 billion as amended in April 2015. The CP Program is currently supported by the 2015 credit facility. At December 31, 2015, BlackRock had no CP Notes outstanding.
Long-Term Borrowings
The carrying value and fair value of long-term borrowings estimated using market prices and foreign exchange rates at December 31, 2015 included the following:
(in millions)
6.25% Notes due 2017 5.00% Notes due 2019 4.25% Notes due 2021 3.375% Notes due 2022 3.50% Notes due 2024 1.25% Notes due 2025
Total Long-term Borrowings
Unamortized Discount and Debt Issuance Costs
Maturity Amount
700 S. 1,000
750
750 1,000
760
4,960
Carrying Value
699 997 745 744 992 753
757 1,106
828
773 1,030
729
Long-term borrowings at December 31, 2014 had a carrying value of $4,922 biiiion and a fair value of $5,309 billion determined using market prices a! the end of December 2014.
2025 Notes. In May 2015, the Company issued €700 mition of 1.25% senior unsecured notes maturing on May 6, 2025 (the "2025 Notes"). The notes are listed on the New York Stock Exchange. The net proceeds of the 2025 Notes were used for general corporate purposes, including refinancing of outstanding indebtedness. Interest of approximately $10 million per year based on current exchange rates is payable annually on May 6 of each year. The 2025 Notes may be redeemed in whole or in part prior to maturity at any time at the option of the Company at a "make-whole" redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2025 Notes.
Upon conversion to U.S. dollars the Company designated the €700 million debt offering as a net investment hedge to offset its currency exposure relating to its net investment in certain euro functional currency operations. A gain of $19 million, net of tax, was recognized in other comprehensive income for 2015. No hedge ineffectiveness was recognized during 2015.
2024 Notes. In March 2014, the Company issued $1.0 billion in aggregate principal amount of 3.50% senior unsecured and unsubordinated notes maturing on March 18, 2024 (the "2024 Notes"). The net proceeds of the 2024 Notes were used to refinance certain indebtedness which matured in the fourth quarter of 2014. Interest is payable semiannually m arrears on March 18 and September 18 of each year, or approximately $35 million per year. The 2024 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a "make-whole" redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2024 Notes.
2022 Notes. In May 2012, the Company issued $1.5 billion in aggregate principal amount of unsecured unsubordinated obigations. These notes were issued as two separate series of senior debt securities, including $750 miion of 1.375% notes, which were repaid in June 2015 at maturity, and $750 milEon of 3.375% notes maturing in June 2022 (the "2022 Notes"). Net proceeds were used to fund the repurchase of BlackRock's common stock and Series B Preferred from Barclays and affiliates and for genera! corporate purposes. Interest on the 2022 Notes of approximately $25 million per year, respectively, is payable semi-annualy on June 1 and December 1 of each year, which commenced December 1, 2012. The 2022 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a "make-whole" redemption price. The "make-whole" redemption price represents a price, subject to the specific terms of the 2022 Notes and related indenture, that is the greater of (a) par value and (b) the present value of future payments that will not be paid because of an early redemption, which is discounted at a fixed spread over a comparable Treasury security. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2022 Notes.
2021 Notes. In May 2011, the Company issued $1.5 billion in aggregate principal amount of unsecured unsubordinated obligations. These notes were issued as two separate series of senior debt securities, including $750 milion of 4.25% notes maturing in May 2021 and $750 million of floating rate notes ("2013 Floating Rate Notes"), which were repaid in May 2013 at maturity. Net proceeds of this offering were used to fund the repurchase of BlackRock's Series B Preferred from affSiates of Merrill Lynch & Co., Inc. ("Merril Lynch"): Interest on the 4.25% notes due in 2021 ("2021 Notes") is payable semi-annuaty on May 24 and November 24 of each year, which commenced November 24, 2011, and is approximately $32 million per year. The 2021 Notes may be redeemed prior to maturity at any time in whole or In part at the option of the
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Company at a "make-whole" redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2021 Notes.
2019 Notes In December 2009, the Company issued $2.5 billion in aggregate principal amount of unsecured and unsubordinated obligations. These notes were issued as three separate series of senior debt securities including $0.5 billion of 2.25% notes, which were repaid in December 2012, $1.0 billion of 3.50% notes, which were repaid in December 2014 at maturity, and $1.0 billion of 5.0% notes maturing in December 2019 (the "2019 Notes"). Net proceeds of this offering were used to repay borrowings under the CP Program, which was used to finance a portion'of the acquisition of Barclays Global Investors ("BGI") from Barclays on December 1, 2009 (the "BGI Transaction"), and for general corporate purposes. Interest on the 2019 Notes of approximately $50 million per year is payable semi-annually in arrears on June 10 and December 10 of each year. These notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a "make-whole" redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term ofthe 2019 Notes.
2017 Notes In September 2007, the Company issued $700 million in aggregate principal amount of 6.25% senior unsecured and unsubordinated notes maturing on September 15, 2017 (the "2017 Notes"). A portion of the net proceeds of the 2017 Notes was used to fund the initial cash payment for the acquisition of the fund-of-funds business of Quellos and the remainder was used for general corporate purposes. Interest is payable semi-annually in arrears on March 15 and September 15 of each year, or approximately $44 million per year. The 2017 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a "make-whole" redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term ofthe 2017 Notes.
13. Commitments and Contingencies Operating Lease Commitments
Tho Company leases its primary office spaces under agreements that expire through 2035. Future minimum commitments under these operating leases are as follows:
(in millions)
Year Amount
2016 $ 134
133
131
125
120
Thereafter 560
Total $ 1,203
Rent expense and certain office equipment expense under lease agreements amounted to $136 million, $132 million and $137 million in 2015, 2014 and 2013, respectively.
Investment Commitments. At December 31, 2015, the Company had $179 minion of various capital commitments to fund sponsored investment funds, including consolidated VIEs. These funds include private equity funds, real estate funds, infrastructure funds and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontroting interest holders have the legal obligation to fund the respective commitments of such funds of funds. In addition to the capital commitments of $179 million, the Company had approximately $38 million of contingent commitments for certain funds which have investment periods that have expired. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.
Contingencies
Contingent Payments. The Company acts as the portfolio manager in a series of derivative transactions and has a maximum potential exposure of $17 million between the Company and counterparty. See Note 7, Derivatives and Hedging, for further discussion.
Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to the acquired businesses achieving specified performance targets over a certain period subsequent to the applicable acquisition date. The fair value ofthe remaining aggregate contingent payments at December 31, 2015 is not significant to the condensed consolidated statement of financial condition and is included in other liabilities.
Legal Proceedings. From time to time, BlackRock receives subpoenas or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock's policy to cooperate fuJy with such inquiries. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock's activities. Additionally, BlackRock advised investment portfolios may be subject to lawsuits, any of which potentially could harm the investment returns of the applicable portfolio or result in the Company being liable to the portfolios for any resulting damages.
On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the "Funds") filed a consolidated complaint (the "Consolidated Complaint") in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited (collectively, the "Defendants') under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the Defendants violated Section 36(b) of the Investment Company Act by receiving
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allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by Defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalf of the Funds all allegedly excessive advisory fees received by Defendants in the twelve month period preceding the start of each lawsuit, along with purported lost investment returns on those amounts, plus interest. On March 25, 2015, Defendants' motion to dismiss the Consolidated Complaint was denied The Defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions.
Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors. Inc. ("BRA") and the BlackRock Granite Property Fund. Inc. ("Granite Fund"), along with certain other Granite Fund-related entities (collectively, the "BlackRock Parties") were named as defendants in thirteen separate lawsuits filed in the Superior Court ofthe State of California for the County of Alameda arising out ofthe June 16, 2015 collapse of a balcony at the Library Gardens apartment complex in Berkeley, California (the "Property"). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which is the property manager of the Property, and certain other entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property's balcony, and seek monetary, including punitive, damages. The Company believes the claims in the lawsuits are without merit and intends to vigorously defend the actions.
Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock's results of operations, financial position, or cash flows. However, there is no assurance as to whether any such pending or threatened matters will have a material effect on BlackRock's results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.
Indemnifications. In the ordinary course of business or in connection with certain acquisition agreements, BlackRock enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote. Consequently, no liability has been recorded on the consolidated statements of financial condition.
In connection with securities lending transactions, BlackRock has issued certain indemnifications to certain securities lending clients against potential loss resulting from a borrower's failure to fulfil its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower's obligation under the securities lending agreement. At December 31, 2015, the Company indemnified certain of its clients for their securities lending loan balances of approximately $169.3 billon. The Company held as agent, cash and securities totaling $179.6 billion as collateral for indemnified securities on loan at December 31, 2015. The fair value of these indemnifications was not material at December 31, 2015.
14. Stock-Based Compensation
The components of stock-based compensation expense are as follows:
(in millions)
Stock-based compensation:
Restricted stock and RSUs
Long-term incentive plans to be funded by PNC
Total stock-based compensation
Year, ended December 31.
2014
421 32
415 33
Stock Award and Incentive Plan. Pursuant to the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan (the "Award Ran"), options to purchase shares of the Company's common stock at an exercise price not less than the market value of BlackRock's common stock on the date of grant in the form of stock options, restricted stock or RSUs may be granted to employees and nonemployee directors. A maximum of 34,500,000 shares of common stock were authorized for issuance under the Award Ran. Of this amount 7,621,046 shares remain available for future awards at December 31, 2015. Upon exercise of employee stock options, the issuance of restricted stock or the vesting of RSUs, the Company issues shares out of treasury to the extent available.
Restricted Stock and RSUs. Pursuant to the Award Plan, restricted stock grants and RSUs may be granted to certain employees. Substantially ali restricted stock and RSUs vest over periods ranging from one to three years and are expensed using the straight-line method over the requisite service period for each separately vesting portion of the award as if the award was, m-substance, multiple awards. "
Restricted stock and RSU activity for 2015 is summarized below.
Outstanding at
December 31, 2014
Granted
Converted
Forfeited
Iffc^B^YfcWflt]
Restricted Stock and Units
3,401,909 t
1,377.263 $
(1,639,078) $
(72,357) $
Weighted Average Grant-Date Fair Value
257.01 343.49 231.26 306.41
(1) At December 31, 2015, approximately 2.8 million awards arc expected to vest and 0.2 million awards have vested but have not been converted.
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Tho Company values restricted stock and RSUs at their grant-date fair value as measured by BlackRock's common stock price. The total fair market value of RSUs/restricted stock granted to employees during 2015. 2014 and 2013 was $473 million, $472 miHion and $390 million, respectively. The total fair market value of RSUs/restricted stock converted to common slock during 2015, 2014 and 2013 was $379 million, $534 million and $528 million, respectively.
At December 31, 2015, the intrinsic value of outstanding RSUs was $1.0 billion, reflecting a closing stock price of $340.52 at December 31, 2015. RSUs/restricted stock granted under the Award Plan primarily related to the following"
Year ended December 31,
2015 2014 2013
Awards granted as part of annual incentive compensation that vest ratably over three
years from the date of grant Awards granted that cliff vest 100% on:
January 31, 2016
January 31, 2017
January 31, 2018
952,329 1.022,295 1,172,381
— — 370,812
— 287,963 —
303.999 — —
1,256,328 1,310,258 1,543,193
In addition the Company also granted RSUs of 120,935,166,018 and 117,339 during 2015, 2014 and 2013, respectively.
At December 31, 2015, there was $305 million in total unrecognized stock-based compensation expense related to unvested RSUs. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 0.9 years.
In January 2016, the Company granted under the Award Plan
1,030,964 RSUs or shares of restricted stock to employees as part of annual incentive compensation that vest ratably over three years from the date of grant; and
303,587 RSUs or shares of restricted stock to employees that cliff vest 100% on January 31, 2019.
Market Performance-based RSUs. Pursuant to the Award Ran, market performance-based RSUs may be granted to certain employees. The market performance-based RSUs require that separate 15%, 25% and 35% share price appreciation targets be achieved during the six-year term of the awards. The awards are split into three tranches and each tranche may vest if the specified target increase in share price is met. Eligible vesting dates for each tranche are January 31 (or, if such date is not a business day, the next following business day) of the year in which the fourth, fifth or sixth anniversaries of the grant-date occurs. Certain awards are forfeited if the employee leaves BlackRock before the vesting date. These awards are amortized over a service period of four years, which is the longer of the explicit service period or the period in which the market target is expected to be met Market performance-based RSUs are not considered participating securities as the dividend equivalents are subject to forfeiture prior to vesting of the award. During 2015 there were no market performance-based awards granted. In 2014 and 2013, the Company granted 315,961 and 556,581 market performance-based RSUs, respectively. The 2013 grant wii be funded primarily by shares currently held by PNC (see Long-Term Incentive Plans Funded by PNC below).
Market performance-based RSU activity for 2015 is summarized below.
Weighted
Market Average Performance- Grant-Date
Outstanding at Based RSUs Fair Value
December 31,2014 1,425,319 $ 137.31
Forfeited (47,142) $ 144.27
W«SBSra:(1) At December31, 2015, approximately 1.3 million awards are expected to vest and an Immaterial amount of awards have vested and have not been converted.
At December 31,2015, total unrecognized stock-based compensation expense related to unvested market performance-based awards was $47 million. The unrecognized
compensation cost is expected to be recognized over the remaining weighted-average period of 0.9 years.
At December 31,2015, the intrinsic value of outstanding market performance-based awards was $469 million reflecting a closing stock price of $340.52.
The grant-date fair value of the awards was $62 million in 2014 and $71 million in 2013. The fair value was calculated using a Monte Carlo simulation with the following assumptions:
Risk-Free Expected Expected-
Grant Interest Performance Stock Dividend
Year Rate Period Volatility Yield
2013 1.05%|99|25.85% 2.89%
2014 2.05% 6 27.40% 2.42%
The Company's expected stock volatility assumption was based upon an average of the historical stock price fluctuations of BlackRock's common stock and an implied volatility at the grant-date. The dividend yield assumption was derived using estimated dividends over the expected term and the stock price at the date of grant. The risk-free interest rate is based on the U.S. Treasury yield at date of grant
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Performance-Based RSUs. Pursuant to the Award Plan, performance-based RSUs may be granted to certain employees. Each performance-based award consists of a "base" number of RSUs granted to the employee. The number of shares that an employee ultimately receives at vesting wiH be equal to the base number of performance-based RSUs granted, multiplied by a predetermined percentage determined in accordance with the level of attainment of Company performance measures during the performance period and could be higher or lower than the original RSU grant. The awards are generally forfeited if the employee leaves the Company before the vesting date. Performance-based RSUs are not considered participating securities as the dividend equivalents are subject to forfeiture prior to vesting of the award.
In January 2015, the Company granted 262,847 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2018. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures.
Performance-based RSU activity for 2015 is summarized boiow.
Performance-Based RSUs
Outstanding at
December31, 2014 Granted Forfeited
Weighted Average Grant-Date Fair Value
262,647 $ 343.86
(6,979) $ 343 86
At December 31, 2015, total unrecognized stock-based compensation expense related to unvested performance-based awards was $59 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 2.1 years.
The Company values performance-based RSUs at their grant-date fair value as measured by BlackRock's common stock price. The total grant-date fair market value of performance-based RSUs expected to vest was $90 million.
At December 31, 2015, the intrinsic value of outstanding performance-based RSUs was $87 million reflecting a closing stock price of $340.52.
In January 2016, the Company granted 375,242 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2019. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures.
Long-Term Incentive Plans Funded by PNC. Under a share surrender agreement, PNC committed to provide up to 4 million shares of BlackRock stock, held by PNC, to fund certain BlackRock long-term incentive plans ("LTIP"). The current share surrender agreement commits PNC to provide BlackRock series C nonvoting participating preferred stock to fund the remaining committed shares. As of December 31, 2015, 2.7 milion shares had been surrendered by PNC.
At December 31, 2015, the remaining shares committed by PNC of 1.3 million were available to fund certain future long-term incentive awards.
In January 2016, 548,277 shares were surrendered by PNC.
Stock Options. Stock option grants were made to certain employees pursuant to the Award Plan in 1999 through 2007. Options granted have a ten-year life, vested ratably over periods ranging from two to five years and became exercisable upon vesting. The Company has not granted any stock options subsequent to the January 2007 grant, which vested on September 29, 2011. Stock option activity for 2015 is summarized below.
Outstanding and Exercisable at—•
December 31. 2014 Exercised
Shares under
¦option--
906,719 (752,625)
Weighted
average
exercise
price
167.76 167.76
The aggregate intrinsic value of options exercised during 2015,2014 and 2013 was $128 million, $4 million and $19 million, respectively.
The aggregate intrinsic value of exercisable shares was $27 million at December 31, 2015, reflecting a closing stock price of $340.52. The weighted average remaining life of the options outstanding at December 31, 2015 was approximately one year.
As of December 31, 2015, the Company had no remaining unrecognized stock-based compensation expense related to stock options.
Employee Stock Purchase Plan ("ESPP"). The ESPP allows eligible employees to purchase the Company's common stock at 95% of the fair market value on the last day of each three-month offering period. The Company does not record compensation expense related to employees purchasing shares under the ESPP.
15. Employee Benefit Plans Defened Compensation Plans
Voluntary Deferred Compensation Plan. The Company adopted a Voluntary Deferred Compensation Plan ("VDCP") that allows eligible employees in the United States to elect to defer between 1% and 100% of their annual cash incentive compensation. The participants must specify a deferral period of up to 10 years from the year of deferral and additionally, elect to receive distributions in the form of a lump sum or in up to 10 annual installments. The Company may fund the obligation through the rabbi trust on behalf of the plan's participants.
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The rabbi trust established for the VDCP, with assets totaling $65 million at both December 31, 2015 and 2014, is reflected in investments on the consolidated statements of financial condition. Such investments are classified as trading investments. The corresponding liability balance of $68 million and $78 million at December 31, 2015 and 2014, respectively, is reflected on the consolidated statements of financial condition as accrued compensation and benefits. Earnings in the rabbi trust, including unrealized appreciation or depreciation, are reflected as nonoperating income (expense) and changes in the corresponding liability are reflected as employee compensation and benefits expense on the consolidated statements of income.
Other Deferred Compensation Plans. The Company has additional compensation plans for the purpose of providing deferred compensation and retention incentives to certain employees. For these plans, the final value of the deferred amount to be distributed in cash upon vesting is associated with investment returns of certain investment funds. The liabilities for these plans were $178 million and $126 million at December 31, 2015 and 2014, respectively, and are reflected in the consolidated statements of financial condition as accrued compensation and benefits. In January 2016, the Company granted approximately $151 million of additional deferred compensation that will fluctuate with investment returns and will vest ratably over three years from the date of grant.
Defined Contribution Plans
The Company has several defined contribution plans primarily in the United States and United Kingdom.
Certain ofthe Company's U.S. employees participate in a defined contribution plan ("U.S. Ran"). Employee contributions of up to 8% of eligible compensation, as defined by the plan and subject to Internal Revenue Code ("IRC") limitations, are matched by the Company at 50% up to a maximum of $5,000 annually. In addition, the Company makes an annual retirement contribution to eligible participants equal to 3-5% of eligible compensation. In 2015, 2014 and 2013, the Company's contribution expense related to the U.S. Plan was $72 million, $67 million and $63 million, respectively.
Certain U.K. wholly owned subsidiaries of the Company contribute to a defined contribution plan for their employees ("U.K. Plan"). The contributions range between 6% and 15% of each employee's eligible compensation. The Company's contribution expense related to this plan was $33 million in both 2015 and 2014, and $29 million in 2013.
In addition, the contribution expense related to defined contribution plans in other regions was S18 million in 2015 and 2014. and 2013.
Defined Benefit Plans. The Company has several defined benefit pension plans primarily in Japan and Germany. All accrued benefits under the Germany defined benefit plan are currently frozen and the plan is closed to new participants. The participant benefits under the Germany plan will not change with salary increases or additional years of service. At December 31, 2015 and 2014, the plan assets for both these plans were approximately $22 million and $21 million, respectively. The underfunded obligations at December 31, 2015 and 2014 were not material. Benefit payments for the next five years and in aggregate for the five years thereafter are not expected to be material.
16. Related Party Transactions Determination of Related Parties
PNC. The Company considers PNC, along with its affiliates, to be related parties based on the level of its ownership of BlackRock capital stock. At December 31, 2015, PNC owned approximately 21.1% ofthe Company's voting common stock and held approximately 22.2% of the total capital stock.
Registered Investment Companies and Equity Method Investments. The Company considers the registered investment companies that it manages, which include mutual funds and exchange-traded funds, to be related parties as a result of the Company's advisory relationship. In addition, equity method investments are considered related parties, due to the Company's influence over the financial and operating policies of the investee.
Revenue from Related Parties
Revenues for services provided by the Company to these and other related parties are as follows:
(in millions)
Investment advisory, administration fees and securities lending revenue: PNC and affiliates
Registered investment companies/equity method investees
Total investment advisory, administration fees, and securities lending revenue Investment advisory performance fees BlackRock Solutions and advisory:
PNC and affiliates
Equity method investees
Other
Total BlackRock Solutions and advisory Other revenue:
PNC and affiliates
Equity method investees
Year ended December 31,|1010|6,733
6,738 173
3 67
|1010|5.986
5,991 185
7 11|1010|
3 58
Total other revenue
Total revenue from related parties
The Company provides investment advisory and administration services to its open- and closed-end funds and other commingled or pooled funds and separate accounts in which related parties invest In addition, the Company provides investment advisory and administration services
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to PNC and its affiliates for fees based on AUM. Further, the Company provides risk management services to PNC. The Company records its investment advisory and administration fees net of retrocessions.
Aggregate Expenses for Transactions with Related Parties
Aggregate expenses included in the consolidated statements of income for transactions with related parties are as follows.
(in millions)
Expenses with related parties'
Distribution and servicing costs PNC and affiliates
Total distribution and servicing costs
General and administration expenses
Other registered investment companies Other
2 50
Total general and administration expenses
Total expenses with related parties
Certain Agreements and Arrangements with PNC
PNC. On February 27, 2009, BlackRock entered into an amended and restated implementation and stockholder agreement with PNC, and a third amendment to the share surrender agreement with PNC.
Receivables and Payables with Related Parties. Due from related parties, which is included within other assets on tho consolidated statements of financial condition was $73 million and $89 million at December 31, 2015 and 2014, respectively, and primarily represented receivables from certain investment products managed by BlackRock. Accounts receivable at December 31, 2015 and 2014 included $705 million and $747 million, respectively, related to receivables from BlackRock mutual funds. Including iShares, for investment advisory and administration services.
Due to related parties, which is included within other liabilities on the consolidated statements of financial condition, was $18 million and $12 million at December 31, 2015 and 2014, respectively, and primariy represented payables to certain investment products managed by BlackRock.
17. Net Capital Requirements
The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions, including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.
Banking Regulatory Requirements. BlackRock Institutional Trust Company, N.A. ("BTC"), a wholly owned subsidiary of the Company, is chartered as a national bank whose powers are limited to trust activities. BTC is subject to regulatory capital requirements administered by the Office of the Comptroller of the Currency. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by,regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under the caprtal adequacy guidelines and the regulatory framework for prompt corrective action, BTC must meet specific capital guidelines that invoke quantitative measures of BTC's assets, liabilities, and certain off-balance sheet items as calculated under the regulatory accounting practices. BTC's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulators to ensure capital adequacy require BTC to maintain a minimum Tier 1 capital and Tier 1 leverage ratio, as well as Tier 1 and total risk-based capital ratios. Based on BTC's calculations as of December 31, 2015 and 2014, it exceeded the applicable capital adequacy requirements.
For Capital Adequacy Purposes
To Be Well Capitalized Under Prompt Corrective Actictn Provisions'
(In millions)
December 31, 2015(1)
Total capital (to risk weighted assets)
Common Equity Tier 1 capital (no risk weighted assets)(1)
Tier 1 capital (to risk weighted assets)
Tier 1 capital (to average assets)
December 31, 2014
Total capital (to risk weighted assets)
Tier 1 capital (to risk weighted assets)
Tier 1 capital (to average assets)
775 775 775
Ratio
142.0% $ 142.0% $ 72.1% $
44 22 43
8.0% $ 4.0% $ 4.0% $
56 33 54
10.0% 6.0% 5.0%
(1) Ratios and amounts as of December 31, 2015 reflect the adoption of revised capital rules effective January 1, 2015.
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Broker-dealers. BlackRock Investments, LLC and BlackRock Execution Services are registered broker-dealers and wholly owned subsidiaries of BlackRock that are subject to the Uniform Net Capital requirements under the Securities Exchange Act of 1934, which requires maintenance of certain minimum net caprtal levels.
Capital Requirements. At both December 31, 2015 and 2014, the Company was required to maintain approximately $1.1 billion in net caprtal in certain regulated subsidiaries, including BTC, entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom, and the Company's broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.
18. Accumulated Other Comprehensive Income (Loss)
The following table presents changes in accumulated other comprehensive income (loss) ("AOCI") by component for 2015, 2014 and 2013:
(in millions)
December31, 2012
Other comprehensive income (loss) before
reclassifications Amount reclassified from AOCIH)
Unrealized Gains
(Losses) on Available-for-sale lnvcstmcnts(1).(2)
|1010|(13)
Foreign Currency Translation Adjustments (3)
(71) $
(59)
37 03)
23
(9)
(48) (231)|1010|(2)
(35)
(230)
(8)
Net other comprehensive income (loss) for 2013|1010|(8)
December 31, 2013
Other comprehensive income (loss) before
(238)
(231)
(5)
(2)
(279) S (173)
reclassifications Amount reclassified from AOCI(4)
(273)
(173)
(2)
Net other comprehensive income (loss) for 2014
0) (2)
December 31, 2014
Other comprehensive income (loss) before
reclassifications Amount reclassified from AOCI(4)
Net other comprehensive income (loss) for 2015 (3)|99|(173) (175)
All amounts are net of tax.
The tax benefit (expense) was not material for 2015, 2014 and 2013. (3)
Amount for 2015 includes gains from a net investment hedge of $19 million, net of tax of $11 million. {4) The pre-tax amount reclassified from AOCI was included in net gain (loss) on investments on the consolidated statements of income.
19. Capital Stock
The Company's authorized common stock and nonvoting participating preferred stock, $0.01 par value, ("Preferred") consisted of the following:
Common Stock
Nonvoting Participating Preferred Stock
Series A Preferred Series B Preferred Series C Preferred Series D Preferred
December 31, 2015
500,000,000
20,000.000 150,000,000 6,000,000 20,000.000
December 31, 2014
500,000,000
20,000,000 150.000.000 6,000,000 20,000,000
January 2013 PNC Capital Contribution. In January 2013, PNC surrendered to BlackRock 205,350 shares of BlackRock Series C Preferred to fund certain LTIP awards in accordance with the share surrender agreement between PNC and BlackRock.
Cash Dividends for Common and Preferred Shares I RSUs. During 2015, 2014 and 2013, the Company paid cash dividends of $8.72 per share (or $1,476 million), $7.72 per share (or $1,338 mitlion)and $6.72 per share (or $1,168 million), respectively.
Share Repurchases. The Company repurchased 3.1 million common shares in open market-transactions under its share repurchase program for $1.1 billion during 2015. At December 31, 2015, there were 6.3 million shares still authorized to be repurchased.
F-34
The Company's common and preferred shares issued and outstanding and related activity consist of the following
Shares Outstanding
Decembcr31, 2012 Shares repurchased
Net issuance of common shares related to employee
stock transactions PNC LTIP capital contnbution
Common Shares
171,252.185
Treasury Common Shares
(2,376,B81 ) (3,689,845)
Series B Preferred
Series C Preferred
1,517,237
(205,350)
Common Shares
168,875.304 (3,689,845)
1,404,229
Scries B Preferred
Series C Preferred
1,517,237
(205,350)
December 31, 2013
Shares repurchased
Net issuance of common shares related to employee stock transactions
December31, 2014 Shares repurchased
Net issuance of common shares related to employee stock transactions
171,252,185
(3,175.0e8)
1,372,188
(6,465,397) (3,080,689)
— 1,754,965
1,311,887
166.589,688
(3.175,088) 1,372.188
823.188 1,311,887 164,786,788
— — (3,080,689)
20. Income Taxes
The components of income tax expense for 2015, 2014 and 2013, are as follows:
(in millions)
Current income tax expense: ... Federal
State and local
Foreign
Total net current income tax expense
Deferred income tax expense (benefit): Federal
State and local
Foreign
Total net deferred income tax expense (benefit)
Total income tax expense
923 $
54 258
1,235
(73) (9) (22)
(104)
869 39 307
1,215
(68) 13 (138)
(193)
1,022
Income tax expense has been based on the following components of income before taxes, less net income (loss) attributable to noncontroBing interests:
2.946 1,479
m^QTssam 2014
(in millions)
4,425
Domestic Foreign
Total
2,814 1.140
• 3,954
The foreign income before taxes includes countries that have statutory tax rates that are lower than the U.S. federal statutory tax rate of 35%, such as the United Kingdom, Channel Islands, Canada and the Netherlands.
%
35% $ 1
(10)
35% $ 1
0) (8)
35% 1
(2) (8)
A reconciliation of income tax expense with expected federal income tax expense computed at the applicable federal income tax rate of 35% is as follows:
% 2014
2013
1,549
51
(4) (434) (31)
1,383
39
(69)
(329)
PL
(in millions)
Statutory income tax expense Increase (decrease) in income taxes resulting from: State and local taxes (net of federal benefit) Impact of foreign, state, and local tax rate changes on deferred taxes
27% $
1.131
26% $
1,022
26%
Effect of foreign tax rates Other
Income tax expense
Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. These temporary differences result in taxable or deductible amounts in future years.
F-35
Tho components of deferred income tax assets and liabilities are shown below
December 31,
(in millions)
Deferred income tax assets
Compensation and benefits
Unrealized investment losses
Loss carryforwards
Foreign tax credit carryforwards
Other
Gross deferred tax assets Less deferred tax valuation allowances
Deferred tax assets net of valuation allowances
323 157 47 40 253
820 (29)
Deferred income tax liabilities.
Goodwill and acquired indefinite-lived intangibles
Acquired finite-lived intangibles
Other
5,616 65 89
Gross deferred tax liabilities
Net deferred tax (liabilities)
Deferred income tax assets and liabilities are recorded net when related to the same tax jurisdiction. At December 31, 2015, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $20 million and $4,851 million, respectively. At December 31, 2014, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $10 million and $4,989 million, respectively.
During 2015, tax legislation enacted In the United Kingdom and domestic state and local tax changes resulted in a $54 million net noncash benefit related to the revaluation of certain deferred income tax liabilities. During 2014, state and local tax changes resulted in a $4 million net noncash benefit related to the revaluation of certain deferred income tax liabilities.
At December 31, 2015 and 2014, the Company had available state net operating loss carryforwards of $1.5 billion and $1.2 billion, respectively, which will begin to expire in 2017. Al December 31, 2015 and 2014. the Company had foreign net operating loss carryforwards of $135 million and $137 million, respectively, of which $6 million will begin to expire in 2017 and the balance will carry forward indefinitely. At December 31, 2015, the Company had foreign tax credit carryforwards for income tax purposes of $83 million which will begin to expire in 2023.
At December 31, 2015 and 2014, the Company had $20 million and $29 million of valuation allowances for deferred income tax assets, respectively, recorded on the consolidated statements of financial condition. The year-over-year decrease in the valuation allowance primarily related to the realization of tax loss carryforwards and certain foreign deferred income tax assets.
Goodwill recorded in connection with the Quellos Transaction has been reduced during the period by the amount of tax benefit realized from tax-deductible goodwill. See Note 9, Goodwill, for further discussion.
Current income taxes are recorded net on the consolidated statements of financial condition when related to the same tax jurisdiction. At December 31, 2015, the Company had current income taxes receivable and payable of $166 million and $79 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively. At December 31, 2014, the Company had current income taxes receivable and payable of $117 million and $125 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively.
The Company does not provide deferred taxes on the excess ofthe financial reporting over tax basis on its investments in foreign subsidiaries that are essentially permanent in duration. The excess totaled $4,734 million and $3,871 million at December 31, 2015 and 2014, respectively. The determination ofthe additional deferred income taxes on the excess has not been provided because it is not practicable due to the complexities associated with its hypothetical calculation.
The folowing tabular reconciliation presents the total amounts of gross unrecognized tax benefits:
Year ended December 31,
(in millions)
Balance at January 1
Additions for tax positions of prior years
Reductions for tax positions of prior years
Additions based on tax positions related to current year
Lapse of statute of limitations
Settlements
Positions assumed in acquisitions
Balance at December 31
467 21 (24) 85 (2)
(168)
379
404 11 (5) 67
(12) 2
Included in the balance of unrecognized tax benefits at December 31, 2015, 2014 and 2013, respectively, are $320 million, $283 million and $304 million of tax benefits that, if recognized, would affect the effective tax rate.
The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued interest and penalties of $12 million during 2015 and in total, as of December 31, 2015, had recognized a liability for interest and penalties of $56 million. The Company accrued interest and penalties of $(25) million during 2014 and in total, as of December 31, 2014, had recognized a liability for interest and penalties of $44 million. The Company accrued interest
F-36
and penalties ot $(1) million during 2013 and in total, as of December 31, 2013, had recognized a liability for interest and penalties of $68 million.
BlackRock is subject to U.S. federal income tax. state and bcal income tax, and foreign income tax in multiple jurisdictions. Tax years after 2009 remain open to U.S. federal income tax examination
In June 2014, the IRS commenced its examination of BlackRock's 2010 through 2012 tax years, and while the impact on the consolidated financial statements is undetermined, it is not expected to be material.
The Company is currently under audit in several state and local jurisdictions. The significant state and local income tax examinations are in New York State and New York City for tax years 2009 through 2011, and New Jersey for tax years 2007 through 2009. No state and local income tax audits cover years earlier than 2007. No state and local income tax audits are expected to result in an assessment material to BlackRock's consolidated financial statements.
Her Majesty's Revenue and Customs' ("HMRC") United Kingdom income tax audit for various U.K. BlackRock subsidiaries is in progress for tax years 2009 and forward. While the impact on the consolidated financial statements is undetermined, it is not expected to be material.
At December 31, 2015, it ts reasonably possible the total amounts of unrecognized tax benefits will change within the next twelve months due to completion of tax authorities' exams or the expiration of statues of limitations. Management estimates lhat the existing liability for uncertain tax positions could decrease by approximately $13 million to $33 million within tho next twelve months.
21. Earnings Per Share
The following table sets forth the computation of basic and diluted EPS for 2015, 2014 and 2013 under tho treasury stock method:
(inmilhons. ctcopl shares and per shsroasta)
Net income attributable to BlackRock
Basic weighted-average shares outstanding
Dilutive effect of nonparticipating RSUs and stock options
2014
3,294 168,225,154 2,887,107
2013
2,932 170,185,870 3,643,032
Total diluted weighted-average shares outstanding
Basic earnings per share Diluted earnings per share
171.112,261
19.58 19.25
173,828,902
17.23 16.87
There were no anU-dikitive RSUs for 2015 and 2013. Amounts of anti-dilutive RSUs for 2014 were immaterial. In addition, there were no anti-dilutive stock options fqr 2015, 2014 and 2013.
22. Segment Information
The Company's.management directs BlackRock's operations as one business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10.
The foPowing table illustrates investment advisory, administration fees, securities lending revenue and performance fees by product type. BlackRock Solutions and advisory revenue, distribution fees and other revenue for 2015, 2014 and 2013.
(in millions) Equity
Fixed income Multi-asset Alternatives ' Cash management
Total investment advisory, administration fees, securities lending revenue and performance fees BlackRock Solutions and advisory Distribution fees Other revenue
5,337 2,171 1,236 1,103 292
10,139 635 70 237
4,816 1,996 1,063 1,104 321
9,300 577 73 230
Total revenue
The following table illustrates total revenue for 2015, 2014 and 2013 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the customer resides.
(in millions)
Revenue
Amencas Europe Asia-Pacific
Total revenue
7,286 3,246 549
11,081
6,829 2,632 519
10.180
F-37
The following table illustrates long-lived assets that consist of goodwill and property and equipment at December 31, 2015, 2014 and 2013 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located.
(in millions}
Long-lived Assets ^^jSHSfSkW^i 2014 2013
Americas f^^^ii^M $ 13'151 $ 13'204
Europe 194 214
Asia-Pacific &ttja@k'iBiM96 $1 83 67
Total long-lived assets Sfi^33sT3^'3fttf*% $ 13,428 S 13.505
Americas primarily is comprised of the United States and Canada, while Europe primarily is comprised of the United Kingdom and Luxembourg. Asia-Pacific primarily is comprised of Hong Kong, Australia. Japan and Singapore.
23. Selected Quarterly Financial Data (unaudited)
2014
Revenue Operating income Net income
Net income attnbutable to BlackRock
Earnings per share attributable to BlackRock, Inc. common stockholders: Basic Diluted
Weighted-average common shares outstanding: Basic Diluted
Dividend declared per share Common stock price per share:
High
Low
Close
2,670 1,051 744 756
4.47 4.40
169,081,421 171,933,803 1.93
323.89 286.39 314.48
2,778 1,122 841 808
4.79 4.72
168,712,221 171,150,153 • 1.93
319.85 293.71 319.60
2.849 1,157 873 917
5.46 5.37
167,933,040 170,778,766 1.93
336.47 301.10 328.32
2,784 1,144 806 813
4.86 4.77
167,197,844 170,367,445 1.93
364.40 303.91 357.56
The first quarter of 2015 included nonrccumng tax benefits of S69 million, pnmarily due to the realization of losses from changes in the Company's organizational tax structure and the resolution of certain outstanding tax matters.
The fourth quarter of 2015 included a $64 million noncash tax benefit, primarily related to tho revaluation of certain deferred Income tax liabilities, including the effect of tax legislation enacted in the United Kingdom.
