UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from/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 1-6439

Sony Kabushiki Kaisha

(Exact Name of Registrant as specified in its charter)

SONY CORPORATION

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

7-1, KONAN 1-CHOME, MINATO-KU,

TOKYO 108-0075 JAPAN

(Address of principal executive offices)

J. Justin Hill, Senior Vice President, Investor Relations

Sony Corporation of America

25 Madison Avenue, 26^th Floor

New York, NY 10010-8601

Telephone: 212-833-6722

E-mail: ir.sony@am.sony.com

(Name, Telephone, E-mail and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
American Depositary Shares*	New York Stock Exchange
Common Stock**	New York Stock Exchange

* American Depositary Shares evidenced by American Depositary Receipts.

Each American Depositary Share represents one share of Common Stock.

** No par value per share.

Not for trading, but only in connection with the listing of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.

Securities registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report:

	Outstanding as of
	March 31, 2017		March 31, 2017
Title of Class	(Tokyo Time)		(New York Time)
Common Stock		1,262,690,438
American Depositary Shares				106,342,079

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☑    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  ☑

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  ☑    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  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☑  Large accelerated filer ☐  Accelerated filer ☐  Non-accelerated filer ☐  Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP  ☑ International Financial Reporting Standards as issued by the International Accounting Standards Board  ☐ Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ☐ Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐ No  ☑

Cautionary Statement

Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:

(i) the global economic and political environment in which Sony operates and the economic and political conditions in Sony’s markets, particularly levels of consumer spending;

(ii) foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets and liabilities are denominated;

(iii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms, smartphones and televisions, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer preferences;

(iv) Sony’s ability and timing to recoup large-scale investments required for technology development and production capacity;

(v) Sony’s ability to implement successful business restructuring and transformation efforts under changing market and regulatory conditions;

(vi) changes in laws, regulations and government policies in the markets in which Sony operates, including those related to taxation and corporate social responsibility;

(vii) Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms;

(viii) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in the electronics businesses);

(ix) Sony’s ability to maintain product quality and customer satisfaction with its products and services;

(x) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments;

(xi) significant volatility and disruption in the global financial markets or a ratings downgrade;

(xii) Sony’s ability to forecast demands, manage timely procurement and control inventories;

(xiii) Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, supply and distribution of its products, and its other business operations;

(xiv) the outcome of pending and/or future legal and/or regulatory proceedings;

(xv) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;

(xvi) the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment;

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(xvii) the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information, potential business disruptions or financial losses; and

(xviii) risks related to catastrophic disasters or similar events.

Risks and uncertainties also include the impact of any future events with material adverse impact.

Important information regarding risks and uncertainties is also set forth elsewhere in this annual report, including in “Risk Factors” included in “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects,” “Legal Proceedings” included in “Item 8. Financial Information,” Sony’s consolidated financial statements referenced in “Item 8. Financial Information” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

In this document, Sony Corporation and its consolidated subsidiaries are together referred to as “Sony” or “Sony Group.” In addition, sales and operating revenue are referred to as “sales” in the narrative description except in the consolidated financial statements.

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TABLE OF CONTENTS

Item 1. Identity of Directors, Senior Management and Advisers	6
Item 2. Offer Statistics and Expected Timetable	6
Item 3. Key Information	6
A. Selected Financial Data	6
B. Capitalization and Indebtedness	7
C. Reasons for the Offer and Use of Proceeds	7
D. Risk Factors	7
Item 4. Information on the Company	23
A. History and Development of the Company	23
B. Business Overview	25
C. Organizational Structure	34
D. Property, Plant and Equipment	35
Item 4A. Unresolved Staff Comments	36
Item 5. Operating and Financial Review and Prospects	37
A. Operating Results	37
B. Liquidity and Capital Resources	61
C. Research and Development	63
D. Trend Information	64
E. Off-balance Sheet Arrangements	68
F. Contractual Obligations, Commitments, and Contingent Liabilities	69
Critical Accounting Policies and Estimates	70
Recently Adopted Accounting Standards	76
Recent Accounting Pronouncements	76
Item 6. Directors, Senior Management and Employees	76
A. Directors and Senior Management	76
B. Compensation	83
C. Board Practices	88
D. Employees	92
E. Share Ownership	93
Item 7. Major Shareholders and Related Party Transactions	94
A. Major Shareholders	94
B. Related Party Transactions	94
C. Interests of Experts and Counsel	94
Item 8. Financial Information	95
A. Consolidated Statements and Other Financial Information	95
Legal Proceedings	95
Dividend Policy	95
B. Significant Changes	96
Item 9. The Offer and Listing	96
A. Offer and Listing Details	96
B. Plan of Distribution	96
C. Markets	97
D. Selling Shareholders	97
E. Dilution	97
F. Expenses of the Issue	97
Item 10. Additional Information	97
A. Share Capital	97
B. Memorandum and Articles of Association	97
C. Material Contracts	105
D. Exchange Controls	105
E. Taxation	106
F. Dividends and Paying Agent	108
G. Statement by Experts	108
H. Documents on Display	108
I. Subsidiary Information	109
Item 11. Quantitative and Qualitative Disclosures about Market Risk	109
Item 12. Description of Securities Other Than Equity Securities	110
A. Debt Securities	110

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B. Warrants and Rights	110
C. Other Securities	110
D. American Depositary Shares	110
Item 13. Defaults, Dividend Arrearages and Delinquencies	111
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	112
Item 15. Controls and Procedures	112
Item 16. [Reserved]	113
Item 16A. Audit Committee Financial Expert	113
Item 16B. Code of Ethics	113
Item 16C. Principal Accountant Fees and Services	113
Audit and Non-Audit Fees	113
Audit Committee’s Pre-Approval Policies and Procedures	113
Item 16D. Exemptions from the Listing Standards for Audit Committees	114
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	114
Item 16F. Change in Registrant’s Certifying Accountant	114
Item 16G. Disclosure About Differences in Corporate Governance	115
Item 16H. Mine Safety Disclosure	120
Item 17. Financial Statements	120
Item 18. Financial Statements	120
Item 19. Exhibits	121
Signatures	122

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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

	Fiscal year ended March 31
	2013			2014			2015			2016			2017
	(Yen in millions, yen per share amounts)
Income statement data:
Sales and operating revenue		6,795,504			7,767,266			8,215,880			8,105,712			7,603,250
Equity in net income (loss) of affiliated companies		(6,948	)		(7,374	)		3,921			2,238			3,563
Operating income		226,503			26,495			68,548			294,197			288,702
Income before income taxes		242,084			25,741			39,729			304,504			251,619
Income taxes		140,398			94,582			88,733			94,789			124,058
Net income (loss) attributable to Sony Corporation’s stockholders		41,540			(128,369	)		(125,980	)		147,791			73,289
Comprehensive income (loss)		325,798			121,978			34,317			(44,915	)		143,652
Data per share of Common Stock:
Net income (loss) attributable to Sony Corporation’s stockholders*
— Basic		41.32			(124.99	)		(113.04	)		119.40			58.07
— Diluted		38.79			(124.99	)		(113.04	)		117.49			56.89
Cash dividends declared Interim		12.50			12.50			—			10.00			10.00
		(15.18 cents	)		(12.12 cents	)		—			(8.09 cents	)		(8.79 cents	)
Cash dividends declared Fiscal year-end		12.50			12.50			—			10.00			10.00
		(12.46 cents	)		(12.19 cents	)		—			(9.01 cents	)		(9.13 cents	)
Balance sheet data:
Sony Corporation’s stockholders’ equity		2,192,262			2,258,137			2,317,077			2,463,340			2,497,246
Common stock		630,923			646,654			707,038			858,867			860,645
Net assets		2,672,004			2,783,141			2,928,469			3,124,410			3,135,422
Total assets		14,211,033			15,333,720			15,834,331			16,673,390			17,660,556
Number of shares issued at fiscal year-end (thousands of shares of common stock)		1,011,950			1,044,708			1,169,773			1,262,494			1,263,764
Sony Corporation’s stockholders’ equity per share of common stock		2,168.62			2,163.63			1,982.54			1,952.79			1,977.72

* Refer to Note 22 of the consolidated financial statements.

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	Average		High		Low		Period-end
	(Yen)
Yen exchange rates per U.S. dollar:
Fiscal year ended March 31
2013		82.96		96.16		77.41		94.16
2014		100.15		105.25		92.96		102.98
2015		109.75		121.50		101.26		119.96
2016		120.04		125.58		111.30		112.42
2017		108.25		118.32		100.07		111.41
2017
January		—		117.68		112.72		112.72
February		—		114.34		111.74		112.06
March		—		115.02		110.48		111.41
April		—		111.52		108.40		111.44
May		—		114.19		110.68		110.71
June (through June 9)		—		111.24		109.34		110.61

The yen exchange rates represent noon buying rates for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York for the business days in the respective periods.

B. Capitalization and Indebtedness

Not Applicable

C. Reasons for the Offer and Use of Proceeds

Not Applicable

D. Risk Factors

This section contains forward-looking statements that are subject to the Cautionary Statement appearing on page 2 of this annual report. Risks to Sony are also discussed elsewhere in this annual report, including, without limitation in the other sections of this annual report referred to in the Cautionary Statement.

Sony must overcome increasingly intense competition, especially in its electronics businesses.

Sony’s electronics businesses compete against competitors, including new entrants, on the basis of various factors including price and function. Even for those products where Sony believes it has a strong competitive advantage, such as image sensors, it is possible that its competitors’ technological capabilities will catch up with Sony’s, and Sony will be unable to maintain its advantageous market position. In its consumer electronics businesses, in order to produce products that appeal to changing and increasingly diverse consumer preferences or to overcome the fact that a relatively high percentage of consumers already possess products similar to those that Sony offers, Sony must develop superior technology, anticipate consumer tastes and rapidly develop attractive and differentiated products with competitive selling prices and features. Sony faces increasingly intense pricing pressure from competitors, retailer consolidation, and shorter product cycles in a variety of consumer product categories. Sony’s operating results depend on Sony’s ability to continue to efficiently develop and offer products at competitive prices, through multiple sales channels, that meet changing and increasingly diverse consumer preferences. If Sony is unable to maintain its advantageous market position in the fields in which it has a technological or other competitive advantage, if Sony is unable to effectively anticipate and counter the ongoing price erosion that frequently affects its consumer products, if there is a change in existing business models or consumer preferences, or if the average selling prices of its consumer products decrease faster than Sony is able to reduce its manufacturing costs, Sony’s operating results and financial condition may be adversely impacted.

To remain competitive and stimulate customer demand, Sony must successfully manage frequent introductions of, and transitions to, new products, semiconductors, components, and services, while managing the impact on the sales of Sony’s existing products, semiconductors, components, and services.

Due to the highly volatile and competitive nature of the consumer electronics, network services and mobile communication industries, Sony must continually introduce, enhance and stimulate customer demand for products, semiconductors (including image sensors), components, services and technologies in both mature and

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developing markets. The successful introductions of, and transitions to, new products, semiconductors, components, and services depend on a number of factors, such as the timely and successful completion of development efforts, market acceptance, Sony’s ability to plan and execute an effective marketing strategy, Sony’s ability to manage the risks associated with new products and production ramp-up issues, the availability of application software for new products, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities to meet anticipated demand, and the risk that new products, semiconductors, components, and services may have quality or other issues in the early stages of introduction.

Additionally, markets for existing products and services such as smartphones, and the image sensors within, or game consoles might contract as consumer preferences shift, or new, competing technologies are introduced. Under these circumstances, Sony must respond to changing consumer demands with appealing new products and services as well as continue to improve the value of its existing products and services.

Accordingly, if Sony cannot adequately manage frequent introductions of, and transitions to, new products, semiconductors, components and services, Sony’s operating results and financial condition may be adversely impacted.

Sony is subject to competition from firms that may be more specialized or have greater resources.

Sony has several business segments in different industries with many product and service categories, which cause it to compete with many existing and new competitors ranging from large multinational companies to highly specialized entities that focus on only a few businesses. In addition, outsourced manufacturing services partners may enter and compete with Sony in markets in which they currently supply products to Sony. Furthermore, current and future competitors may have greater financial, technical, labor and marketing resources available to them than those available to the businesses of Sony, and Sony may not be able to fund or invest in certain areas of its businesses to the same degree as its competitors or match competitor pricing. A failure to efficiently anticipate and respond to these established and new competitors may adversely impact Sony’s operating results.

Sony’s investments in research and development may not yield the expected results.

Sony’s businesses operate in intensely competitive markets characterized by changing consumer preferences and rapid technological innovation. Due to advanced technological innovation and the relative ease of technology imitation, new products and services tend to become standardized more rapidly, leading to more intense competition and ongoing price erosion. In order to strengthen the competitiveness of its products in this environment, Sony continues to invest heavily in research and development(“R&D”), particularly in growth areas such as image sensors and the Game & Network Services (“G&NS”) segment, and intends to limit its expenses in markets it deems mature or as having limited growth potential. However, Sony may not be successful in identifying growth potential and evaluating major market trends, its investments may not yield the innovation or the expected results quickly enough, or competitors may lead Sony in technological innovation. This may hinder Sony’s ability to commercialize, in a timely manner, new and competitive products and services that meet the needs of the market, which consequently may adversely impact Sony’s operating results as well as its reputation.

Sony’s business restructuring and transformation efforts are costly and may not attain their objectives.

Sony is implementing restructuring initiatives that focus on profitability, business autonomy, shareholder value and the clear positioning of each business within the overall business portfolio. Restructuring charges in the amount of 98.0 billion yen, 38.3 billion yen and 60.2 billion yen were recorded in the fiscal years ended March 31, 2015, 2016 and 2017, respectively. Restructuring charges for the fiscal year ended March 31, 2017 include an impairment charge of 42.3 billion yen resulting from the planned transfer of the battery business. While Sony anticipates recording approximately 15.0 billion yen of restructuring charges in the fiscal year ending March 31, 2018, significant additional or future restructuring charges may be recorded due to reasons such as the impact of economic downturns or exiting from unprofitable businesses, including the potential sale of certain businesses. An example of such additional restructuring charges occurred during the fiscal year ended March 31, 2017, in which restructuring charges were initially estimated to be approximately 12.0 billion yen; however, the actual restructuring charges incurred were 60.2 billion yen due to the decision to sell the battery business. Restructuring charges are recorded primarily in cost of sales, selling, general and administrative (“SGA”) expenses and other operating (income) expense, net, and thus adversely affect Sony’s operating income (loss) and net income (loss) attributable to Sony’s stockholders (refer to Note 19 of the consolidated financial statements). Sony continues to take initiatives to optimize its manufacturing operations, utilize outsourced

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manufacturing, reduce SGA expenses across the Sony group, outsource support functions and information processing operations, and optimize business process across functions, including sales and marketing, manufacturing, logistics, procurement, quality and R&D.

Due to internal or external factors, efficiencies and cost savings from the above-mentioned and other restructuring and transformation initiatives may not be realized as scheduled and, even if those benefits are realized, Sony may not be able to achieve the expected level of profitability due to market conditions worsening beyond expectations. Possible internal factors may include, for example, changes in restructuring and transformation plans, an inability to implement the initiatives effectively with available resources, an inability to coordinate effectively across different business groups, delays in implementing the new business processes or strategies, or an inability to effectively manage and monitor the post-transformation performance of the operation. Possible external factors may include, for example, delays in obtaining necessary regulatory approvals, as well as increased or unanticipated burdens from local legal or regulatory restrictions, including labor regulations and labor union agreements, or from customary Japanese labor practices that may prevent Sony from executing its restructuring initiatives as planned. The inability to fully and successfully implement restructuring and transformation programs may adversely affect Sony’s operating results and financial condition. Additionally, operating cash flows may be reduced as a result of payments for restructuring charges. For example, it had been anticipated that no operating losses or exit costs related to the planned transfer of the battery business to Murata Manufacturing Co., Ltd. would be incurred during the fiscal year ending March 31, 2018 because the planned transfer was originally scheduled to close during the fiscal year ended March 31, 2017. However, the timing of this planned transfer changed due to the timing of the regulatory approvals, and as a result Sony expects to incur losses and expenses during the fiscal year ending March 31, 2018.

Sony’s acquisitions, joint ventures and investments may not be successful.

Sony actively engages in acquisitions, joint ventures and other strategic investments in order to acquire new technologies, efficiently develop new businesses, and enhance its business competitiveness. For example, in February 2016, Sony completed the acquisition of Altair Semiconductor, which develops and sells products focused on LTE (Long Term Evolution) technologies. Additionally, in February 2017, Sony completed the first phase of a two-phase acquisition of the TEN Sports Network, which owns leading sports networks both within and outside of India. Furthermore, Sony has previously engaged in joint ventures with third parties in order to reduce its capital investment, reduce operating costs and share risk with its joint venture partners, and may do so again in the future. Moreover, Sony may sell its equity interest in a joint venture or buy out the joint venture partner’s equity due to the achievement of its original objectives or other reasons. For example, in September 2016, Sony acquired the 50% equity interest in Sony/ATV Music Publishing LLC (“Sony/ATV”) held by the Estate of Michael Jackson (the “Estate”) and Sony/ATV became a wholly-owned subsidiary of Sony. Sony/ATV was Sony’s joint venture with the Estate in the music publishing business.

Sony may incur significant expenses to acquire and integrate businesses. Additionally, Sony may not achieve strategic objectives, planned revenue improvements and cost savings, and may not retain key personnel of the acquired businesses. Sony’s operating results may also be adversely affected by the assumption of liabilities related to any acquired businesses.

Sony currently has investments in several joint ventures and strategic partnerships, and may engage in new investments in the future. If Sony and its partners are unable to reach their common financial objectives successfully due to changes in the competitive environment, strategic or cultural differences, failure to achieve synergies or other reasons, Sony’s operating results may be adversely affected. Sony’s operating results may also be adversely affected in the short- and medium-term during a partnership, even if Sony and its partners remain on course to achieve their common financial objectives. In addition, by participating in joint ventures or other strategic investments, Sony may encounter conflicts of interest, may not maintain sufficient control over these relationships, including over cash flow, and may be faced with an increased risk of the loss of proprietary technology or know-how. Sony’s reputation may be harmed by the actions or activities of a joint venture that uses the Sony brand. Sony may also be required to provide additional funding or debt guarantees to a joint venture, or to buy-out a joint venture partner, sell its share or dissolve a joint venture, whether as a result of financial performance, or otherwise. Moreover, if the value of any of Sony’s investments in an affiliate accounted for under the equity method declines below the carrying value of Sony’s investment, and such decrease is judged to be other than temporary, Sony will be required to record an impairment loss, and the loss may increase if Sony is unable to dispose of such investments due to contractual or other reasons.

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Sony may not be able to recoup the capital expenditures or investments it makes to increase production capacity.

Sony continues to invest in production facilities and equipment in its electronics businesses, including image sensor fabrication facilities to meet the demand for image sensors, particularly for use in smartphones. For example, in the fiscal year ended March 31, 2016, Sony signed an agreement with Toshiba Corporation (“Toshiba”) to acquire semiconductor fabrication facilities, equipment and related assets for 19.0 billion yen, of which a majority was acquired by March 2017. Sony invested approximately 45 billion yen of capital in the fiscal year ended March 31, 2017 and expects to invest approximately 110 billion yen of capital in the fiscal year ending March 31, 2018, in order to increase image sensor production capacity. However, if market changes and corresponding declines in demand result in a mismatch between sales volume and anticipated production volumes, or if unit sales prices decline due to market oversupply, Sony may not be able to recover its capital expenditures or investments, in part or in full, or the recovery of these capital expenditures or investments may take longer than expected. In particular, with respect to image sensors, much of Sony’s sales depends on smartphones, and it is possible that Sony will not be able to achieve its expected sales volume, based on factors such as consumer demand and the competitive environment in the smartphone market, or the business decisions, operating results, or financial condition of Sony’s major customers. As a result of these factors, the carrying value of the related assets may be subject to an impairment charge, which may adversely affect Sony’s profitability.

Sony’s sales and profitability may be affected by the operating performance of wholesalers, retailers and other resellers.

Sony is dependent for the distribution of its products on wholesalers, retailers and other resellers, many of whom also distribute competitors’ products. For example, Sony Mobile Communications Inc. (“Sony Mobile”) is dependent on cellular network carriers’ distribution channels for distribution of its smartphone products in many countries. The operating results and financial condition of many wholesalers, retailers and other resellers have been adversely impacted by competition from online retailers and weak economic conditions.

Sony invests in programs to incentivize wholesalers, retailers, and other resellers to position and promote Sony’s products, but there is no assurance that these programs will provide a significant return or incremental revenue by persuading consumers to buy Sony products instead of competitors’ products. In some cases, Sony’s smartphones sold through cellular network carriers are subsidized by the carriers. There is no assurance that such subsidies will be continued at all or in the same amounts upon renewal of Sony’s agreements with these carriers or in agreements Sony enters into with new carriers.

Sony also sells many of its products directly to consumers through its online and retail stores. Some wholesalers and retailers may perceive Sony’s direct sales as conflicting with their business interests as distributors and resellers of Sony’s products. Such a perception could discourage resellers from investing resources in the distribution and sale of Sony’s products or lead them to limit or cease distribution of those products.

Sony’s operating results and financial condition may be adversely affected if the financial condition of these wholesalers, retailers, and other resellers weakens, if they stop distributing Sony’s products, or if uncertainty regarding demand for Sony’s products or other factors cause them to reduce their ordering, marketing, subsidizing, and distribution of Sony’s products.

As a global company, Sony is subject to a wide range of laws and regulations and a growing consumer focus on corporate social responsibility and sourcing practices in the countries where it does business. Those laws and regulations, as well as consumer focus, might change in significant ways, leading to an increase in the costs of Sony’s operations, a curtailment of Sony’s activities, and/or an adverse effect on Sony’s reputation.

Sony is subject to laws and regulations affecting its operations in a number of areas including advertising, data protection, consumer protection, import and export requirements, anti-corruption, anti-competition, environmental protection, occupational health and safety, labor practices and human rights. These include laws and regulations relating to greenhouse gas emission reduction, air pollution, water pollution, and the use of hazardous substances in manufacturing and non-manufacturing sites; energy efficiency of certain products and recycling of products, batteries and packaging materials; sourcing of raw materials; modern slavery; as well as laws relating to the collection, use, retention, security and transfer of personally identifiable information (“PII”). For example, the European Union’s (“EU”) General Data Protection Regulation, which will become effective in May 2018, will impose significant new worldwide obligations on the handling of PII of EU residents. In many cases, these laws apply not only to customer data but also may restrict transfers of employee PII among Sony’s subsidiaries.

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Compliance with these laws, regulations and similar requirements may be onerous and expensive. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Any such costs, which may increase in the future as a result of changes in these laws and regulations, or in their interpretation, could individually or in the aggregate make Sony’s products less attractive to its customers, delay introduction of new products in one or more regions or cause Sony to change or limit its business practices. Sony has implemented policies and procedures designed to ensure compliance with applicable laws and regulations but there is no assurance that Sony’s employees, contractors or agents will not violate such laws or Sony’s policies and procedures, and subject Sony to fines, penalties, legal judgments, restrictions on business operations and/or reputational damage.

Additionally, there is a growing global regulatory and consumer focus on corporate social responsibility and sourcing practices and increasing regulatory obligations of public disclosure regarding these matters. In particular, there is an interest regarding labor practices, including work environments at electronic component manufacturers and original design manufacturing/original equipment manufacturing (“ODM/OEM”) product manufacturers operating in Asia. Increased regulation and public pressure in this area could cause Sony’s compliance costs to increase, particularly since Sony uses many components and materials to manufacture its products and relies on suppliers to provide these components and materials but does not directly control the suppliers’ procurement or employment practices. A finding of non-compliance, or the perception that Sony has not responded appropriately to growing consumer concern for such issues, whether or not Sony is legally required to do so, may adversely affect Sony’s operating results and financial condition if that finding or that perception causes consumers to choose products of other companies.

Increased reliance on external business partners may increase financial, brand image, reputational and other risks to Sony.

With the increasing necessity of pursuing quick business development and high operating efficiency with limited managerial resources, Sony increasingly relies on third-party suppliers and business partners for parts and components, software and network services. Sony also relies on other business partners to provide software technologies, such as the Android OS for mobile products and televisions, and services. As a result, Sony’s products or services may be affected by quality issues caused by the failure of third-party parts and components, software, or network services. In addition, reliance on third-party software technologies may make it increasingly difficult for Sony to differentiate its products from competitors’ products. Moreover, third-party parts and components, software and network services used in Sony products or services may be subject to copyright or patent infringement claims. Particularly in Sony’s electronics businesses, the uncertain economic environment surrounding Sony is compounded by continued, intense pricing pressure from competitors, shrinking markets for certain key products and shorter product cycles. In this environment, third-party business partners may also discontinue support or otherwise change business terms for Sony’s products and services, or prioritize the products and services of Sony’s competitors or customers outside the electronics industry. Such issues resulting from reliance on third-party suppliers and business partners for parts and components, software, and network services may adversely affect Sony’s operating results, brand image or reputation. Sony also utilizes outsourced manufacturing services for product and component supply in its consumer electronics businesses. If Sony cannot adequately manage these outsourcing relationships, or if natural disasters, cyber-attacks or other events affect Sony’s business partners, Sony’s production operations may be adversely affected. Sony may not be able to achieve target volume or quality levels, and may risk losing proprietary technology or know-how. Sony also outsources activities, including certain procurement, logistics, sales, data processing, human resources, accounting, and other services, to external business partners. Sony’s operations may be affected if the external business partners do not comply with applicable laws or regulations, or if they infringe third-party intellectual property rights, or if they are subject to business or service interruption caused by accidents, natural disasters, cyber-attacks or bankruptcies. Furthermore, a breach of a business partner’s information security may result in unauthorized access to Sony’s business information, including proprietary information, intellectual property, employee information and data related to Sony’s customers, suppliers and other business partners.

Sony must efficiently manage its procurement of parts and components and control its inventory of products, parts, and components within volatile markets.

In Sony’s electronics businesses, Sony uses a large volume of parts and components, such as semiconductors including chipsets for mobile products, and liquid crystal display (“LCD”) panels, for its products. Fluctuations in the availability and pricing of parts and components can adversely affect Sony’s operating results. For instance, shortages of parts or components or fluctuations in the prices of raw materials may result in sharply higher prices and an increase in the cost of goods sold. Also, shortages or delayed

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shipments of critical parts or components, particularly where Sony is substantially reliant on one supplier, where there is limited production capacity for custom components, or where there are initial manufacturing capacity constraints for products or components which use new technologies, may result in a reduction or suspension of production at Sony’s or its business partners’ manufacturing sites.

Sony places orders for parts and components in line with production and inventory plans determined in advance based on its forecast of consumer demand, which is highly volatile and difficult to predict. Inaccurate forecasts of consumer demand or inadequate business planning can lead to a shortage or excess of inventory, which can disrupt production plans and result in lost sales opportunities or inventory adjustments. Sony writes down the value of its inventory when the underlying parts, components or products have become obsolete, when inventory levels exceed the amount expected to be used, or when the value of the inventory is otherwise recorded at a value higher than net realizable value. For example, in the fiscal year ended March 31, 2015, Sony recorded an 11.2 billion yen write-down of PlayStation^®Vita (“PS Vita”) and PlayStation TV (“PS TV”) components because the latest forecast of PS TV unit sales did not reach Sony’s original forecast. Additionally, Sony recorded a 6.5 billion yen inventory write-down of certain image sensors for mobile products in the Semiconductors segment in the fiscal year ended March 31, 2017. Sony has experienced shortages of certain parts and components as a result of the damage to its suppliers caused by natural disasters, and may experience such shortages due to similar circumstances again in the future. Such lost sales opportunities, inventory adjustments, or shortages of parts and components have had and may have an adverse impact on Sony’s operating results and financial condition.

Sony’s sales and profitability are sensitive to economic trends in Sony’s major markets.

Sony’s sales and profitability are sensitive to economic trends in each of the major markets in which Sony operates. These markets may be subject to significant economic downturns, resulting in an adverse impact on Sony’s operating results and financial condition. In the fiscal year ended March 31, 2017, 31.5%, 22.0% and 21.5% of Sony’s sales were attributable to Japan, the U.S. and Europe, respectively.

Sony’s operating results depend on the demand from consumers and commercial customers and the performance of retailers, wholesalers and other resellers. An actual or expected deterioration of economic conditions in any of Sony’s major markets may depress consumer confidence and spending, resulting in an actual decline in consumption. Commercial customers and other business partners may experience deterioration in their own businesses mainly due to cash flow shortages, difficulty in obtaining financing and reduced end-user demand, resulting in reduced demand for Sony’s products and services. Commercial customers’ difficulty in fulfilling their obligations to Sony may also have an adverse impact on Sony’s operating results and cash flows. Sony’s suppliers are also susceptible to similar conditions that may impact their ability to fulfill their contractual obligations and may adversely impact Sony’s operating results if products and services cannot be obtained at competitive prices.

Global economic conditions may also affect Sony in other ways. For example, further restructuring charges, higher pension and other post-retirement benefit costs or funding requirements, and additional asset impairment charges, among other factors, have had and may have an adverse impact on Sony’s operating results, financial condition and cash flows.

Foreign exchange rate fluctuations can affect Sony’s operating results and financial condition.

Sony’s operating results and financial condition are sensitive to foreign exchange rate fluctuations because many of Sony’s products are sold in countries other than the ones in which they were developed and/or manufactured. For example, within Sony’s electronics businesses, research and development and headquarters’ overhead costs are incurred mainly in yen, and manufacturing costs, including material costs, costs of procurement of parts and components, and costs of outsourced manufacturing services, are incurred mainly in the U.S. dollar and yen. Sales are dispersed and recorded in Japanese yen, the U.S. dollar, euro, Chinese renminbi, and local currencies of other areas, including emerging markets. Consequently, foreign exchange rate fluctuations have had and may have an adverse impact on Sony’s operating results, especially when the yen or the euro weaken significantly against the U.S. dollar, when the yen strengthens significantly against the euro, or when the U.S. dollar strengthens against emerging market currencies. Sony’s operating results may also be adversely impacted by foreign exchange rate fluctuations since Sony’s consolidated statements of income are prepared by translating the local currency denominated operating results of its subsidiaries around the world into yen. Furthermore, as Sony’s businesses have expanded in China and other areas, including emerging markets, the impact of fluctuations of foreign currency exchange rates in these areas against the U.S. dollar and yen has increased. Mid- to long-term changes in exchange rate levels may interfere with Sony’s global allocation of

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resources and hinder Sony’s ability to engage in research and development, procurement, production, logistics, and sales activities in a manner that is profitable after the effect of such exchange rate changes.

Although Sony hedges most of the net short-term foreign currency exposure resulting from import and export transactions shortly before they are projected to occur, such hedging activity cannot entirely eliminate the risk of adverse exchange rate fluctuations.

Moreover, since Sony’s consolidated balance sheet is prepared by translating the local currency denominated assets and liabilities of its subsidiaries around the world into yen, Sony’s equity capital may be adversely impacted when the yen strengthens significantly against the U.S. dollar, the euro and/or other foreign currencies.

Ratings downgrades or significant volatility and disruption in the global financial markets may adversely affect the availability and cost of Sony’s funding.

Sony’s credit ratings may be adversely impacted by unfavorable operating results and a decline in its financial condition. Any credit rating downgrades may, in turn, result in an increase in Sony’s cost of funding and may have an adverse impact on Sony’s ability to access commercial paper or mid- to long-term debt markets on acceptable terms.

Additionally, global financial markets may experience significant levels of volatility and disruption, generally putting downward pressure on financial and other asset prices and impacting credit availability. Historically, Sony’s primary sources of funds have been cash flows from operations, the issuance of commercial paper and other debt securities such as term debt as well as borrowings from banks and other institutional lenders. There can be no assurance that such sources will continue to be available at acceptable terms or be sufficient to meet Sony’s needs.

As a result, Sony may seek other sources of financing to fund operations, such as the draw-down of funds from contractually committed lines of credit from financial institutions or the sale of assets, in order to repay commercial paper and mid- to long-term debt as they become due, and to meet other operational and liquidity needs. However, such funding sources may also not be available at acceptable terms or be sufficient to meet Sony’s requirements. As a result, Sony’s operating results, financial condition and liquidity may be adversely affected.

Sony is subject to the risks of operations in different countries.

Sony’s operations are conducted in many countries around the world, and these international operations can create challenges. For example, in Sony’s electronics businesses, production and procurement of products, parts and components in China and other Asian countries increase the time necessary to supply products to other markets worldwide, which can make it more difficult to meet changing customer demand. Further, in certain countries, Sony may encounter difficulty in planning and managing operations due to unfavorable political or economic factors, such as armed conflicts, deterioration in foreign relations, domestic cultural and religious conflicts, non-compliance with expected business conduct, local regulations, trade policies and taxation laws and a lack of adequate infrastructure. Moreover, changes in local regulations, trade policies and taxation laws, such as local content regulations, business or investment permit approval requirements, foreign exchange controls, import or export controls, or the nationalization of assets or restrictions on the repatriation of income from foreign operations and investments in major markets and regions may affect Sony’s operating results. For example, a labor dispute or a change in labor regulations or policies may significantly change local labor environments. Such a condition in China or another country in which Sony or a partner manufactures could cause interruptions in production and shipping of Sony’s products and parts, a sharp rise in local labor costs, or a shortage of well-trained employees, which may adversely affect Sony’s operating results. If international or domestic political and military instability disrupts Sony’s business operations or those of its business partners, or depresses consumer confidence, Sony’s operating results and financial condition may be adversely affected. In addition, the time required to recover from disruptions, whether caused by these factors or other causes, such as natural disasters or pandemics, may be greater in certain countries. Moreover, Sony’s susceptibility to the above-mentioned risks may be greater in certain emerging markets that continue to be important to its operations, and this may have an adverse impact on its operating results and financial condition.

Sony’s success depends on the ability to recruit and retain skilled technical employees and management professionals.

In order to successfully continue to develop, design, manufacture, market, and sell products and services, including networked products, game hardware and software, film, television and music content as well as

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financial instruments in increasingly competitive markets, Sony must attract and retain key personnel, including its executive team, other management professionals, creative talent and skilled employees such as hardware and software engineers. However, there is high demand for such skilled employees, and Sony may be unable to attract or retain qualified employees to meet future business needs. In addition, business divestitures, restructuring or other transformation initiatives may lead to an unintended loss of experienced human resources or know-how. If this should happen, it may adversely affect Sony’s operating results and financial condition.

Sony may not be successful in integrating its business strategies and operations across different business units to increase the competitiveness of hardware, software, entertainment content and network services.

Sony believes that integrating its hardware, software, entertainment content and network services is essential in differentiating itself in the marketplace and in generating revenue growth and profitability. For example, in April 2016, Sony Computer Entertainment Inc. (“SCEI”) and Sony Network Entertainment International LLC (“SNEI”) founded Sony Interactive Entertainment LLC (“SIE”), a new company that combined all the business units belonging to SCEI and SNEI, including hardware, software, content and network services operations. However, this strategy depends on the continuing development (both inside and outside of Sony) of network services technologies, strategic and operational coordination and prioritization among Sony’s various business units and sales channels, and the standardization of technological and interface specifications industry-wide and across Sony’s networked products and business groups. Furthermore, in such a competitive business environment, which continuously changes with new entrants, it is critical for Sony to continuously introduce enhanced and competitively priced hardware that is seamlessly connected to network platforms, with user interfaces that are innovative and attractive to consumers. Sony also believes that it is essential to provide competitive and differentiated content-based service offerings that include Sony and third-party licensed audio, video and game content from major motion picture and television studios, music labels and game publishers. If Sony is not successful in implementing this strategy, it may adversely affect Sony’s reputation, competitiveness and profitability.

Sony’s online activities are subject to laws and regulations that can increase the costs of operations or limit its activities.

Sony engages in a wide array of online activities, including the sale and marketing of electronics and entertainment products, entertainment network services and financial services, as well as serving as an Internet Services Provider (ISP), and is thus subject to a broad range of related laws and regulations including those relating to privacy, consumer protection, critical infrastructure protection, breach disclosure, data retention and data protection, trans-border data flows, content and broadcast regulation, defamation, age verification and other online child protections, accessibility, installation of cookies or other software on the end-user’s computers or other devices, pricing, advertising to both children and adults, taxation, copyright and trademark, promotions, and billing. The application of such laws and regulations created to address online activities, or for other purposes, including those passed prior to the popular use of the Internet that may be applied to online activities, varies among jurisdictions, may be unclear or unsettled in many instances, and is subject to change. Sony may incur substantial costs to comply with these laws and regulations and may incur substantial penalties, other liabilities, or damage to its reputation if it fails to comply with them. Compliance with these laws and regulations also may cause Sony to change or limit its online activities in a manner that may adversely affect operating results. In addition, Sony’s failure to anticipate changes to relevant laws and regulations, changes in laws that provide protections that Sony relies on in conducting its online activities, or judicial interpretations narrowing such protections, may subject Sony to greater risk of liability, increase the costs of compliance, or limit Sony’s ability to engage in certain online activities.

Sales of Sony’s consumer products including game hardware and peripherals are particularly sensitive to the seasonality of consumer demand.

Sony’s G&NS segment offers a relatively small range of game hardware and peripherals and a significant portion of overall demand for these and other products is weighted towards the year-end holiday season. Sony’s other consumer products are also dependent upon demand during the year-end holiday season. As a result, changes in the competitive environment, changes in market conditions, delays in the release of consumer products, including highly anticipated game software titles, and insufficient supply of hardware and peripherals during the year-end holiday season can adversely impact Sony’s operating results.

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The sales and profitability of Sony’s G&NS segment mainly depend on the penetration of its gaming platforms, which is sensitive to software line-ups, including software produced by Sony or third-party developers and publishers.

In Sony’s G&NS segment, the penetration of gaming platforms is a significant factor driving sales and profitability, which is affected by the ability to provide customers with attractive software line-ups, including software produced by Sony or third-party game software developers and publishers, and with online services, including network and cloud-based gaming and digital content delivery. There is no assurance that third-party game software developers and publishers will continue to develop and release software regularly or at all. Discontinuance or delay of software development or delays in the delivery of new online services may adversely affect Sony’s operating results.

Sony’s content businesses, including the Pictures, Music and G&NS segments, and other businesses, are subject to digital theft and illegal downloading.

Digital technology, the availability of digital media, and global Internet penetration have created risks with respect to Sony’s ability to protect copyrighted content, including pre-release content, of the Pictures, Music and G&NS segments and other businesses from digital theft and counterfeiting. In particular, software and technologies that enable the duplication, transfer or downloading of digital media files from the Internet and other sources without authorization from the owners of the rights to such content have adversely impacted and continue to threaten the conventional copyright-based business model by making it easier to create, transmit, and redistribute high-quality, unauthorized digital media files. The availability of unauthorized content significantly contributes to a decrease in legitimate product sales and puts pressure on the price of legitimate products, which may adversely affect Sony’s operating results. Sony has incurred and will continue to incur expenses to help protect its intellectual property, to develop new services for the authorized digital distribution of motion pictures, television programming, music, and games, and to combat unauthorized digital distribution of its copyrighted content. These initiatives will increase Sony’s near-term expenses and may not achieve their intended result.

Operating results for Sony’s Pictures and Music segments vary according to worldwide consumer acceptance and the availability of competing products and entertainment alternatives.

Operating results for the Pictures and Music segments can fluctuate depending upon worldwide consumer acceptance of their products, which is difficult to predict. Moreover, the Pictures segment must invest substantial amounts in motion picture and television productions and broadcast programming before learning the extent to which these products will earn consumer acceptance. Similarly, the Music segment must make significant upfront investments in artists before being able to determine how those artists and their recordings will be received by consumers. Further, the commercial success of Sony’s Pictures and Music segments’ products may be impacted by other competing products released at or near the same time, and alternative forms of entertainment and leisure activities available to consumers. Underperformance of a motion picture or television production, especially an “event” or “tent-pole” film, may have an adverse effect on the Pictures segment’s operating results in the year of release or exhibition, and in future years given the high correlation between a product’s level of success from its initial release or exhibition and subsequent revenue from other distribution markets, such as home entertainment and television. Similarly, the underperformance of a recorded music release may have an adverse effect on the Music segment’s operating results in the fiscal year of release.

Increases in the costs of producing, acquiring, or marketing entertainment content may adversely affect operating results in Sony’s Music and Pictures segments.

The success of Sony’s Music segment is highly dependent on finding and establishing artists, songwriters and music publishing catalogs that appeal to customers over the long term. If the Music segment is unable to find and establish new talented artists and songwriters or sign established artists and songwriters, its operating results may be adversely affected. Competition to identify, sign and retain such talent is intense as is the competition to sell their music. In the Pictures segment, high demand for top talent continues to contribute to increases in the cost of producing motion pictures and television programming. Competition to acquire motion pictures and television programming is intense and could result in increased acquisition-related spending. Overall increases in production and acquisition costs of the Pictures segment’s products, as well as increases in the costs to market these products, may also adversely impact the segment’s operating results.

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Changes in consumer behavior resulting from new technologies and distribution platforms may adversely affect operating results in Sony’s Music and Pictures segments.

Rapid changes in technology and the adoption of new technology by consumers have impacted the timing and manner in which consumers acquire and view entertainment products. Industry-wide trends such as the general maturation of physical media formats, including CD, DVD and Blu-ray Disc™ formats, the shift to digital distribution of audio and video content, and increased competition for retailer shelf space have contributed to and may continue to contribute to an industry-wide decline in the worldwide sales of physical media formats. Revenue from digital distribution, such as subscription streaming services and digital downloads, may not be sufficient to offset the decline in physical media sales that has affected and may continue to affect the operating results of Sony’s Music and Pictures segments and disc manufacturing business. For example, in fiscal year ended March 31, 2017, Sony recorded an impairment charge against the goodwill of the Pictures segment of 112.1 billion yen due to a downward revision in the future profitability projection for the Motion Pictures business within the Pictures segment. The downward revision was primarily due to a lowering of previous expectations regarding the home entertainment business (including packaged media such as DVD and Blu-ray Disc™ formats as well as digital downloads), mainly driven by an acceleration of market decline. The future profitability projection for the Motion Pictures business also reflected a reduction in the underlying profitability projections of film performance largely mitigated by measures identified to improve the profitability of the Motion Pictures business. Furthermore, the music industry has continued to see a year-over-year decline in digital download sales. If streaming services cannot attract sufficient subscribers to offset this decline, the operating results of Sony’s Music segment could be negatively impacted.

Operating results of Sony’s Pictures segment may be adversely affected by changes in advertising markets or by the failure to renew, or renewal on less favorable terms of, television carriage contracts (broadcasting agreements).

The strength of the advertising market can fluctuate in response to the economic prospects of specific advertisers or industries, advertisers’ current spending priorities and the economy in general, and this may adversely affect the Pictures segment’s television revenues. The Pictures segment’s television operations, including its worldwide television networks, derive substantial revenues from the sale of advertising on a variety of platforms. A decline in overall spending within the advertising market may have a direct adverse effect on the Pictures segment’s Media Networks’ revenues. The Pictures segment also recognizes sales from the licensing of its motion picture and television content to U.S. and international television network customers. A decline in the advertising market may also adversely affect third-party television networks’ ability to generate revenues, which may result in lower license fees paid by these networks for Sony’s content.

The Pictures segment also depends on third-party cable, satellite and other distribution systems to distribute its worldwide television networks. The failure to renew or renewal on less favorable terms of television carriage contracts (broadcasting agreements) with these third-party distributors may adversely affect the Pictures segment’s ability to generate advertising and subscription sales through its worldwide television networks.

Sony’s Pictures segment is particularly subject to labor interruption.

The Pictures segment and certain of its suppliers are dependent upon highly specialized union members, including writers, directors, actors and other talent, and trade and technical employees, who are covered by union contracts and are essential to the development and production of motion pictures and television programming. A strike by one or more of these unions, or the possibility of a strike, work slowdown or work stoppage caused by uncertainties about, or the inability to reach agreement on, a new contract could delay or halt production activities. Such a delay or halt, depending on the length of time involved, could cause a delay or interruption in the release of new motion pictures and television programming and thereby may adversely affect operating results and cash flows in the Pictures segment. An inability to reach agreement on one or more of these union contracts or renewal on less favorable terms may also increase costs within Sony’s Pictures segment and have an adverse effect on operating results.

New rules, regulations and regulatory initiatives by government authorities may adversely affect the flexibility and the operating results of Sony’s Financial Services segment.

Sony’s Financial Services segment operates in highly regulated industries subject to comprehensive regulation and supervision, including the Japanese insurance and banking industries. Future developments or changes in laws, regulations, or policies and their effects are unpredictable and may lead to increased compliance costs or limitations on operations in the Financial Services segment. Due to Sony’s common branding strategy,

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compliance failures in any of its businesses within the Financial Services segment may have an adverse impact on the overall business reputation of the Financial Services segment. Furthermore, additional compliance costs may adversely affect the operating results of the Financial Services segment. In addition, Sony Corporation’s ability to receive funds from its affiliate Sony Financial Holdings Inc. (“SFH”) in the form of financial support or loans is restricted by guidelines issued by regulatory agencies in Japan. If these regulations change, it may further reduce Sony Corporation’s ability to receive funds for its use.

Changes in interest rates may adversely affect the operating results and financial condition of Sony’s Financial Services segment.

Sony’s Financial Services segment engages in asset-liability management (“ALM”) in an effort to manage its investment assets in a manner appropriate to its liabilities, which arise from the insurance policies that Sony’s Financial Services segment underwrites in both its life insurance and non-life insurance businesses and the deposits, borrowings and other liabilities in its banking business. ALM considers the long-term balance between assets and liabilities in an effort to ensure stable returns. Any failure to appropriately conduct its ALM activities, or any significant changes in market conditions beyond what its ALM may reasonably address, may have an adverse effect on the financial condition and operating results of the Financial Services segment. In particular, because Sony Life Insurance Co., Ltd. (“Sony Life”)’s liabilities to policyholders generally have longer durations than its investment assets, which are concentrated in long-term Japanese national government bonds, lower or negative interest rates tend to reduce yields on Sony Life’s investment portfolio while guaranteed yields (assumptions used for calculation of insurance premiums) remain generally unchanged on outstanding policies. As a result, Sony Life’s profitability and long-term ability to meet policy commitments may be adversely affected. In addition, declines in the yield of Sony Life’s investments resulting from changes in interest rates, particularly those held in respect of interest rate-sensitive whole life insurance policies, may result in additional policy reserves being recorded and the accelerated amortization of deferred acquisition costs, since the review of actuarial assumptions used for the valuation of policy reserves and deferred acquisition costs is required at least annually. Additional policy reserves and accelerated amortization of deferred acquisition costs may have an adverse impact on Sony’s operating results and financial condition.

Declines in the value of equity securities may have an adverse impact on Sony’s operating results and financial condition, particularly in Sony’s Financial Services segment.

In the Financial Services segment, declines in the yield of Sony Life’s separate account assets, resulting from the factors such as declines in the value of equity securities, may result in additional policy reserves being recorded and the accelerated amortization of deferred acquisition costs, since the review of actuarial assumptions used for the valuation of policy reserves concerning minimum death guarantees for variable life insurance and deferred acquisition costs is required at least annually. Additional policy reserves and accelerated amortization of deferred acquisition costs may have an adverse impact on Sony’s operating results and financial condition. Sony Life engages in derivative transactions to hedge the risk of declines in the value of equity securities pertaining to minimum death guarantees for variable life insurance. However, if the derivative transactions do not produce the desired effect, Sony Life could record or face an increase in losses as a result.

For equity securities held by Sony outside of the Financial Services segment, a decrease in fair value could result in a non-cash impairment charge. Any such charge may adversely affect Sony’s operating results and financial condition.

The investment portfolio within Sony’s Financial Services segment exposes Sony to a number of additional risks other than the risks related to declines in the value of equity securities and changes in interest rates.

In the Financial Services segment, generating stable investment income is important to its operations, and the Financial Services segment’s investments are concentrated in long-term Japanese national government bonds, although it also has investments in a variety of asset classes, including shorter-term Japanese national government bonds, Japanese local government and corporate bonds, foreign government and corporate bonds, Japanese stocks, loans and real estate. In addition to risks related to changes in interest rates and the value of equity securities, the Financial Services segment’s investment portfolio is exposed to a variety of other risks, including foreign exchange risk, credit risk and real estate investment risk, any or all of which may have an adverse effect on the operating results and financial condition of the Financial Services segment. For example, mortgage loans account for 94.3% of the total loan balance, or 59.8% of the total assets of Sony Bank Inc. (“Sony Bank”), as of March 31, 2017. An increase in non-performing loans or a decline in the prices of real estate, the collateral for these mortgage loans provided by Sony Bank, may result in an increase in the allowance for doubtful accounts.

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Differences between actual and assumed policy benefits and claims may require Sony’s Financial Services segment to increase policy reserves in the future.

The life insurance and non-life insurance businesses of the Financial Services segment establish policy reserves for future benefits and claims. These reserves are calculated based on many assumptions and estimates, including the frequency and timing of the event covered by the policy, the amount of benefits or claims to be paid and the investment returns on the assets these businesses purchase with the premiums received. These assumptions and estimates are inherently uncertain, and the Financial Services segment cannot determine with precision the ultimate amounts that it will be required to pay for, or the timing of payment of, actual benefits and claims, or whether the assets supporting the policy liabilities will grow at the level assumed prior to the payment of benefits or claims. The frequency and timing of an event covered by a policy and the amount of benefits or claims to be paid are subject to a number of risks and uncertainties, many of which are outside of its control, including:

• changes in trends underlying its assumptions and estimates, such as mortality and morbidity rates;

• the availability of sufficient reliable data and its ability to correctly analyze the data;

• the selection and application of appropriate pricing and rating techniques; and

• changes in legal standards, claim settlement practices and medical care expenses.

If the actual experience of the insurance businesses becomes significantly less favorable than their assumptions or estimates, their policy reserves may be inadequate. Any changes in regulatory guidelines or standards with respect to the required level of policy reserves may also require that the insurance businesses establish policy reserves based on more stringent assumptions, estimates or actuarial calculations. Such events may result in a need to increase provisions for policy reserves, which may have an adverse effect on the operating results and financial condition of the Financial Services segment.

Furthermore, if actual insurance claims are higher than the estimated provision for policy reserves due to the occurrence of catastrophic events such as earthquakes or pandemic diseases in Japan, the operating results and financial condition of the Financial Services segment may be adversely impacted.

Sony’s physical facilities and information systems are subject to damage as a result of catastrophic disasters, outages, malfeasance or similar events. Such an unexpected catastrophic event may also lead to supply chain and production disruptions as well as lower demand from commercial customers, resulting in an adverse impact on Sony’s operating results.

Sony’s headquarters and many of Sony’s most advanced device manufacturing facilities, including those for semiconductors, are located in Japan, where the risk of earthquakes is relatively high compared to other parts of the world. A major earthquake in Japan, especially in Tokyo where Sony headquarters are located, the Tokai area where certain product manufacturing sites are located, or the Kyushu and Tohoku areas, where Sony’s semiconductor manufacturing sites are located, could cause substantial damage to Sony’s business operations, including damage to buildings, machinery, equipment and inventories, and the interruption to production at manufacturing facilities. For example, the earthquake of April 14, 2016 and subsequent earthquakes in the Kumamoto region in Japan caused damage to the buildings, machinery, equipment and inventories of a semiconductor manufacturing site, and production at the site was interrupted. As a result of the delay in the supply of semiconductor components, sales in the Semiconductors and IP&S segments in the fiscal year ended March 31, 2017, were lower than the level anticipated prior to the earthquakes.

In addition, offices and facilities used by Sony, its service providers and business partners, including those used for network, telecommunications and information systems infrastructure, research and development, material procurement, manufacturing, motion picture and television production, logistics, sales, and online and other services are located throughout the world and are subject to possible destruction, temporary stoppage or disruption as a result of unexpected catastrophic events such as natural disasters, pandemic diseases, terrorist attacks, cyber-attacks, large-scale power outages and large-scale fires. If any of these facilities or offices were to experience a significant loss as a result of any of the above events, it may disrupt Sony’s operations, delay design, development or production, interrupt shipments and postpone the recording of sales, and result in large expenses to repair or replace these facilities or offices. In addition, if Sony’s suppliers are damaged by such catastrophic events, Sony may be exposed to supply shortages of raw materials, parts or components, which may result in a reduction or suspension of production, interruption of shipment and delays in product launches. Sony may also be exposed to price increases for raw materials, parts and components, and lower demand from commercial customers.

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Moreover, as computer systems, networks and online services have become increasingly important to Sony’s operating activities, the impact that computer system, network and online service shutdowns may have on Sony’s operating activities has increased. Shutdowns may be caused by events similar to those described above or other unforeseen events, such as software or hardware defects. For example, in the fiscal year ended March 31, 2015, Sony’s Pictures segment experienced a serious disruption of its network and IT infrastructure as a result of a cyber-attack. Similar events may result in the disruption of Sony’s major business operations, delays in financial reporting, design, development, production, shipments and recognition of sales, and large expenditures necessary to enhance, repair or replace such facilities and network and information systems. Furthermore, Sony’s insurance may be insufficient to cover the resulting expenditures and losses. Sony also may be unable to obtain sufficient insurance in the future, or insurance premiums may increase. These situations may have an adverse impact on Sony’s operating results and financial condition.

Sony’s brand image, reputation and business may be harmed and Sony may be subject to legal and regulatory claims if there is a breach or other compromise of Sony’s information security or that of its third-party service providers or business partners.

As a critical element of its operations, Sony, its third-party service providers and other business partners make extensive use of information technology, including computer systems, networks and online services to receive, store, process and transmit information, including Sony’s business information, which includes but is not limited to proprietary information, intellectual property, and employee information, and data related to customers, suppliers, and other business partners. Sony’s business information may be compromised by a malicious third party, or a man-made or natural event, or impacted by intentional or inadvertent actions or inactions by Sony employees, a third-party service provider or other business partner. As cyber-attacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, there can be no guarantee that Sony’s actions, security measures and controls designed to prevent, detect or respond to intrusion, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative impact from such attacks, can provide absolute security against compromise. As a result, Sony’s business information may be lost, destroyed, disclosed, misappropriated, altered, or accessed without consent, and Sony’s information technology systems, or those of its service providers or other business partners, may be disrupted. Malicious third parties may also use unauthorized access to Sony’s networks as a platform to access the networks and thereby the information of Sony’s third-party business partners without Sony’s knowledge. Sony has previously been the subject of sophisticated and targeted attacks. For example, in the fiscal year ended March 31, 2015, Sony’s Pictures segment was subject to a cyber-attack that resulted in unauthorized access to, and theft and disclosure of Sony business information, including employee information and other information, and the destruction of data. In addition, Sony’s network services, online game businesses and websites of certain subsidiaries have been subject to cyber-attacks by groups and individuals with a range of motives and expertise, resulting, in some instances, in unauthorized access to, the potential or actual theft of, and/or disclosure of customer information.

In addition, even if such data is not stored on a network, and regardless of where or in what form such data is stored, Sony’s business information and other data owned or maintained by or on behalf of Sony may be compromised by malicious third parties, or man-made or natural events, or impacted by intentional or inadvertent actions or inactions of Sony employees, or those of a third-party service provider, through loss, destruction, disclosure, misappropriation, alteration or unauthorized access to such data.

Further, the confidentiality, integrity and availability of products and services, including networked products and online services, provided by Sony or its service providers or business partners may be compromised by malicious third parties or man-made or natural events, or impacted by intentional or inadvertent actions or inactions by Sony employees, or those of a third-party service provider or business partner. For example, Sony’s online services and websites have been subjected to denial-of-service and other attacks by technically sophisticated and well-resourced third parties and others.

Any of the above compromises can result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel, training employees, and compensation or incentives offered to third parties whose data has been compromised. In addition, a disruption to Sony’s networks and online services may seriously disrupt the businesses that rely on these networks and online services for their operations, resulting in lost revenues, damage to relationships with business partners and other third parties, and the failure to retain or attract customers. Breaches or other compromises of information security, whether or not involving a cyber-attack, may lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of proprietary information, including intellectual property, the failure to retain or attract customers, the disruption of critical business processes or information technology

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systems, and the diversion of management’s attention and resources. Moreover, such disruptions and breaches may result in adverse media coverage, which may harm Sony’s brand image and reputation. Sony may also be subject to legal claims or legal proceedings, including regulatory investigations and actions, and the attendant legal fees, as well as potential settlements, judgments and fines. Sony’s cyber insurance may not cover all expenses and losses and, accordingly, cyber-attacks may have an adverse impact on Sony’s operating results and financial condition. Even without actual breaches of information security, protection against increasingly sophisticated and prevalent cyber-attacks may result in significant future prevention, detection, response and management costs, or other costs, including the deployment of additional cyber-security technologies, engaging third-party experts, deploying additional personnel, and training employees. Such expenses may also have an adverse impact on Sony’s operating results and financial condition.

Sony’s business may suffer as a result of adverse outcomes of current or future litigation and regulatory actions.

Sony faces the risk of litigation and regulatory proceedings in different countries in connection with its operations. Legal proceedings, including regulatory actions, may seek to recover very large indeterminate amounts or to limit Sony’s operations, and the possibility that they may arise and their magnitude may remain unknown for substantial periods of time. For example, legal proceedings, including regulatory actions, may result from antitrust scrutiny of market practices for anti-competitive conduct. A substantial legal liability or adverse regulatory outcome and the substantial cost to defend the litigation or regulatory proceedings may have an adverse effect on Sony’s reputation, operating results and financial condition.

Sony is subject to financial and reputational risks due to product quality and liability issues.

Sony’s products and services, such as consumer products, non-consumer products, parts and components, semiconductors, software and network services are becoming increasingly sophisticated and complicated as rapid advancements in technologies occur and as demand increases for mobile products and online services. Sony’s efforts to adapt to rapid advancements in technologies and increased demand for mobile products and online services, while also maintaining product quality, may not be successful and may increase exposure to product liability. As a result, Sony may incur both reputational damage and expenses in connection with, for example, product recalls and after-sales services. In addition, Sony may not be successful in introducing after-sales upgrades, enhancements or new features to existing products and services, or in enabling existing products and services to continue to conveniently and effectively integrate with other technologies and online services. As a result, the quality of Sony’s existing products and services may not remain satisfactory to consumers and become less marketable, less competitive or obsolete, and Sony’s reputation, operating results and financial condition may be adversely affected. Moreover, allegations of health and safety issues related to Sony products, or lawsuits related to product quality, health issues arising from products or product safety, regardless of merit, may adversely impact Sony’s operating results and financial condition, either directly or as a result of the impact on Sony’s brand image and reputation as a producer of high-quality products and services. These issues are relevant to Sony products sold directly to customers, whether manufactured by Sony or a third party, and also to products of other companies that are equipped with Sony’s components, such as semiconductors.

Sony’s operating results and financial condition may be adversely affected by its employee benefit obligations.

Sony recognizes an unfunded pension obligation for its defined benefit pension plans based on (i) the Projected Benefit Obligation (“PBO”) under each pension plan less (ii) the fair value of the pension plan’s assets, in accordance with the accounting guidance for defined benefit plans. Actuarial gains and losses are amortized and included in pension expenses in a systematic manner over employees’ average remaining service periods. Any decrease of the pension plan asset value due to low returns from investments or increases in the PBO due to a lower discount rate, increases in rates of compensation and changes in certain other actuarial assumptions may increase the unfunded pension obligations and may result in an increase in pension expenses recorded as cost of sales or as a selling, general and administrative expense.

Sony’s operating results and financial condition may be adversely affected by the status of its Japanese and foreign pension plans. Specifically, adverse equity market conditions and volatility in the credit markets may have an unfavorable impact on the value of Sony’s pension plan assets and its future estimated pension liabilities, the majority of which relate to the Japanese plans, which have approximately 30% of pension plan assets invested in equity securities. As a result, Sony’s operating results or financial condition could be adversely affected.

Further, Sony’s operating results and financial condition could be adversely affected by future pension funding requirements pursuant to the Japanese Defined Benefit Corporate Pension Plan Act (“Act”). Under the

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Act, Sony is required to meet certain financial criteria including periodic actuarial revaluation and the annual settlement of gains or losses of the plans. In the event that the actuarial reserve required by law exceeds the fair value of pension plan assets and that the fair value of pension assets may not be recovered within a certain moratorium period permitted by laws and/or special legislative decree, Sony may be required to make an additional contribution to the plan, which may reduce cash flows. Similarly, if Sony is required to make an additional contribution to a foreign plan to meet any funding requirements in accordance with local laws and regulations in each country, Sony’s cash flows might be adversely affected. If Sony is required to increase cash contributions to its pension plans when actuarial assumptions, such as an expected long-term rate of return of the pension plan assets, are updated for purposes of determining statutory contributions, it may have an adverse impact on Sony’s cash flows.

Further losses in jurisdictions where Sony has established valuation allowances against deferred tax assets, the inability of Sony to fully utilize its deferred tax assets, limitations on the use of its deferred tax assets under local law, exposure to additional tax liabilities or changes in Sony’s tax rates could adversely affect net income (loss) attributable to Sony Corporation’s stockholders and Sony’s financial condition.

Sony is subject to income taxes in Japan and numerous other jurisdictions, and in the ordinary course of Sony’s business there are many situations where the ultimate tax determination can be uncertain, sometimes for an extended period. The calculation of Sony’s tax provision and the carrying value of tax assets and liabilities requires significant judgment and the use of estimates, including estimates of future taxable income.

Deferred tax assets are evaluated on a jurisdiction by jurisdiction basis. In certain jurisdictions, Sony has established valuation allowances against deferred tax assets, including net operating loss carryforwards and tax credit carryforwards, where it has concluded that the deferred tax assets are not more likely than not to be realized. As of March 31, 2017, Sony had valuation allowances principally in the following jurisdictions: (1) Sony Corporation and its national filing group in Japan, as well as for local taxes in a number of Japanese subsidiaries; (2) Sony Americas Holding Inc. (“SAHI”) and its consolidated tax filing group in the U.S.; (3) Sony Mobile Communications AB in Sweden; (4) Sony Europe Limited (“SEU”) in the U.K.; and (5) various subsidiaries operating in Brazil. In jurisdictions where valuation allowances have been established, no tax benefit will be recorded against any continuing losses and as a result, net income (loss) attributable to Sony Corporation’s stockholders and Sony’s financial condition could be adversely affected. Additionally, deferred tax assets could expire unused or otherwise not be realizable if Sony is unable to implement tax planning strategies or generate sufficient taxable income in the appropriate jurisdiction in the future (from operations and/or tax planning strategies) to utilize them, if Sony enters into transactions that limit its legal ability to use them or if the use of such deferred tax assets is limited under local law. As a result, Sony may lose any associated cash tax reduction available in future periods. If it becomes more likely than not that any of Sony’s remaining deferred tax assets without valuation allowances will expire unused and are not available to offset future taxable income, or otherwise will not be realizable, Sony will have to recognize an additional valuation allowance, increasing income tax expense. Net income (loss) attributable to Sony Corporation’s stockholders and Sony’s financial condition could be adversely affected when the deferred tax assets expire unused or in periods in which an additional valuation allowance is recorded.

A key factor in the evaluation of the deferred tax assets and the valuation allowance is the determination of the uncertain tax positions related to the adjustments for Sony’s intercompany transfer pricing. Sony is subject to income taxes in Japan and numerous other jurisdictions, and in the ordinary course of Sony’s business there are many transactions, including intercompany charges, where the ultimate tax determination is uncertain. Sony is subject to the continuous examination of its income tax returns by tax authorities and, as a result, Sony regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. Significant judgment is required in making these assessments and, as additional evidence becomes available in subsequent periods, the ultimate outcomes for Sony’s uncertain tax positions and, accordingly, its valuation allowance assessments may potentially have an adverse impact on net income (loss) attributable to Sony Corporation’s stockholders and Sony’s financial condition.

In some jurisdictions, the use of net operating loss carryforwards to reduce taxable income in a subsequent period is limited to a fixed percentage of taxable income. Thus, it is possible that even with significant net operating loss carryforwards, Sony could record and pay taxes in a jurisdiction where it has taxable income but still has significant net operating loss carryforwards available. Similarly, in some jurisdictions, tax credits may only be used to offset taxes on income from certain sources. Thus, it is possible that even with significant tax credit carryforwards, Sony could record and pay taxes in a jurisdiction where it has taxable income but still has significant tax credit carryforwards available.

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In addition to the above, Sony’s future effective tax rates may be unfavorably affected by changes in both the statutory rates and the mix of earnings in countries with differing statutory rates or by other factors such as changes in tax laws and regulations or their interpretation, including limitations or restrictions on various tax deductions and credits, including, but not limited to, cost of goods sold, interest, net operating loss carryforwards and income tax credits.

Sony could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.

Sony has a significant amount of goodwill, intangible assets and other long-lived assets, including production facilities and equipment in its electronics businesses. A decline in financial performance, market capitalization or changes in estimates and assumptions used in the impairment analysis, which in many cases requires significant judgment, could result in impairment charges against these assets. Goodwill and indefinite lived intangible assets are tested annually for impairment during the fourth quarter of the fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below the carrying amount. Such an event or change in circumstances would include unfavorable variances from or adjustments to established business plans, significant changes in forecasted results or volatility inherent to external markets and industries. The increased levels of global competition and the faster pace of technological change to which Sony is exposed can result in greater volatility of these estimates, assumptions and judgments, and increase the likelihood of impairment charges. In addition, the recoverability of the carrying value of long-lived assets held and used and long-lived assets to be disposed of is reviewed whenever events or changes in circumstances, including the types of events or changes described above with respect to goodwill and intangible assets, indicate that the carrying value of the assets or asset groups may not be recoverable. If the carrying value of the asset or asset group is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the asset or asset group exceeds its fair value. For example, in the fiscal year ended March 31, 2015, Sony recorded a 176.0 billion yen impairment charge related to goodwill in the Mobile Communications (“MC”) segment. In the fiscal year ended March 31, 2016, Sony recorded impairment charges related to long-lived assets, both in the camera module business in the Semiconductors segment, amounting to 59.6 billion yen, and in the battery business in the Components segment, amounting to 30.6 billion yen. In the fiscal year ended March 31, 2017, Sony recorded a 23.9 billion yen impairment charge against long-lived assets in the Semiconductors segment resulting from the termination of the development and manufacturing of certain high-functionality camera modules for external sale, as well as a 112.1 billion yen impairment charge related to goodwill in the Pictures segment. Any such charge may adversely affect Sony’s operating results and financial condition.

Sony may be accused of infringing others’ intellectual property rights and be liable for significant damages.

Sony’s products incorporate a wide variety of technologies. Claims have been and may be asserted against Sony that such technology infringes the intellectual property owned by others. Such claims may be asserted by competitors to protect their products and services and/or as a business strategy to seek a competitive advantage, or by other patent holders, particularly as markets become more competitive, and products evolve to include new technologies and enhanced functionality that incorporate an increasing amount of intellectual property. Such claims might require Sony to enter into settlement or license agreements, to pay significant damage awards, and/or to face a temporary or permanent injunction prohibiting Sony from marketing or selling certain of its products, which may have an adverse effect on Sony’s reputation, operating results and financial condition.

Sony may not be able to continue to obtain necessary licenses for certain intellectual property rights of others or protect and enforce the intellectual property rights on which its business depends.

Many of Sony’s products are designed under the license of patents and other intellectual property rights owned by third parties. Based upon past experience and industry practice, Sony believes that it will be able to obtain or renew licenses relating to various intellectual properties useful in its business that it needs in the future; however, such licenses may not be available at all or on acceptable terms, and Sony may need to redesign or discontinue marketing or selling such products as a result. Additionally, Sony’s intellectual property rights may be challenged or invalidated, or such intellectual property rights may not be sufficient to provide Sony with competitive advantages. Such events may adversely impact Sony’s operating results and financial condition.

Holders of American Depositary Shares have fewer rights than shareholders and may not be able to enforce judgments based on U.S. securities laws.

The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining Sony’s accounting books and records, and

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exercising appraisal rights, are available only to shareholders of record. Because the depositary, through its custodian agents, is the record holder of the shares underlying the American Depositary Shares (“ADSs”), only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying ADSs in accordance with the instructions of ADS holders and will pay the dividends and distributions collected from Sony. However, ADS holders will not be able to bring a derivative action, examine Sony’s accounting books and records, or exercise appraisal rights through the depositary.

