Exhibit 2 

 

Case 2:23-cv-00576-JRG-RSP Document 26-11 Filed 01/29/24 Page 1 of 235 PageID #:

876
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

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

For the fiscal year ended March 31, 2023

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 Group Kabushiki Kaisha

(Exact Name of Registrant as specified in its charter)

SONY GROUP 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, Finance & Investor Relations

Sony Corporation of America

25 Madison Avenue, 26th Floor

New York, New York 10010-8601

Telephone: 212-833-6722

E-mail: ir@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 Trading Symbol(s) Name of Each Exchange on Which Registered

American Depositary Shares* SONY New York Stock Exchange

Common Stock**

* 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 or to be 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, 2023 March 31, 2023

Title of Class (Tokyo Time) (New York Time)

Common Stock 1,234,497,560

American Depositary Shares 117,871,924

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

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 Í No ‘

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such

files). Yes Í 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.

Í 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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm

that prepared or issued its audit report. Í

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ‘

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ‘

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 Í 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 Í

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Cautionary Statement

Statements made in this document 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 forwardlooking 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) Sony’s ability to maintain product quality and customer satisfaction with its products and services;

(ii) 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;

(iii) 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;

(iv) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of

Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic

initiatives;

(v) changes in laws, regulations and government policies in the markets in which Sony and its third-party

suppliers, service providers and business partners operate, including those related to taxation, as well

as growing consumer focus on corporate social responsibility;

(vi) Sony’s continued ability to identify the products, services and market trends with significant growth

potential, to devote sufficient resources to research and development, to prioritize investments and

capital expenditures correctly and to recoup its investments and capital expenditures, including those

required for technology development and product capacity;

(vii) 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, marketing and

distribution of its products, and its other business operations;

(viii) 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;

(ix) Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption

in the global financial markets or a ratings downgrade;

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

(xi) 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,

liabilities and operating results are denominated;

(xii) Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel;

(xiii) Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew

licenses relating to intellectual property rights and to defend itself against claims that its products or

services infringe the intellectual property rights owned by others;

(xiv) 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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(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) risks related to catastrophic disasters, geopolitical conflicts, pandemic disease or similar events;

(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 and the

personally identifiable information of its employees and customers, potential business disruptions or

financial losses; and

(xviii) the outcome of pending and/or future legal and/or regulatory proceedings.

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

continued impact of developments relating to the situation in Ukraine and Russia could heighten many of the

risks and uncertainties noted above.

Important information regarding risks and uncertainties is also set forth elsewhere in this annual report,

including in “Risk Factors” under “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 Group Corporation and its consolidated subsidiaries are together referred to as

“Sony” or “Sony Group.” In addition, “Sales and financial services 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. [Reserved] ........................................................................ 6

B. Capitalization and Indebtedness ........................................................ 6

C. Reasons for the Offer and Use of Proceeds ............................................... 6

D. Risk Factors ....................................................................... 6

Item 4. Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

A. History and Development of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

B. Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

C. Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

D. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Item 4A. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Item 5. Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

A. Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

B. Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

C. Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

D. Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

E. Critical Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Item 6. Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

A. Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

B. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

C. Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

D. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

E. Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Item 7. Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

A. Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

B. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

C. Interests of Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Item 8. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

A. Consolidated Statements and Other Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

B. Significant Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Item 9. The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

A. Offer and Listing Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

B. Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

C. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

D. Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

E. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

F. Expenses of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Item 10. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

A. Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

B. Memorandum and Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

C. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

D. Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

E. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

F. Dividends and Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

G. Statement by Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

H. Documents on Display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

I. Subsidiary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

J. Annual Report to Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Item 11. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Item 12. Description of Securities Other Than Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

A. Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

B. Warrants and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

C. Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

D. American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

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Item 13. Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds . . . . . . . . . . . . . . . . 106

Item 15. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Item 16. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Item 16A. Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Item 16B. Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Item 16C. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Audit and Non-Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Audit Committee’s Pre-Approval Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Item 16D. Exemptions from the Listing Standards for Audit Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . . . . . . . . . . . . . . . . . 109

Item 16F. Change in Registrant’s Certifying Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Item 16G. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Item 16H. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . 116

Item 17. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Item 18. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Item 19. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

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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. [Reserved]

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.

Sony must overcome increasingly intense competition, which could lead to lower revenue or operating

margins.

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 one or a few businesses and also, potentially, with outsourced

manufacturing service partners that currently supply products to Sony. These competitors may have greater

financial, technical, labor and marketing resources available to them than those available to Sony. Sony’s

financial condition and operating results depend on its ability to efficiently anticipate and respond to these

established and new competitors.