The second quarter of 2014 included a $23 million net noncash tax expense, primarily associated with the revaluation of certain deferred income tax liabilities arising from the state and local tax effect of changes in the Company's organizational structure. In addition, the second quarter of 2014 benefited from an improvement in the geographic mix of earnings and included a $34 million net tax benefit related to several favorabla nonrccumng items.
The third quarter of 2014 included a $32 million noncash tax benefit, pnmarily associated with the revaluation of certain deferred income tax liabilities related to intangible assets and goodwill as a result of domestic state and local tax changes.
In addition, the third quarter of 2014 included a $94 million tax benefit, primarily due to the resolution of certain outstanding tax matters related to the acquisition of BGI. In connection with the acquisition, BlackRock recorded a $50 million indemnification asset for unrecognized tax benefits. Due to tho resolution of such tax matters, BlackRock recorded $50 million of general and administration expense to reflect the reduction of the indemnification asset and an offsetting $50 million tax benefit.
The fourth quarter of 2014 benefited from $39 million of nonrecurring tax items.
Dunng the second quarter of 2015, the Company adopted new accounting guidance on consolidations effective January 1, 2015 using the modified retrospective method. Upon adoption, the Company recorded a change to total nonoperating income (expense) with an equal and offsetting change to noncontrolling interests for the three months ended March 31, 2015. There was no impact to net income attnbutable to BlackRock, Inc. or to BlackRock's earnings per share.
F-38
24. Subsequent Events
In November 2015, the Company announced that rt had entered an agreement to assume investment management responsibilities of approximately $87 billion of cash assets under management from BofA® Global Capital Management, Bank of America's asset management business. The transaction is expected lo close in the first half of 2016. subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company's consolidated financial condition or results of operations.
On January 14; 2016, the Board of Directors approved BlackRock's quarterly dividend of $2.29 to be paid on March 23, 2016 to stockholders of record on March 7, 2016.
The Company conducted a review for additional subsequent events and determined that no additional subsequent events had occurred lhal would require accrual or additional disclosures.
F-39
As used in this exhibit list, "BlackRock" refers to BlackRock, Inc. (formerly named New BlackRock. Inc and previously, New Boise, Inc.) (Commission File No. 001-33099) and "Old BlackRock" refers to BlackRock Holdco 2, Inc. (formerly named BlackRock. Inc.) (Commission File No. 001-15305), which is the predecessor of BlackRock The following exhibits are filed as part of this Annual Report on Form 10-K:
Exhibit Index
Please note that the agreements included as exhibits to this Form 10-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about BlackRock or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to tlie applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit No. Description
3.1(1) Amended and Restated Certificate of Incorporation of BlackRock.
3.2(2) Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BlackRock, Inc.
3.3(3) Amended and Restated Bylaws of BlackRock.
3.4(1) Certificate of Designations of Series A Convertible Participating Preferred Stock of BlackRock.
3.5(4) Certificate of Designations of Series B Convertible Participating Preferred Stock of BlackRock.
3.6(4) Certificate of Designations of Series C Convertible Participating Preferred Stock of BlackRock.
3.7(5) Certificate of Designations of Series D Convertible Participating Preferred Stock of BlackRock.
4.1(6) Specimen of Common Stock Certificate.
4.2(7) Indenture, dated September 17, 2007, between BlackRock and The Bank of New York, as trustee, relating to senior debt securities.
4.3(8) Form of 6.25% Notes due 2017.
4.4(9) Form of 5.00% Notes due 2019.
4.5(10) Form of 4.25% Notes due 2021.
4.6(11) Form of 3.375% Notes due 2022.
4.7(12) Form of 3.500% Notes due 2024.
4.8(13) Form of 1.250% Notes due 2025.
4.9(13) Officers' Certificate, dated May 6, 2015, for the 1.250% Notes due 2025 issued pursuant to the Indenture.
10.1 BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.+
10.2(14) Amended and Restated BlackRock, Inc. 1999 Annual Incentive Performance Plan.+
10.3(15) Amendment No. 1 to the BlackRock, Inc. Amended and Restated 1999 Annual Incentive Performance Plan.+
10.4(16) Form of Restricted Stock Unit Agreement under the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.+
10.5(16) Form of Performance-Based Restricted Stock Unit Agreement (BPIP) under the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and
Incentive Plan.+
10.6(1) Form of Stock Option Agreement expected to be used in connection with future grants of Stock Options under the BlackRock, Inc. Second Amended and
Restated 1999 Stock Award and Incentive Plan.+
10.7(1) Form of Restricted Stock Agreement expected to be used in connection with future grants of Restricted Stock under the BlackRock, Inc. Second Amended
and Restated 1999 Stock Award and Incentive Plan.+
10.8(1) Form of Directors' Restricted Stock Unit Agreement expected to be used in connection with future grants of Restricted Stock Units under the BlackRock,
Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan.+
10.9 BlackRock, Inc. Amended and Restated Voluntary Deferred Compensation Plan, as amended and restated as of November 16, 2015.+
10.10(17) Share Surrender Agreement, dated October 10, 2002 (the "Share Surrender Agreement"), among Old BlackRock, PNC Asset Management, Inc. and The
PNC Financial Services Group, lnc.+
10.11(18) ¦ First Amendment, dated as of February 15, 2006, to the Share Surrender Agreement.+
10.12(19) Second Amendment, dated as of June 11, 2007, to the Share Surrender Agreemont.+
10.13(4) Third Amendment, dated as of February 27,2009, to the Share Surrender Agreement.*
10.14(20) Fourth Amendment, dated as of August 7, 2012, to the Share Surrender Agreement.+
10.15(21) Five-Year Revolving Credit Agreement, dated as of March 10, 2011, by and among BlackRock, Inc., certain of its subsidiaries. Wells Fargo Bank, National
Association, as administrative agent, swingline lender, issuing lender and L/C agent, Sumitomo Mitsui Banking Corporation, as Japanese Yen lender, a group of lenders, Wells Fargo Securities, LLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Caprtal, J.P. Morgan Securities LLC and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners, Citibank, NA, as syndication agent and Bank of . America, N.A., Barclays Bank PLC, JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding, Inc., as documentation agents.
10.16(22) Amendment No. 1, dated as of March 30, 2012, by and among BlackRock, Inc., certain of its subsidiaries, Wells Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and A lender, and the banks and other financial institutions referred to therein.
10.17(23) Amendment No. 2, dated as of March 28, 2013, by and among BlackRock, Inc., certain of its subsidiaries, Wels Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.18(24) Amendment No. 3, dated as of March 28, 2014, by and among BlackRock, Inc., certain of its subsidiaries, Wells Fargo Bank, National Association, as
administrative agent, swingline lender,, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.19(25) Amendment No. 4, dated as of AprJ 2, 2015, by and among BlackRock, Inc., certain of its subsidiaries, Weds Fargo Bank, National Association, as
administrative agent, swingline lender, issuing lender, L/C agent and a lender, and the banks and other financial institutions referred to therein.
10.20(26)f Second Amended and Restated Global Distribution Agreement, dated as of November 15, 2010, among BlackRock and Merrill Lynch & Co., Inc.
10.21(3) Amended and Restated Implementation and Stockholder Agreement, dated as of February 27, 2009, between The PNC Financial Services Group, Inc. and
BlackRock.
10 22(27) Amendment No. 1, dated as of June 11, 2009, to the Amended and Restated Implementation and Stockholder Agreement between The PNC Financial
Services Group, Inc. and BlackRock.
10.23(28) Lease Agreement, dated as of February 17, 2010. among BlackRock Investment Management (UK) Limited and Mourant & Co Trustees Limited and
Mourant Property Trustees Limited as Trustees ofthe Drapers Gardens Unit Trust for the iease of Drapers Gardens, 12 Throgmorton Avenue, London, EC2, United Kingdom.
10.24(29) Letter Agreement, dated February 12. 2013, between Gary S. Shedlin and BlackRock +¦
10.25(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Barclays Capital Inc., dated as of December 23, 2014.
10.26(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Citigroup Global Markets Inc., dated as of December 23, 2014.
10.27(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of
January 6, 2015.
10.28(30) Amended and Restated Commercial Paper Dealer Agreement between BlackRock and Credit Suisse Securities (USA) LLC dated as of January 6, 2015.
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of Registrant.
23.1 Deloitte & Touche LLP Consent.
Section 302 Certification of Chief Executive Officer.
Section 302 Certification of Chief Financial Officer.
32.1 Section 906 Certification of Chief Executive Officer and Chief Financial Officer.
101.1NS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101 .CAL XBRL Taxonomy Extension Calculation Linkbase DocumenL
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on October 5, 2006.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 25. 2012.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31, 2012.
Incorporated by reference to BlackRock's Cunent Report on Form B-K filed on February 27, 2009.
Incorporated by refcrenco to BlackRock's Current Report on Fonn 8-K filed on December 3. 2009.
Incorporated by reference to BlackRock's Registration Statement on Form S-8 (Registration No. 333-137708) filed on September 29, 2006.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31. 2007.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on September 17, 2007.
Incorporated by reference to BlackRock's Current Report on Fonn 8-K filed on December 10, 2009.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 25, 2011.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 31, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on March 18. 2014.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on May 6, 2015.
Incorporated by reference to Old BlackRock's Annual Report on Form 10-K for the year ended December 31, 2002.
Incorporated by reference to Old BlackRock's Current Report on Form 8-K filed on May 24, 2006.
Incorporated by reference to BlackRock's Quartcdy Report on Form 10-Q for the quarter ended June 30. 2015
Incorporated by reference to Old BlackRock's Quarterly Report on Form 10-Q for the quarter ended September 30. 2002.
Incorporated by reference to Old BlackRock's Current Report on Form 8-K filed on February 22. 2006.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on June 15, 2007.
Incorporated by reference to BlackRock's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K/A filed on August 24, 2012.
(22) ' Incorporated by reference to BlackRock's Current Report on Form 8-K filed on April 4, 2012.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on April 3, 2013.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on March 28, 2014.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on April 3, 2015.
Incorporated by reference to'BlackRock's Current Report on Form 8-K/A filed on August 24, 2012.
Incorporated by reference to BlackRock's Current Report on Form 8-K filed on June 17, 2009.
Incorporated by reference to BlackRock's Annual Report on Form 10-K for the year ended December 31, 2009.
Incorporated by reference to BlackRock's Current Report on Form B-K filed on February 19, 2013.
(30) Incorporated by reference to BlackRock's Annual Report on Foim 10-K tor (he year ended December 31. 2014. + Denotes compensatory plans or arrangements.
f Confidential treatment has been granted for certain portions of this exhibit, which portions have been omitted and fited separately with the Securities and Exchange Commission
Exhibit 10.1
AS ADOPTED
BLACKROCK, INC.
SECOND AMENDED AND RESTATED 1999 STOCK AWARD AND INCENTIVE PLAN
Purpose: Types of Awards: Construction.
The purposes of the Plan are to afford an incentive to Eligible Individuals to (i) continue as employees of or other service providers to the Company and its Affiliates, (ii)"increase their efforts on behalf of the Company and (iii) promote the success of the Company's business. Pursuant to the Plan, the Company may grant stock options (including "incentive stock options" and "nonqualified stock options"), stock appreciation rights, restricted stock, restricted stock units and other stock-based awards or cash-based awards.
Definitions.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
"Award" means any Option, SAR, Restricted Stock, Restricted Stock Unit or Other Stock-Based Award or Cash-Based Award granted under the Plan.
"Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award.
"Beneficial Owner" (or any variant thereof) means a "beneficial owner" as defined in Rule 13d-3 under the Exchange Act.
"Board" means the Board of Directors of the Company.
"Cash-Based Award" means an Award granted pursuant to Section 6(b)(v) that is not denominated or valued by reference to Stock, including any such Award that is subject to the attainment of Performance Goals or otherwise as permitted under the Plan.
"Change in Control" means the occurrence of any of the following:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or
during any period of twelve consecutive months, the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with ah actual or threatened election "contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved or recommended by a vote of a majority of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; or.
there is consummated a merger, amalgamation or consolidation of the Company or any Subsidiary thereof with any other corporation, other than (A) a merger,
(iv) ' amalgamation or consolidation which results in the voting securities of the Company outstanding immediately prior
to such merger, amalgamation or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities
of the surviving entity or the amalgamated company or any parent thereof) at least 50% of the combined voting power of the securities of the
Company or such surviving entity or the amalgamated company or any parent thereof outstanding immediately after such merger, amalgamation or
consolidation or (B) a merger, amalgamation or consolidation effected to implement a recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(v) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the sale or
disposition by the Company of all or substantially all of the Company's assets is consummated, other than (A) a sale or disposition by the
Company of all or substantially all of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting
securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions
as their ownership of the Company immediately prior to such sale or (B) a sale or disposition of all or substantially all of the Company's assets
immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors
of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.
For each Award that constitutes deferred compensation under Section 409A of the Code, to the extent required to avoid additional income or other tax under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to such Award, only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code. A Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the holders of Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to time.
(i) "Committee" means, until the Board appoints a different Committee to administer the Plan, the Management Development and
Compensation Committee of the Board. The composition of the Committee shall at all times satisfy the applicable requirements of the New York
Stock Exchange listing requirements.
(j) "Company" means BlackRock, Inc., a corporation organized under the laws of the State of Delaware, or any successor
corporation.
(k) "Effective Date" means the date on which the Plan is approved by stockholders of the Company.
(I) "Eligible Individual" means an Employee, Non-Employee Director or other individual performing advisory or consulting services
for the Company or an Affiliate, as determined and designated by the Committee.
(m) "Employee" means any individual performing services for the Company or an Affiliate of the Company and designated as an
employee on the payroll records of the Company or .such Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
(o) "Fair Market Value" means, with respect fo Stock or other property, the fair'market value of such Stock or other property
determined by such methods or procedures as shall be established in from time to time by the Committee, including without limitation, pursuant to any equity approval policy adopted by the Committee. Unless otherwise determined by the Committee, the per share Fair Market Value of Stock as of a particular date shall mean (i) the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for such date, or (ii) if the shares of Stock are then traded in an over-the-counter market, the average of the closing bid and asked prices for the shares of Stock in such over-the-counter market for the last preceding date on which there was a sale of such Stock in such market, or (iii) if the shares of Stock are not then listed on a national securities exchange or traded in an over-the-counter market, such value as i the Committee, in its sole discretion, shall determine.
(p) "Grantee" means an Eligible Individual who has been granted an Award under the Plan.
(q) "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the
Code.
(r) "Non-Employee Director" means a member of the Board who is not also an Employee,
(s) "NQSO" means any Option that is designated as a nonqualified stock option.
(t) "Option" means a right, granted to a Grantee under Section 6(b)(1), to purchase shares of Stock. An Option may be either an
ISO or an NQSO; provided that ISOs may be granted only to employees of the Company or any Subsidiary.
(u) "Other Stock-Based Award" means an Award granted pursuant to Section 6(b)(v) that is denominated or valued in whole or in
part by reference to Stock, including, but not limited to (1) restricted or unrestricted Stock awarded subject to the attainment of Performance Goals or otherwise as permitted under the Plan and (2) a right granted to a Grantee to acquire Stock from the Company for cash.
(v) "Performance-Based Compensation" means any Award that is intended to constitute "performance-based compensation"
within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, in each case as amended from time to time.
(w) "Performance Goals" means performance goals based on one or more of the following criteria: (i) before-tax income or after-
tax income, (ii) operating profit, (iii) return on equity, assets, capital or investment, (iv) earnings or book value per share, (v) sales or revenues, (vi) operating expenses, (vii) Stock price appreciation and (viii) implementation or completion of critical projects or processes. Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to the Company or one or all of the Affiliates of the Company, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum-level of performance above.which no additional payment will be made (or at which full vesting will occur)To the. extent possible, each of the foregoing Performance Goals shall be determined in accordance with generally accepted accounting principles and shalj be subject to certification by the Committee; provided, that, the Committee shall make such equitable adjustments as it determines to be appropriate to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or other Affiliate or the financial statements of the Company or any Subsidiary or other Affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles; provided, further, that, any. such adjustments made to Performance Goals applicable to Awards intended to constitute Performance-Based Compensation shall be made in a manner so as not to adversely affect the treatment of such Awards as Performance-Based Compensation.
¦ (x) "Person" means a "person" as defined in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) the Company or any Affiliate thereof, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Affiliate thereof, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned! directly or indirectly, by the stockholders of the Company in" substantially the same proportions as their ownership of shares of the Company.
(y) "Plan" means this BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan, as amended from
time to time.
(z) "Plan Year" means the fiscal year of the Company.
(aa) "Restricted Stock" means an Award of shares of Stock to a Grantee under Section 6(b)(iii) that may be subject to certain
transferability and other restrictions and to a risk of forfeiture (including by reason of not satisfying certain Performance Goals).
(bb) "Restricted Stock Unit" means a nght granted to a Grantee under Section 6(b)(iv) to receive Stock or cash at the end of a
specified deferral period, which right may be conditioned on the satisfaction of certain requirements (including the satisfaction of certain Performance Goals).
(cc) "Rule 16b-3" means Rule 16b-3, as from time to time in effect promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act, including any successor to such Rule.
(dd) "Stock" means shares of common stock, par value $0.01 per share, of the Company.
(ee) "Stock Appreciation Right" or "SAR" means the right, granted to a Grantee under Section 6(b)(ii), to be paid an amount
measured by the appreciation in the Fair Market Value of Stock from the date of grant to the date of exercise of the right, with payment to be made in cash, Stock or property as specified in the Award Agreement or determined by the Committee.
(ff) "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of
granting of an Award, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
(gg) "Substitute Award" means an Award designated as such and granted in connection with a transaction between the Company
or an Affiliate and another entity or business in substitution or exchange for, or conversion, adjustment, assumption or replacement of, awards previously granted by such other entity to any individuals who have become Eligible Individuals as a result of such transaction or who were formerly employed by the acquired entity. An Award granted as inducement to joining the Company or an Affiliate in replacement of an award forfeited when leaving a previous employer to join the Company or an Affiliate shall not be considered a Substitute Award.
3. Administration.
(a) Committee: Committee Powers.
The Plan shall be administered by the Committee. The Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to (A) grant Awards; (B) determine the persons to whom and the time or times at which Awards shall be granted; (C) determine the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate and the terms, conditions, restrictions and Performance Goals relating to any Award; (D) determine Performance Goals that may be applicable to Awards; (E) determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered; (F) make adjustments in the terms and conditions (including Performance Goals) applicable to Awards; (G) designate Affiliates; (H) construe and interpret the terms of the Plan and any Award; (I) prescribe, amend and rescind rules and regulations relating to the Plan; (J) determine the terms and provisions of the Award Agreements (which need not be identical for each Grantee); (K) make all other determinations it deems necessary or advisable for the administration of the Plan and (L) correct any defect, supply any omission or reconcile any inconsistency in the terms of the Plan or any Award Agreement in the manner and to the extent that it shall deem desirable. Notwithstanding anything herein to the contrary, with respect to Grantees working outside the United States, the Committee may determine the terms and conditions of Awards and make such adjustments to the terms thereof as are necessary or advisable taking into account matters of local law or practice, including tax and securities laws of jurisdictions outside the United States.
The Committee's determinations under the Plan need not be uniform and may be made by it selectively among Eligible Individuals (whether or not such Eligible Individuals are similarly-situated). Without.limiting the generality of the foregoing, the Committee shall be entitled, amorlg other things, to make non-uniform and selective determinations, and to enter into non-uniform Award Agreements, as to the Eligible Individuals to receive Awards under the Plan and the terms and provisions of Awards under the Plan.
All decisions, determinations and interpretations of the Committee shall be final and binding on all persons, including the Company, and any Affiliate or Grantee (or any person claiming any rights under the Plan from or through any Grantee) and any stockholder of the Company. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder.
Meetings: Procedures. The Committee may appoint a chairperson and a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan.
Limitations on Repricing / Cash Buyouts. Notwithstanding anything in the Plan to the contrary, the Committee shall not (other than as provided in Section 5(d) or Section 7) (i) reduce the exercise price of any Option or SAR previously granted under the Plan, whether through amendment, cancellation or replacement grant or other means or (ii) provide for the cash buyout of any outstanding Option or SAR with an exercise price that is greater than the Fair Market Value per share of Stock on the date of such cash buyout, unless, in either case, the Company's stockholders shall have approved such exercise price reduction or cash buyout.
Eligibility.
Except as provided below, Awards shall be granted to the Eligible Individuals selected by the Committee. In determining the Eligible Individuals to whom Awards shall be granted and the type of Award (including the number of shares of Stock to be covered by such Award), the ¦ Committee shall take into account such factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan.
ISOs shall be granted only to Employees of the Company or any of its Subsidiaries. No ISO shall be granted to any Employee of the Company or any of its Subsidiaries if such Employee owns, immediately prior to the grant of the ISO, stock representing more than 10% of the voting power or more than 10% of the value of all classes of stock of the Company or a Subsidiary, unless the purchase price for the stock under such ISO shall be at least 110% of its Fair Market Value at the time such ISO is granted and the ISO, by its terms, shall not be exercisable more than five years following the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code shall be controlling.
Stock Subject to the Plan.
Shares. Subject to adjustment as provided in Section 5(d), 34,500,000 shares of Stock shall be reserved for the grant or settlement of Awards under the Plan. Shares of Stock issued hereunder may, in whole or in part, be authorized but unissued shares or shares that shall have been or may be reacquired by the Company in the open market, iri private transactions or otherwise.
Share Counting. If any shares of Stock subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates, expires or is settled without a distribution of shares to the Grantee, the shares of Stock with respect to such Award shall, to the extent of any such'forfeiture, cancellation, exchange, surrender, termination, settlement or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, any and all shares of Stock that are (i) withheld or tendered in payment of an Option exercise price or (ii) withheld by the Company to satisfy any tax 'withholding obligation or (iii) covered by a SAR (to the extent that it is settled in shares of Stock, without regard to the number of shares of Stock that are actually issued to the Grantee upon exercise) shall not again be available for issuance under the Plan.
(c) — Maximum Individual-Awards: -
General. No more than 4,000,000 shares of Stock may be covered by stock-based Awards (including Options, SARs, Restricted Stock and Restricted Stock Units and Other Stock-Based Awards) made to a single Eligible Individual during any Plan Year, which number shall be subject to adjustment as provided in Section 5(d).
Limits on Awards to Non-Employee Directors. Notwithstanding Section 5(cX0, the aggregate maximum value of Awards granted under the Plan in any Plan Year to a Non-Employee Director in respect of services as a Non-Employee Director (including Awards made at the'election of a Non-Employee Director in lieu of cash directors' fees) shall not exceed $2,000,000. The value of Awards for purposes of the preceding sentence shall be determined based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (or any successor thereto).
(d) Adjustments
In the event that the Committee shall determine that any dividend or other distribution (whether in the fonn of cash, Stock, or other property), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, reclassification, repurchase, or share exchange, or other similar corporate transaction or event (any such event, a "Change in Capitalization") affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, then the Committee shall make such equitable changes or adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Stock or other property (including cash) issued or issuable in respect of outstanding Awards, (iii) the exercise price, grant price, or purchase price relating to any Award, (iv) the Performance Goals and (v) the individual limitations applicable to Awards.
Any adjustment made pursuant to Section 5(d)(i) in the Stock or other stock or securities (A) subject to outstanding ISOs (including any change in the exercise price) is intended to be made in a manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code, (B) subject to outstanding Awards that are intended to qualify as Performance-Based Compensation shall be made in such a manner as not to adversely affect the treatment of the Awards as Performance-Based Compensation and (C) with respect to any Award that is not subject to Section 409A of the Code, is intended to be made in a manner that would not subject the Award to Section 409A of the Code and, with respect to any Award that is subject to Section 409A of the Code, is intended to be made in a manner that complies with Section 409A of the Code and all regulations and other guidance issued thereunder.
If, by reason of a Change in Capitalization, pursuant to an Award, a Grantee shall be entitled to, or shall be entitled to exercise an Option or SAR with respect to, new, additional or different shares of stock or securities of the Company or any other corporation, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Stock subject to the Award, prior to such Change in Capitalization.
(e) Substitute Awards. Notwithstanding the foregoing, shares subject to a.Substitute Award shall not count against any share limit
set forth in this Section 5.
6. Terms of Awards.
General Terms of Awards. The term of each Award shall be for such period as may be determined by the Committee. Subject to the terms of the Plan, the Award Agreement and applicable law, payments to be made by the Company or Affiliate upon the grant, maturation, settlement or exercise of an Award may be made in such forms as the Committee shall determine at the date of grant, including, without limitation, cash, Stock, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The Committee may make rules relating to installment or deferred payments with respect to Awards, including the rate of interest, if any, to be credited with respect to such payments. In addition to the foregoing, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter, such additional terms and conditions, not inconsistent with the provisions of the Plan or applicable law, as the Committee shall determine.
Specific Terms of Awards. The Committee is authorized to grant to Eligible Individuals the following Awards, as deemed by the Committee to be consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of such Awards at the date of grant.
(i) Options. The Committee is authorized to grant Options to Eligible Individuals on the following terms and conditions:
Type of Award. The Award Agreement evidencing the grant of an Option under the Plan shall designate the Option as an ISO or an NQSO.
Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee; provided, that, with respect to any Option that is not a Substitute Award, such exercise price shall be not less than the Fair Market Value per share of Stock on the date of grant. The Committee may provide, in the applicable Award Agreement or otherwise, for the method for payment of the exercise price, which may include, in the
discretion of the Committee, payment: (1) in cash, electronic funds transfer or check acceptable to the Committee, (2) by an exchange of Stock previously owned by the Grantee for a period acceptable to the Committee and which Stock is otherwise acceptable to the Committee or Stock issuable to the Grantee pursuant to the Option, provided that the Committee may impose whatever restrictions it deems necessary or desirable with respect to such method of payment; (3) through a broker-dealer facilitated cashless exercise procedure acceptable to the Committee or (4) in any combination of any of the methods described in this Section 6(b)(i)(B).
Term and Exercisability of Options. Options shall be exercisable over the exercise period (which shall not exceed ten years from the date of grant), at such times and upon such conditions as the Committee may determine, in each case as reflected in the Award Agreement; provided, that, subject to Section 6(c) and Section 7, the Committee shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate. An Option may be exercised to the extent of any or all full shares of Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Committee or its designated agent'in the form required by the Committee and otherwise in accordance with any procedures (including, without limitation, procedures restricting the frequency or method of exercise) as may be established by the Committee or its delegate from time to time.
Termination of Employment, etc. An Option may not be exercised unless the Grantee is then in the employ of or otherwise in a service provider relationship with the Company and its Subsidiaries (or a company or a parent or subsidiary company of such company issuing or assuming the Option in a transaction to which Section 424(a) of the Code applies) and unless the Grantee has remained continuously so employed, or continuously maintained such relationship, since the date of grant of the Option; provided, that, the Award Agreement may contain provisions extending the exercisability of Options, in the event of specified terminations, to a date not later than the expiration date of such Option.
No Dividend Equivalents. In no event shall any Option granted under the Plan include any right to receive dividend equivalents with respect to such Option.
Other Provisions. Options may be subject to such other conditions including, but not limited to, restrictions on transferability of the shares acquired upon exercise of such Options, as the Committee may prescribe in its discretion or as may be required by applicable law.
SARs. The Committee is authorized to grant SARs to Eligible Individuals on the following terms and conditions:
In General. A SAR may be granted on a standalone basis or in tandem with an Option. Unless the Committee determines otherwise, a SAR (1) granted in tandem with an NQSO may be granted at the time of grant of the related NQSO or at any time thereafter or (2) granted in tandem with an ISO may be granted only at the time of grant of the related ISO. A SAR granted in tandem with an Option shall be exercisable only to the extent the underlying Option is exercisable.
Settlement of SARs. With respect to each share subject thereto, a SAR shall confer on the Grantee a right to receive upon exercise an amount in cash or shares of Stock (at the sole discretion of the Committee) equal to the excess of (1) the Fair Market Value per share of Stock on the date of exercise over (2) the per share exercise price of the SAR (which shall, in the case of (i) a SAR granted in tandem with an Option, be equal to the exercise price of the underlying Option and (ii) any other SAR (other than a Substitute Award), be not less than the Fair Market Value per share of Stock on the date of grant). The exercise of a SAR shall be effected pursuant to any procedures established by the Committee or its delegate and/or as set forth in the applicable Award Agreement.
No Dividend Equivalents. In no event shall any SAR granted under the Plan include any right to receive dividend equivalents with respect to such'SAR.
Restricted Stock. The Committee is authorized to grant Restricted Stock to Eligible Individuals on the following terms and conditions:
(A) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and
other restrictions, if any, as the Committee may impose at the date of grant, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the
Committee may determine. The Committee may place restrictions on Restricted Stock that shall lapse, in whole or in part, upon the attainment of Performance Goals. Except to the extent provided in the applicable Award Agreement, a Grantee granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock and the right to receive dividends (in accordance with Section 6(b)(iii)(D)).
Forfeiture. Upon termination of employment or other service relationship with the Company or an Affiliate, during the applicable restriction period, Restricted Stock and any accrued but unpaid dividends that are at that time subject to restrictions shall be forfeited; provided, that, subject to the terms of the Plan, the Committee may (1) provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived or will not apply, in whole or in part, in the event of terminations resulting from specified causes and (2) in other cases waive in whole or in part the forfeiture of Restricted Stock.
Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Grantee, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificates.
Dividends. Cash dividends paid on Restricted Stock shall be deferred and paid to a Grantee only when, and to the extent that, the shares of underiying Restricted Stock vest. Stock dividends shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock has been distributed.
Restricted Stock Units. The Committee is authorized to grant Restricted Stock Units to Grantees, subject to the following terms and conditions:
Award and Restrictions. Delivery of Stock or cash, as determined by the Committee, will occur upon expiration of the deferral period specified for Restricted Stock Units by the Committee or, if permitted by the Committee, upon expiration of such deferral period as may have been elected by the Grantee. The Committee may condition the vesting of and/or payment with respect to Restricted Stock Units, in whole or in part, upon the attainment of Performance Goals.
Forfeiture. Upon termination of employment or other service relationship with the Company or an Affiliate during the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other.conditions precedent to the delivery of Stock or cash to which such Restricted Stock Units relate, all Restricted Stock Units that are then subject to deferral or restriction shall be forfeited; provided, that, subject to the terms of the Plan, (1) the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination resulting from specified causes and (2) the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock Units.
Dividend Equivalents. If provided in the applicable Award Agreement, a holder of Restricted Stock Units shall be entitled to receive dividend equivalents with respect to such Restricted Stock Units, provided, that, such dividend equivalents shall not be payable unless and until, and to the extent that, the underlying Restricted Stock Units vest and become payable.
Other Stock-Based Awards or Cash-Based Awards. The Committee is authorized to grant Awards to Eligible Individuals in the form of Other Stock-Based Awards or Cash-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan. Awards granted pursuant to this paragraph may be granted with value and payment contingent upon the attainment of certain Performance Goals. The Committee shall determine the terms and conditions of such Awards at the date of grant. The maximum payment that any Grantee who is an executive officer of the Company may receive pursuant' to a Cash-Based Award that is subject to the attainment of Performance Goals granted under this paragraph in any single Plan Year shall be $10,000,000. Subject to the terms of the Plan, payments earned hereunder may be decreased in the sole discretion of the Committee based on such factors as it deems appropriate.
(c) Minimum Vesting. An Award granted under the Plan after the Effective Date shall not vest prior to the first anniversary of the
date of grant of the Award. Notwithstanding the foregoing, the Committee may grant Awards that vest within one year following the date of grant (i) due to the Grantee's retirement, death, disability, leave of absence,
termination of employment, or upon the sale or other disposition of a Grantee's employer or any other similar event, as determined by the Committee, (ii) as otherwise provided in Section 7 or (iii) as a Substitute Award in replacement of an award scheduled to vest within one year following the date of grant of such Substitute Award. Notwithstanding the foregoing, up to 5% of the shares of Stock authorized for issuance under the Plan pursuant to Section 5(a) (as adjusted pursuanl to Section 5(d)) may be granted as Awards that provide for vesting within one year following the date of grant.
Change in Control. Unless otherwise provided in a written agreement between the Grantee and the Company, or unless otherwise determined by the Committee and evidenced in an Award Agreement, in the event of a Change in Control:
With respect to each outstanding Award granted after the Effective Date that is assumed or substituted in connection with the Change in Control, in the event the Grantee's employment or service is terminated by the Company, its successor or an Affiliate thereof without Cause (as defined in an Award Agreement) on or after the effective date of the Change in Control but prior to twelve (12) months following the Change in Control, then:
any unvested or unexercisable portion of any Award carrying a right to exercise shall become fully vested and
exercisable; and
the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to an Award granted under the Plan shall lapse and such Awards shall be deemed fully vested and any performance conditions imposed with respect to such Awards shall be deemed to be achieved at target performance levels.
With respect to each outstanding Award granted after the Effective Date that is not assumed or substituted in connection with a Change in Control, immediately upon the occurrence of the Change of Control, (i) such Award shall become fully vested and, if applicable, exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (iii) and any performance conditions imposed with respect to such Award shall be deemed to be achieved at target performance levels. Each award subject to Section 409A of the Code shall vest and shall be paid in accordance with its terms or as may be permitted earlier under Section 409A of the Code.
For purposes of this Section 7, an Award shall be considered assumed or substituted if, following the Change in Control, the Award is of substantially comparable value and remains subject to substantially the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to shares of Stock, the Award instead confers the right to receive common stock of the acquiring or ultimate parent entity.
If the vesting of any Options and/or SARs is accelerated in connection with the Change in Control, the Committee shall have the discretion to provide that all Options and/or SARs outstanding immediately prior to such Change in Control shall expire on the effective date of such Change in Control.
General Provisions.
Nontransferability. Unless otherwise provided in an Award Agreement, Awards shall not be transferable by a Grantee except
by will or the laws of descent and distribution and shall be exercisable during the lifetime of a Grantee only by such Grantee or his guardian or legal
representative. ' ""'
Interpretation.
Section 16 Compliance. The Plan is intended to comply with Rule 16b-3 and the Committee shall interpret and administer the Plan or any Award Agreement in a manner consistent therewith. Any provision inconsistent with Rule 16b-3 shall be inoperative and shall not affect the validity of the Plan.
Compliance with' Section 409A. All Awards granted under the Plan are intended either not to be subject to Section 409A of the Code or, if subject to Section 409A of the Code, to be administered, operated and construed in compliance with Section 409A of the Code and all regulations and other guidance issued thereunder. Any payments described in the Plan that are due within the "short-term deferral period" as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in the Plan, no payment or distribution under this Plan or any other plan or agreement of the Company or any of
its Affiliates that constitutes an item of deferred compensation under Section 409A of the Code and becomes payable by reason of a Grantee's termination of employment or service with the Company will be made to such Grantee until such Grantee's termination of employment or service constitutes a "separation from service" (as defined in Section 409A of the Code). Notwithstanding anything to the contrary in the Plan or any other plan or agreement of the Company or any of its Affiliates, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided during the six (6) month period immediately following the Grantee's termination of employment shall instead be paid on the first business day after the date that is six (6) months following the Grantee's separation from service (or upon the Grantee's death, if earlier). In addition, for purposes of the Plan, each amount to be paid or benefit to be provided to the Grantee pursuant to the Plan, which constitutes deferred compensation subject lo Section 409A of the Code, shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Company makes no representation that any or all of the payments or benefits described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Grantee shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A.
(iii) Compliance With Section 162(m). The Committee may make Awards of Performance-Based Compensation
hereunder. The exercisability and/or payment of such Performance-Based Compensation may, to the extent required to qualify as performance-based compensation under Section 162(m) of the Code, be subject to the achievement of performance criteria based upon one or more Performance Goals and to certification of such achievement in writing by the Committee. The Committee may in its discretion reduce the amount of such Performance-Based Compensation that would otherwise become exercisable and/or payable upon achievement of such Performance Goals and the certification in writing of such achievement, but may not increase such amounts. Any such Performance Goals, to the extent required to qualify as performance-based compensation under Section 162(m) of the Code, shall be established in writing by the Committee not later than the time period prescribed under Section 162(m) of the Code and the regulations thereunder. Notwithstanding anything set forth in the Plan to contrary, all provisions of such Awards which are intended to qualify as performance-based compensation under Section 162(m) of the Code shall be construed in a manner to so comply.
Forfeiture Events: Clawback. In addition to any forfeiture provisions otherwise applicable to an Award, a Grantee's right to any payment or benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, clawback or recoupment (i) in accordance with any clawback, recoupment or similar policy of the Company as in effect from time to time or (ii) as required by applicable law.
No Right to Continued Employment. Nothing in the Plan or in any Award granted under the Plan or in any Award Agreement or other agreement entered into pursuant hereto shall confer upon any Grantee the right to continue in the employ of or other service provider to the Company or any Affiliate or to be entitled to any remuneration or benefits not set forth in the Plan or such Award Agreement or other agreement or to interfere with or limit in any way the right of the Company or any such Affiliate to terminate such Grantee's employment or other service provider relationship.
Withholding and Other Taxes. The Company or any applicable Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan (including from a distribution of Stock) or any other payment to a Grantee, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Grantees to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Grantee's tax obligations. If Stock is withheld to satisfy withholding and other taxes due in connection with an exercise of an Option, the Company shall not withhold more Stock than is necessary to satisfy the minimum withholding obligation in respect of such exercise.
Amendment and Termination. The Board may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part. Notwithstanding the foregoing, (i) no amendment shall affect adversely any of the rights of any Grantee, without such Grantee's consent, under any Award theretofore granted under the Plan and (ii) any -amendment shall be approved by- stockholders, unless otherwise determined by the Board, if necessary to comply with state law, stock listing requirements or other applicable law. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan shall terminate on the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such termination date.
(g) No Rights to Awards: No Stockholder Rights. No Grantee or Eligible Individual shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have no rights as a stockholder with respect to any shares covered by the Award until the date as of which the Grantee is identified as a stockholder on the books and records of the Company with respect to such shares.