Sony Corporation is incorporated in Japan with limited liability. A majority of Sony’s directors and corporate executive officers are non-U.S. residents, and a substantial portion of the assets of Sony Corporation and the assets of Sony’s directors and corporate executive officers are located outside the U.S. As a result, it may be more difficult for investors to enforce against Sony Corporation or such persons, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal and state securities laws of the U.S. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the U.S.

Item 4. Information on the Company

A. History and Development of the Company

Sony Corporation was established in Japan in May 1946 as Tokyo Tsushin Kogyo Kabushiki Kaisha, a joint stock company (Kabushiki Kaisha) under Japanese law. In January 1958, it changed its name to Sony Kabushiki Kaisha (“Sony Corporation” in English).

In December 1958, Sony Corporation was listed on the Tokyo Stock Exchange (the “TSE”). In June 1961, Sony Corporation issued American Depositary Receipts (“ADRs”) in the U.S.

In March 1968, Sony Corporation established CBS/Sony Records Inc. in Japan, as a 50-50 joint venture company between Sony Corporation and CBS Inc. in the U.S. In January 1988, the joint venture became a wholly-owned subsidiary of Sony Corporation, and in April 1991, changed its name to Sony Music Entertainment (Japan) Inc. (“SMEJ”). In November 1991, SMEJ was listed on the Second Section of the TSE.

In September 1970, Sony Corporation was listed on the New York Stock Exchange (the “NYSE”).

In August 1979, Sony Corporation established Sony Prudential Life Insurance Co., Ltd. in Japan, as a 50-50 joint venture company between Sony Corporation and The Prudential Insurance Company of America. In April 1991, the joint venture changed its name to Sony Life. In March 1996, Sony Life became a wholly-owned subsidiary of Sony Corporation, and in April 2004, with the establishment of SFH, a financial holding company, Sony Life became a wholly-owned subsidiary of SFH.

In July 1984, Sony Magnescale Inc., a subsidiary of Sony Corporation, was listed on the Second Section of the TSE. The subsidiary changed its name to Sony Precision Technology Inc. in October 1996 and then to Sony Manufacturing Systems Corporation in April 2004. In April 2012, Sony Manufacturing Systems was merged into Sony EMCS Corporation. Sony EMCS Corporation changed its name to Sony Global Manufacturing & Operations Corporation in April 2016.

In July 1987, Sony Chemicals Corporation, a subsidiary of Sony Corporation, was listed on the Second Section of the TSE. The subsidiary changed its name to Sony Chemical & Information Device Corporation in July 2006, and changed its name again to Dexerials Corporation in October 2012.

In January 1988, Sony Corporation acquired CBS Records Inc., a music business division of CBS Inc. in the U.S. The acquired company changed its name to Sony Music Entertainment Inc. in January 1991 and then to Sony Music Holdings Inc. in December 2008.

In November 1989, Sony Corporation acquired Columbia Pictures Entertainment, Inc. in the U.S. In August 1991, Columbia Pictures Entertainment, Inc. changed its name to Sony Pictures Entertainment Inc. (“SPE”).

In November 1993, Sony established SCEI in Japan. SCEI changed its name to Sony Interactive Entertainment Inc. (“SIEI”) in April 2016.

In October 1995, Sony/ATV was formed as a 50-50 joint venture company between Sony Corporation and Michael Jackson. In September 2016, the joint venture became a wholly-owned subsidiary of Sony Corporation.

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In January 2000, acquisition transactions by way of a share exchange were completed such that three subsidiaries which had been listed on the TSE — SMEJ, Sony Chemicals Corporation (currently Dexerials Corporation), and Sony Precision Technology Inc. (which was merged into Sony EMCS Corporation) — became wholly-owned subsidiaries of Sony Corporation. In September 2012, Sony Corporation completed the sale of certain of its chemical products businesses, including Sony Chemical & Information Device Corporation (currently Dexerials Corporation) to Development Bank of Japan Inc.

In October 2001, Sony Ericsson Mobile Communications AB (“Sony Ericsson”), a 50-50 joint venture company between Sony Corporation and Telefonaktiebolaget LM Ericsson (“Ericsson”) of Sweden, was established. In February 2012, Sony acquired Ericsson’s 50% equity interest in Sony Ericsson. As a result of the acquisition, Sony Ericsson became a wholly-owned subsidiary of Sony and changed its name to Sony Mobile Communications AB.

In October 2002, Aiwa Co., Ltd. (“Aiwa”), then a TSE-listed subsidiary, became a wholly-owned subsidiary of Sony Corporation. In December 2002, Aiwa was merged into Sony Corporation.

In June 2003, Sony Corporation adopted the “Company with Three Committees” corporate governance system in line with the revised Japanese Commercial Code then effective. (Refer to “Board Practices” in “Item 6. Directors, Senior Management and Employees.”)

In April 2004, Sony Corporation established SFH, a financial holding company, in Japan. Sony Life, Sony Assurance Inc. (“Sony Assurance”), and Sony Bank became subsidiaries of SFH. In October 2007, SFH was listed on the First Section of the TSE in conjunction with the global initial public offering of shares of SFH by Sony Corporation and SFH.

In April 2004, S-LCD Corporation (“S-LCD”), a joint venture between Sony Corporation and Samsung Electronics Co., Ltd. of Korea for the manufacture of amorphous thin film transistor LCD panels, was established in Korea. Sony’s stake in S-LCD was 50% minus 1 share. In January 2012, Sony sold all of its shares of S-LCD to Samsung Electronics Co., Ltd.

In August 2004, Sony combined its worldwide recorded music business, excluding its recorded music business in Japan, with the worldwide recorded music business of Bertelsmann AG (“Bertelsmann”), forming a 50-50 joint venture, SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”). In October 2008, Sony acquired Bertelsmann’s 50% equity interest in SONY BMG. As a result of the acquisition, SONY BMG became a wholly-owned subsidiary of Sony. In January 2009, SONY BMG changed its name to Sony Music Entertainment (“SME”).

In December 2005, Sony Communication Network Corporation, a subsidiary of Sony Corporation, was listed on the Mother’s market of the TSE, and was later listed on the First Section of the TSE in January 2008. Sony Communication Network Corporation was renamed So-net Corporation (“So-net”) in July 2013. In January 2013, Sony Corporation acquired all of the common shares of So-net through a tender offer and subsequent share exchange and, as a result of the acquisition, So-net became a wholly-owned subsidiary of Sony Corporation. So-net was renamed Sony Network Communications Inc. (“SNC”) in July 2016.

In April 2013, Sony Olympus Medical Solutions Inc. (“SOMED”), a medical business venture between Sony Corporation and Olympus Corporation (“Olympus”) was established in Japan. Sony’s stake in SOMED is 51%.

In July 2014, Sony Corporation sold its personal computer (“PC”) business operated under the VAIO brand to Japan Industrial Partners, Inc.

In July 2014, pursuant to a separation of Sony’s businesses into distinct subsidiaries, the television business was split out and began operations as Sony Visual Products Inc. (“SVP”).

In October 2015, the video and sound business was split out and began operations as Sony Video & Sound Products Inc. (“SVS”).

In April 2016, the semiconductors business was split out and began operations as Sony Semiconductor Solutions Corporation (“SSS”).

In April 2017, the imaging products and solution business was split out and began operations as Sony Imaging Products & Solutions Inc. (“SIPS”), which completed the sequential separation of Sony’s business units into distinct subsidiaries.

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Sony Corporation’s registered office is located at 7-1, Konan 1-chome, Minato-ku, Tokyo 108-0075, Japan, telephone +81-3-6748-2111.

The agent in the U.S. for purposes of this Item 4 is Sony Corporation of America (“SCA”), 25 Madison Avenue, 26^th Floor, New York, NY 10010-8601 (Attn: Office of the General Counsel).

Principal Capital Investments

In the fiscal years ended March 31, 2015, 2016 and 2017, Sony’s capital expenditures were 251.0 billion yen, 468.9 billion yen and 272.2 billion yen, respectively. Sony’s capital expenditures are expected to be approximately 330.0 billion yen during the fiscal year ending March 31, 2018. For a breakdown of principal capital expenditures and divestitures (including interests in other companies), refer to “Item 5. Operating and Financial Review and Prospects.” The funding requirements of such various capital expenditures are expected to be financed by cash provided principally by operating and financing activities or the existing balance of cash and cash equivalents.

Sony invested approximately 260 billion yen in the Semiconductors segment, including the acquisition of semiconductor fabrication facilities, equipment and related assets owned by Toshiba, during the fiscal year ended March 31, 2016. This 260 billion yen investment included approximately 206 billion yen for image sensor fabrication capacity. In the fiscal year ended March 31, 2017, Sony invested approximately 84 billion yen in the Semiconductors segment. This investment included approximately 45 billion yen for image sensor fabrication capacity.

B. Business Overview

Sony is engaged in the development, design, production, manufacture, offer and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets such as mobile phones, game hardware and software, network services, still and video cameras, televisions, audio and video recorders and players, and semiconductors. Sony is engaged in the production, acquisition and distribution of motion pictures and television programming and the operation of television and digital networks. Sony is also engaged in the development, production, manufacture, and distribution of recorded music and the management and licensing of the words and music of songs as well as the production and distribution of animation titles. Further, Sony is also engaged in various financial services businesses, including life and non-life insurance operations through its Japanese insurance subsidiaries and banking operations through a Japanese Internet-based banking subsidiary.

Sony has striven to ensure the implementation of 1) clearly attributable accountability and responsibility, 2) management policies with an emphasis on sustainable profit generation and 3) the acceleration of decision-making processes and reinforcement of business competitiveness. To achieve this, Sony has implemented plans to sequentially separate business units within Sony Corporation to form distinct subsidiaries and operate them alongside existing Sony Group companies. These separations include SVP in July 2014, SVS in October 2015, SSS in April 2016, and SIPS in April 2017. As a result of this sequential separation of businesses, all segments are now being operated as subsidiaries of Sony Corporation.

Sony realigned its business segments from the first quarter of the fiscal year ended March 31, 2017 to reflect a change in the Corporate Executive Officers in charge of certain segments and modifications to the organizational structure of certain segments as of April 1, 2016. In connection with this realignment, Sony separated the Devices segment into the Semiconductors segment and the Components segment. In addition, the operations of the automotive camera business, which were included in the Imaging Products & Solutions (“IP&S”) segment, and the operations of the Imaging Device Development Division, which were included in Corporate and elimination, are now included in the Semiconductors segment. Additionally, certain operations which were included in All Other and Corporate and elimination are now included in the Music segment and All Other, respectively.

Products and Services

Mobile Communications (“MC”)

Sony Mobile undertakes product research, development, design, marketing, sales, production, distribution and customer services for mobile phones, tablets, accessories and applications. SNC provides Internet broadband network services to subscribers as well as creates and distributes content through its portal services to various electronics product platforms such as PCs and mobile phones.

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Game & Network Services (“G&NS”)

SIE undertakes product research, development, design, marketing, sales, production, distribution and customer service for PlayStation^® hardware, software, content and network services.

The G&NS segment includes the Hardware, Network and Other categories. Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by SIE; and Other includes packaged software and peripheral devices.

Imaging Products & Solutions (“IP&S”)

In the IP&S segment, Sony undertakes product research, development, design, manufacturing, sales, distribution and customer service for interchangeable lens cameras, compact digital cameras, consumer and professional video cameras as well as display products such as projectors and medical equipment. SOMED undertakes development, design, manufacturing, and selling of high resolution technologies, new surgical endoscopes with 3D capabilities and related systems, and provides comprehensive medical and imaging device solutions for operating rooms and other medical areas.

The IP&S segment includes the Still and Video Cameras as well as Other categories. Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast. Other includes display products such as projectors and medical equipment.

Home Entertainment & Sound (“HE&S”)

SVP undertakes product research, development, design, marketing, sales, production, distribution and customer services for televisions. SVS undertakes product research, development, design, marketing, sales, production, distribution and customer services for video and sound products.

Semiconductors

SSS and its subsidiary Sony Semiconductor Manufacturing Corporation undertake product research, development, design, manufacturing, marketing, sales, production, distribution and customer services for complementary metal oxide semiconductor (“CMOS”) image sensors, charge-coupled devices (“CCDs”), large-scale integration systems (“LSIs”) and other semiconductors.

Components

Sony Energy Devices Corporation undertakes product research, development, design, marketing, sales, production, distribution and customer services for batteries. Sony Storage Media and Devices Corporation undertakes product research, development, design, marketing, sales, production, distribution and customer services for audio/video/data recording media and storage media.

Pictures

Motion Pictures:

“Motion Pictures” includes the worldwide production, acquisition and distribution of live-action and animated motion pictures. SPE’s motion picture production organizations include Columbia Pictures, Screen Gems, Sony Pictures Animation, Sony Pictures Classics and TriStar Pictures. SPE also operates Sony Pictures Imageworks, a visual effects and animation unit, and manages a studio facility, Sony Pictures Studios, which includes post-production facilities.

Television Productions:

“Television Productions” includes the production, acquisition and distribution of television programming including scripted series, unscripted “reality” or “light entertainment,” daytime serials, game shows, animated series, made for television movies and miniseries and other programming. Outside the U.S., SPE produces local language programming and licenses SPE owned programming and formats around the world.

Media Networks:

“Media Networks” includes the operation of television and digital networks worldwide. SPE’s television networks around the world include Sony Pictures Networks India Private Limited, which operates television

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networks in India, and a controlling interest in Game Show Network, which operates a U.S.-based cable network and an online game business. Digital networks include Crackle, a multi-platform video entertainment network focusing on premium video content.

Music

Recorded Music:

“Recorded Music” includes the distribution of physical and digital recorded music and revenue derived from artists’ live performance. SME, a global entertainment company, excluding Japan, is engaged primarily in the development, production, marketing and distribution of recorded music in all commercial formats and genres. SMEJ is an entertainment company focused on the Japanese market, which includes a Japanese domestic recorded music business that produces recorded music and music videos through contacts with many artists in all music genres.

Music Publishing:

“Music Publishing” includes the management and licensing of the words and music of songs. Sony/ATV is a U.S.-based music publishing business that owns and acquires rights to musical compositions, exploiting and marketing these compositions and receiving royalties or fees for their use.

Visual Media and Platform:

“Visual Media and Platform” includes the production and distribution of animation titles, game applications based on animation titles and various service offerings for music and visual products. These businesses are operated primarily by SMEJ.

Financial Services

In the Financial Services segment, on April 1, 2004, Sony established a wholly-owned subsidiary, SFH, a holding company for Sony Life, Sony Assurance and Sony Bank, with the aim of integrating various financial services including insurance and savings and loans, and offering individual customers high value-added products and high-quality services. On October 11, 2007, in conjunction with the global initial public offering of shares of SFH, the shares of SFH were listed for trading on the First Section of the TSE. Following this global offering, SFH remains a consolidated subsidiary of Sony Corporation, which is the majority shareholder of SFH.

SFH conducts insurance, banking and other operations primarily through Sony Life, a Japanese life insurance company, Sony Assurance, a Japanese non-life insurance company, and Sony Bank, a Japanese Internet-based bank, which are all wholly-owned by SFH.

All Other

All Other consists of various operating activities, including the disc manufacturing business outside of Japan and the PC business, which was sold in July 2014. Certain costs related to the PC business remain in All Other.

Sales and Distribution

Electronics*

* The term “Electronics” refers to the sum of the MC, G&NS, IP&S, HE&S, Semiconductors and Components segments.

Sony’s electronics products and services, excluding those in the game business, are marketed throughout the world under the trademark “Sony,” which has been registered in approximately 200 countries and territories.

In most cases, sales of Sony’s electronics products are made to sales subsidiaries of Sony Corporation located in or responsible for sales in the countries and territories where Sony’s products and services are marketed. These subsidiaries then sell those products to unaffiliated local distributors and dealers or through direct sales, such as through the Internet. In some regions, sales of certain products and services are made directly to local distributors by Sony Corporation.

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Sales of electronics products and services are particularly seasonal and also vary significantly with the timing of new product introductions and the economic conditions of each country. Sales for the third quarter ending December 31 of each fiscal year are generally higher than other quarters of the same fiscal year due to demand in the year-end holiday season.

Japan:

Sony Marketing (Japan) Inc. markets consumer electronics products mainly through retailers. Sony Business Solutions Corporation markets professional electronics products and services. For electronic components, Sony sells products directly to wholesalers and manufacturers.

United States:

Sony markets its electronics products and services through Sony Electronics Inc. and other wholly-owned subsidiaries in the U.S.

Europe:

In Europe, Sony’s electronics products and services are marketed through sales subsidiaries including Sony Europe Limited, which is headquartered in the United Kingdom and has branches in European countries, and CJSC Sony Electronics in Russia.

China:

Sony markets its electronics products and services through Sony (China) Limited, Sony Corporation of Hong Kong Limited and other wholly-owned subsidiaries in China.

Asia-Pacific:

In Asia-Pacific, Sony’s electronics products and services are marketed through sales subsidiaries including Sony India Private Limited, Sony Electronics of Korea Corporation, Sony Taiwan Limited and Sony Electronics Vietnam.

Other Areas:

In overseas areas other than the U.S., Europe, China and Asia-Pacific, Sony’s electronics products and services are marketed through sales subsidiaries including Sony Brasil Ltda., Sony Middle East & Africa FZE in the United Arab Emirates and Sony de Mexico S.A.de C.V.

PlayStation^® hardware, software and content and network services are marketed and distributed by SIE, SIEI, Sony Interactive Entertainment America (“SIEA”) and Sony Interactive Entertainment Europe, Ltd. (“SIEE”).

Along with certain of its global corporate functions in Japan, Sony Mobile has sales and marketing operations in many major regions of the world, as well as manufacturing sites in China and product development sites in Japan, Sweden and China. Sony Mobile brings its products to market through direct and indirect distribution channels, such as third-party cellular network carriers and retailers, as well as through its website.

Pictures

SPE generally retains all rights relating to the worldwide distribution of its internally produced motion pictures and television programming, including rights for theatrical exhibition, home entertainment distribution, pay and free television exhibition and other markets. SPE also acquires distribution rights to motion pictures and television programming produced by other companies, and jointly produces and distributes motion pictures and television programming with other studios, television networks or production companies. These rights may be limited to particular geographic regions, specific forms of media or periods of time.

Within the U.S., SPE uses its own distribution service businesses, Sony Pictures Releasing and Sony Pictures Classics, for the U.S. theatrical release of its motion pictures and for the theatrical release of motion pictures acquired from and produced by others.

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Outside the U.S., SPE generally distributes and markets motion pictures through one of its Sony Pictures Releasing International subsidiaries. In certain countries, however, SPE has joint distribution or sub-distribution arrangements with other studios, or arrangements with independent local distributors or other entities.

The worldwide home entertainment distribution of SPE’s motion pictures and television programming (and product acquired or licensed from others) is handled through Sony Pictures Home Entertainment, except in certain countries where SPE has joint distribution or sub-distribution arrangements with other studios, or arrangements with independent local distributors. Product is distributed in various home media formats including DVD, Blu-ray Disc™, electronic sell-through and video-on-demand.

The worldwide television distribution of SPE’s motion pictures and television programming (and product acquired or licensed from others) is handled through Sony Pictures Television. SPE’s library of motion pictures and television programming is licensed to linear distributors such as broadcast television networks, pay and basic cable networks and direct broadcast satellite providers, as well as to digital platforms such as subscription and advertising supported Internet television providers (including Sony’s PlayStation^TM Network and Netflix).

SPE’s television networks are distributed to multiple distribution platforms such as cable, satellite, Internet Protocol Television (IPTV) systems, and mobile operators for delivery to viewers around the world. These networks generate advertising, subscription and other ancillary revenues.

Music

SME and SMEJ develop, produce, market, and distribute recorded music in various commercial formats. SME and its affiliates conduct business globally under “Columbia Records,” “Epic Records,” “RCA Records” and other labels. SMEJ conducts business in Japan under “Sony Music Records,” “Epic Records Japan,” “SME Records,” “Ki/oon Music,” “Sony Music Associated Records” and other labels.

Sony owns and acquires rights to musical compositions, exploits and markets these compositions, receives royalties or fees for their use and conducts its music publishing business in countries other than Japan primarily under the Sony/ATV name. Sony/ATV, previously a 50%-owned and consolidated joint venture, became a wholly-owned subsidiary of Sony on September 30, 2016 as a result of Sony’s acquisition of the 50% equity interest in Sony/ATV owned by the Estate.

SMEJ creates artwork and produces packaged home entertainment products including music/games, and organizes various events in Japan through Sony Music Communications Inc. and its affiliates. SMEJ also produces, markets, and distributes animation products and game applications based on animation titles under the Aniplex name.

Financial Services

Sony Life conducts its life insurance business primarily in Japan. Sony Life’s core business is providing death protection and other insurance products to individuals, primarily through a consulting-based sales approach utilizing its experienced team of Lifeplanner^® sales employees as well as partner independent sales agents. Sony Life provides tailor-made life insurance products that are optimized for each customer. As of March 31, 2017, Sony Life employed 4,933 Lifeplanner^® sales employees. Sony Life maintains an extensive service network which mainly consists of the Lifeplanner^® channel and the independent agent channel in Japan. The Lifeplanner^® channel is characterized by strict recruitment and training of sales professionals from industries outside the life insurance industry, performance-linked compensation and its high productivity, and offers custom-made packages. Most of the agents in the independent agent channel are corporate and non-exclusive agents, centering on shop-style agents. Shop-style agents are a sub-channel of the independent agent channel, who offer insurance in local stores and provide customers with opportunities to compare various insurers’ products. To enhance Sony Life’s relationship with independent agents, Sony Life’s agent support staff provides independent agents with various support services, including recruiting, training and sales promotion activities. As part of its plan to expand its sales of individual annuity products, Sony Life established a Japanese joint venture company with AEGON N.V. in August 2009. The 50-50 joint venture, known as AEGON Sony Life Insurance Co., Ltd., began operations in Japan in December 2009. In October 2016, Sony Life purchased 14.9% of the outstanding shares in ClearView Wealth Limited (Australia) with the aim of developing its international business base.

Sony Assurance has conducted a non-life insurance business in Japan since October 1999. Sony Assurance’s core business is providing automobile insurance products and medical and cancer insurance products to individual customers, primarily through direct marketing via the Internet and the telephone. The direct marketing business model employed by Sony Assurance enables it to improve operating efficiency and lower the costs of marketing and maintaining its insurance policies, creating savings which it passes on to policyholders in the form of competitively priced premiums.

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Sony Bank has conducted banking operations in Japan since June 2001. As an Internet bank focusing on the asset management and borrowing needs of individual customers, Sony Bank offers an array of products and services including yen and foreign currency deposits, investment trusts and mortgages. By using Sony Bank’s transaction channel, the “MONEYKit” service website, account holders can invest and manage assets over the Internet according to their life plans. On July 1, 2011, Sony Bank acquired Sony’s 57% equity interest in Sony Payment Services Inc. (“Sony Payment Services”), resulting in Sony Payment Services becoming a consolidated subsidiary of Sony Bank. Sony Payment Services is an industry-leading provider of credit card settlement services to members of its Internet network.

All Other

Sony DADC group (“Sony DADC”) offers Blu-ray Disc™, DVD and CD media replication services as well as digital and physical supply chain solutions to business customers in the entertainment, education and information industries.

Sales to External Customers by Geographic Area

The following table shows Sony’s consolidated sales to external customers in each of its major markets for the periods indicated.

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Japan		2,233,776		2,317,312		2,392,790
United States		1,528,097		1,733,759		1,673,768
Europe		1,932,941		1,881,329		1,634,683
China		546,697		540,497		557,995
Asia-Pacific		1,052,453		959,171		866,712
Other Areas		921,916		673,644		477,302
Total		8,215,880		8,105,712		7,603,250

Sources of Supply

Sony pursues procurement of raw materials, parts and components to be used in the production of its products on a global basis on the most favorable terms that it can achieve. These items are purchased from various suppliers around the world. Sony has a general policy of maintaining multiple suppliers for important parts and components and, in the fiscal year ended March 31, 2017, Sony continued activities to optimize the number of its suppliers by category to achieve efficiencies and to minimize procurement risk when possible.

When raw materials, parts and components become scarce, the cost of production rises. For example, LCD panels and memory devices, which are used in multiple applications, can influence Sony’s performance when the cost of such parts and components fluctuates substantially. With regard to raw materials, the market price of copper has the potential to proportionately affect the cost of the parts and components that utilize copper, such as printed circuit boards and power cables. The price of resin and sheet steel, which is widely used in mechanical parts and components, may also fluctuate and impact the cost of those parts and components.

After-Sales Service

Sony provides repair and servicing functions in the areas where its electronics products are sold. Sony provides these services through its own web support page, call centers, service centers, factories, authorized independent service centers, authorized servicing dealers and subsidiaries.

In line with industry practices of the electronics businesses, almost all of Sony’s consumer-use products that are sold in Japan carry a warranty, generally for a period of one year from the date of purchase, covering repairs, free of charge, in the case of a malfunction in the course of ordinary use of the product. Warranties outside of Japan generally provide coverage for various periods of time depending on the product and the area in which it is marketed. In the case of broadcast- and professional-use products, Sony maintains support contracts with customers in addition to warranties.

To further help ensure customer satisfaction, Sony maintains customer information centers in its principal markets and web support information for all markets.

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Patents and Licenses

Sony has a number of Japanese and foreign patents relating to its products. Sony is licensed to use a number of patents owned by others, covering a wide range of products. Certain of these licenses are important to Sony’s business, such as those for optical disc-related and smartphone products. Sony products that employ DVD player functionality, including PlayStation^®4 (“PS4”) and PlayStation^®3 (“PS3”) hardware, are substantially dependent upon patents that relate to technologies specified in the DVD specifications and are licensed from Dolby Laboratories Licensing Corporation. Sony products that employ Blu-ray Disc™ player functionality and DVD player functionality, including PS4 and PS3 hardware, are substantially dependent upon patents that relate to technologies specified in the Blu-ray Disc™ specifications and are licensed by MPEG LA LLC and One-Blue, LLC, in addition to the patents that relate to technologies specified in the DVD specifications, as described above. Sony’s smartphone products are substantially dependent upon patents that relate to technologies specified in certain codec standards and are licensed by MPEG LA LLC and Via Licensing Corporation, as well as patents that relate to CDMA technologies specified by the standard-setting bodies within the telecommunications industry and are licensed by Qualcomm Incorporated and NTT DOCOMO, INC. Sony considers its overall license position beneficial to its operations.

Competition

In each of its principal product lines and services, Sony encounters intense competition throughout the world. Sony believes, however, that in the aggregate it competes successfully and has a major position in all of the principal product lines and services in which it is engaged, although the strength of its position varies with products and markets. Refer to “Risk Factors” in “Item 3. Key Information.”

Electronics

Sony believes that its product planning and product design expertise, the high quality of its products, its record of innovative product introductions and product improvements, the user experience it provides and the ecosystem that supports such an experience, its price competitiveness derived from reductions in manufacturing and indirect costs, and its extensive marketing and servicing efforts are important factors in maintaining its competitive position. Continuing to provide high-value added products, services and experiences is a key factor by which Sony aims to differentiate itself in the highly competitive market of consumer electronics. Sony believes that the success of the game and network services businesses is determined by the availability of attractive software titles and related content, downloadable content, network services and peripherals. In the Semiconductors segment, Sony puts significant effort into keeping Sony’s strong competitive position by investing in R&D and production capacity, while also trying to avoid overinvesting and increasing fixed costs by carefully monitoring customer demand, market trends and demand for end-user products.

Pictures

SPE faces intense competition from all forms of entertainment and other leisure activities to attract the attention of audiences worldwide. SPE competes with other motion picture studios and production companies to obtain story rights and talent, including writers, actors, directors and producers, which are essential to the success of SPE’s products. In motion picture production and distribution, SPE faces competition to obtain exhibition and distribution outlets and optimal release dates for its products. In addition, SPE faces competition to acquire motion pictures and television programming from third parties. In television production and distribution, competition arises from limitations on available broadcast time and increasing fragmentation of audiences among broadcast and cable networks, direct broadcast satellite (“DBS”) providers, the Internet and other outlets both within and outside of the U.S. Furthermore, broadcast networks in the U.S. continue to produce their own shows internally. This competitive environment may result in fewer opportunities to produce shows for U.S. networks and a shorter lifespan for ordered shows that do not immediately achieve favorable ratings. SPE’s worldwide television networks compete for viewers with broadcast and cable networks, DBS providers, the Internet and other forms of entertainment. The growth in the number of networks around the world has increased the competition for advertising and subscription revenues, acquisition of programming, and distribution of SPE’s television networks by cable, satellite, the Internet and other distribution systems.

Music

Success in the music industry is dependent to a large extent upon the artistic and creative abilities of artists, producers and employees and is subject to the vagaries of public taste. The Music segment’s future competitive position depends on its continuing ability to attract and develop artists and products that can achieve a high degree of public acceptance as well as offer efficient services.

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Financial Services

In the Financial Services segment, Sony faces strong competition in the financial services markets in Japan. In recent years, the regulatory barriers between the life insurance and non-life insurance industries as well as among the insurance, banking and securities industries have been relaxed, resulting in new competitive pressures.

Sony Life competes not only with traditional insurance companies in Japan but also with other companies including online insurance companies, foreign-owned life insurance companies and a number of Japanese cooperative associations.

Sony Assurance competes against insurers that sell their policies through sales agents as well as insurers that, like Sony Assurance, primarily sell their policies through direct marketing via the telephone and the Internet. Competition in Japan’s non-life insurance industry has intensified in recent years, in part due to a number of new market entrants, including foreign-owned insurers.

Some of the competitors in the life insurance and non-life insurance businesses have advantages over Sony including:

• greater financial resources and financial strength ratings;

• greater brand awareness;

• more extensive marketing and sales networks, including through tie-ups with other types of financial institutions;

• more competitive pricing;

• larger customer bases; and

• a wider range of products and services.

Sony Bank has focused on providing retail asset management and mortgage services for individuals, and faces significant competition in Japan’s retail financial services market. Sony Bank competes with traditional banking institutions, regional banks, trust banks, non-bank companies, and newer financial groups providing online full-services of bank and brokerage in Japan.

In the Financial Services segment, it is important to maintain a strong and healthy financial foundation for the business as well as to meet diversifying customer needs. Sony Life and Sony Assurance have maintained a high solvency margin ratio, relative to the Japanese domestic minimum solvency margin ratio requirements. Sony Bank has maintained a sufficient capital adequacy ratio relative to the Japanese domestic criteria.

All Other

Sony DADC is facing intense price competition as well as contraction of worldwide physical media markets, as storage of digital content shifts from physical media to online servers. In such an environment, Sony DADC is focused on operating efficiency and service quality.

Government Regulations

Sony’s business activities are subject to various governmental regulations in different countries in which it operates, including regulations relating to: various business/investment approvals; trade affairs, including customs, import and export control; competition and antitrust; anti-bribery; advertising and promotion; intellectual property; broadcasting, consumer and business taxation; foreign exchange controls; personal information protection; product safety; labor; human rights; conflict; occupational health and safety; environmental; and recycling requirements.

In Japan, Sony’s insurance businesses are subject to the Insurance Business Act and approvals and oversight from the Financial Services Agency (“FSA”). The primary purpose of the Insurance Business Act and related regulations is to protect policyholders, not shareholders. The Insurance Business Act specifies the types of businesses insurance companies may engage in, imposes limits on the types and amounts of investments that can be made and requires insurance companies to maintain specified reserves and a minimum solvency margin ratio. In particular, life insurance companies must maintain a premium reserve (for the portion of their portfolio other than unearned premiums), an unearned premium reserve, a reserve for refunds with respect to certain insurance contracts of life insurance companies specified in the Insurance Business Act’s regulations, and a contingency

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reserve in amounts no lower than the amount of the “standard policy reserve” as set forth by the regulatory guidelines. The FSA maintains a solvency standard which is used by Japanese regulators to monitor the financial strength of insurance companies. Non-life insurance companies are also required to provide a policy reserve. Sony Bank is also subject to regulation by the FSA under the Banking Act of Japan, including the requirement that it maintain a minimum capital adequacy ratio in accordance with capital adequacy guidelines adopted by the FSA based on the Basel III agreement. The FSA has broad regulatory powers over insurance and banking businesses in Japan, including the authority to grant or revoke operating licenses and to request information and conduct onsite inspections of books and records. Sony’s subsidiaries in the Financial Services segment are subject to the Japanese Insurance Business Act and Banking Act that require insurance and business companies to maintain their financial credibility and to secure protection for policyholders and depositors in view of the public importance of insurance and banking services. As such, lending and borrowing between subsidiaries in the Financial Service segment and the other companies within Sony Group is strictly limited.

In addition, Sony’s telecommunication businesses in Japan are subject to approvals and oversight from the Ministry of Internal Affairs and Communications, under the Telecommunications Business Act and other regulations related to the Internet businesses and communication methods in Japan.

Social Responsibility Regulations Such as Environmental and Human Rights Regulations

Sony monitors, evaluates, and complies with new environmental requirements that may affect its operations. For example, in Europe, Sony is required to comply with a number of environmental regulations enacted by the EU such as the Restriction of Hazardous Substances (“RoHS”) Directive, the Waste Electrical and Electronic Equipment (“WEEE”) Directive and the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulation. Similar regulations are being formulated in other areas of the world, including South American and Southeast Asian countries.

Sony has taken steps to address new regulations or governmental policies related to climate change including carbon disclosure, greenhouse gas emission reduction, carbon taxes and energy efficiency for electronics products. For example, Sony has established an internal management system in response to the EU directive on energy-related products and their energy efficiency (“ErP”).

Sony also monitors and evaluates newly adopted laws and regulations that may affect its operations applicable to purchasing activities including the procurement of raw materials, with respect to environmental, occupational health and safety, human rights, labor and armed conflict issues, and complies as appropriate.

Also refer to “Risk Factors” in “Item 3. Key Information.”

Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities sanctioned under programs relating to terrorism or the proliferation of weapons of mass destruction. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

Sony is aware that certain transactions during the fiscal year ended March 31, 2017, as described below, may be disclosable pursuant to Section 13(r) of the Exchange Act.

Sony does not customarily allocate net profit on a country-by-country or activity-by-activity basis, other than as set forth in Sony’s consolidated financial statements prepared in accordance with U.S. GAAP; thus, the net profit and loss described below are non-U.S. GAAP figures and are estimated solely for the purpose of preparing this disclosure pursuant to Section 13(r) of the Exchange Act. The information below is to the best of Sony’s knowledge, and in particular Sony may not be aware of all potentially reportable sales by third-party-owned dealers and distributors.

• During the fiscal year ended March 31, 2017, a non-U.S. subsidiary of Sony sold medical instruments, including medical printers, print media and monitors, to a third-party-owned dealer in Dubai, which, to the best of Sony’s knowledge, planned to resell those products to hospitals and health organizations in Iran, some of which are under the control of the Iranian Ministry of Health. Sony’s gross revenue from these sales was approximately 5.7 million U.S. dollars, and Sony has estimated that its net profit from such sales was 0.4 million U.S. dollars.

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• Sony’s representative office in Tehran, Iran, which was established in 1992, has been closed and has been under liquidation processes since before the beginning of the fiscal year ended March 31, 2014. In the course of liquidation, Sony engages in certain incidental transactions (for example, permits, taxes, and similar matters incidental to the wind-down of the office in Iran) with Iranian government-owned entities. No material revenues or profits are associated with these transactions with the Iranian government-owned entities.

Sony is not aware of any other activity, transaction or dealing by Sony Corporation or any of its affiliates during the fiscal year ended March 31, 2017 that is disclosable in this report under Section 13(r) of the Exchange Act. As of the date of this report, Sony does not anticipate that any activity, transaction or dealing that may be disclosable will be conducted during the fiscal year ending March 31, 2018, except as described above in connection with the wind-down of its representative office or for certain transactions through third-party-owned dealers that Sony believes to be intended for hospitals and health organizations in Iran. Nevertheless, Sony has continued to monitor developments in this area, especially in the light of the Joint Comprehensive Plan of Action of July 14, 2015, among the United States, the United Kingdom, China, France, Russia, Germany, the EU and Iran, and will determine whether and to what extent they affect Sony’s business with Iranian customers as currently conducted and may additionally be conducted. Such business activities may require disclosure pursuant to Section 13(r) of the Exchange Act. Sony intends to conduct any such business activities in accordance with applicable law.

Sony believes, and maintains policies and procedures designed to ensure that, its transactions with Iran and elsewhere have been conducted in accordance with applicable economic sanctions laws and regulations and do not involve transactions likely to result in the imposition of sanctions or other penalties on Sony. However, there can be no assurance that Sony’s policies and procedures will be effective, and if the relevant authorities were to impose penalties or sanctions against Sony, the impact of such sanctions could be material.

C. Organizational Structure

The following table sets forth the significant subsidiaries owned, directly or indirectly, by Sony Corporation.

Name of company	Country of incorporation	(As of March 31,  2017) Percentage owned
Sony Global Manufacturing & Operations Corporation	Japan	100.0
Sony Semiconductor Solutions Corporation	Japan	100.0
Sony Semiconductor Manufacturing Corporation	Japan	100.0
Sony Marketing Inc.	Japan	100.0
Sony Mobile Communications Inc.	Japan	100.0
Sony Interactive Entertainment Inc.	Japan	100.0
Sony Visual Products Inc.	Japan	100.0
Sony Video & Sound Products Inc.	Japan	100.0
Sony Music Entertainment (Japan) Inc.	Japan	100.0
Sony Financial Holdings Inc.*	Japan	63.0
Sony Life Insurance Co., Ltd.*	Japan	100.0
Sony Bank Inc.*	Japan	100.0
Sony Americas Holding, Inc.	U.S.A.	100.0
Sony Corporation of America	U.S.A.	100.0
Sony Electronics Inc.	U.S.A.	100.0
Sony Interactive Entertainment LLC	U.S.A.	100.0
Sony Interactive Entertainment America LLC	U.S.A.	100.0
Sony Pictures Entertainment Inc.	U.S.A.	100.0
Sony Music Entertainment	U.S.A.	100.0
Sony Europe Limited	U.K.	100.0
Sony Interactive Entertainment Europe Ltd.	U.K.	100.0
Sony Global Treasury Services Plc	U.K.	100.0
Sony Overseas Holding B.V.	Netherlands	100.0
Sony Mobile Communications AB	Sweden	100.0
Sony Electronics Asia Pacific Pte. Ltd.	Singapore	100.0
Sony (China) Limited	China	100.0

* Sony Corporation owns 63% of Sony Financial Holdings Inc., and Sony Financial Holdings Inc. owns 100% of Sony Life Insurance Co., Ltd. and Sony Bank Inc.

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D. Property, Plant and Equipment

Sony has a number of offices, plants and warehouses throughout the world. Most of the buildings and land in/on which such offices, plants and warehouses are located are owned by Sony.

The following table sets forth information as of March 31, 2017 with respect to plants used for the production of products mainly for electronics products and services with floor space of more than 500,000 square feet:

Location	Approximate floor space		Principal products produced
	(square feet)
In Japan:
Nagasaki (Sony Semiconductor Manufacturing Corporation — Nagasaki TEC)		2,306,000	CMOS image sensors and other semiconductors
Kumamoto (Sony Semiconductor Manufacturing Corporation — Kumamoto TEC)		2,136,000	CCDs, CMOS image sensors, LCDs and other semiconductors
Kagoshima (Sony Semiconductor Manufacturing Corporation — Kagoshima TEC)		1,767,000	CCDs and other semiconductors
Oita (Sony Semiconductor Manufacturing Corporation — Oita TEC)		585,000	CMOS image sensors and other semiconductors
Motomiya, Fukushima (Sony Energy Devices Corporation — Motomiya Plant)		961,000	Batteries
Kohda, Aichi (Sony Global Manufacturing & Operations Corporation — Tokai TEC — Kohda Site)		902,000	Home-use video cameras, compact digital cameras and interchangeable single-lens cameras
Inazawa, Aichi (Sony Global Manufacturing & Operations Corporation — Tokai TEC — Inazawa Site)		842,000	LCD televisions
Tsuruoka, Yamagata (Sony Semiconductor Manufacturing Corporation — Yamagata TEC)		703,000	CMOS image sensors and other semiconductors
Koriyama, Fukushima (Sony Energy Devices Corporation — Koriyama Plant)		593,000	Batteries
Kosai, Shizuoka (Sony Global Manufacturing & Operations Corporation — Tokai TEC — Kosai Site)		576,000	Broadcast- and professional-use video equipment
Kisarazu, Chiba (Sony Global Manufacturing & Operations Corporation — Kisarazu TEC)		541,000	Blu-ray Disc™ players/recorders, audio equipment and video conference systems

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Location	Approximate floor space		Principal products produced
	(square feet)
Outside of Japan:
Terre Haute, Indiana, U.S.A. (Sony DADC US Inc.)		1,541,000	Blu-ray Disc™-ROMs, CDs, DVDs and UMDs (Universal Media Disc)
Huizhou, China (Sony Precision Devices (Huizhou) Co., Ltd.)		1,027,000	Optical pickups and LCDs
Wuxi, China (Sony Electronics (Wuxi) Co., Ltd., Sony Digital Products (Wuxi) Co., Ltd. and Sony (China) Ltd.)		1,876,000	Batteries and compact digital cameras
Penang, Malaysia (Sony EMCS (Malaysia) Sdn. Bhd. — PG TEC)		1,021,000	Audio equipment
Tuas, Singapore (Sony Electronics (Singapore) Pte. Ltd.)		834,000	Batteries
Bangi, Malaysia (Sony EMCS (Malaysia) Sdn. Bhd. — KL TEC)		954,000	LCD televisions, TV components, Blu-ray Disc™ players/recorders and DVD-players/recorders
Guangzhou, China (Sony Electronics Huanan Co., Ltd.)		687,000	Optical pickups
Beijing, China (Sony Mobile Communications (China) Co., Ltd.)		604,000	Mobile phones

In addition to the above facilities, Sony has a number of other plants for electronic products throughout the world. Sony owns R&D facilities, and Sony Corporation’s headquarters building, with a total floor space of approximately 1,753,000 square feet, in Tokyo, Japan, where administrative functions and product development activities are carried out. SIEI has its corporate headquarters in Sony Corporation’s headquarters building and leases additional office space in Tokyo from a third party, where administrative functions, product development, and software development are carried out. SIEA and SIEE lease their offices in the U.S. and Europe, respectively.

SPE’s corporate offices and motion picture and television production facilities are headquartered in Culver City, California, where it owns and operates a studio facility, Sony Pictures Studios, with aggregate floor space of approximately 1,935,000 square feet. SPE also leases office space and motion picture and television support facilities from third parties and affiliates of Sony Corporation in various worldwide locations. SPE’s film and videotape storage operations are located in various leased locations in the U.S. and Europe.

SME’s corporate offices are headquartered in New York, NY where it leases office space from SCA. SME also leases office space from third parties in various locations worldwide.

Most of SMEJ’s offices, including leased premises, are located in Tokyo, Japan.

SCA’s corporate offices are headquartered in New York, NY where it leases office space from a third party.

On March 31, 2016, Sony Semiconductor Manufacturing Corporation Oita TEC was established in Japan. This facility uses semiconductor fabrication equipment and certain related assets acquired from Toshiba.

On April 1, 2017, Sony China completed the transfer of all of the equity interest in Sony Electronics Huanan Co., Ltd., which manufactures camera modules, to Shen Zhen O-film Tech Co., Ltd.

Pursuant to the definitive agreement between Sony and Murata Manufacturing Co., Ltd., Sony will transfer to Murata Manufacturing Co., Ltd. the battery-related plants located in Japan, China and Singapore, subject to required regulatory approvals and other conditions.

Item 4A. Unresolved Staff Comments

Not applicable

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Item 5. Operating and Financial Review and Prospects

A. Operating Results

Operating Performance

	Fiscal year ended March 31
	2015			2016		2017
	(Yen in billions)
Sales and operating revenue		8,215.9			8,105.7		7,603.3
Equity in net income of affiliated companies		3.9			2.2		3.6
Operating income		68.5			294.2		288.7
Income before income taxes		39.7			304.5		251.6
Net income (loss) attributable to Sony Corporation’s stockholders		(126.0	)		147.8		73.3

Sales

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales and operating revenue (“sales”) were 7,603.3 billion yen, a decrease of 6.2% compared to the fiscal year ended March 31, 2016. This decrease was primarily due to the impact of foreign exchange rates. On a constant currency basis, sales were essentially flat year-on-year, due to significant increases in G&NS and Semiconductors segment sales, substantially offset by a significant decrease in MC segment sales. A further breakdown of sales figures is presented under “Operating Performance by Business Segment” below.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales were 8,105.7 billion yen, a decrease of 1.3% compared to the fiscal year ended March 31, 2015. This decrease was mainly due to a significant decrease in MC segment sales, reflecting a significant decrease in smartphone unit sales, partially offset by increases in G&NS segment sales, reflecting a significant increase in PS4 software sales, and in Music segment sales mainly reflecting depreciation of the yen against the U.S. dollar. A further breakdown of sales figures is presented under “Operating Performance by Business Segment” below.

Cost of Sales, Selling, General and Administrative Expenses and Other Operating Expense, net

“Sales” in the analysis of the ratio of “cost of sales” to sales, the ratio of “R&D costs” to sales, and the ratio of “selling, general and administrative expenses (“SGA expenses”)” to sales refers only to the “net sales” and “other operating revenue” portions of consolidated sales (which excludes financial services revenue). This is because “financial services expenses” are recorded separately from cost of sales and SGA expenses in the consolidated financial statements. The calculations of all ratios below that pertain to reportable segments include intersegment transactions.

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, cost of sales decreased by 413.9 billion yen year-on-year, to 4,753.0 billion yen. The cost of sales included net charges of 15.4 billion yen in expenses in the Semiconductors segment resulting from the earthquakes in the Kumamoto region in 2016 (“the 2016 Kumamoto Earthquakes”). Refer to Note 18 of the consolidated financial statements for details. The ratio of cost of sales to sales improved year-on-year from 73.4% to 72.9%.

R&D costs (all R&D costs are included within cost of sales) decreased by 20.7 billion yen year-on-year, to 447.5 billion yen. The ratio of R&D costs to sales was 6.9% compared to 6.7% in the fiscal year ended March 31, 2016. For further details, refer to Research and Development in Item 5.C.

SGA expenses decreased by 186.0 billion yen year-on-year, to 1,506.0 billion yen, mainly due to the impact of the appreciation of the yen. The ratio of SGA expenses to sales improved year-on-year from 24.0% to 23.1%.

Other operating expense, net was 149.0 billion yen, an increase of 101.8 billion yen year-on-year. This significant deterioration was mainly due to the recording of a 962 million U.S. dollar (112.1 billion yen) charge for the impairment of goodwill recorded in the Pictures segment. Refer to Note 9 of the consolidated financial statements for details of the impairment. In addition, other operating expense, net in the fiscal year ended March 31, 2017 included a 42.3 billion yen impairment charge related to the planned transfer of the battery

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business in the Components segment, as well as a 23.9 billion yen impairment charge against long-lived assets resulting from the termination of the development and manufacturing of certain high-functionality camera modules for external sale in the Semiconductors segment. Offsetting all of the above charges was a 37.2 billion yen gain on the sale of certain shares of M3, Inc. (“M3”) recorded in All Other. Other operating expense, net for the fiscal year ended March 31, 2016 included a 59.6 billion yen impairment charge against long-lived assets in the camera module business recorded in the Semiconductors segment, and a 30.6 billion yen impairment charge against long-lived assets in the battery business recorded in the Components segment, as well as a 151 million U.S. dollar (18.1 billion yen) gain recorded in the Music segment on the remeasurement to fair value of SME’s 51% equity interest in Orchard Media, Inc. (“The Orchard”), which had previously been accounted for under the equity method, as a result of SME increasing its ownership interest to 100%. It also included a gain of 12.3 billion yen from the sale of a part of the logistics business, in connection with the formation of a logistics joint venture, recorded in Corporate and elimination. Refer to Note 20 of the consolidated financial statements.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, cost of sales decreased by 108.3 billion yen year-on-year, to 5,166.9 billion yen. Cost of sales in the fiscal year ended March 31, 2015 included an 11.2 billion yen write-down of PS Vita and PS TV components in the G&NS segment. The ratio of cost of sales to sales improved year-on-year from 73.9% to 73.4%.

R&D costs (all R&D costs are included within cost of sales) increased by 3.9 billion yen year-on-year, to 468.2 billion yen. The ratio of R&D costs to sales was 6.7% compared to 6.5% in the fiscal year ended March 31, 2015. For further details, refer to Research and Development in Item 5. C.

SGA expenses decreased by 119.5 billion yen year-on-year, to 1,691.9 billion yen, mainly due to decreases in advertising costs and restructuring charges. The ratio of SGA expenses to sales improved year-on-year from 25.4% to 24.0%.

Other operating expense, net was 47.2 billion yen, a decrease of 134.5 billion yen year-on-year. This significant improvement was mainly due to a decrease in the amount of impairment charges. Other operating expense, net for the fiscal year ended March 31, 2016 included a 59.6 billion yen impairment charge against long-lived assets in the camera module business recorded in the Semiconductors segment, and a 30.6 billion yen impairment charge against long-lived assets in the battery business recorded in the Components segment, as well as a 151 million U.S. dollar (18.1 billion yen) gain recorded in the Music segment on the remeasurement to fair value of SME’s 51% equity interest in The Orchard described above. It also included a gain of 12.3 billion yen from the sale of a part of the logistics business, in connection with the formation of a logistics joint venture, recorded in Corporate and elimination. Other operating expense, net for the fiscal year ended March 31, 2015 included a 176.0 billion yen impairment charge against goodwill recorded in the MC segment and a gain of 14.8 billion yen recognized on the sale of certain buildings and premises at the Gotenyama Technology Center in Japan, recorded in Corporate and elimination. Refer to Note 20 of the consolidated financial statements.

Equity in Net Income (Loss) of Affiliated Companies

For the fiscal year ended March 31, 2017, equity in net income of affiliated companies was 3.6 billion yen, an increase of 1.3 billion yen year-on-year. For the fiscal year ended March 31, 2016, equity in net income of affiliated companies was 2.2 billion yen, a decrease of 1.7 billion yen year-on-year.

Operating Income

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, operating income decreased 5.5 billion yen year-on-year, to 288.7 billion yen. This decrease was mainly due to the 962 million U.S. dollars (112.1 billion yen) impairment charge of goodwill recorded in the Pictures segment, substantially offset by an improvement in the operating results of the MC segment and an increase in the operating income of the G&NS segment. Restructuring charges, net, increased 22.0 billion yen year-on-year to 60.2 billion yen primarily due to the above-mentioned impairment charge related to the planned transfer of the battery business.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, operating income increased by 225.6 billion yen year-on-year, to 294.2 billion yen. This significant increase was primarily due to significant improvements in the results of the MC segment and All Other, as well as the G&NS, IP&S, Music and Home Entertainment & Sound (“HE&S”)

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segments. The increase in consolidated operating income was partially offset by a significant deterioration in the operating results of the Semiconductors, Components, Financial Services and Pictures segments. Restructuring charges, net, decreased 59.8 billion yen year-on-year to 38.3 billion yen.

Other Income and Expenses

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, other income decreased by 52.4 billion yen year-on-year, to 14.4 billion yen, while other expenses decreased by 5.0 billion yen year-on-year, to 51.5 billion yen. The net amount of other income and other expenses was an expense of 37.1 billion yen, a deterioration of 47.4 billion yen year-on-year primarily due to the absence in the fiscal year ended March 31, 2017 of a 46.8 billion yen gain on the sale of certain shares of Olympus recorded in the fiscal year ended March 31, 2016.

The foreign exchange loss, net, increased by 1.6 billion yen year-on-year, to 22.2 billion yen.

Interest and dividends in other income of 11.5 billion yen were recorded in the fiscal year ended March 31, 2017, a decrease of 1.0 billion yen year-on-year. Interest recorded in other expenses totaled 14.5 billion yen, a decrease of 10.7 billion yen year-on-year, mainly due to a decrease in interest rates.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, other income increased by 41.8 billion yen year-on-year, to 66.8 billion yen, while other expenses increased by 2.6 billion yen year-on-year, to 56.5 billion yen. The net amount of other income and other expenses was income of 10.3 billion yen, an improvement of 39.1 billion yen year-on-year. This was mainly due to an increase in the gain on securities investments. The gain on sales of securities investments in the fiscal year ended March 31, 2016 included a 46.8 billion yen gain on the sale of certain shares of Olympus and a 2.7 billion yen gain on the sale of shares in connection with the above-mentioned formation of a logistics joint venture. The gain on sales of securities investments in the fiscal year ended March 31, 2015 included a 4.8 billion yen gain on Sony’s shares in SQUARE ENIX HOLDINGS CO., LTD.

The foreign exchange loss, net, was 20.6 billion yen, essentially flat year-on-year. Interest and dividends in other income of 12.5 billion yen were recorded in the fiscal year ended March 31, 2016, a decrease of 0.4 billion yen year-on-year. Interest recorded in other expenses totaled 25.3 billion yen, an increase of 1.7 billion yen year-on-year.

Income before Income Taxes

For the fiscal year ended March 31, 2017, income before income taxes was 251.6 billion yen, a decrease of 52.9 billion yen year-on-year. For the fiscal year ended March 31, 2016, income before income taxes was 304.5 billion yen, an increase of 264.8 billion yen year-on-year.

Income Taxes

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

During the fiscal year ended March 31, 2017, Sony recorded 124.1 billion yen of income tax expense, resulting in an effective tax rate of 49.3%, which exceeded the effective tax rate of 31.1% of the fiscal year ended March 31, 2016. This higher effective tax rate was mainly due to the nondeductible impairment charge of goodwill recorded during the fiscal year ended March 31, 2017. Refer to Note 21 of the consolidated financial statements.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

During the fiscal year ended March 31, 2016, Sony recorded 94.8 billion yen of income tax expense, resulting in an effective tax rate of 31.1 %. This effective tax rate was lower than the Japanese statutory tax rate primarily as a result of profits recorded at foreign subsidiaries and in the insurance business, which are both subject to lower tax rates, the reversal of valuation allowances on deferred tax assets for local taxes by a subsidiary in Japan, and an income tax benefit due to a reduction in the corporate tax rate in Japan which resulted in a reduction of net deferred tax liabilities. These reductions were partially offset by increases in valuation allowances for deferred tax assets in the national tax filing group in Japan and certain foreign subsidiaries. Refer to Note 21 of the consolidated financial statements.

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Net Income Attributable to Sony Corporation’s Stockholders

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, the net income attributable to Sony Corporation’s stockholders, which excludes net income attributable to noncontrolling interests, was 73.3 billion yen, a decrease of 74.5 billion yen year-on-year.

Net income attributable to noncontrolling interests of 54.3 billion yen was recorded, a decrease of 7.7 billion yen year-on-year. This decrease was mainly due to the acquisition of the 50% equity interest in Sony/ATV held by the Estate, making Sony/ATV a wholly-owned subsidiary of Sony.

Basic net income per share and diluted net income per share, attributable to Sony Corporation’s stockholders for the fiscal year ended March 31, 2017 were 58.07 yen and 56.89 yen, respectively, compared with 119.40 yen and 117.49 yen, respectively, in the fiscal year ended March 31, 2016. Refer to Note 22 of the consolidated financial statements.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, the net income attributable to Sony Corporation’s stockholders, which excludes net income attributable to noncontrolling interests, was 147.8 billion yen, compared to a net loss of 126.0 billion yen in the fiscal year ended March 31, 2015.

Net income attributable to noncontrolling interests of 61.9 billion yen was recorded, a decrease of 15.1 billion yen year-on-year. This decrease was mainly due to the decreased income at SFH, for which there was a noncontrolling interest of 40%.

Basic net income per share and diluted net income per share, attributable to Sony Corporation’s stockholders for the fiscal year ended March 31, 2016 were 119.40 yen and 117.49 yen respectively, compared to the loss of 113.04 yen of both basic net income per share and diluted net income per share, attributable to Sony Corporation’s stockholders for the fiscal year ended March 31, 2015. Refer to Note 22 of the consolidated financial statements.

Operating Performance by Business Segment

The following discussion is based on segment information. Sales and operating revenue in each business segment include intersegment transactions. Refer to Note 28 of the consolidated financial statements.

In addition to those significant trends, uncertainties and events listed herein, refer to Trend Information in Item 5.D for more information on significant trends, uncertainties and events that had, or may have, an effect on business segment operating performance.

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Business Segment Information

	Fiscal year ended March 31
	2015			2016			2017
	(Yen in billions)
Sales and operating revenue
Mobile Communications		1,410.2			1,127.5			759.1
Game & Network Services		1,388.0			1,551.9			1,649.8
Imaging Products & Solutions		700.6			684.0			579.6
Home Entertainment & Sound		1,238.1			1,159.0			1,039.0
Semiconductors		700.1			739.1			773.1
Components		250.7			224.6			195.4
Pictures		878.7			938.1			903.1
Music		560.4			619.2			647.7
Financial Services		1,083.6			1,073.1			1,087.5
All Other		385.6			332.2			267.0
Corporate and elimination		(380.1	)		(343.0	)		(298.1	)
Consolidated		8,215.9			8,105.7			7,603.3
	Fiscal year ended March 31
	2015			2016			2017
	(Yen in billions)
Operating income (loss)
Mobile Communications		(217.6	)		(61.4	)		10.2
Game & Network Services		48.1			88.7			135.6
Imaging Products & Solutions		38.7			69.3			47.3
Home Entertainment & Sound		24.1			50.6			58.5
Semiconductors		96.2			14.5			(7.8	)
Components		(7.5	)		(42.9	)		(60.4	)
Pictures		58.5			38.5			(80.5	)
Music		58.2			86.5			75.8
Financial Services		193.3			156.5			166.4
All Other		(94.2	)		1.7			30.9
Sub-Total		198.0			401.9			375.8
Corporate and elimination*		(129.4	)		(107.7	)		(87.1	)
Consolidated		68.5			294.2			288.7

* Corporate and elimination includes headquarters restructuring costs and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

Mobile Communications

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales decreased 32.7% year-on-year to 759.1 billion yen. This significant decrease was primarily due to a decrease in smartphone unit sales mainly in Europe, the Middle East and Latin America, as well as a significant downsizing of unit sales in unprofitable regions.

Operating income of 10.2 billion yen was recorded, compared to an operating loss of 61.4 billion yen in the fiscal year ended March 31, 2016. Despite the impact of the above-mentioned decrease in sales, operating results improved significantly mainly due to a reduction in operating costs including the benefit of restructuring initiatives, an improvement in profitability resulting from a concentration on fewer geographic areas and a focus on high value-added models, the positive impact of foreign exchange rates, as well as a reduction in restructuring charges.

The operating performance of the MC segment for the fiscal year ended March 31, 2017 reflected the slowing and maturation of the smartphone market on a global scale, primarily due to a slowdown in sales in emerging markets, as well as the intentional downsizing of operations in unprofitable geographic regions. In this environment, Sony focused on the higher-end of the product portfolio, since the market at the low-end is

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increasingly more competitive, price-sensitive and volatile. Furthermore, Sony focused on product differentiation in areas where Sony believes it has a technological advantage, such as image sensors, and in geographic areas where Sony believes it has a competitive edge, such as Japan. Sony also focused on stabilizing the segment’s operating results by further reducing operating costs and by growing recurring revenue businesses, such as the Internet services provider business. Sony intends to continue these initiatives in the fiscal year ending March 31, 2018.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales decreased 20.0% year-on-year to 1,127.5 billion yen. This decrease was due to a strategic decision not to pursue scale in order to improve profitability, resulting in a significant decrease in smartphone unit sales, partially offset by an improvement in the product mix of smartphones reflecting an increased focus on high value-added models.

Operating loss decreased 156.1 billion yen year-on-year to 61.4 billion yen. This significant decrease was primarily due to the absence of 176.0 billion yen goodwill impairment charge recorded in the fiscal year ended March 31, 2015. The operating results were also primarily affected by the negative impact of the appreciation of the U.S. dollar, reflecting a high ratio of U.S. dollar-denominated costs, and an increase in restructuring charges. The negative impact of the above-mentioned decrease in smartphone unit sales was offset by the improvement in product mix, as well as cost reductions.

Major product unit sales

	Fiscal year ended March 31
	2015		2016		2017
	(Units in millions)
Smartphones		39.1		24.9		14.6

Game & Network Services

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales increased 6.3% year-on-year to 1,649.8 billion yen. This increase was primarily due to an increase in PS4 software sales, including sales through the network, as well as an increase in PS4 hardware sales, partially offset by the impact of foreign exchange rates and the impact of a price reduction for PS4 hardware.

Operating income increased 46.9 billion yen year-on-year to 135.6 billion yen. This significant increase was primarily due to PS4 hardware cost reductions and the above-mentioned increase in PS4 software sales, partially offset by the impact of the price reduction for PS4 hardware and a decrease in PS3 software sales.

The operating performance of the G&NS segment for the fiscal year ended March 31, 2017 reflected the continued demand for hardware, software and network services. The expansion of the PS4 eco-system is expected to continue throughout the fiscal year ending March 31, 2018, and Sony intends to expand the network services business during that fiscal year as the PS4 eco-system enters its harvesting period.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales increased 11.8% year-on-year to 1,551.9 billion yen. This significant increase was primarily due to increases in PS4 software sales, including sales through the network, and PS4 hardware unit sales, partially offset by a decrease in PS3 software and hardware sales.

Operating income increased 40.6 billion yen year-on-year to 88.7 billion yen. This significant increase was primarily due to the increase in PS4 software sales and PS4 hardware cost reductions as well as the absence in the fiscal year ended March 31, 2016 of an 11.2 billion yen write-down of PS Vita and PS TV components recorded in the fiscal year ended March 31, 2015. Partially offsetting the increase in operating income were the negative impact of the appreciation of the U.S. dollar, reflecting a high ratio of U.S. dollar-denominated costs, and the decrease in PS3 software sales.

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Sales to external customers by product category

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Hardware		733,757		721,829		598,373
Network		351,467		529,318		714,924
Other		206,922		228,628		268,271
G&NS Total		1,292,146		1,479,775		1,581,568
Major product unit sales
	Fiscal year ended March 31
	2015		2016		2017
	(Units in millions)
PS4		14.8		17.7		20.0

Imaging Products & Solutions

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales decreased 15.3% year-on-year to 579.6 billion yen. This significant decrease was mainly due to the impact of foreign exchange rates and a decrease in unit sales resulting from the 2016 Kumamoto Earthquakes.

Operating income decreased 22.1 billion yen year-on-year to 47.3 billion yen. This significant decrease was mainly due to the negative impact of foreign exchange rates and the impact of the above-mentioned decrease in unit sales, partially offset by an improvement in the product mix of Still and Video Cameras reflecting a shift to high value-added models and cost reductions.

The operating performance of the IP&S segment for the fiscal year ended March 31, 2017 reflected shrinking markets for compact digital cameras, consumer video cameras and interchangeable lens cameras, as well as decreased production as a result of the 2016 Kumamoto Earthquakes. In this environment, Sony strengthened its high value-added products, such as interchangeable lens cameras and lenses, and focused on high-end models within its product portfolio of compact digital cameras and consumer video cameras. Sony intends to continue these initiatives in the fiscal year ending March 31, 2018.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales decreased 2.4% year-on-year to 684.0 billion yen. Sales were essentially flat year-on-year primarily due to decreases in unit sales of Still and Video Cameras reflecting a contraction of the market, substantially offset by an improvement in the product mix, reflecting a shift to high value-added models.

Operating income increased 30.5 billion yen year-on-year to 69.3 billion yen. This significant increase was mainly due to the improvement in the product mix of Still and Video Cameras and cost reductions.

Below are the sales to external customers by product category and unit sales of major products:

Sales to external customers by product category

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Still and Video Cameras		478,099		428,777		351,834
Other		218,789		248,454		219,665
IP&S Total		696,888		677,231		571,499
Major product unit sales
	Fiscal year ended March 31
	2015		2016		2017
	(Units in millions)
Digital cameras within Still and Video Cameras*		8.5		6.1		4.2

* Digital cameras include compact digital cameras and interchangeable single-lens cameras.

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Home Entertainment & Sound

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales decreased 10.4% year-on-year to 1,039.0 billion yen, primarily due to the impact of foreign exchange rates.

Operating income increased 7.9 billion yen year-on-year to 58.5 billion yen. This increase was primarily due to an improvement in the product mix reflecting a shift to high value-added models, partially offset by the negative impact of foreign exchange rates as well as an increase in expenses* resulting from the change in the method of calculating royalties and other costs for brand and patent utilization, pursuant to the separation of Sony’s businesses into distinct subsidiaries and the realignment of corporate functions.

The operating performance of the HE&S segment for the fiscal year ended March 31, 2017 reflected the relative stabilization of the television market and a market shift to high value-added models such as 4K televisions. In this environment, Sony expects to continue to pursue an improvement in product mix reflecting the shift to high value-added models and an enhancement of its marketing initiatives.

* For further details, refer to Note 28 of the consolidated financial statements.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales decreased 6.4% year-on-year to 1,159.0 billion yen. This decrease was primarily due to a decrease in unit sales of LCD televisions, and a decrease in home audio and video unit sales reflecting a contraction of the market, partially offset by an improvement in the product mix of LCD televisions reflecting a shift to high value-added models, as well as the impact of foreign exchange rates.

Operating income increased 26.5 billion yen year-on-year to 50.6 billion yen. This significant increase was primarily due to cost reductions and an improvement in product mix, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, as well as the impact of the above-mentioned decrease in sales.

Below are the sales to external customers by product category and unit sales of major products:

Sales to external customers by product category

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Televisions		835,068		797,764		720,557
Audio and Video		396,814		354,946		311,771
Other		3,804		2,375		1,887
HE&S Total		1,235,686		1,155,085		1,034,215
Major product unit sales
	Fiscal year ended March 31
	2015		2016		2017
	(Units in millions)
LCD televisions		14.6		12.2		12.1

Semiconductors

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales increased 4.6% year-on-year to 773.1 billion yen. This increase in sales was primarily due to a significant increase in unit sales of image sensors mainly for mobile products, partially offset by the impact of foreign exchange rates, a significant decrease in sales of camera modules, a business which was downsized, and the decrease in production due to the 2016 Kumamoto Earthquakes. Sales to external customers increased 10.1% year-on-year.

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Operating loss of 7.8 billion yen was recorded, compared to operating income of 14.5 billion yen in the previous fiscal year. This significant deterioration in operating results was primarily due to the negative impact of foreign exchange rates, the above-mentioned expenses resulting from the 2016 Kumamoto Earthquakes, and a 6.5 billion yen write-down of inventories of certain image sensors mainly for mobile products. This deterioration was partially offset by the above-mentioned year-on-year increase in sales and the decrease in impairment charges against long-lived assets related to the camera module business.

The operating performance of the Semiconductors segment for the fiscal year ended March 31, 2017 reflected growing demand for image sensors for mobile products, which is currently the most important market for Sony’s image sensors, as well as Sony’s efforts to increase its customer base. This growth was largely due to increased demand for high value-added products that use these image sensors to improve their front-facing cameras, dual-lens cameras and video functionality. In this environment, Sony streamlined the portfolio of the Semiconductors segment to focus on image sensors, exiting from certain other businesses in the segment, including the camera modules business. Sony also continued to invest in production capacity for image sensors and increased its customer base while carefully monitoring demand. Sony intends to continue these initiatives in the fiscal year ending March 31, 2018.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales increased 5.6% year-on-year to 739.1 billion yen primarily due to the impact of foreign exchange rates and increases in camera module and image sensor sales. Sales to external customers increased 12.0% year-on-year.

Operating income decreased 81.7 billion yen year-on-year to 14.5 billion yen. This significant decrease was primarily due to the deterioration in the operating results of the camera module business, including the recording of a 59.6 billion yen impairment charge related to long-lived assets, increases in depreciation and amortization expenses as well as an increase in R&D expenses. This deterioration was partially offset by the positive impact of foreign exchange rates. For the camera module business, due to a decrease in projected future demand, Sony revised its Mid-Range Plan for the period beginning with the fiscal year ended March 31, 2017. Given the decrease in projected future demand, Sony performed an impairment analysis in the quarter ended March 31, 2016, and determined that future cash flows would not be sufficient to recover the entire carrying amount of the long-lived assets, resulting in the impairment charge.

