Mitsubishi UFJ Financial Group Closes $9 Billion Equity Investment in Morgan Stanley as Part of Global Strategic Alliance

Mitsubishi UFJ Financial Group, Inc. (“MUFG”) (NYSE: MTU), Japan’s largest financial group and the world’s second largest bank holding company with $1.1 trillion in bank deposits, and Morgan Stanley (NYSE: MS), a global financial services firm and a market leader in investment banking, today announced that MUFG has closed on a $9 billion equity investment in Morgan Stanley that gives MUFG a 21 percent ownership interest in Morgan Stanley on a fully diluted basis. The investment is part of a previously announced global strategic alliance.

Under the revised terms of the transaction, MUFG has acquired $7.8 billion of perpetual non-cumulative convertible preferred stock with a 10 percent dividend and a conversion price of $25.25 per share, and $1.2 billion of perpetual non-cumulative non-convertible preferred stock with a 10 percent dividend.

MUFG and Morgan Stanley have already identified numerous areas of potential collaboration for their global strategic alliance, including corporate and investment banking, certain areas of retail banking and asset management, as well as lending activities such as corporate and project related loans. The alliance will provide both MUFG and Morgan Stanley with a valuable strategic partner as they seek to enhance their global footprints and capture financial services opportunities around the world. MUFG will receive a Morgan Stanley Board seat and the companies will establish a Steering Committee to maximize the strategic benefits of their alliance.

The MUFG investment further bolsters Morgan Stanley’s already strong capital position. Morgan Stanley’s Tier 1 Capital Ratio is now estimated to be more than 15.5 percent on a pro-forma basis as of August 31, 2008. This is far in excess of the 6 percent required by the Federal Reserve to be treated as well-capitalized and is one of the highest Tier 1 Capital Ratios among bank holding companies peers. The MUFG investment also reduces Morgan Stanley’s leverage ratio to just under 20 times and its adjusted leverage ratio to just over 10 times on a pro-forma basis at August 31, 2008. In addition, Morgan Stanley has continued to reduce the size of its balance sheet since the end of the third quarter. As of today, total assets are now under $900 billion, down from $987 billion at August 31, 2008.

Nobuo Kuroyanagi, MUFG’s President and Chief Executive Officer, said, “Despite a very challenging environment, MUFG and Morgan Stanley have demonstrated our mutual commitment to this strategic alliance and have revised the terms of our investment in the best interests of both companies and our shareholders. We are now looking forward to working with Morgan Stanley to deliver the significant strategic benefits that we believe our alliance will bring.”

John J. Mack, Morgan Stanley’s Chairman and Chief Executive Officer, said, “We are honored to welcome Mitsubishi UFJ, a global leader in commercial banking, as a long-term investor and strategic partner of Morgan Stanley. We are working toward numerous areas of collaboration, and we are confident that these two world-class institutions will create a powerful global alliance in the current challenging market environment. Today’s investment further bolsters our strong capital position and, together with our strategic alliance, will accelerate our transition under our new bank holding company structure and help us realize opportunities created by the continuing dislocation in the financial markets.”

Half of the convertible preferred stock automatically converts after one year into common stock when Morgan Stanley’s stock trades above 150 percent of the conversion price for a certain period and the other half converts on the same basis after year two. The non-convertible preferred stock is callable after year three at 110 percent of the purchase price.

Lazard served as financial advisor to MUFG, and Sullivan & Cromwell LLP and Mori Hamada & Matsumoto served as MUFG’s U.S. and Japanese legal advisors, respectively. BlackRock provided advice to MUFG on asset valuation. Wachtell, Lipton, Rosen & Katz served as legal advisor to Morgan Stanley.