(h) Unfunded Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Grantee pursuant to an Award, nothing contained in the Plan or any Award shall give any such
Grantee any rights that are greater than those of a general creditor of the Company.
(i) No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such
fractional shares or any nghts thereto shall be forfeited or otherwise eliminated.
0) Regulations and Other Approvals.
The obligation, of the Company to sell or deliver Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.
Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Committee.
. In the event that the. disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a Grantee receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that.the Stock acquired by such.Grantee.is acquired for investment only and not with a view to distribution.
(k) Governing Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the
State of Delaware without giving effect to the conflict of laws principles thereof.
Exhibit 10.9
AS ADOPTED
AMENDED AND RESTATED BLACKROCK, INC. VOLUNTARY DEFERRED COMPENSATION PLAN
as amended and restated as of November 16, 2015
The Amended and Restated BlackRock, Inc. Voluntary Deferred Compensation Plan is intended to provide deferred compensation for a select group of management or highly compensated employees as described in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is a continuation, and amendment and restatement, of the BlackRock, Inc. Voluntary Deferred Compensation Plan, as amended.
Article I.
Definitions
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
"Board" means the Board of Directors of the Company.
"Bonus" means that portion of the discretionary annual performance bonus in respect of a Plan Year that is (i) payable by the Company or an Affiliate of the Company to a Participant in cash, (ii) not subject to deferral under a mandatory deferral program and (iii) paid at the time that the Company pays annual bonuses to employees with respect to such Plan Year generally.
"Change of Control" shall be deemed to occur if (i) due to a transfer of Voting Stock, a Person other than PNC or its Affiliates holds a majority of the voting power of the Voting Stock, or (ii) whether by virtue of an actual or threatened proxy contest (including a consent solicitation) or any merger, reorganization, consolidation or similar transaction, Persons who are directors of the Company immediately prior to such proxy contest or the execution of the agreement pursuant to which such transaction is consummated (other than a director whose initial assumption of office was in connection with a prior actual or threatened proxy contest) cease to constitute a majority of the Board or any successor entity immediately following such proxy contest or the consummation of such transaction, provided, however, that the occurrence of an event described in (i) or (ii) above shall not constitute a Change of Control unless it constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets ofthe Company, within the meaning of Section 409A.
"Code" means the Internal Revenue Code of 1986, as it may from time to time be amended or supplemented.
"Company" means BlackRock, Inc., a corporation organized under the laws ofthe State of Delaware, or any successor corporation.
"Compensation" means the salary, Bonus and commissions (but, for the avoidance of doubt, excluding the grant, vesting
or settlement of equity-based compensation) payable to an Eligible Employee by the Company or an Affiliate of the Company and/or such components of compensation as tlie Plan Manager may determine in the Plan Manager's discretion.
1.8 "Deferral Amount" means the portion of a Participant's Bonus elected by the Participant to be deferred in a Plan Year in
accordance with Article ITI.
I . 9 "Deferral Election" means a Participant's timely election pursuant to Article III which sets forth a Deferral Amount, a
Deferral Period and a Distribution Method.
1.10 "Deferred Compensation Account" means tlie bookkeeping entry account maintained by the Company for each
Participant that reflects Deferral Amounts and adjustments (including gains and losses) thereto.
"Deferral Period" has the meaning set forth in Section 3.1.
"Distribution Method" has the meaning set forth in Section 6.2.
"Eligible Employee" means, wilh respect to a Plan Year, an employee of an Employer who has a corporate tide of Director or above and who: (i) is eligible to receive a Bonus; (ii) is employed by tlie Company or an Affiliate of the Company on the date the entire Bonus would otherwise have been paid but for the deferral; and (iii) has annual Compensation (determined in accordance with procedures developed by the Plan Manager) in excess of (A) $375,000 or (B) the compensation threshold approved by the Plan Manager with respect to such Plan Year.
"Employer" means the Company or any Affiliate of the Company based in the United States that employs the Participant.
"ERISA" has the meaning set forth in the preamble.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
1.17 "Grandfathered Amounts" means the Deferral Amounts that were accrued and vested as of December 31, 2004
(including earnings thereon). The terms and conditions applicable to the Grandfathered Amounts are set forth on Appendix A hereto.
"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time.
"Investment Funds" means the tracking investments that are from time to time offered under the Plan, as chosen in the sole discretion of the Company.
"Knowledgeable Employee" has the meaning.set forth in Rule 3c-5. under the Investment Company Act.
"MDCC" means the Management Development & Compensation Committee of the Board, or any successor committee.
"Participant" means an Eligible Employee who has elected to participate in the Plan in accordance with Article II.
"Payment Commencement Date" means, with respect to any Deferral Amount, a date that is within 60 days following the end of the Deferral Period.
"Person" means any individual, partnership, limited partnership, corporation, trust, estate, association, limited liability company, private foundation or other entity.
"Plan" means this Amended and Restated BlackRock, Inc. Voluntary Deferred Compensation Plan.
"Plan Manager" means the Company's most senior global Human Resources professional.
"Plan Year" means, with respect to a Bonus (or portion thereof) that is deferred under die Plan, the calendar year to which such Bonus (or portion thereof) relates.
"PNC" means The PNC Financial Services Group, Inc., a Pennsylvania corporation, or any successor thereto.
"Qualified Purchaser" shall have die meaning ascribed to such term in the Investment Company Act.
"Section 409A" means Code Section 409A and the regulations and interpretive guidance issued thereunder.
"Separation from Service" means a Participant's "separation from service" widi the Company in accordance widi Treas. Reg. Secdon 1.409A- 1(h).
"Specified Date" has the meaning set forth in Section 3.1.
"Subsequent Election" has the meaning set forth in Secdon 3.3.
"Unforeseeable Emergency" has meaning set forth in Section 409A.
"Valuation Date" means the last business day of each month, or such other date specified by the Plan Manager.
"Voting Stock" means the then-outstanding shares of capital stock of the Company entitled to vote generally on the
election of directors and shall exclude any class or series of capital stock of the Company only entitled to vote in the event of dividend arrearages or any default under any provision of such class or series whether or not at the time of determination diere are any such dividend arrearages or defaults.
Article II.
Participation
Eligibility to Participate. Eligibility under tlie Plan is limited to Eligible Employees. An Eligible Employee shall become a Participant in the Plan upon making a Deferral Election that has become irrevocable in accordance with Section 3.1.
Cessation of Participation. A Participant shall cease to be a Participant upon the final distribution of all amounts credited to the Participant's Deferred Compensation Account.
Article III.
Deferral Elections
3.1 Deferral Election. An Eligible Employee may elect to defer, in one percent (1%) increments, between one percent (1%)
and one hundred percent (100%) of his or her Bonus for a Plan Year. Each Deferral Election shall be made on a deferral election form ' to be provided by the Plan Manager and shall specify (i) the Deferral Amount; (ii) the Deferral Period and (iii) the Distribution Method. With respect to any particular Deferral
Election for any Plan Year commencing on or alter January 1, 2016, the " Deferral Period" shall mean the period commencing on the date on which die Bonus would have otherwise been paid and ending, at die election of tlie Participant (including pursuant to any Subsequent Election under Section 3.3), on (A) the date specified by die Participant in his or her deferral election fonn (a "Specified Date") or (B) the earlier of either die date of die Participant's Separation from Service or a Specified Date. Any Specified Date shall, except as may be provided by die Plan Manager, be no later dian 10 years following die commencement of die Deferral Period and may be limited to die dates made available by die Plan Manager in the deferral election form. A new deferral election fonn shall be filed by the Participant for a Deferral Election for each Plan Year. A Deferral Election shall be irrevocable once die deadline set by die Plan Manager for filing such election has elapsed.
3.2 Timing of Deferral Elections. Deferral Elections shall made no later than December 31 (or such earlier date as determined
by die Plan Manager in die Plan Manager's discretion) ofthe calendar year preceding die applicable Plan Year. Notwithstanding die
foregoing, if, in the discretion of the Plan Manager, a Bonus to a Participant constitutes "performance-based compensation" within the
meaning of Section 409A, the Plan Manager may permit such Participant to make a Deferral Election no later dian June 30 of die Plan
Year relating to such Bonus.
3.3 ¦ Subsequent Deferral Elections. With respect to a Deferral Election, after an initial election has been made in accordance
with Section 3.1, to the extent permitted by the Plan Manager, a Participant may make a subsequent election to change (i) the Specified
Date and/or (ii) the Distribution Method applicable to a Specified Date by providing written notice in the form required by the Plan
Manager (a "Subsequent Election"). A Subsequent Election shall be made only if (i) die Subsequent Election does not take effect for
at least twelve (12) months following die date of the Subsequent Election, (ii) each payment which is subject to the Subsequent
Election is deferred for a period of at least five (5) years from the date such payment would otherwise have been made pursuant to die
previous election then in effect (except if the election relates to a payment on account of death or an unforeseeable emergency), and
(iii) the Subsequent Election is made no fewer than twelve (12) months prior to the date on which the such payment was scheduled to
be made pursuant to the previous election then in effect. No Subsequent Election shall, except as may be provided by the Plan
Manager, result in a Deferral Period that is greater dian 10 years. The Plan Manager may from time to time, in the Plan Manager's
discretion, permit Participants who would otherwise receive a distribution upon a Separation from Service to make a Subsequent
Election with respect to such distributions in accordance with procedures developed by the Plan Manager.
Article IV.
Deferral Accounts
Deferral Account. A Deferred Compensation Account shall be established on the books and records ofthe Company in the name of each Participant reflecting, as an unfunded liability, of the Employer, the amount deferred pursuant to Article III increased by any earnings and decreased by any losses thereon. Amounts attributable to each Deferral Election shall be accounted for separately in a Participant's Deferred Compensation Account. Participants shall be fully vested in their Deferred Compensation Account balance at all times. .
Allocation of Deferral Amounts. A Participant's Deferral Amount shall be credited to his or her Deferred Compensation Account as soon as practicable after the Participant is paid the Bonus for the applicable Plan Year (or, if the entire Bonus is deferred, at the time such Bonus would odierwise have been paid).
4 . 3 Adjustments to Deferred Compensation Account Balances. As of each Valuation Date, a Participant's Deferred
Compensation Account shall consist ofthe balance ofthe Participant's Deferred Compensation
Account as ofthe immediately preceding Valuation Date, adjusted to reflect (i) any additional Defenal Amounts, (ii) distributions (if any), and (iii) increases or decreases in die value of die Investment Funds selected by die Participant as tracking investments. All adjustments and earnings related thereto will be determined on a monthly basis in accordance with die Valuation Date or on such other basis as may be specified by the Plan Manager from time to time.
Article V.
Tracking Investments
Investment Election. A Participant shall specify dial all, or any whole percentage, of his or her Deferral Amount for the applicable Plan Year shall be designated to one or more of the Investment Funds. The available Investment Funds and any requirements applicable to a particular Investment Fund (such as, without limitation, any minimum investment amounts or percentages) shall be determined by the Plan Manager in the Plan Manager's discretion from time to time. The Company or an Affiliate of the Company may make a corresponding investment in die actual Investment Fund, but shall not be obligated to do so.
Restricted Investment Funds. The Plan Manager may prevent a Participant from directing an investment to an Investment Fund in order to comply with applicable securities laws if die Participant is not a Qualified Purchaser, Knowledgeable Employee or otherwise permitted to direct an investment lo an Investment Fund under the Plan.
Plan Manager Discretion. The Plan Manager shall have the sole discretion to determine the Investment Funds available under the Plan and may change, limit or eliminate an Investment Fund provided hereunder from time to time. If any Investment Fund ceases to be available under the Plan (whether in whole or in part), or if a Participant fails to make a valid election to invest in an Investment Fund, the Plan Manager shall have the authority to credit any allocation to such Investment Fund (or non-allocation, as the case may be) (along with deemed earnings, gains, losses, expenses or charges thereto) to any other then-available Investment Fund. The Plan Manager may disregard the deemed investment instructions of a Participant
5 . 4 Investment Reallocation. To the extent a Participant wishes to change the manner in which his or her Deferred
Compensation Account is directed into or out of an Investment Fund, such transfer shall only be effected as of die next available distribution or contribution date, as the case may be, of the applicable Investment Fund. Any amount directed to an Investment Fund prior to such fund's next contribution date shall, until such contribution date, be directed to in the Investment Fund which provides the lowest risk of loss of capital, as determined in the sole discretion ofthe Plan Manager.
Article VI
Distributions
6. 1 Distributions Upon End of Deferral Period. With respect to a Deferral Election, payment of a Participant's Deferred
Compensation Account attributable to such Deferral Election shall be made or commence to be paid on the Payment Commencement Date in the manner set forth in this Article VI.
Distribution Method. Distribution of a Participant's Deferred Compensation Account or any portion thereof shall be made in accordance with die Distribution Mediod elected by the Participant in die applicable Deferral Election. For purposes of the Plan, "Distribution Method" means, with respect to payment of amounts credited to a Participant's Deferred Compensation Account pursuant to a Deferral Election, either (i) a lump sum payment on the Payment Commencement Date or (ii) a number of annual installments (not exceeding 10) specified by the Participant in his or her Deferral Election, widi (A) the first installment to be paid on the Payment Commencement Date and (B) installments subsequent to the first installment to be paid in the applicable calendar month each year thereafter; provided, that, unless die Plan Manager otherwise permits in die deferral election form for a particular Plan Year, distributions upon a Participant's Separation from Service shall be in the form of a lump sum only.
Amount of Distribution.
Lump Sum Payment If a Participant elects a lump sum payment with respect to a Deferral Election, such payment shall consist of cash equal to die value, as of the Valuation Date immediately preceding distribution, of that portion of the Participant's Deferred Compensation Account balance that is attributable to such Deferral Election.
Installment Payments. If a Participant elects installments with respect to a Deferral Election, the amount payable under each such installment shall be a cash payment equal to the value, as of the Valuation Date immediately preceding the installment payment, of that portion of the Participant's Deferred Compensation Account balance that is attributable to such Deferral Election, divided by the number of remaining installment payments to be made (including die installment then being made).
Separation from Service. Except as may otherwise be provided in Section 11.8 or as may be permitted by the Plan Manager pursuant to Section 3.3, notwithstanding any provision in the Plan or any Deferral Election made by a Participant to the contrary, upon a Participant's Separation from Service, the portion of a Participant's Deferred Compensation Account relating to Deferral Amounts for Plan Years prior die 2016 Plan Year shall be distributed in a cash lump sum to such Participant within 60 days following such Separation from Service.
Distribution due to Unforeseeable Emergency. In the event the Pian Manager, upon written request of a Participant, determines in the Plan Manager's sole discretion that the Participant has suffered an Unforeseeable Emergency, the Plan Manager may pay to a Participant as soon as practicable following such detennination, an amount from a Participant's Deferred Compensation 'Account that shall not exceed the minimum amount necessary to'satisfy the emergency plus amounts necessary to pay taxes reasortably anticipated as a result of the distribution, after taking into account the extent that such hardship is or maybe relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). A Participant who receives a distribution pursuant to this Section 6.5 shall be ineligible to make any additional deferrals under the Plan for the balance of the Plan Year in which the distribution occurs and for the immediately following Plan Year.
6 . 6 Small Account Distributions. Notwithstanding any Distribution Method elected by the Participant, if, as of the
Participant's Separation from Service, die value of amounts in die Participant's Deferred Compensation Account, including Grandfathered Amounts (determined as of the Valuation Date immediately preceding such date), is less than the applicable dollar amount under Code Section 402(g)(1)(B), die entire balance in the Participant's Deferred Compensation Account shall be distributed as soon as practicable and in accordance widi Section 409A to the Participant (or if die Participant is deceased, die Participant's beneficiary) as a lump sum payment, provided diat, a distribution pursuant to diis Section 6.6 shall be made only if such distribution results in die termination and liquidation of die entirety of die Participant's interests under die Plan, and all agreements, methods, programs or other arrangements with respect to which deferrals are treated as having been deferred under a single nonqualified deferred compensation plan under Section 409A.
Accelerated Payment in die Event of Death. Notwithstanding any other provision of the Plan or any Deferral Election, in the event a Participant dies prior to receiving distribution of his or her entire Deferred Compensation Account balance, any unpaid amount in the Participant's Deferred Compensation Account shall be paid to the Participant's beneficiary widiin 90 days following the date of the Participant's death.
Change of Control. Notwithstanding any other provision of the Plan or any Deferral Election, upon a Change of Control, all Deferred Compensation Accounts shall be paid to Participants in a lump sum within 30 days following the date of the Change in Control.
6.9 ('ode Section 162(m1. Notwithstanding anything in the Plan or a Deferral Election to the contrary, in the event that
distribution of any Deferral Amount to a Participant would not be deductible by the Company by operation of Code Section 162(m),
such amount shall, subject to the Participant's consent, not be distributed to the Participant until the earlier of (i) the first tax year ofthe
Company in which Code Section 162(m) would not prohibit a deduction if such amount were paid or (ii) during die period beginning
with the date of the Participant's Separation from Service and ending on the later of die last day of the taxable year of die Company in
which the Participant's Separation from Service occurs or the 15th day ofthe third month following the Participant's Separation from
Service. The additional deferral provided in this Section 6.9 shall apply only to the extent such deferral complies, in all respects, with
the requirements of Treas. Reg. Section 1.409A-2(b)(7).
Article VII.
Beneficiary Designation
Beneficiary Designation. Each Participant shall have the right, in accordance with any procedures adopted by the Plan Manager from time to time, to designate any person or persons as beneficiary or beneficiaries (both principal as well as contingent) to whom payment of the balance of the Participant's Deferred Compensation Account shall be made in the event of the Participant's death. In the event of multiple beneficiaries, such payment shall be apportioned among the beneficiaries in accordance with die designation forms, or if applicable, as determined pursuant to Section 7.2. A beneficiary designation may be changed by a Participant by filing such change on a form prescribed by the Plan Manager. The receipt of a hew beneficiary designation form will cancel aU previously filed beneficiary designations.
Failure to Designate. If a Participant fails to designate a beneficiary as provided above, or if all designated beneficiaries predecease the Participant, tiicn the Participant's designated beneficiary shall be deemed to be the persons surviving him in the first of the following classes in which there is a survivor on a per capita basis: (i) the surviving spouse; (ii) the Participant's children, except that if any ofthe children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share their parent would have taken if living; and (iii) die Participant's personal representative (executor or administrator).
Article VIII
Administration
Subject to oversight by die MDCC, die Plan Manager shall have die audiority to administer the Plan and to make and adopt rules and procedures relating to the operation of the Plan, to the extent not inconsistent with the provisions of the Plan or the Code, including, witiiout limitation, the authority to construe and interpret die Plan and any Plan related documentation; to determine all questions arising in connection widi the Plan; to correct any defect, supply any omissions or reconcile any inconsistency in the administration of die Plan, to determine die terms and provisions of deferral election forms; and to make all odier determinations deemed necessary or advisable for the administration of the Plan. The Plan Manager shall have die audiority to delegate to his or her designees on such terms and conditions as he or she deems appropriate for purposes of performing any of the Plan Manager's responsibilities and obligations hereunder (including, widiout limitation, die distribution and collection of deferral election forms and the establishment of bookkeeping accounts). The Plan Manager's interpretations and decisions wilh respect to the Plan (including, without limitation, any interpretation or decision relating to a provision of the Plan) shall, subject to die foregoing, be final and conclusive.
Article DC-Claims Appeal Procedure
9.1 The Participant may. make a claim under this Plan in writing to the Plan Manager. The Plan Manager shall make all
determinations concerning such claim. Any decision by the Plan Manager denying such claim shall be in writing and shall be delivered
to the Participant, or if applicable, anyone who makes a claim in respect of the Participant. Such decision shall set forth the specific
reasons for denial in plain language. Pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how
the claimant can perfect the claim will be provided, including a description of any additional material or information needed to perfect
the claim. The notice of benefit denial shall also provide a description of the Plan's review procedures and the time limits applicable to
such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA following an
adverse determination on review. This notice of denial of benefits will be provided within 90 days of the Plan Manager's receipt of die
claimant's claim for benefits, unless the Plan Manager determines that special circumstances require an extension of up to 90 additional
days to process the claim, in which case the Plan Manager will notify.the claimant ofthe extension prior to the expiration of the initial
90-day period and the special circumstances that warrant the extension. If the Plan Manager fails to notify the claimant of the Plan
Manager's decision regarding the claim, the claim shall be considered denied, and the claimant shall then be permitted to proceed with
the appeal as provided in Section 9.2.
9.2 A claimant who has been completely or partially denied a benefit shall be entitied to appeal this denial of his/her claim by
filing a written statement of his/her position with the Plan Manager no later than sixty (60) days after receipt ofthe written notification
of such claim denial. The Plan Manager shall schedule an opportunity for a full and fair review ofthe issue within thirty (30) days of
receipt of the appeal. During such review, the Plan Manager shall provide claimants the opportunity to submit written comments,
documents, records or other information related to the claim for benefits. The Plan manager will provide claimants, upon request and
free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for
benefits. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Plan
provisions on which the decision is based. Following the review of any additional information submitted by die claimant, eitiier
through the hearing
process or otherwise, the Plan Manager shall render a decision on the review of the denied claim. The Plan Manager shall make a decision regarding die merits of the denied claim widiin sixty (60) days following receipt of die request for review (or within one hundred twenty (120) days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). The Plan Manager shall deliver die decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to die commencement of the extension. If die decision on review is not furnished within the prescribed time, die claim shall be deemed denied on review. The decision on review shall set forth specific reasons for (he decision, and shall cite specific references to the pertinent Plan provisions on which the decision is based.
9 . 3 Liability Indemnification. Neither the Plan Manager nor any member of the Board or the MDCC shall be liable for any action taken or determination made in good faith with respect to the Plan. The Plan Manager and the members of die Board and the MDCC and their agents shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability, or expense diat may be imposed upon or incurred by diem in connection widi or resulting from any claim, action, suit, or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by them in settiement (with the Company's written approval) or paid by them in satisfaction of a judgment in any action suit, or proceeding. The foregoing shall not be applicable to any person if the loss, cost, liability or expense is due to such person's gross negligence or willful misconduct.
Article X.
Amendment and Termination of Plan
The MDCC may at any time amend or terminate the Plan in whole or in part; provided, however, that no amendment or termination may act to reduce a Participant's Deferred Compensation Account at the time of such amendment or termination.
Article XI.
Miscellaneous
11.1 Unsecured General Creditor. Participants and their beneficiaries shall have no legal or equitable rights, interest or claims
in any property or assets ofthe Company, any Affiliate ofthe Company or any Investment Fund. The obligation under the Plan to a
Participant shall be merely tiiat of an unfunded and unsecured promise of his or her Employer to pay money to the Participant in the
future. The Company shall be jointiy and severally liable for the obligation of Employers in respect of obligations owed to Participants
and beneficiaries hereunder. The Company may establish a trust for the benefit of Participants hereunder or otherwise segregate,
identify or reserve assets for the purpose of paying benefits hereunder; provided, however, that assets segregated, identified or reserved
for the purpose of paying benefits pursuant to the Plan shall remain general corporate assets subject to die claims of creditors of the
Company and any Employer for whom a Participant provides services or, in the case of assets held in a trust established by the
Company, subject to the claims of general creditors to the extent provided in such trust
11.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any,
payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and
nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.
Not a Contract of Service. The terms and conditions of this Plan shall not be deemed to constitute a contract of service between a Participant and the Company or any Affiliate of the Company. Except as may otherwise be specifically provided herein, neither a Participant nor any beneficiary shall have rights against the Company or any Affiliate of the Company. Moreover, nodiing in this Plan shall be deemed to give a Participant die right to be retained in the service or employment of die Company or any Affiliate of the Company.
Offset Amounts due to or in respect of Participants under the Plan shall not be affected by any circumstances, including, widiout limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or any Affiliate of die Company may have against a Participant or others.
Incapacity. In die event benefits become payable under the Plan after a Participant becomes incapacitated, such benefits shall be paid to the Participant's legal guardian or legal representative.
Withholding. The Company, or as applicable, an Affiliate of the Company, shall have the power to withhold an amount sufficient to satisfy all federal, state, local or foreign withholding requirements in respect of any payment or credit made under the Plan. In addition, the Plan Manager may require a Participant to satisfy employment taxes applicable to credits made under the Plan in such other method as the Plan Manager may reasonably require.
Severability. If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; rather, each pro vision shall be fully severable and the Plan shall be construed and enforced
11.8 Section 409A. All amounts payable under the Plan are intended to be administered, operated and construed in
compliance with Section 409A. Notwithstanding anything to the contrary in the Plan, a Deferral Election or any other plan or
agreement of the Company or any of its Affiliates, to the extent required in order to avoid accelerated taxation and/or tax penalties
under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided during the six (6) montii
period immediately following the Grantee's Separation from Service shall instead be paid on the first business day after the date that is
six (6) months following the Grantee's Separation from Service (or upon the Grantee's death, if earlier), hi addition, for purposes of the
Plan, each amount to be paid' or benefit to be provided to the Grantee pursuant to the Plan, which constitutes deferred compensation
subject to Section 409A, shall be construed as a separate identified payment for purposes of Section 409A. The Company makes no
representation that any or all ofthe payments or benefits described in this Plan will be exempt from or comply with Section 409A and
makes no undertaking to preclude Section. 409A from applying to any such payment. A Participant shall be solely responsible for the
payment of any taxes and penalties incurred under Section 409A.
11.9 Governing Law. The Plan, and any Participation Agreement related thereto, shall be governed by the laws of the State of
Delaware without giving effect to the conflict of law principles thereof.
AMENDED AND RESTATED BLACKROCK, INC. VOLUNTARY DEFERRED COMPENSATION PLAN
APPENDIX A
The rules contained in this appendix (diis "Appendix") shall apply to die portion of a Participant's Deferred Compensation Account that consists of Grandfathered Amounts (as defined in the Plan). The provisions of the Plan, to which this Appendix is attached, arc hereby incorporated by reference; however, to the extent any of die terms or provisions of (his Appendix arc inconsistent with die Plan, this Appendix shall govern. Terms used herein without definitions shall have the meanings ascribed to diem in die Plan.
Termination of Employment. Except as may be elected by a Participant pursuant to Section 3.3 of the Plan, upon a Participant's termination of employment or service widi his or her Employer for any reason, die Plan Manager shall, as soon as is practicable, distribute the Grandfathered Amounts in a cash lump sum to such Participant, or in die event of die Participant's death, to the Participant's beneficiary or beneficiaries.
Hardship Withdrawal. In the event the Plan Manager, upon written request of a Participant, determines in the Plan Manager's sole discretion diat the Participant has suffered an unforeseeable financial emergency, the Plan Manager may pay all or a portion of the Grandfathered Amounts to a Participant as soon as practicable following such determination, provided that the amount paid shall not exceed die minimum amount necessary to satisfy the emergency. For purposes of this Section 2, an unforeseeable financial emergency is an unanticipated emergency that is caused by an event beyond the control of the Participant as may result from illness, casualty loss or sudden financial reversal and that would result in severe financial hardship to the individual if the emergency distribution were not permitted. Financial needs arising from foreseeable events, such as the purchase of a residence or education expenses for children, shall not be considered a financial emergency. A Participant who receives a hardship distribution pursuant to diis Section 2 shall be ineligible to make any additional deferrals under the Plan for the balance of the Plan Year in which the hardship distribution occurs and for the immediately following Plan Year.
Penalized Withdrawals. Whether or not a Participant is eligible for a hardship withdrawal (in accordance with Section 2 above), a Participant may request payment of all or a portion of the Participant's Grandfathered Amounts. Any payment made pursuant to such a request shall be subject to a penalty equal to ten percent (10%) of the payment, which penalty shall be deducted from the payment and forfeited. A Participant who receives a distribution pursuant to this Section 3 shall be ineligible to make any additional deferrals under the Plan for the balance ofthe Plan Year in which the distribution occurs and for the immediately following Plan Year.
Small Account Balances. Notwithstanding any distribution metiiod elected by a Participant, the Plan Manager may, in the Plan Manager's sole discretion, elect to pay in a lump sum the Grandfathered Amounts with a balance of less than $5,000.
Change of Control. If there is a Change of Control of the Company (whether or not such Change of Control constitutes a change in the ownership or effective control ofthe Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A), then no additional benefits shall accrue with respect to the Grandfathered Amounts, unless the successor or acquiring corporation shall elect to continue the Plan with respect to the Grandfathered Amounts. The Grandfathered Amounts which had accrued up to the date of die Change of Control shall be paid as scheduled unless the successor or acquiring corporation elects to accelerate payment.
Exhibit 12.1
RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
Year ended December 31,
(in millions)
Income before income taxes
Less: Net income (loss) attributable to noncontrolling interests(i)
Pre-tax income attributable to BlackRock, Inc. Add" Fixed charges
Distributions of earnings from equity method investees Less* (Losses) earnings from equity method investees
2014
4,395 $ (30)
4,425 254 57 158
2013
3,973 19
3,954 256 80 158
2012
3,470 (18)
3,488 261 42 175
3,135 2
3,133 236 30 23
Pre-tax income before fixed charges
Fixed charges: Interest expense
Interest expense on uncertain tax positions^) Portion of rent representative of interests)
Total fixed charges
232 (22) 44
254
211 3 44
258
215 3 43
261
176 10 50
236
Ratio of earnings to fixed charges
Amount includes redeemable and nonredeemable noncontrolling interests.
Interest expense on uncertain tax positions has been recorded within income lax expense on the consolidated statements of income.
The portion of rent representative of interest is calculated as one third of the total rent expense.
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
The following table lists the direct and indirect subsidiaries of BlackRock, Inc. as of December 31, 2015*.
Name of Subsidiary
52nd Street Capital Advisors. LLC Acero C.V.
Acero Cooperatif U.A.
Acero Dutch Holdco II, LLC
Acero Dutch Holdco, LLC
Acero Holdings I B.V.
Acero Holdings II, BV
BAA Holdings, LLC
BlackRock (Channel Islands) Limited
BlackRock (Hong Kong) Limited
BlackRock (Iste of Man) Holdings Limited
BlackRock (Isle of Man) Limited
BlackRock (Luxembourg) S.A.
BlackRock (Netherlands) B.V.
BlackRock (Singapore) Holdco Pte. Limited
BlackRock (Singapore) Limited
BlackRock Advisors (UK) Limited
BlackRock Advisors Singapore Pte. Limited
BlackRock Advisors. LLC
BlackRock Asia-Pac Holdco, LLC
BlackRock Asset Management Canada Limited
BlackRock Asset Management Deutschland AG
BlackRock Asset Management tntcmational Inc.
BlackRock Asset Management Investors Services Limited
BlackRock Asset Management Ireland Limited
BlackRock Asset Management North Asia Limited
BlackRock Asset Management Schweiz AG
BlackRock Asset Management UK Limited
BlackRock Australia Holdco Pty. Ltd.
BlackRock Brasit Gestora de Investimentos Ltda.
BlackRock Cal 1 Investor. LLC
BlackRock Canada Holdings LP
BlackRock Canada Holdings, ULC
BlackRock Capital Holdings, Inc.
BlackRock Capital Management, Inc.
BlackRock Cayco Limited
BlackRock Cayman Capital Holdings Limited
BlackRock Cayman Finco Limited
BlackRock Channel Island Holdco Limited
BlackRock Chile Asesorias Limitada
BlackRock Chile Holdings Inversiones Limitada
BlackRock Colombia Holdco, LLC
BlackRock Colombia SAS
BlackRock Company Secretarial Services (UK) Limited
BlackRock Corporation US Inc.
BlackRock Delaware Holdings Inc.
BlackRock Europe Development Management Limited
BlackRock Execution Services
BlackRock Executor & Trustee Co. Limited
BlackRock Finance Europe Limited
BlackRock Financial Management, Inc.
BlackRock Finco UK Ltd.
BlackRock Finco, LLC
BlackRock First Partner Limited
BlackRock Fund Advisors
BlackRock Fund Management Company (Ireland) Limited. BlackRock Fund Management Company S.A. BlackRock Fund Managers Limited BlackRock Funding International, Ltd. BlackRock Funds Services Group, LLC. BlackRock Group Limited
BlackRock Group Limited - Luxembourg Branch BlackRock HK Holdco Limited
BlackRock Holdco 2. Inc. BlackRock Holdco 3. LLC BlackRock Holdco 4, LLC BlackRock Holdco 5. LLC BlackRock Holdco 6, LLC BlackRock Holdings (Schweiz) AG BlackRock Index Services, LLC. BlackRock Institutional Sen/ices, Inc.
Jurisdiction/State of Incorporation Delaware Netherlands Netherlands Delaware Delaware1 Netherlands Netherlands Delaware Jersey Hong Kong Isle of Man Isle of Man Luxembourg Netherlands Singapore Singapore United Kingdom Singapore Delaware Delaware Canada Germany Delaware United Kingdom Ireland Hong Kong Switzerland United Kingdom Australia Brazil Delaware Canada Canada Delaware Delaware Cayman Islands Cayman Islands Cayman Islands Jersey Chile Chile Delaware Colombia United Kingdom California Delaware Cyprus California United Kingdom United Kingdom Delaware United Kingdom Delaware Jersey California Ireland Luxembourg United Kingdom Cayman Islands Delaware United Kingdom Luxembourg Hong Kong
Delaware
Delaware
Delaware
Delaware
Delaware
Switzerland
Delaware
Delaware
Name of Subsidiary
BlackRock Institutional Trust Company, National Association BlackRock International Holdings, Inc. BlackRock International Limited
BlackRock Investment Management (Australia) Limited
BlackRock Investment Management (Dublin) Limited
BlackRock Investment Management (Korea) Limited
BlackRock Investment Management (Taiwan) Limited
BlackRock Investment Management (UK) Limited
BlackRock Investment Management Ireland Holdings Limited
BlackRock Investment Management, LLC
BlackRock Investments, LLC
BlackRock Japan Co., Ltd.
BlackRock Japan Holdings GK
BlackRock Jersey Finco 1 Limited
BlackRock Jersey Fmco 2 Limited
BlackRock Life Limited
BlackRock Lux Finco S.a r.l
BlackRock Luxembourg Holdco S.a r.l.
BlackRock Mexican Holdco. LLC
Blackrock Mexico Infraestructura I, S. de R.L. dc C.V.
Blackrock Mexico Infraestructura II. S. de R.L. de C.V.
BlackRock Mortgage Ventures, LLC
BlackRock Niagara LLC
BlackRock Operations (Luxembourg) S.a r.l.
BlackRock Overseas Investment Fund Management (Shanghai) Co Ltd.
BlackRock Pensions Limited
BlackRock Pensions Nominees Limited
BlackRock Property Asia Limited
BlackRock Property Consulting (Beijing) Co., Ltd.
BlackRock Property France S.a.r.l
BlackRock Property Germany GmbH
BlackRock Property Lux S.a.r.l.
BlackRock Property Malaysia Sdn. Bhd.
BlackRock Property Singapore Pte. Ltd.
BlackRock Realty Advisors, Inc.
BlackRock Services India Pnvate Limited
BlackRock Slovakia s.r.o.
BlackRock Trident Holding Company Limited
BlackRock UK 1 LP
BlackRock UK 2 LLP
BlackRock UK 3 LLP
BlackRock UK 4 LLP
BlackRock UK A LLP
BlackRock UK Holdco Limited
BR Acquisition Mexico S.A. de C.V.
BR Jorsey International Holdings L.P.
Grosvenor Alternate Partner Limited
Grosvenor Ventures Limited
HLX Financial Holdings, LLC
Impulse-ra y Promotora BlackRock Mexico, S.A. de C.V.
iShares (DE) I Investmentaktiengesellschaft mit Teilgesellschaftsvermogen
iShares Delaware Trust Sponsor LLC
Mercury Carry Company Ltd.
Mercury Private Equity MUST 3 (Jersey) Limited
Portfolio Administration & Management Ltd.
Prestadora de Servicios Integrates BlackRock Mexico, S.A. de C.V.
Stl Albans House Nominees (Jersey) Ltd.
TIali Acero. S.A. de C.V., SOFAM
Trident Merger, LLC
Xulu, Inc.
Jurisdiction/State of Incorporation
United States
Delaware
Scotland
Australia
Ireland
Korea
Taiwan
United Kingdom
Ireland
Delaware
Delaware
Japan
Japan
Jersey
Jersey
United Kingdom
Luxembourg
Luxembourg
Delaware
Mexico
Mexico
Delaware
Delaware
Luxembourg
China
United Kingdom
United Kingdom
Hong Kong
China
France
Germany
Luxembourg
Malaysia
Singapore
Delaware
India
Slovakia
Ireland
United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Mexico Jersey
United Kingdom United Kingdom Delaware Mexico Germany Delaware Isle of Man Jorsey
Cayman Islands
Mexico
Jersey
Mexico
Delaware
Delaware
Certain subsidiaries that are not significant have been omitted.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-137708, 333-169329 and 333-197764 on Form S-8 of BlackRock, Inc. of our reports dated February 26, 2016, relating to the consolidated financial statements of BlackRock, Inc., and the effectiveness of BlackRock, Inc.'s internal control over financial reporting, appearing in this Annual Report on Form 10-K of BlackRock, Inc. for the year ended December 31, 2015.
Isl Deloitte & Touche LLP
New York, New York February 26, 2016
Exhibit 31.1
CEO CERTIFICATION
I, Laurence D. Fink, certify that:
I have reviewed this Annual Report on Form 10-K, for the fiscal year ended December 31, 2015 of BlackRock, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows ofthe registrant as of, and for, tlie periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(0), for the registrant and have'
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting, and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
AH significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 26, 2016 By:/s/ Laurence D. Fink
Laurence D. Fink
Chairman &
Chief Executive Officer
Exhibit 31.2
CFO CERTIFICATION
I, Gary S. Shedlin, certify that:
I have reviewed this Annual Report on Form 10-K, for the fiscal year ended December 31, 2015 of BlackRock, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to stale a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
¦>¦ The registrant's other certifying officers) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 26, 2016
Gary S. Shedlin
Senior Managing Director &
Chief Financial Officer
Exhibit 32.1
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of BlackRock, Inc. (the "Company") for the annual period ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Laurence D. Fink, as Chief Executive Officer ofthe Company, and Gary S. Shedlin, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairty presents, in all material respects, the financial condition and results of operations of tlie Company.