Components

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales decreased 13.0% year-on-year to 195.4 billion yen primarily due to the impact of foreign exchange rates and a decrease in sales in the battery business.

Operating loss increased 17.5 billion yen year-on-year to 60.4 billion yen. This significant increase in the operating loss was primarily due to a 42.3 billion yen impairment charge related to the planned transfer of the battery business and the impact of the above-mentioned decrease in sales, partially offset by the absence of the 30.6 billion yen impairment charge related to long-lived assets of the battery business recorded in the previous fiscal year.

Sony and Murata Manufacturing Co., Ltd. signed a binding definitive agreement to transfer the Sony Group’s battery business to the Murata Group, on October 31, 2016. The closing of the transaction is subject to required regulatory approvals and other conditions.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales decreased 10.4% year-on-year to 224.6 billion yen primarily due to the impact of a decrease in battery business sales.

Operating loss increased 35.4 billion yen year-on-year to 42.9 billion yen. This significant increase in the operating loss was primarily due to the deterioration in the operating results of the battery business, including the recording of a 30.6 billion yen impairment charge related to long-lived assets. This deterioration was partially offset by the positive impact of foreign exchange rates. For the battery business, due to the increasingly competitive markets, Sony performed an impairment analysis in the quarter ended December 31, 2015, and reduced the corresponding estimated future cash flows and the estimated ability to recover the entire carrying amount of the long-lived assets, resulting in the impairment charge.

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Electronics*

* The term “Electronics” refers to the sum of the MC, G&NS, IP&S, HE&S, Semiconductors and Components segments.

Inventory

	Fiscal year ended March 31
	2016		2017
	(Yen in billions)
Mobile Communications		84.5		79.5
Game & Network Service		84.2		81.7
Imaging Products & Solutions		64.9		62.9
Home Entertainment & Sound		105.3		114.1
Semiconductors		224.7		203.6
Components		36.5		11.4
Electronics Total		600.1		553.2

Sales to External Customers by Geographic Area

	Fiscal year ended March 31
	2015			2016			2017
Japan		16.6	%		18.1	%		20.1	%
United States		16.7	%		20.5	%		21.9	%
Europe		27.5	%		27.5	%		26.1	%
China		9.6	%		9.6	%		10.8	%
Asia-Pacific (other than Japan and China)		16.7	%		14.9	%		14.7	%
Other		12.9	%		9.3	%		6.4	%
Electronics Total		100	%		100	%		100	%

Manufacturing by Geographic Area

The following tables set forth the Electronics segments’ total production breakdown of in-house and outsourced production, and the breakdown of in-house production by geographic regions. Figures in parentheses indicate the percentage of products that were exported from each geographic region to other regions.

Total production breakdown of in-house and outsourced production*

	Fiscal year ended March 31
	2016			2017
In-house production		61	%		66	%
Outsourced production		39	%		34	%
Electronics total		100	%		100	%

Breakdown of in-house production by geographic regions*

	Fiscal year ended March 31
	2016			2017
Japan		37% (86%	)		44% (87%	)
China		42% (70%	)		33% (69%	)
Asia-Pacific (other than Japan and China)		19% (55%	)		22% (59%	)
Americas and Europe		1% (less than 5%	)		1% (less than 5%	)
Electronics total		100%			100%

* Because decimals have been rounded upwards, there may be cases in which the sum of individual figures does not equal 100%.

Pictures

Pictures segment results presented below are a yen-translation of the results of SPE, a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results is specified as being on “a U.S. dollar basis.”

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Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales decreased 3.7% year-on-year (a 5% increase on a U.S. dollar basis) to 903.1 billion yen, primarily due to the impact of the appreciation of the yen against the U.S. dollar. The increase in sales on a U.S. dollar basis was primarily due to higher sales for Television Productions and Media Networks. Sales for Television Productions increased primarily due to higher subscription video-on-demand (“SVOD”) licensing revenues. The increase in sales for Media Networks was due to higher advertising and subscription revenues mainly in India, Latin America and the U.S.

Operating loss of 80.5 billion yen was recorded, compared to operating income of 38.5 billion yen in the previous fiscal year. This significant deterioration in operating results was primarily due to the above-mentioned 962 million U.S. dollars (112.1 billion yen) impairment charge of goodwill. The operating results for the Pictures segment were also negatively impacted by higher programming and marketing expenses for Media Networks as well as higher theatrical marketing expenses for Motion Pictures.

As of March 31, 2017, unrecognized license fee revenue at SPE was approximately 2.6 billion U.S. dollars. SPE expects to record this amount over a ten year period, having entered into contracts with television broadcasters to provide those broadcasters with completed motion pictures and television programming. Under current revenue recognition requirements and SPE’s policies, the license fee revenue will be recognized in the fiscal year in which the product is made available for broadcast.

Within the Pictures segment in the fiscal year ended March 31, 2017, the operating performance of Motion Pictures reflected an acceleration of market decline in the home entertainment business, which resulted in a lowering of previous expectations regarding the home entertainment business, and a reduction in film performance. Underlying market trends in Motion Pictures include a larger share of film revenue being concentrated in fewer tent-pole films. In this environment, Sony is working to expand the global appeal of its films and enhance developed and acquired intellectual property. In the market in which Television Productions operates, U.S. networks are seeking to own more of the content broadcast on their networks. This impacts the number of series that these networks license from third-party producers such as SPE or the rights SPE retains in the series that are licensed. Sony, which does not own a major U.S. broadcast network, has been striving to build strong relationships with top content creators and major networks around the world to offset that impact. In the market in which Media Networks operates, there has been a gradual movement from a linear carriage environment — that is, one in which a viewer watches a program at a particular, pre-scheduled time — to a non-linear, on-demand carriage environment, which has put pressure on Media Networks’ carriage negotiations with distributors. As a result, Sony expects to continue to aim to differentiate its branded channels from the competition. Sony intends to continue these initiatives in the fiscal year ending March 31, 2018.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales increased 6.8% year-on-year (essentially flat on a U.S. dollar basis) to 938.1 billion yen. On a U.S. dollar basis, the impact of foreign exchange rates as well as lower sales in Motion Pictures were substantially offset by higher sales in Media Networks and Television Productions. The decrease in Motion Pictures sales was primarily due to a decrease in home entertainment revenues as the fiscal year ended March 31, 2015 benefited from the strong home entertainment performances of The Amazing Spider-Man 2, 22 Jump Street and Heaven Is For Real. Partially offsetting the decrease in home entertainment revenues was higher theatrical revenues in the fiscal year ended March 31, 2016, driven by the strong worldwide theatrical performances of Spectre and Hotel Transylvania 2. The increase in Media Networks sales was primarily due to higher advertising revenues in India and the United Kingdom. The increase in Television Productions sales was primarily due to higher SVOD revenues for Breaking Bad, The Blacklist and Better Call Saul.

Operating income decreased 20.0 billion yen year-on-year to 38.5 billion yen. This decrease was primarily due to the impact of the above-mentioned lower home entertainment revenues, the underperformance of The Walk and The Brothers Grimsby, and the negative impact of foreign exchange rates. This decrease was partially offset by the above-mentioned impact of higher Media Networks sales in India and the United Kingdom and the worldwide theatrical performance of Hotel Transylvania 2.

As of March 31, 2016, unrecognized license fee revenue at SPE was approximately 1.9 billion U.S. dollars. SPE expects to record this amount over a ten-year period, having entered into contracts with television broadcasters to provide those broadcasters with completed motion pictures and television programming. Under current revenue recognition requirements and SPE’s policies, the license fee revenue will be recognized in the fiscal year in which the product is made available for broadcast.

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Below are the sales to external customers by product category:

Sales to external customers by product category

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Motion Pictures		434,253		447,355		409,363
Television Productions		252,456		270,115		271,886
Media Networks		189,605		218,357		219,981
Pictures Total		876,314		935,827		901,230

Music

The Music segment results include the yen-translated results of SME and Sony/ATV, both U.S.-based operations which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis and the results of SMEJ, a Japan-based music company which aggregates its results in yen. The segment also includes equity in net income for EMI Music Publishing (“EMI”), an affiliated company accounted for under the equity method for which Sony records 39.8% of EMI’s net income in the segment operating income.

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, sales increased 4.6% year-on-year (an 11% increase on a constant currency basis) to 647.7 billion yen. The significant increase in sales on a constant currency basis was due to higher Visual Media and Platform sales and higher Recorded Music sales, and was partially offset by the impact of the appreciation of the yen against the U.S. dollar. Visual Media and Platform sales increased due to the strong performance of Fate/Grand Order, a game application for mobile devices in Japan. Recorded Music sales increased due to an increase in digital streaming revenues. Best-selling music titles included Beyoncé’s Lemonade, various hit tracks from The Chainsmokers and Sia’s This is Acting.

Operating income decreased 10.7 billion yen year-on-year to 75.8 billion yen. Operating income decreased primarily due to the above-mentioned absence of the 151 million U.S. dollar (18.1 billion yen) gain that was recorded in the previous fiscal year on the remeasurement of SME’s equity interest in The Orchard. The operating results of the Music segment were also positively impacted by the above-mentioned increase in sales, partially offset by the negative impact of the appreciation of the yen against the U.S. dollar.

The operating performance of the Music segment for the fiscal year ended March 31, 2017 reflected the growth in the market for recorded music after many years of market decline, as the continued development and growth of digital streaming has begun to offset the decreases in physical and download revenues. In this environment, Sony has pursued initiatives to offset the decreases in physical and digital download revenues with increased streaming, broadcast, and other licensing revenues through continued investment in new recorded music and music publishing rights. Sony intends to continue these initiatives in the fiscal year ending March 31, 2018.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, sales increased 10.5% year-on-year (a 5% increase on a constant currency basis) to 619.2 billion yen primarily due to the impact of the depreciation of the yen against the U.S. dollar. The increase in sales on a constant currency basis was primarily due to significantly higher Visual Media and Platform sales reflecting the strong performance of Fate/Grand Order, a game application for mobile devices in Japan. In Recorded Music, digital streaming revenues significantly increased, partially offset by a worldwide decline in physical and digital download sales. The fiscal year ended March 31, 2016 included the record-breaking sales of Adele’s new album 25. Other best-selling titles included One Direction’s Made in the A.M., David Bowie’s Blackstar and Meghan Trainor’s Title.

Operating income increased 28.3 billion yen year-on-year to 86.5 billion yen. This increase was primarily due to the above-mentioned gain recorded on the remeasurement to fair value of SME’s 51% equity interest in The Orchard as well as the impact of the above-mentioned increases in digital streaming revenues in Recorded Music and in Visual Media and Platform sales. Partially offsetting the increase was the negative impact of the above-mentioned decline in physical and digital download sales in Recorded Music.

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Below are the sales to external customers by product category:

Sales to external customers by product category

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Recorded Music		383,350		412,718		388,948
Music Publishing		70,959		71,258		66,541
Visual Media & Platform		87,383		118,588		175,278
Music Total		541,692		602,564		630,767

Financial Services

In Sony’s Financial Services segment, the results include SFH and SFH’s consolidated subsidiaries such as Sony Life, Sony Assurance and Sony Bank. The results of Sony Life discussed below on the basis of U.S. GAAP differ from the results that SFH and Sony Life disclose separately on a Japanese statutory basis.

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

For the fiscal year ended March 31, 2017, financial services revenue was 1,087.5 billion yen, essentially flat year-on-year. This was primarily due to an improvement in investment performance in the separate account driven by a rise in the stock market, substantially offset by a decrease in insurance premium revenue and a deterioration in investment performance in the general account, all at Sony Life. Revenue at Sony Life was 965.6 billion yen, essentially flat year-on-year.

Operating income increased 9.9 billion yen year-on-year to 166.4 billion yen primarily due to an increase in operating income at Sony Life. Operating income at Sony Life increased 15.5 billion yen year-on-year to 154.3 billion yen mainly due to decreases in the amortization of deferred insurance acquisition costs and the provision of policy reserves, primarily driven by an increase in interest rates and the improvement in the stock market, partially offset by a decline in net gains on sales of securities in the general account.

The operating performance of the Financial Services segment for the fiscal year ended March 31, 2017 reflected the continuation of an unfavorable interest rate environment. Following the January 2016 decision by the Bank of Japan (“BOJ”) to introduce the “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate” policy, long-term interest rates, which were already at a low level, fell until the BOJ’s decision in July 2016 to forgo a further reduction in interest rates. Following that decision, interest rates began to rise due to factors such as the adoption of the “Quantitative and Qualitative Monetary Easing with Yield Curve Control” policy in September 2016 with the BOJ’s purchasing of long-term government bonds to realize a target level of long-term interest rates, and moves by major countries’ central banks to curb monetary easing and shift interest rates in a positive direction. However, long-term interest rates rose only modestly in Japan due to the BOJ’s continuous monetary easing policy. Although Sony expects the current unfavorable interest rate environment to continue in the fiscal year ending March 31, 2018, Sony is continuing to pursue growth in the Financial Services segment by focusing on differentiating itself through high-quality financial products and services.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

For the fiscal year ended March 31, 2016, financial services revenue was 1,073.1 billion yen, essentially flat year-on-year. This was primarily due to a deterioration in investment performance in the separate account at Sony Life, driven by the deterioration in the stock market, substantially offset by an increase in insurance premium revenue reflecting a steady increase in policy amount in force at Sony Life. Revenue at Sony Life was 952.6 billion yen, essentially flat year-on-year.

Operating income decreased 36.8 billion year-on-year to 156.5 billion yen mainly due to a decrease in operating income at Sony Life. At Sony Life, operating income decreased 39.2 billion yen year-on-year to 138.8 billion yen, mainly due to increases in the amortization of deferred insurance acquisition costs and the provision of policy reserves, primarily driven by a significant decrease in interest rates and the deterioration in the stock market.

Information on Operations Separating Out the Financial Services Segment

The following charts show Sony’s information on operations for the Financial Services segment alone and for all segments excluding the Financial Services segment. These separate condensed presentations are not

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required or prepared under U.S. GAAP, which is used in Sony’s consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze its results without the Financial Services segment and believes that these presentations may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, then eliminated in the consolidated figures shown below.

	Fiscal year ended March 31
Financial Services segment	2015			2016			2017
	(Yen in millions)
Financial services revenue		1,083,629			1,073,069			1,087,504
Financial services expenses		889,540			915,881			917,479
Equity in net loss of affiliated companies		(782	)		(645	)		(3,601	)
Operating income		193,307			156,543			166,424
Other income, net		—			—			—
Income before income taxes		193,307			156,543			166,424
Income taxes and other		42,184			37,741			47,711
Net income of Financial Services		151,123			118,802			118,713
	Fiscal year ended March 31
Sony without the Financial Services segment	2015			2016			2017
	(Yen in millions)
Net sales and operating revenue		7,141,492			7,044,415			6,527,499
Costs and expenses		7,218,528			6,909,651			6,412,385
Equity in net income of affiliated companies		4,703			2,883			7,164
Operating income (loss)		(72,333	)		137,647			122,278
Other income (expenses), net		(20,987	)		20,755			(22,728	)
Income (loss) before income taxes		(93,320	)		158,402			99,550
Income taxes and other		63,094			71,451			84,956
Net income (loss) of Sony without Financial Services		(156,414	)		86,951			14,594
	Fiscal year ended March 31
Consolidated	2015			2016			2017
	(Yen in millions)
Financial services revenue		1,077,604			1,066,319			1,080,284
Net sales and operating revenue		7,138,276			7,039,393			6,522,966
		8,215,880			8,105,712			7,603,250
Costs and expenses		8,151,253			7,813,753			7,318,111
Equity in net income of affiliated companies		3,921			2,238			3,563
Operating income		68,548			294,197			288,702
Other income (expenses), net		(28,819	)		10,307			(37,083	)
Income before income taxes		39,729			304,504			251,619
Income taxes and other		165,709			156,713			178,330
Net income (loss) attributable to Sony Corporation’s Stockholders		(125,980	)		147,791			73,289

All Other

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

Sales for the fiscal year ended March 31, 2017 decreased 19.6% year-on-year, to 267.0 billion yen. This significant decrease in sales was primarily due to a decrease in sales of the disc manufacturing business resulting from the contraction of the market.

Operating income for the fiscal year ended March 31, 2017 increased 29.2 billion yen year-on-year to 30.9 billion yen. This significant increase was primarily due to a gain of 37.2 billion yen from the sale of certain shares of M3.

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Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

Sales for the fiscal year ended March 31, 2016 decreased 13.8% year-on-year to 332.2 billion yen. This significant decrease in sales was primarily due to the recording of sales in the fiscal year ended March 31, 2015 from the PC business, which was sold in July 2014.

Operating income of 1.7 billion yen was recorded, compared to an operating loss of 94.2 billion yen in the fiscal year ended March 31, 2015. This significant improvement was primarily due to a decrease in PC exit costs, including restructuring charges and after-sales service expenses, as well as the absence in the fiscal year ended March 31, 2016 of sales company fixed costs charged to the PC business in the fiscal year ended March 31, 2015, which were allocated based on the prior year results.

Restructuring

In a highly competitive landscape, Sony has made significant efforts to revitalize its Electronics businesses and has undertaken several large-scale restructuring initiatives including exiting from businesses or product categories, headcount reduction programs, and streamlining of its sales and administrative functions. For example, during the fiscal year ended March 31, 2015, Sony substantially completed the activities for optimizing the functions of its sales companies and headquarters, and experienced fixed cost reductions of more than 100 billion yen in the fiscal year ended March 31, 2016 compared with the fiscal year ended March 31, 2014. During the fiscal year ended March 31, 2015, Sony began restructuring plans in the MC segment, and has substantially completed those plans as of March 31, 2017. As a result, Sony experienced fixed cost reductions in the MC segment of more than 120 billion yen in annual operating expenses, including reductions in R&D expenses and marketing costs, in the fiscal year ended March 31, 2017 compared with the fiscal year ended March 31, 2015. Additionally, during the fiscal year ended March 31, 2017, Sony and Murata Manufacturing Co., Ltd. signed a binding definitive agreement to transfer Sony Group’s battery business to the Murata Group. Sony classified certain assets and liabilities related to the battery business as held for sale and, as a result of the fair value valuation of these assets and liabilities, recorded impairment losses of 42.3 billion yen in other operating expenses (net).

Sony believes the competitive environment will continue to be difficult, and therefore plans to be vigilant with respect to the scale of its businesses and to changes in the environment. Sony will continue to evaluate the cost and profit structure of its businesses and continue to take action to reduce cost where Sony believes appropriate.

The chart below shows the restructuring charges, which include non-cash charges related to depreciation associated with restructured assets, recorded in the fiscal years ended March 31, 2015, 2016 and 2017. For further details, refer to Note 19 of the consolidated financial statements.

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in millions)
Restructuring charges		98,036		38,259		60,215

Foreign Exchange Fluctuations and Risk Hedging

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

During the fiscal year ended March 31, 2017, the average rates of the yen were 108.4 yen against the U.S. dollar and 118.8 yen against the euro, which were 10.8% and 11.6% higher, respectively, than the fiscal year ended March 31, 2016. For the latest yen exchange rates per U.S. dollar, refer to “Selected Financial Data” in “Item 3. Key Information.”

For the fiscal year ended March 31, 2017, consolidated sales decreased 6.2% year-on-year (essentially flat on a constant currency basis) to 7,603.3 billion yen.

Consolidated operating income decreased 5.5 billion yen year-on-year to 288.7 billion yen. The foreign exchange fluctuations had a negative impact on the consolidated operating results mainly in Electronics.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

During the fiscal year ended March 31, 2016, the average rates of the yen were 120.1 yen against the U.S. dollar, which were 8.5% lower and 132.6 yen against the euro, which were 4.7% higher, respectively, than the fiscal year ended March 31, 2015. For the latest yen exchange rates per the U.S. dollar, refer to “Selected Financial Data” in “Item 3. Key Information.”

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For the fiscal year ended March 31, 2016, consolidated sales decreased 1.3% year-on-year (a 4% decrease on a constant currency basis) to 8,105.7 billion yen.

Consolidated operating income increased 225.6 billion yen year-on-year to 294.2 billion yen. The foreign exchange fluctuations had a negative impact on the consolidated operating results mainly in Electronics.

The table below indicates the foreign exchange impact on sales and operating results in each of the Electronics segments. For further details, refer to “Operating Performance by Business Segment” which discusses the impact of foreign exchange rates within segments and categories where foreign exchange rate fluctuations had a significant impact.

		Fiscal year ended March 31									Impact of changes in foreign exchange rates
		2015			2016			2017			2015 to 2016		2016 to 2017
		(Yen in billions)
MC	Sales		1,410.2			1,127.5			759.1			-2.4		-37.8
	Operating income (loss)		(217.6	)		(61.4	)		10.2			-64.3		+26.1
G&NS	Sales		1,388.0			1,551.9			1,649.8			+30.2		-144.2
	Operating income		48.1			88.7			135.6			-47.7		-2.2
IP&S	Sales		700.6			684.0			579.6			+20.6		-55.1
	Operating income		38.8			69.3			47.3			-1.6		-26.5
HE&S	Sales		1,238.1			1,159.0			1,039.0			+23.7		-111.3
	Operating income		24.1			50.6			58.5			-36.7		-13.4
Semiconductors	Sales		700.1			739.1			773.1			+50.2		-76.3
	Operating income (loss)		96.2			14.5			(7.8	)		+22.8		-43.7
Components	Sales		250.7			224.6			195.4			+14.7		-18.9
	Operating loss		(7.5	)		(42.9	)		(60.4	)		+1.9		-3.9

During the fiscal year ended March 31, 2017, sales for the Pictures segment decreased 3.7% year-on-year to 903.1 billion yen, while sales increased approximately 5% on a U.S. dollar basis. In the Music segment, sales increased 4.6% year-on-year to 647.7 billion yen, while sales increased approximately 11% year-on-year on a constant currency basis. During the fiscal year ended March 31, 2016, sales for the Pictures segment increased 6.8% year-on-year to 938.1 billion yen, while sales were essentially flat on a U.S. dollar basis. In the Music segment, sales increased 10.4% year-on-year to 617.6 billion yen, while sales increased 5% year-on-year on a constant currency basis. For a detailed analysis of segment performance, refer to the Pictures and Music segments under “Operating Performance by Business Segment.” Sony’s Financial Services segment consolidates the yen-based results of SFH. As most of the operations in this segment are based in Japan, Sony management analyzes the performance of the Financial Services segment on a yen basis only.

During the fiscal year ended March 31, 2017, Sony estimated that a one yen appreciation against the U.S. dollar would have decreased Electronics sales by approximately 22 billion yen, with an increase in operating income of approximately 3 billion yen. A one yen appreciation against the euro was estimated to decrease Electronics sales by approximately 9 billion yen, with a corresponding decrease in operating income of approximately 5 billion yen. For more details, refer to “Risk Factors” in “Item 3. Key Information.”

Sony’s consolidated results are subject to foreign currency rate fluctuations primarily due to different currency composition of revenue and costs. In the MC segment, the proportion of sales in yen is relatively high, but a significant proportion of manufacturing and procurement costs is incurred in U.S. dollars. Therefore, yen appreciation against the U.S. dollar has a positive impact on operating income. In the G&NS segment, a significant proportion of costs is incurred in U.S. dollars but sales are recorded in Japanese yen, U.S. dollars or euros. As a result, the yen appreciation against the U.S. dollar has a positive impact on operating income while the yen appreciation against the euro has a negative impact. In the IP&S segment, there is a relatively high proportion of costs in yen, while a large proportion of sales is in emerging markets, so yen appreciation against the currencies of emerging markets, particularly the Chinese yuan, has a negative impact on operating income. Similarly, in the HE&S segment, yen appreciation against emerging market currencies has a negative impact on operating income, but yen appreciation against the U.S. dollar has a positive impact on operating income due to a high proportion of manufacturing costs being incurred in U.S. dollars. In the Semiconductors segment, a significant proportion of sales contracts are denominated in U.S. dollars, but manufacturing operations are located in Japan, and, therefore, yen appreciation against the U.S. dollar has a significantly negative impact on operating income. In the Components segment, foreign exchange rate fluctuations do not have a significant impact on operating income because sales and costs are relatively balanced in all major currencies.

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In order to reduce the risk caused by foreign exchange rate fluctuations, Sony employs derivatives, including foreign exchange forward contracts and foreign currency option contracts, in accordance with a consistent risk management strategy. Such derivatives are used primarily to mitigate the effect of foreign currency exchange rate fluctuations on cash flows generated or anticipated by Sony Corporation and by its subsidiaries’ transactions and accounts receivable and payable denominated in foreign currencies.

Sony Global Treasury Services Plc (“SGTS”) in London provides integrated treasury services for Sony Corporation, its subsidiaries, and affiliated companies. Sony’s policy is that Sony Corporation and all subsidiaries with foreign exchange exposures should enter into commitments with SGTS to hedge their exposures. Sony Corporation and most of its subsidiaries utilize SGTS for this purpose. Sony’s policy of concentrating its foreign exchange exposures means that SGTS and Sony Corporation hedge most of the net foreign exchange exposure within the Sony group. Sony has a policy on the use of derivatives that, in principle, SGTS should centrally deal with and manage derivatives with financial institutions for risk management purposes. SGTS enters into foreign exchange transactions with creditworthy third-party financial institutions. Most of these transactions are entered into against projected exposures before the actual export and import transactions take place. In general, SGTS hedges the projected exposures for a period of one to three months before the actual transactions take place. Sony enters into foreign exchange transactions with financial institutions primarily for hedging purposes. Sony does not use these derivative financial instruments for trading or speculative purposes except for certain derivatives in the Financial Services segment. In the Financial Services segment, Sony uses derivatives primarily for asset liability management.

To minimize the effects of foreign exchange fluctuations on its financial results, particularly in the Electronics segments, Sony seeks, when appropriate, to localize material and parts procurement, design and manufacturing operations in areas outside of Japan.

Changes in the fair value of derivatives designated as cash flow hedges are initially recorded in accumulated other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Foreign exchange forward contracts, foreign currency option contracts and other derivatives that do not qualify as hedges are marked-to-market with changes in value recognized in other income and expenses. The notional amount of all the foreign exchange derivative contracts as of March 31, 2016 and 2017 was 1,835.2 billion yen and 2,567.7 billion yen, respectively. The net fair value of all the foreign exchange derivative contracts as of March 31, 2016 and 2017 was a liability of 2.5 billion yen and an asset of 9.4 billion yen, respectively. Refer to Note 14 of the consolidated financial statements.

* Note: In this section, the impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rates for the fiscal year ended March 31, 2015 and 2016 from the fiscal year ended March 31, 2016 and 2017, respectively, to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) described herein is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. Additionally, the MC segment enters into its own foreign exchange hedging transactions. The impact of those transactions is included in the impact of foreign exchange rate fluctuations on operating income (loss) for that segment. The descriptions of sales on a constant currency basis reflects sales obtained by applying the yen’s monthly average exchange rates from the fiscal year ended March 31, 2015 and 2016 to local currency-denominated monthly sales in the fiscal years ended March 31, 2016 and 2017, respectively. In the Pictures segment and SME, Sony/ATV and EMI in the Music segment, the constant currency amounts are after aggregation on a U.S. dollar basis. This information is not a substitute for Sony’s consolidated financial statements measured in accordance with U.S. GAAP. However, Sony believes that these disclosures provide additional useful analytical information to investors regarding the operating performance of Sony.

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Assets, Liabilities and Stockholders’ Equity

The following charts show Sony’s unaudited information on financial position for the Financial Services segment alone, and for all segments excluding the Financial Services segment. These separate condensed presentations are not required or prepared under U.S. GAAP, which is used in Sony’s consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze its results without the Financial Services segment and believes that these presentations may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, and then eliminated in the consolidated figures shown below.

Financial Services segment

	March 31
	2016		2017
	(Yen in millions)
ASSETS
Current assets:
Cash and cash equivalents		233,701		268,382
Marketable securities*1		943,195		1,051,441
Notes and accounts receivable, trade		9,743		10,931
Other		141,505		168,892
		1,328,144		1,499,646
Investments and advances*2		9,004,981		9,904,576
Property, plant and equipment		18,047		21,323
Other assets:
Deferred insurance acquisition costs		511,834		568,837
Other		52,523		69,493
		564,357		638,330
		10,915,529		12,063,875
	March 31
	2016		2017
	(Yen in millions)
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings*3		93,398		411,643
Notes and accounts payable, trade		—		—
Deposits from customers in the banking business		1,912,673		2,071,091
Other		203,161		218,851
		2,209,232		2,701,585
Long-term liabilities:
Long-term debt		34,567		75,511
Accrued pension and severance costs		29,082		31,289
Future insurance policy benefits and other*4		6,910,535		7,465,565
Other		345,277		338,868
		7,319,461		7,911,233
Stockholders’ equity of Financial Services		1,385,515		1,449,605
Noncontrolling interests		1,321		1,452
		10,915,529		12,063,875

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Sony without the Financial Services segment

	March 31
	2016		2017
	(Yen in millions)
ASSETS
Current assets:
Cash and cash equivalents		749,911		691,760
Marketable securities		3,202		—
Notes and accounts receivable, trade*5		847,788		947,602
Other		1,272,710		1,222,382
		2,873,611		2,861,744
Film costs		301,228		336,928
Investments and advances		309,184		285,965
Investments in Financial Services, at cost		111,476		133,514
Property, plant and equipment		801,485		735,590
Other assets*6		1,559,646		1,463,324
		5,956,630		5,817,065

	March 31
	2016		2017
	(Yen in millions)
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings*7		243,543		106,437
Notes and accounts payable, trade		550,964		539,900
Other		1,832,039		1,879,483
		2,626,546		2,525,820
Long-term liabilities:
Long-term debt		525,507		609,692
Accrued pension and severance costs		433,302		365,427
Other		462,319		433,761
		1,421,128		1,408,880
Redeemable noncontrolling interest		7,478		12,058
Stockholders’ equity of Sony without Financial Services		1,796,891		1,770,632
Noncontrolling interests		104,587		99,675
		5,956,630		5,817,065

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Consolidated

	March 31
	2016		2017
	(Yen in millions)
ASSETS
Current assets:
Cash and cash equivalents		983,612		960,142
Marketable securities		946,397		1,051,441
Notes and accounts receivable, trade		853,592		953,811
Other		1,413,126		1,390,328
		4,196,727		4,355,722
Film costs		301,228		336,928
Investments and advances		9,234,083		10,111,793
Property, plant and equipment		820,818		758,199
Other assets:
Deferred insurance acquisition costs		511,834		568,837
Other		1,608,700		1,529,077
		2,120,534		2,097,914
		16,673,390		17,660,556

	March 31
	2016		2017
	(Yen in millions)
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings		336,940		518,079
Notes and accounts payable, trade		550,964		539,900
Deposits from customers in the banking business		1,912,673		2,071,091
Other		2,030,173		2,092,669
		4,830,750		5,221,739
Long-term liabilities:
Long-term debt		556,605		681,462
Accrued pension and severance costs		462,384		396,715
Future insurance policy benefits and other		6,910,535		7,465,565
Other		781,228		747,595
		8,710,752		9,291,337
Redeemable noncontrolling interest		7,478		12,058
Sony Corporation’s stockholders’ equity		2,463,340		2,497,246
Noncontrolling interests		661,070		638,176
		16,673,390		17,660,556

*1 Marketable securities as of March 31, 2017 in the Financial Services segment increased year-on-year due to increases in the amount of marketable securities mainly at Sony Life.

*2 Investments and advances as of March 31, 2017 in the Financial Services segment increased year-on-year due to an increase in investments and advances mainly at Sony Life.

*3 Short-term borrowings as of March 31, 2017 in the Financial Services segment increased year-on-year due to an increase in short-term borrowings mainly at Sony Life.

*4 Future insurance policy benefits and other as of March 31, 2017 in the Financial Services segment increased year-on-year due to an increase in future insurance policy benefits resulting from the increase in the policy amount in force at Sony Life.

*5 Notes and accounts receivable, trade as of March 31, 2017 in all segments, excluding the Financial Services segment, increased year-on-year due to increases in notes and accounts receivable, trade in the G&NS, Pictures and Music segments.

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*6 Other assets as of March 31, 2017 in all segments, excluding the Financial Services segment, decreased year-on-year due to a decrease in goodwill (Refer to Note 9 of the consolidated financial statements).

*7 Short-term borrowings as of March 31, 2017 in all segments, excluding the Financial Services segment, decreased year-on-year mainly due to the repayment of the current portion of long-term debt.

Investments

The following table contains available-for-sale and held-to-maturity securities, including the breakdown of unrealized gains and losses by investment category.

	March 31, 2017
	Cost		Unrealized gain		Unrealized loss			Fair market value
	(Yen in millions)
Financial Services Business:
Available-for-sale
Debt securities
Sony Life		1,149,125		188,332		(2,772	)		1,334,685
Sony Bank		613,954		6,857		(1,686	)		619,125
Other		59,504		182		(16	)		59,670
Equity securities
Sony Life		25,302		13,660		(370	)		38,592
Sony Bank		—		—		—			—
Other		530		1,517		—			2,047
Held-to-maturity
Debt securities
Sony Life		6,066,464		1,522,835		(75,043	)		7,514,256
Sony Bank		6,219		87		—			6,306
Other		75,837		16,064		(449	)		91,452
Total Financial Services		7,996,935		1,749,534		(80,336	)		9,666,133
Non-Financial Services:
Available-for-sale securities		32,131		54,760		(7	)		86,884
Held-to-maturity securities		—		—		—			—
Total Non-Financial Services		32,131		54,760		(7	)		86,884
Consolidated		8,029,066		1,804,294		(80,343	)		9,753,017

At March 31, 2017, Sony Life had debt and equity securities with gross unrealized losses of 78.2 billion yen. Sony Life principally invests in Japanese and foreign government and corporate bonds. Almost all of the debt securities in which Sony Life invested were rated higher than or equal to “BBB” or its equivalent by Standard & Poor’s Ratings Services (“S&P”), Moody’s Investors Service (“Moody’s”) or other rating agencies.

At March 31, 2017, Sony Bank had debt securities with gross unrealized losses of 1.7 billion yen. Of the unrealized loss, 46.8% related to securities in an unrealized loss position for periods greater than 12 months at March 31, 2017. Sony Bank principally invests in Japanese government bonds, Japanese corporate bonds and foreign bonds. Almost all of these securities were rated higher than or equal to “BBB” or its equivalent by S&P, Moody’s or other rating agencies.

These unrealized losses related to numerous investments, with no single investment being in a material unrealized loss position for greater than 12 months. In addition, there was no individual security with unrealized losses that met the test for impairment as the decline in values were small both in amount and percentage, and the decline in values for those investments were still determined to be temporary in nature.

For fixed maturity securities with unrecognized losses held by Sony Life as of March 31, 2017 (77.8 billion yen), maturity dates vary as follows:

• Within 1 year:	—
• 1 to 5 years:	—
• 5 to 10 years:	—
• above 10 years:	100.0	%

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For fixed maturity securities with unrecognized losses held by Sony Bank as of March 31, 2017 (1.7 billion yen), maturity dates vary as follows:

• Within 1 year:	10.5	%
• 1 to 5 years:	57.5	%
• 5 to 10 years:	2.0	%
• above 10 years:	30.0	%

For the fiscal years ended March 31, 2015, 2016 and 2017, Sony Life recorded net realized gains on available-for-sale securities of 9.3 billion yen, 19.3 billion yen and 1.3 billion yen, respectively.

In the ordinary course of business, Sony maintains long-term investment securities, included in securities investments and other issued by a number of non-public companies. The aggregate carrying amount of the investments in non-public companies at March 31, 2017 was 61.3 billion yen. A non-public equity investment is primarily valued at cost if fair value is not readily determinable. If the value is estimated to have declined and such decline is judged to be other-than-temporary, the impairment of the investment is recognized immediately and the carrying value is reduced to its fair value.

For the fiscal years ended March 31, 2015, 2016 and 2017, total realized impairment losses were 0.9 billion yen, 3.6 billion yen and 7.6 billion yen, respectively, of which 0.1 billion yen, 0.1 billion yen and 0.0 billion yen, respectively, were recorded in financial services revenue by the subsidiaries in the Financial Services segment. Realized impairment losses recorded other than by subsidiaries in the Financial Services segment in each of the three fiscal years were reflected in non-operating expenses and primarily relate to certain strategic investments in non-Financial Services businesses. These investments primarily relate to certain strategic investments in Japan and the U.S. with which Sony has strategic relationships for the purposes of developing and marketing new technologies. Impairment losses were recorded for each of the three fiscal years as certain companies failed to successfully develop and market such technology, resulting in the operating performance of these companies being more unfavorable than previously expected. As a result the decline in the fair value of these companies was judged as other-than-temporary. None of these impairment losses were individually material to Sony.

Upon determination that the value of an investment is impaired, the value of the investment is written down to its fair value. For an investment where the quoted price is available in an active market, fair value is determined based on unadjusted quoted prices as of the date on which the impairment determination is made. For investments where the quoted price is not available in an active market, fair value is usually determined based on quoted prices of securities with similar characteristics or measured through the use of various methodologies such as pricing models, discounted cash flow techniques, or similar techniques that require significant management judgment or estimation of assumptions that market participants would use in pricing the investments. The impairment losses that were recorded in each of the three fiscal years related to the unique facts and circumstances of each individual investment and did not significantly impact other investments.

Sony Life and Sony Bank’s investments constitute the majority of the investments in the Financial Services segment. As of March 31, 2017, Sony Life and Sony Bank account for approximately 92% and 7% of the investments in the Financial Services segment, respectively.

Cash Flows

Fiscal year ended March 31, 2017 compared to fiscal year ended March 31, 2016:

Operating Activities: During the fiscal year ended March 31, 2017, there was a net cash inflow of 809.3 billion yen from operating activities, an increase of 60.2 billion yen, or 8.0% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 445.8 billion yen, an increase of 183.0 billion yen, or 69.6% year-on-year. This increase was primarily due to an increase in net income after taking into account non-cash adjustments (including depreciation and amortization, gain on sales of securities investments and other operating income (expense)) and a decrease of inventories, compared to an increase in the previous fiscal year.

The Financial Services segment had a net cash inflow of 376.2 billion yen, a decrease of 119.1 billion yen, or 24.0% year-on-year. This decrease was primarily due to a decrease in net income after taking into account a net gain or loss on revaluation of marketable securities held for trading purposes.

Investing Activities: During the fiscal year ended March 31, 2017, Sony used 1,254.0 billion yen of net cash in investing activities, an increase of 223.6 billion yen, or 21.7% year-on-year.

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For all segments excluding the Financial Services segment, there was a net cash outflow of 299.4 billion yen, a decrease of 35.5 billion yen, or 10.6% year-on-year. This decrease was mainly due to a decrease in payments for fixed asset purchases such as semiconductor manufacturing equipment.

The Financial Services segment used 953.2 billion yen of net cash, an increase of 259.2 billion yen, or 37.3% year-on-year. This increase was mainly due to a year-on-year decrease in proceeds from sales or return of investments and collections of advances at Sony Life.

In all segments excluding the Financial Services segment, net cash generated in operating and investing activities combined*for the fiscal year ended March 31, 2017 was 146.3 billion yen, a 218.5 billion yen improvement from net cash used in the previous fiscal year.

Financing Activities: Net cash provided by financing activities during the fiscal year ended March 31, 2017, was 452.3 billion yen, an increase of 72.2 billion yen, or 19.0% year-on-year.

For all segments excluding the Financial Services segment, there was a 173.4 billion yen net cash outflow, compared to a 144.8 billion yen net cash inflow in the previous fiscal year. During the fiscal year ended March 31, 2017, there was a net cash outflow as Sony redeemed long-term debt and made a payment for the acquisition of the 50% equity interest in Sony/ATV previously owned by the Estate, making Sony/ATV a wholly-owned subsidiary of Sony, partially offset by the issuance of straight bonds by Sony. During the previous fiscal year, Sony issued new stock and convertible bonds.

In the Financial Services segment, there was a 611.6 billion yen net cash inflow, an increase of 386.7 billion yen, or 171.9% year-on-year. This increase was primarily due to an increase in short-term borrowings at Sony Life and a larger year-on-year increase in deposits from customers at Sony Bank.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at March 31, 2017 was 960.1 billion yen. Cash and cash equivalents of all segments excluding the Financial Services segment was 691.8 billion yen at March 31, 2017, a decrease of 58.2 billion yen, or 7.8% compared with the balance as of March 31, 2016. Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 524.4 billion yen of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at March 31, 2017. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 268.4 billion yen at March 31, 2017, an increase of 34.7 billion yen, or 14.8% compared with the balance as of March 31, 2016.

Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015:

Operating Activities: During the fiscal year ended March 31, 2016, there was a net cash inflow of 749.1 billion yen from operating activities, a decrease of 5.6 billion yen, or 0.7% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 262.8 billion yen, a decrease of 40.9 billion yen, or 13.5% year-on-year. This decrease was primarily due to the negative impact of an increase in inventories, resulting from a larger increase in inventories in the Semiconductors segment, compared to a decrease in the fiscal year ended March 31, 2015, partially offset by positive factors such as a year-on-year improvement in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating expense, net, deferred income taxes and equity in net income of affiliated companies) and a year-on-year smaller decrease in notes and accounts payable, trade.

The Financial Services segment had a net cash inflow of 495.3 billion yen, an increase of 35.6 billion yen, or 7.7% year-on-year. This increase was primarily due to an increase in insurance premium revenue at Sony Life.

Investing Activities: During the fiscal year ended March 31, 2016, Sony used 1,030.4 billion yen of net cash in investing activities, an increase of 390.8 billion yen, or 61.1% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 334.9 billion yen, an increase of 231.3 billion yen, or 223.2% year-on-year. This increase was primarily due to an increase in the amount of fixed asset purchases, such as semiconductor manufacturing equipment, partially offset by factors such as cash inflow from the sale of certain shares of Olympus.

The Financial Services segment used 694.0 billion yen of net cash, an increase of 157.1 billion yen, or 29.3% year-on-year. This increase was mainly due to a year-on-year increase in payments for investments and advances at Sony Life.

In all segments excluding the Financial Services segment, net cash used in operating and investing activities combined* for the fiscal year ended March 31, 2016, was 72.1 billion yen, a 272.1 billion yen deterioration from cash generated in the fiscal year ended March 31, 2015.

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Financing Activities: Net cash provided by financing activities during the fiscal year ended March 31, 2016, was 380.1 billion yen, compared to a net cash outflow of 263.2 billion yen in the fiscal year ended March 31, 2015.

For all segments excluding the Financial Services segment, there was a 144.8 billion yen net cash inflow, compared to a net cash outflow of 315.4 billion yen in the fiscal year ended March 31, 2015. This change was primarily due to the issuance of new shares and convertible bonds in the fiscal year ended March 31, 2016, partially offset by factors such as repayments of long-term debt.

In the Financial Services segment, financing activities provided 224.9 billion yen of net cash, an increase of 180.5 billion yen, or 406.6% year-on-year. This increase was primarily due to a larger increase in short-term borrowings and policyholders’ account at Sony Life and an increase in customer deposits at Sony Bank, compared to a decrease in the fiscal year ended March 31, 2015.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at March 31, 2016 was 983.6 billion yen. Cash and cash equivalents of all segments excluding the Financial Services segment was 749.9 billion yen at March 31, 2016, an increase of 8.0 billion yen, or 1.1% compared with the balance as of March 31, 2015. In order to manage cash balance globally, Sony utilizes a system in which cash surpluses among subsidiaries are deposited with SGTS and cash shortfalls are covered by loans through SGTS. Sony’s ability to repatriate cash held in foreign subsidiaries may be restricted or delayed by local laws; however, any such amounts are considered insignificant. Refer to Cash Management in Item 5 B. Liquidity and Capital Resources. Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 522.5 billion yen of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at March 31, 2016. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 233.7 billion yen at March 31, 2016, an increase of 26.2 billion yen, or 12.6% compared with the balance as of March 31, 2015.

* Sony has included the information for cash flow from operating and investing activities combined, excluding the Financial Services segment’s activities, as Sony’s management frequently monitors this financial measure and believes this non-U.S. GAAP measurement is important for use in evaluating Sony’s ability to generate cash to maintain liquidity and fund debt principal and dividend payments from business activities other than its Financial Services segment. This information is derived from the reconciliations prepared in the section “Information on Cash Flows Separating Out the Financial Services Segment”. This information and the separate condensed presentations shown below are not required or prepared in accordance with U.S. GAAP. The Financial Services segment’s cash flow is excluded from the measure because SFH, which constitutes a majority of the Financial Services segment, is a separate publicly traded entity in Japan with a significant minority interest and it, as well as its subsidiaries, secures liquidity on its own. This measure may not be comparable to those of other companies. This measure has limitations because it does not represent residual cash flows available for discretionary expenditures, principally due to the fact that the measure does not deduct the principal payments required for debt service. Therefore, Sony believes it is important to view this measure as supplemental to its entire statement of cash flows and together with Sony’s disclosures regarding investments, available credit facilities and overall liquidity.

A reconciliation of the differences between the Consolidated Statement of Cash Flows reported and cash flows from operating and investing activities combined excluding the Financial Services segment’s activities is as follows:

	Fiscal year ended March 31
	2015			2016			2017
	(Yen in billions)
Net cash provided by operating activities reported in the consolidated statements of cash flows		754.6			749.1			809.3
Net cash used in investing activities reported in the consolidated statements of cash flows		(639.6	)		(1,030.4	)		(1,254.0	)
(1)		115.0			(281.3	)		(444.7	)
Less: Net cash provided by operating activities within the Financial Services segment (2)		459.7			495.3			376.2
Less: Net cash used in investing activities within the Financial Services segment (3)		(536.9	)		(694.0	)		(953.2	)
Eliminations**(4)		7.8			10.5			14.1
Cash flow generated by operating and investing activities combined excluding the Financial Services segment’s activities (1) - (2) - (3) + (4)		200.0			(72.1	)		146.3

** Eliminations primarily consist of intersegment dividend payments

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Information on Cash Flows Separating Out the Financial Services Segment

The following charts show Sony’s cash flow information for the Financial Services segment alone, and for all segments, excluding the Financial Services segment. These separate condensed presentations are not required or prepared under U.S. GAAP, which is used in Sony’s consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze its results without the Financial Services segment and believes that these presentations may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, and then eliminated in the consolidated figures shown below.

	Fiscal year ended March 31
Financial Services segment	2015			2016			2017
	(Yen in millions)
Net cash provided by operating activities		459,719			495,283			376,229
Net cash used in investing activities		(536,920	)		(694,031	)		(953,192	)
Net cash provided by financing activities		44,396			224,922			611,644
Net increase (decrease) in cash and cash equivalents		(32,805	)		26,174			34,681
Cash and cash equivalents at beginning of the fiscal year		240,332			207,527			233,701
Cash and cash equivalents at end of the fiscal year		207,527			233,701			268,382
	Fiscal year ended March 31
Sony without the Financial Services segment	2015			2016			2017
	(Yen in millions)
Net cash provided by operating activities		303,659			262,783			445,770
Net cash used in investing activities		(103,630	)		(334,900	)		(299,435	)
Net cash provided (used) in financing activities		(315,415	)		144,751			(173,425	)
Effect of exchange rate changes on cash and cash equivalents		51,138			(64,609	)		(31,061	)
Net increase (decrease) in cash and cash equivalents		(64,248	)		8,025			(58,151	)
Cash and cash equivalents at beginning of the fiscal year		806,134			741,886			749,911
Cash and cash equivalents at end of the fiscal year		741,886			749,911			691,760
	Fiscal year ended March 31
Consolidated	2015			2016			2017
	(Yen in millions)
Net cash provided by operating activities		754,640			749,089			809,262
Net cash used in investing activities		(639,636	)		(1,030,403	)		(1,253,973	)
Net cash provided (used) by financing activities		(263,195	)		380,122			452,302
Effect of exchange rate changes on cash and cash equivalents		51,138			(64,609	)		(31,061	)
Net increase (decrease) in cash and cash equivalents		(97,053	)		34,199			(23,470	)
Cash and cash equivalents at beginning of the fiscal year		1,046,466			949,413			983,612
Cash and cash equivalents at end of the fiscal year		949,413			983,612			960,142

B. Liquidity and Capital Resources

The description below covers basic financial policy and figures for Sony’s consolidated operations except for the Financial Services segment, which secures liquidity on its own. Furthermore, the Financial Services segment is described separately at the end of this section.

Liquidity Management and Market Access

An important financial objective of Sony is to maintain the strength of its balance sheet, while securing adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and the unused amount of committed lines of credit. Sony’s basic liquidity management policy is to secure sufficient liquidity throughout the relevant fiscal year, covering such factors as 50% of monthly consolidated sales and repayments on debt that comes due within six months.

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Funding requirements that arise from maintaining liquidity are principally covered by cash flow from operating activities and investing activities (including asset sales) combined and by the cash balance; however, as needed, Sony has demonstrated the ability to procure funds from financial and capital markets. In the event financial and capital markets become illiquid, based on its current forecasts, Sony could sustain sufficient liquidity through access to committed lines of credit with financial institutions, together with its cash balance.

Sony procures funds mainly from the financial and capital markets through Sony Corporation and SGTS, a finance subsidiary in the U.K.

In order to meet working capital requirements, Sony Corporation and SGTS maintain Commercial Paper (“CP”) programs that have the ability to access the Japanese, U.S. and European CP markets, subject to prevailing market conditions. The borrowing limits under the CP program, translated into yen, were 836.6 billion yen in total for Sony Corporation and SGTS. There were no amounts outstanding under the CP programs as of March 31, 2017, although the largest month-end outstanding balance of CP during the fiscal year ended March 31, 2017 was 130.0 billion yen in August 2016.

Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated loans). If market disruption and volatility occur and Sony could not raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions. Sony has a total, translated into yen, of 524.4 billion yen in unused committed lines of credit, as of March 31, 2017. Details of those committed lines of credit are: a 300.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, effective until July 2019, a 1.5 billion U.S. dollar multi-currency committed line of credit also with a syndicate of Japanese banks, effective until December 2018, and a 500 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until March 2017, in all of which Sony Corporation and SGTS are defined as borrowers. The above 500 million U.S. dollar committed line with a syndicate of foreign banks was renewed as of April 3, 2017, will remain in effect until March 2018 and was increased to 525 million U.S. dollars. These contracts are aimed at securing sufficient liquidity in a quick and stable manner even in the event of turmoil within the financial and capital markets.

In the event of a downgrade in Sony’s credit ratings, there are no financial covenants in any of Sony’s material financial agreements with financial institutions that would cause an acceleration of the obligation. Even though the cost of borrowing for some committed lines of credit could change according to Sony’s credit ratings, there are no financial covenants that would cause any impairment on the ability to draw down on unused facilities. Furthermore, there are no restrictions on the uses of most proceeds except that certain borrowings may not be used to acquire securities listed on a U.S. stock exchange or traded over-the-counter in the U.S. in accordance with the rules and regulations issued by authorities such as the Board of Governors of the Federal Reserve Board.

In September 2016, Sony Corporation issued unsecured straight bonds in the aggregate principal amount of 200,000 million yen. Most of the proceeds from the issuance of the bonds have already been applied to the repayment of borrowings and debt. Sony intends to apply the remaining proceeds to the repayment of borrowings and debt by the end of July 2017.

Ratings

Sony considers one of management’s top priorities to be the maintenance of stable and appropriate credit ratings in order to ensure financial flexibility for liquidity and capital management and continued adequate access to sufficient funding resources in the financial and capital markets.

In order to facilitate access to global capital markets, Sony obtains credit ratings from two rating agencies, Moody’s and S&P. In order to facilitate access to Japanese financial and capital markets, Sony obtains credit ratings from two agencies in Japan, including Rating and Investment Information, Inc. and Japan Credit Rating Agency, Ltd. 9

Sony currently believes that it has access to sufficient funding resources in the financial and capital markets. For information regarding a possible further rating downgrade, refer to “Risk Factors” in “Item 3. Key Information.”

Cash Management

Sony manages its global cash management activities mainly through SGTS. The excess or shortage of cash at most of Sony’s subsidiaries is invested or funded by SGTS on a net basis, although Sony recognizes that fund

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transfers are limited in certain countries and geographic areas due to restrictions on capital transactions. In order to pursue more efficient cash management, cash surpluses among Sony’s subsidiaries are deposited with SGTS and cash shortfalls among subsidiaries are covered by loans through SGTS, so that Sony can make use of excess cash balances and reduce third-party borrowings. Where local restrictions prevent an efficient intercompany transfer of funds, Sony’s intent is that cash balances remain outside of SGTS and that Sony meet its liquidity needs through ongoing cash flows, external borrowings, or both. Sony does not expect restrictions of capital transactions on amounts held outside of Japan to have a material effect on Sony’s overall liquidity, financial condition or results of operations.

Financial Services segment

The management of SFH, Sony Life, Sony Assurance and Sony Bank recognizes the importance of securing sufficient liquidity to cover the payment of obligations that these companies incur in the ordinary course of business. Sony Life, Sony Assurance and Sony Bank maintain a sufficient cash balance and secure sufficient means to meet their obligations while abiding by laws and regulations such as the Insurance Business Act or the Banking Act of Japan, and restrictions imposed by the Financial Services Agency (“FSA”) and other regulatory authorities as well as establishing and operating under company guidelines that comply with these regulations. Sony Life and Sony Assurance establish a sufficient level of liquidity for the smooth payment of insurance claims when they invest primarily in various securities cash inflows which are mainly from policyholders’ insurance premiums. Sony Bank maintains a necessary level of liquidity for the smooth settlement of transactions when it uses its cash inflows, which come mainly from customers’ deposits in local currency, in order to offer mortgage loans to individuals, and the remaining cash inflows are invested mainly in marketable securities. Cash inflows from customers’ deposits in foreign currencies are invested in investment instruments of the same currency.

In addition, Sony’s subsidiaries in the Financial Services segment are subject to the Japanese Insurance Business Act and Banking Act, which require insurance and business companies to maintain their financial credibility and to secure protection for policyholders and depositors in view of the public nature of insurance and banking services. As such, lending and borrowing between subsidiaries in the Financial Service segment and the other companies within Sony Group is strictly limited. Sony’s subsidiaries in the Financial Services segment are managed separately from Sony’s cash management activities through SGTS as mentioned above.

C. Research and Development

Sony’s mission is to be a company that provides customers with Kando, which means to move people emotionally, and to inspire and fulfill their curiosity. To realize this mission, Sony plans to continue to conduct R&D based on the spirit of innovation and challenge detailed in its Founding Prospectus, and create new customer value at the “last one inch,” or the very closest point of contact with its customers. Even as the requirements of hardware change over time, the importance of hardware as the first and last customer touchpoint remains, and Sony believes that this is somewhere it can demonstrate its uniqueness and find new sources of growth. Core technological components that Sony believes are the foundation of its competitive advantage and are necessary for the continuous development of products and services unique to Sony, include the following:

• Mastering image and sound, with audiovisual technologies such as Sony’s original super-resolution image processing engine, X-Reality™ PRO, and high-resolution audio technology including S-Master HX™ and DSEE HX™.

• Connecting people’s minds, with user interface and communication technologies that facilitate communication and connect people to one another.

• Going beyond human intelligence, with machine learning technology such as Deep Learning and reinforcement learning, recognition technology such as voice and image recognition, and computer vision technology combining Sony’s image sensors with image signal processing.

Sony has been engaged in the sequential separation of business units into distinct subsidiaries across the Sony Group, in order to reinforce the competitiveness of each business, and ensure clearly attributable accountability and responsibility. Concurrently, Sony has also been realigning the Group headquarters functions and platform functions that support each of its business units in order to enhance the effectiveness and efficiency of these operations. At its Group headquarters, Sony promotes corporate R&D, which leads its differentiation and creativity through technological innovation, and promotes the incubation of new businesses in areas beyond Sony’s current business domains.

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R&D costs for the fiscal year ended March 31, 2017 decreased by 20.7 billion yen to 447.5 billion yen. This decrease was primarily a result of the strategic decision in the MC segment not to pursue scale in order to improve profitability, which accelerated cost control initiatives.

The following table includes R&D expenses in the fiscal years ended March 31, 2015, 2016, and 2017.

	Fiscal year ended March 31
	2015		2016		2017
	(Yen in billions)
R&D expenses
Mobile Communications		91.0		78.1		54.9
Game & Network Services		89.1		91.9		95.6
Imaging Products & Solutions		66.0		61.5		58.6
Home Entertainment & Sound		49.3		44.8		47.3
Semiconductors		96.0		120.4		117.6
Components		13.6		15.7		14.4
Corporate R&D		34.7		31.3		44.4
Total		464.3		468.2		447.5

Consolidated R&D costs for the fiscal year ending March 31, 2018 are expected to be essentially flat year-on-year at 450 billion yen.

R&D costs for the fiscal year ended March 31, 2016 were essentially flat year-on-year at 468.2 billion yen. This was primarily due to an increase in R&D costs in the Semiconductors segment, reflecting an increase in image sensor-related R&D costs, substantially offset by a decrease in R&D costs in the MC, IP&S and HE&S segments, each categorized as either a “stable profit generator” or an “area focusing on volatility management.” (refer to Trend Information in Item 5 D). This decrease was a result of the strategic decision not to pursue scale in order to improve profitability, which accelerated cost control initiatives to address the decrease in scale of Sony’s AV/IT electronics businesses.

D. Trend Information

This section contains forward-looking statements about the possible future performance of Sony and should be read in light of the cautionary statement on that subject, which appears on the inside front cover page and applies to this entire document.

Issues Facing Sony and Management’s Response to those Issues

Amid worldwide movements towards preservationist and protectionist policies, there has been a moderate recovery in the global economy. In advanced economies, the United States has benefited from favorable consumer spending trends and a recovery in capital expenditures and exports, while the European economy has seen a modest recovery amid the impact of Brexit. In emerging markets, Russia and Brazil are coming out of recession, backed by a moderate recovery in international commodity markets, while growth in China is slowing due to a reduction of surplus production facilities. Furthermore, noneconomic shocks related to geopolitical conflicts, political discord, or terrorism loom over many regions, and could have a significant impact on the global economy.

The uncertain economic environment surrounding Sony is compounded by continued, intense pricing pressure from competitors, shrinking markets for certain key products and shorter product cycles, primarily in Sony’s Electronics businesses.

On February 18, 2015, Sony unveiled its mid-range plan announcing that it would position Return on Equity (“ROE”) (i.e., net income attributable to Sony Corporation’s stockholders divided by stockholders’ equity) as its most important performance indicator. With the goal of transforming into a highly profitable enterprise, Sony set targets of ROE of 10% or more and operating income above 500 billion yen for the fiscal year ending March 31, 2018, the last year of the mid-range plan.

Sony’s key strategies for business operations are as follows:

• Business management that emphasizes profitability, without necessarily pursuing volume

• Business management that grants each business unit greater autonomy and mandates a focus on shareholder value

• Clearly defined positioning of each business within a broader business portfolio perspective

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Based on its specific characteristics and the competitive landscape, each of the Sony Group’s businesses is classified as a “growth driver,” “stable profit generator,” or “area focusing on volatility management” in terms of its position within Sony’s overall business portfolio. Each business has been assigned a target figure for Return on Invested Capital (“ROIC”) linked with the ROE target for Sony Group as a whole, and managed with a clear emphasis on profitability.

On May 23, 2017, Sony held its Corporate Strategy Meeting for the fiscal year ended March 31, 2017 and provided an update on the progress of its mid-range corporate plan covering the fiscal year ended March 31, 2016 through the fiscal year ending March 31, 2018. Sony also presented details of initiatives it is undertaking to establish the Company’s foundations for the fiscal year ending March 31, 2019 and beyond. Highlights from this presentation are outlined below.

1. Progress of Mid-range Corporate Plan (fiscal year ended March 31, 2016 to fiscal year ending March 31, 2018)

For the five years since the fiscal year ended March 31, 2013, Sony has been managed with an emphasis on “transforming Sony” as well as “profit generation and investment for growth.” During the mid-range plan from the fiscal year ended March 31, 2016 through fiscal year ending March 31, 2018, Sony has been working to transition to a highly profitable enterprise and has established financial targets for the consolidated Sony Group of 10% or more ROE and 500 billion yen or more operating income in the fiscal year ending March 31, 2018, the final year of the mid-range plan. Sony currently expects to achieve 500 billion yen in consolidated operating income in the fiscal year ending March 31, 2018, the final year of the mid-range plan, a level of profit that it has not achieved for twenty years. After achieving that mid-range target, Sony aims to generate sustainably high profit and be a company that continuously generates new value.

Sony believes that the primary reason for the improvement in financial results for the fiscal year ended March 31, 2017 was the revitalization of the consumer electronics business. The strategy employed to manage that business was “emphasize differentiation, not volume,” a strategy which has been in Sony’s DNA since its founding, and Sony was able to revitalize the business to the point where it is expected to contribute stable profit.

In order to achieve the financial targets for the fiscal year ending March 31, 2018 and to generate sustainably high profit for the fiscal year ending March 31, 2019 and beyond, Sony believes that it not only needs consumer electronics to generate stable profit, but it also needs profits in the G&NS segment to increase, the image sensor for mobile use business to recover, the Music and Financial Services segments to continue to contribute significant profits and the Pictures segment to improve in profitability.

Revitalization of Consumer Electronics

The consumer electronics business had been struggling for a long time, but by employing the strategy “emphasize differentiation, not volume,” Sony was able to revitalize the business to the point where it is expected to contribute stable profit.

The television business, which had generated sizable operating losses since the fiscal year ended March 31, 2005, abandoned the strategy of attempting to improve profitability by expanding its business scale, and, since November 2011, has transformed its business structure to one that could break-even even with a business scale less than half the size it had previously targeted. At the same time, it shifted to a strategy of generating profit by increasing the added value of its products. As a result of these changes, the business improved to the point of generating an approximately 5% operating income margin (i.e., operating income divided by sales) for the fiscal year ended March 31, 2017.

The digital imaging business was able to transform its business by responding quickly to rapid changes in the operating environment. At a time when the digital camera market was changing dramatically mainly due to the emergence of smartphones, it was able to maintain a high level of profit by continuously reducing fixed costs and increasing the added value of its products, especially in the interchangeable lens camera space.

On the other hand, the profitability of the smartphone business remains an issue despite the fact that it was able to turn a profit in the fiscal year ended March 31, 2017 due to thorough structural reforms and a reduction in products and sales regions. Smartphones are the “last one inch” products which have the most touch-points with customers, and they showcase Sony’s differentiation by utilizing the latest Sony technology, such as Sony’s camera technology. However, the business is an extremely volatile and competitive one. Sony will carefully manage the business in the fiscal year ending March 31, 2018 so as to quickly respond to rapid changes in the environment while developing new business areas in the MC segment such as IoT (Internet of Things).

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Increase Profit in the Game & Network Services Segment

The PlayStation^® and PlayStation^TMNetwork businesses continue to deliver strong results, and Sony successfully launched the PlayStation^®4 Pro (“PS4^TMPro”), as well as the PlayStation^®VR (“PS VR”), in the fiscal year ended March 31, 2017.

Sony expects to sell 18 million units of PS4 in the fiscal year ending March 31, 2018 and reach a total cumulative units sold of 78 million units by the end of the fiscal year ending March 31, 2018. Sony will introduce several appealing software titles and a variety of network services to accompany the PS4^TMPro and PS VR, which add to the enjoyment of the PS4 world, at a time when the platform is entering its harvest period.

The network business aims to contribute profit by further enhancing the PS4 eco-system, which will in turn be achieved by further increasing the connection customers have to the PlayStation^TMNetwork and by expanding Sony’s loyal customer base.

Since it went on sale in October 2016, PS VR has provided a totally new, high-quality VR experience and is receiving acclaim from customers around the world. Over 100 game titles are already being sold for PS VR, and Sony expects to aggressively promote the development of not only game titles but non-game content as well.

Reviving the Image Sensor Business for Mobile Use

In the devices business, Sony has recognized the necessity of rapidly responding to changes in the operating environment and focusing on its strong businesses. Consequently, in the camera module business, which had produced significant losses, the development and production of high-functionality camera modules for external sale at Kumamoto Technology Center was terminated and the factory in Guangzhou, China was sold.

In the image sensors for mobile use business, Sony was not able to supply enough product to meet external customer demand in the first half of the fiscal year ended March 31, 2016 and financial results rapidly deteriorated from the second half of that fiscal year as sales stagnated due to a slow-down in growth of the smartphone market, particularly high-end models. In response to these circumstances, Sony worked to increase sales to Chinese smartphone makers and those efforts contributed to an improvement in results from the second half of the fiscal year ended March 31, 2017.

Recent trends in the market for image sensors for mobile use include an acceleration of dual-lens adoption, migration to higher resolution for front-facing cameras and more emphasis on video functionality. This means that the market for products that Sony excels at making is growing, and, as a result, Sony expects significant improvement in the profitability of this segment to be a positive contributor to profit in the fiscal year ending March 31, 2018.

Sony’s image sensors are receiving high acclaim for their functionality, yields and quality. However, there is still room to improve in areas like production lead-time and manufacturing cost. Sony plans to make the investments necessary to fuel future growth, including in the automotive space. Sony also aims to transform this business into an even more highly profitable one that generates a return which justifies the large investments made.

Deliver a Consistently High Level of Profit in the Music and Financial Services Segments

In the Music segment, songs from artists like Adele and Beyoncé became huge hits and contributed significantly to profit. In addition to the actual results of the underlying business, which is the discovery, development and promotion of artists, Sony has made strategic investments to augment recurring revenue businesses at a time when the market for paid streaming services is expanding. Examples of these investments include the acquisition of the remaining equity interests in Sony/ATV, which operates a music publishing business, and The Orchard, which operates a digital distribution platform for independent labels, making them wholly-owned subsidiaries of Sony. At a time when the operating environment for the music industry is changing dramatically, the strength of this business segment lies in creating new businesses which will become new sources of profit, while, at the same time, establishing a stable foundation of profit. Examples of these new businesses include SMEJ’s efforts in the animation and concert hall businesses.

The Financial Services segment is a recurring revenue business which has a “last one inch” connection to customers and leverages the Sony brand. It also continues to generate consistently high profit. Moreover, it demonstrates Sony’s DNA of innovating new business models as a new entrant, and creating change in existing markets. In that way, it has several of the elements Sony is emphasizing in its mid- to long-term strategy and is a very important business.

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Activities in the Pictures Segment

In the fiscal year ended March 31, 2017, Sony recorded a 112.1 billion yen impairment of goodwill in the Pictures segment as a result of a revision of the future profitability plan in the Motion Pictures business. The profit forecast for the fiscal year ending March 31, 2018 is also significantly below the level of the original target set in the mid-range plan.

However, the Pictures segment remains an important business for Sony and the level of urgency with which measures are being implemented to improve the profitability of the Motion Pictures business has increased.

As more of the world moves online and the manner in which video content is consumed diversifies, demand for appealing content is increasing more than ever before. In this environment, Sony is working to establish even stronger relations with content creators to create high-quality content.

Due to the nature of the business model for the Motion Pictures business, it takes time for results to improve, but Sony is enacting reforms to transform this business into one that generates a high level of profit.

2. Looking Forward to the fiscal year ending March 31, 2019 and Beyond

Sony operates a diverse range of businesses in the Electronics, Entertainment and Financial Services arenas with a mission to “be a company that inspires and fulfills your curiosity” and a vision to “use our unlimited passion for technology, content and services to deliver groundbreaking new excitement and entertainment, as only Sony can.” Having diverse business domains and operating them with a common set of values under the SONY brand is the fundamental strength of Sony.

In order to achieve sustainable growth over the mid- to long term, Sony believes it must 1) remain the “last one inch” that delivers a sense of “wow” to customers through its direct relationships with consumers, 2) enhance recurring revenue business models which grow stable profit by maintaining a relationship with each customer and 3) be a diverse company that pursues new businesses.