The competitive factors Sony faces vary depending on the nature of the business. For example, in the

electronics area, Sony competes on the basis of various factors including price and function, while in the Music

and Pictures segments, Sony competes for talent, such as artists, songwriters, actors, directors and producers, and

for entertainment content that is created, acquired, licensed and/or distributed. Competition on price can lead to

lower margins when costs do not fall at a proportional rate, and competition for talent and appealing product can

also lead to lower profitability if the higher costs required for such talent and content cannot be recouped through

greater sales. Moreover, 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 accelerate such that Sony

would be unable to maintain its advantageous market position. In terms of consumer electronics products, to

produce products that appeal to changing and increasingly diverse consumer preferences, including constantly

changing consumer interest in minimizing energy consumption and using environmentally friendly materials for

both products and packaging, or to overcome the fact that a relatively high percentage of consumers already

possess similar products, Sony must develop superior technology, anticipate consumer tastes, and rapidly

develop attractive and differentiated products with competitive prices and features. Sony faces increasingly

intense pricing pressure from competitors, retailer consolidation, new sales/distribution channels, and shorter

product cycles in a variety of consumer product categories. In the Music and Pictures segments, operating results

can be impacted by worldwide consumer acceptance of their products, which is difficult to predict, and by

alternative forms of entertainment and leisure activities available to consumers, as well as by competing products

released at or near the same time. For example, in the Pictures segment, as box office revenues recover as

restrictions due to the spread of COVID-19 have been lifted around the world and movie theaters continue to

reopen, the theatrical release calendar of films by major studios is becoming more crowded, increasing

competition for available screen space. This situation could adversely affect the operating results of the Pictures

segment.

If Sony is unable to maintain its advantageous market position in the fields in which it has a technological or

other competitive advantage, Sony is unable to effectively anticipate and counter the ongoing price erosion that

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frequently affects its consumer products or the cost pressures affecting its businesses, there is a change in

existing business models or consumer preferences, or the average prices of Sony’s products decrease faster than

Sony is able to reduce manufacturing costs, Sony’s operating results and financial condition may be adversely

impacted.

To remain competitive and stimulate customer demand, Sony must invest in research and development to

achieve product and service innovations and successfully manage frequent introductions of such new products

and services.

To strengthen the competitiveness of its products and services, Sony continues to invest in research and

development (“R&D”), particularly in growth areas such as the Game & Network Services (“G&NS”) and

Imaging & Sensing Solutions (“I&SS”) segments. However, Sony may not be successful in investing in R&D if

it fails to identify products, services and market trends with significant growth potential. In addition, Sony’s

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 new and competitive products and

services.

Sony must continually introduce, enhance and stimulate customer demand for consumer electronic products

and network services. Sales of these products and services are particularly sensitive to the significant weighting

of consumer demand to the year-end holiday season. In the G&NS segment, the successful introduction and

penetration of gaming platforms, including streaming, is a significant factor driving sales and profitability, and

this success is affected by the ability to provide customers with attractive software line-ups and online services.

However, there is no assurance that third-party software developers and publishers, major contributors to this

effort, will continue to develop and release software. In addition, Sony believes that integrating its hardware,

software, entertainment content and network services and minimizing their energy consumption, as well as

investing in R&D to effect such integration, is essential in generating revenue growth and profitability. However,

this strategy depends on its ability to further develop network services technologies, coordinate and prioritize

strategic and operational issues among Sony’s various business units and sales channels, continually introduce

enhanced, energy efficient and competitively priced hardware that is seamlessly connected to energy efficient

network platforms with user interfaces that are innovative and attractive to consumers and also standardize

technological and interface specifications industry-wide and across Sony’s networked products and business

units. In addition, the G&NS, Music and Pictures segments must invest substantial amounts, which may include

significant upfront investments, in internally developed software titles, artist advances, music catalogs, motion

picture productions, television productions and broadcast programming before knowing whether their products

will receive customer acceptance. Furthermore, underperformance of Pictures’ products in the initial distribution

market is correlated with weak performance in subsequent distribution markets, which would have an adverse

effect on Sony’s results in the year of initial release as well as future years.