Isl Laurence D. Fink
Name: Laurence D. Fink
Title: Chairman & Chief Executive Officer
Date: February 26, 2016
Isl Gary Shedlin
Name: Gary S. Shedlin
Title' Senior Managing Director &
Chief Financial Officer Date: February 26, 2016
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Goldman, Sachs & Co.
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[x] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address ofthe Disclosing Party: 71 S. Wacker Drive, Suite 500
Corporate Headquarters: Chicago, IL 60606
200 West Street,
New York, NY 10282
Telephone: 312-655-6156 Fax: 212-256-6299 Email: Carlos.pineiro@gs.com
Name of contact person: Carlos Pineiro
Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? City of Chicago, Dept. of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
[ ] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[x] Limited partnership
L1 Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: New York
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
W Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which arc legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
The Goldman Sachs Group, Inc Limited Partner
The Goldman, Sachs & Co., LLC General Partner
Please refer to the attachment titled "Executive Officers of Goldman, Sachs & Co." in reference to Section II.B.1.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
The Goldman Sachs Group, Inc. 200 West Street, New York, NY 10282 99.80%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
Please see the attachment titled "Business Relationships with City Elected Officials" in reference to Section III.
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
f] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [s§ No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
c. have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3,4 and 5 concern:
the Disclosing Party;
« any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to ali persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Please see the attachment titled "Disclosing Party Certifications" in reference to Section V. B2. Section V.B3, Section V.B4, and Section V.B5.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none"). N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. N/A* Please see the attachment titled "Gift Expenses" in reference to Section IV.B9.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We arc not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary): Please see the attachment titled "Certification of Status as Financial Institution" in reference to Section V.C1.
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Docs any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E. This certification is made to the undersigned's knowledge, after due inquiry.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Docs the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D. 1., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor'entitics regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:.
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "N A" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501 (c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to. applicable federal regulations? (Sec 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ 3 No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and arc material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor arc the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that docs not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
PFRTIFir ATir»T\J P'ease see attachment entitled "Acknowledgements, Contract Incorporation, Compliance, Penalties LLKllb 1L-A11UIN Disclosure* in reference to Section VILE, Section VII.F1, Section VII.F2 and Section VII.F3
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
(Print or type name of person signing) Managing Director
(Print or type title of person signing)
„ ¦ ¦ PATRICIA S. CRAWLEY
Commission expires:Hofary Public. smt«»oi Now v«nV .
No. 31-4817132 Qualified in New Y»rk County Commfesion Expire* Jan. Sljgfiage 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Paity1 or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Docs the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Please see the attachment titled "Familial Relationships with Elected City Officials and Department
Heads" in reference to Appendix A.
Page 13 of 13
Disclaimers
Please note nothing in Goldman, Sachs & Co.'s response to this EDS is an expressed nor an implied commitment by Goldman, Sachs & Co. to provide Financing or to purchase or place the City's O'Hare General Airport Senior Lien Revenue Bonds (the "Bonds") or any other securities. Any such commitment shall only be set forth in a bond purchase agreement or other appropriate form of agreement for the type of transaction undertaken by the City. Further, Goldman, Sachs & Co.'s participation in any transaction (contemplated by this EDS or otherwise) remains subject to, among other things, execution of a mutually agreed upon bond purchase agreement (or other appropriate form of agreement), further internal review and approvals, satisfactory completion of our due diligence investigation and market conditions.
Executive Officers of Goldman, Sachs & Co,
Title
Cohn, Gary D. Lee, Brian J. Palm, Gregory K. Armstrong, Philip Stuart Matthias, Thomas Fairbanks Pompey, Asahi M Ockene, Paul Bradford
Chief Executive Officer Chief Financial Officer Palm Chief Legal Officer Chief Operating Officer Chief Compliance Officer Chief Compliance Officer Chief Compliance Officer -Investment Advisers Act
Note: Goldman, Sachs & Co. is managed by its General Partner, The Goldman, Sachs & Co. L.L.C., and does not have a Board of Directors.
Business Relationships with City Elected Officials
To the knowledge of the undersigned, after due inquiry, the Disclosing Party has not had a "business relationship" directly with any city elected official, or his or her spouse or domestic partner, in the 12 months before the date this EDS was signed. The Disclosing Party does not have access to the information necessary to determine whether it has had a "business relationship" in the 12 months before the date this EDS was signed with any entity in which any City elected official, or his or her spouse or domestic partner, has a "financial interest," as defined in Chapter 2-156 of the Municipal Code.
Disclosing Party Certifications
SECTION V.B.2. - This certification is made to the best of the undersigned's knowledge, after due inquiry. As a general matter, from time to time, the firm, its managing directors and employees are involved in proceedings and receive inquiries, subpoenas and notices of investigation relating to various aspects of its business. Please also refer to the firm's various regulatory filings under applicable laws and regulations, including Form BD and periodic filings pursuant to the Securities Exchange Act of 1934.
SECTIONS V.B.3. AND V.B.4. - These certifications are made on behalf of the (A) Disclosing Party, (B) Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, (C) the GS Team, (D) any other official, agent or employee of the entities listed in clauses (A) and (B) above that is acting pursuant to the direction or authorization of an authorized officer ofthe Disclosing Party or any such Affiliated Entity in connection with providing services in connection with the Matter to the best of the undersigned's knowledge, after reasonable inquiry. For Purposes of this response, the "GS Team" refers to: Jeff Scruggs, Carlos Pineiro, Mark Somers, Ben Herbst, and Rahul Sharma. For the sake of clarity, Goldman, Sachs & Co. has not retained Contractors for the purposes of this EDS.
SECTION V.B.5. - These certifications are made on behalf of the Disclosing Party and Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, to the best of the undersigned's knowledge, after due inquiry.
Gift Expenses
To the best of the Disclosing Party's knowledge after reasonable inquiry, the Disclosing Party has not given any gifts or caused any gifts to be given, to an employee, or elected or appointed official ofthe City of Chicago, at any time during the 12-month period preceding the execution of this EDS.
Certification of Status as Financial Institution
To the knowledge ofthe undersigned, after due inquiry, the Disclosing Party is not, as of the date this EDS is being signed, a predatory lender (as defined in Chapter 2-32 of the Municipal Code), and has no present intention of becoming a predatory lender. The Disclosing Party cannot certify as to any future predatory lending activity that may be beyond its control due to a merger or other similar event. To the undersigned's knowledge, upon inquiry, none of its affiliates are predatory lenders or have any present intention of becoming predatory lenders. With respect to itself and its affiliates, the Disclosing Party cannot certify as to any future predatory lending activity arising from change in applicable law. The Disclosing Party understands that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City.
Acknowledgments, Contract Incorporation, Compliance, Penalties, Disclosure.
VII. E-The Disclosing Party agrees to supplement this EDS (i) upon the request of the City in the event the Matter has not been completed on the date that is three months from the date this EDS is executed and (ii) in the event of any material change in the information provided by the Disclosing Party in this EDS, prior to the execution of bond purchase agreement connection with this Matter.
VII F.l. - This representation is made on behalf of the Disclosing Party and Affiliated Entities in respect of any services provided by such entities in connection with the Matter.
VII F.2. - This representation is made on behalf of the Disclosing Party and Affiliated Entities in respect of any services provided by such entities in connection with the Matter.
VII F.3. - This representation is made on behalf ofthe Disclosing Party and Affiliated Entities in respect of any services provided by such entities in connection with the Matter.
Familial Relationships with Elected City Officials and Department Heads
This certification is made on behalf of the Disclosing Party and the Executive Officers of the Disclosing Party identified on the attachment titled "Executive Officers of Goldman, Sachs & Co." to the best of the undersigned's knowledge, after reasonable inquiry.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an. indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a
building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal
Code? Please note that for purposes of this response, we
are only speaking to the defined term "Building
[ ] Yes [ x ] N O code scofflaw" in Section 2-92-416 of the
Municipal Code.
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [x] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
The Goldman, Sachs & Co. LLC.
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [x] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control: Goldman. Sachs & Co.
B. Business address ofthe Disclosing Party: 200 West Street i
New York, NY 10282
Telephone: 312-655-6156 Fax: 212-256-6299 Email: cartos.plnelro@gs.com
Name of contact person: Carlos Pineiro
Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? City of Chicago, Dept. of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page I of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
[x] Limited liability company
[ ] Limited liability partnership
[] Joint venture
[ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[x] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Please refer to the attachment titled "Executive Officers and Directors of The Goldman, Sachs & Co. LLC."
in reference to Section II.B1.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
The Goldman Sachs Group, Inc. 200 West Street. New York, NY 10282 100%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
Please see the attachment titled "Business Relationships with City Elected Officials" In reference to Section III.
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor; attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (I) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
|x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
I. Pursuant to Municipal Code Chapter 1-23, Article I ("Article l")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity; .
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any A ffiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (I) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Please see the attachment titled "Disclosing Party Certifications" In reference to Section V.B2, Section V.B3, Section V.B4, and Section V.B5.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none"). N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary): Please see the attachment titled "Certification of Status as Financial Institution" in reference to Section V.C1.
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
This certification is made to the undersigned's knowledge, after due inquiry.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either I. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
__2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
I. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501 (c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section
501 (c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII-- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicaKO.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon . request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that docs not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F. 1., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
PFR TIFIP A TICJN P'ease see attachment entitled "Acknowledgements, Contract Incorporation, Compliance, Penalties t-fcK I If It- A11UN Disciosure» in rcferencc to Section VILE, Section V1LF1, Section VII.F2 and Section VII.F3
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
ngntiere) Jeff Scruggs
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
Signed and sworn tp before me on (jjate) sfl/fyf-
otary Public.
„ . PATRICIA 8. CRAWLEY
Commission expires: Hotil* jj^qlj-ij^* Yvk
OuaWto* in Naw YorK County * Q Commtttloo Expire* Jw.aES^'i Jo
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (I) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (I) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Please see the attachment titled "Familial Relationships with Elected City Officials and Department
Heads" In reference to Appendix A.
Page 13 of 13
Executive Officers and Directors of The Goldman, Sachs & Co. L.L.C. Name Title
Blankfein, Lloyd C. Chairman and Chief Executive Officer
Cohn, Gary D. President and Chief Operating Officer
Palm, Gregory K. Executive Vice President, General Counsel and Secretary of the
Corporation
Schwartz, Harvey M. Executive Vice President and Chief Officer
Business relationships with citv elected officials
To the knowledge of the undersigned, after due inquiry, the Disclosing Party has not had a "business relationship" directly with any city elected official, or his or her spouse or domestic partner, in the 12 months before the date this EDS was signed. The Disclosing Party does not have access to the information necessary to determine whether it has had a "business relationship" in the 12 months before the date this EDS was signed with any entity in which any City elected official, or his or her spouse or domestic partner, has a "financial interest," as defined in Chapter 2-156 of the Municipal Code.
Disclosing Party Certifications
SECTION V.B.2. - This certification is made to the best ofthe undersigned's knowledge, after due inquiry. As a general matter, from time to time, the firm, its managing directors and employees are involved in proceedings and receive inquiries, subpoenas and notices of investigation relating to various aspects of its business. Please also refer to the firm's various regulatory filings under applicable laws and regulations, including periodic filings pursuant to the Securities Exchange Act of 1934.
SECTION V.B.3. - These certifications are made on behalf of the (A) Disclosing Party and (B) Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, (C) any other official, agent or employee ofthe entities listed in clauses (A) and (B) above that is acting pursuant to the direction or authorization of an authorized officer of the Disclosing Party or any such Affiliated Entity in connection with providing services in connection with the Matter to the best of the undersigned's knowledge, after reasonable inquiry. For the sake of clarity, The Goldman, Sachs & Co. L.L.C. has not retained Contractors for the purposes of this EDS.
SECTION V.B.4 - These certifications are made on behalf of the (A) Disclosing Party and (B) Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, (C) any other official, agent or employee ofthe entities listed in clauses (A) and (B) above that is acting pursuant to the direction or authorization of an authorized officer of the Disclosing Party or any such Affiliated Entity in connection with providing services in connection with the Matter to • the best of the undersigned's knowledge, after reasonable inquiry. For the sake of clarity, The Goldman, Sachs & Co. L.L.C. has not retained Contractors for the purposes of this EDS.
SECTION V.B.5. - These certifications are made on behalf of the Disclosing Party and Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, to the best ofthe undersigned's knowledge, after due inquiry.
Certification of Status as Financial Institution
To the knowledge of the undersigned, after due inquiry, the Disclosing Party is not, as of the date this EDS is being signed, a predatory lender (as defined in Chapter 2-32 of the Municipal Code), and has no present intention of becoming a predatory lender. The Disclosing Party cannot certify as to any future predatory lending activity that may be beyond its control due to a merger or other similar event. To the undersigned's knowledge, upon inquiry, none of its affiliates are predatory lenders or have any present intention of becoming predatory lenders. With respect to itself and its affiliates, the Disclosing Party cannot certify as to any future predatory lending activity arising from change in applicable law. The Disclosing Party understands that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City.
Acknowledgments, Contract Incorporation, Compliance, Penalties, Disclosure
VII. E-The Disclosing Party agrees to supplement this EDS upon the request of the City in the event the Matter has not been completed on the date that is three months from the date this EDS is executed and in the event of any material change in the information provided by the Disclosing Party in this EDS.
VII. F.l. - This representation is made on behalf of the Disclosing Party and its Affiliated Entities in respect of any services provided by such entities in connection with the Matter.
Familial Relationships with Elected City Officials and Department Heads
This certification is made on behalf of the Disclosing Party and the Executive Officers of the Disclosing Party identified on the attachment titled "Executive Officers of The Goldman, Sachs & Co. L.L.C." to the best of the undersigned's knowledge, after reasonable inquiry.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a
building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal
Code? Please note that for purposes of this response, we
are only speaking to the defined term "Building
[ ] Yes [ X ] No c°de scofflaw" in Section 2-92-416 of the
Municipal Code.
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code? Please note that our firm docs not have a central repository that
directly tracks the type of information contemplated in Question 2.
[ ]Yes [ ]No [ ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OFTHE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
The Goldman Sachs Group, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Gojdman, Sachs & Co.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 200 West Street '
New York, NY 10282
Telephone: 312-655-6156 Fax: 212-256-6299 Email: carios.pineiro@gs.com
Name of contact person: Carlos Pin**"
Federal Employer Identification No. (if you have one): - ¦ 'V"S
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds i_.
G. Which City agency or department is requesting this EDS? City of Chicago. Dept. of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[x] Publicly registered business corporation [ ]
[ ] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
L ] Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[x] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there arc no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholdcr(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Please refer to the attachment titled "Executive Officers and Directors of The Goldman Sachs Group, Inc."
in reference to Section II. B1
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
N/A
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the namc(s) of such City elected official(s) and describe such rclationship(s):
Please see the attachment titled "Business Relationships with City Elected Officials" in reference to Section III.
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
A, COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
B. FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
c. have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor1' (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
« any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Please see the attachment titled "Disclosing Party Certifications" In reference to Section V.B2, Section V.B3,
Section V.B4, and Section V.B5.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none"). N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" docs not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary): Please see the attachment titled "Certification of Status as Financial Institution" in reference to Section V.C1.
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to
Item D.l., proceed to Part E. This certification is made to the undersigned's knowledge, after due inquiry.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No J
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either I. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501 (c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
. 1. Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.) []Yes []No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Ycs [)No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics . and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy, to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that docs not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F. 1., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
r'FRTriTIPATimsJ p'ease see attachment entitled "Acknowledgements, Contract Incorporation, Compliance, Penalties lt-A IIUIN Disclosure" in reference to Section VII.E, Section VH.Fl, Section VII.F2., and Section VII.F3
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) arc true, accurate and complete as of the date furnished to the City.
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
. m , PATRICIA S. CRAWLE^/ Commission expire3lotary Public, state of New vnrb
No.dl-4ai7J.32
c™2«uh,ed in New Yo* Cow „
Comntiuion E*Pirw Jan. 31^flPagc 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Docs the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Please see the attachment titled "Familial Relationships with Elected City Officials and Department
Heads" in reference to Appendix A.
Page 13 of 13
Executive Officers and Directors of The Goldman Sachs Group, Inc.
Executive Officers Lloyd C. Blankfein Alan M. Cohen Gary D. Cohn Edith W. Cooper Gregory K. Palm John F.W. Rogers Harvey M. Schwartz Mark Schwartz Michael S. Sherwood
Directors
Lloyd C. Blankfein
M. Michele Burns
Gary D. Cohn
Mark A. Flaherty
William W. George
James A. Johnson
Lakshmi N. Mittal
Adebayo O. Ogunlesi
Peter Oppenheimer
Debora L. Spar
Mark E. Tucker
David A. Viniar
Mark (Marius) O. Winkelman
Business Relationships with City Elected Officials
To the knowledge of the undersigned, after due inquiry, the Disclosing Party has not had a "business relationship" directly with any city elected official, or his or her spouse or domestic partner, in the 12 months before the date this EDS was signed. The Disclosing Party does not have access to the information necessary to determine whether it has had a "business relationship" in the 12 months before the date this EDS was signed with any entity in which any City elected official, or his or her spouse or domestic partner, has a "financial interest," as defined in Chapter 2-156 ofthe Municipal Code.
Disclosing Party Certifications
SECTION V.B.2. - This certification is made to the best of the undersigned's knowledge, after due inquiry. As a general matter, from time to time, the firm, its managing directors and employees are involved in proceedings and receive inquiries, subpoenas and notices of investigation relating to various aspects of its business. Please also refer to the firm's various regulatory filings under applicable laws and regulations, including periodic filings pursuant to the Securities Exchange Act of 1934.
SECTION V.B.3. - These certifications are made on behalf of the (A) Disclosing Party and (B) Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, (C) any other official, agent or employee ofthe entities listed in clauses (A) and (B) above that is acting pursuant to the direction or authorization of an authorized officer of the Disclosing Party or any such Affiliated Entity in connection with providing services in connection with the Matter to the best of the undersigned's knowledge, after reasonable inquiry. For the sake of clarity, Tlie Goldman Sachs Group, Inc. has not retained Contractors for the purposes of this EDS.
SECTION V.B.4 - These certifications are made on behalf of the (A) Disclosing Party and (B) Affiliated Entities of the Disclosing Party that are providing services in connection with the Matter, (C) any other official, agent or employee ofthe entities listed in clauses (A) and (B) above that is acting pursuant to the direction or authorization of an authorized officer of the Disclosing Party or any such Affiliated Entity in connection with providing services in connection with the Matter to the best of the undersigned's knowledge, after reasonable inquiry. For the sake of clarity, The Goldman Sachs Group, Inc. has not retained Contractors for the purposes of this EDS.
SECTION V.B.5. - These certifications are made on behalf of the Disclosing Party and Affiliated Entities ofthe Disclosing Party that are providing services in connection with the Matter, to the best of the undersigned's knowledge, after due inquiry.
Certification of Status as Financial Institution
To the knowledge ofthe undersigned, after due inquiry, the Disclosing Party is not, as of the date this EDS is being signed, a predatory lender (as defined in Chapter 2-32 of the Municipal Code), and has no present intention of becoming a predatory lender. The Disclosing Party cannot certify as to any future predatory lending activity that may be beyond its control due to a merger or other similar event. To the undersigned's knowledge, upon inquiry, none of its affiliates are predatory lenders or have any present intention of becoming predatory lenders. With respect to itself and its affiliates, the Disclosing Party cannot certify as to any future predatory lending activity arising from change in applicable law. The Disclosing Party understands that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City.
Acknowledgments, Contract Incorporation. Compliance, Penalties, Disclosure
VII. E-The Disclosing Party agrees to supplement this EDS upon the request ofthe City in the event the Matter has not been completed on the date that is three months from the date this EDS is executed and in the event of any material change in the information provided by the Disclosing Party in this EDS.
VII. F. I. - This representation is made on behalf of the Disclosing Party and its Affiliated Entities in respect of any services provided by such entities in connection with the Matter.
Familial Relationships with Elected City Officials and Department Heads
This certification is made on behalf of the Disclosing Party and the Executive Officers of the Disclosing Party identified on the attachment titled "Executive Officers and Directors of The Goldman Sachs Group, Inc." to the best of the undersigned's knowledge, after reasonable inquiry.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal
Code? Please note that for purposes of this response, we
are only speaking to the defined term "Building
[ ] Yes [ X ] No code scofflaw" in Section 2-92-416 of the
Municipal Code.
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code? Please note that our firm does not have a central repository that
directly tracks the type of information contemplated in Question 2.
[ ]Yes [ ]No [ ] Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Samuel A. Ramirez & Co., Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[x] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State me legal name of tie entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: 200 N- Lasaiiest., suite 1900
Chicago, IL 60601
Telephone: 312.630.2001 Fax: 312 . 630 .2005 Email: phil. culpepper@ramirezco . o*.
Name of contact person: Phil Culpepper
Federal Employer Identification No. (if you have one):|:
I; ¦ ¦ . .....
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
"O' Hare General Airport Senior Lien Revenue Bonds "
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -
- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
[x] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
" ] Limited partnership
;] Trust []
Limited Uability company Limited liability partnership Joint "venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
New York
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
pc] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Samuel A. Ramirez Sr. - President & CEO; Phil Culpepper - Managing Director Vincent Mazzaro - Chief Operating Officer Dominick Quartucio - Corporate Secretary Mike Kick - Chief Financial Officer
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage interest in the
Disclosing Party
Samuel A. Ramirez Sr.; 61 Broadway, Suite 2924, New York, NY 10006; 53.93% Samuel A. Ramirez Jr.; 61 Broadway, Suite 2924, New York,. NY 10006; 27.07%
SECTION III — BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
N/A
SECTION TV — DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Paity has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
N/A
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [x] No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Paxly is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not; within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of cither the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N/A
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
y is [ ] is not
a "financial institution11 as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
N/A .
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes |x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does ihe Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.L, provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder, insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of -any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section
501 (c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofChicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in- the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information proyided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee,, tax or other charge owed to the City. This, includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the. Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in fonn and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (I) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Samuel A. Ramirez & Co., Inc. (Print or type name of Disclosing Party)
(Sign here)
Phil Culpepper
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
Signed and sworn to before me on (date) o ? ^ i Z-11 jp
at py-pc*^. County, , / (¦Wr f (state).
Page 12 of 13
Commission expires:
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Parry" means (1) all executive officers of the Disclosing Party listed in Section TLB. 1 .a, if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general parmerahip; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Patty; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. 'Trincipal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a 'Tamilial relationship" with an elected city official or department head?
[ ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity ¦which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of Ihe Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [x] Not Applicable
If yes to (1) or (2) above, please identify below the name ofthe person or legal entity identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPEND LX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Estrada Hinojosa & Company, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
1. the Applicant
OR
2. [ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name ofthe entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 161 North Clark St., Suite 4700, Chicago, IL 60601
1717 Main St Sutie 4700, Pallas, Tx 75201
„ ^ , , 312.523.2086 _ 312.277.7499 _ fegrillo@ehmuni.com
Telephone: 7U.658.1670 Fax: 214.658.1671 Email: rat^rfTmMni"mm
Name of contact person: Fernando Grillo & Robert A. Estrada
Federal Employer Identification No. (if you have one):;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds; O'Hare GARB New Money
Which City agency or department is requesting this EDS? Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # fsj/A and Contract #
Page 1 of 13
SECTION II — DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature ofthe Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
[] Trust []
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ "J No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Texas
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
UYes []No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Noe Hinojosa, Jr. President & CEO
Robert A. Estrada Senior Managing Director & Chairman
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Noe Hinojosa, Jr. 1717 Main St., Suite 4700, Dallas, Tx 75201 50.31%
Robert A. Estrada 1717 Main St., Suite 4700, Dallas, Tx 75201 20.02%
Donald J. Gonzales 100 W. Houston St., Suite 1400, San Antonio, Tx 78205 10%
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[XJ Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if tho Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disolosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or chargod with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities dentified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before tlie date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
tm.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Parly pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [Jj No
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.L, provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and arc material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is'falsc, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including tenninating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Parly must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 of the Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Parly represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Estrada Hinojosa & Company, Inc.
(Print or type name of Disclosing Party)
By; L^— (Sign here)
Robert A. Estrada (Print or type name of person signing)
Senior Managing Director
(Print or type title of person signing)
BELINDA ANN GARZA tWfl MY COMMISSION EXPIRES November 10,2019
at
Signed and sworn to before me on (date)
County, TlA/a^S (slate).
\\-lO-ZO\
Notary Public.
Commission expires:
BELINDA ANN6A: fTSSflS MY COMMISSION t' ^Sffi November 10,"'•
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Parly" or any Spouse or Domestic Parmer thereof is related to the mayor, any alderman, tlie city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Parly or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [X] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [X] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Blaylock Beal Van, LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
p] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing P.arty: 180 North LaSalle Street, Suite 3145
Chicago, IL 60601
(312)324-0772 _ (312)541-1743 . . ,,
Telephone: Fax: Email: opxerre@brv-llc . com
Name of contact person: 0see Pierre .
E. Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
Person \%Publicly registered business corporation [ ]
Privately held business corporation [ ]
Sole proprietorship [ ]
General partnership (Is
Limited partnership
Trust [ ]
Limited liability company Limited liability partnership loint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: California
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
M Yes []No . []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Eric V. Standifer President and CEO
Ronald E. Blaylock Non-Active Chairman
Bernard B. Beal Chairman
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-1 54-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Blaylock & Company, Inc. 600 Lexington Avenue, 3rd Floor, New York, NY 10022 47,4% Robert Van Securities, Inc. 350 Frank H. Ogawa Plaza, 10th Floor, Oakland, CA 94612 51.51%
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as-defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [3§ No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business retained or anticipated . Address to be retained)
Relationship to Disclosing Party (subcontractor, attorney, lobbyist, etc.)
Fees (indicate whether paid or estimated.) NOTE: "hourly rate" or "t.b.d." is not an acceptable response.
(Add sheets if necessary)
[ ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should cojnsult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party
V -submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party
certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Parly or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
P] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes P] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes ' f] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the. lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
• 1. Have you developed and do you have on file affirmative action programs pursuant to applicable
federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-1 54-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. TheDisclosing Party is not-delinquent in the payment of any tax administered by the Illinois-Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Blaylock Beal Van, LLC
(Print orjype name of Disclosing Party)
By: ^=M^ -
Eric V. Standifer
(Print or type name of person signing)
President (Print or type title of person signing)
Signed and sworn to before me on (date)
{J/* County, Agr/j^m/^ (state).
Notary Public.
Commission expires: \CX>/^L2->/'^
CONRAD TREMBATH \ COMM. It 2094638 t. NOTARY PUBLIC-CALIFORNIA > CONTRA COSTA COUNTY ^ My Commtosion Expires , DECEMBER 22, 2016 1
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head? '
[ ] Yes £ ] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Appl icant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ] No [X ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Blaylock & Company, Inc.
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Blaylock Beal van, llc
OR
3. [ ] a legal entity with a right of control (see Section II.B. 1.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: 600 Lexington Avenue, 3rd Floor
New York, NY 10022
Telephone: (212) 715-6625 pax; (212) 715-3300 Email: rblaylock@brv-lie.com
Name of contact person: Ronald E. Blaylock
Federal Employer Identification No. (if you have one): >.
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [ ] Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[X] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: California
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Ronald E. Blaylock Principal
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [xj No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or'expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. 1. of this EDS:
arc not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an A ffiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is P] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes p] No
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes p] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on.file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public pn its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City,
(Print By:
(h^xoiocX^-'^- cCWt^puccA t£*U2-.
nt or type name of Disclosing Paity)
(Sign here)
(Print or type title of person signing)
¦ Commission exdires^T?^ ^
ll &>iu>.
CHRISTINE ANN HOLLY NOTARY PUBLIC-STATE OF NEW YORK No. 01HO6221697 Qualltled In New York County My Commlnlon Expire* May 10. 2018
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes ] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ JYes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ J No [X J Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Robert Van Securities, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Blaylock Beal van, llc
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 350 Frank h. ogawa Plaza, 10th Floor
Oakland, CA 94612
Telephone: (510) 208-6100 Fax: (510) 625-1065 Email: management@brv-llc . com
Name of contact person: Eric v. standifer
Federal Employer Identification No. (if you have one): .-""j
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -
- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [ ] Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
P] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: California
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [X] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s). .
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Eric V. Standifer President and CEO
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [x] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclos.ed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury.or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
P] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes p] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes p] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage lo or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the.names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.l. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It i§ the City's policy to make this document available, to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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—FtIt— -The Disclosing Party is not delinquenHn the payment of any tax adm the Illinois—
Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the 'City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Robert Van Securities, Inc.
(Print or type name of person signing)
President (Print or type title of person signing)
Signed and sworn to before me on (date)
at ,/\1cNotary Public.
Commission expires:_
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild,; father-in-law, modier-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of tlie Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes ] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [ ]No [X] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if
applicable: Valdes & Moreno, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[X ] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
[ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 6300 N. Revere Drive, Suite 110
Kansas City, MO 64151
Telephone: (816) 221-6700 Fax: (816)221-1310 Email: marco@valdesmoreno.com
Name of contact person: Marco Listrom
Federal Employer Identification No. (if you have one): s
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? City of Chicago, Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
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SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [ ] Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[X ] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Missouri
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
£X ] YeS [ ] No [ ] N/A Note. Registration submitted and approval pending.
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Marco Listrom President
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint
venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Marco Listrom 6300 N. Revere Drive, Suite 110 Class A-100 percent
Kansas City, MO 64151 Class B - 90.5 percent
Preferred - 100 percent
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [X ] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[X ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been .declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [X ] No [] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[]Yes []No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [X ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[JYes [X]No
NOTE: If you checked "Yes" to Item D. L, proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [X ] No
3. If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting,the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes . [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[]Yes []No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any. fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
(Print or type name of Disclosing Party)
(Sign here)
(Print or type name of person signing)
(Print or type title of person signing)
ASHLEY WYER Notary Public - Notary Seal STATE OF MISSOURI Jackson County My Commission Expires Dec. 2, 2017 Commission # 13058467
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section JJ.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ X ] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[" ] Yes [ X ] No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ] Yes [ ] No [ X ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if
applicable: Valdes & Moreno, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[X ] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name ofthe
Applicant in which the Disclosing Party holds an interest:
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 6300 N! Revere Drive, Suite 110
Kansas City, MO 64151
Telephone: (816) 221 -6700 Fax: (816) 221 -1310 Email: marco@valdesmoreno.com
Name of contact person: Marco Listrom
Federal Employer Identification No. (if you have one); -; ¦
Brief description of contract, transaction Or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? City of Chicago, Department of Finance
tf the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Ver. 01-01-12 Page 1 of 13
- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership
1. Indicate the nature ofthe Disclosing Party: [ ] Person [ [ ] Publicly registered business corporation [ [X ] Privately held business corporation [ [ ] Sole proprietorship [ [.] General partnership (1
[ ] Trust [
[ ] Yes [ ] No
f ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Missouri
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
Note Registration submitted and approval pending.
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
List below the full names and titles of all executive officers and all directors of the entity . NOTE*. For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company; limited liability partnership or joint venture, list below the name arid title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Mateo Listrom President
Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples
of such an interest include shares in a corporation, partnership interest in a partnership or joint
venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none; state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Marco Listrom 6300 N. Revere Drive, Suite 110 Class A -100 percent
Kansas City, MO 64151 Class B - 90.5 percent
Preferred -100 percent
SECTION III BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [X ] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant, and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as ah employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[X ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [X ] No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Parry.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article 1 ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant, nor any controlling person is currently indicted or charged with; or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and. if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B,2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or. more public transactions (federal, state or local) terminated for cause or default; and
e. . have not, within a five-year period preceding the date of this EDS, been convicted, adjudged
guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or .subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors arid Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the-Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or. prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the D isclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the. U.S. Department of the Treasury or the Bureau of Industry and Security of the U-S. Department of Commerce ot their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
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Tf the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
None
To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per.recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (cheek one)
[ ] is [X ] is not
a "financial institution" as defined in Section 2-32-455(.b) Of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will hot become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates-is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [X ] No
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D. 1., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this PartD.
Does the Matter involve a City Property Sale?
t ] Yes [X ] No
If. you checked "Yes" to Item D.L, provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee,
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing. Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X ¦ 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect-to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that.NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respeqt to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. I. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant Or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration, of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[]Yes [JNo If "Yes," answer the three questions below:
Have you developed and do you have, on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR .Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other Cily action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters.2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these.ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided, in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response tp a Freedom of Information Act request, or otherwise. By completing and Signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the MatteT is a contract being handled by the City's Department of Procurement Services, the Diselosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-J 54-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A* on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired of to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items.in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications arid statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
(Print or type name of Disclosing Party)
By:
(Sign here)
(Print or type name of person signing) (Print or type title of person signing)
ASHLEY WYER
Notary Public - Notary Seal
STATE OF MISSOURI
Jackson County
^ , My Commission Expires Dec. 2, 2017
Notary Public. Commission # 13058467
Commission expires:
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece Or nephew, grandparent,.grandchild, father-in-law, mother-in-law, sori-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managmg.members and members ofthe Disclosing Party, if tlie Disclosing Party is a limited liability company; (2) all principal Officers of the Disclosing Party; and (3) any person having more than a 7-5 percent ownership interest in the Disclosing Party. "Principal officers1' means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ X ] No
If yes, please identify below (1) the name and title of such person, ,(2) the name ofthe legal entity to which such person is connected; <3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest.iri the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ X ] No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director Of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ] No [ X ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person of legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDED B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
AFFIDAVIT
DEBT OBLIGATION AND BROKERAGE TRANSACTIONS
Name of Reporting Firm: Valdes & Moreno Inc.
Description of Matter: O'Hare General Airport Senior Lien Revenue Bonds
Role of Reporting Firm: Co-Managing Underwriter
This affidavit is submitted in conjunction with (check one):
X a City of Chicago debt obligation transaction (Municipal Code Section 2-154-017)
brokerage services for the City Treasurer (Municipal Code Section 2-154-018)
Fill out below (and attach additional sheets using the same format, if necessary), the following information for each person in the Reporting Firm who will directly provide professional services to the City in connection with the Matter described above: the individual's position in the Reporting Firm and the role he or she will fill in the Matter, gender, and race or ethnicity. Individuals' names need not be disclosed.
Individual Position and Role Gender Race/Ethnicity
Marco Listrom President/Underwriting
Cesar Maldonado Managing Director/Public Finance r. > i 1 .' ;:
Brian Cookson Vice President/Sales & Trading i. ¦ I ¦
Patrick Hosry Director/Institutional Sales \. i - ¦'; - v.;
Paul Gabriel Managing I)irector/Fixed Income
Kelly Jones Financial & Operations Principal/Administrative
(If needed, pleaseuse additional sheets to identify additional personnel.)
By signing below, I represent under penalty of perjury that: (I) 1 am authorized to acton behalf of the Reporting Firm, and (2) the mformation in this Affidavit and associated attachment are true, complete, and correct.
By signing below, I understand and acknowledge, on behalf of the Reporting Firm, that failure to accurately and completely supply the information requested herein may result in a declaration of ineligibility to participate, in future Matters for the City of Chicago.
Printed Name: Marco Listrom
Signature:
Title:
Date:
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
MfAufn ^urAMte, UJL,
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[vj the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest;
OR
3. [] a legal entity with a right of control (see Section II.B.L) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: V55~ A) Ctk^-frr^-h fhz* hr S/e S/£>c>
Telephone: {3&> W-orm Fax:: Email: CjnrluCs.^ W^^.
Name of contact person: Phrishplii't- ttylufn
Federal Employer Identification No. (if you have one): !
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
0'Ma.ce^ CnfiyV£cd AirpcA- Sfrfrcy Litsx £l>uf»uu- fionJ<
G: Which City agency or department is requesting this EDS? J^paAnIf the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS A. "NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing [ ] Person
[ ] Publicly registered business corporation [ ] Privately held business corporation [ ] Sole proprietorship [ ] General partnership [ ] Limited partnership [] Trust
[j^Limited liability company
[ ] Limited liability partnership
[] Joint venture
[ ] Not-for-profit corporation
(Is tbe not-for-profit corporation also a 501 (c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
3. For legal entities not organized in the State of lUinois: Has the organization registered to do business in the State of Illinois as a foreign entiry?
[ ] Yes [} No [B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal ,entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list beLow the legal tltleholder(s).
If the. entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint Venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entiry listed below must submit an EDS on its own behalf.
Name Title
— —
2. Please provide the following information concerning each person or entity having a direct or indirect-beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation., partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
MtWrx ft CnMftoii-LUL tAfl-/t/.&y^f Ha** jW 9^%
L &t)rP ;
SECTION HI — BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is sighed?
[ ] Yes M'No
If yes, please identify below the name(s) of such City elected officials) and describe such relationship^):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney^ lobbyist, accountant, consultant and any other person qr entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entiry who undertakes to influence any legislative or administrative action on behalf of any person oi entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Parly Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
ty Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-4 IS, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[]Yes [(/No [] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If. "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e:g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is :doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, Or has ever been convicted of, or placed under supervision for, any criminal offense involving.actual, attempted, or conspiracy to commit briberyj theft, fraud, forgery, perjury, dishonesty or deceit, against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties*);
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the meligiWUty of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or. entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entiry, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entiry (collectively "Agents")-
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States, of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders ot prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
4. : Neitherthe Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials,
agents or partners, is barred from contracting with any nhit of state or local government as a result of
engaging in or being convicted of (1) bid-rigging in violation of 720iL.CS 5/33E-3; (2) bid-rotating in
violation of 720 ILCS 5/33E-4; or (3) any similar offense, of any state or ofthe United States of
America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U:S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, ihe Unverified List, the Entity List and the Debarred List
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of til e above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
. _ . NJA _ : : ^
Page 6 of 13
If the letters "NA," the word "None," or no.response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To tlie best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
: j4or%Ar
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" ot "none"). As to any gift listed below, please also list the name of the City recipient.