“Kando @ The Last One Inch”

• Sony is a brand that makes and delivers to customers, around the world, products that enable them to enjoy a variety of content, like videos and music, in the space closest to those customers: the “last one inch.” Sony will continue to make products that create emotion, appeal to all five senses and embody “Kando @ The Last One Inch,” such as the 4K BRAVIA OLED TVs, the Xperia^TM XZ Premium smartphone with the world’s first super slow motion functionality and 4K HDR display and the Alpha 9 full-sized mirrorless interchangeable lens camera, all of which were announced in spring of 2017. Another example of how the entire Sony Group is working together to create a new market is VR. VR is a field that can fully leverage the camera and film technology, content creation capability and rich entertainment assets owned across the Sony Group. Sony is working to nurture it into a new business domain.

Enhance Recurring Revenue Business Models

• As a part of Sony’s current mid-range plan, Sony is focusing on recurring revenue businesses which maintain a continuous relationship with customers to create a high level of stable profit.

• Recurring revenue businesses include: 1) subscription businesses like financial services, network services and channel businesses, 2) add-on revenue businesses like lenses for digital interchangeable lens cameras and game software and 3) content businesses like music and television show production. Going forward, Sony thinks that the highest potential lies with subscription and other service businesses which connect directly to customers.

• Through the enhancement of recurring revenue businesses, Sony plans to stabilize the business model of each of its businesses to generate sustainably high profit, enabling it to create new value and open a path to the future.

Be a Diverse Company that Undertakes New Business

• Since its founding, Sony has grown by entering into new businesses through the integration of its strengths and the strengths of other companies and by providing new value to existing industries. Examples of this are the Music and Financial Services businesses, which were started with other

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companies as joint ventures, and the Game business, which created a new business by combining knowledge from the diverse businesses already within the Sony Group. More recently, the medical business, which began operations as a joint venture between Sony and Olympus Corporation, LifeSpace UX and Sony Seed Acceleration Program (“SAP”), the new business development program, are producing good results. Sony plans to continue to proactively create new businesses going forward by utilizing the expertise held in its diverse range of businesses.

• The Sony Innovation Fund, a corporate venture capital fund established in July 2016 with the goal of promoting collaboration with highly-skilled researchers outside of Sony and with venture businesses, is laying a foundation for the future through several investments.

• As for Sony’s efforts to create new businesses using artificial intelligence and robotics, several projects are steadily progressing which combine Sony’s strength in the “moving things” of robotics and its strength in sensor technology.

After achieving the financial targets for the fiscal year ending March 31, 2018, the Sony Group as a whole, and each business unit within it, must not maintain the status quo, but must instead try new things so as to continue to generate a high level of profit over the mid- to long term. The company will work together as One Sony to create sustainable profit and continue to be a company that provides new value to society.

Group Environmental Mid-Term Targets “Green Management 2020”

Sony announced in June 2015 the establishment of its “Green Management 2020” group environmental mid-term targets, effective from fiscal 2016 (the fiscal year ended March 31, 2017) through fiscal 2020 (the fiscal year ending March 31, 2021). Based on the following three pillars, Sony has been implementing various initiatives to reduce the Sony Group’s environmental footprint:

• Formulate targets and implement initiatives that leverage the distinctive characteristics of Sony’s businesses, from Electronics to entertainment. Among these, reduce annual energy consumption by an average of 30% (compared to levels at the fiscal year ended March 31, 2014) in Electronics products, and in entertainment, continue to look to use its contents to raise awareness of sustainability issues and inspire environmentally conscious actions;

• Enhance efforts to reduce Sony’s environmental footprint across its entire value chain, including manufacturing partners and suppliers, by calling on them to reduce greenhouse gas (GHG) emissions and water consumption; and

• Accelerate the use of renewable energy.

Sony’s long-term vision is to achieve a “zero environmental footprint” throughout all stages of its product lifecycles and business activities by 2050. The “Green Management 2020” mid-term plan has been backcasted (calculated backwards) in order to determine the necessary intermediate steps that need to be taken by fiscal 2020 on the way to this long-term goal. With “Green Management 2020,” Sony plans to further accelerate its various initiatives directed towards its ultimate goal of a “zero environmental footprint.”

Sony plans to also continue to participate in the WWF’s Climate Savers Programme, which aims to achieve reductions in greenhouse gas emissions, from the fiscal year ended March 31, 2017 onwards. Climate change targets are verified by WWF and a third-party verification body for their degrees of difficulty and progress.

Further details of the group environmental mid-term targets “Green Management 2020” and actual measures undertaken by Sony are reported in Sony’s CSR report available on the following website: http://www.sony.net/SonyInfo/csr_report/.

E. Off-balance Sheet Arrangements

Sony has certain off-balance sheet arrangements that provide liquidity, capital resources and/or credit risk support.

Refer to Note 6 of the consolidated financial statements for transfers of financial asset transactions in which Sony has relinquished control of receivables and accounted for these transfers as sales, and Note 23 of the consolidated financial statements for various arrangements with variable interest entities, including those where Sony is not the primary beneficiary and therefore does not consolidate the entity.

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F. Contractual Obligations, Commitments, and Contingent Liabilities

The following table summarizes Sony’s contractual obligations and commitments as of March 31, 2017. The references to the notes below refer to the corresponding notes within the consolidated financial statements.

	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	(Yen in millions)
Contractual obligations and commitments:
Short-term debt (Note 11)		464,655		464,655		—		—		—
Long-term debt (Notes 8 and 11)
Capital lease obligations and other		34,224		10,152		12,338		7,794		3,940
Other long-term debt		700,662		43,272		336,968		149,723		170,699
Interest on other long-term debt		8,530		4,165		2,942		887		536
Minimum rental payments required under operating leases (Note 8)		268,520		54,727		83,842		42,691		87,260
Purchase commitments (Note 27)
Expected cost for the production or purchase of motion pictures and television programming or certain rights		139,006		76,104		55,933		4,446		2,523
Long-term contracts with recording artists, songwriters and companies		61,660		26,286		18,147		8,872		8,355
Long-term sponsorship contracts related to advertising and promotional rights		13,305		4,826		8,479		—		—
Long-term contracts for programming contents		16,317		7,620		8,697		—		—
Other purchase commitments		113,619		84,971		21,921		5,067		1,660
Future insurance policy benefits and other and policyholders’ account in the life insurance business* (Note 10)		21,320,690		470,406		1,024,469		1,149,210		18,676,605
Gross unrecognized tax benefits** (Note 21)		119,529		1,288		—		—		—
Total		23,260,717		1,248,472		1,573,736		1,368,690		18,951,578

* Future insurance policy benefits and other and policyholders’ account in the life insurance business are the estimated future cash payments to be made to policyholders and others. These cash payments are based upon assumptions including morbidity, mortality, withdrawals and other factors. Amounts presented in the above table are undiscounted. The sum of the cash payments of 21,320.7 billion yen exceeds the corresponding liability amounts of 7,413.8 billion yen included in the consolidated balance sheets principally due to the time value of money. Refer to Note 10 of the consolidated financial statements.

** The total amount represents the liability for gross unrecognized tax benefits in accordance with the accounting guidance for uncertain tax positions. Sony estimates that 1.3 billion yen of the liability is expected to be settled within one year. The settlement period for the liability, which totaled 118.2 billion yen, cannot be reasonably estimated due to the uncertainty associated with the timing of the settlements with the various taxing authorities. Refer to Note 21 of the consolidated financial statements.

The following items are not included in either the above table or the total amount of commitments outstanding at March 31, 2017:

• The total amount of expected future pension payments is not included as such amount is not currently determinable. Sony expects to contribute approximately 12 billion yen to Japanese pension plans and approximately 5 billion yen to foreign pension plans during the fiscal year ending March 31, 2018. Refer to Note 15 of the consolidated financial statements.

• The total unused portion of the line of credit extended under loan agreements in the Financial Services segment is not included in the above table as it is not foreseeable what loans will be incurred under such line of credit. The total unused portion of the line of credit extended under these contracts was approximately 31.4 billion yen as of March 31, 2017. Refer to Note 27 of the consolidated financial statements.

• Purchases made during the ordinary course of business from certain component manufacturers and contract manufacturers in order to establish the best pricing and continuity of supply for Sony’s

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production are not included as there are typically no binding purchase obligations. Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on Sony. These obligations specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include contracts that may be cancelled without penalty. These purchases include arrangements with certain component manufacturers whereby Sony procures goods, including product components, for these component manufacturers and is reimbursed for the related purchases. This allows Sony’s supply chain management to have flexible and mutually beneficial purchase arrangements with these manufacturers in order to minimize inventory risk. Consistent with industry practice, Sony purchases processed goods that meet technical criteria from these component manufacturers after issuing to these manufacturers information on Sony’s projected demand and manufacturing needs.

Refer to Item 8 A. “Financial Information” Consolidated Statements and Other Financial Information for legal proceedings and Note 27 of the consolidated financial statements for guarantees issued, including product warranties.

Critical Accounting Policies and Estimates

The preparation of the 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, Sony evaluates its estimates, which are based on historical experience, future projections and various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of expenses that are not readily apparent from other sources. Actual results may significantly differ from these estimates. Sony considers an accounting policy to be critical if it is important to its financial condition and results, and requires significant judgment and estimates on the part of management in its application. Sony believes that the following represents its critical accounting policies.

Investments

Sony’s investments include debt and equity securities accounted for under both the cost and equity method of accounting. If it has been determined that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value with a charge to income. Sony regularly evaluates its investment portfolio to identify other-than-temporary impairments of individual securities. Factors that are considered by Sony in determining whether an other-than-temporary decline in value has occurred include: the length of time and extent to which the market value of the security has been less than its original cost, the financial condition, operating results, business plans and estimated future cash flows of the issuer of the security, other specific factors affecting the market value, deterioration of the credit condition of the issuer, sovereign risk, and whether or not Sony is able to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value.

In evaluating the factors for available-for-sale securities whose fair values are readily determinable, Sony presumes a decline in value to be other-than-temporary if the fair value of the security is 20% or more below its original cost for an extended period of time (generally for a period of up to six months). This criterion is employed as a threshold to identify securities which may have a decline in value that is other-than-temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if there is evidence to support that the decline is temporary in nature due to the existence of other factors which overcome the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses are recognized when the decline in the fair value of the security is not more than 20% or such decline has not existed for an extended period of time, as a result of considering specific factors which may indicate that the decline in the fair value is other-than-temporary.

When an other-than-temporary impairment of a held-to-maturity debt security has occurred, the amount of the other-than-temporary impairment recognized in income depends on whether Sony intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost. If the debt security meets either of these two criteria, the other-than-temporary impairment is recognized in income, measured as the entire difference between the security’s amortized cost and its fair value at the impairment measurement date. For other-than-temporary impairments of debt securities that do not meet these two criteria,

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the net amount recognized in income is a credit loss equal to the difference between the amortized cost of the debt security and its net present value calculated by discounting Sony’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. Any difference between the fair value and the net present value of the debt security at the impairment measurement date is recorded in accumulated other comprehensive income. Unrealized gains or losses on securities for which an other-than-temporary impairment has been recognized in income are presented as a separate component of accumulated other comprehensive income.

The assessment of whether a decline in the value of an investment is other-than-temporary is often subjective in nature and involves certain assumptions and estimates concerning the expected operating results, business plans and future cash flows of the issuer of the security. Accordingly, it is possible that investments in Sony’s portfolio that have had a decline in value that Sony currently believes to be temporary may be determined to be other-than-temporary in the future based on Sony’s evaluation of subsequent information such as continued poor operating results, future broad declines in the value of worldwide equity markets and the effect of worldwide interest rate fluctuations. As a result, unrealized losses recorded for investments may be recognized and reduce income in future periods.

Valuation of inventory

Sony values its inventory based on the lower of cost and net realizable value. Sony writes down inventory in an amount equal to the difference between the cost of the inventory and the net realizable value — i.e., estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. Sony writes down the value of its inventory when the underlying parts, components or products have become obsolete, when inventory levels exceed the amount expected to be used, or when the value of the inventory is otherwise recorded at a higher value than net realizable value. As a result, if actual market conditions are less favorable than projected and further price decreases are needed, additional inventory write-downs may be required in the future.

Impairment of long-lived assets

Sony reviews the recoverability of the carrying value of its long-lived assets held and used and long-lived assets to be disposed of, whenever events or changes in circumstances indicate that the carrying value of the assets or asset groups may not be recoverable. Long-lived assets to be held and used are reviewed for impairment by comparing the carrying value of the asset or asset group with their estimated undiscounted future cash flows. This review is primarily performed using estimates of future cash flows by product category (e.g. LCD televisions) or, in certain cases, by entity. If the carrying value of the asset or asset group is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the asset or asset group exceeds its fair value. Fair value is determined using the present value of estimated net cash flows or comparable market values. This approach uses significant estimates and assumptions including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates applied to determine terminal values, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables.

Management believes that the estimates of future cash flows and fair value are reasonable; however, changes in estimates resulting in lower future cash flows and fair value due to unforeseen changes in Sony’s businesses or assumptions could negatively affect the valuations of long-lived assets.

Business combinations

When Sony applies the acquisition method of accounting, the deemed purchase price is allocated to identifiable assets acquired and liabilities assumed. Any residual purchase price is recorded as goodwill. The allocation of the purchase price utilizes significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. Independent third-party appraisal firms are typically engaged in order to assist in the estimation process. The significant estimates and assumptions include, but are not limited to, the timing and amount of revenue and future cash flows, the discount rate reflecting the risk inherent in future cash flows and the perpetual growth rate used to calculate the terminal value.

Due to the inherent uncertainties involved in making the estimates and assumptions, the purchase price for acquisitions could be valued and allocated to the acquired assets and liabilities differently. Actual results may differ, or unanticipated events and circumstances may affect such estimates, which could require Sony to record an impairment of an acquired asset, including goodwill, or increase in the amounts recorded for an assumed liability.

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Goodwill and other intangible assets

Goodwill and indefinite lived intangible assets are tested annually for impairment during the fourth quarter of the fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Such an event or change in circumstances would include unfavorable variances from established business plans, significant changes in forecasted results or volatility inherent to external markets and industries, which are periodically reviewed by Sony’s management.

In the fiscal year ended March 31, 2017, Sony elected not to perform an optional qualitative assessment of goodwill and instead proceeded directly to a two-step quantitative impairment process which involves a comparison of the estimated fair value of a reporting unit to its carrying amount to identify potential impairment. Reporting units are Sony’s operating segments or one level below the operating segments. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. Indefinite lived intangible assets are tested for impairment by comparing the fair value of the intangible asset with its carrying value, and if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Determining the fair value of a reporting unit under the first step of the goodwill impairment test and determining the fair value of individual assets and liabilities of a reporting unit (including unrecognized intangible assets) under the second step of the goodwill impairment test is judgmental in nature and often involves the use of significant estimates and assumptions. Similarly, estimates and assumptions are used in determining the fair value of indefinite lived intangible assets. These estimates and assumptions could significantly impact whether or not an impairment charge is recognized as well as the magnitude of any such charge.

In its impairment review, Sony performs internal valuation analyses or utilizes third-party valuations when management believes it to be appropriate, and considers other market information that is publicly available. The fair value of a reporting unit or indefinite lived intangible asset is generally determined using a discounted cash flow analysis. This approach uses significant estimates and assumptions including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, earnings multiples, determination of appropriate comparable entities and the determination of whether a premium or discount should be applied to comparables. Consideration is also given to Sony’s market capitalization in relation to the sum of the calculated fair values of the reporting units, including reporting units with no goodwill, and taking into account corporate level assets and liabilities not assigned to individual reporting units as well as a reasonable control premium.

The assumptions used for projected future cash flows and the timing of such cash flows are based on the forecast and mid-range plan (“MRP”) of each reporting unit and take into account such factors as historical experience, market and industry information, and current and forecasted economic conditions. Perpetual growth rates are utilized to determine a terminal cash flow value and are generally set after the three-year forecasted period for the MRP. Certain reporting units, such as those in the Pictures segment, utilize longer forecast periods and base the terminal value on an exit price using an earnings multiple applied to the final year of the forecasted earnings, which also takes into consideration a control premium. Discount rates are derived from the weighted average cost of capital of market participants in similar businesses.

Except as described below, for all reporting units with goodwill, fair value exceeded the carrying amount, and therefore no impairment existed and the second step of the impairment test was not required. These reporting units’ fair value exceeded their respective carrying values by at least 10.0%. Also, for indefinite lived intangible assets, fair value exceeded the carrying amount, and therefore no impairment existed.

During the fiscal year ended March 31, 2017, Sony recorded an impairment loss of 112,069 million yen in the Pictures segment. The impairment loss reflected the overall decline in the fair value of the reporting unit. The fair value of the reporting unit was estimated using the present values of expected future cash flows.

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The carrying amounts of goodwill by segment as of March 31, 2017 are as follows:

	Yen in millions
Mobile Communications		3,286
Game & Network Services		151,938
Imaging Products & Solutions		8,151
Semiconductors		48,069
Components		4,456
Pictures		138,153
Music		166,110
Financial Services		2,375
Total		522,538

A discussion of the significant assumptions, other than the MRP described above, including a sensitivity analysis with respect to their impact, of the estimated fair value of Sony’s reporting units for the impairment analysis performed for the fiscal year ended March 31, 2017 is included below:

• The discount rates ranged from 5.8% to 9.7%. A hypothetical one percentage point increase in the discount rate, holding all other assumptions constant, would not have resulted in a failure of the first step of the goodwill impairment test.

• The growth rates applied to the terminal values for reporting units within the MC, G&NS, IP&S, Semiconductors and Components segments and Financial Services ranged from approximately 1.0% to 1.5%. The growth rates beyond the MRP period for the reporting units in the Music segment ranged from 0% to 4.0%, and in the Pictures segment was 4.5%. A hypothetical one percentage point decrease in the growth rate, holding all other assumptions constant, would not have resulted in a failure of the first step of the goodwill impairment test.

• The earnings multiple used to calculate the terminal value in the Pictures reporting units was 9.0x. A hypothetical reduction in the earnings multiple to 8.0x, holding all other assumptions constant, would not have resulted in a failure of the first step of the goodwill impairment test.

Management believes that the assumptions used to estimate the fair value used in the goodwill impairment tests are reasonable; however, in the future, changes in estimates resulting in lower than currently anticipated cash flows and fair value due to unforeseen changes in assumptions could negatively affect the valuations, which may result in Sony recognizing impairment charges for goodwill and indefinite lived intangible assets in the future.

Pension benefit costs

Employee pension benefit costs and obligations are dependent on certain assumptions including discount rates, retirement rates and mortality rates, which are based upon current statistical data, as well as expected long-term rates of return on pension plan assets and other factors. Specifically, the discount rate and expected long-term rate of return on pension plan assets are two critical assumptions in the determination of periodic pension costs and pension liabilities. Assumptions are evaluated at least annually, or at the time when events occur or circumstances change and these events or changes could have a significant effect on these critical assumptions.

In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods. Therefore, actual results generally affect recognized costs and the recorded obligations for pensions in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect Sony’s pension obligations and future costs.

Sony’s principal pension plans are its Japanese pension plans. No individual foreign pension plan is significant to the consolidated pension plan assets and pension obligations.

To determine the benefit obligation of the Japanese pension plans, Sony used a discount rate of 0.9% for its Japanese pension plans as of March 31, 2017. The discount rate was determined by using information about yields on high-quality bonds currently available and expected to be available during the period to maturity of the pension benefit obligation in consideration of amounts and timing of cash outflows for expected benefit payments. Such available information about yields is collected from published market information and credit rating agencies. The 0.9% discount rate represents a 30 basis point increase from the 0.6% discount rate used for the fiscal year ended March 31, 2016 and reflects current Japanese market interest conditions.

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To determine the expected long-term rate of return on pension plan assets, Sony considers the current and expected asset allocations, as well as historical and expected long-term rates of return on various categories of pension plan assets. Sony’s pension investment policy recognizes the expected growth and the variability risk associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment policy gives appropriate consideration to recent market performance and historical returns, the investment assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of the corresponding pension liabilities. For Japanese pension plans, the expected long-term rate of return on pension plan assets was 3.0% and 2.7% as of March 31, 2016 and 2017, respectively. The actual return on pension plan assets for the fiscal years ended March 31, 2016 and 2017 was a 1.3% loss and a 5.2% gain, respectively. The difference between the expected and the actual rate of return on pension plan assets was primarily due to the positive performance in the domestic (Japan) and the global equity markets in the second half of the fiscal year ended March 31, 2017. Actual results that differ from the expected return on pension plan assets are accumulated and amortized as a component of pension costs over the average future service period, thereby reducing the year-to-year volatility in pension costs. As of March 31, 2016 and 2017, Sony had, with respect to Japanese pension plans, net actuarial losses of 389.3 billion yen and 317.4 billion yen, respectively, including losses related to pension plan assets. The net actual loss decreased due to the increase in the discount rate used to determine the defined benefit obligation, as compared to the prior fiscal year’s rate, and the higher actual return on pension plan assets than expected.

The following table illustrates the effect on the fiscal year ending March 31, 2018 of changes in the discount rate and the expected return on pension plan assets, while holding all other assumptions as of March 31, 2017 constant, for Japanese pension plans.

Change in assumption	Projected benefit obligations		Pension costs		Net income
	(Yen in billions)
25 basis point increase / decrease in discount rate		-/+38.5		-/+1.9		+/-1.3
25 basis point increase / decrease in expected long-term rate of return on pension plan assets		—		-/+1.7		+/-1.2

Deferred tax asset valuation

Carrying amounts of deferred tax assets require a reduction by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized prior to expiration. Accordingly, the need to establish a valuation allowance for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets. Management’s judgments related to this assessment consider, among other matters, the nature, frequency and severity of current and cumulative losses on an individual tax jurisdiction basis, forecasts of future profitability after consideration of uncertain tax positions, excess of appreciated asset value over the tax basis of net assets, the duration of statutory carryforward periods, the past utilization of net operating loss carryforwards prior to expiration, as well as prudent and feasible tax planning strategies which would be employed by Sony to prevent net operating loss and tax credit carryforwards from expiring unutilized.

As a result of losses incurred in recent years, Sony Corporation and several subsidiaries in Japan, SAHI and its consolidated tax filing group in the U.S., Sony Mobile Communication AB in Sweden, SEU in the U.K., certain subsidiaries in Brazil, and certain entities in other tax jurisdictions have been in cumulative loss positions. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset that is difficult to overcome when determining that a valuation allowance is not needed against deferred tax assets. As of March 31, 2017, some of these entities have now moved into a cumulative profit position. This is only one factor to be considered, however, and a pattern of consistent earnings still needs to be established in order to support a reversal of the valuation allowance.

The amount of the deferred tax assets as it relates to Sony Corporation, SAHI and its consolidated tax filing group in the U.S., SIEI, SIEE and SEU takes into account the uncertain tax positions related to the more likely than not adjustments for Sony’s intercompany transfer pricing. Such transfer pricing is currently under review by the relevant governments as a result of applications for Bilateral Advance Pricing Agreements (“APAs”) filed in the U.S., the U.K. and Japan. Sony is required to estimate the final outcome of those government to government negotiations in recording its tax positions, including the allocation and amount of deferred tax assets among the various legal entities as of the balance sheet date. Sony reviews its estimated tax expense based on the progress made in these procedures, and the progress of transfer pricing audits generally, and makes adjustments to its estimates as necessary.

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It is possible that advance pricing agreement negotiations could result in a different allocation of profits and losses than those currently estimated by management, and that such allocation could have a positive or negative impact on the amount or realizability of deferred tax assets or could change the amount of the valuation allowances recorded. Sony may record adjustments to its provision for uncertain tax positions and, accordingly, to its valuation allowance assessments, as additional evidence becomes available.

The estimate for the valuation of deferred tax assets, which is based on currently enacted tax laws and rates as of the balance sheet date, reflects management’s judgment and best estimate of the likely future tax consequences of events that have been recognized in Sony’s financial statements and tax returns, the ability to implement various tax planning strategies and, in certain cases, future forecasts, business plans and other expectations about future outcomes. Changes in existing tax laws or rates in tax jurisdictions in which Sony operates could affect actual tax results, and market or economic deterioration or failure of management to achieve its restructuring objectives could affect future business results, either of which could affect the valuation of deferred tax assets over time. If future results are less than projected, if negotiations of the APAs result in a different allocation of profits and losses than currently anticipated, if tax planning alternatives are no longer viable, or if there is no excess appreciated asset value over the tax basis of the assets contemplated for sale, further valuation allowance may be required in the future to reduce the deferred tax assets to their net realizable value. On the other hand, an improvement in future results, or other factors such as business reorganizations, could lead to the future reversal of valuation allowance into income as a reduction to tax expense, subject to review of the relevant qualitative factors and uncertainties. These factors and other changes that are not anticipated in current estimates could have a material impact on Sony’s earnings or financial condition in the period or periods in which the impact is recorded or reversed.

Film accounting

An aspect of film accounting that requires the exercise of judgment relates to the process of estimating the total revenues to be received throughout a film’s life cycle. Such estimate of a film’s ultimate revenue is important for two reasons. First, while a film is being produced and the related costs are being capitalized, it is necessary for management to estimate the ultimate revenue, less additional costs to be incurred, including exploitation costs which are expensed as incurred, in order to determine whether the value of a film has been impaired and thus requires an immediate write-off of unrecoverable film costs. Second, the amount of film costs recognized as cost of sales for a given film as it is exhibited in various markets throughout its life cycle is based upon the proportion that current period actual revenues bear to the estimated ultimate total revenues.

Management bases its estimates of ultimate revenue for each film on several factors including the historical performance of similar genre films, the star power of the lead actors and actresses, the expected number of theaters at which the film will be released, anticipated performance in the home entertainment, television and other ancillary markets, and agreements for future sales. Management updates such estimates on a regular basis based on the actual results to date and estimated future results for each film. For example, a film that has resulted in lower than expected theatrical revenues in its initial weeks of release would generally have its theatrical, home entertainment and television distribution ultimate revenues adjusted downward; a failure to do so would result in the understatement of amortized film costs for the period.

Future insurance policy benefits

Liabilities for future insurance policy benefits, which mainly relate to individual life insurance policies, are established in amounts adequate to meet the estimated future obligations of policies in force. These liabilities, which require significant management judgment and estimates, are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality, withdrawals and other factors. Future policy benefits are computed using interest rates ranging from 1.0% to 4.5% and are based on factors such as market conditions and expected investment returns. Morbidity, mortality and withdrawal assumptions for all policies are based on either the subsidiary’s own experience or various actuarial tables. Generally these assumptions are locked-in throughout the life of the contract upon the issuance of new insurance, although significant changes in experience or assumptions may require Sony to provide for expected future losses.

Policyholders’ account in the life insurance business

Policyholders’ account in the life insurance business represents an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges. Policyholders’ account includes universal life insurance and investment contracts. Universal life insurance includes interest sensitive whole life contracts and variable contracts. The credited rates associated with interest sensitive whole life contracts range from 1.8% to

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2.0%. For variable contracts, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. Investment contracts mainly include single payment educational endowment contracts, individual variable annuities and policies after the start of annuity payments. The credited rates associated with investment contracts, except for individual variable annuities, range from 0.01% to 6.3%. For individual variable annuities, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio.

Recently Adopted Accounting Standards

Refer to Note 2, summary of significant accounting policies, recently adopted accounting pronouncements, of the consolidated financial statements.

Recent Accounting Pronouncements

Refer to Note 2, summary of significant accounting policies, recent accounting pronouncements not yet adopted, of the consolidated financial statements.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Set forth below are the current members of the Board of Directors and Corporate Executive Officers of Sony Corporation, their responsibility as a director or officer, date of birth, the number of years they have served as a director or officer, and other principal business activities outside the Corporation as of June 15, 2017.

Board of Directors

Kazuo Hirai
Responsibility as a Director: Member of the Nominating Committee
Date of Birth: December 22, 1960
Number of Years Served as a Director: 5 years
Principal Business Activities Outside the Corporation: None
Brief Personal History:
April 1984	Joined CBS/Sony Inc. (currently Sony Music Entertainment (Japan) Inc.)
July 1996	EVP and COO, Sony Computer Entertainment America LLC (currently Sony Interactive Entertainment America LLC)
October 1997	Corporate Executive, Sony Computer Entertainment Inc. (currently Sony Interactive Entertainment Inc.)
April 1999	President and COO, Sony Computer Entertainment America LLC
August 2003	President and CEO, Sony Computer Entertainment America LLC
December 2006	President and Group COO, Sony Computer Entertainment Inc. Chairman, Sony Computer Entertainment America LLC
June 2007	President and Group CEO, Sony Computer Entertainment Inc.
April 2009	EVP, Corporate Executive Officer, Sony Corporation
April 2011	Executive Deputy President, Representative Corporate Executive Officer, Sony Corporation
September 2011	Chairman, Sony Computer Entertainment Inc.
April 2012	President and CEO, Representative Corporate Executive Officer, Sony Corporation (present)
June 2012	Director, Sony Corporation (present)

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Kenichiro Yoshida
Responsibility as a Director: Member of the Compensation Committee
Date of Birth: October 20, 1959
Number of Years Served as a Director: 3 years
Principal Business Activities Outside the Corporation: None
Brief Personal History:
April 1983	Joined Sony Corporation
July 2000	Joined Sony Communication Network Corporation (currently Sony Network Communications Inc.)
May 2001	SVP, Sony Communication Network Corporation
April 2005	President and Representative Director, Sony Communication Network Corporation
December 2013	EVP, CSO and Deputy CFO, Corporate Executive Officer, Sony Corporation
April 2014	EVP and CFO, Representative Corporate Executive Officer, Sony Corporation
June 2014	Director, Sony Corporation (present)
April 2015	Executive Deputy President and CFO, Representative Corporate Executive Officer, Sony Corporation (present)

Osamu Nagayama

Responsibility as a Director: Chairman of the Board

Chair of the Nominating Committee

Date of Birth: April 21, 1947

Number of Years Served as a Director: 7 years

Brief Personal History and Principal Business Activities Outside the Corporation:

April 1971	Joined The Long-Term Credit Bank of Japan, Limited
November 1978	Joined Chugai Pharmaceutical Co., Ltd.
March 1985	Member of the Board, Chugai Pharmaceutical Co., Ltd.
March 1987	Director and Senior Vice President, Chugai Pharmaceutical Co., Ltd.
March 1989	Representative Director and Deputy President, Chugai Pharmaceutical Co., Ltd.
September 1992	Representative Director, President and Chief Executive Officer, Chugai Pharmaceutical Co., Ltd.
January 2006	Member of Enlarged Corporate Executive Committee, F. Hoffmann-La Roche Ltd. (present)
June 2010	Director, Sony Corporation (present)
March 2012	Representative Director, Chairman and Chief Executive Officer, Chugai Pharmaceutical Co., Ltd. (present)
Takaaki Nimura
Responsibility as a Director: Chair of the Audit Committee
Date of Birth: October 25, 1949
Number of Years Served as a Director: 5 years
Brief Personal History and Principal Business Activities Outside the Corporation:
October 1974	Joined Arthur Young & Co., Tokyo Office
October 1980	Transferred to Asahi & Co., Osaka Office
October 1983	Transferred to Arthur Young, Los Angeles Office
May 1989	Partner, Asahi Shinwa & Co.
July 1993	Joined Showa Ota & Co.
May 1997	Senior Partner, Showa Ota & Co.
August 2008	Executive Board Member, Ernst & Young ShinNihon LLC
June 2012	Director, Sony Corporation (present)
March 2016	Outside Audit & Supervisory Board Member, Chugai Pharmaceutical Co., Ltd. (present)

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Eikoh Harada
Responsibility as a Director: Chair of the Compensation Committee
Date of Birth: December 3, 1948
Number of Years Served as a Director: 4 years
Brief Personal History and Principal Business Activities Outside the Corporation:
April 1972	Joined NCR Japan, Ltd.
November 1980	Joined Yokogawa Hewlett-Packard Company
January 1983	Director, Schlumberger Group
October 1994	Director, Apple Japan, Inc.
April 1997	President, Apple Japan, Inc. Vice President, Apple Computer, Inc.
March 2005	Chairman, President and Chief Executive Officer, Representative Director, McDonald’s Holdings Company (Japan), Ltd. Chairman, President and Chief Executive Officer, Representative Director, McDonald’s Company (Japan), Ltd.
June 2013	Director, Sony Corporation (present) Director, Benesse Holdings, Inc.
March 2014	Chairman, Director, McDonald’s Holdings Company (Japan), Ltd. Chairman, Director, McDonald’s Company (Japan), Ltd.
June 2014	Representative Director, Chairman and CEO, Benesse Holdings, Inc.
October 2014	Representative Director and CEO, Benesse Corporation
Tim Schaaff
Responsibility as a Director: -
Date of Birth: December 5, 1959
Number of Years Served as a Director: 4 years
Brief Personal History and Principal Business Activities Outside the Corporation:
December 1982	Joined New England Digital Corporation
July 1991	Joined Apple Computer, Inc.
1998	Vice President, Apple Computer, Inc.
December 2005	Senior Vice President, Sony Corporation of America
November 2006	Deputy President, Technology Development Group, Sony Corporation
June 2008	President, Sony Media Software and Services Inc.
December 2009	President, Sony Network Entertainment International LLC
June 2013	Director, Sony Corporation (present)
January 2014	Independent startup advisor (present)
July 2015	Chief Product Officer, Intertrust Technologies Corporation (present)
Kazuo Matsunaga
Responsibility as a Director: Member of the Audit Committee
Date of Birth: February 28, 1952
Number of Years Served as a Director: 3 years
Brief Personal History and Principal Business Activities Outside the Corporation:
April 1974	Joined Ministry of International Trade and Industry (currently Ministry of Economy, Trade and Industry (“METI”))
June 2004	Director-General, Nuclear and Industrial Safety Agency, METI
September 2005	Assistant Vice-Minister, Minister’s Secretariat, METI
July 2006	Deputy Vice-Minister, Minister’s Secretariat, METI
July 2008	Director-General, Economic and Industrial Policy Bureau, METI
July 2010	Vice-Minister of Economy, Trade and Industry, METI
April 2012	Specially-appointed Professor, Graduate School of International Corporate Strategy, Hitotsubashi University (present)
June 2013	Outside Director, Takasago Thermal Engineering Co., Ltd. (present)
June 2014	Director, Sony Corporation (present) Outside Director, Hashimoto Sogyo Co., Ltd. (currently Hashimoto Sogyo Holdings Co., Ltd.) (present) President, Japan Cooperation Center for the Middle East (present)
April 2016	Vice Chairman of the Board, Mitsubishi Fuso Truck and Bus Corporation
January 2017	Chairman of the Board, Mitsubishi Fuso Truck and Bus Corporation (present)

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Koichi Miyata
Responsibility as a Director: Member of the Nominating Committee
Date of Birth: November 16, 1953
Number of Years Served as a Director: 3 years
Brief Personal History and Principal Business Activities Outside the Corporation:
April 1976	Joined The Mitsui Bank, Ltd.
June 2003	Executive Officer, Sumitomo Mitsui Banking Corporation
October 2006	Managing Executive Officer, Sumitomo Mitsui Banking Corporation
April 2009	Director and Senior Managing Executive Officer, Sumitomo Mitsui Banking Corporation
April 2010	Senior Managing Executive Officer, Sumitomo Mitsui Financial Group, Inc.
June 2010	Director, Sumitomo Mitsui Financial Group, Inc.
April 2011	Director and President, Sumitomo Mitsui Financial Group, Inc. Director, Sumitomo Mitsui Banking Corporation
June 2014	Director, Sony Corporation (present)
June 2016	Outside Corporate Auditor, Isetan Mitsukoshi Holdings Ltd. (present)
April 2017	Chairman of the Board, Sumitomo Mitsui Financial Group, Inc. (present) Chairman of the Board, Sumitomo Mitsui Banking Corporation (present)

John V. Roos

Responsibility as a Director: Member of the Nominating Committee

Member of the Compensation Committee

Date of Birth: February 14, 1955

Number of Years Served as a Director: 3 years

Brief Personal History and Principal Business Activities Outside the Corporation:

October 1980	Associate, O’Melveny and Myers LLP
February 1985	Associate, Wilson Sonsini Goodrich & Rosati
February 1988	Partner, Wilson Sonsini Goodrich & Rosati
February 2000	Managing Director of Professional Services, Wilson Sonsini Goodrich & Rosati
February 2005	Chief Executive Officer, Wilson Sonsini Goodrich & Rosati
August 2009	United States Ambassador to Japan
September 2013	Outside Director, Salesforce.com, inc. (present)
October 2013	Chief Executive Officer, The Roos Group, LLC (present)
December 2013	Member of Global Advisory Board, Mitsubishi UFJ Financial Group, Inc. (present)
April 2014	Senior Advisor, Centerview Partners LLC (present)
June 2014	Director, Sony Corporation (present)
May 2015	Founding Partner, Geodesic Capital (present)
January 2016	Chairman of the Advisory Board, Toyota Research Institute, Inc. (present)
Eriko Sakurai
Responsibility as a Director: Member of the Compensation Committee
Date of Birth: November 16, 1960
Number of Years Served as a Director: 3 years
Brief Personal History and Principal Business Activities Outside the Corporation:
June 1987	Joined Dow Corning Corporation
May 2008	Director, Dow Corning Toray Co., Ltd.
March 2009	Chairman and Chief Executive Officer, Representative Director, Dow Corning Toray Co., Ltd. (present)
June 2014	Director, Sony Corporation (present)
June 2015	Outside Director, Sumitomo Mitsui Financial Group, Inc. (present)

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Kunihito Minakawa
Responsibility as a Director: Member of the Audit Committee
Date of Birth: August 15, 1954
Number of Years Served as a Director: -
Brief Personal History and Principal Business Activities Outside the Corporation:
April 1978	Joined Ricoh Company, Ltd.
October 1997	Senior Vice President and Chief Financial Officer, Ricoh Americas Corporation
April 2010	Corporate Vice President, and General Manager of Finance and Accounting Division, Ricoh Company, Ltd.
June 2010	Outside Audit & Supervisory Board Member, Ricoh Leasing Company, Ltd.
April 2012	Corporate Senior Vice President, and General Manager of Finance and Accounting Division, Ricoh Company, Ltd.
June 2013	Audit & Supervisory Board Member, Ricoh Company, Ltd. (present)
June 2017	Director, Sony Corporation (present)
Shuzo Sumi
Responsibility as a Director: Member of the Nominating Committee
Date of Birth: July 11, 1947
Number of Years Served as a Director: -
Brief Personal History and Principal Business Activities Outside the Corporation:
April 1970	Joined Tokio Marine & Fire Insurance Co., Ltd.
June 2000	Director and Chief Representative in London, Overseas Division, Tokio Marine & Fire Insurance Co., Ltd.
June 2002	Managing Director, Tokio Marine & Fire Insurance Co., Ltd.
October 2004	Managing Director, Tokio Marine & Nichido Fire Insurance Co., Ltd.
June 2005	Senior Managing Director, Tokio Marine & Nichido Fire Insurance Co., Ltd.
June 2007	President & Chief Executive Officer, Tokio Marine & Nichido Fire Insurance Co., Ltd. President & Chief Executive Officer, Tokio Marine Holdings, Inc.
June 2013	Chairman of the Board, Tokio Marine & Nichido Fire Insurance Co., Ltd. Chairman of the Board, Tokio Marine Holdings, Inc. (present)
June 2014	Outside Director, Toyota Industries Corporation (present)
June 2017	Director, Sony Corporation (present)

Corporate Executive Officers

In addition to Kazuo Hirai and Kenichiro Yoshida, the eight individuals set forth below are the current Corporate Executive Officers of Sony Corporation as of June 15, 2017. Refer to “Board Practices” below.

Tomoyuki Suzuki

Responsibility as an Officer: Executive Deputy President,

Officer in charge of R&D Platform, in charge of Energy Business and Storage Media Business

Date of Birth: August 19, 1954

Number of Years Served as a Corporate Executive Officer: 5 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1979	Joined Sony Corporation
June 2004	Vice President, Executive Officer, Sony Corporation
June 2005	SVP, Corporate Executive, Sony Corporation
April 2006	Deputy President, Semiconductor Business Group, Sony Corporation
April 2010	President, Sony Mobile Display Corporation
June 2011	Corporate Executive in charge of R&D Platform, Sony Corporation
April 2012	EVP, Corporate Executive Officer, Sony Corporation Officer in charge of Semiconductor Business, Device Business and Advanced Device Technology Platform, Sony Corporation
June 2013	Officer in charge of Device Solutions Business, R&D Platform and Common Software Design, Sony Corporation
April 2015	Executive Deputy President, Corporate Executive Officer, Sony Corporation (present)
April 2016	Officer in charge of R&D Platform, in charge of Energy Business and Storage Media Business, Sony Corporation (present)

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Shiro Kambe

Responsibility as an Officer: EVP, Officer in charge of Legal, Compliance, Corporate Communications, CSR,

External Relations and Information Security & Privacy

Date of Birth: December 18, 1961

Number of Years Served as a Corporate Executive Officer: 3 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1984	Joined Sony Corporation
June 2010	SVP, Corporate Executive, Sony Corporation
	Officer in charge of Corporate Communications and CSR, Sony Corporation (present)
April 2014	Officer in charge of External Relations, Sony Corporation (present)
	Officer in charge of Brand, Sony Corporation
June 2014	EVP, Corporate Executive Officer, Sony Corporation (present)
	Officer in charge of Legal and Compliance, Sony Corporation (present)
August 2016	Officer in charge of Information Security & Privacy, Sony Corporation (present)

Masashi Imamura

Responsibility as an Officer: EVP, Officer in charge of Manufacturing, Logistics, Procurement, Quality and

Environment, in charge of Engineering Platform

Date of Birth: January 8, 1957

Number of Years Served as a Corporate Executive Officer: 2 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1979	Joined Sony Corporation
June 2009	SVP, Corporate Executive, Sony Corporation President, Personal Imaging & Sound Business Group, Sony Corporation
August 2011	President, Home Entertainment Business Group, Sony Corporation
April 2012	President, Home Entertainment & Sound Business Group, Sony Corporation
July 2014	Group Executive, Sony Corporation Representative Director and President, Sony Visual Products Inc.
April 2015	EVP, Corporate Executive Officer, Sony Corporation (present) Officer in charge of Manufacturing, Logistics, Procurement, Quality and Environment, in charge of Engineering Platform, Sony Corporation (present)

Shigeki Ishizuka

Responsibility as an Officer: EVP, Officer in charge of Imaging Products & Solutions Business

Date of Birth: November 14, 1958

Number of Years Served as a Corporate Executive Officer: 2 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1981	Joined Sony Corporation
August 2004	Managing Director, Corporate Executive, Sony EMCS Corporation
June 2007	SVP, Corporate Executive, Sony Corporation
June 2009	President, Device Solutions Business Group, Sony Corporation
April 2012	President, Digital Imaging, Sony Corporation
April 2015	EVP, Corporate Executive Officer, Sony Corporation Officer in charge of Imaging Products & Solutions Business, Sony Corporation (present)
January 2016	President, Professional Solutions & Services Group, Sony Corporation
April 2017	Representative Director and President, Sony Imaging Products & Solutions Inc. (present)

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Andrew House

Responsibility as an Officer: EVP, Officer in charge of Game & Network Services Business

Date of Birth: January 23, 1965

Number of Years Served as a Corporate Executive Officer: 1 year

Principal Business Activities Outside Sony: None

Brief Personal History:

October 1990	Joined Sony Corporation
April 1995	Transferred to Sony Computer Entertainment Inc. (currently Sony Interactive Entertainment Inc.)
September 2005	Group Executive, Sony Corporation
May 2009	President, CEO and Co-COO, Sony Computer Entertainment Europe Ltd. (currently Sony Interactive Entertainment Europe Ltd.)
September 2011	President and Group CEO, Sony Computer Entertainment Inc.
April 2013	Officer in charge of Sony Network Entertainment Business, Sony Corporation
June 2013	Member of the Board of Sony Music Entertainment (Japan) Inc. (present)
April 2016	President and Global CEO, Sony Interactive Entertainment LLC (present) President, Sony Interactive Entertainment Inc. (present) EVP, Corporate Executive Officer, Sony Corporation (present) Officer in charge of Game & Network Services Business, Sony Corporation (present)

Ichiro Takagi

Responsibility as an Officer: EVP, Officer in charge of Home Entertainment & Sound Business,

Consumer AV Sales & Marketing

Date of Birth: December 26, 1958

Number of Years Served as a Corporate Executive Officer: 1 year

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1981	Joined Sony Corporation
June 2011	SVP, Corporate Executive, Sony Corporation
July 2014	President, Video & Sound Business Group, Sony Corporation Representative Director and Vice President, Sony Visual Products Inc.
April 2015	Group Executive, Sony Corporation Representative Director and President, Sony Visual Products Inc. (present)
October 2015	Representative Director and President, Sony Video & Sound Products Inc. (present)
April 2016	EVP, Corporate Executive Officer, Sony Corporation (present) Officer in charge of Home Entertainment & Sound Business, Consumer AV Sales & Marketing (present)

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Hiroki Totoki

Responsibility as an Officer: EVP, CSO,

Officer in charge of Mid-to-Long Term Business Strategy, New Business,

in charge of Mobile Communications Business

Date of Birth: July 17, 1964

Number of Years Served as a Corporate Executive Officer: 1 year

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1987	Joined Sony Corporation
February 2002	Representative Director, Sony Bank Incorporated
June 2005	Director, Corporate Executive Officer and Senior Managing Director, Sony Communication Network Corporation (currently Sony Network Communications Inc.)
April 2012	Representative Director, Corporate Executive Officer and Senior Managing Director, So-net Corporation (currently Sony Network Communications Inc.)
April 2013	Representative Director, Corporate Executive Officer, Deputy President and CFO, So-net Entertainment Corporation (currently Sony Network Communications Inc.)
December 2013	SVP, Corporate Executive, Sony Corporation Corporate Executive in charge of Business Strategy, Corporate Development and Transformation
November 2014	Group Executive, Sony Corporation President and CEO, Sony Mobile Communications Inc. (present)
June 2015	Director, Chairman, So-net Corporation (currently Sony Network Communications Inc.)
April 2016	EVP, Corporate Executive Officer, Sony Corporation (present) Officer in charge of Mobile Communications Business, Sony Corporation (present) President and Representative Director, So-net Corporation (currently Sony Network Communications) (present)
June 2017	CSO, Sony Corporation (present) Officer in Charge of Mid-to-Long Term Business Strategy, New Business (present)

Kazushi Ambe

Responsibility as an Officer: EVP, Officer in charge of Human Resources and General Affairs

Date of Birth: April 23, 1961

Number of Years Served as a Corporate Executive Officer: 1 year

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1984	Joined Sony Corporation
October 2001	Vice President, Sony Ericsson Mobile Communications
April 2006	Senior Vice President, Sony Corporation of America
November 2014	Corporate Executive, SVP, Sony Corporation
June 2016	EVP, Corporate Executive Officer, Sony Corporation (present) Officer in charge of Human Resources and General Affairs (present)

Kazuo Hirai, Kenichiro Yoshida, Tomoyuki Suzuki, Shiro Kambe, Masashi Imamura, Shigeki Ishizuka, Andrew House, Ichiro Takagi, Hiroki Totoki and Kazushi Ambe are engaged on a full-time basis by Sony Corporation. There is no family relationship between any of the persons named above. There is no arrangement or understanding with major shareholders, customers, suppliers, or others pursuant to which any person named above was selected as a Director or a Corporate Executive Officer.

B. Compensation

Under the Financial Instruments and Exchange Act of Japan and related regulations, Sony is required to disclose the total remuneration paid by Sony Corporation to Directors and Corporate Executive Officers, as well as remuneration of any Director or Corporate Executive Officer who receives total aggregate annual remuneration exceeding 100 million yen from Sony in a fiscal year, on an individual basis. The following table and accompanying footnotes show the information on such matters that Sony Corporation has disclosed in its annual Securities Report for the fiscal year ended March 31, 2017 filed on June 15, 2017 with the Director General of the Kanto Local Finance Bureau of the Ministry of Finance in Japan.

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(1) Total amounts of remuneration paid by Sony Corporation to Directors and Corporate Executive Officers

	Fixed remuneration		Remuneration linked to  business results		Phantom restricted stock plan
	Number of persons	Amount (Yen in millions)	Number of persons	Amount (Yen in millions)	Number of persons	Amount (Yen in millions)
Directors	10	138	—	—	1	28
	(*)(**)			(***)		(*****)
(Outside Directors)	(9)	(123)	(—)	(—)	(1)	(28)
Corporate Executive	11	517	7	577	—	—
Officers	(**)			(****)
Total******	21	655	7	577	1	28

* The number of persons does not include two Directors who concurrently serve as Corporate Executive Officers, because Sony Corporation does not pay any additional remuneration for services as Director to Directors who concurrently serve as Corporate Executive Officers.

** The number of persons includes one Director who resigned on the day of the Ordinary General Meeting of Shareholders held on June 17, 2016 and a Corporate Executive Officer who resigned on February 2, 2017.

*** Sony Corporation does not pay remuneration linked to business results to Directors who do not concurrently serve as Corporate Executive Officers.

**** The Remuneration linked to business results includes the amount that was paid in June 2017.

***** The Phantom Restricted Stock Plan includes the amount that will be paid to a Director who resigned on the day of the Ordinary General Meeting of Shareholders held on June 15, 2017.

****** In addition to the above, during the fiscal year ended March 31, 2017, Sony Corporation recorded 625 million yen in expenses for Stock Acquisition Rights granted to Corporate Executive Officers during the fiscal year ended March 31, 2017 or in the past for stock option purposes.

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(2) Amounts of remuneration paid by Sony Corporation and its subsidiaries to Directors and Corporate Executive Officers on an individual basis.

Name	Position	Basic Remuneration (*)(**) (Yen in millions)	Remuneration linked to business results (*) (Yen in millions)	Phantom restricted stock plan (Yen in millions)	Total (*) (Yen in millions)	Granted number of stock acquisition rights (***) (Thousand shares)
Kazuo Hirai	Sony Corporation Director, President & CEO, and Representative Corporate Executive Officer(****)	228 (*****)	286 (*****)	—	514   (*****)	300
Kenichiro Yoshida	Sony Corporation Director, Executive Deputy President and CFO, and Representative Corporate Executive Officer(****)	75	101	—	176	200
Tomoyuki Suzuki	Sony Corporation Executive Deputy President, and Corporate Executive Officer (In charge of R&D Platform; In charge of Energy Business and Storage Media Business)	57	61	—	118	100
Shiro Kambe	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Legal, Compliance, Corporate Communications, CSR, External Relations and Information Security & Privacy)	36	25	—	61	30
Masashi Imamura	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Manufacturing, Logistics, Procurement, Quality & Environment; In charge of Engineering Platform)	36	36	—	72	30
Shigeki Ishizuka	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Imaging Products and Solutions Business)	40	43	—	83	30
Andrew House	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Game & Network Services Business)	135 (*****) (******)	118 (*****) (******)	—	254   (*****)   (******)	60
Michael Lynton	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Pictures and Music businesses) (Until February 2, 2017)	271 (*****) (******)	736 (*****) (******)	—	1,007   (*****)   (******)	100
Ichiro Takagi	Sony Corporation Corporate Executive Officer, Executive Vice President (In charge of Home Entertainment & Sound Business and Consumer AV Sales & Marketing)	40 (******)	44 (******)	—	84   (******)	30
Hiroki Totoki	Sony Corporation Corporate Executive Officer, Executive Vice President, CSO (In charge of Mid-to-Long Term Business Strategy, New Business; In charge of Mobile Communications Business)	40 (******)	40 (******)	—	80   (******)	30

* Due to rounding, individual sums may not total 100%.

** Apart from the remuneration contained in the above table, Sony also paid 6 million yen for Director and Officer liability insurance for 10 Corporate Executive Officers.

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*** The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal year ended March 31, 2017 was 1,291 yen and was estimated using the Black-Scholes option-pricing model with several assumptions. Refer to Note 17 of the consolidated financial statements for details. The weighted-average fair value per share does not indicate the actual value that would be realized by a Corporate Executive Officer upon the exercise of the above-mentioned stock acquisition rights. The actual value, if any, that is realized by a Corporate Executive Officer upon the exercise of any stock acquisition rights will depend on the extent to which the market value of Sony Corporation’s common stock (“Common Stock”) exceeds the exercise price of the stock acquisition rights on the date of exercise, and several other restrictions imposed on the exercise of the stock acquisition rights, including the period when a Corporate Executive Officer could exercise the stock acquisition rights. Accordingly, there is no assurance that the value realized or to be realized by a Corporate Executive Officer upon the exercise of the stock acquisition rights is or will be at or near the weighted-average fair value per share presented above. In addition, the above weighted-average fair value per share was calculated to recognize compensation expense for the fiscal year ended March 31, 2017 for accounting purposes and should not be regarded as any indication or prediction of Sony with respect to its future stock performance.

**** As noted above, Sony Corporation does not pay any remuneration for services as Director to Directors who concurrently serve as Corporate Executive Officers.

***** Remuneration for Kazuo Hirai, Representative Corporate Executive Officer, is set in U.S. dollars. Apart from the remuneration contained in the above table, Sony also provided certain personal benefits and perquisites, including fringe benefits (and in some instances Sony paid the executive’s income taxes related to his perquisites), totaling 15 million yen to Kazuo Hirai, during the fiscal year ended March 31, 2017.

****** In the above chart, remuneration for Andrew House, Corporate Executive Officer, includes 135 million yen in regular compensation and 118 million yen in performance-based compensation from SIEI. Remuneration for Michael Lynton, Corporate Executive Officer, includes 271 million yen in fixed compensation and 334 million yen in performance-based compensation from SPE, and 401 million yen in performance-based compensation from SCA. Remuneration for Ichiro Takagi, Corporate Executive Officer, includes 13 million yen in fixed compensation and 15 million yen in performance-based compensation from SVP, 13 million yen in fixed compensation and 14 million yen in performance-based compensation from SVS, and 14 million yen in fixed compensation and 15 million yen in performance-based compensation from Sony Marketing. Remuneration for Hiroki Totoki, Corporate Executive Officer, includes 40 million yen in fixed compensation and 40 million yen in performance-based compensation from Sony Mobile.

(3) Basic policy regarding Corporate Executive Officer remuneration

The basic policy regarding remuneration for Directors and Corporate Executive Officers, as determined by the Compensation Committee, is as follows:

(a) Basic policy of Director remuneration

The primary duty of Directors is to supervise the performance of business operations of the Sony Group as a whole. In order to improve this supervisory function over the business operations of Sony, which is a global company, the following two elements have been established as the basic policy for the determination of remuneration of Directors. No Director remuneration is paid to those Directors who concurrently serve as Corporate Executive Officers.

• Attracting and retaining an adequate talent pool of Directors possessing the requisite abilities to excel in the global marketplace; and

• Ensuring the effectiveness of the supervisory function of the Directors.

Based upon the above, remuneration of Directors consists of the following two components:

• Fixed remuneration; and

• Phantom Restricted Stock Plan.

The schedule for the amount of each component and its percentage of total remuneration is determined in accordance with the basic policy above. Remuneration of Directors shall be at an appropriate level determined based upon research made by a third party regarding remuneration of directors of both domestic and foreign companies.

Regarding the Phantom Restricted Stock Plan, points determined every year by the Compensation Committee shall be granted to Directors every year during his/her tenure, and at the time of resignation, the remuneration amount shall be calculated by multiplying the Common Stock price by the individual’s accumulated points. In principle, the resigning Director shall purchase shares of Common Stock with this remuneration.

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(b) Basic policy of Corporate Executive Officer remuneration

Corporate Executive Officers are key members of management responsible for executing the business operations of Sony. In order to further improve the business results of the Corporation, the following two elements have been established as the basic policy for the determination of remuneration of Corporate Executive Officers.

• Attracting and retaining an adequate talent pool of Corporate Executive Officers possessing the requisite abilities to excel in the global marketplace; and

• Providing effective incentives to improve business results on a short, medium and long term basis.

Based upon the above, remuneration of Corporate Executive Officers shall consist of the following four components:

• Fixed remuneration;

• Remuneration linked to business results;

• Remuneration linked to share price; and

• Phantom Restricted Stock Plan.

The schedule for the amount of each component and its percentage of total remuneration shall be determined in accordance with the above basic policy with an emphasis on linking remuneration to business results and shareholder value. Remuneration of Corporate Executive Officers shall be at an appropriate level determined based upon research made by a third party regarding remuneration of management of both domestic and foreign companies.

The basis for the schedule for the amount of each component is below.

The amount of remuneration linked to business results shall be determined based upon 1) the consolidated financial results of the Corporation, such as ROE (return on equity), operating income, net income and cash flow, for the fiscal year for which remuneration is being given, and 2) the level of achievement of business results in the business area(s) for which the relevant Corporate Executive Officer is responsible. The amount paid shall fluctuate within a range from 0 percent to 200 percent, in principle, of the standard payout amount.

Remuneration linked to the share price, such as stock options and restricted stock, will be used to incentivize executives to increase mid- to long- term shareholder value. Appropriate restrictions and conditions shall be set in order to enhance the effectiveness of this program.

Regarding the Phantom Restricted Stock Plan, points determined every year by the Compensation Committee shall be granted to Corporate Executive Officers every year during his/her tenure in office, and at the time of resignation, the remuneration amount shall be calculated by multiplying the Common Stock price by the individual’s accumulated points. In principle, the resigning Corporate Executive Officer shall purchase the shares of Common Stock with this remuneration.

(For Reference)

(i) Remuneration linked to business results

The standard payout amount of remuneration linked to business results for the fiscal year ended March 31, 2017 shall be between 37.5 percent and 50.0 percent of cash compensation (fixed remuneration plus remuneration linked to business results) related to each individual’s level of responsibility. The key performance indicators (“KPIs”) and the weighting of each KPI related to the performance of consolidated Sony shall be as follows:

KPI	Weight
ROE	40%
Operating Income	40%
Net Income	10%
Cash Flow	10%

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(ii) Restricted Stock

The Compensation Committee decided to introduce a restricted stock plan starting from the fiscal year ending March 31, 2018. The purpose of the plan is to further reinforce management’s alignment with shareholder value, and to incentivize management to improve mid- to long-term performance and increase shareholder value.

The Corporation intends to grant shares of Common Stock to Corporate Executive Officers and key management as a partial replacement for stock options. The grantees will not be able to sell or transfer the stocks during the restricted period, and the Corporation will acquire free of charge the granted shares under certain conditions. Details of the plan such as vesting conditions, eligibility and the number of grants will be determined by the Compensation Committee.

C. Board Practices

General

Sony continuously strives to strengthen its corporate governance system, recognizing that sound corporate governance is extremely important in operating Sony effectively, efficiently, and in a way that increases corporate value over the mid- to long-term. Sony approaches its corporate governance through two basic precepts: (a) the Board of Directors (the “Board”), a majority of which is comprised of independent outside Directors, focuses on effective oversight of management’s operation of the business and maintaining a sound and transparent governance framework; and (b) the Board determines Sony’s fundamental management policies and other material matters and delegates to each of the Corporate Executive Officers decision-making authority to conduct Sony’s business operations broadly in line with their respective responsibilities, as defined by the Board, with a view to promoting timely and efficient decision-making within Sony. In furtherance of these efforts, Sony Corporation has adopted a “Company with Three Committees” corporate governance system under the Companies Act of Japan (Kaishaho) and related regulations (collectively the “Companies Act”). Under this system, in addition to the requirements of applicable corporate governance laws and regulations, Sony has introduced its own requirements to help improve and maintain the soundness and transparency of its governance by strengthening the separation of the Directors’ function from that of management; maintaining what the company believes is an appropriate Board size, which enables the members of the Board to actively contribute to discussion; and advancing the proper functioning of the statutory committees.

Sony Corporation is governed by the Board, the members of which are elected at the Ordinary General Meeting of Shareholders. Under the Companies Act, a “Company with Three Committees” is required to have three committees: the Nominating Committee, Audit Committee and Compensation Committee. Under the Companies Act, each committee is required to consist of not fewer than three Directors, which must be named by the Board and the majority of whom must be outside Directors. Under this system, Directors have no power to execute the business of Sony Corporation except for limited circumstances as permitted by law. The Board appoints Corporate Executive Officers (Shikko-yaku), who make decisions regarding the execution of Sony’s business activities within the scope of the authority delegated to them by the Board. In addition to these statutory bodies and positions, Sony has Corporate Executives who carry out business operations and corporate functions within designated areas.

A summary of the governance system adopted by Sony Corporation is set forth below. For an explanation of the significant differences between the New York Stock Exchange’s corporate governance standards and Sony’s corporate governance practices, refer to “Item 16G. Disclosure About Differences in Corporate Governance.”

Board of Directors

The primary roles of the Board are to: (a) determine Sony’s fundamental management policies; (b) oversee the management of Sony’s business operations as an entity independent from the Chief Executive Officer (“CEO”) and other Corporate Executive Officers; (c) appoint and dismiss the statutory committee members; and (d) appoint and dismiss Representative Corporate Executive Officers and Corporate Executive Officers.

Under the Companies Act, the term of office of Directors expires at the conclusion of the Ordinary General Meeting of Shareholders held with respect to the last business year ending within one year after their election.

With a view toward securing effective input and oversight by the Board, the Nominating Committee reviews and selects candidates for the Board with the aim of assuring that a substantial part of the Board is comprised of qualified outside Directors that satisfy the independence requirements established by Sony and by law. The Nominating Committee selects candidates that it views as well-suited to be Directors in light of the Board’s

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purpose of enhancing Sony’s corporate value. The Nominating Committee broadly considers various relevant factors, including a candidate’s capabilities (such as the candidate’s experience, achievements, expertise and international fluency), availability, and independence, as well as diversity in the boardroom, the appropriate size of the Board, and the knowledge, experiences and talent needed for the role. Under the Charter of the Board (the “Board Charter”), Sony also requires that the Board consist of not fewer than 10 Directors and not more than 20 Directors. In addition, since 2005 the majority of the members of the Board have been outside Directors.

Sony expects that each outside Director play an important role in ensuring proper business decisions by Sony and effective input and oversight by the Board through actively exchanging opinions and having discussions about Sony’s business based on his or her various and broad experience, knowledge and expertise.

As of June 15, 2017, the Board has 12 Directors, nine of whom are outside Directors. The Nominating Committee has five Directors, four of whom are outside Directors; the Compensation Committee has four Directors, three of whom are outside Directors; and the Audit Committee’s three members are all outside Directors.

The qualifications for Directors of Sony are generally as summarized below. As of June 15, 2017, all Directors satisfy the qualifications of the Board Charter as set forth below, and all outside Directors are qualified and designated as Independent Directors under the Securities Listing Regulations of the Tokyo Stock Exchange.

All Directors must meet the qualifications below:

(a) He/she shall not be a director, a statutory auditor, a corporate executive officer, a general manager or other employee of any company in competition with Sony in any of Sony’s principal businesses (a “Competing Company”) or own 3% or more of the shares of any Competing Company.

(b) He/she shall not be or have been a representative partner or partner of Sony’s independent auditor the past three years before being nominated as a Director.

(c) He/she shall not have any connection with any matter that may cause a material conflict of interest in performing the duties of a Director.

Outside Directors must meet the additional qualifications below:

(a) He/she shall not have received directly from Sony, during any consecutive twelve-month period within the last three years, more than an amount equivalent to U.S. $120,000, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).

(b) He/she shall not be a director, a statutory auditor, corporate executive officer, general manager or other employee of any company whose aggregate amount of transactions with Sony, in any of the last three fiscal years, exceeds the greater of an amount equivalent to U.S. $1,000,000, or two percent of the annual consolidated sales of such company.

In addition, in order to qualify as an outside Director under the Companies Act, a Director must be a person who satisfies all of the following requirements:

(a) a person who is not a director of Sony or any of its subsidiaries engaged in the business operations of Sony or such subsidiaries, as the case may be, or a Corporate Executive Officer or general manager or other employee (“Group Executive Director, etc.”) of Sony or any of its subsidiaries and who has not been a Group Executive Director, etc. of Sony or any of its subsidiaries at any time within the ten years prior to assuming his/her office;

(b) if a person has been a director, accounting counselor (if the accounting counselor is a juridical person, a member who is in charge of the affairs), or corporate auditor of Sony or any of its subsidiaries (excluding a person who has been a Group Executive Director, etc.) at any time within the ten years prior to assuming office, a person who has not been a Group Executive Director, etc. of Sony or any of its subsidiaries at any time within the ten years prior to assuming office as a director, an accounting counselor, or a corporate auditor;

(c) a person who is not a director or a Corporate Executive Officer or general manager or other employee of a parent company or any entity which controls the management of Sony;

(d) a person who is not an Group Executive Director, etc. of a direct/indirect subsidiary of Sony or any entity the management of which is directly or indirectly controlled by Sony; and

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(e) a person who is not a spouse or relative within the second degree of kinship of a director or a Corporate Executive Officer or general manager or other employee of Sony.

Also, each outside Director may, by resolution of the Nominating Committee, be nominated as a Director candidate for re-election five times, and thereafter by resolution of the Nominating Committee and by consent of all of the Directors. Even with consent of all of the Directors, in no event may any outside Director be re-elected more than eight times.

Nominating Committee

The primary roles of the Nominating Committee are to: (a) determine the content of proposals to be submitted for approval at the General Meeting of Shareholders regarding the appointment and dismissal of Directors and (b) evaluate management succession plans.

As stated above, under the Companies Act, the Nominating Committee must consist of at least three Directors, the majority of whom must be outside Directors. In addition, under the Board Charter, at least one Director of the Nominating Committee shall be a Corporate Executive Officer and the chair is to be selected from among the outside Directors. In determining whether to appoint or remove a member of the Nominating Committee, continuity of the Nominating Committee shall be duly taken into account.

The Nominating Committee is comprised of the following members as of June 15, 2017: Osamu Nagayama, who is the Chair of the Nominating Committee, the Chairman of the Board and an outside Director; Koichi Miyata, John V. Roos and Shuzo Sumi who are each outside Directors; and Kazuo Hirai, who is a Corporate Executive Officer.

Audit Committee

The primary roles of the Audit Committee are to: (a) monitor the performance of duties by Directors and Corporate Executive Officers and (b) oversee and evaluate the independent auditor.

As stated above, under the Companies Act, the Audit Committee must consist of at least three Directors, the majority of whom must be outside Directors. In addition, under the Companies Act and the Board Charter, each member of the Audit Committee (“Audit Committee Member”) must satisfy all of the following qualifications: (a) he/she shall not be a Director engaged in the business operations of Sony or any of its subsidiaries, a Corporate Executive Officer, an accounting counselor, a general manager or other employee of Sony and (b) he/she shall meet the independence requirements or such other equivalent requirements of the U.S. securities laws and regulations as may from time to time be applicable to Sony Corporation. The chair is to be selected from among the outside Directors. No Audit Committee Member shall become, as a general rule, a member of the Nominating Committee or the Compensation Committee. Moreover, at least one Audit Committee Member shall meet the audit committee financial expert requirements or such other equivalent requirements of the U.S. securities laws and regulations as may from time to time be applicable to Sony Corporation. The Board makes a determination on whether or not such Audit Committee Members meet these requirements. In determining whether to appoint or remove the Audit Committee Member, continuity of the Audit Committee shall be duly taken into account.

With respect to the candidates for independent auditor nominated by the CEO and other Corporate Executive Officers, the Audit Committee evaluates the nomination, prior to making a decision on the candidates. The Audit Committee continues to evaluate the performance, the independence, the qualification and the reasonableness of the independent auditor so appointed.

The Audit Committee is comprised of the following members as of June 15, 2017: Takaaki Nimura, who is the Chair of the Audit Committee and an outside Director, and Kazuo Matsunaga and Kunihito Minakawa, who are each outside Directors. Takaaki Nimura and Kunihito Minakawa are “audit committee financial experts” within the meaning of Item 16A of this report.

Compensation Committee

The primary roles of the Compensation Committee are to: (a) set policy on the content of individual compensation for Directors and Corporate Executive Officers and Corporate Executives and (b) determine the amount and content of individual compensation of Directors and Corporate Executive Officers in accordance with the policy.

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As stated above, under the Companies Act, the Compensation Committee must consist of at least three Directors, the majority of whom must be outside Directors. In addition, under the Board Charter, as a general rule, at least one Director of the Compensation Committee must be a Corporate Executive Officer and the chair is to be selected from among the outside Directors; provided, however, that a Director who is a CEO or a Chief Operating Officer of Sony or who holds any equivalent position shall not be a member of the Compensation Committee. In determining whether to appoint or remove a member of the Compensation Committee, continuity of the Compensation Committee shall be duly taken into account.