The successful introductions of, and transitions to, new products and services depend on a number of

factors, such as the timely and successful completion of development efforts, market acceptance, planning and

executing an effective marketing strategy, managing new product introductions, managing production ramp-up

issues, the availability of application software for new products, quality control and the concentration of

consumer demand in the year-end holiday season. If Sony cannot achieve the expected results from its

investment in R&D, adequately manage frequent introductions of new products and services and obtain

consumer acceptance of its new products and services, or if Sony is not successful in implementing its integration

strategy, Sony’s reputation, operating results and financial condition may be adversely impacted.

Sony’s strategic initiatives, including acquisitions, joint ventures, investments, capital expenditures and

restructurings, may not be successful in achieving their strategic objectives.

Sony actively engages in acquisitions, joint ventures, capital expenditures and other strategic investments to

acquire new technologies, efficiently develop new businesses and enhance its business competitiveness. For

example, in the fiscal year ended March 31, 2022, Sony made an additional strategic investment in Epic Games,

Inc. (“Epic Games”), in which Sony already held a minority interest; acquired 100% of the shares and related

assets of certain subsidiaries of Kobalt Music Group Limited (“Kobalt”) including AWAL, Kobalt’s music

distribution business mainly for independent recording artists, and Kobalt Neighbouring Rights, Kobalt’s music

neighboring rights management business; acquired 100% of the equity interest in Ellation Holdings, Inc.

(“Ellation”), a subsidiary of AT&T Inc. which operated the anime business Crunchyroll; made a minority

investment in Japan Advanced Semiconductor Manufacturing Inc., a subsidiary of Taiwan Semiconductor

Manufacturing Company Limited (TSMC); and acquired 100% of the shares and related assets of Som Livre, an

independent music label in Brazil. In the fiscal year ended March 31, 2023, Sony acquired 100% of the shares of

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Bungie, Inc. (“Bungie”) an independent videogame developer in the United States; made an additional strategic

investment in Epic Games; and established a joint venture with Honda Motor Co., Ltd. in the mobility field.

In some cases, the completion of mergers and acquisitions is subject to certain closing conditions, including

regulatory approvals. As a result of anti-trust laws and regulations and anti-trust regulatory authorities becoming

stricter, regulatory reviews following the signing of a definitive agreement may take longer than expected, or

Sony may fail to obtain regulatory approvals, resulting in the loss of business opportunities and Sony’s inability

to realize some or all of the initially expected results of mergers and acquisitions. As of the date of this report,

mergers and acquisitions that Sony has already signed definitive agreements for and whose completion is subject

to regulatory approvals include the merger of Sony Pictures Networks India (“SPNI”) with Zee Entertainment

Enterprises Ltd. (“Zee”), a publicly listed Indian media and content company.

While Sony performs a comprehensive analysis and evaluation of merged or acquired organizations prior to

their acquisition from various perspectives such as technology, accounting, tax, finance, human resources (“HR”)

and legal, Sony’s financial results may be adversely affected by factors including the significant cost of the

acquisition and/or integration expenses, IT and information security risks introduced from newly acquired

organizations, failure to achieve initially expected synergies, failure to generate expected revenue and cost

improvements, loss of key personnel and assumption of liabilities.

When establishing joint ventures and strategic partnerships, Sony’s financial and operating results may be

adversely affected by strategic or cultural differences with partners, conflicts of interest, failure to achieve

synergies, additional funding or debt guarantees required to maintain the joint venture or partnership,

requirements to buy out a joint venture partner, sell its shares or dissolve a partnership, insufficient management

control including control over cash flow, loss of proprietary technology and know-how, impairment losses and

reputational harm from the actions or activities of a joint venture that uses the Sony brand.

Sony invests heavily in production facilities and equipment, including fabrication facilities used to make

image sensors for smartphones and other products. Sony may not be able to execute these capital expenditures as

planned or recover these capital expenditures in part or full or in the planned timeframe due to the competitive

environment, lower-than-expected consumer demand, changes in the financial condition or business decisions of

Sony’s major customers, or delays in the procurement of production facilities and equipment. Sony invested

237.1 billion yen and 355.9 billion yen of capital in the fiscal years ended March 31, 2022 and 2023,

respectively, mainly for the purpose of increasing image sensor production capacity.

Further, Sony is implementing initiatives for restructuring and transformation to enhance profitability,

business autonomy and shareholder value or to clearly position each business within the overall business

portfolio. However, the expected benefits of these initiatives, including the expected level of profitability, may

not be realized due to internal and external impediments or market conditions worsening beyond expectations. If

Sony is not successful in achieving its restructuring and transformation initiatives, Sony’s operating results,

financial condition, reputation, competitiveness or profitability may be adversely affected.