= tL&sc — -
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
Thp Disclosing Party certifies thatthe Disclosing Party (check one)
Hfis [ } is not
a "financial institution" as defined in Section 2-32-^455(b). of the Municipal Code.
If the Disclosing. Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City:"
If the Disclosing Party is unable tp make this pledge because it Or any of its affiliates (as defined in Section 2-32-455(b) of die Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
'_ uM , -
Page 7 of 13
if the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter? /
{] Yes y^Sfo.
NOTE: If you checked "Yes" to Item. D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[JYes [JNo
If you checked "Yes" to Item D.l., provide the names and business addtesses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest ta the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Parry and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records:
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments oi profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter Is not federally fonded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List.below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
— — —Z tdAi
{If no explanation appears or. begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. l. above for bis or her lobbying activities or tp pay any. person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects tbe accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organizatibn described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal iu form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party mnst maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require tbe Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ 1 No
If "Yes," answer the three questions below:
Have you developed and do you have pn file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[JYes []No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[]Yes (]No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and arc material inducements to the City's execution of any contractor taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.citvofchicago.org/Ethics . and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in tbis EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or.in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
lt is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be mode available to the public on. the Internet, in response to a Freedom of Information Act request, or Otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible tights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in tbis EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action On the Matter. If the Matter is s contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1 -.23 and Section 2-154-020 of the Municipal Code,.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l ., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements eontained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
(Print or type name of person signing)
title of person signing)
Signed and sworn to before me oh (date) ]
at . lOot County, flf/M/'S ' (state).
j^/fe^^l Notary Public.
Commission expires:
OFFICIAL SEAL JASMINE BLUMENSTEIN
NOTARY PUBLIC. STATE OF ILLINOIS My Commission Expires Nov 2. 2019
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCIX)STJRE STATEMENT AND AFFIDAVIT APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
Tbis Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest In the Applicant exceeding 7.5 percent It is not to be completed by any legal entity which has only an Indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Diselosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city, official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, tnother-in-law, son-in-law, daughter-hvlaw, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section TLB. 1.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and mombers.of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entiry or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently have a "familial relationship" with an elected city official or deparMent head?
i ]Yes
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precisenaturepfsuch familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT APPENDIX B
BUILDING CODE SCOFFLAVV7PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.S percent (an "Owner"), lt is not to be completed by any legal entiry which has only an indirect ownership interest in the Applicant.
1. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal
Code?
I JYes
[ JYes
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Not Applicable
3. If yes to (I) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Check ONE of the following three boxes:
indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
Ha legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an,interest: Mfiuin j>Q~jjn'4ft.<
OR
3. [] a legal entity with aright of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: Al rj^fry,n-h flarA. brioe- "Si-C 3too
Telephone: IP-3 Fax: s Email: flt^l^ ^L.^^.
Name of contact person: CJiri<4fyitej- Mtiuts.
Federal Employer Identification No. (if you have one): '
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
fytfflvr- GxriLftd jAfrporl- He^^r Iritis, fiptsf^so fig^M
Which City agency or department is requesting this EDS? J^^nr^T^^ixjr Fthan** _
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION n - DISCLOSURE OF OWNERSHIP INTERESTS A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
13 Person Limited liability company
[] Publicly registered business corporation [] Limited liability partnership
[] Privately held business corporation [] Joint venture
[ ] Sole proprietorship ( ] Not-for-profit corporation
[] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership (] Yes [ ] No
[ ] Trust [ ] other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Sfek of Mroi<,
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[JYes []No tfN/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
I. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholdeifs).
If .the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title pf each general partner, managing member, manager or any other person. or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
i
Name Title
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
. . V57 t\j fifty farf- pjflz* bfirt- $1%
Settle SiQP ,
— flhir^/,, ,77 i*CK>(l : , ,
SECTION HI - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[]Yes
If yes, please identify below the name(s) of such City elected officials) arid describe such relationship(s):
SECTION IV - DISCLOSURE OP SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party, is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If die Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) f,hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[Vfcheck here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any chUd support obligations by any Illinois court of competent jurisdiction?
IJYes y4>
t ] No person directly or indirectly owns 10% or more of the Disclosing Party.
If "Yes," has the person entered into a court-approved, agreement for payment of all support owed and is the person in compliance with that agreement?
UYes []No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article F)(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges, that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
axe not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state/or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty^ or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not Unrited to all persons or legal entities disclosed.under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity thaty directly or indirecUy: controls the Disclosing Party, is controlled by the Disclosing Party, ox is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the inehgibility of a business entity to do. business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entiry means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is sighed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2^92-610 (Li ving Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense-pf any state or of the United States of America that contains the same elements as; the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entiry is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau bf Industry and Security, of the U.S. Department pf .Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified tp the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, tbe following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
NOAJL ,
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also listthe name of the City recipient.
,
C. CERTIFICATION OF STATUS AS FINANCIAL mSTTTUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code,
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to ihake this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
N/A.
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter? ?
[]Yes [vfNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you.checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively; "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes []No
If you checked "Yes" to Item DJ., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
/
_Z_l. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verities that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have madelobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lilies above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or air employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
t ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and dp you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
t]Yes [JNO
Have yon filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question l - or 2. above, please provide ah explanation:
Page 10 of 13
SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties arid obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any uaformation provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is tie City's policy to make this document available to the public on its Internet site and/or upon request. Some or alLof the information provided-on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The hrfonnation provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must Update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affdiated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, ail water charges, sewer charges, license fees, parking tickets, property taxes or sales'taxes.
F.2 If.the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has.reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. dr F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below; (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
(Print or type name of person signing)
at
Signed and sworn to before me on (date) l}iz}}{{) (MIL County, Jj/iwrt (state).
y
Commission expires:_
OFFICIAL SEAL JASMINE BLUMENSTEIN
NOTARY PUBLIC. STATE OF ILLINOIS My Commission Expires Nov 2, 2019
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix ts to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an mdirect ownership Interest In the Applicant.
Under Municipal Code Section 2-154-015, the disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of die date, tbis EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following; whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, sOn-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section ILB.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general paroiership; all general partners and limited rjartners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members arid members of the Disclosing Party, if the Disclosing Party is a limited uability company; (2) all principal officers of the Disclosing Parry; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof crurently have a "familial relationship" with an elected city official or department head?
t ]Yes
If yes, please identify below (!) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to'Section 2-92-416 of the Municipal Code?
t ]Yes [jrfio
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ 3 Yes [ "]No. [ ] Not Applicable
3. If yes to (1) or{2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflawor problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX BARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OFTHE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Siebert Brandford Shank & Co., L.L.C.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
>f the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: ¦
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the DisclosingParty: 111 East Wacker Drive, Suite 2605
Chicago, IL 60601
Telephone: 312-759-0400 Fax: 319-759-0109 Email: kwalker@sbsco.com
Name of contact person: Karen Walker
Federal Employer Identification No. (if you have one): j ,.\ ,;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
] Person ^ Limited liability company
] Publicly registered business corporation [ ] Limited liability partnership
] Privately held business corporation [] Joint venture
] Sole proprietorship [ ] Not-for-profit corporation
] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
] Limited partnership [ ] Yes [ ] No
] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
f/Yes []No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Suzanne Shank Chairwoman and CEO/Member
Sean Duffy Head of Sales/Membere
William Thompson Chief Administrative Officer/Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Siebert Brandord Shank Financial Co., L.L.C. 100 Wall Street 18th Floor, New York, NY 10005 100%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[]Yes f/No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
' The Disclosing Party must disclose the name and business address of each subcontractor, attorney; lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[xj Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities, SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term;
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [>} No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, slate or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
arc not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and s
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, wilh respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N/A
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
WA
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
ty is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 of the Municipal Code, explain here (attach additional pages if necessary):
N/A
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [V^o
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
^ 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step I above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is nol an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1 986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have .you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and.the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the. City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE:.If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Siebert brandford Shank & C, L.L.C, (Print or type name of Disclosing Party)
By;
(Sign here)
Karen Walker .
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
Signed and sworn to before me on (date)
at Cook County, Illinois
Commission expires
July 12. 2016
(state).
Notary Public.
SUSANA CHAPARR0 OFFICIAL SEAL Notaiy Public. State of Illinois My Commission Expires October 29. 2019
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, tlie Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ]Yes
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [VfNo
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [ ]No h^Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Siebert Brandford Shank Financial Co. LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
fv^a legal entity holding a direct or indirect interest in the Applicant. State the legal name ofthe Applicant in which the Disclosing Party holds an interest: Siebert Brandford Shank & Co., L L C
OR
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 100 Wall Street, 18th Floor
New York, NY 10005
Telephone: (6461-775-4841 Fax: (6461-576-9683 Email: jmendola@sbsco.com
Name of contact person: Joseph Mendola
Federal Employer Identification No. (if you have one): ¦
F. Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
"^Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
rfccs [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s). ..
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Suzanne Shank President and Chief Executive Officer
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Suzanne Shank 535 Griswold St., Suite 2250, Detroit, Ml 48226 58% CM Holdings, INC 454 Soledad. Suite 300. San Antonio. TX 78205 28%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes fV^No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
{^jtheck here if the Disclosing Party has not retained, nor expects to retain, any such persons or-entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[]Yes *fNo [ ] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. 1. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
• any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed .under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the dale this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid^rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or .the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N/A
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
WA
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
t^is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
N/A
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes -p/No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the. City in connection with the Matter voidable by the City.
_V^_1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII -- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in tlie payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Siebert Brandford Shank Financial Co, LLC (Print or type name of Disclosing Party)
ISigA here)
Joseph Mendola
(Print or type name of person signing)
Chief Compliance Officer
(Print or type title of person signing)
v
SignecLand sworn to before me on (date) July 11. 2016
at / N.Y„ / County, N Y (state).
Notary Public.
Commission expires: fy///
Page 12 of 13
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes L>^No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ] No E^Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
CM Holdings LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
|^a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: Siebert Brandford Shank & Co., L.L.C.
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 454 Soledad, Suite 300
San Antonio, TX 7B20S
Telephone: 210-228-9681 Fax: 210-228-9906 Email: hcisneros@sbsco.com ,
Name of contact person: Henry Cisneros .
Federal Employer Identification No. (if you have one): '. i
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds :
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION If -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Par [ ] Person
[ ] Publicly registered business corporation [ ] Privately held business corporation [ ] Sole proprietorship [ ] General partnership [ ] Limited partnership [] Trust
|Vf Limited liability company
[ ] Limited liability partnership
[ ] Joint venture
[ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
f ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Texas
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
"^Yes [JNo []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Henry Cisneros Chairman
Victor Miramontes .. Vice Chairman
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Henry Cisneros 454 Soledad, Suite 300, San Antonio TX 78205 55%
Victor Miramontes 454 Soledad, Suite 300, San Antonio TX 78205 35%
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[JYes |j/No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
N/A
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business retained or anticipated Address to be retained)
Relationship to Disclosing Party Fees (indicate whether
(subcontractor, attorney, paid or estimated.) NOTE:
lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
-yf Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
A. COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] No person directly or indirectly owns 10% or more of the Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[] Yes
B. FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance),
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N7A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
]vfis [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
N/A
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes frfNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if .necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[]Ycs [JNo If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ J No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ J Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Bthtcs , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F. 1. The Disclosing Party is not delinquent in the payment of any tax. administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
CM Holdings. LLC
(Print or type name of Disclosing Party)
By:_
. Henry Cisneros
(Print or type name of person signing)
Chairman of the Executive Committee (Print or type title of person signing)
Signed and sworn to before me on (date)
at ^XdY County, TMrfjj £ (state).
HOUY J. THOMAN Notary Public, state o( T»xa» My Commission Explroa Oclob«r 02, 2018
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CITV OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Parly or any "Applicable Party" or any Spouse or Domestic Partner diereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes f^No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [VfNo
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-116 of the Municipal Code?
[ ] Yes [ ] No [VfNot Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Katten Muchin Rosenman LLP
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is: 1. | / | the Applicant OR
2.1 I a legal entity holding a direct or indirect interest in the Applicant. State the legal name ofthe
Applicant in which the Disclosing Party holds an interest:
OR
3.| | a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
525 W. Monroe Street
B. Business address of the Disclosing Party:
Chicago/Illinois 60661
(312)902-5200 (312)902-1061 . N/A
C. Telephone: Fax: Email:
Allan D. Wood
D. Name of contact person:
E. Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
Chicago O'Hare General Airport Senior Lien Revenue Bonds, Series 2016
Comptroller's Office
Which City agency or department is requesting this EDS-*
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party: Person
Publicly registered business corporation Privately held business corporation Sole proprietorship General partnership Limited partnership Trust
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
| |Yes | |no
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Illinois
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
| |Yes | |No [/]n/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title See attached Exhibit A.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
None
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
? Yes [/
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business'address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
None
(Add sheets if necessary)
|y^| Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
QYes | |No [/ No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
?Yes | |No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: IfArticle I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if" the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them "in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
• any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
PageS of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N.A.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified'to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
?
1. The Disclosing Party certifies that the Disclosing Party (check one) is not
is
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
2. If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
1. In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
? Yes f/lNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[~]Yes | |No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
I I 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A. 1. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
is the Disclosing Party the Applicant?
| |Yes | [No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
Q]Yes | | No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
Q]Yes | |No
Have you participated in any previous contracts or subcontracts subject to the
opportunity clause?
Yes | |No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII-- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public .on its Internet site and/or.upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Katten Muchin Rosenman LLP ' (Print or type name of Disclosing Party)
Bv: ^J/^y
(Sign here)
Allan D. Wood
(Print or type name of person signing) Chief Operating Officer
(Print or type title of person signing)
Signed and sworn to before me on (date) _J_
at £YHK County, H I (state).
A^dM , Of- {^^^Q^ Notary Public.
Commission expires: 8^/2> J .
"OFFICIAL SEAL" Keith A. Forrest m Notary Public, State of Illinois
My Commission Expires August 03,28» ! |
in.T_T-T.-i- ' ** ' ' ''" n—***1'
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
1. Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal
Code?
/ No
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
¦J Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
KATTEN MUCHIN ROSENMAN LLP MARCH 31, 2016 PARTNER LISTING
PARTNER
STREET ADDRESS
PERCENT OF OWNERSHIP
MEREDITH MARTIN ADDY KRISTIN J. ACHTERHOF SETH M. AIGNER CLAUDIA H. ALLEN DAVID M. ALLEN JANET M. ANGSTADT D. STEPHEN ANTION BRIAN F. ANTWEIL FRANK E. ARADO KAREN ARTZ ASH CHRISTOPHER S. ATKINSON S. WARD ATTERBURY MANCHITAU YEUNG NOAH R. BALCH SHELDON I. BANOFF, P.C. CRAIG A. BARBAROSH PAIGE E. BARR ANGELA L. BATTERSON RICHARD P. BAUER DIANE E. BELL STEPHEN P. BENSON KARIN H. BERG RUSSELL M. BLACK DAVID C BOHAN CATHLEEN A. BOOTH DUSTIN P. BRANCH HENRY BREGSTEIN DAVID A. BRENNAND SHANNON S. BROOME MATTHEW S. BROWN ALAN J. BRUDNER DAVID J. BRYANT CYNTHIA L. BURCH CHRISTINA B. BURGESS JAMES J. CALDER MICHAEL R. CALLAHAN CLAUDIA CALLAWAY DAWN M. CANTY NEIL V. CARBONE JAN HARRIS CATE JANE M. CAVANAUGH CHARLES CHEFJEC BONNIE L CHMIL LILY N. CHINN NADIRA CLARKE STEVE COCHRAN DAVID P. COHEN WENDY E. COHEN HOWARD E. COTTON DAVID A. CRICHLOW TANYA L. CURTIS BRET J. DANOW JILL E. DARROW RONNI G. DAVIDOWITZ W. KENNETH DAVIS, JR. ANDREW J. DEMKO CHRISTOPHER J. Dl ANGELO DAVID Y. DICKSTEIN GREGORY C. DILLARD KAREN B. DINE MICHAEL J. DIVER DAVID R. DLUGIE JOHN W. DOMBY GLEN DONATH MICHAEL A. DORFMAN WILLIAM J DORSEY JEFFREY L. ELEGANT WHITNEY C. ELLERMAN
525 W MONROE ST. 1900 CHICAGO IL 60661 1.4471%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W.MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.6150%
1301 McKINNEY ST. 3000 HOUSTON TX 77010 0.5789%
550 S. TRYON ST. 2900 CHARLOTTE NC 28202 0.3618%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.7959%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
575 MADISON AVE 1100 NEW YORK NY 10022 0 7959%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
100 SPECTRUM CENTER DR. 1050 IRVINE CA 92618 1.2301%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.4884%
2900 K ST N.W. 200 WASHINGTON DC 20007 0.4703%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
550 S. TRYON ST. 2900 CHARLOTTE NC 28202 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.5065%
525 W.-MONROE ST. 1900 CHICAGO IL 60661 0.0000%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 1.3024%
525 W.MONROE ST. 1900 CHICAGO IL 60661 0.0000%
1999 HARRISON ST. 1800 OAKLAND CA 94612 0.4884%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.3256%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.4703%
525 W. MONROE ST. 1900 CHICAGO IL 60661 1.1577%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.6874%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.5246%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
2900 K ST., N.W. 200 WASHINGTON DC 20007 0.7959%
525 W.MONROE ST. 1900 CHICAGO IL, 60661 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
515 S. FLOWER ST. 1000 LOS ANGELES CA 90071 0.5789%
2900 K ST., N.W. 200 WASHINGTON DC 20007 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.6150%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
1999 HARRISON ST. 1800 OAKLAND CA 94612 0.3437%
2900 K ST., N.W. 200 WASHINGTON DC 20007 0.3618%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.3256%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.4341%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.4341%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.5789%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.5065%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.5065%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.5969%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.3980%
2029 CENTURY PARK EAST 2600 LOS ANGELES CA 90067 0.0000%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.6331%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
1301 McKINNEY ST. 3000 HOUSTON TX 77010 0.6512%
575 MADISON AVE. 1100 NEW YORK NY 10022 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.4703%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.8683%
550 S. TRYON ST. 2900 CHARLOTTE NC 28202 0.7236%
2900 K ST., N.W. 200 WASHINGTON DC 20007 0.3618%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.0000%
525 W. MONROE ST. 1900 CHICAGO IL 60661 0.4522%
2900 K ST., N.W. 200 WASHINGTON DC 20007 0.5789%
K ATT EN MUCHIN ROSENMAN LLP MARCH 31, 2016 PARTNER LISTING
PARTNER
STREET ADDRESS
PERCENT OF OWNERSHIP
ADAM J. ENGEL DANIEL M. ENTSMINGER STEPHEN B. ESKO VALENTINA FAMPARSKA MARK L FARLEY, P C. RICHARD L FARLEY JONATHAN J. FAUST ABBY L T. FEINMAN LEONARD A. FERBER WENDY L FIELDS MARK I. FISHER CHRISTINE N. FITZGERALD KEVIN M. FOLEY WILLIAM B FREEMAN JAY W. FREIBERG JEFF J. FRIEDMAN RENEE M. FRIEDMAN ROGER P. FUREY BROOKS T. GILES D. LOUIS GLASER II DAVID L. GOLDBERG DARIUS J. GOLDMAN DORON S. GOLDSTEIN TERANCE A. GONSALVES MICHAEL S. GORDON ERIC T. GORTNER JULIE L. GOTTSHALL JACK P. GOVERNALE TERRY GREEN LEWIS GREENBAUM RUSSELL E. GREENBLATT, P.C. SUSAN A. GRODE MARK R. GROSSMANN ARTHUR W. HAHN ZVI HAHN
DAVID HALBERSTADTER' MEGAN HARDIMAN J. HAYDEN HARRELL PATRICK C. HARRIGAN ANNA-LIZA B. HARRIS CHARLES HARRIS MICHAEL O. HARTZ CHRISTINA E. HASSAN THOMAS E. HEALEY TRAVIS M. HEIDORF KARL R. HEISLER NOAH S. HELLER TED S. HELWIG CHRISTIAN B. HENNION STEWART B. HERMAN MATTHEW M. HINDERMAN CHRISTOPHER HITCHINS MICHAEL S. HOBEL JANET GOELZ HOFFMAN DAVID S. HOFFMANN RICARDO J. HOLLINGSWORTH GARY W. HOWELL JOHN P. HUANG BRIAN D. HUBEN DANIEL S. HUFFENUS CAROLYN JACKSON KENNETH M. JACOBSON MICHAEL A. JACOBSON ANDREW L. J AGO DA CAROL A. JOHNSTON KATHY P. JOSEPHSON JOYCE S. JUN ALVIN KATZ
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
1301 McKINNEY ST. 3000
550 S. TRYON ST. 2900
575 MADISON AVE 1100
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
575 MADISON AVE 1100
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
515 S. FLOWER ST. 1000
575 MADISON AVE. 1100
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
575 MADISON AVE. 1100
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
550 S. TRYON ST. 2900
525 W. MONROE ST. 1900
2900 K ST N.W. 200
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2900 K ST N.W. 200
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
550 S. TRYON ST. 2900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
525 W. MONROE ST 1900
LOS ANGELES
CHICAGO
NEW YORK
CHICAGO
HOUSTON
CHARLOTTE
NEW YORK
LOS ANGELES
CHICAGO
WASHINGTON
NEW YORK
LOS ANGELES
CHICAGO
LOS ANGELES
NEW YORK
NEW YORK
CHICAGO
WASHINGTON
CHICAGO
CHICAGO
NEW YORK
NEW YORK
NEW YORK
CHICAGO
NEW YORK
CHICAGO
CHICAGO
NEW YORK
CHICAGO
CHICAGO
CHICAGO
LOS ANGELES
CHICAGO
CHICAGO
NEW YORK
LOS ANGELES
CHICAGO
CHARLOTTE
CHICAGO
WASHINGTON
CHICAGO
CHICAGO
WASHINGTON
WASHINGTON
CHICAGO
WASHINGTON
NEW YORK
CHICAGO
CHICAGO
NEW YORK
CHICAGO
CHICAGO
LOS ANGELES
CHICAGO
WASHINGTON
NEW YORK
CHICAGO
CHICAGO
LOS ANGELES
CHARLOTTE
CHICAGO
CHICAGO
CHICAGO
NEW YORK
LOS ANGELES
CHICAGO
LOS ANGELES
CHICAGO
CA
IL
NY
IL
TX
NC
NY
CA
IL
DC
NY
CA
IL
CA
NY
NY
IL
DC
IL
IL
NY
NY
NY
IL
NY
IL
IL
NY
IL
IL
IL
CA
IL
IL
NY
CA
IL
NC
IL
DC
IL
IL
DC
DC
IL
DC
NY
IL
IL
NY
IL
IL
CA
IL
DC
NY
IL
IL
CA
NC
IL
IL
IL
NY
CA
IL
CA
IL
90067 60661 10022 60661 77010 28202 10022 90067 60661 20007 10022 90067 60661 90071 10022 10022 60661 20007 60661 60661 10022 10022 10022 60661 10022 60661 60661 10022 60661 60661 60661 90067 60661 60661 10022 90067 60661 28202 60661 20007 60661 60661 20007 20007 60661 20007 10022 60661 60661 10022 60661 60661 90067 60661 20007 10022 60661 60661 90067 28202 60661 60661 60661 10022 90067 60661 90067 60661
0.0000% 0.0000% 0.0000% 0.0000% 1 5918% 0.3618% 0.0000% 0 3980% 0.0000% 0.3437% 0.5789% 0.0000% 0.0000% 0.8683% 0.0000% 0'.0000% 0.3618% 0.7959% 0.0000% 0.5789% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.3618% 0.0000% . 0.4703% 0.0000% 0.5065% 0.0000% 0.6150% 1.3748% 1.5918% 0.0000% 0.3256% 0.0000% 0.3618% 0.0000% 0.5789% 0.8683% 0.8683% 0.0000% 0.0000% 0.0000% 0.0000% 0.8683% 0.5065% 0.0000% 0.5427% 0.0000% 0.0000% 0.6874% 0.1737% 0.0000% 0.4341% 0.0000% 0.0000% 0.0000% 0.8683% 0.0000% 0.4160% 0.6874% 0.7959% 0.4341% 0.3618% 0.4341% 0.6874%
K ATT EN MUCHIN ROSENMAN LLP MARCH 31, 2016 PARTNER LISTING
PARTNER
STREET ADDRESS
PERCENT OF OWNERSHIP
AHARON S. KAYE JOHN P. KEISERMAN BRIAN D. KELLEY CHRISTIAN T. KEMNITZ THOMAS N. KIEHNHOFF BRETT A. KIFFERSTEIN ADAM R. KLEIN ANDREW G. KLEVORN TYEJ KLOOSTER CHARLES H. KNAUSS STACEY D. McKEE KNIGHT NICOLE L. KOBRINE GREGORY S. KORMAN BRUCE E. KOSUB DAVID S. KRAVITZ JOHN KROL CRAIG M. KUCHII ERIC A. KUWANA DEREK F. LADGENSKI NATHANIEL LALONE THOMAS F. LAMPRECHT DAVID H. LANDAU DANIELLA D. LANDERS MELISSA F. LANGSDORF RYAN J. LARSEN LOR IE SOARES LAZARUS NOAH J. LEICHTLING LAWRENCE D. LEVIN AUSTIN S. LILLING REBECCA K. LINDAHL TIMOTHY G. LITTLE MICHAEL J. LOHNES KENNETH G. LORE TIMOTHY J. LYNES SCOTT E. LYONS DONALD J. MACBEAN SETH R. MADORSKY BARRETT C.MALLOS FLOYD A. MANDELL, P.C. JONATHAN L. MARKS RICHARD DMARSHALL LAURA KEIDAN MARTIN MICHAEL S. McBRIDE MARA A. GLASER McCAHAN SANJAY MEHTA SETH M. MESSNER GLENN S. MILLER KENNETH W. MILLER LESLIE D. MINIER ZIA F. MODAB8ER LISA-MARIE C. MONSANTO S. SCOTT MORRISON JOHN D. MUIR, JR. CHRISTINE M. MURPHY MICHAEL P. MURPHY KAREN M. NELSON PHILIP A. NEMECEK KRISTIN A. NICHOLS MATTHEW W. OLSEN KENNETH J. OTTAVIANO ANTHONY L. PACCIONE MATTHEW D. PARROTT TIMOTHY J. PATENODE JEFFREY R. PATT BENJAMIN H. PATTON JOSEPH PAYNE ROSS PAZZOL DANIEL H. PETERS
525 W MONROE ST. 1900
575 MADISON AVE. 1100
550 S. TRYON ST. 2900
525 W. MONROE ST. 1900
1301 McKINNEY ST. 3000
525 W. MONROE ST. 1900
525 W MONROE ST. 1900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
2029 CENTURY PARK EAST 2600
2900KSTNW. 200
2029 CENTURY PARK EAST 2600
545 E. JOHN CARPENTER FWY. 300
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
1301 McKINNEY ST. 3000
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
2029 CENTURY PARK EAST 2600
575 MADISON AVE. 1100
525 W MONROE ST. 1900
575 MADISON AVE. 1100
550 S. TRYON ST. 2900
575 MADISON AVE. 1100
525 W. MONROE ST 1900
2900 K ST., N.W. 200
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
550 S. TRYON ST. 2900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
2900 K ST., N.W. 200
2900 K ST., N.W. 200
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
2900 K ST., N.W. 200
2900 K ST., N.W. 200
2900 K ST., N.W. 200
575 MADISON AVE. 1100
2900 K ST., N.W. 200
550 S. TRYON ST. 2900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
1301 McKINNEY ST. 3000
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
CHICAGO
NEW YORK
CHARLOTTE
CHICAGO
HOUSTON
CHICAGO
CHICAGO
CHICAGO
CHICAGO
WASHINGTON
LOS ANGELES
WASHINGTON
LOS ANGELES
IRVING
NEW YORK
CHICAGO
CHICAGO
WASHINGTON
CHICAGO
CHICAGO
CHICAGO
NEW YORK
HOUSTON
CHICAGO
LOS ANGELES
LOS ANGELES
NEW YORK
CHICAGO
NEW YORK
CHARLOTTE
NEW YORK
CHICAGO
WASHINGTON
WASHINGTON
CHICAGO
NEW YORK
CHICAGO
CHARLOTTE
CHICAGO
CHICAGO
NEW YORK
CHICAGO
NEW YORK
WASHINGTON
CHICAGO
WASHINGTON
WASHINGTON
CHICAGO
CHICAGO
LOS ANGELES
WASHINGTON
WASHINGTON
WASHINGTON
NEW YORK
WASHINGTON
CHARLOTTE
NEW YORK
CHICAGO
NEW YORK
CHICAGO
NEW YORK
NEW YORK
CHICAGO
CHICAGO
HOUSTON
CHICAGO
CHICAGO
LOS ANGELES
IL
NY
NC
IL
TX
IL
IL
IL
IL
DC
CA
DC
CA
TX
NY
IL
IL.
DC
IL
IL
IL
NY
TX
IL
CA
CA
NY
IL
NY
NC
NY
IL
DC
DC
IL
NY
IL
NC
IL
IL
NY
IL
NY
DC
IL
DC
DC
IL
IL
CA
DC
DC
DC
NY
DC
NC
NY
IL
NY
IL
NY
NY
IL
IL
TX
IL
IL
CA
60661 10022 28202 60661 77010 60661 60661 60661 60661 20007 90067 20007 90067 75062 10022 60661 60661 20007 60661 60661 60661 10022 77010 60661 90067 90067 10022 60661 10022 28202 10022 60661 20007 20007 60661 10022 60661 28202 60661 60661 10022 60661 10022 20007 60661 20007 20007 60661 60661 90067 20007 20007 20007 10022 20007 28202 10022 60661 10022 60661 10022 10022 60661 60661 77010 60661 60661 90067
0.0000% 0.4341% 0.0000% 0.5065% 0.0000% 0 0000% 0.7959% 0.8683% 0 0000% 1.0130% 0.5065% 0.0000% 0.3980% 0.6150% 0.0000% 0.4884% 0.0000% 0.6512% 0.8683% 0.0000% 0.0000% 0.3256% 0.4703% 0.0000% 0.0000% 0.5246% 0.5427% 0.7959% 0.0000% 0.0000% 0.6150% 0.0000% 1.1577% 0.8683% 0.4884% 0.0000% 0.5427% 0.0000% 0.7236% 0.4703% 0.6150% 0.6874% 0.0000% 0.0000% 0.0000% 0.0000% 0.6150% 0.8683%
0:0000%
0.4522% 0.0000% 1.0130% 0.0000% 0.0000% 0.5065% 0.0000% 0.0000% 0.0000% 0.0000% 1.0853% 0.4884% 0.4703% 0.3799% 0.4522% 0.0000% 0.0000% 0.0000% 0.0000%
KATTEN MUCHIN ROSENMAN LLP MARCH 31, 2016 PARTNER LISTING
PARTNER
GREGORY P.L. PIERCE DANIEL J. POLATSEK DEVAN H, POPAT BRIAN J. PORONSKY ELLIOT PRESS JOHN W. REALE STANFORD A. RENAS SCOTT A. RESNIK MARK J. REYES NANCY J RICH STUART M. RICHTER PETER J. RIEBLING KRISTOPHER J. RING NEIL ROBSON JOHN ROSANS MICHAEL M. ROSENSAFT YONATON M. ROSENZWEIG JOSHUAS RUBENSTEIN HOWARD R. RUBIN SAUL E. RUDO MARTIN Q. RUHAAK JENNIFER C. RYAN FRED M. SANTO JEFFREY S.SCHARFF HOWARD M. SCHICKLER CRAIG M. SCULLY VINCENT A.F. SERGI, P.C. CHRISTOPHER T. SHANNON DANIEL P. SHAPIRO NATHANIELS. SHAPO GLORIA C. FRANKE SHAW NEIL G. SHELTON STUART P. SHULRUFF PETER A. SfDDIQUI JOHN P. SIEGER ROSS O. SILVERMAN MARK C. SIMON ANN MARIE SINK MARTIN I. SIROKA KIMBERLY T. SMITH PATRICK M. SMITH ROBERT T. SMITH BRIAN SODIKOFF GILM. SOFFER STEVEN P. SOLOW DANIEL C. SPURLOCK DAVID J. STAGMAN JOELW. STERNMAN BONITA L. STONE PETER SUGDEN MARCIA W. SULLIVAN, P.C. IRA J. SWIDLER JAN TAMULEWICZ GAIL MIGDAL TITLE MELANIE TOMANOV JOSEPH P. TOPOLSKI PHILIP J. TORTORICH MARC M. TRACT JAMES D. VAN DE GRAAFF THOMAS L. VAN WYNGARDEN BRUCE G. VANYO JEAN VARAK MICHAEL I. VERDE SCOTT M. VETRI GAVIN VOLLANS
CHRISTINA L. COSTLEY VOROBIOV ZACHARY D. WAGMAN MILTON S. WAKSCHLAG
STREET ADDRESS
525 W. MONROE ST. 525 W. MONROE ST. 525 W MONROE ST. 525 W MONROE ST. 575 MADISON AVE. 525 W. MONROE ST. 575 MADISON AVE. 575 MADISON AVE. 525 W. MONROE ST. 525 W. MONROE ST. 2029 CENTURY PARK 2900 K ST., N.W. 2029 CENTURY PARK 525 W. MONROE ST. 2900 K ST., N.W. 575 MADISON AVE. 2029 CENTURY PARK 575 MADISON AVE. 2900 K ST., N.W. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 575 MADISON AVE. 575 MADISON AVE. 575 MADISON AVE. 575 MADISON AVE. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 2029 CENTURY PARK 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 575 MADISON AVE. 525 W. MONROE ST. 525 W. MONROE ST. 2900 K ST., N.W. 525 W. MONROE ST. 525 W. MONROE ST. 2900 K ST., N.W. 2900 K ST., N.W. 525 W. MONROE ST. 575 MADISON AVE. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 525 W. MONROE ST. 575 MADISON AVE. 2029 CENTURY PARK 2029 CENTURY PARK 575 MADISON AVE. 525 W. MONROE ST. 575 MADISON AVE. 525 W. MONROE ST. 2029 CENTURY PARK 2029 CENTURY PARK 525 W. MONROE ST. 575 MADISON AVE. 575 MADISON AVE. 525 W. MONROE ST. 2029 CENTURY PARK 525 W. MONROE ST. 525 W. MONROE ST.