The Compensation Committee is comprised of the following members as of June 15, 2017: Eikoh Harada, who is the Chair of the Compensation Committee and an outside Director; John V. Roos and Eriko Sakurai who are each outside Directors; and Kenichiro Yoshida, who is a Corporate Executive Officer.

Corporate Executive Officers

As stated above, the Board must appoint one or more Corporate Executive Officers who make decisions regarding the execution of Sony’s business activities within the scope of authority delegated by the Board. As of June 15, 2017, there are ten Corporate Executive Officers, two of whom are also Directors. Significant decision-making authority has been delegated to the CEO and also to each Corporate Executive Officer with respect to investments, strategic alliances and other actions related to the execution of business operations. Sony Corporation believes that this significant delegation enables Sony to be managed in a dynamic and responsive manner. The terms of office of Corporate Executive Officers expire at the conclusion of the first meeting of the Board held immediately after the conclusion of the Ordinary General Meeting of Shareholders held with respect to the last business year ending within one year after their election. From among those Corporate Executive Officers who, as a general rule, are also Directors, the Board shall elect Representative Corporate Executive Officers. Each Representative Corporate Executive Officer has the statutory authority to represent Sony Corporation in the conduct of its affairs. The appointment and dismissal of Corporate Executive Officers and the assignment of roles and responsibilities for Corporate Executive Officers are made by the Board. In making these decisions, the Board, especially outside Directors, considers whether candidates have the necessary skills, capabilities, experiences and achievements that correspond to the Corporate Executive Officers’ expected roles and responsibilities in executing relevant business operations. For a list of the Corporate Executive Officers as of June 15, 2017, refer to “Directors and Senior Management” in “Item 6.A Directors, Senior Management and Employees.”

The Board determines the fundamental management policies and other material matters related to the operation of Sony’s business. The Board assigns the duties of Corporate Executive Officers by determining the areas over which each Corporate Executive Officer is in charge and delegating its decision-making authority to the Corporate Executive Officer accordingly, with a view to promoting timely and efficient decision-making within the Sony Group. Please refer to the Board Charter, attached as Exhibit 1.3 hereto, which details the processes and policies for reporting by the Corporate Executive Officers to the Board and matters requiring Board approval.

Meeting Record and Other Information

During the fiscal year ended March 31, 2017, the Board convened nine times. The Nominating Committee met six times, the Audit Committee met seven times and the Compensation Committee met seven times. All nine outside Directors, including Kanemitsu Anraku who retired in June 2016, participated in all meetings of the Board held during their tenure period in the fiscal year ended March 31, 2017 except for Joichi Ito (Joichi Ito participated in eight meetings out of nine). Also, all eight outside Directors, including Kanemitsu Anraku who retired in June 2016, who are members of Committees participated in all of the meetings of each Committee held during the fiscal year ended March 31, 2017. The Board conducted outside Directors’ meetings, Directors’ corporate strategic workshops with management, site visits by outside Directors and meetings of the Chairman of the Board and the CEO. These activities were aimed at enhancing the oversight function of the Board, securing better understanding by outside Directors of Sony’s business and management’s initiatives and encouraging corporate strategic discussions among Directors.

No Directors have executed service contracts with Sony providing for benefits upon termination of service as a Director.

Under the Companies Act and the Articles of Incorporation of Sony Corporation, Sony Corporation may, by a resolution of the Board, exempt Directors from liabilities to Sony Corporation to the extent permitted by law arising in connection with their failure to execute their duties. Also, in accordance with the Companies Act and

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its Articles of Incorporation, Sony Corporation has entered into a liability limitation agreement with each outside Director and one non-executive Director that limits the maximum amount of liabilities owed by each such Director to Sony Corporation arising in connection with their failure to execute their duties to the greater of either 30 million yen or an amount equal to the aggregate sum of the amounts prescribed in each item of Article 425, Paragraph 1 of the Companies Act.

At a Board meeting held on April 26, 2006, the Board reaffirmed the internal control and governance framework in effect as of the date of determination and determined to continue to evaluate and improve such framework going forward, as appropriate. At a Board meeting held on May 13, 2009 and April 30, 2015, the Board amended and updated the internal control and governance framework, reaffirming such framework in effect and determining to continue to evaluate and improve such framework going forward, as appropriate. These determinations were required by and met the requirements of the Companies Act.

D. Employees

As of March 31, 2017, Sony had approximately 128,400 employees, an increase of approximately 3,100 employees from March 31, 2016. During the fiscal year ended March 31, 2017, there was an increase of employees mainly in the Electronics segment due to an increase at manufacturing sites in Asia Pacific, and Japan due to the acquisition of the semiconductor business from Toshiba Corporation. Approximately 20% of the total number of employees were members of labor unions.

As of March 31, 2016, Sony had approximately 125,300 employees, a decrease of approximately 6,400 employees from March 31, 2015. During the fiscal year ended March 31, 2016, while employees of the Pictures, Music and Financial Services segments increased due to the expansion of these businesses, the total number of Electronics employees decreased due to production adjustments implemented at manufacturing sites in East Asia (except Japan) and restructuring initiatives taken mainly in the MC segment. The number of employees in All Other also decreased compared to March 31, 2015, reflecting the decrease of employees in the disc manufacturing business worldwide. Approximately 23% of the total number of employees were members of labor unions.

As of March 31, 2015, Sony had approximately 131,700 employees, a decrease of approximately 9,200 employees from March 31, 2014. During the fiscal year ended March 31, 2015, while employees of the Pictures, Music and Financial Services segments increased due to the expansion of these businesses, the total number of Electronics employees decreased due to restructuring initiatives taken mainly in Japan and North America. The number of employees in All Other also decreased compared to March 31, 2014, reflecting the decrease of employees in the disc manufacturing business worldwide. Approximately 20% of the total number of employees were members of labor unions.

The following table shows the number of employees of Sony by segment and region as of March 31, 2015, 2016 and 2017.

Number of Employees by Segment and Region

	March 31
	2015		2016		2017
By segment:
Electronics*		94,600		88,000		91,100
Pictures		7,600		8,700		9,000
Music		7,500		7,900		8,200
Financial Services		8,800		9,400		10,100
All Other		5,700		4,700		4,600
Unallocated — Corporate employees		7,500		6,600		5,400
By region:
Japan		49,900		49,000		51,400
Outside of Japan		81,800		76,300		77,000
Total		131,700		125,300		128,400

* The term “Electronics” refers to the sum of the MC, G&NS, IP&S, HE&S, Semiconductors and Components segments.

In addition, the average number of employees for the fiscal years ended March 31, 2015, 2016 and 2017 calculated by averaging the total number of employees at the end of each quarter, was approximately 136,300, 128,700 and 128,000 respectively.

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Sony generally considers its labor relations to be good.

In Japan, Sony Corporation and several subsidiaries have labor unions.

In Electronics, Sony owns many manufacturing sites, particularly in Asia, where a few sites have labor unions that have union contracts. In China, most employees are members of labor unions. In the Americas, some manufacturing sites have labor unions. Sony has generally maintained good relationships with these labor unions. In Europe, Sony maintains good labor relations with the Work Councils in each country.

In the Pictures segment, Sony also generally considers its labor relations to be good. A number of Pictures’ subsidiaries are signatories to union contracts. During the fiscal year ended March 31, 2017, negotiations were successfully concluded for a new three-year agreement with the Directors Guild of America (“DGA”) covering two separate collective bargaining agreements (the DGA Basic Agreement and the DGA Film and Live Television Agreement). Negotiations were also concluded for a new three-year agreement with the Writers Guild of America. In addition, negotiations were successfully concluded for a new three-year agreement between Sony Pictures Animation Inc. and the International Alliance of Theatrical Stage Employees. Negotiations with the Screen Actors Guild-American Federation of Television and Radio Artists (“SAG-AFTRA”) covering two separate collective bargaining agreements (the SAG-AFTRA Codified Basic Agreement and the SAG-AFTRA Television Agreement) began in May 2017.

In the Music segment, Sony has several labor unions and generally considers its labor relations to be good.

Sony continuously strives to provide competitive wages and benefits and good working conditions for all of its employees.

E. Share Ownership

The total number of shares of Common Stock beneficially owned by Directors and Corporate Executive Officers (12 people) listed in “Directors and Senior Management” above was approximately 0.006% percent of the total shares outstanding as of May 30, 2017. Refer to “Board Practices” above.

During the fiscal year ended March 31, 2017, Sony granted stock acquisition rights, which represent rights to subscribe for shares of Common Stock, to Corporate Executive Officers, Corporate Executives, Group Executives, and selected employees. The stock acquisition rights cannot be exercised for one year from the date of grant and generally vest ratably up to three years from the date of grant and are generally exercisable up to ten years from the date of grant. The following table shows the portion of those stock acquisition rights which were granted by Sony to Directors and Corporate Executive Officers as of May 30, 2017 and which were outstanding as of the same date.

Year granted (Fiscal year ended March 31)	Total number of shares subject to stock acquisition rights		Exercise price per share
	(in thousands)
2017		360	31.06 U.S. dollars
2017		470	3,364 yen
2016		240	27.51 U.S. dollars
2016		286	3,404 yen
2015		140	20.67 U.S. dollars
2015		178	2,410.5 yen
2014		230	20.01 U.S. dollars
2014		77	2,007 yen
2013		230	11.23 U.S. dollars
2013		19	932 yen
2012		110	19.44 U.S. dollars
2012		28	1,523 yen
2011		72	35.48 U.S. dollars
2011		33	2,945 yen
2010		70	29.56 U.S. dollars
2010		27	2,595 yen
2009		45	30.24 U.S. dollars
2009		20	2,987 yen
2008		45	48.15 U.S. dollars
2008		17	5,514 yen

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Regarding the above compensation plans, refer to Note 17 of the consolidated financial statements.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

As of March 31, 2017, there were 1,263,763,660 shares of Common Stock outstanding, including 1,073,222 shares of treasury stock. Out of the total outstanding shares, 106,342,079 shares were in the form of ADRs and 323,414,298 shares were held of record in the form of Common Stock by residents in the U.S. As of March 31, 2017, the number of registered ADR holders was 5,553 and the number of registered holders of Common Stock in the U.S. was 390.

The Financial Instruments and Exchange Act of Japan requires any person who solely or jointly owns more than 5% of total issued voting shares of a company listed on any Japanese stock exchange to file with the Director General of the Kanto Local Finance Bureau (“Bureau”) a Bulk Shareholding Report. The following table summarizes the Bulk Shareholding Reports related to Sony (each a “Report”) submitted to the Bureau, where it is reported that ownership percentage by the reported entity exceeds 5% in the most recent updated Report. The Reports do not specify whether reported ownership is direct or beneficial.

Date of Report*	Reported entities	Reported number of direct or indirect owned and deemed owned shares**		Reported percentage of direct or indirect owned and deemed  owned shares**
April 4, 2014	Sumitomo Mitsui Trust Bank, Limited		52,312,421		5.04
March 22, 2017	BlackRock Japan Co., Ltd.		79,184,569		6.27
April 7, 2017	Capital Research and Management Company		90,944,900		7.20

* The table above contains information from the most recent updated Reports.

** Shares issuable or transferable upon exchange of exchangeable securities, conversion of convertible securities or exercise of warrants or stock acquisition rights (including those incorporated in bonds with stock acquisition rights) are taken into account in determining both the size of the reported entity’s holding and Sony’s total issued share capital.

To the knowledge of Sony Corporation, it is not directly or indirectly owned or controlled by any other corporation, by any foreign government or by any other natural or legal person either severally or jointly. As far as is known to Sony Corporation, there are no arrangements the operation of which may, at a subsequent date, result in a change in control of Sony Corporation.

To the knowledge of Sony Corporation, there were no significant changes in the percentage ownership held by any other major beneficial shareholders during the past three fiscal years. Major shareholders of Sony Corporation do not have different voting rights from other shareholders.

B. Related Party Transactions

In the ordinary course of business, Sony purchases materials, supplies, and services from numerous suppliers throughout the world, including firms with which certain members of the Board of Directors are affiliated.

In addition, in the fiscal year ended March 31, 2017, sales to affiliates accounted for under the equity method totaled 31.2 billion yen and purchases from those equity affiliates totaled 2.0 billion yen. Although there were 109 equity affiliates accounted for under the equity method at March 31, 2017, there were no individually significant investments.

As of March 31, 2017, Sony had accounts receivable, trade of 10.9 billion yen due from its equity affiliates and had accounts payable, trade of 2.5 billion yen due to its equity affiliates. Due to the size of these transactions, Sony does not consider the amount involved to be material to its business. Refer to Note 5 of the consolidated financial statements for additional information regarding Sony’s investments in and transactions with equity affiliates.

C. Interests of Experts and Counsel

Not Applicable

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Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Refer to the consolidated financial statements and the notes of the consolidated financial statements.

Legal Proceedings

Beginning in 2009, the U.S. Department of Justice (“DOJ”), the European Commission and certain other governmental agencies outside the United States have conducted investigations relating to competition in the optical disk drives market. Sony Corporation and/or certain of its subsidiaries have been subject to these investigations. Sony understands that the investigations of several agencies, including the DOJ, have ended, and only one agency continues to investigate. However, proceedings initiated by the European Commission as a result of its investigation continue. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation and certain of its subsidiaries 31 million euros; however, Sony filed an appeal against the decision with the EU’s General Court. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

Beginning in 2011, the DOJ, the European Commission and certain other governmental agencies outside the United States conducted investigations relating to competition in the secondary batteries market. Sony Corporation and/or certain of its subsidiaries were subject to these investigations. Sony understands that the investigations by these agencies, including the DOJ and the European Commission, have ended or are no longer active. With respect to the investigation by the European Commission, in December 2016, Sony and certain of its subsidiaries reached a settlement with the European Commission to pay a fine of approximately 29.8 million euros. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

A Sony subsidiary outside Japan was subject to a non-Japanese customs investigation in connection with the import and export of certain HE&S products. Sony cooperated with the relevant government authorities and settled the matter in March 2017. Settlement of the matter had no material impact on Sony’s results of operations and financial position.

In addition, Sony Corporation and certain of its subsidiaries are defendants or otherwise involved in other pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position.

Dividend Policy

Sony believes that continuously increasing corporate value and providing dividends are essential to rewarding shareholders. It is Sony’s policy to utilize retained earnings, after ensuring the perpetuation of stable dividends, to carry out various investments that contribute to an increase in corporate value such as those that ensure future growth and strengthen competitiveness. Going forward, Sony will determine the amount of dividends based on an overall consideration of Sony’s consolidated operating results, financial condition and future business expectations.

A fiscal year-end dividend of 10 yen per share of Common Stock of Sony Corporation was approved at the Board of Directors meeting held on April 28, 2017 and the payment of such dividend started on May 31, 2017. Sony Corporation has already paid an interim dividend for Common Stock of 10 yen per share to each shareholder; accordingly, the total annual dividend per share of Common Stock for the fiscal year ended March 31, 2017 is 20 yen.

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B. Significant Changes

No significant change has occurred since the date of the annual financial statements included in this annual report.

Item 9. The Offer and Listing

A. Offer and Listing Details

Trading Markets

The principal trading markets for Sony Corporation’s ordinary shares are the TSE in the form of Common Stock and the NYSE in the form of ADSs evidenced by American Depositary Receipts (“ADRs”). Each ADS represents one share of Common Stock.

Sony Corporation’s Common Stock, with no par value per share, has been listed on the TSE since 1958.

Sony Corporation’s ADRs have been traded in the U.S. since 1961 and have been listed on the NYSE since 1970 under the symbol “SNE.” Sony Corporation’s ADRs are issued and exchanged by Citibank, N.A., as the Depositary.

Trading on the TSE and the NYSE

The following table sets forth for the periods indicated the reported high and low sales prices per share of Sony Corporation’s Common Stock on the TSE and the reported high and low sales prices per share of Sony Corporation’s ADS on the NYSE.

	Tokyo Stock Exchange price per share of Common Stock				New York Stock Exchange price per share of ADS
	High		Low		High		Low
	(yen)				(U.S. dollars)
Annual highs and lows*
The fiscal year ended March 31, 2013		1,750		772		20.83		9.57
The fiscal year ended March 31, 2014		2,413		1,497		23.38		15.23
The fiscal year ended March 31, 2015		3,450		1,588		28.65		15.93
Quarterly highs and lows*
The fiscal year ended March 31, 2016		3,970		2,199		32.95		19.90
1st quarter		3,970		3,195		32.95		27.00
2nd quarter		3,719		2,713		29.99		21.51
3rd quarter		3,568		2,887		29.08		23.97
4th quarter		3,066		2,199		26.49		19.90
Quarterly highs and lows*
The fiscal year ended March 31, 2017		3,792		2,700		34.17		23.62
1st quarter		3,122		2,700		29.45		23.62
2nd quarter		3,450		2,953		34.17		29.03
3rd quarter		3,493		2,930		33.67		27.72
4th quarter		3,792		3,269		33.78		28.04
Monthly highs and lows*
2016
December		3,413		3,136		29.73		27.72
2017
January		3,570		3.269		31.20		28.04
February		3,626		3,351		32.22		30.07
March		3,792		3,481		33.78		30.72
April		3,797		3,402		34.59		31.21
May		4,091		3,814		36.82		34.39

* Stock price data are based on prices throughout the sessions for each corresponding period at each stock exchange.

B. Plan of Distribution

Not Applicable

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C. Markets

Please refer to Item 9 A “Offer and Listing Details.”

D. Selling Shareholders

Not Applicable

E. Dilution

Not Applicable

F. Expenses of the Issue

Not Applicable

Item 10. Additional Information

A. Share Capital

Not Applicable

B. Memorandum and Articles of Association

Organization

Sony Corporation is a joint stock corporation (Kabushiki Kaisha) incorporated in Japan under the Companies Act (Kaishaho) of Japan. It is registered in the Commercial Register (Shogyo Tokibo) maintained by the Minato Branch Office of the Tokyo Legal Affairs Bureau.

Objects and purposes

The Articles of Incorporation of Sony Corporation provide that its purpose is to engage in the following business activities:

(i) manufacture and sale of electronic and electrical machines and equipment, medical instruments, optical instruments and other equipment, machines and instruments;

(ii) planning, production and sale of audio-visual software and computer software programs;

(iii) manufacture and sale of metal industrial products, chemical industrial products and ceramic industrial products, textile products, paper products and wood-crafted articles, daily necessities, foodstuffs and toys, transportation machines and equipment, and petroleum and coal products;

(iv) real estate activities, construction business, transportation business and warehousing business;

(v) publishing business and printing business;

(vi) advertising agency business, insurance agency business, broadcasting enterprise, recreation business such as travel, management of sporting facilities, etc. and other service enterprises;

(vii) financial business;

(viii) Type I and Type II telecommunications business under the Telecommunications Business Law;

(ix) investing in stocks and bonds, etc.;

(x) manufacture, sale, export and import of products which are incidental to or related to those mentioned above;

(xi) rendering of services related to those mentioned above;

(xii) investment in businesses mentioned above operated by other companies or persons; and

(xiii) all businesses which are incidental to or related to those mentioned above.

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Directors

Under the Companies Act, because Sony Corporation has adopted the “Company with Three Committees” system, Directors have no power to execute the business of Sony Corporation except in limited circumstances as permitted by law. If a Director also serves concurrently as a Corporate Executive Officer, then he or she can execute the business of Sony Corporation in the capacity of Corporate Executive Officer. Under the Companies Act, Directors must refrain from engaging in any business competing with Sony Corporation unless approved by the Board of Directors, and any Director who has a material interest in the subject matter of a resolution to be taken by the Board of Directors cannot vote on such resolution. The amount of remuneration to each Director is determined by the Compensation Committee, which consists of Directors, the majority of whom are outside Directors (Refer to “Board Practices” in “Item 6. Directors, Senior Management and Employees”). No member of the Compensation Committee may vote on a resolution with respect to his or her own compensation as a Director or a Corporate Executive Officer.

Neither the Companies Act nor Sony Corporation’s Articles of Incorporation make a special provision as to the borrowing powers exercisable by Directors (subject to requisite internal authorizations as required by the Companies Act), their retirement age, or a requirement to hold any shares of capital stock of Sony Corporation.

For more information on Directors, refer to “Board Practices” in “Item 6. Directors, Senior Management and Employees.”

Capital stock

(General)

Unless indicated otherwise, set forth below is information relating to Sony Corporation’s capital stock, including brief summaries of the relevant provisions of Sony Corporation’s Articles of Incorporation and Share Handling Regulations, currently in effect, and of the Companies Act and related regulations.

On January 5, 2009, a central book-entry transfer system for shares of Japanese listed companies was established pursuant to the Act Concerning Book-entry Transfer of Corporate Bonds, Shares, etc. (including regulations promulgated thereunder, “Book-entry Transfer Act”), and this system is applied to the shares of Common Stock of Sony Corporation. Under this system, shares of all Japanese companies listed on any Japanese stock exchange are dematerialized, and shareholders must have accounts at account management institutions to hold their shares unless such shareholder has an account at Japan Securities Depository Center, Inc. (“JASDEC”). “Account management institutions” are financial instruments traders (i.e., securities companies), banks, trust companies and certain other financial institutions that meet the requirements prescribed by the Book-entry Transfer Act. Transfer of the shares of Common Stock of Sony Corporation is effected exclusively through entry in the records maintained by JASDEC and the account management institutions, and title to the shares passes to the transferee at the time when the transfer of the shares is recorded at the transferee’s account at an account management institution. The holder of an account at an account management institution is presumed to be the legal holder of the shares recorded in such account.

Under the Companies Act and the Book-entry Transfer Act, in order to assert shareholders’ rights against Sony Corporation, a shareholder of shares must have its name and address registered in Sony Corporation’s register of shareholders. Under the central book-entry transfer system operated by JASDEC, shareholders shall notify the relevant account management institutions of certain information prescribed under the Book-entry Transfer Act or Sony Corporation’s Share Handling Regulations, including their names and addresses, and the registration on Sony Corporation’s register of shareholders is updated upon receipt by Sony Corporation of necessary information from JASDEC (as described in “Record date”). On the other hand, in order to assert, against Sony Corporation, shareholders’ rights to which shareholders are entitled, regardless of whether such shareholder held shares on the requisite record date, such as minority shareholders’ rights, including the right to propose a matter to be considered at a General Meeting of Shareholders, except for shareholders’ rights to request that Sony Corporation purchase or sell shares constituting less than a full unit (as described in “Unit share system”), JASDEC shall, upon the shareholder’s request, issue a notice of certain information, including the name and address of such shareholder, to Sony Corporation.

Thereafter, such shareholder is required to present Sony Corporation a receipt of the notice request in accordance with the Sony Corporation’s Share Handling Regulations. Under the Book-entry Transfer Act, the shareholder shall exercise such shareholders’ right within four weeks after the notice above has been given to Sony Corporation.

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Mitsubishi UFJ Trust and Banking Corporation is the transfer agent for Sony Corporation’s capital stock. As such, it keeps Sony Corporation’s register of shareholders in its office at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo.

Non-resident shareholders are required to appoint a standing proxy in Japan or file notice of a mailing address in Japan. Notices from Sony Corporation to non-resident shareholders are delivered to such standing proxies or mailing address. Japanese securities companies and commercial banks customarily act as standing proxies and provide related services for standard fees. The recorded holder of deposited shares underlying the ADSs is the depositary for the ADSs. Accordingly, holders of ADSs will not be able to directly assert shareholders’ rights against Sony Corporation.

(Authorized capital)

Under the Articles of Incorporation of Sony Corporation, Sony Corporation may only issue shares of Common Stock. Sony Corporation’s Articles of Incorporation provide that the total number of shares authorized to be issued by Sony Corporation is 3.6 billion shares.

All shares of capital stock of Sony Corporation have no par value. All issued shares are fully-paid and non-assessable.

(Distribution of Surplus)

Distribution of Surplus — General

Under the Companies Act, distributions of cash or other assets by joint stock corporations to their shareholders, so called “dividends,” are referred to as “distributions of Surplus” (“Surplus” is defined in “— Restriction on distributions of Surplus”). Sony Corporation may make distributions of Surplus to shareholders any number of times per business year, subject to certain limitations described in “— Restriction on distributions of Surplus.” Distributions of Surplus are required in principle to be authorized by a resolution of a General Meeting of Shareholders, but Sony Corporation may authorize distributions of Surplus by a resolution of the Board of Directors as long as its non-consolidated annual financial statements and certain documents for the last business year present fairly its assets and profit or loss, as required by ordinances of the Ministry of Justice.

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 the Board of Directors or a General Meeting of Shareholders 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 of the distribution. If a distribution of Surplus is to be made in kind, Sony Corporation may, pursuant to a resolution of the Board of Directors or (as the case may be) a General Meeting of Shareholders, grant a right to the shareholders to require Sony Corporation 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 (refer to “Voting rights” with respect to a “special resolution”).

Under the Articles of Incorporation of Sony Corporation, year-end dividends and interim dividends may be distributed in cash to shareholders appearing in Sony Corporation’s register of shareholders as of March 31 and September 30 each year, respectively, in proportion to the number of shares of Common Stock held by each shareholder following approval by the Board of Directors or (as the case may be) the General Meeting of Shareholders. Sony Corporation is not obliged to pay any dividends in cash unclaimed for a period of five years after the date on which they first became payable.

In Japan, the ex-dividend date and the record date for dividends precede the date of determination of the amount of the dividends to be paid. The price of the shares of Common Stock generally goes ex-dividend on the second business day prior to the record date (or if the record date is not a business day, the third business day prior thereto).

Distribution of Surplus — Restriction on distribution of Surplus

In making a distribution of Surplus, Sony Corporation must, until the sum of its additional paid-in capital and legal reserve reaches one quarter of its stated capital, set aside in its additional paid-in capital and/or legal reserve an amount equal to one-tenth of the amount of Surplus so distributed.

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The amount of Surplus at any given time must be calculated in accordance with the following formula:

A + B + C + D - (E + F + G)

In the above formula:

“A” =	the total amount of other capital surplus and other retained earnings, each such amount being that appearing on the non-consolidated balance sheet as of the end of the last business year
“B” =	(if Sony Corporation has disposed of its treasury stock after the end of the last business year) the amount of the consideration for such treasury stock received by Sony Corporation less the book value thereof
“C” =	(if Sony Corporation has reduced its stated capital after the end of the last business year) the amount of such reduction less the portion thereof that has been transferred to additional paid-in capital or legal reserve (if any)
“D” =	(if Sony Corporation has reduced its additional paid-in capital or legal reserve after the end of the last business year) the amount of such reduction less the portion thereof that has been transferred to stated capital (if any)
“E” =	(if Sony Corporation has cancelled its treasury stock after the end of the last business year) the book value of such treasury stock
“F” =	(if Sony Corporation has distributed Surplus to its shareholders after the end of the last business year) the total book value of the Surplus so distributed
“G” =	certain other amounts set forth in ordinances of the Ministry of Justice, including (if Sony Corporation has reduced Surplus and increased its stated capital, additional paid-in capital or legal reserve after the end of the last business year) the amount of such reduction and (if Sony Corporation has distributed Surplus to the shareholders after the end of the last business year) the amount set aside in additional paid-in capital or legal reserve (if any) as required by ordinances of the Ministry of Justice.

The aggregate book value of Surplus distributed by Sony Corporation may not exceed a prescribed distributable amount (the “Distributable Amount”), as calculated on the effective date of such distribution. The Distributable Amount at any given time shall be equal to the amount of Surplus less the aggregate of the following:

(a) the book value of its treasury stock;

(b) the amount of consideration for any of treasury stock disposed of by Sony Corporation after the end of the last business year; and

(c) certain other amounts set forth in ordinances of the Ministry of Justice, including (if the sum of one-half of goodwill and the deferred assets exceeds the total of stated capital, additional paid-in capital and legal reserve, each such amount being that appearing on the non-consolidated balance sheet as of the end of the last business year) all or certain part of such exceeding amount as calculated in accordance with ordinances of the Ministry of Justice.

As Sony Corporation has become a company with respect to which consolidated balance sheets should also be considered in the calculation of the Distributable Amount (renketsu haito kisei tekiyo kaisha), Sony Corporation must further deduct from the amount of Surplus the excess amount, if any, of (x) the total amount of stockholders’ equity appearing on the non-consolidated balance sheet as of the end of the last business year and certain other amounts set forth by an ordinance of the Ministry of Justice over (y) the total amount of stockholders’ equity and certain other amounts set forth by an ordinance of the Ministry of Justice appearing on the consolidated balance sheet as of the end of the last business year.

If Sony Corporation has prepared interim financial statements as described below, and if such interim financial statements have been approved by the Board of Directors or (if so required by the Companies Act) by a General Meeting of Shareholders, then the Distributable Amount must be adjusted to take into account the amount of profit or loss, and the amount of consideration for any of the treasury stock disposed of by Sony Corporation, during the period in respect of which such interim financial statements have been prepared. Sony Corporation may prepare non-consolidated interim financial statements consisting of a balance sheet as of any date subsequent to the end of the last business year and an income statement for the period from the first day of the current business year to the date of such balance sheet. Interim financial statements so prepared by Sony Corporation must be audited by the Audit Committee and the independent auditor, as required by the Companies Act and in accordance with the details prescribed by ordinances of the Ministry of Justice.

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(Capital and reserves)

Sony Corporation may generally reduce its additional paid-in capital or legal reserve by resolution of a General Meeting of Shareholders and, if so decided by the same resolution, may account for the whole or any part of the amount of such reduction as stated capital. On the other hand, Sony Corporation may generally reduce its stated capital by a special shareholders’ resolution (as defined in “Voting rights”) and, if so decided by the same resolution, may account for the whole or any part of the amount of such reduction as additional paid-in capital. In addition, Sony Corporation may reduce its 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)

Sony Corporation may at any time split shares in issue into a greater number of shares at the determination of the CEO, and may amend its Articles of Incorporation to increase the number of the authorized shares to be issued to allow such stock split pursuant to a resolution of the Board of Directors or a determination by a Corporate Executive Officer to whom the authority to make such determination has been delegated by a resolution of the Board of Directors, rather than relying on a special shareholders’ resolution, which is otherwise required for amending the Articles of Incorporation.

When a stock split is to be made, Sony Corporation must give public notice of the stock split, specifying the record date thereof, at least two weeks prior to such record date. Under the central book-entry transfer system operated by JASDEC, Sony Corporation must also give notice to JASDEC regarding a stock split at least two weeks prior to the relevant effective date of the stock split. On the effective date of the stock split, the numbers of shares recorded in all accounts held by Sony Corporation’s shareholders at account managing institutions or JASDEC will be increased in accordance with the applicable ratio.

(Consolidation of shares)

Sony Corporation may at any time consolidate issued shares into a smaller number of shares by a special shareholders’ resolution. When a consolidation of shares is to be made, Sony Corporation must give public notice or notice to each shareholder at least two weeks prior to the effective date of the consolidation of shares. Under the central book-entry transfer system operated by JASDEC, Sony Corporation must also give notice to JASDEC regarding a consolidation of shares at least two weeks prior to the effective date of the consolidation of shares. On the effective date of the consolidation of shares, the numbers of shares recorded in all accounts held by Sony Corporation’s shareholders at account managing institutions or JASDEC will be decreased in accordance with the applicable ratio. Sony Corporation must disclose the reason for the consolidation of shares at a General Meeting of Shareholders.

(General Meeting of Shareholders)

The Ordinary General Meeting of Shareholders of Sony Corporation for each business year is normally held in June of each year in Tokyo, Japan. In addition, Sony Corporation may hold an Extraordinary General Meeting of Shareholders whenever necessary by giving notice thereof at least two weeks prior to the date set for the meeting.

Notice of a shareholders’ meeting setting forth the place, time and purpose thereof must be mailed to each shareholder having voting rights (or, in the case of a non-resident shareholder, to such shareholder’s resident proxy or mailing address in Japan) at least two weeks prior to the date set for the meeting. Under the Companies Act, such notice may be given to shareholders by electronic means, subject to obtaining consent by the relevant shareholders. The record date for an Ordinary General Meeting of Shareholders is March 31 of each year.

Any shareholder or group of shareholders holding at least three percent of the total number of voting rights for a period of six months or more may require the convocation of a General Meeting of Shareholders for a particular purpose. Unless such a shareholders’ meeting is convened promptly or a convocation notice of a meeting which is to be held not later than eight weeks from the day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene such a shareholders’ meeting.

Any shareholder or group of shareholders holding at least 300 voting rights or one percent of the total number of voting rights for a period of six months or more may propose a matter to be considered at a General Meeting of Shareholders by submitting a written request to Sony Corporation at least eight weeks prior to the date set for such meeting.

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If the Articles of Incorporation so provide, any of the minimum voting rights or percentages, time periods and number of voting rights necessary for exercising the minority shareholder rights described above may be decreased or shortened. Sony Corporation’s Articles of Incorporation currently do not include any such provisions.

(Voting rights)

So long as Sony Corporation maintains the unit share system, a holder of shares constituting one or more units is entitled to one vote for each such unit of stock (refer to (“Unit share system”) below; currently 100 shares constitute one unit), except that no voting rights with respect to shares of capital stock of Sony Corporation are afforded to Sony Corporation or any corporate or certain other entities more than one-quarter of the total voting rights of which are directly or indirectly held by Sony Corporation. If Sony Corporation eliminates from its Articles of Incorporation the provisions relating to units of stock, holders of capital stock will have one vote for each share they hold. Except as otherwise provided by law or by the Articles of Incorporation of Sony Corporation, a resolution can be adopted at a General Meeting of Shareholders by a majority of the number of voting rights of all the shareholders represented at the meeting. The Companies Act and Sony Corporation’s Articles of Incorporation provide, however, that the quorum for the election of Directors shall be one-third of the total number of voting rights of all the shareholders. Sony Corporation’s shareholders are not entitled to cumulative voting in the election of Directors. Shareholders may cast their votes in writing and may also exercise their voting rights through proxies, provided that the proxies are also shareholders holding voting rights. Shareholders may also exercise their voting rights by electronic means pursuant to the method designated by Sony Corporation.

The Companies Act and the Articles of Incorporation of Sony Corporation provide that in order to amend the Articles of Incorporation and in certain other instances, including:

(1) acquisition of its own shares from a specific party other than its subsidiaries;

(2) consolidation of shares;

(3) any offering of new shares or existing shares held by Sony Corporation as treasury stock at a “specially favorable” price (or any offering of stock acquisition rights to acquire shares of capital stock, or bonds with stock acquisition rights on “specially favorable” conditions) to any persons other than shareholders;

(4) the exemption of liability of a Director, Corporate Executive Officer or independent auditor with certain exceptions;

(5) a reduction of stated capital with certain exceptions;

(6) a distribution of in-kind dividends which meets certain requirements;

(7) dissolution, merger, consolidation, or corporate split with certain exceptions;

(8) the transfer of the whole or a material part of the business;

(9) the transfer of the whole or a part of the shares or equity interests in a subsidiary which meets certain requirements;

(10) the taking over of the whole of the business of any other corporation with certain exceptions; or

(11) share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with certain exceptions,

the quorum shall be one-third of the total number of voting rights of all the shareholders, and the approval by at least two-thirds of the number of voting rights of all the shareholders represented at the meeting is required (the “special shareholders’ resolutions”).

(Issue of additional shares and pre-emptive rights)

Holders of Sony Corporation’s shares of capital stock have no pre-emptive rights under its Articles of Incorporation. Authorized but unissued shares may be issued at such times and upon such terms as the Board of Directors or the CEO determines, subject to the limitations as to the offering of new shares at a “specially favorable” price mentioned under (“Voting rights”) above.

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In the case of an issuance or transfer of shares or stock acquisition rights whereby any subscriber will hold more than 50 percent of the voting rights of all shareholders, generally Sony Corporation shall give public notice at least two weeks prior to the payment date for such issuance or transfer, and if shareholders who hold one-tenth or more of the voting rights of all shareholders dissent from the issuance or transfer of shares or stock acquisition rights, the approval by a resolution of a General Meeting of Shareholders is generally required before the payment date pursuant to the Companies Act. In addition, in the case of an issuance of shares (including a transfer of treasury shares) of Sony Corporation or its stock acquisition rights by way of an allotment to a third party which would dilute the outstanding voting shares by 25 percent or more or change the controlling shareholder, in addition to a resolution of the Board of Directors, the approval of the shareholders or an affirmative vote from a person independent of the management is generally required pursuant to the rules of the TSE. The Board of Directors or the CEO may, however, determine that shareholders shall be given subscription rights regarding a particular issue of new shares, in which case such rights must be given on uniform terms to all shareholders as of a record date of which not less than two weeks’ prior public notice is given. Each of the shareholders to whom such rights are given must also be given notice of the expiry thereof at least two weeks prior to the date on which such rights expire.

Subject to certain conditions, Sony Corporation may issue stock acquisition rights by a resolution of the Board of Directors or a determination by the CEO. Holders of stock acquisition rights may exercise their rights to acquire a certain number of shares within the exercise period as prescribed in the terms of their stock acquisition rights. Upon exercise of stock acquisition rights, Sony Corporation will be obliged to issue the relevant number of new shares or alternatively to transfer the necessary number of treasury stock held by it.

In cases where a particular issue of new shares or stock acquisition rights (i) violates laws and regulations or Sony Corporation’s Articles of Incorporation, or (ii) will be performed in a materially unfair manner, and shareholders may suffer disadvantages therefrom, such shareholders may file an injunction to enjoin such issue with a court.

(Liquidation rights)

In the event of a liquidation of Sony Corporation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among the holders of shares of Common Stock in proportion to the respective numbers of shares of Common Stock held.

(Record date)

March 31 is the record date for Sony Corporation’s year-end dividends, if declared. So long as Sony Corporation maintains the unit share system, shareholders who are registered as the holders of one or more unit of stock in Sony Corporation’s register of shareholders at the end of each March 31 are also entitled to exercise shareholders’ rights at the Ordinary General Meeting of Shareholders with respect to the business year ending on such March 31. September 30 is the record date for interim dividends, if declared. In addition, Sony Corporation may set a record date for determining the shareholders entitled to other rights and for other purposes by giving at least two weeks’ prior public notice.

JASDEC is required to promptly give Sony Corporation notice of the names and addresses of Sony Corporation’s shareholders, the numbers of shares of Common Stock held by them and other relevant information as of such respective record dates.

The price of shares generally goes ex-dividends or ex-rights on Japanese stock exchanges on the second business day prior to a record date (or if the record date is not a business day, the third business day prior thereto), for the purpose of dividends or rights offerings.

(Acquisition by Sony Corporation of its capital stock)

Under the Companies Act and the Articles of Incorporation of Sony Corporation, Sony Corporation may acquire shares of Common Stock (i) from a specific shareholder other than any of its subsidiaries (pursuant to the special shareholders’ resolution), (ii) from any of its subsidiaries (pursuant to a determination by the CEO as delegated by the Board of Directors), or (iii) by way of purchase on any Japanese stock exchange on which Sony Corporation’s shares of Common Stock are listed or by way of tender offer (pursuant to a resolution of the Board of Directors, as long as its non-consolidated annual financial statements and certain documents for the last business year present fairly its assets and profit or loss, as required by ordinances of the Ministry of Justice).

In the case of (i) above, any other shareholder may make a request to Sony Corporation that such other shareholder be included as a seller in the proposed purchase, provided that no such right will be available if the

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purchase price or any other consideration to be received by the relevant specific shareholder will not exceed the last trading price of the shares on the relevant stock exchange on the day immediately preceding the date on which the resolution mentioned in (i) above was adopted (or, if there is no trading in the shares on the stock exchange or if the stock exchange is not open on such day, the price at which the shares are first traded on such stock exchange thereafter).

The total amount of the purchase price of shares of Common Stock may not exceed the Distributable Amount, as described in “(Distribution of Surplus) — Distributions of Surplus — Restriction on distributions of Surplus.”

Shares acquired by Sony Corporation may be held for any period or may be retired at the determination of the CEO. Sony Corporation may also transfer (by public or private sale or otherwise) to any person the treasury shares held by it, subject to a determination by the CEO, and subject also to other requirements similar to those applicable to the issuance of new shares, as described in (“Issue of additional shares and pre-emptive rights”) above. Sony Corporation may also utilize its treasury stock for the purpose of transfer to any person upon exercise of stock acquisition rights or for the purpose of acquiring another company by way of merger, share exchange or corporate split through exchange of treasury stock for shares or assets of the acquired company.

(Unit share system)

The Articles of Incorporation of Sony Corporation provide that 100 shares constitute one “unit” of shares of stock. The Board of Directors or the Corporate Executive Officer to whom the authority to make such a determination has been delegated by a resolution of the Board of Directors is permitted to amend the Articles of Incorporation to reduce the number of shares that constitute a unit or to abolish the unit share system entirely. Under the Companies Act, the number of shares constituting one unit cannot exceed 1,000 shares nor 0.5 percent of the total number of issued shares.

Under the unit share system, shareholders have one voting right for each unit of stock that they hold. Any number of shares less than one full unit have neither voting rights nor rights related to voting rights. Holders of shares constituting less than one unit will have no other shareholder rights if Sony Corporation’s Articles of Incorporation so provide, except that such holders may not be deprived of certain rights specified in the Companies Act or an ordinance of the Ministry of Justice, including the right to receive distribution of Surplus.

A holder of shares constituting less than one full unit may require Sony Corporation to purchase such shares at their market value in accordance with the provisions of the Share Handling Regulations of Sony Corporation. In addition, the Articles of Incorporation of Sony Corporation provide that a holder of shares constituting less than one full unit may request Sony Corporation to sell to such holder such amount of shares which will, when added together with the shares constituting less than one full unit, constitute one full unit of stock. Such request by a holder and the sale by Sony Corporation must be made in accordance with the provisions of the Share Handling Regulations of Sony Corporation. As prescribed in the Share Handling Regulations, such requests shall be made through an account management institution and JASDEC pursuant to the rules set by JASDEC, without going through the notification procedure required for the exercise of the shareholders’ rights to which shareholders are entitled, regardless of whether such shareholder held shares on the requisite record date, as described in “General.” Shares constituting less than a full unit are transferable, under the book-entry transfer system described in “General.” Under the rules of the stock exchanges, however, shares constituting less than a full unit do not comprise a trading unit, except in limited circumstances, and accordingly may not be sold on the Japanese stock exchanges.

(Sale by Sony Corporation of shares held by shareholders whose location is unknown)

Sony Corporation is not required to send a notice to a shareholder if a notice to such shareholder fails to arrive at the registered address of the shareholder in Sony Corporation’s register of shareholders or at the address otherwise notified to Sony Corporation continuously for five years or more.

In addition, Sony Corporation may sell or otherwise dispose of shares of capital stock for which the location of the shareholder is unknown. Generally, if (i) notices to a shareholder fail to arrive continuously for five years or more at the shareholder’s registered address in Sony Corporation’s register of shareholders or at the address otherwise notified to Sony Corporation, and (ii) the shareholder fails to receive distributions of Surplus on the shares continuously for five years or more at the address registered in Sony Corporation’s register of shareholders or at the address otherwise notified to Sony Corporation, Sony Corporation may sell or otherwise dispose of such shareholder’s shares at the then market price of the shares by a determination of a Corporate Executive Officer and after giving at least three months’ prior public and individual notice, and hold or deposit the proceeds of such sale or disposal of shares for such shareholder.

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Reporting of substantial shareholdings

The Financial Instruments and Exchange Act of Japan and its related regulations require any person, regardless of residence, who has become, beneficially and solely or jointly, a holder of more than five percent of the total issued shares of capital stock of a company listed on any Japanese stock exchange or whose shares are traded on the over-the-counter market in Japan to file with the Director General of the competent Local Finance Bureau of the Ministry of Finance within five business days a report concerning such shareholdings. A similar report must also be filed in respect of any subsequent change of one percent or more in any such holding, or any change in material matters set out in reports previously filed, with certain exceptions. For this purpose, shares issuable to such persons upon conversion of convertible securities or exercise of share subscription warrants or stock acquisition rights are taken into account in determining both the number of shares held by such holders and the issuer’s total issued share capital. Any such report shall be filed with the Director General of the relevant Local Finance Bureau of the Ministry of Finance through the Electronic Disclosure for Investors’ Network (EDINET) system.

Except for the general limitation under Japanese anti-trust and anti-monopoly regulations against holding of shares of capital stock of a Japanese corporation which leads or may lead to a restraint of trade or monopoly, except for the limitations under the Foreign Exchange Regulations as described in D. Exchange Controls below, and except for general limitations under the Companies Act or Sony Corporation’s Articles of Incorporation on the rights of shareholders applicable regardless of residence or nationality, there is no limitation under Japanese laws and regulations applicable to Sony Corporation or under its Articles of Incorporation on the rights of non-residents or foreign shareholders to hold or exercise voting rights on the shares of capital stock of Sony Corporation.

There is no provision in Sony Corporation’s Articles of Incorporation or internal regulations that would have an effect of delaying, deferring or preventing a change in control of Sony Corporation and that would operate only with respect to merger, acquisition or corporate restructuring involving Sony Corporation.

C. Material Contracts

None

D. Exchange Controls

The Foreign Exchange and Foreign Trade Act of Japan and its related cabinet orders and ministerial ordinances (the “Foreign Exchange Regulations”) govern the acquisition and holding of shares of capital stock of Sony Corporation by “exchange non-residents” and by “foreign investors.” The Foreign Exchange Regulations currently in effect do not, however, affect transactions between exchange non-residents to purchase or sell shares outside Japan using currencies other than Japanese yen.

Exchange non-residents are:

• individuals who do not reside in Japan; and

• corporations whose principal offices are located outside Japan.

Generally, branches and other offices of non-resident corporations that are located within Japan are regarded as residents of Japan. Conversely, branches and other offices of Japanese corporations located outside Japan are regarded as exchange non-residents.

Foreign investors are:

• individuals who are exchange non-residents;

• corporations that are organized under the laws of foreign countries or whose principal offices are located outside of Japan; and

• corporations (i) 50 percent or more of whose shares are held, directly or indirectly, by individuals who are exchange non-residents and/or corporations (a) that are organized under the laws of foreign countries or (b) whose principal offices are located outside of Japan or (ii) a majority of whose officers, or officers having the power of representation, are individuals who are exchange non-residents.

In general, the acquisition of shares of a Japanese company (such as the shares of capital stock of Sony Corporation) by an exchange non-resident from a resident of Japan is not subject to any prior filing requirements. In certain limited circumstances, however, the Minister of Finance may require prior approval of an acquisition

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of this type. While prior approval, as described above, is not required, in the case where a resident of Japan transfers shares of a Japanese company (such as the shares of capital stock of Sony Corporation) for consideration exceeding 100 million yen to an exchange non-resident, the resident of Japan who transfers the shares is required to report on the transfer to the Minister of Finance through the Bank of Japan within 20 days from the date of the transfer or the date of the receipt of payment, whichever comes later, unless the transfer was made through a bank or financial instruments business operator registered under Japanese law.

If a foreign investor acquires shares of a Japanese company that is listed on a Japanese stock exchange (such as the shares of capital stock of Sony Corporation) or that is traded on an over-the-counter market in Japan and, as a result of the acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly holds 10 percent or more of the issued shares of the relevant company, the foreign investor must file a report of the acquisition with the Minister of Finance and any other competent Ministers having jurisdiction over that Japanese company by the 15th day of the month immediately following the month in which such acquisition took place. In limited circumstances, such as where the foreign investor is in a country that is not listed on an exemption schedule in the Foreign Exchange Regulations, or where that Japanese company is engaged in certain businesses designated by the Foreign Exchange Regulations, a prior notification of the acquisition must be filed with the Minister of Finance and any other competent Ministers, who may then modify or prohibit the proposed acquisition.

Under the Foreign Exchange Regulations, dividends paid on and the proceeds from sales in Japan of shares of capital stock of Sony Corporation held by non-residents of Japan may generally be converted into any foreign currency and repatriated abroad.

E. Taxation

The following is a summary of the major Japanese national tax and U.S. federal income tax consequences of the ownership, acquisition and disposition of shares of Common Stock of Sony Corporation and of ADRs evidencing ADSs representing shares of Common Stock of Sony Corporation by a non-resident of Japan or a non-Japanese corporation without a permanent establishment in Japan. The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular investor, and does not take into account any specific individual circumstances of any particular investor. Accordingly, holders of shares of Common Stock or ADSs of Sony Corporation are encouraged to consult their tax advisors regarding the application of the considerations discussed below to their particular circumstances.

This summary is based upon the representations of the depositary and the assumption that each obligation in the deposit agreement in relation to the ADSs dated as of October 15, 2014, and in any related agreement, will be performed in accordance with its terms.

For purposes of the income tax convention between Japan and the United States (the “Treaty”) and the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. holders of ADSs generally will be treated as owning shares of Common Stock of Sony Corporation underlying the ADSs evidenced by the ADRs. For the purposes of the following discussion, a “U.S. holder” is a holder that:

(i) is a resident of the U.S. for purposes of the Treaty;

(ii) does not maintain a permanent establishment in Japan (a) with which shares of Common Stock or ADSs of Sony Corporation are effectively connected and through which the U.S. holder carries on or has carried on business or (b) of which shares of Common Stock or ADSs of Sony Corporation form part of the business property; and

(iii) is eligible for benefits under the Treaty with respect to income and gain derived in connection with shares of Common Stock or ADSs of Sony Corporation.

The following is a summary of the principal Japanese tax consequences (limited to national taxes) to non-residents of Japan or non-Japanese corporations without a permanent establishment in Japan (“non-resident Holders”) who are holders of shares of Common Stock of Sony Corporation or of ADRs evidencing ADSs representing shares of Common Stock of Sony Corporation. The information given below regarding Japanese taxation is based on the tax laws and tax treaties in force and their interpretations by the Japanese tax authorities as of June 15, 2017. Tax laws and tax treaties as well as their interpretations may change at any time, possibly with retroactive effect. Sony Corporation will not update this summary for any changes in the tax laws or tax treaties or their interpretation that occurs after such date.

Generally, non-resident Holders are subject to Japanese withholding tax on dividends paid by Japanese corporations. Such taxes are withheld prior to payment of dividends as required by Japanese law. Stock splits are, in general, not a taxable event.

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In the absence of an applicable tax treaty, convention or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to non-resident Holders is generally 20.42 percent, provided, with respect to dividends paid on listed shares issued by a Japanese corporation (such as the shares of Common Stock or ADSs of Sony Corporation) to non-resident Holders other than any individual shareholder who holds 3 percent or more of the total shares issued by the relevant Japanese corporation, the aforementioned 20.42 percent withholding tax rate is reduced to 15.315 percent for dividends due and payable on or before December 31, 2037. Due to the imposition of a special additional withholding tax (2.1 percent of the original withholding tax amount) to secure funds for reconstruction from the Great East Japan Earthquake, the original withholding tax rates of 15 percent and 20 percent as applicable, have been effectively increased to 15.315 percent and 20.42 percent, respectively, until December 31, 2037.

As of the date of this document, Japan has income tax treaties, conventions or agreements in force, whereby the above-mentioned withholding tax rate is reduced, in most cases to 15 percent or 10 percent for portfolio investors (15 percent under the income tax treaties with, among other countries, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore and Spain, and 10 percent under the income tax treaties with, among other countries, Australia, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the U.K. and the United States). Under the Treaty, the maximum rate of Japanese withholding tax that may be imposed on dividends paid by a Japanese corporation to a U.S. holder that does not own directly or indirectly at least 10 percent of the voting stock of the Japanese corporation is generally reduced to 10 percent of the gross amount actually distributed, and dividends paid by a Japanese corporation to a U.S. holder that is a pension fund are exempt from Japanese income taxation by way of withholding or otherwise unless such dividends are derived from the carrying on of a business, directly or indirectly, by such pension fund.

If the maximum tax rate provided for in the income tax treaty applicable to dividends paid by Sony Corporation to any particular non-resident Holder is lower than the withholding tax rate otherwise applicable under Japanese tax law, or if any particular non-resident Holder is exempt from Japanese income tax with respect to such dividends under the income tax treaty applicable to such particular non-resident Holder, such non-resident Holder who is entitled to a reduced rate of or exemption from Japanese withholding tax on payment of dividends on shares of Common Stock by Sony Corporation is, in principle, required to submit an Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends (together with any other required forms and documents) in advance through the withholding agent to the relevant tax authority before the payment of dividends. A standing proxy for non-resident Holders of a Japanese corporation may provide this application service. 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, by submitting a Special Application Form for Income Tax Convention Regarding Relief from Japanese Tax and Special Income Tax for Reconstruction on Dividends of Listed Stock (together with any other required forms and documents). With respect to ADSs, this reduced rate or exemption is applicable 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). To claim this reduced rate or exemption, a non-resident Holder 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. A non-resident Holder who is entitled, under an applicable income tax treaty, to a reduced rate which is lower than the withholding tax rate otherwise applicable under Japanese tax law or an exemption from the withholding tax, but failed to submit the required application in advance will be entitled to claim the refund of taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident Holder is entitled to a reduced treaty rate under the applicable income tax treaty) or the full amount of tax withheld (if such non-resident Holder is entitled to an exemption under the applicable income tax treaty) from the relevant Japanese tax authority, by complying with a certain subsequent filing procedure. Sony Corporation does not assume any responsibility to ensure withholding at the reduced treaty rate or to ensure the absence of withholding for shareholders who would be so eligible under any applicable income tax treaty but where the required procedures as stated above are not followed.

Gains derived from the sale of shares of Common Stock or ADSs of Sony Corporation outside Japan by a non-resident Holder holding such shares or ADSs as portfolio investors are, in general, not subject to Japanese income tax or corporation tax under Japanese tax law. U.S. holders are not subject to Japanese income or corporation tax with respect to such gains under the Treaty.

Japanese inheritance tax and gift tax at progressive rates may be payable by an individual who has acquired from another individual shares of Common Stock or ADSs of Sony Corporation as a legatee, heir or donee even though neither the acquiring individual nor the deceased nor donor is a Japanese resident.

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Holders of shares of Common Stock or ADSs of Sony Corporation should consult their tax advisors regarding the effect of these taxes and, in the case of U.S. holders, the possible application of the Estate and Gift Tax Treaty between the U.S. and Japan.

United States Taxation with respect to shares of Common Stock and ADSs

The U.S. dollar amount of dividends received (prior to deduction of Japanese taxes) by a U.S. holder of ADSs or Common Stock of Sony Corporation will be included in income as ordinary income for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits of Sony Corporation as determined for U.S. federal income tax purposes. Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by a non-corporate U.S. holder with respect to the ADSs or Common Stock will be subject to taxation at a reduced rate if the dividends are “qualified dividends.” Dividends paid on the ADSs or Common Stock will be treated as qualified dividends if Sony Corporation was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid a passive foreign investment company (“PFIC”). Based on Sony Corporation’s audited financial statements and relevant market and shareholder data, Sony Corporation believes that it was not treated as a PFIC for U.S. federal income tax purposes with respect to its 2016 taxable year. In addition, based on Sony Corporation’s audited financial statements and Sony Corporation’s current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, Sony Corporation does not anticipate becoming a PFIC for the 2017 taxable year. Holders of ADSs and Common Stock of Sony Corporation should consult their own tax advisors regarding the availability of the reduced dividend tax rate in light of the considerations discussed above and their own particular circumstances.

Subject to applicable limitations and special considerations discussed below, a U.S. holder of ADSs or Common Stock of Sony Corporation will be entitled to a credit for Japanese tax withheld in accordance with the Treaty from dividends paid by Sony Corporation. For purposes of the foreign tax credit limitation, dividends will be foreign source income, and will generally constitute “passive” income. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions and may not be allowed in respect of arrangements in which economic profit, after non-U.S. taxes, is insubstantial. Holders of ADSs and Common Stock of Sony Corporation should consult their own tax advisors regarding the implications of these rules in light of their particular circumstances.

Dividends paid by Sony Corporation to U.S. corporate holders of ADSs or Common Stock of Sony Corporation will not be eligible for the dividends-received deduction.

In general, a U.S. holder will recognize capital gain or loss upon the sale or other disposition of ADSs or Common Stock of Sony Corporation equal to the difference between the amount realized on the sale or disposition and the U.S. holder’s tax basis in the ADSs or Common Stock. Such capital gain or loss will be long-term capital gain or loss if the ADSs or Common Stock have been held for more than one year on the date of the sale or disposition. The net amount of long-term capital gain recognized by an individual holder is subject to lower rates of federal income taxation than ordinary income or short-term capital gain rates.

Under the Code, a U.S. holder of ADSs or Common Stock of Sony Corporation may be subject, under certain circumstances, to information reporting and possibly backup withholding with respect to dividends and proceeds from the sale or other disposition of ADSs or Common Stock, unless the U.S. holder provides proof of an applicable exemption or correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld under the backup withholding rules is not an additional tax and may be refunded or credited against the U.S. holder’s federal income tax liability, so long as the required information is furnished to the U.S. Internal Revenue Service.

F. Dividends and Paying Agent

Not Applicable

G. Statement by Experts

Not Applicable

H. Documents on Display

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. You can also access the documents at the SEC’s home page (http://www.sec.gov/index.html).

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I. Subsidiary Information

Not Applicable

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Sony’s business is continuously exposed to market fluctuation, such as fluctuations in currency exchange rates, interest rates or stock prices. Sony utilizes several derivative instruments, such as foreign exchange forward contracts, foreign currency option contracts, interest rate swap agreements and currency swap agreements in order to hedge the potential downside risk on the cash flow from the normal course of business caused by market fluctuation. Sony uses foreign exchange forward contracts and foreign currency option contracts primarily to reduce the foreign exchange volatility risk that accounts receivable or accounts payable denominated in yen, U.S. dollars, euros or other currencies have through the normal course of Sony’s worldwide business. Interest rate swap agreements and currency swap agreements are utilized to diversify funding conditions or to reduce funding costs, and in the Financial Services segment, these transactions are used for asset liability management. Sony uses these derivative financial instruments mainly for risk-hedging purposes as described above, and some derivative transactions, such as bond futures and bond options, are held or utilized for trading purposes in the Financial Services segment. If hedge accounting cannot be applied because the accounts receivable or accounts payable to be hedged are not yet booked, or because cash flows from derivative transactions do not coincide with the underlying exposures recorded on Sony’s balance sheet, such derivatives agreements are subject to a mark-to-market evaluation and their unrealized gains or losses are recognized in earnings. In addition, Sony holds marketable securities, such as straight bonds and stocks in yen or other currencies, in the Financial Services segment to obtain interest income or capital gain on the financial assets under management. These securities include a concentration of investments in long-term Japanese national government bonds, for which Sony monitors the related credit ratings and other market information on an ongoing basis. Investments in marketable securities are also subject to market fluctuation.

Sony measures the economic impact of market fluctuations on the value of derivatives agreements and marketable securities by using Value-at-Risk (“VaR”) analysis in order to comply with Item 11 disclosure requirements. VaR in this context indicates the potential maximum amount of loss in fair value resulting from adverse market fluctuations for a selected period of time and at a selected level of confidence.

The following table shows the results of VaR. These analyses for the fiscal year ended March 31, 2017 indicate the potential maximum loss in fair value as predicted by the VaR analysis resulting from market fluctuations in one day at a 95 percent confidence level. The VaR of currency exchange rate risk principally consists of risks arising from the volatility of the exchange rates between the yen and the U.S. dollar and between the yen and the euro, the currencies in which a significant amount of financial assets and liabilities and derivative transactions are maintained on a consolidated basis. The VaR of interest rate risk and stock price risk consists of risks arising from the volatility of the interest rates and stock prices against invested securities and derivatives transactions in the Financial Services segment.

The net VaR for Sony’s entire portfolio is smaller than the simple aggregate of VaR for each component of market risk. This is due to the fact that market risk factors such as currency exchange rates, interest rates and stock prices are not completely independent and potential profits and losses arising from each market risk may be mutually offsetting to some degree.

The disclosed VaR amounts simply represent the calculated maximum potential loss on the specified date and do not necessarily indicate an estimate of actual or future loss.

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Consolidated

	June 30, 2016		September 30, 2016		December 31, 2016		March 31, 2017
	(Yen in billions)
Net VaR		1.3		1.3		0.9		1.1
VaR of currency exchange rate risk		1.3		1.2		0.9		1.1
VaR of interest rate risk		0.1		0.1		0.1		0.1
VaR of stock price risk		0.0		0.0		0.0		0.0

Financial Services

	June 30, 2016		September 30, 2016		December 31, 2016		March 31, 2017
	(Yen in billions)
Net VaR		1.2		1.1		0.7		0.9
VaR of currency exchange rate risk		1.2		1.0		0.7		0.9
VaR of interest rate risk		0.1		0.1		0.1		0.1
VaR of stock price risk		0.0		0.0		0.0		0.0

Sony without the Financial Services segment

	June 30, 2016		September 30, 2016		December 31, 2016		March 31, 2017
	(Yen in billions)
Net VaR		0.9		0.8		0.5		0.6
VaR of currency exchange rate risk		0.9		0.8		0.5		0.6
VaR of interest rate risk		0.0		0.0		0.0		0.0
VaR of stock price risk		0.0		0.0		0.0		0.0

Item 12. Description of Securities Other Than Equity Securities

A. Debt Securities

Not Applicable

B. Warrants and Rights

Not Applicable

C. Other Securities

Not Applicable

D. American Depositary Shares

Citibank N.A. (the “Depositary”) serves as the depositary for Sony Corporation’s ADSs. ADS holders (“Holders”) may be required to pay various fees to the Depositary and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid. The following fees may at any time and from time to time be changed by agreement (the “Deposit Agreement”) between Sony Corporation and the Depositary.

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Under the terms of the Deposit Agreement, Holders may have to pay the following service fees to the Depositary.

Service	Rate	By Whom Paid
Issuance of ADSs upon deposit of Sony Corporation’s Common Stock	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) issued	Person depositing Sony Corporation’s Common Stock or person receiving ADSs
Delivery of deposited securities against surrender of ADSs	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) surrendered	Person surrendering ADSs for the purpose of withdrawal of deposited securities or person to whom deposited securities are delivered
Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements)	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) held	Person to whom distribution is made
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, (ii) exercise of rights to purchase additional ADSs	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) held	Person to whom distribution is made
Distribution of securities other than ADSs or rights purchase Additional ADSs (i.e., spin-off shares)	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) held	Person to whom distribution is made
ADS Services	Up to 5.00 U.S. dollar per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary	Person holding ADSs on the applicable record date(s) established by the Depositary

The Company, Holders, beneficial owners of ADSs, persons depositing Sony Corporation’s Common Stock and persons surrendering ADSs for cancellation and for the purpose of withdrawing deposited securities shall be responsible for the following ADS charges under the term of the Deposit Agreement: (i) taxes (including applicable interest and penalties) and other governmental charges; (ii) such registration fees as may from time to time be in effect for the registration of Sony Corporation’s Common Stock or other deposited securities on the share register and applicable to transfer of Sony Corporation’s Common Stock or other deposited securities to or from the name of the custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; (iii) such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing Sony Corporation’s Common Stock or withdrawing deposited securities or of the Holders and beneficial owners of ADSs; (iv) the expenses and charges incurred by the Depositary in the conversion of foreign currency; (v) such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Sony Corporation’s Common Stock, deposited securities, ADSs and ADRs; and (vi) the fees and expenses incurred by the Depositary, the custodian, or any nominee in connection with the servicing or delivery of deposited property.

Direct and Indirect Payments by the Depositary to Sony

The Depositary reimburses Sony for certain expenses Sony incurs in connection with its ADR program, subject to certain ceilings. These reimbursable expenses currently include, but are not limited to, legal and accounting fees, investor relations expenses and fees payable to service providers for the distribution of material to ADR holders. For the fiscal year ended March 31, 2017, no reimbursement has been received.

In addition, as part of its service to Sony, the Depositary waives fees in connection with its ADR program, subject to a ceiling. These waived expenses currently include, but are not limited to, standard costs associated with the administration of the ADR program, associated operating expenses, investor relations advice and access to an internet-based tool used in Sony’s investor relations activities. For the fiscal year ended March 31, 2017, the amount of such indirect payments was estimated to total 5,000 U.S. dollars.

Item 13. Defaults, Dividend Arrearages and Delinquencies

None

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Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None

Item 15. Controls and Procedures

Item 15(a). Disclosure Controls and Procedures

Sony has carried out an evaluation under the supervision and with the participation of Sony’s management, including the CEO and CFO, of the effectiveness of the design and operation of Sony’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of March 31, 2017. Disclosure controls and procedures require that information to be disclosed in the reports Sony files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported as and when required, within the time periods specified in the applicable rules and forms, and that such information is accumulated and communicated to Sony’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon Sony’s evaluation, the CEO and CFO have concluded that, as of March 31, 2017, the disclosure controls and procedures were effective at the reasonable assurance level.

Item 15(b). Management’s Annual Report on Internal Control over Financial Reporting

Sony’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Sony’s internal control over financial reporting is designed 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 in the United States of America. Sony’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Sony;

(ii) 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 Sony are being made only in accordance with authorizations of management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Sony’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are 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.

Sony’s management evaluated the effectiveness of Sony’s internal control over financial reporting as of March 31, 2017 based on the criteria established in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management has concluded that Sony maintained effective internal control over financial reporting as of March 31, 2017.

Sony’s independent registered public accounting firm, PricewaterhouseCoopers Aarata LLC, has issued an audit report on Sony’s internal control over financial reporting as of March 31, 2017, presented on page (F-2).

Item 15(c). Attestation Report of the Registered Public Accounting Firm

Refer to the Report of Independent Registered Public Accounting Firm on page (F-2).

Item 15(d). Changes in Internal Control over Financial Reporting

There has been no change in Sony’s internal control over financial reporting during the fiscal year ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, Sony’s internal control over financial reporting.

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Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

Sony’s Board of Directors has determined that Takaaki Nimura and Kunihito Minakawa each qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Securities Exchange Act of 1934, as amended. In addition, both are determined to be independent as defined under the NYSE Corporate Governance Standards.

Item 16B. Code of Ethics

Sony has adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended. The code of ethics applies to Sony’s Chief Executive Officer, Chief Financial Officer, chief accounting officer and persons performing similar functions, as well as to directors and all other officers and employees of Sony, as defined in the code of ethics. The code of ethics is available at http://www.sony.net/code.

Item 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

The following table presents fees for audit and other services rendered by PricewaterhouseCoopers for the fiscal years ended March 31, 2016 and 2017.

	Fiscal year ended March  31
	2016		2017
	Yen in millions
Audit Fees (1)		3,561		3,401
Audit-Related Fees (2)		76		177
Tax Fees (3)		6		—
All Other Fees (4)		30		61
		3,673		3,639

(1) Audit Fees consist of fees for the annual audit services engagement and other audit services, which are those services that only the external auditor can provide.

(2) Audit-Related Fees consist of fees billed for assurance and related services, and audit services relating to benefit plans, business acquisitions and dispositions.

(3) Tax Fees primarily consist of fees for tax advice.

(4) All Other Fees consist of fees primarily for services rendered with respect to advisory services.

Audit Committee’s Pre-Approval Policies and Procedures

Consistent with the U.S. Securities and Exchange Commission rules regarding auditor independence, Sony Corporation’s Audit Committee is responsible for appointing, reviewing and setting compensation, retaining, and overseeing the work of Sony’s independent auditor, so that the auditor’s independence will not be impaired. The Audit Committee established a formal policy requiring pre-approval of all audit and permissible non-audit services provided by the independent auditor to Sony Corporation or any of its subsidiaries. The Audit Committee periodically reviews this policy with due regard for compliance with laws and regulations of host countries where Sony Corporation is listed.

Prior to the engagement of the independent auditor for the following fiscal year’s audit, management submits an application form to the Audit Committee for comprehensive pre-approval of all recurring services expected to be rendered during that year. In order to obtain comprehensive pre-approval, management provides sufficient information regarding each service so that each service can be classified into one of four categories (Audit, Audit-Related, Tax, or All Other) as well as information regarding the fees expected to be budgeted for each service. Management describes each service in detail and indicates precisely and unambiguously the nature and scope of each particular service. Any additional services not contemplated in the application form require the Audit Committee’s separate pre-approval on an individual basis. The Audit Committee approves, if necessary, any changes in terms, conditions and fees resulting from changes in the scope of services to be provided or from other circumstances. The Audit Committee Chair retains pre-approval authority and evaluates items for approval upon request. The Audit Committee or its designee establishes procedures to assure that the independent auditor is aware in a timely manner of the services that have been pre-approved.