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

resellers and third-party distributors.

Sony is dependent for the distribution of its products on wholesalers, retailers, other resellers and third-party

distributors, many of whom also distribute competitors’ products. For example, 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. In addition, the Pictures segment depends on third parties to

theatrically exhibit its motion pictures, and to operate cable, satellite, internet and other distribution systems to

distribute its motion pictures and television programming. A decline in the licensing fees received from these

third parties may adversely affect the Pictures segment’s sales. The Pictures segment’s worldwide television

networks are also distributed on third-party cable, satellite and other distribution systems and the failure to

renew, or the 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 these networks.

Sony invests in programs to incentivize wholesalers, retailers, and other resellers and third-party distributors

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.

The operating results and financial condition of many wholesalers, retailers, other resellers and third-party

distributors have been adversely impacted by competition, especially from online retailers, and weak economic

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conditions. If their financial condition continues to weaken, they stop distributing Sony’s products, or uncertainty

regarding demand for Sony’s products or other factors cause them to reduce their ordering, marketing,

subsidizing, or distributing Sony’s products, Sony’s operating results and financial condition may be adversely

impacted.

As a global company, Sony is subject to a wide range of laws and regulations and a growing consumer focus

on corporate social responsibility in many countries. Those laws and regulations, as well as consumer and

regulator 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.

As a global company, Sony is subject to the laws and regulations of many countries throughout the world

that affect its business operations in a number of areas, including advertising, promotions, consumer protection,

import and export requirements, anti-corruption, anti-trust, environmental protection (including decarbonizing

regulations in connection with actions against climate change), data privacy and data protection, content and

broadcast regulation, intellectual property, labor, product liability, taxation (including taxes from certain revenue

on digital services), foreign investment, government procurement, foreign exchange controls, and economic

sanctions.

Compliance with these laws and regulations may be onerous and expensive. These laws and regulations

continue to develop and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of

compliance and doing business. Any such developments could occur frequently and without warning and could

make Sony’s products or services less attractive to its customers, delay or prohibit introduction of new products

or services in one or more regions or cause Sony to change or limit its business practices. For example,

imposition of restrictive trade measures in the United States and elsewhere, as well as retaliatory actions against

such measures, could result in increased customs duties applicable to Sony’s products or increased costs for

procuring parts and components, and could limit or prohibit the sales of Sony’s products and services to certain

of its current or potential customers, which may adversely affect Sony’s operating results and financial condition.

In the I&SS segment, Sony suspended product shipments of image sensors to a certain Chinese customer from

September 15, 2020, pursuant to export restrictions announced by the U.S. government on August 17, 2020. As a

result, image sensor sales decreased compared to before the export restrictions came into effect, although Sony

resumed a portion of shipments to the customer after receiving a U.S. export license. Sony also recorded

inventory write-downs of certain image sensors for the same customer in the fiscal year ended March 31, 2021.

In addition, changes in laws or regulations or the judicial interpretation thereof that Sony relies on or Sony is

subject to in conducting its operations, including online operations, as well as Sony’s failure to anticipate such

changes, may subject Sony to greater risk of liability, increase the costs of compliance, or limit Sony’s ability to

engage in or expand certain operations or lead to discontinuance of certain operations.

Violation of applicable laws or regulations by Sony, its officers or employees, third-party suppliers,

business partners or agents may subject Sony to monetary fines, penalties, legal judgments, restrictions on

business operations and/or reputational damage. Additionally, there is a growing global regulatory and consumer

focus on sustainability efforts, including corporate social responsibility and sourcing practices, as well as

increasing regulatory obligations of public disclosure regarding these matters. In particular, there is increased

attention on labor practices, including work environments at electronic component manufacturers, original

equipment manufacturers/original design manufacturers (OEM/ODM), and product manufacturers operating in

Asia. Increased regulation or public pressure in this area could cause Sony’s compliance costs to increase,

particularly since Sony uses many parts, components and materials to manufacture its products and relies on

suppliers to provide these parts, 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 reputation, operating results and financial condition.

Sony must manage its large volume of and widespread procurement from third-party suppliers and business

partners to control inventory levels, availability, costs and quality of parts, components, materials, software

and network services within volatile markets.