EAST EAST
EAST
EAST
EAST EAST
EAST EAST
EAST
SUITE
1900 1900 1900 1900 1100 1900 1100 1100 1900 1900 2600
200 2600 1900
200 1100 2600 1100
200 1900 1900 1900 1100 1100 1100 1100 1900 1900 1900 1900 2600 1900 1900 1900 1900 1900 1900 1900 1100 1900 1900
200 1900 1900
200
200 1900 1100 1900 1900 1900 1900 1100 2600 2600 1100 1900 1100 1900 2600 2600 1900 1100 1100 1900 2600 1900 1900
CITY
CHICAGO
CHICAGO
CHICAGO
CHICAGO
NEW YORK
CHICAGO
NEW YORK
NEW YORK
CHICAGO
CHICAGO
LOS ANGELES
WASHINGTON
LOS ANGELES
CHICAGO
WASHINGTON
NEW YORK
LOS ANGELES
NEW YORK
WASHINGTON
CHICAGO
CHICAGO
CHICAGO
NEW YORK
NEW YORK
NEW YORK
NEW YORK
CHICAGO
CHICAGO
CHICAGO
CHICAGO
LOS ANGELES
CHICAGO
CHICAGO
CHICAGO
CHICAGO
CHICAGO
CHICAGO
CHICAGO
NEW YORK
CHICAGO
CHICAGO
WASHINGTON
CHICAGO
CHICAGO
WASHINGTON
WASHINGTON
CHICAGO
NEW YORK
CHICAGO
CHICAGO
CHICAGO
CHICAGO
NEW YORK
LOS ANGELES
LOS ANGELES
NEW YORK
CHICAGO
NEW YORK
CHICAGO
LOS ANGELES
LOS ANGELES
CHICAGO
NEW YORK
NEW YORK
CHICAGO
LOS ANGELES
CHICAGO
CHICAGO
IL
IL
IL'
IL
NY
IL
NY
NY
IL
IL
CA
DC
CA
IL
DC
NY
CA
NY
DC
IL
IL
IL
NY
NY
NY
NY
IL
IL
IL
IL
CA
IL
IL
IL
IL
IL
IL
IL
NY
IL
IL
DC
IL
IL
DC
DC
IL
NY
IL
IL
IL
IL
NY
CA
CA
NY
IL
NY
IL
CA
CA
IL
NY
NY
IL
CA
IL
IL
STATE ZIP CODE
60661 60661 60661 60661 10022 60661 10022 10022 60661 60661 90067 20007 90067 60661 20007 10022 90067 10022 20007 60661 60661 60661 10022 10022 10022 10022 60661 60661 60661 60661 90067 60661 60661 60661 60661 60661 60661 60661 10022 60661 60661 20007 60661 60661 20007 20007 60661 10022 60661 60661 60661 60661 10022 90067 90067 10022 60661 10022 60661 90067 90067 60661 10022 10022 60661 90067 60661 60661
PERCENT OF OWNERSHIP
0.3437% 0.0000% 0.0000% 0.0000% 0.5969% 0.0000% 0.6512% 0.4522% 0.0000% 0.0000% 0.9406% 0 0000% 0.4341% 0.0000% 0.0000% 0.0000% 0.0000% 1.4471% 0.5789% 1.3748% 0.0000% 0 0000% 1.3748% 0.0000% 0.6331% 0.3980% 1.0130% 0.0000% 0.4522% 0.7959% 0.0000% 0.0000% 1.4471% 0.0000% 0.8683% 1.5918% 0.4884% 0.0000% 0.8683% 0.5427% 0.0000% 0.0000% 0.0000% 0.8683% 1.4471% 0.0000% 0.0000% 0.3618% 0.3618% 0.0000% 0.4160% 0.0000% 0.0000% 0.1737% 0.0000% 0.5608% 0.0000% 0.4703% 0.6150% 0.0000% 1.0853% 0.0000% 0.5427% 0.4884% 0.0000% 0.0000% 0.7959% 0.3256%
KATTEN MUCHIN ROSENMAN LLP MARCH 31, 2016 PARTNER LISTING
PARTNER
STREET ADDRESS
PERCENT OF OWNERSHIP
PHILIP WATKINS NEIL H. WEINBERG WALTER S. WEINBERG JOELR. WEINER JONATHAN D. WEINER ROBERT WEISS JEFFREY M. WERTHAN BENZION J. WESTREICH JOSEPH V. WILLEY JENNIFER I. WOLFE MARK D. WOOD DANNY G. WORRELL FENG XUE ALLISON C. YACKER RICHARD H. ZELICHOV SHELDON T. ZENNER LANCE A. ZINMAN KRASSIMIRA ZOURKOVA
525 W MONROE ST. 1900
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
575 MADISON AVE 1100
575 MADISON AVE. 1100
2900 K ST., N.W. 200
2029 CENTURY PARK EAST 2600
575 MADISON AVE. 1100
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
111 CONGESS AVE. 400
525 W. MONROE ST. 1900
575 MADISON AVE. 1100
2029 CENTURY PARK EAST 2600
525 W. MONROE ST. 1900
525 W. MONROE ST. 1900
2029 CENTURY PARK EAST 2600
CHICAGO CHICAGO CHICAGO LOS ANGELES NEW YORK NEW YORK WASHINGTON LOS ANGELES NEW YORK CHICAGO CHICAGO AUSTIN CHICAGO NEW YORK LOS ANGELES CHICAGO CHICAGO LOS ANGELES
IL
IL
IL
CA
NY
NY
DC
CA
NY
IL
IL
TX
IL
NY
CA
IL
IL
CA
60661 60661 60661 90067 10022 10022 20007 90067 10022 60661 60661 78701 60661 10022 90067 60661 60661 90067
0.0000% 0.0000% 0.5789% 0.0000% 0.0000% 0.0000% 0.4160% 0.5065% 0.7959% 0.4884% 0.5065% 0 0000% 0.5427% 0.3618% 0.0000% 1.0853% 1.4471% 0.0000%
100.0000%
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Neal & Leroy, LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[yj the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 230 North LaSalle. Suite 2600
Chicago. Illinois 60602
Telephone: (312) 641-7144 Fax: (312) 641-5137 Email: lneal@nealandleroy.com
Name of contact person: Langdon D. Neal
Federal Employer Identification No. (if you have one):\. \
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? Law Department
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
Person |YJ
Publicly registered business corporation [ ]
Privately held business corporation [ ]
Sole proprietorship [ ]
General partnership (Is
Limited partnership
Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Illinois :
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes []No [/J N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Langdon D. Neal Managing Member
Jeanette Sublet! Managing Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including-ownership)4n-excess-0f-7:5%-©f-the Diselosing Party-.—Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Langdon D. Neal 120 N. LaSalle Street. Suite 2600. Chicago. IL 60602 50%
Jeanette Sublett 120 N. LaSalle Street. Suite 2600. Chicago. IL 60602 50%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [y] No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
N/A
(Add sheets if necessary)
[yj Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [X] No [ ] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N/A
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, ofthe City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please.also list the name ofthe City recipient.
_N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [y] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter
2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
N/A
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [X] No
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or. attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[]Yes []No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements ,to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Langdon D. Neal
(Print or type name of person signing)
Managing Member and Principal
(Print or type title of person signing)
Signed and sworn to before me on (date) July 1 \~**\ 2016
at Cook County, Illinois (state).
Notary Public.
Commission expires:_
OFFICIAL SEAL UUJANLSHEPHARD
NOTARY PUBUC - STATE OF ILLINOIS MY COMMISSION V^VQVWto
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [X] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
N/A
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entiry which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entiry which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [x] Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
N/A
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[yj'ihe Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: -2-^3 ^Qp^^ U)<3^cJ^j6T ^PlV^j
Telephone: ? )2 - 2%£^£pax: Z ^^Emsiil: fCxUr* tyX Y^CJrmk Qtwrn. \f
ICMf ) 7 J J ~ 3 J
Name of contact persop_^^Q wAtfl^ cS > v ICJSMlOcJ^K
E. Federal Employer Identification No. (if you have one):
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
Which City agency or department is requesting this EDS?^J^^]^fr^t^^/-^^ /\<7>(uT^j
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
Limited liability company {] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
1 \v\.o\ t
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [ ] No l^/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code'1), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
v' ^ ^, g was ^
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes Is/No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[¦^clieck here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
A. COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] No person directly or indirectly owns 10% or more of the Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
B. FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
Z_—b/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any giftiisted below, please also list the name of the City recipient.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one) [ ] is f^n^not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter? /
[ ] Yes [>yNo
NOTE: If you checked "Yes" to Item D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.L, provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
)/ 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the'slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are. material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided irfthis EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [\/No
[ ] Yes [ ] No [ \] Not Applicable
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Chapman and Cutler LLP
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[XJ the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
• Applicant in which the Disclosing Party holds an interest:
OR
[ ] a legal entity with a right of control (see Section ILB.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address of the Disclosing Party: 111 West Monroe Street -
Chicago, Illinois 60603
Telephone: (312) 845-3426 Fax: (312) 516-3926 Email: white@chapman.com
Name of contact person: Lawrence E. White
Federal Employer Identification No. (if you have one): _j ¦
Brief description of contract, transaction or other undertaking (referred to below as tlie "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
Special Pension Disclosure Counsel, O'Hare PFC Revenue Bonds
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # '¦ and Contract # '_.
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
Person [ ]
Publicly registered business corporation $Q
Privately held business corporation [ ]
Sole proprietorship [ ]
General partnership (Is
Limited partnership
Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Illinois
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Timothy P. Mohan Chief Executive Partner
William M. Libit Chief Operating Partner
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe M unicipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Not applicable - No partner's interest in the firm exceeds 7.5%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes M No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person of entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[X Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [X] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[]Yes []No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should - consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. 1. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government. v
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other.Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any 1 other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
i
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
None ,;
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts .that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything^
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less tham$20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient.
None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [% is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D,
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes W No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale? ,
[ ] Yes [ ] No
If you checked "Yes" to Item D.L, provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited'financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect £o the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A. I. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.) .
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements? '
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicaRQ.orR/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet-site and/or upon request. Some or all ofthe information provided on this EDS and any .attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS. j
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Parly is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain-from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Chapman and Cutler LLP
(Print or type name of Disclosing Party)
(Sign here)
Lawrence E. White
(Print or type name of person signing)
Partner and Authorized Signatory (Print or type title of person signing)
Signed and sworn to before me on (date) July 12, 2016
at Cook County, Illinois (state).
Commission expires: February 2, 2018
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section ILB.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof Currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [Xj No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the.Municipal Code?
[ ]Yes [XJNo
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes J [ ]No [ X] Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS., Include d/b/a/ if applicable:
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
1. the Applicant
OR
2. [ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address ofthe Disclosing Party:
Telephone: ZlL ffi-HtfO Fax: %/2-/?J*-J7/fc Email: k'C#f/u/V- @ •fyHf/X-JktC6^
Name of contact person: /^£i>\ C/l£ - ,
Federal Employer Identification No. (if you have one): "
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
Which City agency or department is requesting this EDS? fy^Afl~/U\C>*,\~~f O'f* f^AanciZ.
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # , and Contract # •
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person j^f Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[ ] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
jrU*jfd/lr
For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes p^No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business" Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes fyrjf No [ ] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements. *
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City ofChicago (if none, indicate with "N/A" or "none").
/0a*&
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
-fji
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is ^is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes ^No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address i Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
^( 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[]Yes []No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII -- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
fr&v^+JkxatAfxkt. LLC
(Print or type name of Disclosing Party)
By:
(Sien here) /
(Sign here)
(Print or type name of person signing)
(Print or type title of person signing)
ff'tsO/«. / title of
Signed and sworn to before me on (date) Julu /), 2j0 /Q>, at kJtUjyortf- County, WtUO VprK. (state).
SANDY GANTENOR Notary Public, State of New Vor:; NO.01AN6267070 Qualified In Rockland County Conmlgslon Expires August 13,201 u 1:
J^_^ft>M^y 0_Ajrt^T7AJtT\ Notary Public.
>ires:
Commission expires:
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [^QNo
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of lhc Disclosing Party submitting this EDS. Include d/b/a/ if applicable; Columbia Capital Management, LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
(xj the Applicant
OR
[] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) Slate the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address ofthe Disclosing Party: J50NJWichi^a^
Chicago, IL 60601
Telephone: (312) 499-9200 Fax: (312) 262-4562 Email: cshea@columbiacapital.com
Name oi* contact person: Courtney Shea
Federal Employer Identification No. (if you have one): \i_
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the slate (or foreign country) of incorporation or organization, if applicable: Missouri
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business* in the State of Illinois as a foreign entity?
|X] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors ofthe entity. NOTE: For not-for-profit corporations, also lisi below all members, if any, which arc legal enlities. If there arc no such members, write "no members." For trusts, estates or other similar entities, list below the legal titlcholdcr(s).
If lhc entity is a general partnership, limited partnership, limilcd liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
J^ennis LJoyd President
Jeff White Pjmcip-al
Cr^urtnexShea Principal
2. Please provide lhc following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
inlcrcsi of a member or manager in a limilcd liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, slate "None." NOTE: Pursuant lo Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
J3ennis Uoyd 63_30_Lamarj4ver^^^ 40%_
Je^Whjte 6330 Lamar Avenue, Suite 200, Overland Park, KS 66202 40%_
ODuj1ney_Shea L^N^JVhchigan_^ 20%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has lhc Disclosing Parly had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the dale this EDS is signed?
[]Ycs |yj No
If yes, please identify below the namc(s) of such City elected official(s) and describe such rclatiohship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Parly musl disclose the name and business ad-drcss ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or enlily whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who arc paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself, "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
ii*lhc Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must cither ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Parly Fees (indicate whether
retained or anticipated Address (subcontractor, atlorncy, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
nol an acceptable response.
(Add sheets if necessary)
[Xl Chock here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities lhat contract with the City must remain in compliance wilh their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Parly been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes W No [] No person directly or indirectly owns 10% or more of the
Disclosing Parly.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is lhc person in compliance with lhat agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant lo Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Parly submitting this EDS is the Applicant arid is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged wilh. or has admitted guill of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (it) the Applicant understands and acknowledges lhat compliance with Article I is a continuing requirement for doing business wilh lhc Cily. NOTE: If Article I applies lo the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
arc not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, stale or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
arc nol presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) wilh committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have nol. within a five-year period preceding the date of this EDS, had one or more public transactions (federal, slate or local) terminated for cause or default; and
c. have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by lhc City or by the federal government, any slate, or any olher unit of local government.
The certifications in subparts 3, 4 and 5 concern:
• lhc Disclosing Parly;
any "Conlraclor" (meaning any conlraclor or subcontractor used by the Disclosing Parly in connection with lhc Matter, including but nol limited lo all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Enlily" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, wilh the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity ofintercsts among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or slate or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, wilh the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Parly, any Contractor or any Affiliated Entity or any other official, ageni or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Parly, any Conlraclor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Parly, nor any Conlraclor, nor any Affiliated Entity of cither the Disclosing Party or any Conlraclor nor any Agents have, during the five years before lhc date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Enlity of a Contractor during the five years before lhc dale of such Contractor's or Affiliated Emily's contract or engagement in connection with the Matter:
bribed or attempted lo bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any stale or local govcrnmcnl in the United States of America, in lhat officer's or employee's official capacity;
agreed or colluded wilh other bidders or prospective bidders, or been a parly to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a mailer of record, bul have nol been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Parly, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unil of slate or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any slate or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither lhc Disclosing Parly nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Parly understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable lo certify to any of the above statements in this Part B (Further Certifications), the Disclosing Parly must explain below:
Page 6 of 13
If the letters "NA," lhc word "None," or no response appears on ihe lines above, it will be conclusively presumed lhat the Disclosing Parly certified to the above statements.
8. To the best of ihe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of ihe Disclosing Parly who were, al any time during the 12-monih period preceding the execution date of this EDS, an employee, or elected or appointed official, of lhc Cily ofChicago (if none, indicate with "N/A" or "none").
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts thai the Disclosing Party has given or caused to be given, at any time during the 12-monih period preceding the execution dale of this EDS, to an employee, or elected or appointed official, ofthe Cily ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in lhc course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As lo any gift listed below, please also list the name ofthe City recipient.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
1 The Disclosing Parly certifies lhat the Disclosing Party (check one)
[ ] is [X| is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
2. If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"Wc arc noi and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. Wc further pledge lhal none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or bece ming an affiliate of a predatory lender may result in lhc loss of the privilege of doing business wilh the City."
T
If the Disclosing Party is unable lo make this pledge because il or any of its affiliates (as defined in Section 2-32-455(b) of lhc Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed thai the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or lerms lhal arc defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance wilh Section 2-156-1 10 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or enlity in lhc Matter?
[ ] Yes pq No
NOTE: If you checked "Yes" lo Ilcm D.L, proceed to Items D.2. and D.3. If you checked "No" to Item D,l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or enlily in lhc purchase of any property lhal (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process al the suit of the City (collectively, "Cily Property Sale"). Compensation for properly laken pursuant to the City's eminent domain power docs not constitute a financial interest within the meaning of this Part D.
Docs the Mailer involve a City Property Sale?
[]Ycs []No
If you checked "Yes" to Ilcm D.L, provide the names and business addresses ofthe Cily officials or employees having such interest and identify ihe nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Parly further certifies lhal no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check cither 1. or 2. below. If lhc Disclosing Party checks 2M the Disclosing Parly must disclose below or in an attachment lo this EDS all information required by paragraph 2 Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Mailer voidable by the Cily.
X _1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during Ihe slavery era (including insurance policies issued lo slaveholders lhat provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies lhal, as a result of conducting the search in step 1 above, lhc
Disclosing Parly has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that lhc following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed io Section VII. For purposes of this Section VI, lax credits allocated by the City and proceeds of debt obligations ofthe City arc not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with rcsbcci io ihe Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under lhc Lobbying Disclosure Aci of 1995 have made lobbying contacts on behalf of the Disclosing Party wilh respect to the Matter.)
2. The Disclosing Party has nol spcnl and will nol expend any federally appropriated funds lo pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt lo influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Parly certifies that cither: (i) it is not an organization described in section 501(c)(4) of lhc Internal Revenue Code of 1986; or (ii) il is an organization described in section
501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will nol engage in "Lobbying Activities":
If the Disclosing Parly is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of lhc Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
1 f the Matter is federally funded, federal regulations require lhc Applicant and all proposed subcontractors lo submit the following information with ihcir bids or in writing at the outscl of negotiations.
Is the Disclosing Party the Applicant?
[JYes [JNo If "Yes," answer the three questions below:
. 1. Have you developed and do you have on file affirmative action programs pursuant to applicable
federal regulations? (Sec 41 CFR Pari 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ J Yes [ ] No
Have you participated in any previous contracts or subcontracts subject lo the equal opportunity clause?
[JYes [JNo
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement. City assistance, or other City action, and arc material inducements to the City's execution of any contract or taking other action with respect lo lhc Matter. The Disclosing Party understands lhal it musi comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line ai www.cilvolchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick Si., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully wilh the applicable ordinances.
If lhc City determines lhat any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the Cily may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Parly's participation in the Mailer and/or declining to allow lhc Disclosing Party lo participate in other transactions with the Cily. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
. D. It is the City's policy to make ihis document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to lhc public on the lnicrncl, in response to a Freedom of Information Act request, or otherwise. By completing and signing ihis EDS, the Disclosing Party waives and releases any possible rights or claims which il may have against the City in connection wilh the public release of information contained in this EDS and also authorizes the City lo verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In lhc event of changes, the Disclosing Party must supplement this EDS up to the lime the Cily takes action on the Mailer. If the Matter is a contract being handled by lhc City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of-Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Parly represents and warrants that:
Page 11 of 13
F. I. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor arc the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, lax or other charge owed to lhc City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, properly taxes or sales taxes.
F.2 If the Disclosing Party is ihe Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors lo use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties Lisi System ("EPLS") maintained by lhc U. S. General Services Administration.
F.3 If lhc Disclosing Party is the Applicant, lhc Disclosing Parly will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor lhal docs not provide such certifications or that the Disclosing Parly has reason lo believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as lo any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, lhc person signing below: (1) warrants lhat he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Parly, and (2) warrants thai all certifications and statements contained in this EDS and Appendix A (if applicable) arc true, accurate and complete as ofthe dale furnished to the City.
Columbia Capital Management, LLC
Dennis Lloyd
(Prim or type name of person signing)
JPreskjent
(Print or lypc title of person signing)
Page 12 of 13
(Print or type name of Disclosing Party)
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-J 54-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected cily official or department head. A "familial relationship" exists if, as of ihe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughlcr-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, 'if the Disclosing Party is a limilcd partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limilcd liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief opcraling officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Docs lhc Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected cily official or department head?
[ ] Yes [X] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which Such person is connected; (3) the name and title ofthe elected cily official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAVV/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership Interest in the Applicant.
1, Pursuantto Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a
building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal
Code?
[ JYes [XjNo
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of
the Applicant identified as a building code scofflaw or problem landlord pursuant to Section
2-92-416 ofthe Municipal Code?
[ JYes [X]No [ J Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS, Include d/b/a/ if applicable: Ricondo & Associates, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is: 1. the Applicant OR
2; [ ] a legal entity, holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [) a legal entity with a right of control (see Section II.B, 1,) State the legal name of the entity in
Which the Disclosing Party holds a right of control;
B. Business address ofthe Disclosing Party: ;2Q N. Clark Street, Suite 1500
Chicago, IL 60602
Telephone: (312) 606-0611 Fax: (312) 606-0706 Email; k davis@riGQndo.com
Name of contact person: Kiiriberly Davis, HR. Manager
Federal Employer Identification No. (if you have one):) . |
F> Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance and Aviation
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following;
Specification # and Contract #
Page 1 of 13
DISCLOSURE OF OWNERSHIP INTERESTS
Party: [] [] [] • [1 (Is
A. NATURE OF THE. DISCLOSING PARTY
I. Indicate the nature of the Disclosing
[ ] Person
[ ] Publicly registered business corporation
P5 Privately held business corporation
[ ] Sole proprietorship
[ ] General partnership
[ ] Limited partnership
[j Trust
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Illinois
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [ 3 No K N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
L List below the full names and titles of all executive officers and all directors of the entity, NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are np such members, write "no members." For trusts, estates or other similar entities, list below the legal titleh,Qlder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership ar joint venture, list below the name arid title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS On its own behalf.
Name Title See attached list .
2. please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Diselosing Party; Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, .estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
See attached list
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the; Municipal Cade, with-any City elected official in the 12 months before the date this EDS is signed?
[]Yes M No
If yes, please identify below the name(s) of such City elected official(sj and describe such relation ship (s):
SECTION IV-DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Diselosing Party must disclose the name and business address of each subcontractor, attorneys lobbyist, accountant, consultant and any other person or entity whom the Disclosing Parry has retained or cxpects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party lYnof required to disclose employees who«re paid solely through the Disclosing Party's fegular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on benalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties ^as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain Whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
til^i } .:. ^^ of Directors and Other Officers ~ ¦ ¦ %
Name ^ ; Gender/Race ;V Address
Ramon Ricondo
President, Director, Secretary, Treas 08/1989 50.13% Ownership
20 N Clark Street, Suite 1500 Male/Hispanic Chicago IL 60602-4185
Pedro Ricondo
Senior Vice President, Director 8.93% Ownership
09/2007 Male/Hispanic 1000 NW 57th Court, Suite 920
Miami FL33126-6015
R. Douglas Trezise
Senior Vice President, Director
8:13% Ownership
02/2001 Male/Caucasian 20 N Clark Street, Suite 1500
Chicago IL 60602-4185
James T. Jarvis
Senior Vice President, Director
8:93% Ownership
05/2007 Male/Caucasian 515 King Street, Suite 500
Alexandria VA 22314-3137
John C.Williams 02/2000 Senior Vice President, Director 7.33% Ownership
Jc-seph A. Huy 05/2010
Senior Vice President,.-Director 0.00 Ownership
Male/Caucasian 40 N. Central Ave, Suite 1400 Phoenix, AZ 85004
Male/Caucasian 1917 Palornar Oaks Way, Suite 350 Carisbad CA 92008-5531
Shawn M. Kinder
Senior Vice President, Director
4.00% Ownership
05/2011 Male/Caucasian 20 N Clark Street, Suite 1500
Chicago IL 60602-4185
Geoffrey A. Wheeler
Senior Vice President, Director
2,53% Ownership
01/2001 Male/Caucasian 105 E Fourth Street, Suite 1700
Cincinnati OH 45202-4011
Colleen E. Quinn
Senior Vice President, Director
2.00% Ownership
Paul D. Hanly
SeniorVice President, Director 2X)0% Ownership
05/2016 Female/Caucasian 20 N Clark Street, Suite 1500
Chicago IL 60602-4185
05/2016 Male/Caucasian 20 N Clark Street, Suite 1500
Chicago IL 60602-4185
CONFIDENTIAL
' — Dated • \::':-:r-H ."•:<.••-;..--:•.
i-i x v Lender/Race; Office Address -:
James E. Branda Vice President
Joseph M. Chang Vice President
M, Allen Hoffman Vice President
Bonnie Ossege Vice President
Max Riesling Vice President
Steve Culberson Vice President
Holland Young Vice President
MarK Taylor Vice President
Male/Caucasian
Male/Asian Male/Caucasian Female/Caucasian Mate/Caucasian
Male/Caucasian Male/Caucasian
. Male/Caucasian
01/2007
20 N Clark Street, Suite 1500 Chicago IL 60602-4185
8/4/2008
515 King Street, Suite 500 Alexandria VA 22314-3137
7/1/2008
515 King Street, Suite 500 Alexandria VA 22314-3137
105 East Fourth Street, Suite 1700 1/1/2015 Cincinnati, OH 45.202
909 Lake Carolyn Parkway, Suite
850 1/1/2015
Irving, TX 75039
20 N Clark Street, Suite 1500 1/1/2015 Chicago IL 60602-4185
909 Lake Carolyn Parkway, Suite
850 02/0272015
Irving, TX 75039
1917 Ralomar Oaks Way, Suite 350 04/18/2016 Carlsbad CA 92008-5531
CONFIDENTIAL
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d," is
not an acceptable response.
(Add sheets if necessary)
[ ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities, SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business, entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10%. or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[] Yes PQ No [ ] No person directly or indirectly owns 10% pi more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[]Yes []No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business7') and legal requirements), if the Disclosing Party submitting this EDS is the Applicant .and is doing business With the City, then the Disclosing Party certifies as follows:.(i) neither the Applicant nor any controlling person is currently indicted pr charged with, or has admitted, guilt-of, or has ever been convicted of, or placed under supervision fbi, any criminal o.fjtense involving actual, attempted* or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a. continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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2. The Disclosing Party and, if tlie Disclosing Party is a legal entity, all of those persons or entities
identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to. obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery- bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, pr criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
e. have not, within a five-year period preceding the date .of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, of in any criminal or civil action, including actions concerning envif ohmerttal violations, instituted by the City or by the federal government, any state, or any other unit of local government.
3, The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
^y ^cnuractbr" (meaning any contractor or subcontractor used by the Diselosing Party In connection with the Matter, including but hot limited to all persons or legal entities disclosed under Section TV, "Disclosure ofSubcontraetors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party* is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of Another person or entity. Indicia of control includei without limitation: mterloCking^ manajgement of ownership; identity of interests among family members, shared facilities and equipment; common use of employees ; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local go vernment, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with Tespeetto Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, pr, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, actingfpursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admissibn of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code; Section 2-92-610 (Living Wage Ordinance).
Neither the. Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local governmen t as a result of engaging in or being convicted of (1.) bid-rigging in violation of720 ILCS 5/33 E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the' same elements as the offense of bid-rigging or bid-TOtating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commercfeor their successors: the Specially Designated Nationals List, the Denied Persons List; the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2456 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements iii this Part B (Further Certifications), the Disclosing Party must explain below:
I certify the above to be true
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, tlie following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the.execution date, of this EDS, an employee, or elected of appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
N/A :
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago, For purposes of this statement, a "gift" does not include; (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course;of official City business and having a retail Value of less than $20 per recipient (if hone, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
1, The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is pQ is not
a "financial institution" aY defined in Section 2-32-455(b) of the Municipal Code.
2. If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that nbttc of bur affiliates is, and none of them Will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City,"
If the Disclosing Party is unable to make this pledge because it er any of its affiliates (as defined in
Section 2-32-45 5(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 Cf the Municipal Code, explain here (attach additional pages if necessary):
I can make the above verification .
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If the Letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes pq No
NOTE: If you checked "Yes" to Item D.I., proceed to Items D.2. and D.3. If you checked "No" to Item D. l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, of (ii) is sold for taxes or assessments, pr (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"), Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[] Yes $ No
If you checked "Yes" to Item D.l., provide the names and business.addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that .no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X I. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to. or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments Or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
N/A . : :
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section "VII. Forpurpqses of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not fedetal funding.
A. CERTIFICATION REGARDING LOBBYING
L List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
N/A ; :
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it Will be conclusively presumed that the Disclosing Party means thatTMO persons, or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person 6r entity listed in Paragraph A. 1. above for his or her lobbying -activities pr to pay any person or entity to influence or attempt to influence ah Officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded Contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13.
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of tlie statements and information set forth in paragraphs A. 1. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; Or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.L through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request,.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations. N/A
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
.1. Have you developed.and do you have on file affirmative action programs pursuant to applicable, federal regulations? (See 41 CFR Part 60-2.) (] Yes []No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[]Yes []No
If you chedked "No" to question L or 2; above, please provide an explanation:
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SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that jt must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign.Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities, seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N .
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with tbe applicable ordinances.
jC. If the City determines that any information provided in this EDS is false, incomplete or inaccurate, ¦any contract or other agreement in connection with which itis submitted may be rescinded or be. void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, of in equity, including terminating the Disclosing .Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false, statement Of material fact may include incarceration and an award to the. City of treble damages.
t). It is the City's policy to make this document available tp the public on its Internet site and/or upon request. Some or all of themfbrmation provided on; this EDS and any attachments to this EDS maybe made available to the public, on the Internet, in response tp a Freedom of Information Act request, or Otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights ar claims which it may have against the City in connection With the public release of information contained in this EDS and also authorizes the City tp verify the. accuracy of any information Submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action oh the Matter. If the Matter is a contract being handled by the City's Department of Procurement Servicesi the Disclosing Party must update this EDS as. the contract requires, NOTE: With respect to Matters subject to Article I of Chapter 1-23 of the Municipal Code (imposing PERMANENT.INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Diselosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does itot provide such certifications or that tide Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. of F.3. above, ah explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of tie Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix; A (if applicable) are true, accurate and complete as of the date furnished to the City.
Ricondo & Associates, Inc.
Kurt Wpodall
(Print or type name of person signing)
Coatroller
(Print or type title of person signing)
Signed and sworn to before me on (date) July li,; 2016
at Cook County, Illinois (state).
Commission expires: 07/27/2016
KIMBERLY DAVIS NOTARY PUBLIC, STATE OF ILLINOIS
IMy-Commissfon Expires 07/27/2016
Page l2.of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (aj the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity Which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such DisclosingParty or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner Or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece of nephew, grandparent, graridchiId, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of me Disclosing Party listed in Section ILB.La,, if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general parmership; all general partners and limited partners of the Diselosing Party, if the Disdlosing Parry is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a Uttrited liability company; (2) all principal officers of the Disclosing Party, and (3) any person having more than a 7,5 percent ownership interest in the Disclosing Party, "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary bf a legal entiry or any person exercising-similar authority.
Does the Disclosing Party of any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a '"familial relationship" with an elected city Official or department head?
[ J Yes pi] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity tp which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship
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GITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entiry which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It Is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
L. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2^92-416 of the Municipal Code?
[ ]Yes p ]No
2. If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No [X j Not Applicable
If yes to (1) or (2) above, please identify below the name pf the person pr legal entity identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to Which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED. BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE JLN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I GENERAL INFORMATION
A. Legal name ofthe Disclosing Parly submitting this EDS. Include d/b/a/ if applicable:
U.S. Bank National Association
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[xjthe Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: ' ¦
OR
3. [ ] a-legal entity with a right of control (see Section II.B.l.) State the legal name ofthe entity in
which the Disclosing Party holds aright of control:
Business address of the Disclosing Party: 425 Walnut Street
Cincinnati, Ohio 45202
Telephone: (312)332-6774 Fax: (312)332-8008 Email: michael.countrvmanrausbank.com
Name of contact person: Michael Countryman Federal Employer Identification No. (if you have one):;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare-General Airport Senior Lien Revenue Bonds ¦
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
- Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
NATURE OF THE DISCLOSING PARTY
Indicate the nature ofthe Disclosing Party;
Person [] Limited liability company
Publicly registered business corporation [ ] Limited liability partnership
Privately held business corporation [ ] Joint venture
Sole proprietorship [] Not-for-profit corporation
General partnership (Is the not-for-profit corporation also a 501(c)(3))?
Limited partnership [ ] Yes [ ] No
Trust [x] Other (please specify)
National Bank
For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
United States - federally granted national bank charter
3. For legal entities not organized in the State of Illinois: Has the organization registered to do
business in the State of Illinois as a foreign entity?
U.S. 8ank operates branches in the State of
r -¦ yes f 1 No Ixl N/A - '"'no's unc'er authority of its national
-* . bank charter and is therefore not required
to register as a foreign corporation with the
IF THE DISCLOSING PARTY IS A LEGAL ENTITY: state.
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Please see attached list of Executive Officers and Directors
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate ox other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
U.S. Bancorp 800 Nicollet Mall 100%
Minneapolis, MN 55402 -
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this-EDS is signed?
[JYes [x]No ?To the best of our knowledge after due inquiry.
If yes, please identify below the name(s) of such City elected official(s).and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person ox entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[ ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE .
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person "who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [x] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities dentified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal ' offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal, entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under commoncontrol of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Parly, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, "in that officer's or employee's official capacity;
agreed or colluded, with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a.result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the. Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List. -
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Please see Attachment B
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none").
N/A - '
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or ''none"). As to any gift listed below, please also list the name ofthe City recipient.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party.certifies that the Disclosing Party (check one)
[x] is [ ] is not
a."financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
)
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No *To the best of our knowledge after due inquiry.
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.L, proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes []No
If you checked "Yes" to Item D. 1provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2 . below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of
the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during tlie slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
x 2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
Please see Attachment A
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City . and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or' employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A. 1. through A.4. above from ali subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Paity the Applicant?
[] Yes [] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes . [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and. obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at w w w .citvofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, TL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and tbe City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article 1 of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to. all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS .
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
U.S. Bank National Assocation
(Print or type name of Disclosing Party)
(Sign here)
Daniel P. Sink
(Print or type name of person signing)
Vice President
(Print or type title of person signing)
at V\t:nne^)(n County, IVinrKsfrttt Estate).
sion expires:_
Notary Public.
JODIK. MILLER SS|ffc^|| NOTARY PUBLIC-MINNESOTA ^ tSw^^ Commission Expires Jan. 31,2018
<£33£©s££Sg!
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal enlity which has only an indirect ownership interest in the Applicant...
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, tlie Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is ahrnited partnership; all managers, managing members and members of the Disclosing Paity, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. ''"Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or departmenthead?
t ] Yes [x] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
Attachment A City of Chicago Economic Disclosure Statement and Affidavit U.S. Bank National Association was formed from the following major banks: (1) Star Bank, National Association (Cincinnati, Ohio) changed its name to Firstar Bank, National Association (Cincinnati, Ohio) effective February 1999; (2) Mercantile Bank National Association (St. Louis, Missouri) merged into Firstar Bank, National Association (Cincinnati, Ohio) effective April 2000; (3) United States National Bank of Oregon (Portland, Oregon) merged with First Bank, National Association under the title -U.S. Bank National Association effective August 1997; (4) U.S, Bank National Association merged into Firstar Bank, National Association, and the succeeding bank, changed its name to U.S, Bank National Association effective August 2001. These banks acquired through mergers and acquisitions numerous smaller banks. There are five hundred and forty-two U.S. Bank National Association predecessors. Thirty-three predecessors were founded before the abolition of slavery in December 1865. Thirteen ofthe pre-1866 predecessors were.established in southern slave-holding states and territories, including Kansas, Kentucky, Missouri, and Tennessee.
In, reviewing historical records held in various external repositories in accordance with the research requirements as set forth in the City of Chicago Office of the Corporation Counsel opinion letter dated April 29, 2004, U.S, Bank National Association has identified external records of its predecessors which necessitate disclosure. The conveyance records, while showing no record of direct ownership of enslaved individuals did contain records of founders and/or directors of predecessor banks owning enslaved individuals, as well as a record where an enslaved individual Was the collateral for a loan. Specifically, the first president of predecessor Marion National Bank of Lebanon, Kentucky (founded in 1856), Benedict Spalding, owned two enslaved individuals in 1850. In 1860 someone with a similar name "Benidict Spalding" is also listed as having owned fourteen enslaved individuals. In addition, certain members ofthe Marion National Bank of Lebanon's board of directors (called "commissioners") owned approximately forty-seven enslaved individuals in total (the records include abbreviated names, which we conclude may be references to commissioners). The first president of predecessor First National Bank of Clarksville, Tennessee (founded in 1865), S.F. Beaumont, owned one enslaved individual in 1860. The first president of predecessor St. Louis Building and Savings Association, Missouri (founded in 1857), Marshall .Brotherton,'owned ten enslaved individuals in 1850 and four enslaved individuals in 1860. Merchants, Bank (founded in 1857) and Bank of St. Louis (founded in 1857), both predecessors, along with a group of other St. Louis firms, Issued a mortgage to Charles McLaran that was secured by his property, which included an unspecified number of enslaved individuals. However, the I860 Federal Census Slave Schedule for St. Louis provided that Charles McLaran owned thirteen enslaved individuals. The above is only a summary. U.S. Bank National Association has previously provided the City of Chicago with supporting attachments.
Attachment B City of Chicago Economic Disclosure Statement and Affidavit U.S. Bank National Association is also one of the largest corporate trustees in the United States and in such capacity is trustee of numerous mortgage-backed securitizations trusts. Each trust holds multiple real property mortgages. From time-to-time, mortgage borrowers in Chicago default on mortgages or otherwise fail to comply with City of Chicago requirements with respect to certain of their properties. With respect to some ofthe troubled properties, U.S. Bank National Association may be a lender. However with respect to the majority ofthe trouble properties in Chicago for which U.S. Bank National Association is involved, U.S. Bank National Association is not the beneficial owner of the property and has no individual or corporate interest in the property. These properties are trust properties which are maintained by a wide variety of servicers. As of January 4,2013, U.S. Bank National Association was aware of outstanding claims against it in its individual capacity of approximately $3,583.38. Moreover, with respect to properties held in trust (excluding Illinois Land Trust properties) for which U.S. Bank National Association acts as trustee, as of January 4, 2013, we were aware of outstanding claims against trust properties in the amount of approximately $132,599.23. As of January 14,2013, U.S. Bank National Association has worked with the trust servicers to reduce that amount to $68,293.01.
U.S. Bank National Association, both in its individual capacity and in its capacity as a trustee, meets with various city officials twice a month to address these claims. U.S. Bank National Association, both individually and as trustee, has continually strived to work with the City to resolve and reconcile amounts potentially owed to the City. U.S. Bank National Association, both individually and as trustee, intends to continue to work with the City in good faith to address property concerns including amounts owed.
U.S. Bank National Association Directors
NAME TITLE
Carlson, Jennie P. Director
Cecere, Andrew Director
Chosy, James L Director
Davis, Richard K. Director
Dolan, Terrance R. Director
Elmore, John R. Director
Godridge, Leslie V. Director
Hernandez, Roland A. Director
Kelligrew, James B. Director
Kotwal, Shailesh M. Director
Parker, P.W. (Bill) Director
Quinn, Katherine B. Director
Rogers, Kathleen A. Director
Runkel, Mark G. Director
Stone, Kent V. Director
Von Gillern/Jeffry H. Director
Wine, Scott W. Director
Entity Name: U.S. Bank National Association
Executive Officers
NAME TITLE
Davis, Richard K. Chairman and Chief Executive Officer
Carlson, Jennie P. Executive Vice President
Runkel, Mark G. Executive Vice President and Chief Credit Officer
Cecere, Andrew President and Chief Operating Officer
Chosy, James L. Executive Vice President and General Counsel
Dolan, Terrance R. Vice Chairman
Elmore, John R. Vice Chairman, Community Banking and Branch Delivery
Godridge, Leslie V. Vice Chairman, Wholesale Banking
Kelligrew, James B. Vice Chairman, Wholesale Banking
Kotwal, Shailesh M. Vice Chairman, Payment Services
Parker, P.W. (Bill) Vice Chairman and Chief Risk Officer
Quinn, Katherine B. Executive Vice President, Chief Strategy Reputation Officer
Rogers, Kathleen A. Vice Chairman and Chief Financial Officer
Stone, Kent V. Vice Chairman, Consumer Banking Sales and Support
Von Gillern, Jeffry H. . Vice Chairman
2016 ORD GARBs (Refunding)
Underwriters:
Senior Manager: Co-Senior Managers
Co-Managers:
Bond Counsel:
Disclosure Counsel:
Pension Disclosure Counsel Financial Advisor:
Feasibility Consultant Trustee:
^Bank of America v^babrera Capital Markets /Jeffries VZiegler y Bonwick /IFS Securities / Stinson Securities \f
Mesirow . \S Raymond James
/Estrada Hinojosa- imW^imXTrft^ /katten Muchin ./Neal & Leroy, LLC
i/rvliller, Canfield, Paddock & Stone
Frasca- ]t4 NC^ (t)0MJ / Columbia Capital Management /rU^rm^f^^ /jRicondo & Associates^ /.US Bank- i~N h* ^ _/
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Merrill Lynch, Pierce, Fenner & Smith Incorporated
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[x] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: One Bryant Park, New York, NY 10 036
c/o 540 W. Madison, Chicago, IL 60661
Telephone:. 312-537-6374 Fax: 312-537-6379
Name of contact person: Eric Rockhold
Federal Employer Identification No. (if you have one): ;::.:.-.:V"':.V-:::^"'-^;'
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
City of Chicago O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party :
[ ] Person [ ] Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
(x] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable:
Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[x3 Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see attached list.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Please see attached list. DisclosingParty
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [k] No Please see attachment.