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Item 16D. Exemptions from the Listing Standards for Audit Committees

Not Applicable

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets out information concerning purchases made by Sony Corporation during the fiscal year ended March 31, 2017.

Period	(a) Total number of shares purchased		(b) Average price paid per share (yen)		(c) Total number of shares purchased as part of  publicly announced plans or programs		(d) Maximum number of shares that may yet be  purchased under the plans or programs
April 1 — 30, 2016		2,086		2,893.37		N/A		N/A
May 1 — 31, 2016		1,606		2,807.74		N/A		N/A
June 1 — 30, 2016		3,531		3,011.32		N/A		N/A
July 1 — 31, 2016		2,621		3,105.63		N/A		N/A
August 1 — 31, 2016		2,884		3,291.33		N/A		N/A
September 1 — 30, 2016		2,086		3,355.76		N/A		N/A
October 1 — 31, 2016		1,718		3,384.11		N/A		N/A
November 1 — 30, 2016		1,974		3,236.87		N/A		N/A
December 1 — 31, 2016		6,398		3,325.43		N/A		N/A
January 1 — 31, 2017		3,253		3,432.55		N/A		N/A
February 1 — 28, 2017		3,331		3,524.78		N/A		N/A
March 1 — 31, 2017		3,369		3,579.95		N/A		N/A
Total		34,857		3,277.89		N/A		N/A

Under the Companies Act, a holder of shares constituting less than one full unit may require Sony Corporation to purchase such shares at their market value (Refer to “B. Memorandum and Articles of Association — Capital stock — (Unit share system)” in “Item 10. Additional Information”). During the fiscal year ended March 31, 2017, Sony Corporation purchased 34,857 shares of Common Stock for a total purchase price of 114,257,503 yen upon such requests from holders of shares constituting less than one full unit.

Item 16F. Change in Registrant’s Certifying Accountant

Not Applicable

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Item 16G. Disclosure About Differences in Corporate Governance

The table below discloses the significant ways in which Sony’s corporate governance practices differ from those required for U.S. companies under the listing standards of the NYSE. As a foreign private issuer listed on the NYSE, Sony is exempt from most of the exchange’s corporate governance standards requirements. For further information on Sony’s corporate governance practices and history, please refer to “Board Practices” in “Item 6. Director, Senior Management and Employees.” In the table below, any reference to “Sony” shall mean Sony Corporation.

NYSE Standards	Sony’s Corporate Governance Practices
Board Independence. A majority of board directors must be independent.	Sony has adopted the “Company with Three Committees” system under the Companies Act. Sony’s Charter of the Board of Directors (attached as an exhibit 1.3 to this report) requires its board to consist of between 10 to 20 directors. The Companies Act does not require Sony to have a majority of “independent” (in the meaning given by the NYSE Corporate Governance Standards) directors on its board; rather, it requires Sony to have a majority of “outside” directors (the definition of the term “outside” director is summarized below) on each of three statutory committees (the Nominating Committee, the Audit Committee and the Compensation Committee).
Director Independence. A director is not independent if such director is (i) a person who the board determines has a material direct or indirect relationship with the company, its parent or a consolidated subsidiary; (ii) a person who, within the last three years, has been an employee of the company or has an immediate family member of an executive officer of the company, its parent or a consolidated subsidiary; (iii) a person who had received, or whose immediate family member had received, during any 12-month period within the last three years, more than 120,000 U.S. dollars per year in direct compensation from the company, its parent or a consolidated subsidiary, other than director and committee fees or deferred compensation for prior services (provided such compensation is not contingent in any way on continued service); (iv) (A) a person who is, or whose immediate family member is, a current partner or employee of a firm that is the company’s internal or external auditor; (B) a person whose immediate family member is a partner of such a firm; (C) a person who has an immediate family member who is a current employee of such a firm and who personally participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) a person who was, or has an immediate family member who was, within the last three years, a partner or employee of such a firm and personally worked on the listed company’s audit within that time;	“Outside” director is defined in the Companies Act as a person who satisfies all of the requirements (i) through (v) below: (i) a person who is not a director of Sony Corporation or any of its subsidiaries engaged in the business operations of Sony Corporation or such subsidiaries, as the case may be, or a Corporate Executive Officer or general manager or other employee (“Group Executive Director, etc.”) of Sony Corporation or any of its subsidiaries and who has not been a Group Executive Director, etc. of Sony Corporation or any of its subsidiaries for ten years prior to assuming his/her office; (ii) if a person who has been a director, accounting counselor (if the accounting counselor is a juridical person, a member who is in charge of the affairs), or corporate auditor of Sony Corporation or any of its subsidiaries (excluding a person who has been a Group Executive Director, etc.) at the time within ten years prior to assuming his/her office, a person who has not been a Group Executive Director, etc. of Sony Corporation or any of its subsidiaries for ten years prior to assuming his/her office as a director, an accounting counselor, or a corporate auditor; (iii) a person who is not a director or a Corporate Executive Officer or general manager or other employee of a parent company or any entity which controls the management of Sony Corporation; (iv) a person who is not a Group Executive Director, etc. of a direct/indirect subsidiary of Sony Corporation or any entity the management of which is directly or indirectly controlled by Sony Corporation; and (v) a person who is not a spouse or relative within the second degree of kinship of a

115

NYSE Standards	Sony’s Corporate Governance Practices
(v) a person who is, or whose immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on that company’s compensation committee; or (vi) an executive officer or employee of a company, or has an immediate family member of an executive officer of a company, that makes payments to, or receives payments from, the listed company, its parent or a consolidated subsidiary for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of 1 million U.S. dollars or 2 percent of such other company’s consolidated gross revenues.	director or a Corporate Executive Officer or general manager or other employee of Sony Corporation. Under the Companies Act, a director’s status as an “outside” director is unaffected by the director’s compensation, his or her affiliation with business partners, or the board’s affirmative determination of independence. On the other hand, under the Companies Act, a director who has had a career as a management director, corporate executive officer, or other employee of the company, its subsidiaries or other group companies is by definition not an “outside” director.
	Sony’s Charter of the Board of Directors includes a provision requiring that each “outside” director: (i) Shall not have received directly from Sony Group, during any consecutive 12-month period within the last three years, more than an amount equivalent to 120,000 U.S. dollars, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); and (ii) Shall not be a director, a statutory auditor, a corporate executive officer, a general manager or other employee of any company whose aggregate amount of transactions with Sony Group, in any of the last three fiscal years, exceeds the greater of an amount equivalent to 1,000,000 U.S. dollars, or 2 percent of the annual consolidated sales of such company;
	In addition, the Securities Listing Regulations of the Tokyo Stock Exchange require Sony to make efforts to have at least one “Independent Director” on the Board of Directors. “Independent Director” is defined in the Securities Listing Regulations of the Tokyo Stock Exchange as an “outside” director who is unlikely to have conflicts of interest with shareholders. According to the guidelines of the Tokyo Stock Exchange, if a person falls in any of the categories listed below, such person, in principle, will be considered to have a conflict of interest with shareholders of the listed company. (1)    A person for which the listed company is a major client or a person who executes business of a person for which the listed company is a major client; (2)    A major client of the listed company or a person who executes business of a major client of the listed company; (3)    A consultant, accounting professional, or legal professional (or, if such consultant, accounting professional, or legal professional is a juridical

116

NYSE Standards	Sony’s Corporate Governance Practices
	person, a member of such juridical person) of the listed company who receives a large amount of money or other consideration other than remuneration for directorship/auditorship from such listed company;
	(4)    A person who has fallen in any of categories (a) through (d) listed below until recently:         (a)    A person who falls in any of (1) through (3) listed above;         (b)    A person who executes business of a parent company of the listed company or a director who does not execute business of a parent company of the listed company;         (c)    A corporate auditor of a parent company of the listed company; or         (d)    A person who executes business of a fellow subsidiary of the listed company.
	(5)    A close relative of a person who falls in any of categories (a) through (h) listed below (only if such person is significant):         (a)    A person who falls in any of (1) through (4) listed above;         (b)    An accounting counselor of the listed company;         (c)    A person who executes business of a subsidiary of the listed company;         (d)    A director who does not execute business of a subsidiary of the listed company or an accounting counselor of a subsidiary of the listed company;         (e)    A person who executes business of a parent company of the listed company or a director who does not execute business of a parent company of the listed company;         (f)     A corporate auditor of a parent company of the listed company;         (g)    A person who executes business of a fellow subsidiary of the listed company; or         (h)    A person who has fallen in any of categories (b) through (d) listed above or a person who has executed business of the listed company until recently.
	As of June 15, 2017, 9 of the 12 members of Sony’s Board of Directors qualified as “outside” directors. In addition, all 9 “outside” directors are qualified and designated as “Independent Directors” under the Securities Listing Regulations of the Tokyo Stock Exchange.

117

NYSE Standards	Sony’s Corporate Governance Practices
Executive Sessions. Non-management directors must meet in regularly scheduled executive sessions without management. Independent directors should meet alone in an executive session at least once a year.	An “outside” director, as defined under the Companies Act, is equivalent to a “non-management director” under the NYSE rules because an “outside” director does not engage in the execution of business operations of the company. The outside/non-management directors generally meet several times a year without management, though neither the Companies Act nor Sony’s Charter of the Board of Directors requires non-management directors to meet regularly without management and there is no requirement for the outside directors to meet alone in an executive session at least once a year.
Nominating/Corporate Governance Committee. A nominating/corporate governance committee of independent directors is required. The committee must have a charter that addresses the purpose, responsibilities (including development of corporate governance guidelines) and annual performance evaluation of the committee.	Sony’s Nominating Committee consists of at least three directors. Under the Companies Act, the Committee is responsible for determining the contents of proposals regarding the appointment and dismissal of directors to be submitted for approval to the shareholders’ meeting. Unlike listed U.S. companies under NYSE rules, it is not responsible for developing governance guidelines or overseeing the evaluation of the board and management. Under the Companies Act, a majority of its members must be “outside” directors, as defined under the Companies Act. Sony’s Charter of the Board of Directors requires at least one of the directors on the Committee to be a corporate executive officer.
Compensation Committee. A compensation committee of independent directors is required. The committee must have a charter that addresses the purpose, responsibilities and annual performance evaluation of the committee. In addition, in accordance with the SEC rules adopted pursuant to Section 952 of the Dodd-Frank Act, NYSE listing standards expanded the factors relevant in determining whether a committee member has a relationship to the company that will materially affect that member’s duties to the compensation committee and provided compensation committees the authority to engage compensation advisers. Additionally, the committee may obtain or retain the advice of a compensation adviser only after taking into consideration all factors relevant to determining that adviser’s independence from management, unless the adviser’s role is (i) limited to consulting on a generally applicable broad-based plan or (ii) is providing information that is not customized for the issuer or is not customized by the adviser and about which the adviser does not provide advice.	Sony’s Compensation Committee consists of at least three directors. Under the Companies Act, a majority of its members must be “outside” directors, as defined under the Companies Act. Sony’s Charter of the Board of Directors recommends that at least one of the directors on the Committee be a corporate executive officer. The Charter prohibits the CEO and/or the COO (or a person at any equivalent position) from serving on the Compensation Committee. Under the Companies Act, the Committee is responsible for, among others, determining the compensation of each director and corporate executive officer.

118

NYSE Standards	Sony’s Corporate Governance Practices
Audit Committee. An audit committee satisfying the independence and other requirements of Rule 10A-3 under the Exchange Act is required. The committee must have at least three members. All members must be independent. The committee must have a charter addressing the committee’s purpose, an annual performance evaluation of the committee and the duties and responsibilities of the committee.	Sony’s Audit Committee consists of at least three directors. Under the Companies Act, a majority of its members must be “outside” directors, as defined under the Companies Act. In addition, pursuant to the Companies Act, no member of the Committee shall be a director of the company or any of its subsidiaries who is engaged in the business operations of the company or such subsidiary, as the case may be, or a corporate executive officer of the company or any of its subsidiaries, or an accounting counselor, general manager or other employee of any of such subsidiaries. Sony’s Charter of the Board of Directors also requires each member of the Audit Committee to meet the independence requirements of the applicable U.S. securities laws and regulations, and requires at least one member to meet the audit committee financial expert requirements. Currently, all the members of Sony’s Audit Committee are also “independent” as defined in the NYSE Corporate Governance Standards, and two members of the Committee are qualified as audit committee financial experts. Sony’s Charter of the Board of Directors discourages any Audit Committee member from concurrently being a member of other Committees.
Equity Compensation Plans. Equity compensation plans require shareholder approval, subject to limited exemptions.	Under the Companies Act, if Sony wishes to adopt an equity compensation plan under which stock acquisition rights are granted on specially favorable conditions, except where all of its shareholders are granted rights to subscribe for such stock acquisition rights or such stock acquisition rights are gratuitously allocated to all of its shareholders, each on a pro rata basis, then Sony must obtain shareholder approval by a “special resolution” of a general meeting of shareholders, where the quorum is one-third of the total number of voting rights of all of its shareholders and the approval by at least two-thirds of the number of voting rights of all the shareholders represented at the meeting is required under Sony’s Articles of Incorporation. On the other hand, under the Companies Act, if Sony wishes to adopt an equity compensation plan under which stock acquisition rights or shares of common stock are granted against fair value thereof, such plan can be adopted by the resolution of Sony’s Compensation Committee, and grants of stock acquisition rights or shares pursuant to such plan may be decided by a resolution of the Board of Directors or a determination by a Corporate Executive Officer to whom the authority to make such determination has been delegated, and no shareholder approval is required.

119

NYSE Standards	Sony’s Corporate Governance Practices
Corporate Governance Guidelines. Corporate governance guidelines must be adopted and disclosed.	Sony is required to disclose the status of its corporate governance under the Companies Act, Financial Instruments and Exchange Act and its related regulations, and the Securities Listing Regulations of the Tokyo Stock Exchange; however, Sony does not have corporate governance guidelines that cover all the requirements described in the NYSE Corporate Governance Standards, as many of the provisions do not apply to Sony. Details of the status are posted on the following website: http://www.sony.net/SonyInfo/csr_report/governance/
Code of Ethics. A code of business conduct and ethics for directors, officers and employees must be adopted and disclosed, along with any waivers of the code for directors or executive officers.	Although this provision of the NYSE Corporate Governance Standards does not apply to Sony, Sony has adopted a code of conduct to be observed by all its directors, officers and other employees. The code of conduct is available at http://www.sony.net/code The code’s content covers principal items described in the NYSE Corporate Governance Standards.

Item 16H. Mine Safety Disclosure

Not Applicable

Item 17. Financial Statements

Not Applicable

Item 18. Financial Statements

Refer to the consolidated financial statements.

120

Item 19. Exhibits

Documents filed as exhibits to this annual report:

1.1	Articles of Incorporation of Sony Corporation, as amended (English Translation), incorporated by reference to Exhibit 1.1 to Sony’s annual report on Form 20-F for the fiscal year ended March 31, 2015 (Commission file number 001-06439) filed on June 23, 2015
1.2	Share Handling Regulations (English Translation), incorporated by reference to Exhibit 1.2 to Sony’s annual report on Form 20-F for the fiscal year ended March 31, 2010 (Commission file number 001-06439) filed on June 28, 2010
1.3	Charter of the Board of Directors, as amended (English Translation)
8.1	Significant subsidiaries (as defined in §210.1-02(w) of Regulation S-X) of Sony Corporation, including additional subsidiaries that management has deemed to be significant, as of March 31, 2017: Incorporated by reference to “Business Overview” and “Organizational Structure” in “Item 4. Information on the Company”
12.1	302 Certification
12.2	302 Certification
13.1	906 Certification
15.1	Consent of PricewaterhouseCoopers Aarata LLC
101.1	XBRL INSTANCE DOCUMENT
101.1	XBRL TAXONOMY EXTENSION SCHEMA
101.1	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.1	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.1	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.1	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

121

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

SONY CORPORATION
(Registrant)
By:	/s/  KENICHIRO YOSHIDA
	(Signature)
	Kenichiro Yoshida
	Executive Deputy President and Chief Financial Officer

Date: June 15, 2017

122

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at March 31, 2016 and 2017	F-4
Consolidated Statements of Income for the years ended March 31, 2015, 2016 and 2017	F-6
Consolidated Statements of Comprehensive Income for the years ended March 31, 2015, 2016 and 2017	F-7
Consolidated Statements of Cash Flows for the years ended March 31, 2015, 2016 and 2017	F-8
Consolidated Statements of Changes in Stockholders’ Equity for the years ended March  31, 2015, 2016 and 2017	F-10
Index to Notes to Consolidated Financial Statements	F-13
Notes to Consolidated Financial Statements	F-14
Financial Statement Schedule II for the years ended March  31, 2015, 2016 and 2017 — Valuation and Qualifying Accounts	F-83

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sony Corporation (Sony Kabushiki Kaisha)

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Sony Corporation and its subsidiaries (the “Company”) at March 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2017 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2017, based on criteria established in Internal Control — Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15(b). Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are 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.

/s/ PricewaterhouseCoopers Aarata LLC

Tokyo, Japan

May 22, 2017

F-2

[THIS PAGE IS INTENTIONALLY LEFT BLANK]

F-3

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets

March 31

	Yen in millions
	2016			2017
ASSETS
Current assets:
Cash and cash equivalents		983,612			960,142
Marketable securities		946,397			1,051,441
Notes and accounts receivable, trade		926,375			1,006,961
Allowance for doubtful accounts and sales returns		(72,783	)		(53,150	)
Inventories		683,146			640,835
Other receivables		206,058			223,632
Deferred income taxes		40,940			—
Prepaid expenses and other current assets		482,982			525,861
Total current assets		4,196,727			4,355,722
Film costs		301,228			336,928
Investments and advances:
Affiliated companies		164,874			149,371
Securities investments and other		9,069,209			9,962,422
		9,234,083			10,111,793
Property, plant and equipment:
Land		121,707			117,293
Buildings		655,379			666,381
Machinery and equipment		1,795,991			1,842,852
Construction in progress		69,286			28,779
		2,642,363			2,655,305
Less — Accumulated depreciation		1,821,545			1,897,106
		820,818			758,199
Other assets:
Intangibles, net		615,754			584,185
Goodwill		606,290			522,538
Deferred insurance acquisition costs		511,834			568,837
Deferred income taxes		97,639			98,958
Other		289,017			323,396
		2,120,534			2,097,914
Total assets		16,673,390			17,660,556

(Continued on following page.)

F-4

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets (Continued)

	Yen in millions
	2016			2017
LIABILITIES
Current liabilities:
Short-term borrowings		149,272			464,655
Current portion of long-term debt		187,668			53,424
Notes and accounts payable, trade		550,964			539,900
Accounts payable, other and accrued expenses		1,367,115			1,394,758
Accrued income and other taxes		88,865			106,037
Deposits from customers in the banking business		1,912,673			2,071,091
Other		574,193			591,874
Total current liabilities		4,830,750			5,221,739
Long-term debt		556,605			681,462
Accrued pension and severance costs		462,384			396,715
Deferred income taxes		450,926			432,824
Future insurance policy benefits and other		4,509,215			4,834,492
Policyholders’ account in the life insurance business		2,401,320			2,631,073
Other		330,302			314,771
Total liabilities		13,541,502			14,513,076
Redeemable noncontrolling interest		7,478			12,058
Commitments and contingent liabilities
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value —
2016 — Shares authorized: 3,600,000,000; shares issued: 1,262,493,760		858,867
2017 — Shares authorized: 3,600,000,000; shares issued: 1,263,763,660					860,645
Additional paid-in capital		1,325,719			1,275,337
Retained earnings		936,331			984,368
Accumulated other comprehensive income —
Unrealized gains on securities, net		140,736			126,635
Unrealized losses on derivative instruments, net		(1,198	)		(58	)
Pension liability adjustment		(371,739	)		(308,736	)
Foreign currency translation adjustments		(421,117	)		(436,610	)
		(653,318	)		(618,769	)
Treasury stock, at cost
Common stock
2016 — 1,047,745 shares		(4,259	)
2017 — 1,073,222 shares					(4,335	)
		2,463,340			2,497,246
Noncontrolling interests		661,070			638,176
Total equity		3,124,410			3,135,422
Total liabilities and equity		16,673,390			17,660,556

The accompanying notes are an integral part of these statements.

F-5

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income

Fiscal year ended March 31

	Yen in millions
	2015			2016		2017
Sales and operating revenue:
Net sales		7,035,537			6,949,357		6,443,328
Financial services revenue		1,077,604			1,066,319		1,080,284
Other operating revenue		102,739			90,036		79,638
		8,215,880			8,105,712		7,603,250
Costs and expenses:
Cost of sales		5,275,144			5,166,894		4,753,010
Selling, general and administrative		1,811,461			1,691,930		1,505,956
Financial services expenses		882,990			907,758		910,144
Other operating expense, net		181,658			47,171		149,001
		8,151,253			7,813,753		7,318,111
Equity in net income of affiliated companies		3,921			2,238		3,563
Operating income		68,548			294,197		288,702
Other income:
Interest and dividends		12,887			12,455		11,459
Gain on sale of securities investments, net		8,714			52,068		225
Other		3,475			2,326		2,734
		25,076			66,849		14,418
Other expenses:
Interest		23,600			25,286		14,544
Loss on devaluation of securities investments		852			3,309		7,629
Foreign exchange loss, net		20,533			20,565		22,181
Other		8,910			7,382		7,147
		53,895			56,542		51,501
Income before income taxes		39,729			304,504		251,619
Income taxes:
Current		80,751			94,578		100,260
Deferred		7,982			211		23,798
		88,733			94,789		124,058
Net income (loss)		(49,004	)		209,715		127,561
Less — Net income attributable to noncontrolling interests		76,976			61,924		54,272
Net income (loss) attributable to Sony Corporation’s stockholders		(125,980	)		147,791		73,289

	Yen
	2015			2016		2017
Per share data:
Common stock
Net income (loss) attributable to Sony Corporation’s stockholders
— Basic		(113.04	)		119.40		58.07
— Diluted		(113.04	)		117.49		56.89
Cash dividends		—			20.00		20.00

The accompanying notes are an integral part of these statements.

F-6

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Fiscal year ended March 31

	Yen in millions
	2015			2016			2017
Net income (loss)		(49,004	)		209,715			127,561
Other comprehensive income, net of tax —
Unrealized gains (losses) on securities		38,718			2,220			(30,293	)
Unrealized gains (losses) on derivative instruments		—			(1,198	)		1,140
Pension liability adjustment		(21,187	)		(171,753	)		63,232
Foreign currency translation adjustments		65,790			(83,899	)		(17,988	)
Total comprehensive income (loss)		34,317			(44,915	)		143,652
Less — Comprehensive income attributable to noncontrolling interests		93,995			75,329			35,814
Comprehensive income (loss) attributable to Sony Corporation’s stockholders		(59,678	)		(120,244	)		107,838

The accompanying notes are an integral part of these statements.

F-7

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows

Fiscal year ended March 31

	Yen in millions
	2015			2016			2017
Cash flows from operating activities:
Net income (loss)		(49,004	)		209,715			127,561
Adjustments to reconcile net income (loss) to net cash provided by operating activities —
Depreciation and amortization, including amortization of deferred insurance acquisition costs		354,624			397,091			327,048
Amortization of film costs		272,941			299,587			297,505
Accrual for pension and severance costs, less payments		9,638			(6,383	)		9,297
Other operating expense, net		181,658			47,171			149,001
(Gain) loss on sale or devaluation of securities investments, net		(7,916	)		(48,857	)		7,404
(Gain) loss on revaluation of marketable securities held in the financial services business for trading purposes, net		(100,729	)		44,821			(55,789	)
(Gain) loss on revaluation or impairment of securities investments held in the financial services business, net		(1,397	)		2,653			47
Deferred income taxes		7,982			211			23,798
Equity in net loss of affiliated companies, net of dividends		2,269			5,045			4,409
Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivable, trade		33,843			(5,828	)		(37,529	)
(Increase) decrease in inventories		113,485			(57,804	)		11,199
Increase in film costs		(252,403	)		(318,391	)		(331,179	)
Decrease in notes and accounts payable, trade		(118,577	)		(49,525	)		(1,386	)
Increase (decrease) in accrued income and other taxes		(11,033	)		(23,607	)		26,701
Increase in future insurance policy benefits and other		460,336			403,392			433,803
Increase in deferred insurance acquisition costs		(79,861	)		(83,774	)		(93,234	)
Increase in marketable securities held in the financial services business for trading purposes		(51,565	)		(107,433	)		(81,456	)
(Increase) decrease in other current assets		16,276			21,299			(21,402	)
Increase (decrease) in other current liabilities		86,718			(25,751	)		79,114
Other		(112,645	)		45,457			(65,650	)
Net cash provided by operating activities		754,640			749,089			809,262
Cash flows from investing activities:
Payments for purchases of fixed assets		(215,916	)		(375,411	)		(333,509	)
Proceeds from sales of fixed assets		36,777			26,472			13,098
Payments for investments and advances by financial services business		(960,045	)		(1,221,093	)		(1,233,290	)
Payments for investments and advances (other than financial services business)		(20,029	)		(20,830	)		(17,208	)
Proceeds from sales or return of investments and collections of advances by financial services business		482,537			534,072			289,901
Proceeds from sales or return of investments and collections of advances (other than financial services business)		49,479			81,535			16,078
Proceeds from sales of businesses		93			17,790			3,262
Other		(12,532	)		(72,938	)		7,695
Net cash used in investing activities		(639,636	)		(1,030,403	)		(1,253,973	)

(Continued on following page.)

F-8

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

	Yen in millions
	2015			2016			2017
Cash flows from financing activities:
Proceeds from issuance of long-term debt		18,507			19,076			254,695
Payments of long-term debt		(258,102	)		(270,669	)		(261,299	)
Increase (decrease) in short-term borrowings, net		(51,013	)		92,153			317,827
Increase in deposits from customers in the financial services business, net		57,464			165,169			277,152
Proceeds from issuance of convertible bonds		—			120,000			—
Proceeds from issuance of new shares of common stock		—			301,708			—
Dividends paid		(13,160	)		(12,751	)		(25,301	)
Payment for purchase of Sony/ATV shares from noncontrolling interests		—			—			(76,565	)
Other		(16,891	)		(34,564	)		(34,207	)
Net cash provided by (used in) financing activities		(263,195	)		380,122			452,302
Effect of exchange rate changes on cash and cash equivalents		51,138			(64,609	)		(31,061	)
Net increase (decrease) in cash and cash equivalents		(97,053	)		34,199			(23,470	)
Cash and cash equivalents at beginning of the fiscal year		1,046,466			949,413			983,612
Cash and cash equivalents at end of the fiscal year		949,413			983,612			960,142
Supplemental data:
Cash paid during the fiscal year for —
Income taxes		97,775			138,770			106,054
Interest		21,982			26,166			13,877
Non-cash investing and financing activities —
Conversion of convertible bonds		118,780			—			—
Obtaining assets by entering into capital leases		10,714			14,759			8,457
Collections of deferred proceeds from sales of receivables —		22,512			2,298			1,202

The accompanying notes are an integral part of these statements.

F-9

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

	Yen in millions
	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income			Treasury stock, at cost			Sony Corporation’s stockholders’ equity			Noncontrolling interests			Total equity
Balance at March 31, 2014		646,654		1,127,090			940,262			(451,585	)		(4,284	)		2,258,137			525,004			2,783,141
Exercise of stock acquisition rights		994		994												1,988						1,988
Conversion of zero coupon convertible bonds		59,390		59,390												118,780						118,780
Stock-based compensation				873												873						873
Comprehensive income:
Net income (loss)							(125,980	)								(125,980	)		76,976			(49,004	)
Other comprehensive income, net of tax —
Unrealized gains on securities										26,644						26,644			12,074			38,718
Pension liability adjustment										(21,092	)					(21,092	)		(95	)		(21,187	)
Foreign currency translation adjustments										60,750						60,750			5,040			65,790
Total comprehensive income (loss)																(59,678	)		93,995			34,317
Stock issue costs, net of tax							(517	)								(517	)					(517	)
Dividends declared							—									—			(14,108	)		(14,108	)
Purchase of treasury stock													(101	)		(101	)					(101	)
Reissuance of treasury stock				(99	)								165			66						66
Transactions with noncontrolling interests shareholders and other				(2,471	)											(2,471	)		6,501			4,030
Balance at March 31, 2015		707,038		1,185,777			813,765			(385,283	)		(4,220	)		2,317,077			611,392			2,928,469

(Continued on following page.)

F-10

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

	Yen in millions
	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income			Treasury stock, at cost			Sony Corporation’s stockholders’ equity			Noncontrolling interests			Total equity
Balance at March 31, 2015		707,038		1,185,777			813,765			(385,283	)		(4,220	)		2,317,077			611,392			2,928,469
Issuance of new shares		150,854		150,854												301,708						301,708
Exercise of stock acquisition rights		975		975												1,950						1,950
Stock-based compensation				1,516												1,516						1,516
Comprehensive income:
Net income							147,791									147,791			61,924			209,715
Other comprehensive income, net of tax —
Unrealized gains (losses) on securities										(13,417	)					(13,417	)		15,637			2,220
Unrealized losses on derivative instruments										(1,198	)					(1,198	)					(1,198	)
Pension liability adjustment										(170,608	)					(170,608	)		(1,145	)		(171,753	)
Foreign currency translation adjustments										(82,812	)					(82,812	)		(1,087	)		(83,899	)
Total comprehensive income (loss)																(120,244	)		75,329			(44,915	)
Stock issue costs, net of tax				(1,478	)											(1,478	)					(1,478	)
Dividends declared							(25,225	)								(25,225	)		(20,868	)		(46,093	)
Purchase of treasury stock													(110	)		(110	)					(110	)
Reissuance of treasury stock				(12	)								71			59						59
Transactions with noncontrolling interests shareholders and other				(11,913	)											(11,913	)		(4,783	)		(16,696	)
Balance at March 31, 2016		858,867		1,325,719			936,331			(653,318	)		(4,259	)		2,463,340			661,070			3,124,410

(Continued on following page.)

F-11

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

	Yen in millions
	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income			Treasury stock, at cost			Sony Corporation’s stockholders’ equity			Noncontrolling interests			Total equity
Balance at March 31, 2016		858,867		1,325,719			936,331			(653,318	)		(4,259	)		2,463,340			661,070			3,124,410
Exercise of stock acquisition rights		1,778		1,778												3,556						3,556
Stock-based compensation				1,601												1,601						1,601
Comprehensive income:
Net income							73,289									73,289			54,272			127,561
Other comprehensive income, net of tax —
Unrealized losses on securities										(14,101	)					(14,101	)		(16,192	)		(30,293	)
Unrealized gains on derivative instruments										1,140						1,140						1,140
Pension liability adjustment										63,003						63,003			229			63,232
Foreign currency translation adjustments										(15,493	)					(15,493	)		(2,495	)		(17,988	)
Total comprehensive income																107,838			35,814			143,652
Stock issue costs, net of tax				(30	)											(30	)					(30	)
Dividends declared							(25,252	)								(25,252	)		(17,068	)		(42,320	)
Purchase of treasury stock													(114	)		(114	)					(114	)
Reissuance of treasury stock				(10	)								38			28						28
Transactions with noncontrolling interests shareholders and other				(53,721	)											(53,721	)		(41,640	)		(95,361	)
Balance at March 31, 2017		860,645		1,275,337			984,368			(618,769	)		(4,335	)		2,497,246			638,176			3,135,422

The accompanying notes are an integral part of these statements.

F-12

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Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

		Page
Notes to Consolidated Financial Statements
1.	Nature of operations		F-14
2.	Summary of significant accounting policies		F-14
3.	Inventories		F-26
4.	Film costs		F-26
5.	Investments in affiliated companies		F-27
6.	Transfer of financial assets		F-28
7.	Marketable securities and securities investments		F-30
8.	Leases		F-32
9.	Goodwill and intangible assets		F-33
10.	Insurance-related accounts		F-35
11.	Short-term borrowings and long-term debt		F-37
12.	Housing loans and deposits from customers in the banking business		F-39
13.	Fair value measurements		F-40
14.	Derivative instruments and hedging activities		F-47
15.	Pension and severance plans		F-51
16.	Stockholders’ equity		F-58
17.	Stock-based compensation plans		F-61
18.	Kumamoto Earthquake		F-62
19.	Restructuring charges		F-62
20.	Supplemental consolidated statements of income information		F-66
21.	Income taxes		F-67
22.	Reconciliation of the differences between basic and diluted EPS		F-71
23.	Variable interest entities		F-71
24.	Acquisitions		F-72
25.	Divestitures		F-74
26.	Collaborative arrangements		F-74
27.	Commitments, contingent liabilities and other		F-75
28.	Business segment information		F-77
29.	Subsequent events		F-82

F-13

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

1. Nature of operations

Sony Corporation and its consolidated subsidiaries (hereinafter collectively referred to as “Sony”) are engaged in the development, design, production, manufacture, offer and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets such as mobile phones, game hardware and software, network services, still and video cameras, televisions, audio and video recorders and players, and semiconductors. Sony’s primary manufacturing facilities are located in Asia including Japan. Sony also utilizes third-party contract manufacturers for certain products. Sony’s products and services are marketed throughout the world by sales subsidiaries and unaffiliated distributors as well as direct sales and offers via the Internet. Sony is engaged in the production, acquisition and distribution of motion pictures and television programming and the operation of television and digital networks. Sony is also engaged in the development, production, manufacture, and distribution of recorded music and the management and licensing of the words and music of songs as well as production and distribution of animation titles, including game applications based on the animation titles. Further, Sony is also engaged in various financial services businesses, including life and non-life insurance operations through its Japanese insurance subsidiaries and banking operations through a Japanese Internet-based banking subsidiary.

2. Summary of significant accounting policies

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP. These adjustments were not recorded in the statutory books and records as Sony Corporation and its subsidiaries in Japan maintain their records and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan, while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domicile.

(1) Significant accounting policies

Basis of consolidation and accounting for investments in affiliated companies -

The consolidated financial statements include the accounts of Sony Corporation and its majority-owned subsidiary companies, general partnerships and other entities in which Sony has a controlling interest, and variable interest entities for which Sony is the primary beneficiary. All intercompany transactions and accounts are eliminated. Investments in business entities in which Sony does not have control, but has the ability to exercise significant influence over operating and financial policies, generally through 20-50% ownership, are accounted for under the equity method. In addition, investments in general partnerships in which Sony does not have a controlling interest and limited partnerships are also accounted for under the equity method if more than minor influence over the operation of the investee exists (generally through more than 3-5% ownership). When the interest in the partnership is so minor that Sony has no significant influence over the operation of the investee, the cost method is used. Under the equity method, investments are stated at cost plus/minus Sony’s portion of equity in undistributed earnings or losses. Sony’s equity in current earnings or losses of such entities is reported net of income taxes and is included in operating income (loss) after the elimination of unrealized intercompany profits. If the value of an investment has declined and is judged to be other-than-temporary, the investment is written down to its estimated fair value.

On occasion, a consolidated subsidiary or an affiliated company accounted for by the equity method may issue its shares to third parties in either a public or private offering or upon conversion of convertible debt to common stock at amounts per share in excess of or less than Sony’s average per share carrying value. With respect to such transactions, the resulting gains or losses arising from the change in ownership interest are recorded in earnings within the fiscal year in which the change in interest transactions occur.

Gains or losses that result from a loss of a controlling financial interest in a subsidiary are recorded in earnings along with fair value remeasurement gains or losses on any retained investment in the entity, while a change in interest of a consolidated subsidiary that does not result in a change in control is accounted for as a capital transaction and no gains or losses are recorded in earnings.

F-14

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The excess of the cost over the underlying net equity of investments in consolidated subsidiaries and affiliated companies accounted for on an equity basis is allocated to identifiable tangible and intangible assets and liabilities based on fair values at the date of acquisition. The unassigned residual value of the excess of the cost over Sony’s underlying net equity is recognized as goodwill as a component of the investment balance.

Use of estimates -

The preparation of the 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates include those used in determining the valuation of investment securities, valuation of inventories, fair values of long-lived assets, fair values of goodwill, intangible assets and assets and liabilities assumed in business combinations, product warranty liability, pension and severance plans, valuation of deferred tax assets, uncertain tax positions, film costs, and insurance related liabilities. Actual results could significantly differ from those estimates.

Translation of foreign currencies -

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate fiscal year end exchange rates and all income and expense accounts are translated at exchange rates that approximate those rates prevailing at the time of the transactions. The resulting translation adjustments are accumulated as a component of accumulated other comprehensive income. Upon remeasurement of a previously held equity interest in accordance with the accounting guidance for business combinations achieved in stages, accumulated translation adjustments, if any, are included in earnings.

Receivables and payables denominated in foreign currencies are translated at appropriate fiscal year end exchange rates and the resulting translation gains or losses are recognized into income.

Cash and cash equivalents -

Cash and cash equivalents include all highly liquid investments, with original maturities of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.

Marketable debt and equity securities -

Debt and equity securities designated as available-for-sale, whose fair values are readily determinable, are carried at fair value with unrealized gains or losses included as a component of accumulated other comprehensive income, net of applicable taxes. Debt and equity securities classified as trading securities are carried at fair value with unrealized gains or losses included in income. Debt securities that are expected to be held-to-maturity are carried at amortized cost. Individual securities classified as either available-for-sale or held-to-maturity are reduced to fair value by a charge to income when an other-than-temporary impairment is recognized. Realized gains and losses are determined on the average cost method and are reflected in income.

Sony regularly evaluates its investment portfolio to identify other-than-temporary impairments of individual securities. Factors that are considered by Sony in determining whether an other-than-temporary decline in value has occurred include: the length of time and extent to which the market value of the security has been less than its original cost, the financial condition, operating results, business plans and estimated future cash flows of the issuer of the security, other specific factors affecting the market value, deterioration of the credit condition of the issuer, sovereign risk, and whether or not Sony is able to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value.

In evaluating the factors for available-for-sale securities whose fair values are readily determinable, Sony presumes a decline in value to be other-than-temporary if the fair value of the security is 20 percent or more below its original cost for an extended period of time (generally for a period of up to six months). This criterion is employed as a threshold to identify securities which may have a decline in value that is other-than-temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if there is evidence to support that the decline is temporary in nature due to the existence of other factors which overcome the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses are recognized when

F-15

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

the decline in the fair value of the security is not more than 20 percent or such decline has not existed for an extended period of time, as a result of considering specific factors which may indicate that the decline in the fair value is other-than-temporary.

When an other-than-temporary impairment of a held-to-maturity debt security has occurred, the amount of the other-than-temporary impairment recognized in income depends on whether Sony intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost. If the debt security meets either of these two criteria, the other-than-temporary impairment is recognized in income, measured as the entire difference between the security’s amortized cost and its fair value at the impairment measurement date. For other-than-temporary impairments of debt securities that do not meet these two criteria, the net amount recognized in income is a credit loss equal to the difference between the amortized cost of the debt security and its net present value calculated by discounting Sony’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. Any difference between the fair value and the net present value of the debt security at the impairment measurement date is recorded in accumulated other comprehensive income. Unrealized gains or losses on securities for which an other-than-temporary impairment has been recognized in income are presented as a separate component of accumulated other comprehensive income.

Equity securities in non-public companies -

Equity securities in non-public companies are primarily carried at cost if fair value is not readily determinable. If the carrying value of a non-public equity investment is estimated to have declined and such decline is judged to be other-than-temporary, Sony recognizes the impairment of the investment and the carrying value is reduced to its fair value. Determination of impairment is based on the consideration of several factors, including operating results, business plans and estimated future cash flows. Fair value is determined through the use of various methodologies such as discounted cash flows, valuation of recent financings and comparable valuations of similar companies.

Allowance for doubtful accounts -

Sony maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Sony reviews accounts receivable by amounts due from customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, Sony makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations.

Inventories -

Inventories in the Mobile Communications (“MC”), Game & Network Services (“G&NS”), Imaging Products & Solutions (“IP&S”), Home Entertainment & Sound (“HE&S”), Semiconductors, Components and Music segments as well as non-film inventories for the Pictures segment are valued at cost, not in excess of the net realizable value – i.e., estimated selling price in the ordinary course of business less predictable costs of completion and disposal, cost being determined on the “average cost” basis, except for the cost of finished products carried by certain subsidiary companies which is determined on the “first-in, first-out” basis.

Other receivables -

Other receivables include receivables which relate to arrangements with certain component manufacturers whereby Sony procures goods, including product components, for these component manufacturers and is reimbursed for the related purchases. No revenue or profit is recognized on these transfers. Sony will repurchase the inventory at a later date from the component manufacturers as either finished goods inventory or as partially assembled product.

Film costs -

Film costs include direct production costs, production overhead and acquisition costs for both motion picture and television productions and are stated at the lower of unamortized cost or estimated fair value and classified as noncurrent assets. Film costs are amortized, and the estimated liabilities for residuals and participations are accrued using an individual-film-forecast method based on the ratio of current period actual revenues to the estimated remaining total revenues. Film costs also include broadcasting rights, which are

F-16

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

recognized when the license period begins and the program is available for use, and consist of acquired programming to be aired on Sony’s worldwide channel network. Broadcasting rights are stated at the lower of unamortized cost or net realizable value, classified as either current or noncurrent assets based on timing of expected use. Broadcasting rights are amortized based on estimated usage or on a straight-line basis over the useful life, as appropriate, although broadcasting rights licensed under multi-year live-event sports programming agreements are generally amortized based on the ratio of the current period’s actual advertising revenue and an allocation of subscription fee revenue to the estimated total remaining attributable revenues. Estimates used in calculating the fair value of the film costs and the net realizable value of the broadcasting rights are based upon assumptions about future demand and market conditions and are reviewed on a periodic basis.

Property, plant and equipment and depreciation -

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Useful lives for depreciation range from two to 50 years for buildings and from two to 10 years for machinery and equipment. Significant renewals and additions are capitalized at cost. Maintenance and repairs, and minor renewals and betterments are charged to income as incurred.

Goodwill and other intangible assets -

Goodwill and indefinite lived intangible assets are tested annually for impairment during the fourth quarter of the fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount. Such an event or change in circumstances would include unfavorable variances from established business plans, significant changes in forecasted results or volatility inherent to external markets and industries, which are periodically reviewed by Sony’s management.

In the fiscal year ended March 31, 2017, Sony elected not to perform an optional qualitative assessment of goodwill and instead proceeded directly to a two-step quantitative impairment process which involves a comparison of the estimated fair value of a reporting unit to its carrying amount to identify potential impairment. Reporting units are Sony’s operating segments or one level below the operating segments. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the impairment test is not performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. Indefinite lived intangible assets are tested for impairment by comparing the fair value of the intangible asset with its carrying value, and if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The fair value of a reporting unit or indefinite lived intangible asset is generally determined using a discounted cash flow analysis. This approach uses significant estimates and assumptions, including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, earnings multiples, the determination of appropriate comparable entities and the determination of whether a premium or discount should be applied to comparables. Consideration is also given to Sony’s market capitalization in relation to the sum of the calculated fair values of the reporting units, including reporting units with no goodwill, and taking into account corporate level assets and liabilities not assigned to individual reporting units as well as a reasonable control premium.

The assumptions used for projected future cash flows and the timing of such cash flows are based on the forecast and mid-range plan (“MRP”) of each reporting unit and take into account such factors as historical experience, market and industry information, and current and forecasted economic conditions. Perpetual growth rates are utilized to determine a terminal cash flow value and are generally set after the three-year forecasted period for the MRP. Certain reporting units, such as those in the Pictures segment, utilize longer forecast periods and base the terminal value on an exit price using an earnings multiple applied to the final year of the forecasted earnings, which also takes into consideration a control premium. Discount rates are derived from the weighted average cost of capital of market participants in similar businesses.

F-17

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method.

Intangible assets with finite useful lives mainly consist of patent rights, know-how, license agreements, customer relationships, trademarks, software to be sold, leased or otherwise marketed, internal-use software, music catalogs, artist contracts, and television carriage contracts (broadcasting agreements). Patent rights; know-how; license agreements; trademarks; software to be sold, leased or otherwise marketed; and internal-use software are generally amortized on a straight-line basis over three to 10 years. Customer relationships, music catalogs, artist contracts and television carriage contracts (broadcasting agreements) are amortized on a straight-line basis, generally, over 10 to 40 years.

Capitalized software -

The costs related to establishing the technological feasibility of software to be sold, leased or otherwise marketed are expensed as incurred as a part of research and development in cost of sales. Costs that are incurred to produce the finished product after technological feasibility is established are capitalized and amortized to cost of sales over the estimated economic life, which is generally three years. The technological feasibility of game software is established when the product master is completed. Consideration to capitalize game software development costs before this point is limited to the development costs of games for which technological feasibility can be proven at an earlier stage. At each balance sheet date, Sony performs reviews to ensure that unamortized capitalized software costs remain recoverable from future profits of the related software products.

The costs incurred for internal-use software during the application development stage are capitalized and amortized, mainly to selling, general and administrative expenses, on a straight-line basis over the estimated useful life. Costs related to the preliminary project stage and post implementation activities are expensed as incurred.

Deferred insurance acquisition costs -

Costs that vary with and are directly related to acquiring new insurance policies are deferred as long as they are recoverable. The deferred insurance acquisition costs include such items as commissions, medical examination costs and inspection report fees, and are subject to recoverability testing at least annually to ensure that the capitalized amounts do not exceed the present value of anticipated gross profits or premiums less benefits and maintenance expenses, as applicable. The deferred insurance acquisition costs for traditional life insurance contracts are amortized over the premium-paying period of the related insurance policies using assumptions consistent with those used in computing policy reserves. The deferred insurance acquisition costs for non-traditional life insurance contracts are amortized over the expected life in proportion to the estimated gross profits.

Product warranty -

Sony provides for the estimated cost of product warranties at the time revenue is recognized. The product warranty is calculated based upon product sales, estimated probability of failure and estimated cost per claim. The variables used in the calculation of the provision are reviewed on a periodic basis.

Certain subsidiaries in the MC, G&NS, IP&S and HE&S segments offer extended warranty programs. The consideration received for extended warranty service is deferred and recognized as revenue on a straight-line basis over the term of the extended warranty.

Future insurance policy benefits -

Liabilities for future insurance policy benefits are primarily comprised of the present value of estimated future payments to policyholders. These liabilities are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality, withdrawals and other factors. These assumptions are reviewed on a periodic basis. Liabilities for future insurance policy benefits also include liabilities for guaranteed benefits related to certain non-traditional life and annuity contracts.

F-18

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Policyholders’ account in the life insurance business -

Liabilities for policyholders’ account in the life insurance business represent the contract value that has accrued to the benefit of the policyholders as of the balance sheet date. This liability is generally equal to the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balances.

Impairment of long-lived assets -

Sony reviews the recoverability of the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of, whenever events or changes in circumstances indicate that the individual carrying amount of an asset or asset group may not be recoverable. Long-lived assets to be held and used are reviewed for impairment by comparing the carrying value of the asset or asset group with their estimated undiscounted future cash flows. If the cash flows are determined to be less than the carrying value of the asset or asset group, an impairment loss would be recognized during the period for the amount by which the carrying value of the asset or asset group exceeds estimated fair value. Long-lived assets that are to be disposed of other than by sale are considered held and used until they are disposed of. Long-lived assets that are to be disposed of by sale are reported at the lower of their carrying value or fair value less cost to sell and are not depreciated. Fair value is determined using the present value of estimated net cash flows or comparable market values. This approach uses significant estimates and assumptions including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates applied to determine terminal values, determination of appropriate market comparables and the determination of whether a premium or discount should be applied to comparables.

Fair value measurement -

Sony measures fair value as an exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Sony has elected the fair value option in the banking business for certain foreign securities. The election was made to mitigate accounting mismatches related to fluctuations of foreign exchange rates by allowing the gains and losses on the translation of these securities to be included in current earnings.

The accounting guidance for fair value measurements specifies a hierarchy of inputs to valuation techniques based on the extent to which inputs used in measuring fair value are observable in the market. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Sony’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Observable market data is used if such data is available without undue cost and effort. Each fair value measurement is reported in one of three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1	—	Inputs are unadjusted quoted prices for identical assets and liabilities in active markets.
Level 2	—	Inputs are based on observable inputs other than level 1 prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3	—	One or more significant inputs are unobservable.

When available, Sony uses unadjusted quoted market prices in active markets to measure fair value and classifies such items within level 1. If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates and option volatilities. Items valued using internally generated models are classified according to the lowest level input that is significant to the valuation. For certain financial assets and liabilities, Sony determines fair value using third-party information such as indicative quotes from dealers and quantitative input from investment advisors following Sony’s established valuation procedures including validation against internally developed prices. Additionally, Sony considers both counterparty credit risk and Sony’s own creditworthiness in determining fair value. Sony attempts to mitigate credit risk to third parties by entering into netting agreements and actively monitoring the creditworthiness of counterparties and its exposure to credit risk through the use of credit limits and by selecting major international banks and financial institutions as counterparties.

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Transfers between levels are deemed to have occurred at the beginning of the interim period in which the transfers occur.

Derivative financial instruments -

All derivatives are recognized as either assets or liabilities in the consolidated balance sheets at fair value on a gross basis. Changes in the fair value of derivative financial instruments are either recognized periodically in income or stockholders’ equity (as a component of accumulated other comprehensive income), depending on whether the derivative financial instrument qualifies as a hedge and the derivative is being used to hedge changes in fair value or cash flows.

The accounting guidance for hybrid financial instruments permits an entity to elect fair value remeasurement for any hybrid financial instrument if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under accounting guidance for derivative instruments and hedging activities. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. Certain subsidiaries in the Financial Services segment had hybrid financial instruments, disclosed in Note 7 as debt securities, that contain embedded derivatives where the entire instrument was carried at fair value.

In accordance with accounting guidance for derivative instruments and hedging activities, various derivative financial instruments held by Sony are classified and accounted for as described below.

Fair value hedges

Changes in the fair value of derivatives designated and effective as fair value hedges for recognized assets or liabilities or unrecognized firm commitments are recognized in earnings as offsets to changes in the fair value of the related hedged assets or liabilities.

Cash flow hedges

Changes in the fair value of derivatives designated and effective as cash flow hedges for forecasted transactions or exposures associated with recognized assets or liabilities are initially recorded in other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Changes in the fair value of the ineffective portion are recognized immediately in earnings.

Derivatives not designated as hedges

Changes in the fair value of derivatives that are not designated as hedges are recognized immediately in earnings.

Assessment of hedges

When applying hedge accounting, Sony formally documents all hedging relationships between the derivatives designated as hedges and the hedged items, as well as its risk management objectives and strategies for undertaking various hedging activities. Sony links all hedges that are designated as fair value or cash flow hedges to specific assets or liabilities on the consolidated balance sheets or to the specific forecasted transactions. Sony also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are designated as hedges are highly effective in offsetting changes in fair value or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge, Sony discontinues hedge accounting. Hedge ineffectiveness, if any, is included immediately in earnings.

Stock-based compensation -

Sony accounts for stock-based compensation using the fair value based method, measured on the date of grant using the Black-Scholes option-pricing model. The expense is mainly included in selling, general and administrative expenses. Stock-based compensation is recognized, net of an estimated forfeiture rate, over the requisite service period using the accelerated method of amortization for grants with graded vesting. The estimated forfeiture rate is based on Sony’s historical experience in the stock acquisition rights plans where the majority of the vesting terms have been satisfied.

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Revenue recognition -

Revenues from sales in the MC, G&NS, IP&S, HE&S, Semiconductors, Components and Music segments are recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery is considered to have occurred when the customer has taken title to the product and the risks and rewards of ownership have been substantively transferred. If the sales contract contains a customer acceptance provision, then sales are recognized after customer acceptance occurs or the acceptance provisions lapse. Revenues are recognized net of anticipated returns and sales incentives. Revenues from prepaid subscription fees, such as within the G&NS segment, are recognized ratably over the subscription term.

Revenue arrangements with customers may include multiple elements, including any combination of products, services and software. An example includes sales of electronics products with rights to receive promotional goods. For Sony’s multiple element arrangements where at least one of the elements is not subject to existing software or film revenue recognition guidance, elements are separated into more than one unit of accounting when the delivered element(s) have value to the customer on a standalone basis, and delivery of the undelivered element(s) is probable and substantially in the control of Sony. Revenue is then allocated to each unit of accounting based on the relative selling price of each unit of accounting based first on vendor-specific objective evidence of selling price (“VSOE”) if it exists, based next on third-party evidence of selling price (“TPE”) if VSOE does not exist, and, finally, if both VSOE and TPE do not exist, based on estimated selling prices (“ESP”). VSOE is limited to either the price charged for an element when it is sold separately or, for an element not yet being sold separately, the price established by management having the relevant authority; it must be probable that the price, once established, will not change before the separate introduction of the element into the market place. TPE is the price of Sony’s or any competitor’s largely interchangeable products or services in standalone sales to similarly situated customers. ESP is the price at which Sony would transact if the element were sold by Sony regularly on a standalone basis. When determining ESP, Sony considers all relevant inputs, including sales, cost and margin analysis of the product, targeted rate of return of the product, competitors’ and Sony’s pricing practices and customer perspectives.

Certain software products published by Sony provide limited on-line features at no additional cost to the customer. Generally, such features are considered to be incidental to the overall software product and an inconsequential deliverable. Accordingly, revenue related to software products containing these limited on-line features is not deferred.

Revenues from sales in the Pictures segment are recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectability is reasonably assured. Revenues from the theatrical exhibition of motion pictures are recognized as the customer exhibits the film. Revenues from the licensing of motion picture and television programming for pay and free television exhibition and other markets are recognized when the product is available for exploitation by the licensee and when any restrictions regarding the use of the product lapse. For home entertainment distribution, revenues from the sale of DVDs and Blu-ray Disc^TM, net of anticipated returns and sales incentives, are recognized when the product is available for sale to the public, and revenues from electronic sell-through and video-on-demand are recognized when the product is made available for viewing via digital distribution platforms. Certain motion picture and television program licensing arrangements involve an allocation to multiple elements, for example a fee for multiple territories and availability dates, that is based on relative fair value using management’s best estimate. Revenues from the sale of broadcast advertising are recognized when the advertisement is aired. Revenues from subscription fees received by television networks are recognized when the service is provided.

Traditional life insurance policies that the life insurance subsidiary underwrites, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health insurance contracts. Premiums from these policies are reported as revenue when due from policyholders.

Amounts received as payment for non-traditional contracts such as interest sensitive whole life contracts, individual annuity contracts and other contracts without life contingencies are recognized in policyholders’ account in the life insurance business. Revenues from these contracts are comprised of fees earned for administrative and contract-holder services, which are recognized over the period of the contracts, and included in financial services revenue.

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Property and casualty insurance policies that the non-life insurance subsidiary underwrites are primarily automotive insurance contracts which are categorized as short-duration contracts. Premiums from these policies are reported as revenue over the period of the contract in proportion to the amount of insurance protection provided.

Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

Consideration given to a customer or a reseller -

Sales incentives or other cash consideration given to a customer or a reseller, including payments for buydowns, slotting fees and cooperative advertising programs, are accounted for as a reduction of revenue unless Sony receives an identifiable benefit (goods or services) in exchange for the consideration, the fair value of the benefit is reasonably estimated and documentation from the reseller is received to support the amounts paid to the reseller. Payments meeting these criteria are recorded as selling, general and administrative expenses. For the fiscal years ended March 31, 2015, 2016 and 2017, consideration given to a reseller, primarily for free promotional shipping and cooperative advertising programs included in selling, general and administrative expenses, totaled 10,503 million yen, 13,178 million yen and 12,046 million yen, respectively.

Cost of sales -

Costs classified as cost of sales relate to the producing and manufacturing of products and include items such as material cost, subcontractor cost, depreciation of fixed assets, amortization of intangible assets, personnel expenses, research and development costs, and amortization of film costs related to motion picture and television productions.

Research and development costs -

Research and development costs, included in cost of sales, include items such as salaries, personnel expenses and other direct and indirect expenses associated with research and product development. Research and development costs are expensed as incurred.

Selling, general and administrative -

Costs classified as selling expenses relate to promoting and selling products and include items such as advertising, promotion, shipping and warranty expenses. General and administrative expenses include operating items such as officers’ salaries, personnel expenses, depreciation of fixed assets, office rental for sales, marketing and administrative divisions, a provision for doubtful accounts and amortization of intangible assets.

Financial services expenses -

Financial services expenses include a provision for policy reserves and amortization of deferred insurance acquisition costs, and all other operating costs, such as personnel expenses, depreciation of fixed assets, and office rental of subsidiaries, in the Financial Services segment.

Advertising costs -

Advertising costs are expensed when the advertisement or commercial appears in the selected media.

Shipping and handling costs -

The majority of shipping and handling, warehousing and internal transfer costs for finished goods are included in selling, general and administrative expenses. An exception to this is in the Pictures segment where such costs are charged to cost of sales as they are an integral part of producing and distributing motion pictures and television programming. All other costs related to Sony’s distribution network are included in cost of sales, including inbound freight charges, purchasing and receiving costs, inspection costs and warehousing costs for raw materials and in-process inventory. Amounts paid by customers for shipping and handling costs are included in net sales.

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Income taxes -

The provision for income taxes is computed based on the pretax income included in the consolidated statements of income, and the tax liability attributed to undistributed earnings of subsidiaries and affiliated companies accounted for by the equity method expected to be remitted in the foreseeable future. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

Carrying amounts of deferred tax assets require a reduction by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically with appropriate consideration given to all positive and negative evidence related to the realization of the deferred tax assets. Management’s judgments related to this assessment consider, among other matters, the nature, frequency and severity of current and cumulative losses on an individual tax jurisdiction basis, forecasts of future profitability after consideration of uncertain tax positions, excess of appreciated asset value over the tax basis of net assets, the duration of statutory carryforward periods, the past utilization of net operating loss carryforwards prior to expiration, as well as prudent and feasible tax planning strategies which would be employed by Sony to prevent net operating loss and tax credit carryforwards from expiring unutilized.

Sony records assets and liabilities for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Sony continues to recognize interest and penalties, if any, with respect to income taxes, including unrecognized tax benefits, as interest expense and as income tax expense, respectively, in the consolidated statements of income. The amount of income taxes Sony pays is subject to ongoing audits by various taxing authorities, which may result in proposed assessments. In addition, several significant items related to intercompany transfer pricing are currently the subject of negotiations between taxing authorities in different jurisdictions as a result of pending advance pricing agreement applications and competent authority requests. Sony’s estimate for the potential outcome for any uncertain tax issues is judgmental and requires significant estimates. Sony assesses its income tax positions and records tax benefits for all years subject to examinations based upon the evaluation of the facts, circumstances and information available at that reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, Sony records the amount that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. If Sony does not believe that it is more likely than not that a tax benefit will be sustained, no tax benefit is recognized. However, Sony’s future results may include favorable or unfavorable adjustments to Sony’s estimated tax liabilities due to closure of income tax examinations, the outcome of negotiations between taxing authorities in different jurisdictions, new regulatory or judicial pronouncements or other relevant events. As a result, the amount of unrecognized tax benefits, and the effective tax rate, may fluctuate significantly.

Net income (loss) attributable to Sony Corporation’s stockholders per share (“EPS”) -

Basic EPS is computed based on the weighted-average number of shares of common stock outstanding during each period. The computation of diluted EPS reflects the maximum possible dilution from conversion, exercise, or contingent issuance of securities. All potentially dilutive securities are excluded from the calculation in a situation where there is a net loss attributable to Sony Corporation’s stockholders.

(2) Recently adopted accounting pronouncements

Amendments to the consolidation analysis -

In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-02 that changes how companies evaluate entities for consolidation. The changes primarily relate to (i) the identification of variable interests related to fees paid to decision makers or service providers, (ii) how entities determine whether limited partnerships or similar entities are variable interest entities, (iii) how related parties and de facto agents are considered in the primary beneficiary determination, and (iv) the elimination of the presumption that a general partner controls a limited partnership. This ASU is effective for Sony as of April 1, 2016. The effect of this ASU did not have a material impact on Sony’s results of operations and financial position.

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Customer’s accounting for fees paid in a cloud computing arrangement -

In April 2015, the FASB issued ASU 2015-05 for fees paid in a cloud computing arrangement. The ASU requires entities to account for a cloud computing arrangement that includes a software license element in a manner consistent with the acquisition of other software licenses. A cloud computing arrangement without a software license element is to be accounted for as a service contract. This ASU does not affect the accounting for service contracts by a customer. This ASU is effective for Sony as of April 1, 2016. The effect of this ASU did not have a material impact on Sony’s results of operations and financial position.

Balance sheet classification of deferred taxes -

In November 2015, the FASB issued ASU 2015-17 amending the presentation of deferred income taxes and requiring that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. This ASU is effective for Sony as of March 31, 2017 and is adopted prospectively. The effect of this ASU did not have a material impact on Sony’s results of operations and financial position.

(3) Recent accounting pronouncements not yet adopted

Revenue from contracts with customers -

In May 2014, the FASB issued ASU 2014-09 addressing revenue recognition which will supersede the current revenue recognition requirements, including most industry-specific guidance. The guidance requires an entity to recognize revenue when it transfers 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. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 for one year and permits early adoption as of the original effective date of ASU 2014-09. Subsequently, the FASB issued several clarifications and updates to the guidance, the most recent of which was issued in December 2016. This guidance will be effective for the first quarter of Sony’s fiscal year beginning April 1, 2018. The guidance permits two methods of adoption: retrospectively to each prior period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective method”). Sony currently expects to adopt this guidance using the modified retrospective method. Sony has made significant progress toward completing its assessment of the impact of adopting the guidance. Sony expects that this guidance will primarily impact the timing of revenue recognition for certain transactions in the Pictures segment. In particular, (1) licensing revenue associated with certain renewals or extensions of existing agreements for motion pictures and television programming is expected to be recognized when the licensed content becomes available under the renewal or extension instead of when the agreement is renewed or extended, and (2) licensing revenue associated with certain minimum guarantees for symbolic intellectual property (e.g., brands, trademarks and logos) is expected to be recognized over the license term instead of at the inception of the license term. Sony continues to assess the potential impact that the guidance may have on these and certain other transactions, and as a result, Sony’s preliminary conclusions as to the impact of this guidance are subject to change.

Recognition and measurement of financial assets and financial liabilities -

In January 2016, the FASB issued ASU 2016-01 amending various aspects of the recognition, measurement, presentation, and disclosure requirements for financial instruments. The changes mainly relate to the requirement to measure equity investments in unconsolidated subsidiaries, other than those accounted for under the equity method of accounting, at fair value with changes in fair value recognized in earnings. This ASU will be effective for Sony as of April 1, 2018. Although the effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position, Sony anticipates that the adoption of this ASU will increase the volatility of Sony’s other income (expenses), net, resulting from the remeasurement of Sony’s equity investments.

Leases -

In February 2016, the FASB issued ASU 2016-02, which amends current leasing guidance. The ASU requires substantially all leases to be recognized on the balance sheet. The guidance is to be applied using a modified retrospective approach from the earliest period presented and includes optional practical expedients. This ASU will be effective for Sony as of the fiscal year beginning April 1, 2019, and early adoption is permitted. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

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Measurement of credit losses on financial instruments -

In June 2016, the FASB issued ASU 2016-13, which amends the accounting guidance for credit losses on financial instruments. The ASU requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts and their implications for expected credit losses. This ASU will be effective for Sony as of the fiscal year beginning April 1, 2020, with early adoption permitted for the first quarter of the fiscal year beginning April 1, 2019. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

Intra-entity transfers of assets other than inventory -

In October 2016, the FASB issued ASU 2016-16, which amends the accounting for income taxes. This update requires recognition of the income-tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. Under current U.S. GAAP, recognition of the income tax consequences for asset transfers other than inventory cannot be recognized until the asset is sold to a third party. This ASU is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. This ASU will be effective for Sony as of the fiscal year beginning April 1, 2018. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

Clarifying the definition of a business -

In January 2017, the FASB issued ASU 2017-01 which clarifies the definition of a business. The ASU requires an entity first to determine whether substantially all of the fair value of a set of assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets. If this criterion is met, the acquired set of assets is not deemed to be a business. If the criterion is not met, the entity then must evaluate whether the set of assets meets the requirement to be deemed a business. To be considered a business, the acquired set of assets would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. This ASU will be effective for Sony as of the fiscal year beginning April 1, 2018, with early adoption permitted as of the fiscal year beginning April 1, 2017. The adoption of this ASU is not expected to have a material impact on Sony’s results of operations and financial position.

Simplifying the test for goodwill impairment -

In January 2017, the FASB issued ASU 2017-04 to simplify the accounting for goodwill impairment. This ASU eliminates the second step from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This ASU will be effective for Sony as of April 1, 2020 and applied prospectively, with early adoption permitted for goodwill impairment tests with a measurement date after January 1, 2017. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

Presentation of net periodic pension and postretirement benefit costs -

In March 2017, the FASB issued ASU 2017-07, which requires separate presentation of service costs and other components of net benefit costs. The service costs will only be presented with other employee compensation costs in operating income or capitalized, while the other components of net benefit costs will be presented outside of operating income, and will not be eligible for capitalization. This ASU is effective for Sony as of April 1, 2018, with early adoption permitted for the first quarter of the fiscal year beginning April 1, 2017. This ASU is required to be applied on a retrospective basis for the presentation of service costs and other components of net benefit costs, and on a prospective basis for the capitalization of only the service costs component of net benefit costs. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

Premium amortization on purchased callable debt securities -

In March 2017, the FASB issued ASU 2017-08, which requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a

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discount will not be affected. This ASU will be effective for Sony as of April 1, 2019. The effect of this ASU is being evaluated for the impact it will have on Sony’s results of operations and financial position.

(4) Reclassifications

Certain reclassifications of the financial statements and accompanying footnotes for the fiscal years ended March 31, 2015 and 2016 have been made to conform to the presentation for the fiscal year ended March 31, 2017.

(5) Out-of-period adjustments

For the fiscal year ended March 31, 2015, Sony recorded an out-of-period adjustment to correct an error in the amounts of revenue and certain capitalizable assets being recorded at a subsidiary. The error began in the fiscal year ended March 31, 2012 and continued until it was identified by Sony during the fiscal year ended March 31, 2015. The adjustment, which related entirely to All Other, impacted net sales, cost of sales, and selling, general and administrative expenses, and decreased income before income taxes in the consolidated statements of income by 5,104 million yen in the aggregate for the fiscal year ended March 31, 2015. Sony determined that the adjustment was not material to the consolidated financial statements for the year ended March 31, 2015 or any prior periods.

For the fiscal year ended March 31, 2016, Sony recorded an out-of-period adjustment to correct an error in the amount of accruals for certain sales incentives being recorded at a subsidiary. The error began in the fiscal year ended March 31, 2009 and continued until it was identified by Sony during the fiscal year ended March 31, 2016. The adjustment, which related to the HE&S segment, impacted net sales and increased income before income taxes in the consolidated statements of income by 8,447 million yen for the fiscal year ended March 31, 2016. Sony determined that the adjustment was not material to the consolidated financial statements for the fiscal year ended March 31, 2016 or any prior periods.

3. Inventories

Inventories are comprised of the following:

	Yen in millions
	March 31
	2016		2017
Finished products		448,273		399,850
Work in process		130,383		140,718
Raw materials, purchased components and supplies		104,490		100,267
Inventories		683,146		640,835

4. Film costs

Film costs are comprised of the following:

	Yen in millions
	March 31
	2016			2017
Motion picture productions:
Released		75,218			80,539
Completed and not released		2,304			5,608
In production and development		95,268			94,197
Television productions:
Released		88,538			120,693
In production and development		14,410			7,707
Broadcasting rights		62,589			65,725
Less: current portion of broadcasting rights included in inventories		(37,099	)		(37,541	)
Film costs		301,228			336,928

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Sony estimates that approximately 93% of the unamortized film costs of released motion picture and television productions at March 31, 2017 will be amortized within the next three years. Approximately 142 billion yen of completed film costs are expected to be amortized during the next twelve months. Approximately 167 billion yen of accrued participation liabilities included in accounts payable, other and accrued expenses are expected to be paid during the next twelve months.