Sony’s products and services rely on a large volume of third-party suppliers and business partners for parts,

components, materials, software and network services, including semiconductors, chipsets for PlayStation® game

consoles and mobile products, LCD (liquid crystal display) panels and the Android OS that is used in mobile

products, televisions and services. As a result, external suppliers’ and partners’ supply shortages, fluctuations in

pricing, quality issues, discontinued support, changes in business terms or prioritization of customers outside the

electronics area or of Sony’s competitors can adversely affect Sony’s operating results, brand and reputation. For

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example, the Entertainment Technology & Services (“ET&S”)* segment was affected by the global shortage of

semiconductors and other components, which became pronounced from the latter half of the fiscal year ended

March 31, 2021 through the first half of the fiscal year ended March 31, 2023 and caused Sony to continue to be

unable to fully meet market demand. Although global demand for semiconductors and other components was on

a declining trend as of the end of the fiscal year ended March 31, 2023, Sony’s operating results and financial

condition could be affected if demand becomes strong again. Reliance on third-party software and technologies

may make it increasingly difficult for Sony to differentiate its products from competitors’ products. Also,

shortages or delayed shipments of critical parts or components may result in a reduction or suspension of

production at Sony’s or its business partners’ manufacturing sites, particularly where Sony is substantially reliant

on one supplier, where there is limited production capacity for custom parts or components, or where there are

initial manufacturing capacity constraints for products, parts or components that use new technologies.

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 inventory, which

can disrupt production plans and result in lost sales opportunities or inventory adjustments, respectively. 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. 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.

* The former Electronics Products & Solutions (EP&S) segment was renamed the Entertainment, Technology &

Services (ET&S) segment effective from April 2022.

Sony’s sales, profitability and operations are sensitive to global and regional economic and political trends

and conditions.

Sony’s sales and profitability are sensitive to economic trends in its major markets, such as inflation. In the

fiscal year ended March 31, 2023, 23.3%, 29.5% and 19.0% of Sony’s sales and financial services revenue were

attributable to Japan, the U.S. and Europe, respectively. These markets may be subject to significant economic

downturns, resulting in an adverse impact on Sony’s operating results and financial condition. An actual or

expected deterioration of economic conditions in any of Sony’s major markets may result in a decline in

consumers’ consumption and adverse impacts on the businesses of commercial customers, resulting in reduced

demand for Sony’s products and services.

In addition, Sony’s operations are conducted in many countries and regions around the world, and these

international operations, particularly in certain emerging markets, can create challenges. For example, in the

ET&S, I&SS and G&NS segments, production and procurement of products, parts and components in China and

other Asian countries and regions increase the time necessary to supply products to other markets worldwide,

which can make it more difficult to meet changing customer demand in a timely manner. Further, in certain

countries and regions, Sony may encounter difficulty in planning and managing operations due to unfavorable

political or economic factors, such as armed conflicts, deterioration in foreign relations, changes in trade policies,

non-compliance with expected business conduct and a lack of adequate infrastructure. If international or

domestic political and military instability disrupts Sony’s business operations or those of its business partners

Sony’s operating results and financial condition may be adversely affected. For example, as a response to the

worsening of the situation in Ukraine and Russia that began in the fiscal year ended March 31, 2022, as of the

date of this report, Sony has suspended its business in Russia. If this situation worsens further in the future, it

could create global uncertainty, possibly leading to the worsening of Sony’s businesses in other regions or a

deterioration in global economic conditions resulting in an adverse impact on Sony’s operating results and

financial condition.

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 area, R&D 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 U.S. dollars and yen. Sales are recorded

in yen, U.S. dollars, euros, 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

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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 resources and hinder Sony’s ability to engage in R&D, procurement,

production, logistics, and sales activities while maintaining profitability.

Although Sony seeks to reduce its exposure to foreign exchange risk by hedging a portion of its net shortterm foreign currency exposure shortly before the transactions occur, such hedging activity may not offset, or

may offset only a portion of, the adverse financial effects of unfavorable movements in foreign exchange rates

over the limited time the hedges are in place.

Moreover, since Sony’s consolidated statements of financial position are 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 (“CP”) 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 CP 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 on 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 CP

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’s success depends on the ability to recruit, retain and maintain productive relations with diverse people

who embrace a challenging spirit and possess the ambition to grow.