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response. Ice Miller LLP 200 W Madison St Underwriter's Counsel
Chicago, IL 60601 $100,000 (est.)*
* Total estimated fee for the representation of the syndicate of underwriters of which Applicant is a part.
(Add sheets if necessary)
[ ] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial.owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No Fx] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, • perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance). Can certify as of May 23, 2016
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
7. If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further
Certifications), the Disclosing Party must explain below: Please see relevant attachment.
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official,
of the City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None with respect to any current or prospective business with the City of
Chicago
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 of the Municipal Code, explain here (attach additional pages if necessary): N.A.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[JYes fx] No Please see attachment.
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. 1. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
Tbe Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to tbe City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully
with the applicable ordinances. - _
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is- the City's policy to make this document available to the public on its Internet site and/or upon ¦ request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 1 1 of 13
F. 1. The Disclosing Parly is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
To the best of mv knowledae after reasonable inauirv
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F. 1. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F. 1., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are "true, accurate and complete as of the date furnished to the City.
To the best of mv knowledae after reasonable inauirv Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Print or type name of Disclosing Party) >-}
(Sign here) Eric Rockhold
(Print or type name of person signing)
Managing Director
(Print or type title of person signing)
Signed and sworn to before me on (date)
Notary Public.
Page 12 of 13
at (troii
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entiry which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-iri-law, mother-in-law, son-ih-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
• * To the best of my knowledge
[ JYes [xj No after reasonable inquiry.
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
1. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No.
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[JYes [JNo [Xj Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
As of 4/21/2016
SOLE SHAREHOLDER:
BAC North America Holding Company
DIRECTORS:
Thomas K. Montag Fabrizio Gallo Andrew M. Sieg John W. Thiel
KEY EXECUTIVE OFFICERS (as reported on Schedule A of Form BP):
Thomas K. Montag Chairman of the Board & Chief Executive Officer
William C. Caccamise General Counsel, Chief Legal Officer and Managing Director
W. Eric Gallinek Co-Chief Compliance Officer/Broker-Dealer
Gloria R. Greco Co-Chief Compliance Officer/Broker-Dealer and Chief Compliance Officer/Registered Investment Adviser
loseph A. Guardino Chief Operations Officer [and FINOP]
Caroline D. Sullivan Chief Financial Officer
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
B.2 Response:
NAME BUSINESS ADDRESS PERCENTAGE INTEREST IN THE DISCLOSING PARTY
BAC North America Holding Company 100 N. Tryon St. Charlotte, NC 28255 100% (Direct)
NB Holdings Corporation 100 N. Tryon St. Charlotte, NC 28255 100% (Indirect)
Bank of America Corporation 100 N. Tryon St. Charlotte, NC 28255 100% (Indirect)
Attachment for Section III:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past .12 months.
Attachment for Section V.B: {Merrill Lynch, Pierce, Fenner & Smith Incorporated}
Disclosing Party certifies, as set forth below, to the best of its knowledge and belief that with respect to V.B.2.a.:
Neither Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") nor its Executive Officers and Directors identified in Section II.B.l of this EDS has had its authorization to act as a federal contractor revoked or suspended. No such information with respect to state or local entities is reported or to the best of our knowledge maintained separately.
V.B.2.b, c and e:
In the ordinary course of business, MLPF&S is subject to regulatory examinations, information gathering requests, inquiries, and investigations ("Regulatory Matters") by various federal or state securities regulatory agencies and attorneys general, other local, state, and federal agencies, and self-regulatory organizations (collectively, "Regulators"); and is routinely a defendant in or party to many pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants ("Legal Matters"), which may be based on alleged violations of securities, environmental, employment, and other laws. In connection with formal and informal Regulatory Matters,-MLPF&S receives numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of its regulated activities, and in some cases regulatory action has been taken against MLPF&S. MLPF&S believes that it has cooperated fully with the Regulators in all such inquiries to date and intends to continue to cooperate fully with the Regulators in all such inquiries involving MLPF&S in the future.
MLPF&S's ultimate parent is Bank of America Corporation ("BAC"). BAC makes all required disclosures in its Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are updated in its Reports on Form 8-K, all of which are filed with the Securities and Exchange Commission ("Regulatory Filings"). Merrill Lynch & Co., Inc. (the "Corporation"), the former parent of MLPF&S, also made such disclosures until it was merged into BAC on October 1, 2013. MLPF&S makes all required disclosures in its Form BD and ADV Filings ("Form BD and ADV Filings") with the Financial Industry Regulatory Authority ("FINRA"). Those Regulatory Filings and Form BD and ADV Filings include disclosures of Regulatory Matters and Legal Matters as required by federal law and applicable regulations, and are publicly available. BAC cannot confirm or deny the existence of any other, nonpublic Regulatory Matters conducted by any Regulator or Legal Matters unless required to do so by law. The Regulatory Filings are publicly available on the SEC's website at www.sec.gov . The Form BD Filings are publicly available on the FINRA BrokerCheck system at . The Form ADV filings are publicly available on the SEC's Investment Adviser Search website at: Search.as px.
MLPF&S's registered officers and employees make required disclosures in their Form U-4, including, among other things, criminal disclosures, which are filed with FINRA pursuant to a directive from the SEC. These Form U-4 filings are publicly available on the FINRA BrokerCheck system at .
Regulatory Filings that include information relating to Regulatory Matters or Legal Matters involving the municipal markets business of MLPF&S since January 1, 201 1 can be accessed as follows and are
incorporated herein by reference: the Corporation's 2012 Annual Report filed on March 1, 2013 (page 116); Quarterly Report on Form 10-Q filed on May 10, 2013 (page 76); 2011 Annual Report filed on February 24, 2012 (pages 132 and 133); and these can be found at [Word Document Version] and BAC's 2012 Annual Report filed on February 28, 2013 (page 230); Quarterly Report on Fonn 10-Q filed on May 7, 2013 (page 201); 2011 Annual Report filed on February 23, 2012 (pages 223 and 224); and these can be found at [Word Document Version]. The Form BD and ADV Filings also include information relating to Regulatory Matters involving the municipal markets business of MLPF&S.
The Corporation cannot confinn or deny the existence of any other, non-public Regulatory Inquiry conducted by any Regulator unless required to do so by law.
Please let us know if you need any additional information.
V.B.2.d
The Disclosing Party performed due diligence within the Public Finance Group of MLPF&S to determine whether any Public Finance Group employees were aware of any public finance transactions (federal, state or local) having been terminated for cause or default within the last five years, and none of such employees were aware of any such terminations.
V.B.3.a, b and c - Please see response to V.B.2. b c and e above.
In addition, MLPF&S believes that it is not ineligible under Section 1-23-020 of the Municipal Code of Chicago because neither MLPF&S (or any controlling person of MLPF&S) nor any entity that MLPF&S has been merged into (including BANA and Banc of America Securities LLC ("BAS")) have within the past 5 years been convicted of, admitted guilt to in any civil or criminal proceeding, or charged with or indicted for any felony or criminal offense for conduct outlined in Section l-23-020(a). Finally, MLPF&S believes that it is not ineligible under Section 2-92-320 of the Municipal Code of Chicago because neither MLPF&S nor its current employees have within the past 5 years been convicted of or made an admission;of guilt regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-927320(a)(4). Moreover, MLPF&S is not aware of any former employees who have been convicted of or made an admission of guilt within the past 5 years regarding the items outlined in 2-92-320-.(a)(P)-(3) or violated the items identified in 2-92-320(a)(4) based on conduct that took place while they were employed by MLPF&S.
V.B.4 - Please see response to V.B.2. b, c and e above.
In addition, MLPF&S believes that it is not barred from contracting with any unit of State or local government pursuant lo 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 because neither MLPF&S nor its current employees have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 LCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses. Moreover, MLPF&S is not aware of any former employees who have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses based on conduct that took place while they were employed by MLPF&S.
Attachment for Section V.D:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: NB Holdings Corporation
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[k] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: Merrill Lynch, Pierce, Fenner
qj^ & Smith Incorporated
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: 100 N. Tryon Street, Charlotte, NC 28255
c/o 540 W. Madison, Chicago, IL 60661
Telephone: 312-537-6374 Fax; 312-537-6379
Nameofcontactperson: Eric Rockhold
Federal Employer Identification No. (if you have one): _} \7ZZV:. Z'';
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
City of Chicago O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract if
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SECTION IT - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
[ ] Person
[ ] Publicly registered business corporation
[x] Privately held business corporation
[ ] Sole proprietorship
[ ] General partnership
[ ] Limited partnership
[ ] Trust
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[]Yes []No [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes be] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see attached list.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Bank of America Corporation 100 N. Tryon St. 100% (indirect)
Charlotte, NC 28255
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [k] No Please see attachment.
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
fx] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No fx] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article 1 is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
,a. are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance). Can certify as of May 23, 2016
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
7. If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further
Certifications), the Disclosing Party must explain below: Please see relevant attachment.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
None with respect to any current or prospective business with the City of
Chicago
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 of the Municipal Code, explain here (attach additional pages if necessary): N.A.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No Please see attachment.
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[]Yes []No
If "Yes," answer the three questions below:
1: Have you developed and do you have on file affirmative action programs pursuant to applicable
federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII -- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
- It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
The information provided in this EDS must be kept current. In the event of changes, the Disclosing Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a contract being handled by the City's Department of Procurement Services, the Disclosing Party must update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified offenses), the information provided herein regarding eligibility must be kept current for a longer period, as required by Chapter 1 -23 and Section 2-1 54-020 of the Municipal Code.
The Disclosing Party represents and warrants lhat:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
To the best of mv knowledae after reasonable inauirv
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
To the best of mv knowledae after reasonable inauirv NB Holdings Corporation
(Print or type name of Disclosing Party)
Edward J. Sisk
(Print or type name of person signing)
Authorized Signatory
(Print or type title of person signing)
Signed and sworn to before me on (date) --jn/t/ ' / , at /Veto VorK^ County, f/e w Vnr-/\ (state).
GRACE ARGANO Notary Public - State of New York No. 01AR6054791 Qualified In Richmond County My Commission Expires Feb. 12, 2019
NB HOLDINGS CORPORATION
LIMITED POWER OF ATTORNEY
NB HOLDINGS CORPORATION, a Delaware corporation (the "Corporation"), does hereby make, constitute, and appoint Edward J. Sisk as Attorney-in-Fact for the Corporation acting for the Corporation and in the Corporation's name, place and stead, for the limited purpose of authorizing, preparing, revising or signing a City of Chicago Economic Disclosure Statement and Affidavits (the "Disclosure Statement") related to Merrill Lynch, Pierce, Fenner & Smith Incorporated's ("MLPF & S") participation in the O'Hare General Airport Senior Lien Revenue Bonds.
Any execution by the Attorney-in-Fact of the Disclosure Statement shall fully bind and commit the Corporation and the City of Chicago may rely upon the execution thereof by the Attorney-in-Fact as if executed by the Corporation and as the true and lawful act of the Corporation.
This Limited Power of Attorney shall automatically terminate as to the authority of the named Attorney-in-Fact upon such Attorney-in-Fact's resignation or termination from MLPF & S or his realignment to a role outside of the Public Finance division of MLPF & S; however; such termination or realignment shall have no impact on the Disclosure Statement executed by the above named attorney-in-fact for the Corporation prior to such termination or realignment.
IN WITNESS WHEREOF, this Power of Attorney has been executed and delivered by the Corporation to each Attorney-in-Fact on this J^faay of July, 2016.
NB HOLDINGS CORPORATION
Eric Billings
Associate General Counsel, Senior Vice President And Assistant Secretary
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [ ] No N/A
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [ JNo n/a
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ] Yes [ ] No [x ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
NB Holdings Corporation Current Appointments
Tom Scrivener Chairman of the Board, President and Chief Executive Officer
Dean Athanasia Director
Cathy Bessant Director
mmmmmmmmm.
Mick Ankrom Chief Risk Officer
Rudi Bless Chief Financial Officer
Attachment for Section III:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
Attachment for Section V.B: {NB Holdings Corporation}
Disclosing Party certifies, as set forth below, to the best of its knowledge and belief that with respect to V.B.2.a.:
Neither NB Holdings Corporation ("NB Holdings") nor its Directors and Executive Officers identified in Section II.B.l of this EDS is subject to any order, judgment or decree by any court or government authority in which it is barred, suspended or otherwise limited from engaging in any type of business practice.
V.B.2.b, cande:
NB Holdings is a direct wholly-owned subsidiary of Bank of America Corporation ("BAC"). Bank of America Corporation makes all required disclosures regarding itself and its subsidiaries in its Form 10-K as filed with the Securities and Exchange Commission and its Annual Report as posted on its website at . In addition, BAC's registered broker-dealer and investment adviser subsidiaries make all required disclosures on their Form BDs as filed with FINRA and their Form ADVs as filed with the SEC. These filings include disclosures of investigations and litigation as required by the SRO's and federal law, and are publicly available. BAC cannot.confirm or deny the existence of any other non-public investigation conducted by any governmental agency unless required to do so by law.
V.B.2.d
The Disclosing Party performed due diligence within the Public Finance Group of MLPF&S to determine whether any Public Finance Group employees were aware of any public finance transactions (federal, state or local) having been terminated for cause or default within the last five years, and none of such employees were aware of any such terminations.
V.B.3.a, b and c - Please see response to V.B.2. b c and c above.
In addition, MLPF&S believes that it is not ineligible under Section 1-23-020 of the Municipal Code of Chicago because neither MLPF&S (or any controlling person of MLPF&S) nor any entity that MLPF&S has been merged into (including BANA and Banc of America Securities LLC ("BAS")) have within the past 5 years been convicted of, admitted guilt to in any civil or criminal proceeding, or charged with or indicted for any felony or criminal offense for conduct outlined in Section l-23-020(a). Finally, MLPF&S believes that it is not ineligible under Section 2-92-320 of the Municipal Code of Chicago because neither MLPF&S nor its current employees have within the past 5 years been convicted of or made an admission of guilt regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4). Moreover, MLPF&S is not aware of any former employees who have been convicted of or made an admission of guilt within the past 5 years regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4) based on conduct that took place while they were employed by MLPF&S.
V.B.4 - Please see response to V.B.2. b, c and e above.
In addition, MLPF&S believes that it is not barred from contracting with any unit of State or local government pursuant to 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 because neither MLPF&S nor its current employees have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720
LCS 5/33E-4 or any similar offenses of any state or the United Stales which contains the same elements as these offenses. Moreover, MLPF&S is not aware of any former employees who have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses based on conduct that took place while they were employed by MLPF&S.
Attachment for Section V.D:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: BAC North America Holding Company-
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
|k] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: Merrill Lynch, Pierce, Fenner
OR & Smith Incorporated
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: 100 N. Tryon Street, Charlotte, NC 28255
c/o 540 W. Madison, Chicago, IL 60661
Telephone: 312-537-6374 Fax: 312-537-6379
Name of contact person: Eric Rockhold
Federal Employer Identification No. (if you have one): ; . ¦ :
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
City of Chicago O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
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SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
[ ] Person
[ ] Publicly registered business corporation
be] Privately held business corporation
[ ] Sole proprietorship
[ ] General partnership
[ ] Limited partnership
[] Trust
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes [x]No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see attached list.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
•Disclosing Party
Bank of America Corporation 100 N. Tryon St. 100% (indirect)
Charlotte, NC 28255
NB Holdings Corporation 100 N. Tryon St. 100% (direct)
Charlotte, NC 28255
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes be] No Please see attachment.
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[k] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No pc] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B. 1. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in •connection with the Matter, including but not limited to all persons or legal entities disclosed under
Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance). Can certify as of May 23, 2016
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
7. If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further
Certifications), the Disclosing Party must explain below: Please see relevant attachment.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official,
of the City ofChicago (if none, indicate with "N/A" or "none"). None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe Gity recipient. None with respect to any current or prospective business with the City of
Chicago
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION-
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 of the Municipal Code, explain here (attach additional pages if necessary): N.A.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-1 10 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No Please see attachment.
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. 1. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Parly understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofcbicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois
Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any
fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges,
sewer charges, license fees, parking tickets, property taxes or sales taxes. * To the best of mv knowledae after reasonable inauirv
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
* To the best of mv knowledae after reasonable inauirv BAC North America Holding Company
(Print or type name of Disclosing Party)
<¦—{Sj^n here)
Edward J. Sisk
(Print or type name of person signing)
Authorized Signatory
(Print or type title of person signing)
Signed and sworn to before me on (date)
at A/COJ Vpr-'fc County, /[/cus' % rtf (state).
Notary Public. GRACE ARGANO
' V Notary Public - State of New York
yCT A ,n a f, ,q No. 01AR6054791
Commission expires:_/&.£ Quaimed In Richmond County
My Commission Expires Fob. 12, 2019
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BAC NORTH AMERICA HOLDING COMPANY
LIMITED POWER OF ATTORNEY
BAC NORTH AMERICA HOLDING COMPANY, a Delaware corporation (the "Corporation"), does hereby make, constitute, and appoint Edward J. Sisk as Attorney-in-Fact for the Corporation acting for the Corporation and in the Corporation's name, place and stead, for the limited purpose of authorizing, preparing, revising or signing a City of Chicago Economic Disclosure Statement and Affidavits (the "Disclosure Statement") related to Merrill Lynch, Pierce, Fenner & Smith Incorporated's ("MLPF & S") participation in the O'Hare General Airport Senior Lien Revenue Bonds.
Any execution by the Attorney-in-Fact of the Disclosure Statement shall fully bind and commit the Corporation and the City of Chicago may rely upon the execution thereof by the Attorney-in-Fact as if executed by the Corporation and as the true and lawful act of the Corporation.
This Limited Power of Attorney shall automatically terminate as to the authority of the named Attorney-in-Fact upon such Attorney-in-Fact's resignation or termination from MLPF & S or his realignment to a role outside of the Public Finance division of MLPF & S; however; such termination or realignment shall have no impact on the Disclosure Statement executed by the above named attorney-in-fact for the Corporation prior to such termination ortrealignment.
IN WITNESS WHEREOF, this Power of Attorney has been executed and delivered by the Corporation to each Attorney-in-Fact on this P^clay of July, 2016.
BAC NORTH AMERICA HOLDING COMPANY
Eric Billings
Associate General Counsel, Senior Vice President and Assistant Secretary
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law,"son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
* To the best of my knowledge
[ ] Yes [x] No after reasonable inquiry.
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ] Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ]No [X] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
BAC North America Holding Company Current Appointments
Tom Scrivener Chairman of the Board, President and Chief Executive Officer
Paul Donofrio Director
Andrea Smith Director
mmmmmmmmmmmmimm
Mick Ankrom Chief Risk Officer
Rudi Bless Chief Financial Officer
Attachment tor Section III:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
Attachment for Section V.B: (BAC North America Holding Company)
Disclosing Party certifies, as set forth below, to the best of Us knowledge and belief that with respect to V.B.2.a.:
Neither BAC North America Holding Company ("BACNAH") nor its Directors and Executive Officers identified in Section II.B.l of this EDS is subject to any order, judgment or decree by any court or government authority in which it is barred, suspended or otherwise limited from engaging in any type of business practice.
V.B.2.b, c and e:
BACNAH is an indirect, wholly-owned subsidiary of Bank of America Corporation ("BAC"). Bank of America Corporation makes all required disclosures regarding itself and its subsidiaries in its Fonn 10-K as filed with the Securities and Exchange Commission and its Annual Report as posted on its website at . In addition, BACs registered broker-dealer and investment adviser subsidiaries make all required disclosures on their Form BDs as filed with FINRA and their Form ADVs as filed with the SEC. These filings include disclosures of investigations and litigation as required by the SRO's and federal law, and are publicly available. BAC cannot confirm or deny the existence of any other non-public investigation conducted by any-governmental agency unless required to do so by law.
V.B.2.d
The Disclosing Party perfonned due diligence within the Public Finance Group of MLPF&S to determine whether any Public Finance Group employees were aware of any public finance transactions (federal, state or local) having been terminated for cause or default within the last five years, and none of such employees were aware of any such terminations.
V.B.3.a, b and c - Please see response to V.B.2. b c and e above.
In addition, MLPF&S believes that it is not ineligible under Section 1-23-020 of the Municipal Code of Chicago because neither MLPF&S (or any controlling person of MLPF&S) nor any entity that MLPF&S has been merged into (including BANA and Banc of America Securities LLC ("BAS")) have within the past 5 years been convicted of, admitted guilt to in any civil or criminal proceeding, or charged with or indicted for any felony or criminal offense for conduct outlined in Section l-23-020(a). Finally, MLPF&S believes that it is not ineligible under Section 2-92-320 of the Municipal Code of Chicago because neither MLPF&S nor its current employees have within the past 5 years been convicted of or made an admission of guilt regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4). Moreover, MLPF&S is not aware of any former employees who have been convicted of or made an admission of guilt within the past 5 years regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4) based'on conduct that took place while they were employed by MLPF&S.
V.B.4 - Please see response to V.B.2. b, c and e above.
In addition, MLPF&S believes that it is not barred from contracting with any unit of State or local government pursuant to 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 because neither MLPF&S nor its current employees have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720
LCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses. Moreover, MLPF&S is not aware of any former employees who have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses based on conduct that took place while they were employed by MLPF&S.
Attachment for Section V.D:
Please note that the Disclosing Party is a subsidiary of Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Bank of America Corporation
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
£c] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the Applicant in which the Disclosing Party holds an interest: Merrill Lynch, Pierce, Fenner
OR & Smith Incorporated
3. [ ] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control: .
Business address of the Disclosing Party: 100 N. Tryon Street, Charlotte, NC 28255
c/o 540 W. Madison, Chicago, IL 60661
Telephone: 312-537-6374 Fax: 312-537-6379 Email: eric.rockhold@baml.com
Name of contact person: Eric Rockhold ,
Federal Employer Identification No. (if you have one): ;,: :.
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
City of Chicago O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification it and Contract #
Ver. 01-01-12 Page 1 of 13
- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
[ ] Limited liability company [ ] Limited liability partnership [ ] Joint venture [ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[]Yes []No [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [x] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see attached list.
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
None
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[JYes [x] No Please see attachment.
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
jx] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No fx] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under-Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the
' Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance). Can certify as of May 23, 2016
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
7. If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further
Certifications), the Disclosing Party must explain below: Please see relevant attachment.
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official,
of the City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none").- As to any gift listed below, please also list the name of the-City-recipient
None with respect to any current or prospective business with the City of
Chicago
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[x] is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in
Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter
2-32 ofthe Municipal Code, explain here (attach additional pages if necessary): N.A.
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If the letters "NA," the word "None," or no response appears on the lines above', it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes fx] No Please see attachment.
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes []No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
x 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
.5. If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII -- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
To the best of mv knowledae after reasonable inauirv
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
To the best of mv knowledae after reasonable inauirv Bank of America Corporation
(Print or type name of Disclosing Party)
Edward J. Sisk
(Print or type name of person signing)
Authorized Signatory
(Print or type title of person signing)
GRACE ARGANO Notary Public - State of New York No. 01AR6054791 Qualified In Richmond County My Commission Expires Feb. 12, 2019
BANK OF AMERICA CORPORATION
LIMITED POWER OF ATTORNEY
BANK OF AMERICA CORPORATION, a Delaware corporation (the "Corporation"), does hereby make, constitute, and appoint Edward J. Sisk as Attorney-in-Fact for the Corporation acting for the Corporation and in the Corporation's name, place and stead, for the limited purpose of authorizing, preparing, revising or signing a City of Chicago Economic Disclosure Statement and Affidavits (the "Disclosure Statement") related to Merrill Lynch, Pierce, Fenner & Smith Incorporated's ("MLPF & S") participation in the O'Hare General Airport Senior Lien Revenue Bonds.
Any execution by the Attorney-in-Fact of the Disclosure Statement shall fully bind and commit the Corporation and the City of Chicago may rely upon the execution thereof by the Attorney-in-Fact as if executed by the Corporation and as the true and lawful act of the Corporation.
This Limited Power of Attorney shall automatically terminate as to the authority of the named Attorney-in-Fact upon such Attorney-in-Fact's resignation or termination from MLPF & S or his realignment to a role outside of the Public Finance division of MLPF & S; however; such termination or realignment shall have no impact on the Disclosure Statement executed by the above named attorney-in-fact for the Corporation prior to such termination or realignment.
IN WITNESS WHEREOF, this Power of Attorney J^as been executed and delivered by the Corporation to each Attorney-in-Fact on this p-r^day of July, 2016.
BANK OF AMERICA CORPORATION
Eric Billings l—'
Assistant General Counsel, Senior Vice President And Assistant Secretary
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
N/A
[ ] Yes [ ] No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[JYes [ ]No N/A
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ] Yes [ ] No [x ] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART QF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
BANK OF AMERICA CORPORATION EXECUTIVE OFFICERS AND DIRECTORS
The following sets forth the name and present principal occupation ofeach executive officer and director of Bank of America Corporation. The business address of each of the executive officers and directors of Bank of America Corporation is Bank of America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255.
Name Brian T. Moynihan
Dean C. Athanasia
Catherine P. Bessant
Paul M. Donofrio Geoffrey Greener Terrence P. Laughlin
David G. Leitch
Thomas K. Montag Thong M. Nguyen
Andrea B. Smith
Sharon L. Allen Susan S. Bies
Jack O. Bovender, Jr.
Position with Bank of America Corporation
Chairman of the Board, Chief Executive Officer, President and Director
President, Preferred and Small Business Banking and Co-Head Consumer Banking
Chief Operations and Technology Officer
Chief Financial Officer
Chief Risk Officer
Vice Chairman, Global Wealth & Investment Mgmt
Global General Counsel
Chief Operating Officer .
President, Retail Banking and Co-Head, Consumer Banking
Chief Administrative Officer
Director Director
Lead Independent Director
Principal Occupation
Chairman of the Board, Chief Executive Officer and President of Bank of America Corporation
President, Preferred and Small Business Banking, Co-Head Consumer Banking of Bank of America Corporation
Chief Operations and Technology Officer of Bank of America Corporation
Chief Financial Officer of Bank of America Corporation
Chief Risk Officer of Bank of America Corporation
Vice Chairman, Global Wealth & Investment Mgmt of Bank of America Corporation
Global General Counsel, Bank of America Corporation
Chief Operating Officer of Bank of America Corporation
President, Retail Banking and Co-Head Consumer Banking of Bank of America Corporation
Chief Administrative Officer of Bank of America Corporation
Former Chairman of Deloitte LLP
Former Member, Board of Governors of the Federal Reserve System
Lead Independent Director, Bank of America Corporation; Former Chairman and Chief Executive Officer of HCA Inc.
Former Executive Officer, MBNA Corporation
Pierre de Week
Arnold W. Donald Linda P. Hudson
Monica C. Lozano Thomas J. May
Lionel L. Nowell, III
Thomas D. Woods
R. David Yost
Michael D. White
Director
Director Director
Director Director
Director
Director
Director
Director
Former Chairman and Global Head of Private Wealth Management, Deutsche Bank AG
President and Chief Executive Officer, Carnival Corporation & pic
Chairman and CEO of The Cardea Group and Former President and Chief Executive Officer of BAE Systems, Inc.
Former Chariman, US Hispanic Media Inc.
Chairman, Eversource Energy
Former Senior Vice President and Treasurer, PepsiCo Inc.
Former Vice Chairman and SEVP, Canadian Imperial Bank of Commerce
Former Chief Executive Officer of AmerisourceBergen Corp.
Former Chairman, President and Chief Executive Officer of DIRECTV
Attachment for Section III:
Please note that the Disclosing Party is Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
Attachment for Section V.B: {Bank of America Corporation}
Disclosing Party certifies, as set forth below, to the best of its knowledge and belief that with respect to V.B.2.a.:
Neither Bank of America Corporation ("BAC") nor its Executive Officers and Directors identified in Section II.B.l of this EDS is subject to any order, judgment or decree by any court or government authority in which it is barred, suspended or otherwise limited from engaging in any type of business practice.
V.B.2.b, c and e:
BAC makes all required disclosures in its Form 10-K as filed with the Securities and Exchange Commission and its Annual Report as posted on its website at . In addition, BAC's registered broker-dealer and investment adviser subsidiaries make all required disclosures on their Form BDs as filed with FINRA and their Form ADVs as filed with the SEC. These filings include disclosures of investigations and litigation as required by the SRO's and federal law, and are publicly available.
BAC cannot, confirm or deny the existence of any other non-public investigation conducted, by any governmental agency unless required to do so by law.
Please let us know if you need any additional information.
V.B.2.d
The Disclosing Party performed due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") to determine whether any Public Finance Group employees were aware of any public finance transactions (federal, state or local) having been terminated for cause or default within the last five years, and none of such employees were aware of any such terminations.
V.B.3.a, b and c - Please see response to V.B.2. b, c and e above.
MLPF&S believes that it is not ineligible under Section 1-23-020 of the Municipal Code of Chicago because neither MLPF&S (or any controlling person of MLPF&S) nor any entity that MLPF&S has been merged into (including BANA and Banc of America Securities LLC ("BAS")) have within the past 5 years been convicted of, admitted guilt to in any civil or criminal proceeding, or charged with or indicted for any felony or criminal offense for conduct outlined in Section l-23-020(a). Finally, MLPF&S believes that it is not ineligible under Section 2-92-320 of the Municipal Code of Chicago because neither MLPF&S nor its current employees have within the past 5 years been convicted of or made an admission of guilt regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4). Moreover, MLPF&S is not aware of any former employees who have been convicted of or made an admission of guilt within the past 5 years regarding the items outlined in 2-92-320 (a)(l)-(3) or violated the items identified in 2-92-320(a)(4) based on conduct that took place while they were employed by MLPF&S.
V.B.4- Please sec response to V.B.2. b, c and e above.
In addition, MLPF&S believes that it is not barred from contracting with any unit of State or local government pursuant to 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 because neither MLPF&S nor its current employees have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 LCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses. Moreover, MLPF&S is not aware of any former employees who have been convicted within the past 5 years of violating 720 ILCS 5/33E-3 or 720 ILCS 5/33E-4 or any similar offenses of any state or the United States which contains the same elements as these offenses based on conduct that took place while they were employed by MLPF&S.
Attachment for Section V.D:
Please note that the Disclosing Party is Bank of America Corporation ("BAC"). BAC and its subsidiaries had approximately 171,200 full-time equivalent employees as of March 31, 2016. Accordingly, it is not possible for BAC to perform due diligence across the full panoply of associates and BAC-related entities in preparing a response to business relationships with City of Chicago elected officials. In responding to this question, the Disclosing Party did perform due diligence within the Public Finance Group of Merrill Lynch, Pierce, Fenner & Smith Incorporated to determine whether any of the Public Finance Group's employees were aware of any such relationships between the City elected officials and the Disclosing Party within the past 12 months.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Cabrera Capital Markets, LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[*3 the Applicant
OR
[] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 10 S. LaSalle Street, Suite 1050
Chicago. IL 60603
Telephone: 312.236.8888 Fax: 312.236.8936 Email: raguilar@cabreracapital.com
Name of contact person: Robert Aguilar
Federal Employer Identification No. (if you have one): - ' 1
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [>£ Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[ ] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
M Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Martin Cabrera, Jr. President (Director)/Manager
Robert Libertini Vice President (Director)
Robert Aguilar Chief Operating Offinpr (COOJATreasnrer
Renee LaBran Board Member
Bruce Foerster Board Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Cabrera Capital Inc. 10 S. LaSalle St., Suite 1050 Chicago, IL 60603 76.5%
RCF Cabrera Holdings, Inc. 155 N Lake Ave, Suite 826, Pasadena, CA 91101 23.5%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[]Yes |>£No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of. another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
fc] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [ ] No [:>§ No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, rhe.permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of cither the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at anytime during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
|>5 is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes [>£No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes OJNo
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1 ¦ The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes • [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Chief Operating Officer
(Print or type title of person signing)
Signed and sworn to before me on (date)
Commission expires:
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [>§ No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [XJ No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[JYes [JNo [XJ Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Cabrera Capital, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
|>3 a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Cabrera Capital Markets
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 10 S. LaSalle Street, Suite 1050
Chicago. IL 60603
Telephone: 312.236.8888 Fax: 312.236.8936 Email: raguilar@cabreracapital.com
Name of contact person: Robert Aguilar
Federal Employer Identification No. (if you have one): '•" ' \
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location ofproperty, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [ ] Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
^ Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Illinois
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes [ ] No rM N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Martin Cabrera, Jr. President (Director)/Manager
Rose Gonzales Secretary
Robert Aguilar Chief Operating Officer (COO)/Treasurer
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Martin Cabrera, Jr. 10 S. LaSalle St., Suite 1050 Chicago, IL 60603 60.0%
Rose Gonzales 100 W. Washington, Chicago, IL 60607 37.0%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [>i No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[X Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes DJNo [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City ofChicago (if none, indicate with "N/A" or "none"). None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [X1 is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes [>£No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed-to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [>J No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
'(Sign here) Robert Aguilar
(Print or type name of person signing)
Chief Operating Officer
OFFICIAL SEAL CYNTHIA AU NOTARY PUBUC - STATE Cf ILLINOIS MY COMMISSION EXPIRES:03/16/19
(Print or type title of person signing)
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes M No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [XI No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [Xl Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: RCF - Cabrera Holdings, Inc.
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[>3 a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Cabrera Capital Markets, LLC
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
B. Business address ofthe Disclosing Party: 155 North Lake AVe, Suite 826
Pasadena, CA91101
Telephone: 626.744.7799 Fax: 225.626.744.9249 Email: renee(5)rcfontis.com
Name of contact person: Renee LaBran
Federal Employer Identification No. (if you have one): _ ' .
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature ofthe Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
£>3 Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
[ ] Limited partnership
[ ] Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes LX> No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Thomas Uterman President
Renee Labran VP, Secretary & Treasurer
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Rustic Canyon/Fontis Partners 155 N. Lake Ave, Suite 826, Pasadena, CA 91101 100%
SECTION III - BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes f>3 No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
^Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes f>3 No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the
• Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any
. Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following'is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name ofthe City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is 05 is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
None
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes |>£No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses ofthe City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1 - The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII — ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the publicon its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l'. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
RCF-Cabrera Holdings, Inc (Print orJy^eTrame of Disclosing Party)
(Sign here) Renee LaBran
(Print or type name of person signing)
Secretary (Print or type title of person signing)
OFFICIAL SEAL CYNTHIA AU NOTARY PUBUC - STATE OF ILLINOIS MY COMMISSION EXPIRES.03/16/19
Signed and sworn to before me on
at CflpJ^ County,
Commission expires:
(date) 7jJbn. *' ri&lh
Wlr^OtS (state).
Notary Public.
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Parmer thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes M No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
1. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [XI No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [x] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Rustic Canyon/Fontis Partners, LP
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
b^ a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Cabrera Capital Markets, LLC
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
Business address of the Disclosing Party: 155 N Lake,Ave, Suite 826
Pasadena. CA91101
Telephone: 626.744.7799 Fax: 225.626.744.9249 Email: renee@rcfontis.com
Name of contact person: Renee LaBran __
Federal Employer Identification No. (if you have one): ¦
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
[ ] Person [ ]
[ ] Publicly registered business corporation [ ]
[ ] Privately held business corporation [ ]
[ ] Sole proprietorship [ ]
[ ] General partnership (Is
F>2 Limited partnership
[ ] Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes f^No []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management ofthe Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Renee LaBran General Partners (This party does not hold 7.5% or more of the applicant on page 1)
Gabrielle E. Green Managing Member
Daniel D. Villanueva Managing Member
Daniel L. Villanueva Managing Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 ofthe Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
PlRasfi see attar.herl sheet
None ofthe parties hold 7.5% or more ofthe applicant named above.