5. Investments in affiliated companies

The summarized combined financial information that is based on information provided by the equity investees including information for significant equity affiliates and the reconciliation of such information to the consolidated financial statements is shown below:

Balance Sheets

	Yen in millions
	March 31
	2016			2017
Current assets		367,465			361,492
Noncurrent assets		773,126			834,765
Current liabilities		245,731			248,450
Noncurrent liabilities and noncontrolling interests		709,134			761,546
Percentage of ownership in equity investees		20%-50	%		20%-50	%

Statements of Income

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Net revenues		308,399			358,256			387,229
Operating income		34,962			32,884			37,800
Net income (loss) attributable to controlling interests		(5,461	)		8,388			11,529
Percentage of ownership in equity investees		20%-50	%		20%-50	%		20%-50	%

On June 29, 2012, an investor group which included a wholly-owned subsidiary of Sony Corporation completed its acquisition of EMI Music Publishing. To effect the acquisition, the investor group formed DH Publishing, L.P. (“DHP”), which acquired EMI Music Publishing for total consideration of 2.2 billion U.S. dollars. Sony invested 320 million U.S. dollars in DHP, through Nile Acquisition LLC, for a 39.8% equity interest. Nile Acquisition LLC is a joint venture with the third-party investor of Sony’s U.S.- based music publishing subsidiary in which Sony holds a 74.9% ownership interest. Sony accounts for its interest in DHP under the equity method. In addition, DHP entered into an agreement with Sony’s U.S.-based music publishing subsidiary in which the subsidiary provides administration services to DHP. DHP was determined to be a variable interest entity (“VIE”) as described in Note 23.

On January 30, 2017, Sony sold 17,302,700 shares of its 127,381,600 shares in its affiliated company M3, Inc. (“M3”) to a third party for cash consideration of 51,968 million yen, which is included within other in the investing activities section of the consolidated statements of cash flows. In connection with the sale, Sony’s share ownership decreased from 39.35% to 34.0% of the issued and outstanding shares of M3 and Sony recorded a gain of 37,167 million yen in other operating expense, net in the consolidated statements of income for the fiscal year ended March 31, 2017. Sony continues to account for its remaining interest in M3 under the equity method. Sony remains a major shareholder of M3 and will continue to pursue opportunities to collaborate with M3 in certain business areas, including medical.

The carrying value of Sony’s investment in M3 exceeded its proportionate share in the underlying net assets of M3 by 95,609 million yen at March 31, 2017. The excess is substantially attributable to the remeasurement to fair value of the remaining shares of M3, and allocated to identifiable tangible and intangible assets. The intangible assets relate primarily to M3’s medical web-portal. The unassigned residual value of the excess is recognized as goodwill as a component of the investment balance. The amounts allocated to intangible assets are

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amortized net of the related tax effects to equity in net income (loss) of affiliated companies over their respective estimated useful lives, principally 10 years, using the straight-line method.

With the exception of M3 as described above, there was no significant difference between Sony’s proportionate share in the underlying net assets of the investees and the carrying value of investments in affiliated companies at March 31, 2016 and 2017.

Several affiliated companies are listed on the Tokyo Stock Exchange and Sony’s investments in these companies have an aggregate carrying value and fair value of 96,494 million yen and 314,188 million yen, respectively, as of March 31, 2017.

The number of affiliated companies accounted for under the equity method as of March 31, 2016 and 2017 were 102 and 109, respectively.

Account balances and transactions with affiliated companies accounted for under the equity method are presented below. There are no other material transactions or account balances with any other related parties.

	Yen in millions
	March 31
	2016		2017
Accounts receivable, trade		9,740		10,873
Accounts payable, trade		2,044		2,525
Capital lease obligations		21,025		10,105

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Sales		29,393		33,569		31,238
Purchases		1,498		2,259		1,966
Lease payments		36,642		32,291		16,492

Sony entered into sale and leaseback transactions regarding certain machinery and equipment with SFI Leasing Company, Limited (“SFIL”), a leasing company in Japan, in the fiscal years ended March 31, 2015, 2016 and 2017. SFIL is accounted for under the equity method and is 34% owned by Sony. Refer to Note 8.

MITSUI-SOKO Supply Chain Solutions, Inc. is accounted for under the equity method and is 34% owned by Sony as a result of the sale of the logistics business on April 1, 2015. As of the fiscal years ended March 31, 2016 and 2017, account balances with MITSUI-SOKO Supply Chain Solutions, Inc. and its subsidiaries were 4,741 million yen and 4,922 million yen, respectively, which are mainly included in accrued expenses. For the fiscal years ended March 31, 2016 and 2017, transactions were 22,576 million yen and 13,752 million yen, respectively, which are mainly included in general and administrative expenses. Refer to Note 25.

Dividends from affiliated companies accounted for under the equity method for the fiscal years ended March 31, 2015, 2016 and 2017 were 6,149 million yen, 7,282 million yen and 7,970 million yen, respectively.

6. Transfer of financial assets

Sony has established several accounts receivable sales programs mainly within the Electronics business. Through these programs, Sony can sell receivables to a commercial bank or a special purpose entity associated with a sponsor bank. Total receivables sold during the fiscal years ended March 31, 2015, 2016 and 2017 were 633,190 million yen, 53,267 million yen and 73,185 million yen, respectively. These transactions are accounted for as sales in accordance with the accounting guidance for transfers of financial assets, because Sony has relinquished control of the receivables. Gains and losses from these transactions, other than as described below, were insignificant, and although Sony continues servicing the receivables subsequent to being sold or contributed, no servicing liabilities are recorded as the costs of collection of the sold receivables are insignificant. Other than the cash proceeds from the sales below, net cash flows related to these transactions, including servicing fees, for the fiscal years ended March 31, 2015, 2016 and 2017 were insignificant.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Certain programs require that a portion of the sales proceeds be held back and deferred until collection of the related receivables by the purchaser. The portion of the sales proceeds held back and deferred are initially recorded at estimated fair value using a discounted cash flow model and are included in other current assets and other long-term assets. The significant assumptions used in valuing the deferred proceeds are the discount rate, the timing and amount of the cash flows. Sony includes collections on deferred proceeds as cash flows within operating activities in the consolidated statements of cash flows when the receivables are the result of operating activities and the associated interest rate risk is insignificant due to their short-term nature. When the interest rate risk associated with the deferred proceeds is greater than insignificant or the receivables are long-term in nature, as is the case for the program in the Pictures segment, Sony includes collections on deferred proceeds as cash flows within investing activities in the consolidated statements of cash flows.

In August 2014, Sony terminated an accounts receivable sales program within the Electronics business in the United States. The program required that a portion of the sales proceeds be held back and deferred until collection of the related receivables by the purchaser. Total trade receivables sold, deferred proceeds from those sales and collections of deferred proceeds during the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Total trade receivables sold		50,400		—		—
Deferred proceeds		16,150		—		—
Collections of deferred proceeds		22,512		—		—

In May 2016, Sony terminated an accounts receivable sales program within the Pictures segment in the United States. The program required that a portion of the sales proceeds be held back and deferred until collection of the related receivables by the purchaser, and the deferred proceeds totaled 30,893 million yen and 30,291 million yen as of March 31, 2015 and 2016, respectively. Total trade receivables sold, deferred proceeds from those sales and collections of deferred proceeds during the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Total trade receivables sold		4,237		2,918		238
Deferred proceeds		4,237		2,918		238
Collections of deferred proceeds		—		2,298		1,202

Certain of the accounts receivable sales programs above also involve VIEs. Refer to Note 23.

F-29

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

7. Marketable securities and securities investments

Marketable securities and securities investments, primarily included in the Financial Services segment, are comprised of debt and equity securities for which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows:

	Yen in millions
	March 31, 2016									March 31, 2017
	Cost		Gross unrealized gains		Gross unrealized losses			Fair value		Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Available-for-sale:
Debt securities:
Japanese national government bonds		1,136,478		218,863		(6	)		1,355,335		1,161,493		182,836		(928	)		1,343,401
Japanese local government bonds		60,707		86		(254	)		60,539		60,450		144		(63	)		60,531
Japanese corporate bonds		132,739		11,472		(230	)		143,981		163,785		7,864		(1,846	)		169,803
Foreign government bonds		35,896		5,724		(160	)		41,460		27,601		359		(918	)		27,042
Foreign corporate bonds		415,994		5,738		(3,185	)		418,547		396,097		4,168		(719	)		399,546
Other		884		0		—			884		15,192		—		(0	)		15,192
		1,782,698		241,883		(3,835	)		2,020,746		1,824,618		195,371		(4,474	)		2,015,515
Equity securities		44,752		70,590		(21	)		115,321		55,928		69,937		(377	)		125,488
Held-to-maturity securities:
Japanese national government bonds		5,353,080		2,020,621		—			7,373,701		5,661,191		1,520,904		(30,553	)		7,151,542
Japanese local government bonds		4,480		522		—			5,002		4,101		449		—			4,550
Japanese corporate bonds		61,811		17,382		—			79,193		230,011		12,346		(22,071	)		220,286
Foreign government bonds		42,934		10,631		—			53,565		253,019		5,269		(22,868	)		235,420
Foreign corporate bonds		198		24		—			222		198		18		—			216
		5,462,503		2,049,180		—			7,511,683		6,148,520		1,538,986		(75,492	)		7,612,014
Total		7,289,953		2,361,653		(3,856	)		9,647,750		8,029,066		1,804,294		(80,343	)		9,753,017

The following table presents the cost and fair value of debt securities classified as available-for-sale securities and held-to-maturity securities by contractual maturity:

	Yen in millions
	March 31, 2017
	Available-for-sale securities				Held-to-maturity securities
	Cost		Fair value		Cost		Fair value
Due in one year or less		139,341		135,351		6,972		7,058
Due after one year through five years		411,540		416,016		19,916		20,761
Due after five years through ten years		283,286		318,272		337,696		390,072
Due after ten years		990,451		1,145,876		5,783,936		7,194,123
Total		1,824,618		2,015,515		6,148,520		7,612,014

Proceeds from sales of available-for-sale securities were 217,651 million yen, 315,043 million yen and 75,319 million yen for the fiscal years ended March 31, 2015, 2016 and 2017, respectively. On these sales, gross realized gains were 15,656 million yen, 67,205 million yen and 2,297 million yen and gross realized losses were 32 million yen, 186 million yen and 37 million yen, respectively, for the fiscal years ended March 31, 2015, 2016 and 2017. Included in the gross realized gains of available-for-sale securities is 46,757 million yen from the sale of Olympus shares in the fiscal year ended March 31, 2016.

Marketable securities classified as trading securities, which consist of debt and equity securities held primarily in the Financial Services segment, totaled 799,241 million yen and 921,320 million yen as of March 31, 2016 and 2017, respectively. Sony recorded net unrealized gains of 100,312 million yen, net unrealized losses of 45,841 million yen, and net unrealized gains of 56,593 million yen for the fiscal years ended

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March 31 2015, 2016 and 2017, respectively. Changes in the fair value of trading securities are primarily recognized in financial services revenue in the consolidated statements of income.

In the ordinary course of business, Sony maintains long-term investment securities, included in securities investments and other, issued by a number of non-public companies. The aggregate carrying amounts of the investments in non-public companies as of March 31, 2016 and 2017 totaled 71,750 million yen and 61,323 million yen, respectively. Non-public equity investments are primarily valued at cost as fair value is not readily determinable.

The following tables present the gross unrealized losses on, and fair value of, Sony’s investment securities with unrealized losses, aggregated by investment category and the length of time that individual investment securities have been in a continuous unrealized loss position, at March 31, 2016 and 2017.

	Yen in millions
	March 31, 2016
	Less than 12 months					12 months or more					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale:
Debt securities:
Japanese national government bonds		2,056		(6	)		—		—			2,056		(6	)
Japanese local government bonds		38,383		(223	)		2,929		(31	)		41,312		(254	)
Japanese corporate bonds		41,206		(201	)		3,125		(29	)		44,331		(230	)
Foreign government bonds		5,882		(147	)		1,140		(13	)		7,022		(160	)
Foreign corporate bonds		127,369		(2,535	)		30,919		(650	)		158,288		(3,185	)
		214,896		(3,112	)		38,113		(723	)		253,009		(3,835	)
Equity securities		166		(10	)		10		(11	)		176		(21	)
Total		215,062		(3,122	)		38,123		(734	)		253,185		(3,856	)

	Yen in millions
	March 31, 2017
	Less than 12 months					12 months or more					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale:
Debt securities:
Japanese national government bonds		52,825		(909	)		2,018		(19	)		54,843		(928	)
Japanese local government bonds		3,793		(6	)		14,270		(57	)		18,063		(63	)
Japanese corporate bonds		53,302		(1,761	)		20,489		(85	)		73,791		(1,846	)
Foreign government bonds		10,258		(577	)		7,792		(341	)		18,050		(918	)
Foreign corporate bonds		27,944		(143	)		24,662		(576	)		52,606		(719	)
		148,122		(3,396	)		69,231		(1,078	)		217,353		(4,474	)
Equity securities		11,878		(370	)		9		(7	)		11,887		(377	)
Held-to-maturity securities:
Japanese national government bonds		277,328		(30,553	)		—		—			277,328		(30,553	)
Japanese local government bonds		—		—			—		—			—		—
Japanese corporate bonds		146,004		(22,071	)		—		—			146,004		(22,071	)
Foreign government bonds		196,740		(22,868	)		—		—			196,740		(22,868	)
Foreign corporate bonds		—		—			—		—			—		—
		620,072		(75,492	)		—		—			620,072		(75,492	)
Total		780,072		(79,258	)		69,240		(1,085	)		849,312		(80,343	)

F-31

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

For the fiscal years ended March 31, 2015, 2016 and 2017, total realized impairment losses were 949 million yen, 3,566 million yen and 7,566 million yen, respectively.

At March 31, 2017, Sony determined that the decline in value for securities with unrealized losses shown in the above table is not other-than-temporary in nature.

8. Leases

Sony leases certain communication and commercial equipment, plant, office space, warehouses, employees’ residential facilities and other assets. Certain of these leases have renewal and purchase options. Sony has also entered into capital lease arrangements with third parties to finance certain of its motion picture productions, as well as sale and leaseback transactions for office buildings, machinery and equipment.

(1) Capital leases

Leased assets under capital leases are comprised of the following:

	Yen in millions
	March 31
Class of property	2016			2017
Machinery, equipment and others		123,816			66,722
Film costs		6,696			4,943
Accumulated amortization		(96,270	)		(53,330	)
		34,242			18,335

The following is a schedule by fiscal year of the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of March 31, 2017:

Fiscal year ending March 31	Yen in millions
2018		7,686
2019		6,765
2020		6,039
2021		5,095
2022		2,857
Later fiscal years		5,098
Total minimum lease payments		33,540
Less — Amount representing interest		2,310
Present value of net minimum lease payments		31,230
Less — Current obligations		7,344
Long-term capital lease obligations		23,886

(2) Operating leases

The minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at March 31, 2017 are as follows:

Fiscal year ending March 31	Yen in millions
2018		54,727
2019		37,464
2020		46,378
2021		23,647
2022		19,044
Later fiscal years		87,260
Total minimum future rentals		268,520

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Rental expenses under operating leases for the fiscal years ended March 31, 2015, 2016 and 2017 were 92,828 million yen, 94,000 million yen and 77,976 million yen, respectively. Sublease rentals received under operating leases for the fiscal years ended March 31, 2015, 2016 and 2017 were 1,180 million yen, 1,138 million yen and 1,157 million yen, respectively. The total minimum rentals to be received in the future under noncancelable subleases for operating leases as of March 31, 2017 were 1,831 million yen.

(3) Sale and leaseback transactions

Sale and leaseback transactions with SFIL -

Sony entered into sale and leaseback transactions regarding certain machinery and equipment with SFIL. In the fiscal years ended March 31, 2015, 2016 and 2017, transactions with total proceeds of 8,391 million yen, 1,856 million yen and 2,679 million yen, respectively and terms which averaged two years, have been accounted for as financings and are included within proceeds from issuance of long-term debt in the financing activities section of the consolidated statements of cash flows.

9. Goodwill and intangible assets

Intangible assets acquired during the fiscal year ended March 31, 2017 totaled 109,726 million yen, of which 109,492 million yen is subject to amortization, and are comprised of the following:

	Intangible  assets acquired during the fiscal year		Weighted-average amortization period
	Yen in millions		Years
Patent rights, know-how and license agreements		4,417		7
Software to be sold, leased or otherwise marketed		17,004		3
Internal-use software		58,097		5
Other		29,974		11

In the fiscal year ended March 31, 2017, additions to internal-use software primarily related to the capitalization of new software across several business platforms.

Intangible assets subject to amortization are comprised of the following:

	Yen in millions
	March 31, 2016					March 31, 2017
	Gross carrying amount		Accumulated amortization			Gross carrying amount		Accumulated amortization
Patent rights, know-how and license agreements		337,675		(223,738	)		317,337		(251,401	)
Customer relationships		36,925		(12,531	)		37,289		(15,585	)
Trademarks		29,825		(12,979	)		31,630		(15,554	)
Software to be sold, leased or otherwise marketed		126,743		(94,009	)		117,897		(86,661	)
Internal-use software		448,109		(297,057	)		473,750		(310,408	)
Music catalogs		217,056		(91,303	)		218,321		(95,367	)
Artist contracts		31,923		(28,857	)		31,393		(29,001	)
Television carriage contracts (broadcasting agreements)		59,607		(15,563	)		74,780		(21,986	)
Other		59,218		(47,475	)		62,212		(46,624	)
Total		1,347,081		(823,512	)		1,364,609		(872,587	)

F-33

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The aggregate amortization expense for intangible assets for the fiscal years ended March 31, 2015, 2016 and 2017 was 132,228 million yen, 125,616 million yen and 121,634 million yen, respectively. The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as follows:

Fiscal year ending March 31	Yen in millions
2018		104,291
2019		74,247
2020		56,934
2021		42,996
2022		30,253

Total carrying amount of intangible assets having an indefinite life are comprised of the following:

	Yen in millions
	March 31
	2016		2017
Trademarks		70,081		70,220
Distribution agreements		18,834		18,834
Other		3,270		3,109
Total		92,185		92,163

The changes in the carrying amount of goodwill by segment for the fiscal years ended March 31, 2016 and 2017 are as follows:

	Yen in millions
	MC			G&NS			IP&S			HE&S			Semiconductors			Components			Pictures			Music			Financial Services			All Other			Total
Balance, March 31, 2015:
Goodwill — gross		179,331			154,399			7,186			5,320			33,006			4,756			224,239			132,675			3,020			24,386			768,318
Accumulated impairments		(176,045	)		—			(300	)		(5,320	)		—			—			—			(306	)		(706	)		(24,386	)		(207,063	)
Goodwill		3,286			154,399			6,886			—			33,006			4,756			224,239			132,369			2,314			—			561,255
Increase (decrease) due to:
Acquisitions*1		—			—			1,589			—			18,035			2,599			12,082			38,487			—			—			72,792
Sales and dispositions		—			—			—			—			—			—			—			—			—			—			—
Impairments		—			—			—			—			—			—			—			—			—			—			—
Translation adjustments		—			(2,106	)		(138	)		—			(1,420	)		(205	)		(14,804	)		(9,084	)		—			—			(27,757	)
Other		—			—			—			—			—			—			—			—			—			—			—
Balance, March 31, 2016:
Goodwill — gross		179,331			152,293			8,637			5,320			49,621			7,150			221,517			162,078			3,020			24,386			813,353
Accumulated impairments		(176,045	)		—			(300	)		(5,320	)		—			—			—			(306	)		(706	)		(24,386	)		(207,063	)
Goodwill		3,286			152,293			8,337			—			49,621			7,150			221,517			161,772			2,314			—			606,290
Increase (decrease) due to:
Acquisitions*2		—			—			—			—			—			—			29,363			7,689			61			—			37,113
Sales and dispositions		—			—			—			—			—			—			(60	)		—			—			—			(60	)
Impairments		—			—			—			—			—			—			(112,069	)		—			—			—			(112,069	)
Translation adjustments		—			(355	)		(186	)		—			(77	)		(11	)		(598	)		(3,351	)		—			—			(4,578	)
Other		—			—			—			—			(1,475	)		(2,683	)		—			—			—			—			(4,158	)
Balance, March 31, 2017:
Goodwill — gross		179,331			151,938			8,451			5,320			48,069			4,456			246,085			166,416			3,081			24,386			837,533
Accumulated impairments		(176,045	)		—			(300	)		(5,320	)		—			—			(107,932	)		(306	)		(706	)		(24,386	)		(314,995	)
Goodwill		3,286			151,938			8,151			—			48,069			4,456			138,153			166,110			2,375			—			522,538

F-34

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Sony realigned its business segments during the fiscal year ended March 31, 2017. As a result of this realignment, Sony has separated the Devices segment into the Semiconductors segment and the Components segment. As part of this realignment, the carrying amounts of associated goodwill for the former Devices segment have been reclassified into the Semiconductors segment and the Components segment using relative fair value method for the fiscal years ended March 31, 2015 and 2016. Refer to Note 28.

*1 Acquisitions for the fiscal year ended March 31, 2016 relate mainly to the Altair Semiconductor Ltd. (“Altair”) acquisition in the Semiconductors segment and the Components segment, and the Orchard Media, Inc. (“The Orchard”) acquisition in the Music segment. Refer to Note 24.

*2 Acquisitions for the fiscal year ended March 31, 2017 relate mainly to the TEN Sports Network acquisition in the Pictures segment. Refer to Note 24.

Impairment of goodwill related to mobile communications business -

During the fiscal year ended March 31, 2015, Sony recorded an impairment loss of 176,045 million yen in the MC segment. The goodwill impairment reflected a revision in the strategy for the MC business to concentrate on its premium lineup and reduce the number of models in the mid-range lineup as well as concentrating on certain selected markets due to continued increasingly competitive markets in various geographical areas, primarily resulting from rapid growth by Chinese smartphone competitors. The impairment loss is included in other operating expenses, net in the consolidated statements of income, and is recorded entirely within the MC segment. Refer to Note 13.

In conjunction with Sony’s review for goodwill impairment, Sony also assessed whether the carrying amount of any of the tangible or definite-lived intangible assets of the MC segment was recoverable. As a result of the assessment, Sony determined that there were no tangible or definite-lived intangible assets within the MC segment that were impaired.

Impairment of goodwill in the Pictures segment -

During the fiscal year ended March 31, 2017, Sony made a downward revision in the future profitability projection for the Motion Pictures business within the Pictures segment primarily due to a lowering of previous expectations regarding the home entertainment business, mainly driven by an acceleration of market decline. The future profitability projection for the Motion Pictures business also reflected a reduction in underlying profitability projections of film performance largely mitigated by measures identified to improve the profitability of the Motion Pictures business.

Sony assessed the aforementioned events and circumstances and determined that it was more likely than not that the fair value of the Production & Distribution reporting unit (which includes the Motion Pictures and the Television Productions businesses) was less than its carrying value. Accordingly, Sony conducted the goodwill impairment tests using this new profitability projection and recalculated the implied fair value of the goodwill of the reporting unit. As a result of this recalculation, the carrying value of the goodwill was determined to be zero.

Consequently, the entire amount of the goodwill in the Production & Distribution reporting unit, 112,069 million yen, was impaired, in the fiscal year ended March 31, 2017. The impairment loss is included in other operating expense, net in the consolidated statements of income, and is recorded entirely within the Pictures segment. The remaining carrying amount of goodwill in the Pictures segment as of March 31, 2017 is related to the Media Networks business.

10. Insurance-related accounts

Sony’s Financial Services segment subsidiaries in Japan maintain their accounting records as described in Note 2 in accordance with the accounting principles and practices generally accepted in Japan, which vary in some respects from U.S. GAAP.

Those differences are mainly that insurance acquisition costs for life and non-life insurance contracts are charged to income when incurred in Japan whereas in the U.S. those costs are deferred and amortized generally over the premium-paying period of the related insurance policies, and that future policy benefits for life insurance contracts calculated locally under the authorization of the supervisory administrative agencies are comprehensively adjusted using the net level premium method with certain adjustments of actuarial assumptions

F-35

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

for U.S. GAAP purposes. For the purpose of preparing the consolidated financial statements, appropriate adjustments have been made to reflect the accounting for these items in accordance with U.S. GAAP.

The combined amounts of statutory net equity of the insurance subsidiaries, which is not measured in accordance with U.S. GAAP, as of March 31, 2016 and 2017 were 510,501 million yen and 502,999 million yen, respectively.

(1) Insurance policies

Life insurance policies that a subsidiary in the Financial Services segment underwrites, most of which are categorized as long-duration contracts, mainly consist of whole life, term life and accident and health insurance contracts. The life insurance revenues for the fiscal years ended March 31, 2015, 2016 and 2017 were 693,132 million yen, 803,549 million yen and 754,242 million yen, respectively. Property and casualty insurance policies that a subsidiary in the Financial Services segment underwrites are primarily automotive insurance contracts, which are categorized as short-duration contracts. The non-life insurance revenues for the fiscal years ended March 31, 2015, 2016 and 2017 were 90,431 million yen, 93,928 million yen and 97,581 million yen, respectively.

(2) Deferred insurance acquisition costs

Amortization of deferred insurance acquisition costs charged to income for the fiscal years ended March 31, 2015, 2016 and 2017 amounted to 56,530 million yen, 92,203 million yen and 36,130 million yen, respectively.

(3) Future insurance policy benefits

Liabilities for future policy benefits, which mainly relate to individual life insurance policies, are established in amounts adequate to meet the estimated future obligations of policies in force. These liabilities, which require significant management judgment and estimates, are computed by the net level premium method based upon the assumptions as to future investment yield, morbidity, mortality, withdrawals and other factors. Future policy benefits are computed using interest rates ranging from 1.0% to 4.5% and are based on factors such as market conditions and expected investment returns. Morbidity, mortality and withdrawal assumptions for all policies are based on either the subsidiary’s own experience or various actuarial tables. Generally these assumptions are locked-in throughout the life of the contract upon the issuance of new insurance, although significant changes in experience or assumptions may require Sony to provide for expected future losses. At March 31, 2016 and 2017, future insurance policy benefits amounted to 4,497,951 million yen and 4,823,687 million yen, respectively.

(4) Policyholders’ account in the life insurance business

Policyholders’ account in the life insurance business represents an accumulation of account deposits plus credited interest less withdrawals, expenses and mortality charges. Policyholders’ account includes universal life insurance and investment contracts. Universal life insurance includes interest sensitive whole life contracts and variable contracts. The credited rates associated with interest sensitive whole life contracts range from 1.8% to 2.0%. For variable contracts, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. Investment contracts mainly include single payment endowment contracts, single payment educational endowment contracts, individual variable annuities and policies after the start of annuity payments. The credited rates associated with investment contracts, except for individual variable annuities, range from 0.01% to 6.3%. For individual variable annuities, policy values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio.

Policyholders’ account in the life insurance business is comprised of the following:

	Yen in millions
	March 31
	2016		2017
Universal life insurance		1,634,642		1,809,142
Investment contracts		638,737		686,182
Other		127,941		135,749
Total		2,401,320		2,631,073

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

11. Short-term borrowings and long-term debt

Short-term borrowings are comprised of the following:

	Yen in millions
	March 31
	2016		2017
Unsecured loans:
with a weighted-average interest rate of 7.70% with a weighted-average interest rate of 7.29%		86,467
				64,046
Secured loans:
with a weighted-average interest rate of 0.00%				20,000
Repurchase agreement:
with a weighted-average interest rate of 0.01%		62,805
with a weighted-average interest rate of 0.01%				310,609
Secured call money:
with a weighted-average interest rate of (0.08)%				70,000
		149,272		464,655

At March 31, 2017, a certain subsidiary in the Financial Services segment pledged marketable securities and securities investments with a book value of 61,994 million yen as collateral for 20,000 million yen of a short-term secured loan and 20,000 million yen of a long-term secured loan.

At March 31, 2017, a certain subsidiary in the Financial Services segment pledged securities investments with a book value of 247,961 million yen as collateral for 310,609 million yen of short-term repurchase agreements. The repurchase agreement provides for net settlement upon a termination event.

At March 31, 2017, a certain subsidiary in the Financial Services segment pledged marketable securities and securities investments with a book value of 88,007 million yen as collateral for 70,000 million yen of secured call money.

In addition, certain subsidiaries in the Financial Services segment pledged marketable securities and securities investments with an aggregate book value of 14,330 million yen as collateral for cash settlements, variation margins of futures markets and certain other purposes.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Long-term debt is comprised of the following:

	Yen in millions
	March 31
	2016		2017
Unsecured loans, representing obligations principally to banks:
Due 2016 to 2024, with interest rates ranging from 0.27% to 5.47% per annum		237,850
Due 2017 to 2024, with interest rates ranging from 0.24% to 5.10% per annum				63,248
Unsecured 0.55% bonds, due 2016		10,000
Unsecured 0.66% bonds, due 2017		45,000
Unsecured 0.43% bonds, due 2018		10,000		10,000
Unsecured 0.86% bonds, due 2018		150,000		150,000
Unsecured 2.00% bonds, due 2018		16,300		16,300
Unsecured 0.05% bonds, due 2019				69,793
Unsecured 2.07% bonds, due 2019		50,000		50,000
Unsecured 0.23% bonds, due 2021				89,670
Unsecured 1.41% bonds, due 2022		10,000		10,000
Unsecured 0.28% bonds, due 2023				15,000
Unsecured 0.42% bonds, due 2026				24,887
Unsecured zero coupon convertible bonds, due 2022		120,000		120,000
Secured 0.10% loans, due 2016 to 2019		40,000
Secured 0.00% loans, due 2019 to 2020				70,000
Capital lease obligations and other:
Due 2016 to 2024, with interest rates ranging from 0.36% to 9.99% per annum		43,248
Due 2017 to 2027, with interest rates ranging from 0.36% to 8.90% per annum				34,224
Guarantee deposits received		11,875		11,764
		744,273		734,886
Less — Portion due within one year		187,668		53,424
		556,605		681,462

At March 31, 2017, a certain subsidiary in the Financial Services segment pledged housing loans with a book value of 87,627 million yen as collateral for 50,000 million yen of a long-term loan.

In March 2012, Sony executed a 1,365 million U.S. dollar unsecured bank loan with a group of lenders having six to ten year maturity terms in connection with Sony’s acquisition of Ericsson’s 50% equity interest in Sony Ericsson. This bank loan utilizes the Japan Bank for International Cooperation Facility, which was established to facilitate overseas mergers and acquisitions by Japanese companies as a countermeasure against yen appreciation. The terms of this U.S. dollar loan require accelerated repayment of the entire outstanding balance if Sony Corporation or its wholly-owned subsidiaries discontinue the business of mobile devices featuring telephone functionality. In March 2016, Sony repaid 682 million U.S. dollars of the 1,365 million U.S. dollars. In September 2016, Sony repaid the remaining 683 million U.S. dollars.

On July 21, 2015, Sony issued 120,000 million yen of 130% callable unsecured zero coupon convertible bonds with stock acquisition rights due 2022 (the “Zero Coupon Convertible Bonds”). The bondholders are entitled to stock acquisition rights effective from September 1, 2015 to September 28, 2022. The initial conversion price is 5,008 yen per common share. In addition to the standard anti-dilution provisions, the conversion price is reduced for a certain period before an early redemption triggered upon the occurrence of certain corporate events including a merger, corporate split and delisting event. The reduced amount of the conversion price will be determined by a formula that is based on the effective date of the reduction and Sony’s common stock price. The reduced conversion price ranges from 3,526.5 yen to 5,008.0 yen per common share. The conversion price is also adjusted for dividends in excess of 25 yen per common share per fiscal year. Sony has the option to redeem all of the Zero Coupon Convertible Bonds outstanding at 100% of the principal amount after July 21, 2020, if the closing sales price per share of Sony’s common stock on the Tokyo Stock Exchange is 130% or more of the conversion price of the Zero Coupon Convertible Bonds for 20 consecutive trading days.

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Sony was not required to bifurcate any of the embedded features contained in the Zero Coupon Convertible Bonds for accounting purposes. There are no significant adverse debt covenants under the Zero Coupon Convertible Bonds.

In September 2016, Sony issued unsecured straight bonds in the aggregate principal amount of 200,000 million yen. Most of the proceeds from the issuance of the bonds have been applied to the repayment of borrowings and debt. Sony intends to apply the remaining proceeds to the repayment of borrowings and debt by the end of July 2017.

There are no significant adverse debt covenants or cross-default provisions related to the other short-term borrowings and long-term debt.

Aggregate amounts of annual maturities of long-term debt are as follows:

Fiscal year ending March 31	Yen in millions
2017		53,424
2018		203,639
2019		145,667
2020		55,000
2021		102,517
Later fiscal years		174,639
Total		734,886

At March 31, 2017, Sony had unused committed lines of credit amounting to 524,880 million yen and can generally borrow up to 180 days from the banks with whom Sony has committed line contracts. Furthermore, at March 31, 2017, Sony has commercial paper programs totaling 836,570 million yen. Sony can issue commercial paper for a period generally not in excess of 270 days up to the size of the programs.

12. Housing loans and deposits from customers in the banking business

(1) Housing loans in the banking business

Sony acquires and holds certain financial receivables in the normal course of business. The majority of financing receivables held by Sony consists of housing loans in the banking business and no other significant financial receivables exist.

A subsidiary in the banking business monitors the credit quality of housing loans based on the classification set by the financial conditions and the past due status of individual obligors. Past due status is monitored on a daily basis and the aforementioned classification is reviewed on a quarterly basis.

The allowance for the credit losses is established based on the aforementioned classifications and the evaluation of collateral. The amount of housing loans in the banking business and the corresponding allowance for credit losses as of March 31, 2016 were 1,235,311 million yen and 910 million yen, respectively, and as of March 31, 2017 were 1,449,790 million yen and 866 million yen, respectively. During the fiscal years ended March 31, 2016 and 2017, charge-offs on housing loans in the banking business and changes in the allowance for credit losses were not significant.

The balance of housing loans placed on nonaccrual status or past due status were not significant as of March 31, 2016 and 2017.

(2) Deposits from customers in the banking business

All deposits from customers in the banking business within the Financial Services segment are interest bearing deposits. At March 31, 2016 and 2017, the balances of time deposits issued in amounts of 10 million yen or more were 247,766 million yen and 275,638 million yen, respectively. These amounts have been classified as current liabilities mainly due to the ability of the customers to make withdrawals prior to maturity.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

At March 31, 2017, aggregate amounts of annual maturities of time deposits with a remaining term of more than one year are as follows:

Fiscal year ending March 31	Yen in millions
2019		59,777
2020		15,411
2021		13,443
2022		9,390
2023		10,619
Later fiscal years		18,771
Total		127,411

13. Fair value measurements

As discussed in Note 2, assets and liabilities subject to the accounting guidance for fair value measurements held by Sony are classified and accounted for as described below.

(1) Assets and liabilities that are measured at fair value on a recurring basis

The following section describes the valuation techniques used by Sony to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified.

Trading securities, available-for-sale securities and other investments

Where quoted prices are available in an active market, securities are classified in level 1 of the fair value hierarchy. Level 1 securities include exchange-traded equities. If quoted market prices are not available for the specific security or the market is inactive, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and mainly classified in level 2 of the hierarchy. Level 2 securities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, such as the majority of government bonds and corporate bonds. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the fair value hierarchy. Level 3 securities primarily include certain hybrid financial instruments and certain private equity investments not classified within level 1 or level 2.

Derivatives

Exchange-traded derivatives valued using quoted prices are classified within level 1 of the fair value hierarchy. However, few classes of derivative contracts are listed on an exchange; thus, the majority of Sony’s derivative positions are valued using internally developed models that use as their basis readily observable market parameters — i.e., parameters that are actively quoted and can be validated to external sources, including industry pricing services. Depending on the types and contractual terms of derivatives, fair value can be modeled using a series of techniques, such as the Black-Scholes option pricing model, which are consistently applied. Where derivative products have been established for some time, Sony uses models that are widely accepted in the financial services industry. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, volatility, and the credit rating of the counterparty. Further, many of these models do not contain a high level of subjectivity as the techniques used in the models do not require significant judgment, and inputs to the model are readily observable from actively quoted markets. Such instruments are generally classified within level 2 of the fair value hierarchy.

In determining the fair value of Sony’s interest rate swap derivatives, Sony uses the present value of expected cash flows based on market observable interest rate yield curves commensurate with the term of each instrument. For foreign currency derivatives, Sony’s approach is to use forward contract and option valuation models employing market observable inputs, such as spot currency rates, time value and option volatilities. These derivatives are classified within level 2 since Sony primarily uses observable inputs in its valuation of its derivative assets and liabilities.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2016 and 2017 are as follows:

	Yen in millions
	March 31, 2016
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Marketable securities		Securities investments and other		Other current assets/ Liabilities		Other noncurrent assets/ Liabilities
Assets:
Trading securities		501,448		297,793		—		799,241		799,241		—		—		—
Available-for-sale securities
Debt securities
Japanese national government bonds		—		1,355,335		—		1,355,335		5,084		1,350,251		—		—
Japanese local government bonds		—		60,539		—		60,539		6,515		54,024		—		—
Japanese corporate bonds		—		140,635		3,346		143,981		5,727		138,254		—		—
Foreign government bonds		—		41,460		—		41,460		2,309		39,151		—		—
Foreign corporate bonds		—		402,694		15,853		418,547		124,680		293,867		—		—
Other		—		—		884		884		—		884		—		—
Equity securities		115,200		121		—		115,321		—		115,321		—		—
Other investments*1		7,179		4,027		13,463		24,669		—		24,669		—		—
Derivative assets*2		437		17,391		—		17,828		—		—		17,257		571
Total assets		624,264		2,319,995		33,546		2,977,805		943,556		2,016,421		17,257		571
Liabilities:
Derivative liabilities*2		668		48,467		—		49,135		—		—		20,680		28,455
Total liabilities		668		48,467		—		49,135		—		—		20,680		28,455

F-41

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

	Yen in millions
	March 31, 2017
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Marketable securities		Securities investments and other		Other current assets/ Liabilities		Other noncurrent assets/ Liabilities
Assets:
Trading securities		611,108		310,212		—		921,320		921,320		—		—		—
Available-for-sale securities
Debt securities
Japanese national government bonds		—		1,343,401		—		1,343,401		18,483		1,324,918		—		—
Japanese local government bonds		—		60,531		—		60,531		8,518		52,013		—		—
Japanese corporate bonds		—		168,493		1,310		169,803		8,433		161,370		—		—
Foreign government bonds*3		—		27,042		—		27,042		1,007		26,035		—		—
Foreign corporate bonds*4		—		358,369		41,177		399,546		86,708		312,838		—		—
Other*5		—		—		15,192		15,192		—		15,192		—		—
Equity securities		125,306		182		—		125,488		—		125,488		—		—
Other investments*1		6,589		4,525		10,483		21,597		—		21,597		—		—
Derivative assets*2		981		26,279		—		27,260		—		—		25,409		1,851
Total assets		743,984		2,299,034		68,162		3,111,180		1,044,469		2,039,451		25,409		1,851
Liabilities:
Derivative liabilities*2		520		33,930		—		34,450		—		—		15,743		18,707
Total liabilities		520		33,930		—		34,450		—		—		15,743		18,707

*1 Other investments include certain hybrid financial instruments and certain private equity investments.

*2 Derivative assets and liabilities are recognized and disclosed on a gross basis.

*3 2,215 million yen are included in foreign securities for which the fair value option has been elected and classified in level 2 and are included in the consolidated balance sheets as securities investments and other.

*4 165,236 million yen are included in foreign securities for which the fair value option has been elected and classified in level 2. 32,167 million yen are included in the consolidated balance sheets as marketable securities and 133,069 million yen are included in the consolidated balance sheets as securities investments and other.

*5 14,619 million yen are included in foreign securities for which the fair value option has been elected and classified in level 3 and are included in the consolidated balance sheets as securities investments and other.

*6 Gains (losses) of 502 million yen arising from financial instruments for which the fair value option has been elected are included in financial services revenue in the consolidated statements of income.

Transfers into level 1 were 3,556 million yen and 2,833 million yen for the fiscal years ended March 31, 2016 and 2017, respectively, as quoted prices for certain trading securities and available-for-sale securities became available in an active market. Transfers out of level 1 were 2,716 million yen and 3,103 million yen for the fiscal years ended March 31, 2016 and 2017, respectively, as quoted prices for certain trading securities and available-for-sale securities were not available in an active market.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The changes in fair value of level 3 assets and liabilities for the fiscal years ended March 31, 2016 and 2017 are as follows:

	Yen in millions
	Fiscal year ended March 31, 2016
	Assets
	Available-for-sale securities
	Debt securities
	Japanese corporate bonds			Foreign corporate bonds			Other			Other Investments
Beginning balance		3,506			9,491			—			74,641
Total realized and unrealized gains (losses):
Included in earnings*1		6			458			—			(2,653	)
Included in other comprehensive income (loss)*2		30			(791	)		—			(2,316	)
Purchases		2,798			11,214			1,000			657
Sales		(3,000	)		(4,872	)		—			—
Settlements		—			(641	)		(116	)		(56,866	)
Transfers into level 3*3		2,002			1,498			—			—
Transfers out of level 3*4		(1,996	)		(504	)		—			—
Ending balance		3,346			15,853			884			13,463
Changes in unrealized losses relating to instruments still held at reporting date:
Included in earnings*1		—			(56	)		—			(2,653	)

	Yen in millions
	Fiscal year ended March 31, 2017
	Assets
	Available-for-sale securities
	Debt securities
	Japanese corporate bonds			Foreign corporate bonds			Other			Other Investments
Beginning balance		3,346			15,853			884			13,463
Total realized and unrealized gains (losses):
Included in earnings*1		—			1,091			514			328
Included in other comprehensive income (loss)*2		(20	)		(84	)		(1	)		(2,416	)
Purchases		—			35,335			14,026			247
Sales		—			—			—			—
Settlements		—			(10,021	)		(231	)		(1,139	)
Transfers into level 3*3		—			1,008			—			—
Transfers out of level 3*4		(2,016	)		(2,005	)		—			—
Ending balance		1,310			41,177			15,192			10,483
Changes in unrealized gains (losses) relating to instruments still held at reporting date:
Included in earnings*1		—			11			79			(27	)

*1 Earning effects are included in financial services revenue in the consolidated statements of income.

*2 Unrealized gains (losses) are included in unrealized gains (losses) on securities in the consolidated statements of comprehensive income.

*3 Certain corporate bonds were transferred into level 3 because differences between the fair value determined by indicative quotes from dealers and the fair value determined by internally developed prices became significant and the observability of the inputs used decreased.

*4 Certain corporate bonds were transferred out of level 3 because quoted prices became available.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

Level 3 assets include certain private equity investments, and certain domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is less transparency around inputs. In determining the fair value of such assets, Sony uses third-party information such as indicative quotes from dealers without adjustment. For validating the fair values, Sony primarily uses internal models which include management judgment or estimation of assumptions that market participants would use in pricing the asset.

(2) Assets and liabilities that are measured at fair value on a nonrecurring basis

Sony also has assets and liabilities that are required to be remeasured to fair value on a nonrecurring basis when certain circumstances occur. During the fiscal years ended March 31, 2016 and 2017, such remeasurements to fair value related primarily to the following:

	During the fiscal year ended March 31, 2016
	Estimated fair value						Amounts included in earnings
	Level 1		Level 2		Level 3
Assets:
Long-lived assets impairments		—		—		19,680		(92,544	)
								(92,544	)
	During the fiscal year ended March 31, 2017
	Estimated fair value						Amounts included in earnings
	Level 1		Level 2		Level 3
Assets:
Long-lived assets impairments		—		—		72		(39,137	)
Goodwill impairments		—		—		0		(112,069	)
								(151,206	)

Long-lived assets impairments

Sony recorded impairment losses of 4,929 million yen for the fiscal year ended March 31, 2015, included within the HE&S segment, related to the LCD television asset group. This impairment loss primarily reflected a decrease in the estimated fair value of property, plant and equipment and certain intangible assets. For the LCD television asset group, the corresponding estimated future cash flows leading to the impairment charge reflected the deterioration in LCD television market conditions in Japan, Europe and North America, and unfavorable foreign exchange rates.

Sony recorded impairment losses of 8,608 million yen for the fiscal year ended March 31, 2015, included within All Other, related to long-lived assets in the disc manufacturing business. The long-lived asset impairments in the disc manufacturing business for the fiscal year ended March 31, 2015 related to a lowered forecast of cash flows outside of Japan and the United States, primarily attributable to the manufacturing and distribution operations in Europe, which began additional restructuring activities in March 2015, and reflected the faster-than-expected contraction of the physical media market.

Sony recorded an impairment loss of 30,643 million yen for the fiscal year ended March 31, 2016, included within the Components segment, related to long-lived assets in the battery business asset group. In the fiscal year ended March 31, 2016, due to increasingly competitive markets, Sony conducted a further strategic review of the business and evolving market trends. Following this review, Sony further reduced the corresponding estimated future cash flows of this business and the estimated ability to recover the entire carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in an impairment charge.

Sony recorded impairment losses of 59,616 million yen and 23,860 million yen for the fiscal years ended March 31, 2016 and 2017, respectively, included within the Semiconductors segment, related to long-lived assets in the camera module business asset group. Due to a decrease in the projected future demand of camera modules, Sony conducted a strategic review of the business and its market conditions. Following this review, Sony reduced the corresponding estimated future cash flows and the estimated ability to recover the entire carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in an impairment charge for the fiscal year ended March 31, 2016. Sony decided to halt all development and production of high-functionality camera modules for external sales during the fiscal year ended March 31, 2017.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

These measurements are classified as level 3 because significant unobservable inputs, such as the condition of the assets or projections of future cash flows, the timing of such cash flows and the discount rate reflecting the risk inherent in future cash flows, were considered in the fair value measurements. For the fiscal year ended March 31, 2015, a discount rate of 10% and projected declining revenue rates ranging from (5)% to (9)% were used in the fair value measurements related to the long-lived assets for the disc manufacturing business. For the fiscal year ended March 31, 2016, a discount rate of 10% and projected revenue growth rates ranging from zero to 14% were used in the fair value measurements related to the long-lived assets for the battery business and a discount rate of 10% and projected revenue growth rates ranging from zero to 108% were used in the fair value measurements related to the long-lived assets for the camera module business. The high end of the camera module revenue growth rate reflects projected revenue from the introduction of new products in the near term. For the fiscal year ended March 31, 2017, a discount rate of 10% and projected declining revenue rates ranging from (1)% to 8% were used in the fair value measurements related to the long-lived assets for the camera module business.

Goodwill impairments

Sony recorded an impairment loss of 176,045 million yen for the fiscal year ended March 31, 2015 related to goodwill in the MC segment. Refer to Note 9. Sony’s determination of fair value of the MC reporting unit was based on the present value of expected future cash flows. These measurements are classified as a level 3 because significant unobservable inputs, such as the projections of future cash flows, the timing of such cash flows and the discount rate reflecting the risk inherent in future cash flows were considered in the fair value measurements. A discount rate of 12% and projected revenue growth rates ranging from (3)% to 11% were used in the fair value measurements.

Sony recorded an impairment loss of 112,069 million yen during the fiscal year ended March 31, 2017 against the goodwill of the Production & Distribution reporting unit in the Pictures segment. Refer to Note 9. Sony’s determination of the estimated fair value of the reporting unit was based on the present value of expected future cash flows including a terminal value which is based on an exit price using an earnings multiple applied to the final year of the forecasted earnings, and which also takes into consideration a control premium. These measurements are classified as level 3 because significant unobservable inputs, such as the projections of future cash flows, the timing of such cash flows, the earnings multiple, the growth rates beyond the forecast and mid-range plan periods, and the discount rate reflecting the risk inherent in future cash flows, were considered in the fair value measurements. An earnings multiple of 9.0x, growth rates beyond the forecast and mid-range plan periods ranging from 3.0% to 4.5% and a discount rate of 9.5% were used in the fair value measurement.

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

(3) Financial instruments

The estimated fair values by fair value hierarchy level of certain financial instruments that are not reported at fair value are summarized as follows:

	Yen in millions
	March 31, 2016
	Estimated fair value								Carrying amount
	Level 1		Level 2		Level 3		Total		Total
Assets:
Housing loans in the banking business		—		1,369,157		—		1,369,157		1,235,311
Total assets		—		1,369,157		—		1,369,157		1,235,311
Liabilities:
Long-term debt including the current portion		—		755,631		—		755,631		744,273
Investment contracts included in policyholders’ account in the life insurance business		—		677,375		—		677,375		638,737
Total liabilities		—		1,433,006		—		1,433,006		1,383,010
	Yen in millions
	March 31, 2017
	Estimated fair value								Carrying amount
	Level 1		Level 2		Level 3		Total		Total
Assets:
Housing loans in the banking business		—		1,603,784		—		1,603,784		1,449,790
Total assets		—		1,603,784		—		1,603,784		1,449,790
Liabilities:
Long-term debt including the current portion		—		745,599		—		745,599		734,886
Investment contracts included in policyholders’ account in the life insurance business		—		710,191		—		710,191		686,182
Total liabilities		—		1,455,790		—		1,455,790		1,421,068

The summary excludes cash and cash equivalents, call loans, time deposits, notes and accounts receivable, trade, call money, short-term borrowings, notes and accounts payable, trade and deposits from customers in the banking business because the carrying values of these financial instruments approximated their fair values due to their short-term nature. The summary also excludes held-to-maturity securities disclosed in Note 7.

Cash and cash equivalents, call loans and call money are classified in level 1. Time deposits, short-term borrowings, deposits from customers in the banking business are classified in level 2. Held-to-maturity securities, included in marketable securities and securities investments and other in the consolidated balance sheets, primarily include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, such as the majority of government bonds and corporate bonds and are substantially all classified in level 2. The fair values of housing loans in the banking business, included in securities investments and other in the consolidated balance sheets, were estimated based on the discounted future cash flows using interest rates reflecting London Interbank Offered Rate base yield curves with certain risk premiums. The fair values of long-term debt including the current portion and investment contracts included in policyholders’ account in the life insurance business were estimated based on either the market value or the discounted future cash flows using Sony’s current incremental borrowing rates for similar liabilities.

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14. Derivative instruments and hedging activities

Sony has certain financial instruments including financial assets and liabilities acquired in the normal course of business. Such financial instruments are exposed to market risk arising from the changes in foreign currency exchange rates and interest rates. In applying a consistent risk management strategy for the purpose of reducing such risk, Sony uses derivative financial instruments, which include foreign exchange forward contracts, foreign currency option contracts, and interest rate swap agreements (including interest rate and currency swap agreements). Certain other derivative financial instruments are entered into in the Financial Services segment for asset-liability management (“ALM”) purposes. These instruments are executed with creditworthy financial institutions, and virtually all foreign currency contracts are denominated in U.S. dollars, euros and other currencies of major countries. These derivatives generally mature or expire within six months after the balance sheet date. Other than derivatives utilized in the Financial Services segment for ALM, Sony does not use derivative financial instruments for trading or speculative purposes. These derivative transactions utilized for ALM in the Financial Services segment are executed within certain limits in accordance with an internal risk management policy.

Derivative financial instruments held by Sony are classified and accounted for as described below.

Fair value hedges

Both the derivatives designated as fair value hedges and the hedged items are reflected at fair value in the consolidated balance sheets. Changes in the fair value of the derivatives designated as fair value hedges, as well as offsetting changes in the carrying value of the underlying hedged items, are recognized in income. For the fiscal years ended March 31, 2015, 2016 and 2017, these fair value hedges were fully effective. In addition, there were no amounts excluded from the assessment of hedge effectiveness of fair value hedges.

Cash flow hedges

Changes in the fair value of derivatives designated as cash flow hedges are initially recorded in other comprehensive income (“OCI”) and reclassified into earnings when the hedged transaction affects earnings. For the fiscal year ended March 31, 2016, the ineffective portions of the hedging relationships were not significant. For the fiscal year ended March 31, 2017, these cash flow hedges were fully effective. In addition, there were no amounts excluded from the assessment of hedge effectiveness for cash flow hedges. As of and for the fiscal year ended March 31, 2015, there were no cash flow hedge derivatives.

Derivatives not designated as hedges

Changes in the fair value of derivatives not designated as hedges are recognized in income.

A description of the purpose and classification of the derivative financial instruments held by Sony is as follows:

Foreign exchange forward contracts and foreign currency option contracts

Foreign exchange forward contracts and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign currency exchange rates on cash flows generated by anticipated intercompany transactions and intercompany accounts receivable and payable denominated in foreign currencies. The majority of written foreign currency option contracts are a part of range forward contract arrangements and expire in the same month with the corresponding purchased foreign currency option contracts.

Sony also entered into foreign exchange forward contracts during the fiscal years ended March 31, 2016 and 2017 which effectively fixed the cash flows from foreign currency denominated payables. Accordingly, these derivatives have been designated as cash flow hedges.

Foreign exchange forward contracts and foreign currency option contracts that do not qualify as hedges are marked-to-market with changes in value recognized in other income and expenses.

Foreign exchange forward contracts, foreign currency option contracts and currency swap agreements held by certain subsidiaries in the Financial Services segment are marked-to-market with changes in value recognized in financial services revenue.

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Interest rate swap agreements (including interest rate and currency swap agreements)

Interest rate swap agreements are utilized primarily to lower funding costs, to diversify sources of funding and to limit Sony’s exposure associated with underlying debt instruments and available-for-sale debt securities resulting from adverse fluctuations in interest rates, foreign currency exchange rates and changes in fair values. Interest rate swap agreements entered into in the Financial Services segment are used for reducing the risk arising from the changes in the fair value of fixed rate available-for-sale debt securities. These derivatives are considered to be a hedge against changes in the fair value of available-for-sale debt securities in the Financial Services segment. Accordingly, these derivatives have been designated as fair value hedges.

Certain subsidiaries in the Financial Services segment have interest rate swap agreements as part of their ALM, which are marked-to-market with changes in value recognized in financial service revenues.

Any other interest rate swap agreements that do not qualify as hedges, which are used for reducing the risk arising from changes of variable rate debt, are marked-to-market with changes in value recognized in other income and expenses.

Other agreements

Certain subsidiaries in the Financial Services segment have equity future contracts, other currency contracts and hybrid financial instruments as part of their ALM, which are marked-to-market with changes in value recognized in financial services revenue. The hybrid financial instruments, disclosed in Note 7 as debt securities, contained embedded derivatives that are not required to be bifurcated because the entire instruments are carried at fair value.

The estimated fair values of Sony’s outstanding derivative instruments are summarized as follows:

Derivatives designated as hedging instruments	Yen in millions
	Balance sheet location	Fair value				Balance sheet location	Fair value
		March 31					March 31
	Asset derivatives	2016		2017		Liability derivatives	2016		2017
Interest rate contracts	Prepaid expenses and other current assets		16		43	Current liabilities: Other		665		497
Interest rate contracts	Other assets: Other		33		95	Liabilities: Other		22,605		13,713
Foreign exchange contracts	Prepaid expenses and other current assets		1		—	Current liabilities: Other		—		31
			50		138			23,270		14,241

Derivatives not designated as hedging instruments	Yen in millions
	Balance sheet location	Fair value				Balance sheet location	Fair value
		March 31					March 31
	Asset derivatives	2016		2017		Liability derivatives	2016		2017
Interest rate contracts	Prepaid expenses and other current assets		—		3	Current liabilities: Other		38		221
Interest rate contracts	Other assets: Other		538		1,599	Liabilities: Other		5,850		4,374
Foreign exchange contracts	Prepaid expenses and other current assets		16,803		24,382	Current liabilities: Other		19,309		14,475
Foreign exchange contracts	Other assets: Other		—		157	Liabilities: Other		—		620
Equity contracts	Prepaid expenses and other current assets		437		981	Current liabilities: Other		668		519
			17,778		27,122			25,865		20,209
Total derivatives			17,828		27,260			49,135		34,450

Presented below are the effects of derivative instruments on the consolidated statements of income for the fiscal years ended March 31, 2015, 2016 and 2017.

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Derivatives under fair value hedging relationships	Yen in millions
	Location of gain or (loss) recognized in income on derivative	Amount of gain or (loss) recognized in income on derivative
		Fiscal year ended March 31
		2015			2016			2017
Interest rate contracts	Financial services revenue		(8,271	)		(8,300	)		1,967
Foreign exchange contracts	Foreign exchange loss, net		(9	)		3			(31	)
Total			(8,280	)		(8,297	)		1,936
	Yen in millions
Derivatives under cash flow hedging relationships	Location of gain or (loss) recognized in income on derivative	Fiscal year ended March 31
		2015			2016			2017
		Amount of gain or (loss) recognized in OCI on derivative
Foreign exchange contracts	—		—			1,914			6,715
Total			—			1,914			6,715
		Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)
Foreign exchange contracts	Foreign exchange loss, net		—			(8	)		—
Foreign exchange contracts	Cost of sales		—			(3,104	)		(5,583	)
Total			—			(3,112	)		(5,583	)

Derivatives not designated as hedging instruments	Yen in millions
	Location of gain or (loss) recognized in income on derivative	Amount of gain or (loss) recognized in income on derivative
		Fiscal year ended March 31
		2015			2016			2017
Interest rate contracts	Financial services revenue		(3,579	)		(5,499	)		(935	)
Interest rate contracts	Foreign exchange loss, net		883			—			—
Foreign exchange contracts	Financial services revenue		(1,942	)		4,166			(5,365	)
Foreign exchange contracts	Foreign exchange loss, net		13,375			(14,501	)		12,339
Equity contracts	Financial services revenue		(2,725	)		3,267			(18,597	)
Total			6,012			(12,567	)		(12,558	)

The following table summarizes additional information, including notional amounts, for each type of derivative:

	Yen in millions
	March 31, 2016					March 31, 2017
	Notional amount		Fair value			Notional amount		Fair value
Foreign exchange contracts:
Foreign exchange forward contracts		1,030,020		(5,118	)		1,062,933		3,011
Currency option contracts purchased		211		2			212		1
Currency option contracts written		210		(2	)		214		(1	)
Currency swap agreements		729,632		(99	)		1,439,395		4,074
Other currency contracts		75,157		2,712			64,944		2,328
Interest rate contracts:
Interest rate swap agreements		436,739		(28,571	)		415,719		(17,065	)
Equity contracts:
Equity future contracts		72,794		(231	)		96,016		462

All derivatives are recognized as either assets or liabilities in the consolidated balance sheets on a gross basis, but certain subsidiaries have entered into master netting agreements or other similar agreements, which are

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mainly International Swaps and Derivatives Association (ISDA) Master Agreements. An ISDA Master Agreement is an agreement between two counterparties that may have multiple derivative contracts with each other, and such ISDA Master Agreement may provide for the net settlement of all or a specified group of these derivative contracts, through a single payment, in a single currency, in the event of a default on or affecting any one derivative contract, or a termination event affecting all or a specified group of derivative contracts. Presented below are the effects of offsetting derivative assets, derivative liabilities, financial assets and financial liabilities as of March 31, 2016 and 2017.

	Yen in millions
	As of March 31, 2016
	Gross amounts presented in the consolidated balance sheet		Gross amounts not offset in the consolidated balance sheet  that are subject to master netting agreements
			Financial instruments		Cash collateral		Net amounts
Derivative assets subject to master netting agreements		10,251		6,990		312		2,949
Derivative assets not subject to master netting agreements		7,577						7,577
Total assets		17,828		6,990		312		10,526
Derivative liabilities subject to master netting agreements		46,328		28,527		8,269		9,532
Derivative liabilities not subject to master netting agreements		2,807						2,807
Repurchase, securities lending and similar arrangements		62,805		61,864		—		941
Total liabilities		111,940		90,391		8,269		13,280
	Yen in millions
	As of March 31, 2017
	Gross amounts presented in the consolidated balance sheet		Gross amounts not offset in the consolidated balance sheet  that are subject to master netting agreements
			Financial instruments		Cash collateral		Net amounts
Derivative assets subject to master netting agreements		11,554		6,584		277		4,693
Derivative assets not subject to master netting agreements		15,706						15,706
Total assets		27,260		6,584		277		20,399
Derivative liabilities subject to master netting agreements		33,261		6,644		18,631		7,986
Derivative liabilities not subject to master netting agreements		1,189						1,189
Repurchase, securities lending and similar arrangements		310,609		309,987		—		622
Total liabilities		345,059		316,631		18,631		9,797

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15. Pension and severance plans

(1) Defined benefit and severance plans

Upon terminating employment, employees of Sony Corporation and its subsidiaries in Japan are entitled, under most circumstances, to lump-sum indemnities or pension payments as described below. Sony Corporation and certain of its subsidiaries’ pension plans utilize a point-based plan under which a point is added every year reflecting the individual employee’s performance over that year. Under the point-based plan, the amount of payment is determined based on the sum of cumulative points from past services and interest points earned on the cumulative points regardless of whether or not the employee is voluntarily retiring.

Under the plans, in general, the defined benefits cover 65% of the indemnities under existing regulations to employees. The remaining indemnities are covered by severance payments by the companies. The pension benefits are payable at the option of the retiring employee either in a lump-sum amount or monthly pension payments. Contributions to the plans are funded through several financial institutions in accordance with the applicable laws and regulations.

From April 1, 2012, Sony Corporation and substantially all of its subsidiaries in Japan have modified existing defined benefit pension plans such that life annuities will no longer accrue additional service benefits, with those participants instead accruing fixed-term annuities. The defined benefit pension plans were closed to new participants and a defined contribution plan was also introduced.

In addition, several of Sony’s foreign subsidiaries have defined benefit pension plans or severance indemnity plans, which cover substantially all of their employees. Under such plans, the related cost of benefits is currently funded or accrued. Benefits awarded under these plans are based primarily on the current rate of pay and length of service.

The components of net periodic benefit costs for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

Japanese plans:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Service cost		24,350			24,670			26,811
Interest cost		11,583			8,689			5,912
Expected return on plan assets		(19,252	)		(20,853	)		(17,829	)
Recognized actuarial loss		9,867			8,588			20,436
Amortization of prior service costs		(9,614	)		(9,489	)		(9,490	)
Net periodic benefit costs		16,934			11,605			25,840

Foreign plans:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Service cost		3,188			3,504			2,958
Interest cost		13,040			12,096			10,426
Expected return on plan assets		(12,993	)		(14,117	)		(11,000	)
Amortization of net transition asset		10			10			9
Recognized actuarial loss		2,991			4,236			2,552
Amortization of prior service costs		(639	)		(478	)		(463	)
Losses on curtailments and settlements		31			354			43
Net periodic benefit costs		5,628			5,605			4,525

The estimated net actuarial loss, prior service cost and obligation (asset) existing at transition for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit costs over the next fiscal year are 18,702 million yen, 9,179 million yen and 4 million yen, respectively.

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The changes in the benefit obligation and plan assets as well as the funded status and composition of amounts recognized in the consolidated balance sheets were as follows:

	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2016			2017			2016			2017
Change in benefit obligation:
Benefit obligation at beginning of the fiscal year		890,415			1,034,284			394,704			356,875
Service cost		24,670			26,811			3,504			2,958
Interest cost		8,689			5,912			12,096			10,426
Plan participants’ contributions		—			—			676			490
Actuarial (gain) loss*		144,416			(33,333	)		(21,868	)		20,045
Foreign currency exchange rate changes		—			—			(16,893	)		(23,183	)
Curtailments and settlements		—			—			(1,246	)		(1,507	)
Other		(14	)		(5	)		—			—
Benefits paid		(33,892	)		(28,993	)		(14,098	)		(13,662	)
Benefit obligation at end of the fiscal year		1,034,284			1,004,676			356,875			352,442
Change in plan assets:
Fair value of plan assets at beginning of the fiscal year		710,602			679,432			280,216			256,341
Actual return on plan assets		(9,030	)		35,508			(6,035	)		29,346
Foreign currency exchange rate changes		—			—			(13,095	)		(20,004	)
Employer contribution		1,951			6,640			7,905			6,738
Plan participants’ contributions		—			—			676			490
Curtailments and settlements		—			—			(504	)		(1,161	)
Benefits paid		(24,091	)		(22,572	)		(12,822	)		(12,573	)
Fair value of plan assets at end of the fiscal year		679,432			699,008			256,341			259,177
Funded status at end of the fiscal year		(354,852	)		(305,668	)		(100,534	)		(93,265	)

* Actuarial loss in Japanese plans for the fiscal year ended March 31, 2016 principally relates to changes in the assumptions for discount and mortality rates.

Amounts recognized in the consolidated balance sheets consist of:

	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2016			2017			2016			2017
Noncurrent assets		2,217			2,753			7,102			6,251
Current liabilities		—			—			(2,892	)		(3,114	)
Noncurrent liabilities		(357,069	)		(308,421	)		(104,744	)		(96,402	)
Ending balance		(354,852	)		(305,668	)		(100,534	)		(93,265	)
Amounts recognized in accumulated other comprehensive income, excluding tax effects, consist of:
	Japanese plans						Foreign plans
	Yen in millions						Yen in millions
	March 31						March 31
	2016			2017			2016			2017
Prior service cost (credit)		(34,905	)		(25,415	)		(1,443	)		(1,034	)
Net actuarial loss		389,302			317,397			82,850			78,548
Obligation existing at transition		—			—			7			(3	)
Ending balance		354,397			291,982			81,414			77,511

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The accumulated benefit obligations for all defined benefit pension plans were as follows:

	Japanese plans				Foreign plans
	Yen in millions				Yen in millions
	March 31				March 31
	2016		2017		2016		2017
Accumulated benefit obligations		1,028,690		998,501		331,975		329,989

The projected benefit obligations, the accumulated benefit obligations and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were as follows:

	Japanese plans				Foreign plans
	Yen in millions				Yen in millions
	March 31				March 31
	2016		2017		2016		2017
Projected benefit obligations		1,022,373		992,052		292,171		291,413
Accumulated benefit obligations		1,018,228		987,428		286,705		287,491
Fair value of plan assets		666,753		685,183		202,913		207,406

Weighted-average assumptions used to determine benefit obligations as of March 31, 2016 and 2017 were as follows:

	Japanese plans						Foreign plans
	March 31						March 31
	2016			2017			2016			2017
Discount rate		0.6	%		0.9	%		3.2	%		3.1	%
Rate of compensation increase		*			*			2.8			2.4

* Substantially all of Sony’s Japanese pension plans were point-based. Point-based plans do not incorporate a measure of compensation rate increases.

Weighted-average assumptions used to determine the net periodic benefit costs for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Japanese plans									Foreign plans
	Fiscal year ended March 31									Fiscal year ended March 31
	2015			2016			2017			2015			2016			2017
Discount rate		1.4	%		1.0	%		0.6	%		4.1	%		3.1	%		3.2	%
Expected return on plan assets		3.0			3.0			2.7			5.6			4.8			4.8
Rate of compensation increase		*			*			*			3.1			2.9			2.8

* Substantially all of Sony’s Japanese pension plans were point-based. Point-based plans do not incorporate a measure of compensation rate increases.

Sony reviews these assumptions for changes in circumstances.

The weighted-average rate of compensation increase is calculated based only on the pay-related plans. The point-based plans discussed above are excluded from the calculation because payments made under the plan are not based on employee compensation.

The mortality rate assumptions are based on life expectancy and death rates for different types of participants. In the fiscal year ended March 31, 2016, Sony updated mortality rate assumptions to consider the latest mortality tables and in certain instances to utilize mortality tables based on gender.

To determine the expected long-term rate of return on pension plan assets, Sony considers the current and expected asset allocations, as well as the historical and expected long-term rates of returns on various categories of plan assets. Sony’s pension investment policy recognizes the expected growth and the variability risk associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with

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levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment policy gives appropriate consideration to recent market performance and historical returns, the investment assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of the corresponding pension liabilities.

The investment objectives of Sony’s plan assets are designed to generate returns that will enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on the current economic environment and other pertinent factors. Sony’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could negatively impact the funding level of the plans, thereby increasing its dependence on contributions from Sony. To mitigate any potential concentration risk, thorough consideration is given to balancing the portfolio among industry sectors and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocations as of March 31, 2017, are, as a result of Sony’s asset liability management, 31% of equity securities, 52% of fixed income securities and 17% of other investments for the pension plans of Sony Corporation and most of its subsidiaries in Japan, and, on a weighted average basis, 29% of equity securities, 45% of fixed income securities and 26% of other investments for the pension plans of foreign subsidiaries.

The fair values of the assets held by Japanese and foreign plans, which are classified in accordance with the fair value hierarchy described in Note 2, are as follows:

	Japanese plans
	Yen in millions
	Fair value at  March 31, 2016		Fair value  measurements using inputs considered as
Asset class			Level 1		Level 2		Level 3
Cash and cash equivalents		17,985		17,985		—		—
Equity:
Equity securities*1		148,658		144,597		4,061		—
Fixed income:
Government bonds*2		218,851		—		218,851		—
Corporate bonds*3		56,779		—		56,779		—
Asset-backed securities*4		1,148		—		1,148		—
Commingled funds*5		115,902		—		115,902		—
Commodity funds*6		20,547		—		20,547		—
Private equity*7		31,852		—		—		31,852
Hedge funds*8		60,395		—		—		60,395
Real estate*9		7,315		—		—		7,315
Total		679,432		162,582		417,288		99,562

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	Japanese plans
	Yen in millions
	Fair value at  March 31, 2017		Fair value  measurements using inputs considered as
Asset class			Level 1		Level 2		Level 3
Cash and cash equivalents		7,976		7,976		—		—
Equity:
Equity securities*1		157,012		152,852		4,160		—
Fixed income:
Government bonds*2		206,632		—		206,632		—
Corporate bonds*3		75,971		—		75,971		—
Asset-backed securities*4		1,105		—		1,105		—
Commingled funds*5		122,264		—		122,264		—
Commodity funds*6		21,098		—		21,098		—
Private equity*7		21,790		—		—		21,790
Hedge funds*8		67,235		—		—		67,235
Real estate and other*9		17,925		—		—		17,925
Total		699,008		160,828		431,230		106,950

*1 Includes approximately 48 percent of Japanese equity securities, and 52 percent of foreign equity securities for both the fiscal years ended March 31, 2016 and 2017.

*2 Includes approximately 51 percent and 46 percent of debt securities issued by Japanese national and local governments, and 49 percent and 54 percent of debt securities issued by foreign national and local governments for the fiscal years ended March 31, 2016 and 2017, respectively.

*3 Includes debt securities issued by Japanese and foreign corporation and government related agencies.

*4 Includes primarily mortgage-backed securities.

*5 Commingled funds represent pooled institutional investments, including primarily investment trusts. They include approximately 44 percent and 48 percent of investments in equity, 54 percent and 51 percent of investments in fixed income, and 1 percent and 1 percent of investments in other for the fiscal years ended March 31, 2016 and 2017, respectively.

*6 Represents commodity futures funds.

*7 Includes multiple private equity funds of funds that primarily invest in venture, buyout, and distressed markets in the U.S. and Europe.

*8 Includes primarily funds that invest in a portfolio of a broad range of hedge funds to diversify the risks and reduce the volatilities associated with a single hedge fund.

*9 Includes primarily private real estate investment trusts.

	Foreign plans
	Yen in millions
	Fair value at  March 31, 2016		Fair value  measurements using inputs considered as
Asset class			Level 1		Level 2		Level 3
Cash and cash equivalents		4,078		4,078		—		—
Equity:
Equity securities*1		37,769		35,818		1,951		—
Fixed income:
Government bonds*2		60,835		—		60,835		—
Corporate bonds*3		30,425		—		23,425		7,000
Asset-backed securities		321		—		321		—
Insurance contracts*4		4,293		—		4,293		—
Commingled funds*5		77,456		—		77,456		—
Real estate and other*6		41,164		—		17,040		24,124
Total		256,341		39,896		185,321		31,124

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	Foreign plans
	Yen in millions
	Fair value at  March 31, 2017		Fair value  measurements using inputs considered as
Asset class			Level 1		Level 2		Level 3
Cash and cash equivalents		8,091		8,091		—		—
Equity:
Equity securities*1		33,103		31,783		1,320		—
Fixed income:
Government bonds*2		65,671		—		65,671		—
Corporate bonds*3		28,296		—		21,370		6,926
Asset-backed securities		982		—		982		—
Insurance contracts*4		5,135		—		5,135		—
Commingled funds*5		81,683		—		81,683		—
Real estate and other*6		36,216		—		13,287		22,929
Total		259,177		39,874		189,448		29,855

*1 Includes primarily foreign equity securities.

*2 Includes primarily foreign government debt securities.

*3 Includes primarily foreign corporate debt securities.

*4 Represents annuity contracts with or without profit sharing.

*5 Commingled funds represent pooled institutional investments including mutual funds, common trust funds, and collective investment funds. They are primarily comprised of foreign equities and fixed income investments.

*6 Includes primarily private real estate investment trusts.

Each level in the fair value hierarchy in which each plan asset is classified is determined based on inputs used to measure the fair values of the asset, and does not necessarily indicate the risks or rating of the asset.

The following is a description of the valuation techniques used to measure Japanese and foreign plan assets at fair value. The valuation techniques are applied consistently from period to period.

Equity securities are valued at the closing price reported in the active market in which the individual securities are traded. These assets are generally classified as level 1.

The fair value of fixed income securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are generally classified as level 2.

Commingled funds are typically valued using the net asset value provided by the administrator of the fund and reviewed by Sony. The net asset value is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. These assets are classified as level 1, level 2 or level 3 depending on availability of quoted market prices.

Commodity funds are valued using inputs that are derived principally from or corroborated by observable market data. These assets are generally classified as level 2.

Private equity and private real estate investment trust valuations require significant judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. These assets are initially valued at cost and are reviewed periodically utilizing available and relevant market data to determine if the carrying value of these assets should be adjusted. These investments are classified as level 3.

Hedge funds are valued using the net asset value as determined by the administrator or custodian of the fund. These investments are classified as level 3.

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The following table sets forth a summary of changes in the fair values of Japanese and foreign plans’ level 3 assets for the fiscal years ended March 31, 2016 and 2017:

	Japanese plans
	Yen in millions
	Fair value measurement using significant unobservable  inputs (Level 3)
	Private equity			Hedge funds			Real estate     and other		Total
Beginning balance at April 1, 2015		32,584			80,037			5,961		118,582
Return on assets held at end of year		157			(3,593	)		315		(3,121	)
Purchases, sales, and settlements, net		(889	)		(16,049	)		1,039		(15,899	)
Ending balance at March 31, 2016		31,852			60,395			7,315		99,562
Return on assets held at end of year		425			2,817			599		3,841
Purchases, sales, and settlements, net		(10,487	)		4,023			10,011		3,547
Ending balance at March 31, 2017		21,790			67,235			17,925		106,950

	Foreign plans
	Yen in millions
	Fair value measurement using significant unobservable inputs (Level 3)
	Corporate bonds			Real estate and  other			Total
Beginning balance at April 1, 2015		7,384			15,522			22,906
Return on assets held at end of year		76			(104	)		(28	)
Return on assets sold during the year		—			19			19
Purchases, sales, and settlements, net		—			3,933			3,933
Transfers, net		—			2,692			2,692
Other*		(460	)		2,062			1,602
Ending balance at March 31, 2016		7,000			24,124			31,124
Return on assets held at end of year		—			84			84
Purchases, sales, and settlements, net		(44	)		(367	)		(411	)
Transfers, net		—			(8	)		(8	)
Other*		(30	)		(904	)		(934	)
Ending balance at March 31, 2017		6,926			22,929			29,855

* Primarily consists of translation adjustments.

Sony makes contributions to its defined benefit pension plans as deemed appropriate by management after considering the fair value of plan assets, expected return on plan assets and the present value of benefit obligations. Sony expects to contribute approximately 12 billion yen to the Japanese plans and approximately 5 billion yen to the foreign plans during the fiscal year ending March 31, 2018.

The expected future benefit payments are as follows:

	Japanese plans		Foreign plans
Fiscal year ending March 31	Yen in millions		Yen in millions
2018		36,638		13,346
2019		38,561		13,205
2020		40,772		13,980
2021		41,646		15,138
2022		43,001		15,713
2023 — 2027		232,773		90,199

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(2) Defined contribution plans

Total defined contribution expenses for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Japanese plans		3,199		3,155		3,412
Foreign plans		13,857		12,419		10,458

16. Stockholders’ equity

(1) Common stock

Changes in the number of shares of common stock issued and outstanding during the fiscal years ended March 31, 2015, 2016 and 2017 have resulted from the following:

	Number of shares
Balance at March 31, 2014		1,044,707,767
Exercise of stock acquisition rights		948,500
Conversion of zero coupon convertible bonds		124,116,993
Balance at March 31, 2015		1,169,773,260
Issuance of new shares		92,000,000
Exercise of stock acquisition rights		720,500
Balance at March 31, 2016		1,262,493,760
Exercise of stock acquisition rights		1,269,900
Balance at March 31, 2017		1,263,763,660

At March 31, 2017, 39,481,061 shares of common stock would be issued upon the conversion or exercise of all convertible bonds and stock acquisition rights outstanding.

Conversions of convertible bonds into common stock are accounted for in accordance with the provisions of the Companies Act of Japan (Kaishaho) and related regulations (collectively the “Companies Act”) by crediting approximately one-half of the conversion proceeds to the common stock account and the remainder to the additional paid-in capital account.

Sony Corporation may purchase its own shares at any time by a resolution of the Board of Directors up to the retained earnings available for dividends to shareholders, in accordance with the Companies Act. No common stock had been acquired by the resolution of the Board of Directors during the fiscal years ended March 31, 2015, 2016 and 2017.

(2) Retained earnings

The amount of statutory retained earnings of Sony Corporation available for dividends to shareholders as of March 31, 2017 was 570,245 million yen. The appropriation of retained earnings for the fiscal year ended March 31, 2017, including cash dividends for the six-month period ended March 31, 2017, has been incorporated in the consolidated financial statements. This appropriation of retained earnings was approved at the meeting of the Board of Directors of Sony Corporation held on April 28, 2017 and was then recorded in the statutory books of account, in accordance with the Companies Act.

Retained earnings include Sony’s equity in undistributed earnings of affiliated companies accounted for by the equity method in the amount of 29,061 million yen and 33,694 million yen at March 31, 2016 and 2017, respectively.

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(3) Other comprehensive income

Changes in accumulated other comprehensive income, net of tax, by component for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
	Unrealized gains (losses) on securities			Pension liability adjustment			Foreign currency translation adjustments			Total
Balance at March 31, 2014		127,509			(180,039	)		(399,055	)		(451,585	)
Other comprehensive income before reclassifications		53,069			(22,552	)		67,334			97,851
Amounts reclassified out of accumulated other comprehensive income*1		(14,351	)		1,365			(1,544	)		(14,530	)
Net current-period other comprehensive income		38,718			(21,187	)		65,790			83,321
Less: Other comprehensive income attributable to noncontrolling interests		12,074			(95	)		5,040			17,019
Balance at March 31, 2015		154,153			(201,131	)		(338,305	)		(385,283	)

	Yen in millions
	Unrealized gains (losses) on securities			Unrealized gains (losses) on derivative instruments			Pension liability adjustment			Foreign currency translation adjustments			Total
Balance at March 31, 2015		154,153			—			(201,131	)		(338,305	)		(385,283	)
Other comprehensive income before reclassifications		45,527			1,914			(174,380	)		(83,899	)		(210,838	)
Amounts reclassified out of accumulated other comprehensive income		(43,307	)		(3,112	)		2,627			—			(43,792	)
Net current-period other comprehensive income		2,220			(1,198	)		(171,753	)		(83,899	)		(254,630	)
Less: Other comprehensive income attributable to noncontrolling interests		15,637			—			(1,145	)		(1,087	)		13,405
Balance at March 31, 2016		140,736			(1,198	)		(371,739	)		(421,117	)		(653,318	)

	Yen in millions
	Unrealized gains (losses) on securities			Unrealized gains (losses) on derivative instruments			Pension liability adjustment			Foreign currency translation adjustments			Total
Balance at March 31, 2016		140,736			(1,198	)		(371,739	)		(421,117	)		(653,318	)
Other comprehensive income before reclassifications		(27,007	)		5,028			54,513			(17,988	)		14,546
Amounts reclassified out of accumulated other comprehensive income		(3,286	)		(3,888	)		8,719			—			1,545
Net current-period other comprehensive income		(30,293	)		1,140			63,232			(17,988	)		16,091
Less: Other comprehensive income attributable to noncontrolling interests		(16,192	)		—			229			(2,495	)		(18,458	)
Balance at March 31, 2017		126,635			(58	)		(308,736	)		(436,610	)		(618,769	)

*1 Foreign currency translation adjustments were transferred from accumulated other comprehensive income to net income as a result of a complete or substantially complete liquidation or sale of certain foreign subsidiaries and affiliates.

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Reclassifications out of accumulated other comprehensive income for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
Comprehensive income components	Amounts reclassified from accumulated other comprehensive income									Affected line items in consolidated statements of income
	2015			2016			2017
Unrealized gains (losses) on securities		(10,515	)		(19,598	)		(4,560	)	Financial services revenue
		(7,942	)		(47,087	)		(30	)	Gain on sale of securities investments, net
		—			3,063			—		Loss on devaluation of securities investments
Total before tax		(18,457	)		(63,622	)		(4,590	)
Tax expense or (benefit)		4,106			20,315			1,304
Net of tax		(14,351	)		(43,307	)		(3,286	)
Unrealized gains (losses) on derivative instruments		—			(8	)		—		Foreign exchange loss, net
		—			(3,104	)		(5,583	)	Cost of sales
Total before tax		—			(3,112	)		(5,583	)
Tax expense or (benefit)		—			—			1,695
Net of tax		—			(3,112	)		(3,888	)
Pension liability adjustment		2,615			2,867			13,044		*
Tax expense or (benefit)		(1,250	)		(240	)		(4,325	)
Net of tax		1,365			2,627			8,719
Foreign currency translation adjustments		(1,544	)		—			—		Foreign exchange loss, net
Tax expense or (benefit)		—			—			—
Net of tax		(1,544	)		—			—
Total amounts reclassified out of accumulated other comprehensive income, net of tax		(14,530	)		(43,792	)		1,545

* The amortization of pension and postretirement benefit components are included in the computation of net periodic pension cost. Refer to Note 15.

(4) Equity transactions with noncontrolling interests

Net income (loss) attributable to Sony Corporation’s stockholders and transfers (to) from the noncontrolling interests for the fiscal years ended March 31, 2015, 2016 and 2017 were as follows:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Net income (loss) attributable to Sony Corporation’s stockholders		(125,980	)		147,791			73,289
Transfers (to) from the noncontrolling interests:
Decrease in additional paid-in capital for purchase of additional shares in consolidated subsidiaries		(2,483	)		(12,776	)		(53,927	)
Change from net income (loss) attributable to Sony Corporation’s stockholders and transfers (to) from the noncontrolling interests		(128,463	)		135,015			19,362

During the fiscal year ended March 31, 2017, Sony obtained full ownership of its U.S.-based music publishing subsidiary by acquiring the 50% interest in the subsidiary held by the Estate of Michael Jackson (the

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“Estate”). The aggregate cash consideration paid to the Estate was 750 million U.S. dollars, including 17 million U.S. dollars of distributions to which the subsidiary previously committed. The difference between cash consideration paid and the decrease in the carrying amount of the noncontrolling interests was recognized as a decrease to additional paid-in capital of 70,730 million yen.

17. Stock-based compensation plans

The stock-based compensation expense for the fiscal years ended March 31, 2015, 2016 and 2017 was 1,286 million yen, 1,944 million yen and 2,737 million yen, respectively. The total cash received from exercises under all of the stock-based compensation plans during the fiscal years ended March 31, 2015, 2016 and 2017 was 1,637 million yen, 1,578 million yen and 2,730 million yen, respectively. Sony issued new shares upon exercise of these rights.

Sony has a stock-based compensation incentive plan for selected directors, corporate executive officers and employees in the form of a stock acquisition rights plan. The stock acquisition rights generally have three year graded vesting schedules and are exercisable up to ten years from the date of grant.

The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the fiscal years ended March 31, 2015, 2016 and 2017 was 1,139 yen, 1,331 yen and 1,291 yen, respectively. The fair value of stock acquisition rights granted on the date of grant and used to recognize compensation expense for the fiscal years ended March 31, 2015, 2016 and 2017 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Fiscal year ended March 31
	2015			2016			2017
Weighted-average assumptions
Risk-free interest rate		1.26%			1.07%			1.10%
Expected lives		7.35 y	ears		7.12 y	ears		6.83 y	ears
Expected volatility*		51.69%			42.07%			40.00%
Expected dividends		1.24%			0.75%			0.66%

* Expected volatility was based on the historical volatilities of Sony Corporation’s common stock over the expected life of the stock acquisition rights.

A summary of the activities regarding the stock acquisition rights plan during the fiscal year ended March 31, 2017 is as follows:

	Fiscal year ended March 31, 2017
	Number of shares		Weighted- average exercise price		Weighted- average remaining life		Total intrinsic value
			Yen		Years		Yen in millions
Outstanding at beginning of the fiscal year		15,778,200		3,188
Granted		3,250,400		3,366
Exercised		1,269,900		2,150
Forfeited or expired		2,239,300		4,209
Outstanding at end of the fiscal year		15,519,400		3,147		5.85		12,335
Exercisable at end of the fiscal year		9,914,700		3,072		4.01		9,573

The total intrinsic value of shares exercised under the stock acquisition rights plan during the fiscal years ended March 31, 2015, 2016 and 2017 was 1,463 million yen, 1,338 million yen and 1,541 million yen, respectively.

As of March 31, 2017, there was 4,057 million yen of total unrecognized compensation expense related to nonvested stock acquisition rights. This expense is expected to be recognized over a weighted-average period of 2.12 years.

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18. Kumamoto Earthquake

In April 2016, a series of earthquakes occurred in the Kumamoto region of Japan. These earthquakes caused damage to certain fixed assets, including buildings, machinery and equipment, as well as inventories in manufacturing sites located in the Kumamoto region.

For the fiscal year ended March 31, 2017, Sony incurred incremental losses and associated expenses including repair costs of fixed assets and a loss on disposal of inventories directly related to the damage caused by the earthquakes of 16,682 million yen. These losses and expenses were primarily recorded in cost of sales in the consolidated statements of income and were offset by insurance recoveries of 10,682 million yen, as described below. In addition, Sony incurred other expenses of 9,365 million yen, which included idle facility costs at manufacturing sites. These expenses were primarily recorded in cost of sales in the consolidated statements of income.

Sony has insurance policies that cover certain damage directly caused by the earthquakes for Sony Corporation and certain of its subsidiaries, including damage at manufacturing sites. The insurance policies cover the damage and costs associated with fixed assets and inventories, as well as incremental expenses including removal and cleaning costs. These policies also provide business interruption coverage, including coverage for lost profits. For the fiscal year ended March 31, 2017, Sony recorded insurance receivables of 10,682 million yen, representing a portion of the insurance recoveries that were deemed probable of collection up to the extent of the amount of corresponding losses recognized in the same period. Of the insurance receivables recorded during the period, substantially all relate to damaged assets and inventories, and do not include amounts for business interruption or lost profits. Sony concluded that the recoveries from insurance claims are probable based on the coverage under valid policies, communications with the insurance carriers, Sony’s past claims history with the insurance carriers, and Sony’s assessment that the insurance carriers have the financial ability to pay the claims. In March 2017, 10,000 million yen was agreed to by the insurance carriers. These receivables are recorded within other receivables, whereas the remaining receivables of 682 million yen is recorded in other current assets in the consolidated balance sheets as of the fiscal year ended March 31, 2017.

Sony has underwritten 2,000 million yen in reinsurance policies for the above insurance carriers related to the policy described above, which will be payable to the insurance carriers. The amount was recorded in other current liabilities in the consolidated balance sheets as of the fiscal year ended March 31, 2017.

In April 2017, the remaining insurance claims of 10,000 million yen that were mainly for business interruption coverage were agreed to by the carriers. As a result, the total amount of insurance recoveries paid to Sony in April 2017 was 20,000 million yen.

19. Restructuring charges

As part of its effort to improve the performance of the various businesses, Sony has undertaken a number of restructuring initiatives. Sony defines restructuring initiatives as activities initiated by Sony, which are designed to generate a positive impact on future profitability. These activities include exiting a business or product category, implementing a headcount reduction program, realignment of its manufacturing sites to low-cost areas, utilizing the services of third-party original equipment and design manufacturers (OEMs and ODMs), a review of its development and design structure, and the streamlining of its sales and administrative functions. The restructuring activities are generally short term in nature and are generally completed within one year of initiation.

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The changes in the accrued restructuring charges for the fiscal years ended March 31, 2015, 2016 and 2017 are as follows:

	Yen in millions
	Employee termination benefits			Non-cash write-downs and disposals, net*			Other associated costs			Total
Balance at March 31, 2014		31,844			—			13,916			45,760
Restructuring costs		53,261			17,169			20,259			90,689
Non-cash charges		—			(17,169	)		—			(17,169	)
Cash payments		(48,787	)		—			(19,937	)		(68,724	)
Adjustments		403			—			(42	)		361
Balance at March 31, 2015		36,721			—			14,196			50,917
Restructuring costs		27,401			1,828			7,298			36,527
Non-cash charges		—			(1,828	)		—			(1,828	)
Cash payments		(40,261	)		—			(11,232	)		(51,493	)
Adjustments		(1,330	)		—			1,473			143
Balance at March 31, 2016		22,531			—			11,735			34,266
Restructuring costs		9,854			42,717			7,142			59,713
Non-cash charges		—			(42,717	)		—			(42,717	)
Cash payments		(19,759	)		—			(8,871	)		(28,630	)
Adjustments		(992	)		—			(839	)		(1,831	)
Balance at March 31, 2017		11,634			—			9,167			20,801

* Significant asset impairments excluded from restructuring charges are described in Note 13.

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Total costs incurred in connection with these restructuring programs by segment for the fiscal years ended March 31, 2015, 2016 and 2017 are as follows:

	Yen in millions
	Fiscal year ended March 31, 2015
	Employee termination benefits			Other associated costs*			Total net restructuring charges			Depreciation associated with restructured assets		Total
Mobile Communications		3,800			1,906			5,706			85		5,791
Game & Network Services		520			6,752			7,272			—		7,272
Imaging Products & Solutions		6,586			39			6,625			714		7,339
Home Entertainment & Sound		1,959			1			1,960			—		1,960
Semiconductors		2,930			2,855			5,785			426		6,211
Components		305			906			1,211			—		1,211
Pictures		1,918			—			1,918			—		1,918
Music		1,530			585			2,115			—		2,115
Financial Services		—			—			—			—		—
All Other and Corporate		33,713			24,384			58,097			6,122		64,219
Total		53,261			37,428			90,689			7,347		98,036
	Yen in millions
	Fiscal year ended March 31, 2016
	Employee termination benefits			Other associated costs*			Total net restructuring charges			Depreciation associated with restructured assets		Total
Mobile Communications		17,259			3,669			20,928			710		21,638
Game & Network Services		15			120			135			—		135
Imaging Products & Solutions		78			126			204			—		204
Home Entertainment & Sound		1,181			26			1,207			—		1,207
Semiconductors		(11	)		(102	)		(113	)		—		(113	)
Components		1			21			22			—		22
Pictures		1,594			7			1,601			5		1,606
Music		1,501			367			1,868			—		1,868
Financial Services		—			—			—			—		—
All Other and Corporate		5,783			4,892			10,675			1,017		11,692
Total		27,401			9,126			36,527			1,732		38,259

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	Yen in millions
	Fiscal year ended March 31, 2017
	Employee termination benefits		Other associated costs*			Total net restructuring charges			Depreciation associated with restructured assets		Total
Mobile Communications		516		172			688			138		826
Game & Network Services		225		6			231			—		231
Imaging Products & Solutions		563		77			640			—		640
Home Entertainment & Sound		68		684			752			—		752
Semiconductors		4		(13	)		(9	)		—		(9	)
Components		922		42,517			43,439			—		43,439
Pictures		2,467		—			2,467			—		2,467
Music		2,116		1,474			3,590			—		3,590
Financial Services		—		—			—			—		—
All Other and Corporate		2,973		4,942			7,915			364		8,279
Total		9,854		49,859			59,713			502		60,215

* Other associated costs includes non-cash write-downs and disposals, net

Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activities refers to the increase in depreciation expense caused by revising the useful life and the salvage value of depreciable fixed assets under an approved restructuring plan. Any impairment of the assets is recognized immediately in the period it is identified.

Retirement programs

Sony has undergone several headcount reduction programs to further reduce operating costs primarily in an effort to improve the performance of certain segments related to the Electronics business and reduce cost at the headquarters function. Through measures including the realignment of its manufacturing sites, a review of its development and design structure, and the streamlining of its sales and administrative functions, Sony has continued to implement a company-wide (including headquarters) rationalization. Sony intends to reallocate and optimize its workforce through programs including work reassignments and outplacements. The employee termination benefits costs in the above table are included in selling, general and administrative in the consolidated statements of income.

During the fiscal year ended March 31, 2015, Sony substantially completed the activities for optimizing the functions of sales companies and headquarters described above, other than those for the Mobile Communication segment. In the third quarter of the fiscal year ended March 31, 2015, Sony began restructuring plans regarding the Mobile Communication segment to reduce headcount by streamlining business operations, including closure and consolidation of manufacturing sites, and the consolidation of headquarters and administrative functions.

During the fiscal year ended March 31, 2016, the restructuring plans regarding the Mobile Communication segment progressed as planned by streamlining business operations, including the closure and consolidation of manufacturing sites, and the consolidation of headquarters and administrative functions described above. This restructuring program was substantially completed before March 31, 2017.

Components

As described in Note 25, as for Components segment, Sony and Murata Manufacturing Co., Ltd. signed a binding definitive agreement to transfer the Sony Group’s battery business to the Murata Group. Sony classified certain assets and liabilities related to the battery business as held for sale and, as a result of the fair value valuation of these assets and liabilities, recorded impairment losses of 42,298 million yen in other operating expense, net in the consolidated statements of income for the fiscal year ended March 31, 2017.

All Other and Corporate

Sony recorded restructuring charges that resulted from exiting the PC business of 19,635 million yen during the fiscal year ended March 31, 2015. The amount above includes costs relating to a reduction in the scale of

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sales companies resulting from the decision to exit the PC business of 8,278 million yen for the fiscal year ended March 31, 2015. Refer to Note 25.

In an effort to improve the performance of the disc manufacturing business, Sony initiated a number of restructuring activities to reduce its operating costs. These activities resulted in restructuring charges primarily consisting of headcount reductions and the closure and consolidation of manufacturing sites totaling 6,923 million yen for the fiscal year ended March 31, 2015. Refer to Note 13 for the long-lived assets impairments related to the disc manufacturing business other than restructuring charges.

As a result of efforts to optimize the sales and headquarters functions that indirectly support the Electronics businesses, which are described above, Sony recorded restructuring charges primarily consisting of headcount reductions totaling 22,345 million yen and 7,112 million yen during the fiscal years ended March 31, 2015 and 2016. There were no significant restructuring charges for the Electronics businesses during the fiscal year ended March 31, 2017.

20. Supplemental consolidated statements of income information

(1) Other operating expense, net

Sony records transactions in other operating expense, net due to either the nature of the transaction or in consideration of factors including the relationship to Sony’s core operations.

Other operating expense, net is comprised of the following:

	Yen in millions
	March 31
	2015			2016			2017
Gain on sale of the U.S. headquarters building*1		(5,991	)		(6,545	)		—
Gain on sale of Sony City Osaki*1		(4,914	)		(4,914	)		(4,914	)
Gain on sales of music publishing catalog in Pictures segment		(1,871	)		—			—
(Gain) loss on sale, remeasurement, and issuance of M3 shares*2		113			(2	)		(37,167	)
(Gain) loss on purchase/sale of interests in subsidiaries and affiliates, net*3		1,716			(31,778	)		(4,259	)
(Gain) loss on sale, disposal or impairment of assets, net*4		192,605			90,410			195,341
		181,658			47,171			149,001

*1 A portion of gain on sale and leaseback transactions is deferred and is amortized on a straight-line basis over the lease term.

*2 Refer to Note 5.

*3 Refer to Notes 24 and 25.

*4 Refer to Notes 9, 13, 19 and 25.

(2) Research and development costs

Research and development costs charged to cost of sales for the fiscal years ended March 31, 2015, 2016 and 2017 were 464,320 million yen, 468,183 million yen and 447,456 million yen, respectively.

(3) Advertising costs

Advertising costs included in selling, general and administrative expenses for the fiscal years ended March 31, 2015, 2016 and 2017 were 444,444 million yen, 391,326 million yen and 363,815 million yen, respectively.

(4) Shipping and handling costs

Shipping and handling costs for finished goods included in selling, general and administrative expenses for the fiscal years ended March 31, 2015, 2016 and 2017 were 65,561 million yen, 50,803 million yen and 42,195 million yen, respectively, which included the internal transportation costs of finished goods.

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21. Income taxes

Domestic and foreign components of income (loss) before income taxes and the provision for current and deferred income taxes attributable to such income are summarized as follows:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Income (loss) before income taxes:
Sony Corporation and all subsidiaries in Japan		(88,855	)		149,256			166,158
Foreign subsidiaries		128,584			155,248			85,461
		39,729			304,504			251,619
Income taxes — Current:
Sony Corporation and all subsidiaries in Japan		40,321			41,080			49,739
Foreign subsidiaries		40,430			53,498			50,521
		80,751			94,578			100,260
Income taxes — Deferred:
Sony Corporation and all subsidiaries in Japan		(3,306	)		(1,745	)		11,478
Foreign subsidiaries		11,288			1,956			12,320
		7,982			211			23,798
Total income tax expense		88,733			94,789			124,058

A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as follows:

	Fiscal year ended March 31
	2015			2016			2017
Statutory tax rate		36.0	%		33.6	%		31.7	%
Non-deductible expenses		16.1			1.6			2.3
Income tax credits		(1.4	)		(2.0	)		(2.9	)
Change in statutory tax rate		(66.7	)		(3.3	)		0.3
Change in valuation allowances		221.1			10.7			7.3
Change in deferred tax liabilities on undistributed earnings of foreign subsidiaries and corporate joint ventures		17.4			(0.8	)		(1.4	)
Lower tax rate applied to life and non-life insurance business in Japan		(24.6	)		(2.3	)		(2.2	)
Foreign income tax differential		(79.7	)		(6.9	)		(3.0	)
Adjustments to tax reserves		(23.1	)		0.7			(1.1	)
Effect of equity in net income (loss) of affiliated companies		0.1			0.0			0.0
Impairment of goodwill in the Pictures segment		—			—			15.0
Tax benefit related to intraperiod tax allocation		(27.2	)		—			—
Impairment of goodwill related to mobile communications business		159.5			—			—
Other		(4.2	)		(0.2	)		3.3
Effective income tax rate		223.3	%		31.1	%		49.3	%

In March 2015, the Japanese legislature enacted tax law changes which included further lowering of the national corporate tax rate, limiting the annual use of net operating loss carryforwards to 65% of taxable income for the periods ended March 31, 2016 and 2017 and to 50% of taxable income for periods beginning on or after April 1, 2017, and increasing the net operating loss carryforward period from nine to ten years for losses incurred

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in the tax years beginning on or after April 1, 2017. As a result, the statutory tax rate for the fiscal year ended March 31, 2016 was approximately 33%. The limitation on the use of net operating loss carryforwards, however, may result in cash tax payments being due if there is taxable income in Japan even though Sony Corporation and its national tax filing group in Japan have significant net operating loss carryforwards available. In addition, the limitation on the use of losses, when combined with the relatively short carryforward period, increases the risk of some net operating loss carryforwards expiring unutilized. The impact of the tax law changes resulted in a net deferred tax benefit of 26,588 million yen for the fiscal year ended March 31, 2015, primarily due to a reduction to the deferred tax liabilities in the insurance business in Japan.

In March 2016, the Japanese legislature enacted tax law changes which included further lowering of the national corporate tax rate, limiting the annual use of net operating loss carryforwards to 60% of taxable income for the period ended March 31, 2017, to 55% of taxable income for the period ending March 31, 2018, and to 50% of taxable income for periods beginning on or after April 1, 2018. As a result, the statutory tax rate from the fiscal year ending March 31, 2017 onward will be approximately 31.5%. The impact of the tax law changes resulted in a net deferred tax benefit of 10,735 million yen for the fiscal year ended March 31, 2016, primarily due to a reduction to the deferred tax liabilities in the insurance business in Japan.

Under the accounting guidance for intraperiod tax allocation, Sony is required to consider all items of income (including items recorded in other comprehensive income) in determining the amount of tax benefit that should be allocated to a loss from continuing operations. During the fiscal year ended March 31, 2015, Sony Corporation and its national tax filing group in Japan and certain other jurisdictions incurred a loss from continuing operations while also recording other comprehensive income. As a result, Sony allocated 10,799 million yen of tax benefit to continuing operations, which was exactly offset by additional income tax expense in other comprehensive income. The total income tax provision did not change and these jurisdictions continue to be impacted by the full valuation allowance on deferred tax assets. During the fiscal years ended March 31, 2016 and 2017, there were no applications of the intraperiod allocation rules as no jurisdictions met the necessary criteria.

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The significant components of deferred tax assets and liabilities are as follows:

	Yen in millions
	March 31
	2016			2017
Deferred tax assets:
Operating loss carryforwards for tax purposes		483,590			455,555
Accrued pension and severance costs		131,262			112,075
Film costs		175,439			181,243
Warranty reserves and accrued expenses		96,327			110,475
Future insurance policy benefits		27,419			30,884
Inventory		38,219			16,322
Depreciation		48,339			47,485
Tax credit carryforwards		145,011			134,427
Reserve for doubtful accounts		10,179			10,887
Impairment of investments		47,083			52,451
Deferred revenue in the Pictures segment		16,336			27,294
Other		140,218			158,420
Gross deferred tax assets		1,359,422			1,337,518
Less: Valuation allowance		(1,055,858	)		(1,051,964	)
Total deferred tax assets		303,564			285,554
Deferred tax liabilities:
Insurance acquisition costs		(144,207	)		(160,308	)
Future insurance policy benefits		(132,521	)		(147,159	)
Unbilled accounts receivable in the Pictures segment		(99,625	)		(113,997	)
Unrealized gains on securities		(97,745	)		(78,643	)
Intangible assets acquired through stock exchange offerings		(23,794	)		(23,794	)
Undistributed earnings of foreign subsidiaries and corporate joint ventures		(35,666	)		(26,473	)
Investment in M3		(33,933	)		(34,775	)
Other		(53,750	)		(34,271	)
Gross deferred tax liabilities		(621,241	)		(619,420	)
Net deferred tax liabilities		(317,677	)		(333,866	)

Based on the weight of the available positive and negative evidence, for the fiscal year ended March 31, 2017, Sony continued to maintain valuation allowances against the deferred tax assets at Sony Corporation and its national tax filing group in Japan, as well as at Sony Americas Holding Inc. (“SAHI”) and its consolidated tax filing group, Sony Mobile Communications in Sweden, Sony Europe Limited (“SEU”) in the U.K., certain subsidiaries in Brazil, and certain subsidiaries in other tax jurisdictions.

The net changes in the total valuation allowance was an increase of 50,092 million yen for the fiscal year ended March 31, 2015, and decreases of 21,764 million yen and 3,894 million yen for the fiscal years ended March 31, 2016 and 2017, respectively.

The increase in the valuation allowances during the fiscal year ended March 31, 2015 was primarily due to increasing tax credit carryforwards at SAHI and its consolidated tax filing group in the U.S. and continuing losses at Sony Corporation and its national tax filing group in Japan.

The decrease in the valuation allowances during the fiscal year ended March 31, 2016 was primarily due to the effect of foreign currency translation adjustments at SAHI and its consolidated tax filing group in the U.S. and the reversal of valuation allowances for local tax purposes for certain Japanese subsidiaries based on the weight of the available positive and negative evidence, including the strength of earnings in recent years and their forecast of continuing profits. These decreases were partially offset by an increase in the valuation allowance for accrued pension and severance costs in the national tax filing group in Japan.

The decrease in the valuation allowances during the fiscal year ended March 31, 2017 was primarily due to the use of net operating loss carryforwards for the national tax filing group in Japan.

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Net deferred tax assets (net of valuation allowance) and liabilities are included in the consolidated balance sheets as follows:

	Yen in millions
	March 31
	2016			2017
Current assets — Deferred income taxes		40,940			—
Other assets — Deferred income taxes		97,639			98,958
Current liabilities — Other		(5,330	)		—
Long-term liabilities — Deferred income taxes		(450,926	)		(432,824	)
Net deferred tax liabilities		(317,677	)		(333,866	)

At March 31, 2017, deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries and corporate joint ventures not expected to be remitted in the foreseeable future totaling 742,924 million yen, and on the gain of 61,544 million yen on a subsidiary’s sale of stock arising from the issuance of common stock of Sony Music Entertainment (Japan) Inc. in a public offering to third parties in November 1991, as Sony does not anticipate any significant tax consequences on the possible future disposition of its investment based on its tax planning strategies.

At March 31, 2017, Sony had net operating loss carryforwards, the tax effect of which totaled 455,555 million yen, which may be available as an offset against future taxable income on tax returns to be filed in various tax jurisdictions. With the exception of 140,885 million yen with no expiration period, substantially all of the total net operating loss carryforwards expire at various dates between the fiscal years ending March 31, 2018 and 2024, and the remaining amounts have expiration periods up to 20 years depending on the jurisdiction.

Tax credit carryforwards at March 31, 2017 amounted to 134,427 million yen. With the exception of 20,022 million yen with no expiration period, substantially all of the total available tax credit carryforwards expire at various dates between the fiscal years ending March 31, 2018 and 2027.

A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:

	Yen in millions
	March 31
	2015			2016			2017
Balance at beginning of the fiscal year		222,318			165,434			114,126
Reductions for tax positions of prior years		(2,898	)		(34,261	)		(558	)
Additions for tax positions of prior years		9,532			6,253			13,353
Additions based on tax positions related to the current year		3,740			4,299			8,231
Settlements		(75,272	)		(12,556	)		(8,300	)
Lapse in statute of limitations		(4,320	)		(8,229	)		(3,454	)
Foreign currency translation adjustments		12,334			(6,814	)		(3,869	)
Balance at end of the fiscal year		165,434			114,126			119,529
Total net amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate		93,538			49,323			45,987

The major changes in the total gross amount of unrecognized tax benefit balances relate to transfer pricing adjustments, including as a result of the Bilateral Advance Pricing Agreements (“APAs”) and competent authority requests filed for certain subsidiaries in the MC, G&NS, IP&S, HE&S, Semiconductors and Components segments and All Other, with respect to the intercompany cross-border transactions. The APAs include agreements between Sony and two taxing authorities under the authority of the mutual agreement procedure specified in income tax treaties. Sony reviews its estimated tax expense based on the progress made in these procedures, and the progress of transfer pricing audits generally, and makes adjustments to its estimates as necessary. In addition, the APAs are government to government negotiations, and therefore it is possible that the final outcomes of the agreements may differ from Sony’s current assessment of the more-likely-than-not outcomes of such agreements.

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During the fiscal year ended March 31, 2015, Sony recorded 1,023 million yen of interest expense and reversed 376 million yen of penalties. At March 31, 2015, Sony had recorded liabilities of 10,035 million yen and 3,684 million yen for the payments of interest and penalties, respectively.

During the fiscal year ended March 31, 2016, Sony reversed 774 million yen of interest expense and recorded 674 million yen of penalties. At March 31, 2016, Sony had recorded liabilities of 9,261 million yen and 4,358 million yen for the payments of interest and penalties, respectively.

During the fiscal year ended March 31, 2017, Sony recorded 474 million yen of interest expense and reversed 597 million yen of penalties. At March 31, 2017, Sony had recorded liabilities of 9,735 million yen and 3,761 million yen for the payments of interest and penalties, respectively.

Sony operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited by Japanese and foreign taxing authorities. As a result of audit settlements, the conclusion of current examinations, the expiration of the statute of limitations in several jurisdictions and other reevaluations of Sony’s tax positions, it is expected that the amount of unrecognized tax benefits will change in the next twelve months. Accordingly, Sony believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to 24,553 million yen within the next twelve months.

Sony remains subject to examinations by Japanese taxing authorities for tax years from 2008 through 2016, and by the U.S. and other material foreign taxing authorities for tax years from 2013 through 2016.

22. Reconciliation of the differences between basic and diluted EPS

Reconciliation of the differences between basic and diluted EPS for the fiscal years ended March 31, 2015, 2016 and 2017 is as follows:

	Yen in millions
	Fiscal year ended March 31
	2015			2016		2017
Net income (loss) attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		(125,980	)		147,791		73,289
	Thousands of shares
Weighted-average shares outstanding		1,114,424			1,237,802		1,262,023
Effect of dilutive securities:
Stock acquisition rights		—			2,109		2,358
Zero coupon convertible bonds		—			17,972		23,962
Weighted-average shares for diluted EPS computation		1,114,424			1,257,883		1,288,343
	Yen
Basic EPS		(113.04	)		119.40		58.07
Diluted EPS		(113.04	)		117.49		56.89

Potential shares of common stock which were excluded from the computation of diluted EPS for the fiscal years ended March 31, 2015, 2016 and 2017 were 17,019 thousand shares, 11,357 thousand shares and 6,856 thousand shares, respectively. The potential shares were excluded as anti-dilutive for the fiscal year ended March 31, 2015 due to Sony incurring a net loss attributable to Sony Corporation’s stockholders for the fiscal year, and potential shares related to stock acquisition rights were excluded as anti-dilutive for the fiscal years ended March 31, 2016 and 2017 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for those fiscal years. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

23. Variable interest entities

Sony has, from time to time, entered into various arrangements with VIEs. These arrangements include several joint ventures in the recorded music business, an equity investment in the music publishing business, the

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financing of film production and the outsourcing of manufacturing operations. In addition, Sony has entered into several accounts receivable sales programs that involve VIEs, which are described in Note 6. For the VIEs that are described below, it has been determined that Sony is the primary beneficiary and, accordingly, these VIEs are consolidated by Sony.

Sony’s U.S. subsidiary that is engaged in the recorded music business has entered into several joint ventures with companies involved in the production and creation of recorded music. Sony has reviewed these joint ventures and determined that they are VIEs. Based on a qualitative assessment, it was determined that Sony has the power to direct the activities that most significantly impact the VIEs’ economic performance, as well as the obligation to absorb the losses of theses VIEs as Sony is responsible for providing funding to these VIEs, and in most cases absorbs all losses until the VIEs become profitable. As a result, it has been determined that Sony is the primary beneficiary. The assets of Sony are not available to settle the obligations of these VIEs. As of March 31, 2017, the total assets and liabilities for these VIEs, on an aggregate basis, were 28,446 million yen and 2,474 million yen, respectively.

VIEs in which Sony holds a significant variable interest, but is not the primary beneficiary are described as follows:

As described in Note 5, on June 29, 2012, an investor group which included a wholly-owned subsidiary of Sony Corporation completed its acquisition of EMI Music Publishing. To effect the acquisition, the investor group formed DH Publishing, L.P. (“DHP”) which acquired EMI Music Publishing. In addition, DHP entered into an agreement with Sony’s U.S.-based music publishing subsidiary in which the subsidiary provides administration services to DHP (the “Administration Agreement”). DHP was determined to be a VIE as many of the decision making rights for the entity do not reside within the entity’s equity interests, but rather are embedded in the Administration Agreement. Under the terms of the Administration Agreement, the largest non-Sony shareholder has approval rights over decisions regarding the activities that most significantly impact DHP, including the acquisition and retention of copyrights and the licensing of songs. These approval rights result in Sony and the largest non-Sony shareholder sharing the power to direct the activities of DHP, and as such, Sony is not the primary beneficiary of the VIE. At March 31, 2017, the only amounts recorded on Sony’s consolidated balance sheet that relate to the VIE are Sony’s net investment of 184 million U.S. dollars and a net payable balance of 7 million U.S. dollars. Sony’s maximum exposure to losses as of March 31, 2017 is the aggregate amount recorded on its balance sheet of 177 million U.S. dollars.

Sony’s subsidiary in the Pictures segment entered into a distribution agreement with and made an investment in a production company that will develop, produce and finance feature-length motion pictures and television programming. The investment is accounted for under the cost method. The production company is a VIE as many of the decision making rights for the entity reside within the equity interests held by the management of the production company which are not at risk of economic loss. Based on a qualitative assessment, it was determined that Sony is not the primary beneficiary as Sony does not have the power to direct the activities of the production company. Sony’s maximum exposure to losses as of March 31, 2017 is the amount of investment and the future funding commitments, which total 50 million U.S. dollars.

As described in Note 6, certain accounts receivable sales programs also involve VIEs. These VIEs are all special purpose entities associated with the sponsor banks. Based on a qualitative assessment, Sony is not the primary beneficiary and therefore does not consolidate these entities as Sony does not have the power to direct the activities, an obligation to absorb losses, or the right to receive the residual returns of these VIEs. Sony’s maximum exposure to losses from these VIEs is considered insignificant.

24. Acquisitions

(1) Sony Semiconductor acquisitions

On December 4, 2015, Sony Corporation and Toshiba Corporation (“Toshiba”) signed definitive agreements (the “Transfer Agreements”) to transfer to Sony Corporation and to Sony Semiconductor Manufacturing Corporation (“SCK”), a wholly-owned subsidiary of Sony, semiconductor fabrication facilities, equipment and related assets, as well as other related equipment and assets owned by Toshiba, for 19,000 million yen.

On March 31, 2016, pursuant to the Transfer Agreements, SCK acquired from Toshiba a portion of the semiconductor fabrication facilities, equipment and related assets (the “Toshiba Transferred Assets”) for 16,700 million yen. The purchase price for the Toshiba Transferred Assets is included within Other in the

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investing activities section of the consolidated statements of cash flows. SCK is utilizing the Toshiba Transferred Assets to establish a new technology center and further strengthen its production capacity for CMOS image sensors. The purchase price for the Toshiba Transferred Assets was allocated and recorded primarily to machinery and equipment. SCK also entered into a supply arrangement with Toshiba to manufacture and supply CMOS image sensors for a certain period following the acquisition. In connection with this acquisition, SCK also acquired related inventories from Toshiba.

During the fiscal year ended March 31, 2017, SCK acquired additional assets under the Transfer Agreements for 1,210 million yen. The remaining portion of the assets to be transferred to SCK under the Transfer Agreements will be acquired in the fiscal year ending March 31, 2018.

As the purchase price for the Toshiba Transferred Assets was fully allocated to identifiable tangible and intangible assets and no liabilities were assumed, no goodwill was recorded as part of the acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material.

(2) Orchard acquisition

In April 2015, Sony Music Entertainment (“SME”), a wholly owned subsidiary of Sony, increased its shareholding in The Orchard to 100% by acquiring Orchard Asset Holdings, LLC’s 49% equity interest for 22,168 million yen (185 million U.S. dollars).

Prior to the acquisition, SME’s interest in The Orchard was accounted for under the equity method of accounting. As a result of SME’s obtaining a controlling interest in The Orchard, Sony consolidated The Orchard in accordance with the accounting guidance for business combinations achieved in stages and remeasured the 51% equity interest in The Orchard that it owned prior to the acquisition at a fair value, and recognized a gain of 18,085 million yen (151 million U.S. dollars) in other operating expense, net in the consolidated statement of income.

As a result of the acquisition, Sony recorded 36,664 million yen (307 million U.S. dollars) of goodwill and 13,806 million yen (115 million U.S. dollars) of intangible assets. The cash consideration of 19,547 million yen (164 million U.S. dollars) paid in this transaction, net of cash received, is included within Other in the investing activities section of the consolidated statements of cash flows.

Pro forma results of operations have not been presented because the effect of the acquisition was not material.

(3) TEN Sports Network acquisition

On February 28, 2017, Sony Pictures Networks India, a wholly-owned subsidiary of Sony, completed the first phase of a two-phase acquisition of the TEN Sports Network in a majority of the countries and territories where TEN Sports Network operates, including India, for total consideration of 39,106 million yen (346 million U.S. dollars), of which 37,298 million yen (330 million U.S. dollars) was paid during the fiscal year ended March 31, 2017. The remaining 16 million U.S. dollars is expected to be paid by the second quarter of the fiscal year ending March 31, 2018. Certain other operations and assets will be included in the final phase of the acquisition, subject to certain closing conditions, for cash consideration of approximately 39 million U.S. dollars.

As a result of the acquisition, Sony recorded 24,729 million yen (219 million U.S. dollars) of goodwill and 14,354 million yen (127 million U.S. dollars) of intangible assets. The cash consideration paid in this transaction, net of cash received, is included within Other in the investing activities section of the consolidated statements of cash flows.

Pro forma results of operations have not been presented because the effect of the acquisition was not material.

(4) Other acquisitions

During the fiscal year ended March 31, 2015, Sony completed other acquisitions for total consideration of 23,103 million yen which were paid for primarily in cash and included the August 14, 2014 acquisition of CSC Media Group for total cash consideration of 18,900 million yen. CSC Media Group is one of the United Kingdom’s largest independent cable and satellite television channel groups. There was no material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 12,626 million yen of goodwill and 10,731 million yen of intangible assets.

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During the fiscal year ended March 31, 2016, Sony completed other acquisitions for total consideration of 46,233 million yen which were paid for primarily in cash and included the February 1, 2016 acquisition of Altair for total consideration of 25,565 million yen. Altair develops and sells products focused on LTE (Long Term Evolution) technologies. There was no material contingent consideration subject to future change. The cash consideration of 22,657 million yen paid in the Altair transaction is included within Other in the investing activities section of the consolidated statements of cash flows. As a result of these acquisitions, Sony recorded 36,128 million yen of goodwill and 14,983 million yen of intangible assets, of which 17,879 million yen of goodwill and 6,600 million yen of intangible assets related to the Altair transaction.

During the fiscal year ended March 31, 2017, Sony completed other acquisitions for total consideration of 12,409 million yen which were paid for primarily in cash and there was no material contingent consideration subject to future change. As a result of these acquisitions, Sony recorded 12,384 million yen of goodwill and 7,073 million yen of intangible assets.

No significant amounts have been allocated to in-process research and development and all of the entities described above have been consolidated into Sony’s results of operations since their respective acquisition dates. Pro forma results of operations have not been presented because the effects of other acquisitions, individually and in aggregate, were not material.

25. Divestitures

(1) PC business

On July 1, 2014, Sony completed the sale of its PC business and certain related assets to VAIO Corporation, which was established by Japan Industrial Partners, Inc., in accordance with the definitive agreements reached on May 2, 2014. Although Sony continued to incur certain costs related to exiting the PC business, there was no gain or loss recorded as a direct result of the sale.

(2) Sale of the logistics business

On April 1, 2015, in connection with the formation of a logistics joint venture, Sony sold a part of its logistics business in Japan, Thailand, and Malaysia within Corporate to MITSUI-SOKO HOLDINGS Co., Ltd. for a sales price of 19,211 million yen. As a result of the sale, Sony recognized a gain of 12,284 million yen in other operating expense, net in the consolidated statement of income.

(3) Battery business

On October 31, 2016, Sony and Murata Manufacturing Co., Ltd. signed a binding definitive agreement to transfer the Sony Group’s battery business to the Murata Group (the “Transfer”). The closing of the Transfer is subject to required regulatory approvals and other conditions. Sony classified certain assets and liabilities related to the battery business as held for sale and, as a result of the fair value valuation of these assets and liabilities, recorded impairment losses of 42,298 million yen in other operating expense, net in the consolidated statements of income for the fiscal year ended March 31, 2017.

26. Collaborative arrangements

Sony’s collaborative arrangements primarily relate to arrangements entered into, through a subsidiary in the Pictures segment, with one or more active participants to jointly finance, produce and/or distribute motion pictures or television programming under which both the subsidiary and the other active participants share in the risks and rewards of ownership. These arrangements are referred to as co-production and distribution arrangements.

Sony typically records an asset for only the portion of the motion pictures or television programming it owns and finances. Sony and the other participants typically distribute the product in different media or markets. Revenues earned and expenses incurred for the media or markets in which Sony distributes the product are typically recorded on a gross basis. Sony typically does not record revenues earned and expenses incurred when the other participants distribute the product. Sony and the other participants typically share in the profits from the distribution of the product in all media or markets. For motion pictures, if Sony is a net receiver of (1) Sony’s share of the profits from the media or markets distributed by the other participants less (2) the other participants’ share of the profits from the media or markets distributed by Sony then the net amount is recorded as net sales. If

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Sony is a net payer then the net amount is recorded in cost of sales. For television programming, Sony records its share of the profits from the media or markets distributed by the other participants as sales, and the other participants’ share of the profits from the media or markets distributed by Sony as cost of sales.

For the fiscal years ended March 31, 2015, 2016 and 2017, 23,741 million yen, 30,888 million yen and 44,124 million yen, respectively, were recorded as net sales for amounts due from the other participants and 22,983 million yen, 38,303 million yen and 29,594 million yen, respectively, were recorded as cost of sales for amounts owed to the other participants in these collaborative arrangements.

27. Commitments, contingent liabilities and other

(1) Loan commitments

Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts. As of March 31, 2017, the total unused portion of the lines of credit extended under these contracts was 31,448 million yen. The aggregate amounts of future year-by-year payments for these loan commitments cannot be determined.

(2) Purchase commitments and other

Purchase commitments and other outstanding as of March 31, 2017 amounted to 343,907 million yen. The major components of these commitments are as follows:

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within three years. As of March 31, 2017, these subsidiaries were committed to make payments under such contracts of 139,006 million yen.

Certain subsidiaries in the Music segment have entered into long-term contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music product. These contracts cover various periods mainly within five years. As of March 31, 2017, these subsidiaries were committed to make payments of 61,660 million yen under such long-term contracts.

A subsidiary in the Game & Network Services segment has entered into long-term contracts for programming content. These contracts cover various periods mainly up to two years. As of March 31, 2017, this subsidiary was committed to make payments of 16,317 million yen under such long-term contracts.

Sony has entered into long-term sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within three years. As of March 31, 2017, Sony has committed to make payments of 13,305 million yen under such long-term contracts.

The schedule of the aggregate amounts of year-by-year payment of purchase commitments during the next five fiscal years and thereafter is as follows:

Fiscal year ending March 31	Yen in millions
2018		199,807
2019		69,850
2020		43,327
2021		9,631
2022		8,754
Later fiscal years		12,538
Total		343,907

(3) Litigation

Beginning in 2009, the U.S. Department of Justice (“DOJ”), the European Commission and certain other governmental agencies outside the United States have conducted investigations relating to competition in the

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optical disk drives market. Sony Corporation and/or certain of its subsidiaries have been subject to these investigations. Sony understands that the investigations of several agencies, including the DOJ, have ended, and only one agency continues to investigate. However, proceedings initiated by the European Commission as a result of its investigation continue. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation and certain of its subsidiaries 31 million euros; however, Sony filed an appeal against the decision with the European Union’s General Court. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

Beginning in 2011, the DOJ, the European Commission and certain other governmental agencies outside the United States conducted investigations relating to competition in the secondary batteries market. Sony Corporation and/or certain of its subsidiaries were subject to these investigations. Sony understands that the investigations by these agencies, including the DOJ and the European Commission, have ended or are no longer active. With respect to the investigation by the European Commission, in December 2016, Sony and certain of its subsidiaries reached a settlement with the European Commission to pay a fine of approximately 29.8 million euros. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

A Sony subsidiary outside Japan was subject to a non-Japanese customs investigation in connection with the import and export of certain HE&S products. Sony cooperated with the relevant government authorities and settled the matter in March 2017. Settlement of the matter had no material impact on Sony’s results of operations and financial position.

In addition, Sony Corporation and certain of its subsidiaries are defendants or otherwise involved in other pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position.

(4) Guarantees

Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of March 31, 2017 amounted to 3,368 million yen.

In addition to the above, Sony also issues contractual product warranties under which it generally guarantees the performance of products delivered and services rendered for a certain period or term. The changes in the product warranty liability for the fiscal years ended March 31, 2015, 2016 and 2017 are as follows:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Balance at beginning of the fiscal year		79,718			75,129			66,943
Additional liabilities for warranties		87,902			83,227			53,502
Settlements (in cash or in kind)		(78,356	)		(81,462	)		(49,532	)
Changes in estimate for pre-existing warranty reserve		(13,731	)		(6,440	)		(7,927	)
Translation adjustment		(404	)		(3,511	)		(2,188	)
Balance at end of the fiscal year		75,129			66,943			60,798

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28. Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chief Executive Officer and President.

Sony realigned its business segments from the first quarter of the fiscal year ended March 31, 2017 to reflect a change in the Corporate Executive Officers in charge of certain segments and modifications to the organizational structure of certain segments as of April 1, 2016. As a result of this realignment, Sony has separated the Devices segment into the Semiconductors segment and the Components segment. In addition, the operations of the automotive camera business, which were included in the IP&S segment, and the operations of the Imaging Device Development Division, which were included in Corporate and elimination, are now included in the Semiconductors segment. Additionally, certain operations which were included in All Other and Corporate and elimination are now included in the Music segment and All Other, respectively. In connection with these realignments, the sales and operating revenue and operating income (loss) of each segment for the comparable period have been reclassified to conform to the current presentation.

The MC segment includes the manufacture and sales of mobile phones and an Internet-related service businesses. The G&NS segment includes the manufacture and sales of home gaming products, network services businesses and production and sales of software. The IP&S segment includes the Still and Video Cameras business. The HE&S segment includes Televisions as well as Audio and Video businesses. The Semiconductors segment includes the image sensors and camera modules businesses. The Components segment includes the batteries and recording media businesses. The Pictures segment includes Motion Pictures, Television Productions and Media Networks businesses. The Music segment includes Recorded Music, Music Publishing and Visual Media and Platform businesses. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and a bank business in Japan. All Other consists of various operating activities, including, the overseas disc manufacturing business and the PC business. Sony’s products and services are generally unique to a single operating segment.

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Segment sales and operating revenue:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Sales and operating revenue:
Mobile Communications —
Customers		1,409,179			1,121,925			752,688
Intersegment		1,036			5,548			6,457
Total		1,410,215			1,127,473			759,145
Game & Network Services —
Customers		1,292,146			1,479,775			1,581,568
Intersegment		95,883			72,118			68,231
Total		1,388,029			1,551,893			1,649,799
Imaging Products & Solutions —
Customers		696,888			677,231			571,499
Intersegment		3,682			6,724			8,134
Total		700,570			683,955			579,633
Home Entertainment & Sound —
Customers		1,235,686			1,155,085			1,034,215
Intersegment		2,371			3,957			4,789
Total		1,238,057			1,159,042			1,039,004
Semiconductors —
Customers		535,398			599,430			659,779
Intersegment		164,706			139,629			113,344
Total		700,104			739,059			773,123
Components —
Customers		213,812			194,564			172,772
Intersegment		36,934			30,048			22,601
Total		250,746			224,612			195,373
Pictures —
Customers		876,314			935,827			901,230
Intersegment		2,367			2,315			1,899
Total		878,681			938,142			903,129
Music —
Customers		541,692			602,564			630,767
Intersegment		18,740			16,675			16,891
Total		560,432			619,239			647,658
Financial Services —
Customers		1,077,604			1,066,319			1,080,284
Intersegment		6,025			6,750			7,220
Total		1,083,629			1,073,069			1,087,504
All Other —
Customers		297,648			241,104			202,344
Intersegment		87,909			91,092			64,634
Total		385,557			332,196			266,978
Corporate and elimination		(380,140	)		(342,968	)		(298,096	)
Consolidated total		8,215,880			8,105,712			7,603,250

G&NS intersegment amounts primarily consist of transactions with All Other. Semiconductors intersegment amounts primarily consist of transactions with the MC segment, the G&NS segment and the IP&S segment. All Other intersegment amounts primarily consist of transactions with the Pictures segment, the Music segment and the G&NS segment. Corporate and elimination includes certain brand and patent royalty income.

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Segment profit or loss:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Operating income (loss):
Mobile Communications		(217,574	)		(61,435	)		10,164
Game & Network Services		48,104			88,668			135,553
Imaging Products & Solutions		38,790			69,320			47,257
Home Entertainment & Sound		24,102			50,558			58,504
Semiconductors		96,214			14,500			(7,811	)
Components		(7,515	)		(42,919	)		(60,445	)
Pictures		58,527			38,507			(80,521	)
Music		58,190			86,509			75,798
Financial Services		193,307			156,543			166,424
All Other		(94,172	)		1,667			30,861
Total		197,973			401,918			375,784
Corporate and elimination		(129,425	)		(107,721	)		(87,082	)
Consolidated operating income		68,548			294,197			288,702
Other income		25,076			66,849			14,418
Other expenses		(53,895	)		(56,542	)		(51,501	)
Consolidated income before income taxes		39,729			304,504			251,619

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

All Other includes the results of the PC business and the disc manufacturing business (Refer to Notes 13 and 25). For the fiscal year ended March 31, 2015, the PC business results include sales company fixed costs which were allocated based on historical results.

Corporate and elimination includes headquarters restructuring costs, restructuring costs related to the reduction in scale of sales companies following the decision to exit from the PC business (Refer to Notes 19 and 25), and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

Pursuant to a separation of Sony’s businesses into distinct subsidiaries and a realignment of corporate functions, beginning from the fiscal year ended March 31, 2017, a change has been made to the method of calculating the amount of corporate costs allocated to each business segment and the amount of royalties paid by each business segment for brand and patent utilization. As a result of this change, an increase in corporate income of 31,780 million yen is included in Corporate and elimination for the fiscal year ended March 31, 2017. Conversely, an increase in expenses totaling the same amount is included in each of the following business segments: 2,771 million yen in the MC segment, 2,739 million yen in the G&NS segment, 3,413 million yen in the IP&S segment, 13,075 million yen in the HE&S segment, 3,727 million yen in the Semiconductors segment, 1,462 million yen in the Components segment, 2,569 million yen in the Pictures segment and 2,024 million yen in the Music segment. There is no change to the Financial Services segment. These changes have no impact on consolidated operating income.

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Other significant items:

	Yen in millions
	Fiscal year ended March 31
	2015			2016			2017
Equity in net income (loss) of affiliated companies:
Mobile Communications		(534	)		(186	)		(79	)
Game & Network Services		—			—			—
Imaging Products & Solutions		(70	)		—			—
Home Entertainment & Sound		—			—			—
Semiconductors		—			—			—
Components		—			—			—
Pictures		(742	)		(981	)		(35	)
Music		3,471			3,801			5,435
Financial Services		(782	)		(645	)		(3,601	)
All Other		2,578			249			1,843
Consolidated total		3,921			2,238			3,563
Depreciation and amortization:
Mobile Communications		24,128			24,186			19,794
Game & Network Services		18,336			20,798			25,486
Imaging Products & Solutions		31,946			27,612			25,442
Home Entertainment & Sound		25,238			21,781			19,830
Semiconductors		78,474			100,964			102,328
Components		11,599			9,170			1,962
Pictures		19,980			22,375			20,487
Music		14,644			17,795			16,124
Financial Services, including deferred insurance acquisition costs		66,223			102,270			47,056
All Other		11,507			8,597			5,445
Total		302,075			355,548			283,954
Corporate		52,549			41,543			43,094
Consolidated total		354,624			397,091			327,048

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SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

The following table includes a breakdown of sales and operating revenue to external customers by product category for certain segments. Sony management views each segment as a single operating segment.

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Sales and operating revenue:
Mobile Communications		1,409,179		1,121,925		752,688
Game & Network Services
Hardware		733,757		721,829		598,373
Network		351,467		529,318		714,924
Other		206,922		228,628		268,271
Total		1,292,146		1,479,775		1,581,568
Imaging Products & Solutions
Still and Video Cameras		478,099		428,777		351,834
Other		218,789		248,454		219,665
Total		696,888		677,231		571,499
Home Entertainment & Sound
Televisions		835,068		797,764		720,557
Audio and Video		396,814		354,946		311,771
Other		3,804		2,375		1,887
Total		1,235,686		1,155,085		1,034,215
Semiconductors		535,398		599,430		659,779
Components		213,812		194,564		172,772
Pictures
Motion Pictures		434,253		447,355		409,363
Television Productions		252,456		270,115		271,886
Media Networks		189,605		218,357		219,981
Total		876,314		935,827		901,230
Music
Recorded Music		383,350		412,718		388,948
Music Publishing		70,959		71,258		66,541
Visual Media and Platform		87,383		118,588		175,278
Total		541,692		602,564		630,767
Financial Services		1,077,604		1,066,319		1,080,284
All Other		297,648		241,104		202,344
Corporate		39,513		31,888		16,104
Consolidated total		8,215,880		8,105,712		7,603,250

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Geographic Information:

Sales and operating revenue attributed to countries and areas based on location of external customers for the fiscal years ended March 31, 2015, 2016 and 2017 and property, plant and equipment, net as of March 31, 2016 and 2017 are as follows:

	Yen in millions
	Fiscal year ended March 31
	2015		2016		2017
Sales and operating revenue:
Japan		2,233,776		2,317,312		2,392,790
United States		1,528,097		1,733,759		1,673,768
Europe		1,932,941		1,881,329		1,634,683
China		546,697		540,497		557,995
Asia-Pacific		1,052,453		959,171		866,712
Other Areas		921,916		673,644		477,302
Total		8,215,880		8,105,712		7,603,250

	Yen in millions
	March 31
	2016		2017
Property, plant and equipment, net:
Japan		625,143		580,453
United States		99,743		101,167
Europe		31,738		24,273
China		19,884		13,466
Asia-Pacific		37,042		34,575
Other Areas		7,268		4,265
Total		820,818		758,199

Major countries and areas in each geographic segment excluding Japan, United States and China are as follows:

(1) Europe:	United Kingdom, France, Germany, Russia, Spain and Sweden
(2) Asia-Pacific:	India, South Korea and Oceania
(3) Other Areas:	The Middle East/Africa, Brazil, Mexico and Canada

There are no individually material countries with respect to sales and operating revenue or property, plant and equipment, net included in Europe, Asia-Pacific and Other Areas.

Transfers between reportable business segments or geographic areas are made at amounts which Sony’s management believes approximate arms-length transactions.

There were no sales and operating revenue with any single major external customer for the fiscal years ended March 31, 2015, 2016 and 2017.

29. Subsequent events

On April 1, 2017, Sony transferred all of the equity interest in Sony Electronics Huanan Co., Ltd. (“SEH”), a wholly-owned subsidiary in the Semiconductors segment that manufactures camera modules, to Shen Zhen O-Film Tech Co., Ltd. The consideration for the transfer is approximately 234 million U.S. dollars, including the assumption of SEH’s debt and the sales price of approximately 95 million U.S. dollars, all of which is subject to customary post-closing adjustments. As the result of the transfer, Sony expects to recognize a gain on transfer totaling approximately 27,000 million yen in other operating (income) expense, net in the consolidated statement of income for the first quarter of the fiscal year ending March 31, 2018.

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SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES

	Yen in millions
	Balance at beginning of period		Additions charged to costs and expenses		Deductions (Note 1)			Other (Note 2)			Balance at end of period
Fiscal year ended March 31, 2015:
Allowance for doubtful accounts and sales returns		75,513		60,252		(51,211	)		2,044			86,598
Fiscal year ended March 31, 2016:
Allowance for doubtful accounts and sales returns		86,598		56,687		(66,443	)		(4,059	)		72,783
Fiscal year ended March 31, 2017:
Allowance for doubtful accounts and sales returns		72,783		33,667		(50,858	)		(2,442	)		53,150
Notes: 1.      Reversal including amounts written off. 2.      Translation adjustment.
	Balance at beginning of period		Additions		Deductions			Other (Note 1)			Balance at end of period
Fiscal year ended March 31, 2015:
Valuation allowance — Deferred tax assets		1,027,530		137,039		(80,541	)		(6,406	)		1,077,622
Fiscal year ended March 31, 2016:
Valuation allowance — Deferred tax assets		1,077,622		154,171		(116,277	)		(59,658	)		1,055,858
Fiscal year ended March 31, 2017:
Valuation allowance — Deferred tax assets		1,055,858		149,697		(154,210	)		619			1,051,964

Note:

1. Translation adjustment and the effect of changes in statutory tax rate.

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