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[]Yes fotNo
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[>3 Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes LX1 No [ ] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee ofthe City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. . None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is f>5 is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender'within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes |>JNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1 ¦ The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII -- ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges,
sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Rustic Canyon/Fontis Partners, LP (Print orJyplTruftTie of Disclosing Party)
(Sign here) Renee LaBran
(Print or type name of person signing) Authorized Signatory, Rustic Canyon/Fontis Partners GP, LLC, its General Partner (Print or type title of person signing)
Signed and sworn to before me on (date)
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [Xi No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes LX]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [Xl Not Applicable
3. If yes to (1) or (2) above, please identify below the name ofthe person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Rustic Canyon/Fontis Partners, LP Investers with 7.5% or More
Company Address %Ownership
NXP Patners c/o Gibson Dunn & Crutcher 2029 Century Park East, Suite 4000 Los Angeles, CA 90067 15.60%
New Mexico State Investement Council Land Grant Permanent Fund New Mexico State Investment Council 20S5 S. Pacheco Street, Suite 100 Sante Fe, NM 87505 12.43%
TMCTII, LLC c/o Lucas, Horsfall Murphy & Plndroh, LLP 100 East Corson St., Suite 200 Pasadena, CA 91103-3841 15.60%
Capiton Link Fund, LLC 152 West 57th Street 34th Floor New York, NY 10010 13.90%
None of the parties above hold 7.5% or more in applicant named on page 1
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I -- GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Rustic Canyon/Fontis Partners GP, LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. DJ a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control: Rustic Canyon/Fontis Partners, LP
B. Business address of the Disclosing Party: 155 N. Lake Ave, Suite 826
Pasadena, CA 91101
Telephone: 626.744.7799 Fax: 225.626.744.9249 Email: renee@rcfontis.com
Name of contact person: Renee LaBran
Federal Employer Identification No. (if you have one): uyl' : ;^
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [X Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[ ] Privately held business corporation [ ] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[ ] Yes No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Rustic Canyon/Fontis Management, LLC Managing Member
Renee LaBran .
A u ii r- A Managing Member
PSahriplle F Green
Daniel D. Villanueva Managing Member
Daniel L. Villanueva Managing Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Please see attached sheet.
None of the parties hold 7.5% or more ofthe applicant named above.
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [>JNo
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc!) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
05 Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes (X1 No [ ] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing; Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any ofthe following lists maintained by the Office of Foreign Assets Control ofthe U.S. Department of the Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City ofChicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [>J is not
a "financial institution" as defined in Section 2-32-455(b) ofthe Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 ofthe Municipal Code, explain here (attach additional pages if necessary): None
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes LXNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit ofthe City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1 ¦ The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A. 1. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf ofthe Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
^Z.^
Rustic Canyon/Fontis Partners GP, LLC (Print or type' nan\e of Disclosing Party)
(Sign here) Renee LaBran
(Print or type name of person signing)
Signed and sworn to before at Qfi)t> Count
Authorized Signatory (Print or type title of person signing)
me on (date) ^AijUq^^J^lS > _^llil£iS>(state/
Commission expires:_
Notary Public.
OFFICIAL SEAL CYNTHIA AU N0™*Y PUBLIC -STATE OF ILLINOIS MY COMMISSION EXPIRESoSS
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [Xi No
If yes, please identify below (1) the name and title of such person, (2) the name of the legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [x]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ] No [X] Not Applicable
If yes to (1) or (2) above, please identify below the name of the person or legal entity identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDLX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Rustic Canyon/Fontis Partners, GP LLC Investers with 7.5% or More
Company Address %Ownership
Mr. Daniel D Villanueva 517 Via Con Dios Camarillo, CA 93010 22.20%
Mr. Daniel L. Villanueva 1076 Country Club Estates Castle Rock, CO 80108 22 20%
Ms. Gabrielle E. Greene 1650 E. Mountain Street Pasadena, CA 91105 22.20%
RC/F Member, LLC 2425 Olympic Blvd., Suite 6050 W Santa Monica, CA 90404 33.30%
None of the parties above hold 7.5% or more in applicant named on page 1
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable:
Rustic Canyon/Fontis Management, LLC
Check ONE of the following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
1. [ ] the Applicant
OR
2. a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.L) State the legal name of the entity in
which the Disclosing Party holds a right of control: Rustic Canyon/Fontis Partners GP, LLC
B. Business address of the Disclosing Party: 155 N. Lake Ave, Suite 826
Pasadena. CA 91101
Telephone: 626.744.7799 Fax: 224.626.744.9249 Email: renee@rcfontis.com
Name of contact person: Renee Labran
Federal Employer Identification No. (if you have one): j - LL. I'd
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
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SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
1. Indicate the nature of the Disclosing Party:
[ ] Person [X1 Limited liability company
[ ] Publicly registered business corporation [ ] Limited liability partnership
[] Privately held business corporation [] Joint venture
[ ] Sole proprietorship [ ] Not-for-profit corporation
[ ] General partnership (Is the not-for-profit corporation also a 501(c)(3))?
[ ] Limited partnership [ ] Yes [ ] No
[ ] Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes E>JNo []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Renee LaBran Managing Member
Gabrielle E. Green Managing Member
Daniel D. Villanueva Managing Member
Daniel L. Villanueva Managing Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Please see attached sheet.
None of the parties hold 7.5% or more of the applicant named above.
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes LX1 No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature ofthe relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
(X1 Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes Fxi No [] No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the Bureau of Industry and Security ofthe U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) ofthe Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none"). None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, ofthe City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient. None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is fjx} is not .
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
None
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If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes OJNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
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comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records ofinvestments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI - CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
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The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy ofthe statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director ofthe Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
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SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any ofthe items in F.l., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
Rustic Canyon/Fontis Management, LLC (Print or tvpe-rrame of Disclosing Party)
By:
>ign here) Renee LaBran
(Print or type name of person signing)
Authorized Signatory (Print or type title of person signing)
OFFICIAL SEAL CYNTHIA AU NOTARY PUBLIC - STATE OF ILLINOIS MY COMMISSION EXPIRES.-03/16/19
Signed and sworn to before me on v , ^
at CPOV- rC^utity, _^4luULL^
Cornrmssion expires: I(^yj j
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.La., if the Disclosing Party is a corporation; all partners ofthe Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members ofthe Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief , operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes LXl No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
1. Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [XJNo
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [x] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address ofthe building or buildings to which tlie pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
Rustic Canyon/Fontis Management, LLC Investers with 7.5% or More
Company Address %Ownership
Ms. Renee Labran 5210 Vista Miguel Dr., La Canada, CA 91011 21.40%
Ms. Gabrielle E. Greene 1650 E. Mountain Street Pasadena, CA 91105 28.57%
Mr. Daniel D. Villanueva 517 Via Con Dios Camarllld, CA 93010 14.29%
Mr. Daniel L. Villanueva 1076 Country Club Estates Castle Rock, CO 80108 28.57%
None of the parties above hold 7.5% or more in applicant named on page 1
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: RC/F Member, LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[ ] the Applicant
OR
[>3 a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control: Rustic Canyon/Fontis GP, LLC
B. Business address of the Disclosing Party: 100 Wilshire Blvd, Suite 200
Santa Monica, CA 90401
Telephone: 626.744.7799 Fax: 225.626.744.9249 Email: renee(a>rcfontis.com
Name of contact person: Renee LaBran
Federal Employer Identification No. (if you have one): -.¦
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare PFC Revenue Bonds
G. Which City agency or department is requesting this EDS? Department of Finance
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
Person
Publicly registered business corporation
Privately held business corporation
Sole proprietorship
General partnership
Limited partnership
Trust
[>3 Limited liability company
[ ] Limited liability partnership
[ ] Joint venture
[ ] Not-for-profit corporation
(Is the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
[ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[]Yes "MNo []N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title
Renee LaBran Managing Member
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% of the Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Please see attached sheet
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes [xl No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV - DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address ofeach subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount ofthe fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
[x] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes fx] No [ ] No person directly or indirectly owns 10% or more ofthe
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article 1 supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any ofthe offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee of the Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency ofthe federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any ofthe above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
None
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none"). None
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
None
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
[ ] is [x] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 ofthe Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss of the privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) ofthe Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee ofthe City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes [x] No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any,other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[]Yes []No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1 ¦ The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI ~ CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [x] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicaeo.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all of the information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 of the Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F. 1., F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as of the date furnished to the City.
RC/F Member, LLC
(Sign here)
(Print or type-rrame of Disclosing Party)
Renee LaBran
(Print or type name of person signing)
Authorized Signatory
(Print or type title of person signing)
Signed and sworn to before me on (date) r ) (J)\i ) | , ^-Q\ j^p ,
at „ _ County, j£ \ \\ Kb K (state).
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners ofthe Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes IX] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ]Yes [ ]No [XJ Not Applicable
3. If yes to (1) or (2) above, please identify below die name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
RC/F Member, LLC
Company Address ^Ownership
Lee Bailey 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 3.00%
Mark Mencll 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 4.43%
Michael Song 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 4.43%
Jon Staenberg 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 4.43%
Tom & Janet Unterman Living Trust 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 7.90%
John Babcock 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 7.90%
Nate Redmond 100 Wilshire Blvd., Suite 200 " Santa Monica, CA 90401 7.90%
Renee LaBran 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 60.00%
Total 100 Wilshire Blvd., Suite 200 Santa Monica, CA 90401 100.00%
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name of the Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Jefferies LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[X] the Applicant
OR
[ ] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest:
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
520 Madison Ave., 5th Floor, New York, NY 10022
C. Telephone: 212-336-7303 Fax: 646-514-9205 Email: karnone@jefferies.com
D. Name of contact person:
Federal Employer Identification No. (if you have one): ;
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
G. Which City agency or department is requesting this EDS? °^Chicago ® Hare Airport
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification #
Page 1 of 13
SECTION II -- DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY 1. Indicate the nature of the Disclosing Party:
Person [X]
Publicly registered business corporation [ ]
Privately held business corporation [ ]
Sole proprietorship [ ]
General partnership (Is
Limited partnership
Trust [ ]
Limited liability company Limited liability partnership Joint venture
Not-for-profit corporation
the not-for-profit corporation also a 501(c)(3))?
[ ] Yes [ ] No
Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
Dd Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title ofeach general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see the following page
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
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Executive Officers and Directors
Peregrine Broadbent - Chief Financial Officer, Executive Vice President and Director
Brian Paul Friedman - Director and Chairman, Executive Committee
Richard Brian Handler - Chairman, Chief Executive Officer and Director
Lauri A Scoran - Chief Compliance Officer, Managing Director
Michael James Sharp - General Counsel, Secretary, Executive Vice President
John Franco Stacconi - Treasurer
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-154-030 of the Municipal Code of Chicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
Jefferies Group LLC 520 Madison Ave., New York, NY 10022 100%
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 ofthe Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[JYes |X]No
If yes, please identify below the name(s) of such City elected official(s) and describe such relationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
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Name (indicate whether Business Relationship to Disclosing Party Fees (indicate whether
retained or anticipated Address (subcontractor, attorney, paid or estimated.) NOTE:
to be retained) lobbyist, etc.) "hourly rate" or "t.b.d." is
not an acceptable response.
(Add sheets if necessary)
|X] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V -- CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more ofthe Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [] No No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
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The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; . embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official ofthe Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
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Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee ofthe City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or of the United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of-Foreign Assets Control of the U.S. Department of the Treasury or the • Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees ofthe Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, of the City ofChicago (if none, indicate with "N/A" or "none").
9. To the best ofthe Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the 12-month period preceding the execution date of this EDS, to an employee, or elected or appointed official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything made generally available to City employees or to the general public, or (ii) food or drink provided in the course of official City business and having a retail value of less than $20 per recipient (if none, indicate with "N/A" or "none"). As to any gift listed below, please also list.the name ofthe City recipient.
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary):
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 ofthe Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 ofthe Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[]Yes WNo
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X 1, The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records ofinvestments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations of the City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end of each calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) of the Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration ofthe Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [] No
If "Yes," answer the three questions below:
Have you developed and do you have-on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[ ] Yes [ ] No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow.the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-1 54-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
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F.l. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent ofthe City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Jefferies LLC
(Print or type name of Disclosing Party)
(Sign here)
Kym Arnone (Print or type name of person signing)
Managing Director (Print or type title of person signing)
S at
igned and sworn to before meion (date) ~M ^ ^~ \ t k^Ni^lt County, Ueq ^ ar>V- (state).
Notary Public.
Commission expires: "p / X I 2^Q
LEON J BIJOU
NOtafy '^SSigg"™' P»gc 12 of 13
Qualified in Kings County Commission Expires 08/02/201
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as ofthe date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any ofthe following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-iri-law, mother-in-law, son-in-law, daughter-in-laW, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers of the Disclosing Party listed in Section II.B. La., if the Disclosing Party is a corporation; all partners of tlie Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers of the Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [X] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title ofthe elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
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CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entiry which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ ]Yes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 ofthe Municipal Code?
[ ] Yes [ ]No [X] Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
SECTION I - GENERAL INFORMATION
A. Legal name ofthe Disclosing Party submitting this EDS. Include d/b/a/ if applicable: Jefferies Group LLC
Check ONE ofthe following three boxes:
Indicate whether the Disclosing Party submitting this EDS is:
[] the Applicant
OR
[x] a legal entity holding a direct or indirect interest in the Applicant. State the legal name of the
Applicant in which the Disclosing Party holds an interest: Jefferies LLC
OR
3. [] a legal entity with a right of control (see Section II.B.l.) State the legal name of the entity in
which the Disclosing Party holds a right of control:
„ . ^ , ^. , . „ 520 Madison Ave., 5th Floor, New York, NY 10022
B. Business address of the Disclosing Party:
Telephone: 212-336-7303 Fax: 646-514-9205 Email.
karnone@jefferies.com ~ -T ~ Kym Arnone
Name of contact person: .
Federal Employer Identification No. (if you have one): V
Brief description of contract, transaction or other undertaking (referred to below as the "Matter") to which this EDS pertains. (Include project number and location of property, if applicable):
O'Hare General Airport Senior Lien Revenue Bonds
Which City agency or department is requesting this EDS? City of Chicago O Hare Airport
If the Matter is a contract being handled by the City's Department of Procurement Services, please complete the following:
Specification # and Contract #
Ver. 01-01-12 Page 1 of 13
SECTION II - DISCLOSURE OF OWNERSHIP INTERESTS
A. NATURE OF THE DISCLOSING PARTY
. 1. Indicate the nature of the Disclosing Party:
Person [X] Limited liability company
Publicly registered business corporation [ ] Limited liability partnership
Privately held business corporation [] Joint venture'
Sole proprietorship [ ] Not-for-profit corporation
General partnership (Is the not-for-profit corporation also a 501(c)(3))?
Limited partnership [ ] Yes [ ] No
Trust [ ] Other (please specify)
2. For legal entities, the state (or foreign country) of incorporation or organization, if applicable: Delaware
3. For legal entities not organized in the State of Illinois: Has the organization registered to do business in the State of Illinois as a foreign entity?
[X] Yes [ ] No [ ] N/A
B. IF THE DISCLOSING PARTY IS A LEGAL ENTITY:
1. List below the full names and titles of all executive officers and all directors of the entity. NOTE: For not-for-profit corporations, also list below all members, if any, which are legal entities. If there are no such members, write "no members." For trusts, estates or other similar entities, list below the legal titleholder(s).
If the entity is a general partnership, limited partnership, limited liability company, limited liability partnership or joint venture, list below the name and title of each general partner, managing member, manager or any other person or entity that controls the day-to-day management of the Disclosing Party. NOTE: Each legal entity listed below must submit an EDS on its own behalf.
Name Title Please see the following page
2. Please provide the following information concerning each person or entity having a direct or indirect beneficial interest (including ownership) in excess of 7.5% ofthe Disclosing Party. Examples of such an interest include shares in a corporation, partnership interest in a partnership or joint venture,
Page 2 of 13
JEFFERIES GROUP LLC DIRECTORS AND OFFICERS
Directors Rich Handler Brian Friedman Richard G. Dooley Barry J. Alperin W. Patrick Campbell MaryAnne Gilmartin Joseph S. Steinberg
Officers
Rich Handler Brian Friedman Peregrine Broadbent Mike Sharp John Stacconi
Chairman and CEO
Chairman of the Executive Committee
CFO
Executive Vice President and General Counsel Treasurer
interest of a member or manager in a limited liability company, or interest of a beneficiary of a trust, estate or other similar entity. If none, state "None." NOTE: Pursuant to Section 2-1 54-030 of the Municipal Code ofChicago ("Municipal Code"), the City may require any such additional information from any applicant which is reasonably intended to achieve full disclosure.
Name Business Address Percentage Interest in the
Disclosing Party
T j- xt f- ir 520 Madison Ave., 100%
Leucadia National Coporation
New York, NY 10022
Jefferies Group LLC is a wholly owned subsidiary of Leucadia National Corporation a public holding company listed on the NYSE under "LUK". Please find attached the most recent 10-K
SECTION III -- BUSINESS RELATIONSHIPS WITH CITY ELECTED OFFICIALS
Has the Disclosing Party had a "business relationship," as defined in Chapter 2-156 of the Municipal Code, with any City elected official in the 12 months before the date this EDS is signed?
[ ] Yes H No
If yes, please identify below the name(s) of such City elected official(s) and describe such reiationship(s):
SECTION IV -- DISCLOSURE OF SUBCONTRACTORS AND OTHER RETAINED PARTIES
The Disclosing Party must disclose the name and business address of each subcontractor, attorney, lobbyist, accountant, consultant and any other person or entity whom the Disclosing Party has retained or expects to retain in connection with the Matter, as well as the nature of the relationship, and the total amount of the fees paid or estimated to be paid. The Disclosing Party is not required to disclose employees who are paid solely through the Disclosing Party's regular payroll.
"Lobbyist" means any person or entity who undertakes to influence any legislative or administrative action on behalf of any person or entity other than: (1) a not-for-profit entity, on an unpaid basis, or (2) himself. "Lobbyist" also means any person or entity any part of whose duties as an employee of another includes undertaking to influence any legislative or administrative action.
If the Disclosing Party is uncertain whether a disclosure is required under this Section, the Disclosing Party must either ask the City whether disclosure is required or make the disclosure.
Page 3 of 13
Name (indicate whether Business retained or anticipated Address to be retained)
N/A
Relationship to Disclosing Party (subcontractor, attorney, lobbyist, etc.)
Fees (indicate whether paid or estimated.) NOTE: ."hourly rate" or "t.b.d." is not an acceptable response.
(Add sheets if necessary)
[X] Check here if the Disclosing Party has not retained, nor expects to retain, any such persons or entities. SECTION V - CERTIFICATIONS
COURT-ORDERED CHILD SUPPORT COMPLIANCE
Under Municipal Code Section 2-92-415, substantial owners of business entities that contract with the City must remain in compliance with their child support obligations throughout the contract's term.
Has any person who directly or indirectly owns 10% or more of the Disclosing Party been declared in arrearage on any child support obligations by any Illinois court of competent jurisdiction?
[ ] Yes [] No [x| No person directly or indirectly owns 10% or more of the
Disclosing Party.
If "Yes," has the person entered into a court-approved agreement for payment of all support owed and is the person in compliance with that agreement?
[ ] Yes [ ] No
FURTHER CERTIFICATIONS
1. Pursuant to Municipal Code Chapter 1-23, Article I ("Article I")(which the Applicant should consult for defined terms (e.g., "doing business") and legal requirements), if the Disclosing Party submitting this EDS is the Applicant and is doing business with the City, then the Disclosing Party certifies as follows: (i) neither the Applicant nor any controlling person is currently indicted or charged with, or has admitted guilt of, or has ever been convicted of, or placed under supervision for, any criminal offense involving actual, attempted, or conspiracy to commit bribery, theft, fraud, forgery, perjury, dishonesty or deceit against an officer or employee of the City or any sister agency; and (ii) the Applicant understands and acknowledges that compliance with Article I is a continuing requirement for doing business with the City. NOTE: If Article I applies to the Applicant, the permanent compliance timeframe in Article I supersedes some five-year compliance timeframes in certifications 2 and 3 below.
Page 4 of 13
The Disclosing Party and, if the Disclosing Party is a legal entity, all of those persons or entities identified in Section II.B.l. of this EDS:
are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any transactions by any federal, state or local unit of government;
have not, within a five-year period preceding the date of this EDS, been convicted of a criminal offense, adjudged guilty, or had a civil judgment rendered against them in connection with: obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; a violation of federal or state antitrust statutes; fraud; embezzlement; theft; forgery; bribery; falsification or destruction of records; making false statements; or receiving stolen property;
are not presently indicted for, or criminally or civilly charged by, a governmental entity (federal, state or local) with committing any of the offenses set forth in clause B.2.b. of this Section V;
have not, within a five-year period preceding the date of this EDS, had one or more public transactions (federal, state or local) terminated for cause or default; and
have not, within a five-year period preceding the date of this EDS, been convicted, adjudged guilty, or found liable in a civil proceeding, or in any criminal or civil action, including actions concerning environmental violations, instituted by the City or by the federal government, any state, or any other unit of local government.
The certifications in subparts 3, 4 and 5 concern:
the Disclosing Party;
any "Contractor" (meaning any contractor or subcontractor used by the Disclosing Party in connection with the Matter, including but not limited to all persons or legal entities disclosed under Section IV, "Disclosure of Subcontractors and Other Retained Parties");
any "Affiliated Entity" (meaning a person or entity that, directly or indirectly: controls the Disclosing Party, is controlled by the Disclosing Party, or is, with the Disclosing Party, under common control of another person or entity. Indicia of control include, without limitation: interlocking management or ownership; identity of interests among family members, shared facilities and equipment; common use of employees; or organization of a business entity following the ineligibility of a business entity to do business with federal or state or local government, including the City, using substantially the same management, ownership, or principals as the ineligible entity); with respect to Contractors, the term Affiliated Entity means a person or entity that directly or indirectly controls the Contractor, is controlled by it, or, with the Contractor, is under common control of another person or entity;
any responsible official of the Disclosing Party, any Contractor or any Affiliated Entity or any other official, agent or employee ofthe Disclosing Party, any Contractor or any Affiliated Entity, acting pursuant to the direction or authorization of a responsible official of the Disclosing Party, any Contractor or any Affiliated Entity (collectively "Agents").
Page 5 of 13
Neither the Disclosing Party, nor any Contractor, nor any Affiliated Entity of either the Disclosing Party or any Contractor nor any Agents have, during the five years before the date this EDS is signed, or, with respect to a Contractor, an Affiliated Entity, or an Affiliated Entity of a Contractor during the five years before the date of such Contractor's or Affiliated Entity's contract or engagement in connection with the Matter:
bribed or attempted to bribe, or been convicted or adjudged guilty of bribery or attempting to bribe, a public officer or employee of the City, the State of Illinois, or any agency of the federal government or of any state or local government in the United States of America, in that officer's or employee's official capacity;
agreed or colluded with other bidders or prospective bidders, or been a party to any such agreement, or been convicted or adjudged guilty of agreement or collusion among bidders or prospective bidders, in restraint of freedom of competition by agreement to bid a fixed price or otherwise; or
made an admission of such conduct described in a. or b. above that is a matter of record, but have not been prosecuted for such conduct; or
violated the provisions of Municipal Code Section 2-92-610 (Living Wage Ordinance).
Neither the Disclosing Party, Affiliated Entity or Contractor, or any of their employees, officials, agents or partners, is barred from contracting with any unit of state or local government as a result of engaging in or being convicted of (1) bid-rigging in violation of 720 ILCS 5/33E-3; (2) bid-rotating in violation of 720 ILCS 5/33E-4; or (3) any similar offense of any state or ofthe United States of America that contains the same elements as the offense of bid-rigging or bid-rotating.
Neither the Disclosing Party nor any Affiliated Entity is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department ofthe Treasury or the Bureau of Industry and Security of the U.S. Department of Commerce or their successors: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List and the Debarred List.
The Disclosing Party understands and shall comply with the applicable requirements of Chapters 2-55 (Legislative Inspector General), 2-56 (Inspector General) and 2-156 (Governmental Ethics) of the Municipal Code.
If the Disclosing Party is unable to certify to any of the above statements in this Part B (Further Certifications), the Disclosing Party must explain below:
N/A
Page 6 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
8. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a complete list of all current employees of the Disclosing Party who were, at any time during the 12-month period preceding the execution date of this EDS, an employee, or elected or appointed official, ofthe City of Chicago (if none, indicate with "N/A" or "none").
N/A
9. To the best of the Disclosing Party's knowledge after reasonable inquiry, the following is a
complete list of all gifts that the Disclosing Party has given or caused to be given, at any time during the
12-month period preceding the execution date of this EDS, to an employee, or elected or appointed
official, of the City of Chicago. For purposes of this statement, a "gift" does not include: (i) anything
made generally available to City employees or to the general public, or (ii) food or drink provided in the
course of official City business and having a retail value of less than $20 per recipient (if none, indicate
with "N/A" or "none"). As to any gift listed below, please also list the name of the City recipient.
N/A
C. CERTIFICATION OF STATUS AS FINANCIAL INSTITUTION
The Disclosing Party certifies that the Disclosing Party (check one)
is [ ] is not
a "financial institution" as defined in Section 2-32-455(b) of the Municipal Code.
If the Disclosing Party IS a financial institution, then the Disclosing Party pledges:
"We are not and will not become a predatory lender as defined in Chapter 2-32 of the Municipal Code. We further pledge that none of our affiliates is, and none of them will become, a predatory lender as defined in Chapter 2-32 of the Municipal Code. We understand that becoming a predatory lender or becoming an affiliate of a predatory lender may result in the loss ofthe privilege of doing business with the City."
If the Disclosing Party is unable to make this pledge because it or any of its affiliates (as defined in Section 2-32-455(b) of the Municipal Code) is a predatory lender within the meaning of Chapter 2-32 of the Municipal Code, explain here (attach additional pages if necessary): N/A
Page 7 of 13
If the letters "NA," the word "None," or no response appears on the lines above, it will be conclusively presumed that the Disclosing Party certified to the above statements.
D. CERTIFICATION REGARDING INTEREST IN CITY BUSINESS
Any words or terms that are defined in Chapter 2-156 of the Municipal Code have the same meanings when used in this Part D.
In accordance with Section 2-156-110 of the Municipal Code: Does any official or employee of the City have a financial interest in his or her own name or in the name of any other person or entity in the Matter?
[ ] Yes pCJ No
NOTE: If you checked "Yes" to Item D.l., proceed to Items D.2. and D.3. If you checked "No" to Item D.l., proceed to Part E.
Unless sold pursuant to a process of competitive bidding, or otherwise permitted, no City elected official or employee shall have a financial interest in his or her own name or in the name of any other person or entity in the purchase of any property that (i) belongs to the City, or (ii) is sold for taxes or assessments, or (iii) is sold by virtue of legal process at the suit of the City (collectively, "City Property Sale"). Compensation for property taken pursuant to the City's eminent domain power does not constitute a financial interest within the meaning of this Part D.
Does the Matter involve a City Property Sale?
[ ] Yes [ ] No
If you checked "Yes" to Item D.l., provide the names and business addresses of the City officials or employees having such interest and identify the nature of such interest:
Name Business Address Nature of Interest
4. The Disclosing Party further certifies that no prohibited financial interest in the Matter will be acquired by any City official or employee.
E. CERTIFICATION REGARDING SLAVERY ERA BUSINESS
Please check either 1. or 2. below. If the Disclosing Party checks 2., the Disclosing Party must disclose below or in an attachment to this EDS all information required by paragraph 2. Failure to
Page 8 of 13
comply with these disclosure requirements may make any contract entered into with the City in connection with the Matter voidable by the City.
X ]. The Disclosing Party verifies that the Disclosing Party has searched any and all records of the Disclosing Party and any and all predecessor entities regarding records of investments or profits from slavery or slaveholder insurance policies during the slavery era (including insurance policies issued to slaveholders that provided coverage for damage to or injury or death of their slaves), and the Disclosing Party has found no such records.
2. The Disclosing Party verifies that, as a result of conducting the search in step 1 above, the
Disclosing Party has found records of investments or profits from slavery or slaveholder insurance policies. The Disclosing Party verifies that the following constitutes full disclosure of all such records, including the names of any and all slaves or slaveholders described in those records:
SECTION VI -- CERTIFICATIONS FOR FEDERALLY FUNDED MATTERS
NOTE: If the Matter is federally funded, complete this Section VI. If the Matter is not federally funded, proceed to Section VII. For purposes of this Section VI, tax credits allocated by the City and proceeds of debt obligations ofthe City are not federal funding.
A. CERTIFICATION REGARDING LOBBYING
1. List below the names of all persons or entities registered under the federal Lobbying Disclosure Act of 1995 who have made lobbying contacts on behalf of the Disclosing Party with respect to the Matter: (Add sheets if necessary):
(If no explanation appears or begins on the lines above, or if the letters "NA" or if the word "None" appear, it will be conclusively presumed that the Disclosing Party means that NO persons or entities registered under the Lobbying Disclosure Act of 1995 have made lobbying contacts on behalf ofthe Disclosing Party with respect to the Matter.)
2. The Disclosing Party has not spent and will not expend any federally appropriated funds to pay any person or entity listed in Paragraph A.l. above for his or her lobbying activities or to pay any person or entity to influence or attempt to influence an officer or employee of any agency, as defined by applicable federal law, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the award of any federally funded contract, making any federally funded grant or loan, entering into any cooperative agreement, or to extend, continue, renew, amend, or modify any federally funded contract, grant, loan, or cooperative agreement.
Page 9 of 13
The Disclosing Party will submit an updated certification at the end ofeach calendar quarter in which there occurs any event that materially affects the accuracy of the statements and information set forth in paragraphs A.l. and A.2. above.
The Disclosing Party certifies that either: (i) it is not an organization described in section 501(c)(4) ofthe Internal Revenue Code of 1986; or (ii) it is an organization described in section 501(c)(4) of the Internal Revenue Code of 1986 but has not engaged and will not engage in "Lobbying Activities".
If the Disclosing Party is the Applicant, the Disclosing Party must obtain certifications equal in form and substance to paragraphs A.l. through A.4. above from all subcontractors before it awards any subcontract and the Disclosing Party must maintain all such subcontractors' certifications for the duration of the Matter and must make such certifications promptly available to the City upon request.
B. CERTIFICATION REGARDING EQUAL EMPLOYMENT OPPORTUNITY
If the Matter is federally funded, federal regulations require the Applicant and all proposed subcontractors to submit the following information with their bids or in writing at the outset of negotiations.
Is the Disclosing Party the Applicant?
[ ] Yes [ ] No
If "Yes," answer the three questions below:
Have you developed and do you have on file affirmative action programs pursuant to applicable federal regulations? (See 41 CFR Part 60-2.)
[ ] Yes [ ] No
Have you filed with the Joint Reporting Committee, the Director of the Office of Federal Contract Compliance Programs, or the Equal Employment Opportunity Commission all reports due under the applicable filing requirements?
[]Yes []No
Have you participated in any previous contracts or subcontracts subject to the equal opportunity clause?
[ ] Yes [ ] No
If you checked "No" to question 1. or 2. above, please provide an explanation:
Page 10 of 13
SECTION VII - ACKNOWLEDGMENTS, CONTRACT INCORPORATION, COMPLIANCE, PENALTIES, DISCLOSURE
The Disclosing Party understands and agrees that:
The certifications, disclosures, and acknowledgments contained in this EDS will become part of any contract or other agreement between the Applicant and the City in connection with the Matter, whether procurement, City assistance, or other City action, and are material inducements to the City's execution of any contract or taking other action with respect to the Matter. The Disclosing Party understands that it must comply with all statutes, ordinances, and regulations on which this EDS is based.
The City's Governmental Ethics and Campaign Financing Ordinances, Chapters 2-156 and 2-164 of the Municipal Code, impose certain duties and obligations on persons or entities seeking City contracts, work, business, or transactions. The full text of these ordinances and a training program is available on line at www.cityofchicago.org/Ethics , and may also be obtained from the City's Board of Ethics, 740 N.
Sedgwick St., Suite 500, Chicago, IL 60610, (312) 744-9660. The Disclosing Party must comply fully with the applicable ordinances.
If the City determines that any information provided in this EDS is false, incomplete or inaccurate, any contract or other agreement in connection with which it is submitted may be rescinded or be void or voidable, and the City may pursue any remedies under the contract or agreement (if not rescinded or void), at law, or in equity, including terminating the Disclosing Party's participation in the Matter and/or declining to allow the Disclosing Party to participate in other transactions with the City. Remedies at law for a false statement of material fact may include incarceration and an award to the City of treble damages.
It is the City's policy to make this document available to the public on its Internet site-and/or upon request. Some or all ofthe information provided on this EDS and any attachments to this EDS may be made available to the public on the Internet, in response to a Freedom of Information Act request, or otherwise. By completing and signing this EDS, the Disclosing Party waives and releases any possible rights or claims which it may have against the City in connection with the public release of information contained in this EDS and also authorizes the City to verify the accuracy of any information submitted in this EDS.
E. The information provided in this EDS must be kept current. In the event of changes, the Disclosing
Party must supplement this EDS up to the time the City takes action on the Matter. If the Matter is a
contract being handled by the City's Department of Procurement Services, the Disclosing Party must
update this EDS as the contract requires. NOTE: With respect to Matters subject to Article I of
Chapter 1-23 ofthe Municipal Code (imposing PERMANENT INELIGIBILITY for certain specified
offenses), the information provided herein regarding eligibility must be kept current for a longer period,
as required by Chapter 1-23 and Section 2-154-020 ofthe Municipal Code.
The Disclosing Party represents and warrants that:
Page 11 of 13
F. 1. The Disclosing Party is not delinquent in the payment of any tax administered by the Illinois Department of Revenue, nor are the Disclosing Party or its Affiliated Entities delinquent in paying any fine, fee, tax or other charge owed to the City. This includes, but is not limited to, all water charges, sewer charges, license fees, parking tickets, property taxes or sales taxes.
F.2 If the Disclosing Party is the Applicant, the Disclosing Party and its Affiliated Entities will not use, nor permit their subcontractors to use, any facility listed by the U.S. E.P.A. on the federal Excluded Parties List System ("EPLS") maintained by the U. S. General Services Administration.
F.3 If the Disclosing Party is the Applicant, the Disclosing Party will obtain from any contractors/subcontractors hired or to be hired in connection with the Matter certifications equal in form and substance to those in F.l. and F.2. above and will not, without the prior written consent of the City, use any such contractor/subcontractor that does not provide such certifications or that the Disclosing Party has reason to believe has not provided or cannot provide truthful certifications.
NOTE: If the Disclosing Party cannot certify as to any of the items in F.L, F.2. or F.3. above, an explanatory statement must be attached to this EDS.
CERTIFICATION
Under penalty of perjury, the person signing below: (1) warrants that he/she is authorized to execute this EDS and Appendix A (if applicable) on behalf of the Disclosing Party, and (2) warrants that all certifications and statements contained in this EDS and Appendix A (if applicable) are true, accurate and complete as ofthe date furnished to the City.
Jefferies Group LLC
(Print or type name of Disclosing Party)
Bv: t > ^ ' ^
(Sign here) Leon Bijou
(Print or type name of person signing)
Assistant Secretary
(Print or type title of person signing)
JOCMVS.PQLOMI
HOtmt pueuc. mm oi mm *>*
Signed and sworn to before me on (daCh^>M»dlnN*wVtoCi County, _
Notary Public.
Corrtmission expires: cO^-^" "^3, ^g~)|ST
Page 12 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX A
FAMILIAL RELATIONSHIPS WITH ELECTED CITY OFFICIALS AND DEPARTMENT HEADS
This Appendix is to be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent. It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Under Municipal Code Section 2-154-015, the Disclosing Party must disclose whether such Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently has a "familial relationship" with any elected city official or department head. A "familial relationship" exists if, as of the date this EDS is signed, the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof is related to the mayor, any alderman, the city clerk, the city treasurer or any city department head as spouse or domestic partner or as any of the following, whether by blood or adoption: parent, child, brother or sister, aunt or uncle, niece or nephew, grandparent, grandchild, father-in-law, mother-in-law, son-in-law, daughter-in-law, stepfather or stepmother, stepson or stepdaughter, stepbrother or stepsister or half-brother or half-sister.
"Applicable Party" means (1) all executive officers ofthe Disclosing Party listed in Section II.B.l.a., if the Disclosing Party is a corporation; all partners of the Disclosing Party, if the Disclosing Party is a general partnership; all general partners and limited partners of the Disclosing Party, if the Disclosing Party is a limited partnership; all managers, managing members and members of the Disclosing Party, if the Disclosing Party is a limited liability company; (2) all principal officers ofthe Disclosing Party; and (3) any person having more than a 7.5 percent ownership interest in the Disclosing Party. "Principal officers" means the president, chief operating officer, executive director, chief financial officer, treasurer or secretary of a legal entity or any person exercising similar authority.
Does the Disclosing Party or any "Applicable Party" or any Spouse or Domestic Partner thereof currently have a "familial relationship" with an elected city official or department head?
[ ] Yes [X] No
If yes, please identify below (1) the name and title of such person, (2) the name ofthe legal entity to which such person is connected; (3) the name and title of the elected city official or department head to whom such person has a familial relationship, and (4) the precise nature of such familial relationship.
Page 13 of 13
CITY OF CHICAGO ECONOMIC DISCLOSURE STATEMENT AND AFFIDAVIT
APPENDIX B
BUILDING CODE SCOFFLAW/PROBLEM LANDLORD CERTIFICATION
This Appendix is Jo be completed only by (a) the Applicant, and (b) any legal entity which has a direct ownership interest in the Applicant exceeding 7.5 percent (an "Owner"). It is not to be completed by any legal entity which has only an indirect ownership interest in the Applicant.
Pursuant to Municipal Code Section 2-154-010, is the Applicant or any Owner identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[ JYes [X]No
If the Applicant is a legal entity publicly traded on any exchange, is any officer or director of the Applicant identified as a building code scofflaw or problem landlord pursuant to Section 2-92-416 of the Municipal Code?
[JYes [ JNo [XJ Not Applicable
3. If yes to (1) or (2) above, please identify below the name of the person or legal entity
identified as a building code scofflaw or problem landlord and the address of the building or buildings to which the pertinent code violations apply.
FILLING OUT THIS APPENDIX B CONSTITUTES ACKNOWLEDGMENT AND AGREEMENT THAT THIS APPENDIX B IS INCORPORATED BY REFERENCE INTO, AND MADE A PART OF, THE ASSOCIATED EDS, AND THAT THE REPRESENTATIONS MADE IN THIS APPENDIX B ARE SUBJECT TO THE CERTIFICATION MADE UNDER PENALTY OF PERJURY ON PAGE 12 OF THE ASSOCIATED EDS.
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