In order to continue to create content, develop services, design, manufacture, market, and sell products, in

increasingly competitive markets, Sony must attract, retain and maintain productive relations with key personnel,

both internally and externally, who possess high levels of expertise and broad experience, including its executive

team, other management professionals, creative talent, and hardware and software engineers. However, such key

personnel are in high demand. In addition, business divestitures, restructuring or other transformation initiatives

may lead to an unintended loss of experienced employees or know-how. Actual or threatened work slowdowns or

stoppages related to unionized workers, particularly in the entertainment field, could lead to delayed releases or

cost increases. For example, in the Pictures segment, the Writers Guild of America (“WGA”) went on strike

effective May 2, 2023. If this strike is prolonged, it may adversely affect the operating results of the Pictures

segment. Furthermore, in Japan, with a declining workforce due to the falling birthrate and aging population,

intensifying competition among companies for specialized talent, and rising labor costs, it may become difficult

to secure the necessary talent if Sony’s HR system is inadequate in its design and operations. If these incidents

occur or if Sony is unable to attract, retain and maintain productive relations with employees with high levels of

expertise and broad experience as well as key management professionals, Sony’s operating results and financial

condition may be adversely affected.

Sony’s intellectual property might be subject to unauthorized use or theft and it might encounter restrictions

in its use of intellectual property owned by third parties.

Sony’s intellectual property might be subject to unauthorized use or theft. For example, digital technology,

the availability of digital media, and global internet penetration impact Sony’s ability to protect its copyrighted

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content from unauthorized duplication, digital theft and counterfeiting, putting pressure on legitimate product

sales. Sony has incurred and will continue to incur expenses to help protect its intellectual property rights;

however, Sony’s various initiatives to prevent such unauthorized use or theft of intellectual property might not

achieve their intended result, which could adversely affect Sony’s competitive position and the value of its

investment in R&D. 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.

Many of Sony’s products and services 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 it will be

able to obtain or renew licenses relating to various intellectual property rights that its business needs in the

future; however, such licenses may not be available at all or on acceptable terms, and as a consequence Sony may

need to redesign or discontinue its marketing, selling or distribution of such products or services.

Claims have been and may be asserted against Sony that its products or services, including third-party parts,

components, software and network services used in Sony’s products or services, infringe the intellectual property

rights of other parties. Such claims may be asserted by competitors or by other rights holders, particularly as

products and services evolve to include new technologies and enhanced functionality. Such claims might require

Sony to enter into settlement or license agreements, pay significant damage awards, face an injunction or refrain

from marketing, selling or distributing certain of its products and services.

The failure to prevent unauthorized use or theft of Sony’s intellectual property rights, the failure to enter

into licenses for necessary third-party intellectual property rights, the invalidation of Sony’s intellectual property

rights or the settlement of an infringement claim against Sony by others may adversely impact Sony’s reputation,

operating results and financial condition.

Changes in consumer behavior resulting from new technologies and distribution platforms, as well as

increasing concentration of digital music distributors and creation of content by distributors themselves, may

adversely affect operating results in the Music and Pictures segments.

Technology, particularly digital technology, used in the Music and Pictures segments continues to evolve,

rapidly leading to alternative methods and platforms for the discovery and consumption of digital content. These

technological advancements have changed consumer behavior and empowered consumers to seek more control

over when, where and how they consume digital content.

The prevalence of digital streaming networks and other new media may negatively impact traditional

television and in-theater motion picture viewership, which could adversely affect operating results of the Pictures

segment.

Furthermore, as more music and video content is consumed over digital streaming networks, digital music

distributors are becoming increasingly concentrated, which may decrease the competitiveness of Sony’s music

content and adversely affect its pricing. In addition, digital music and video distributors may increase the amount

of content they create for their own services, which may reduce the demand for content created or produced by

Sony. If Sony is unable to adequately respond to these changes or fails to effectively adapt to new market

changes, Sony’s operating results and financial condition may be adversely impacted.

Changes in the regulation and performance of financial markets may adversely affect the operating results

and financial condition of the Financial Services segment.

The Financial Services segment operates in industries subject to comprehensive regulation and supervision,

including the Japanese insurance and banking industries. Future developments or changes in laws, regulations or

policies may lead to increased compliance costs or limitations on operations in the Financial Services segment. In

addition, lending and borrowing between Sony’s subsidiaries in the Financial Services segment and other

companies within Sony Group is strictly limited by guidelines issued by regulatory agencies in Japan.

Changes in interest rates, foreign exchange rates and the value of Japanese government and corporate bonds,

U.S. treasury bonds, equities, real estate and other asset classes may have an adverse effect on the operating

results and financial condition of the Financial Services segment. For example, the life insurance business has

invested most of its general account assets in ultra-long-term Japanese government and corporate bonds, as well

as ultra-long-term U.S. treasury bonds, to match the liability characteristics of the long-term maturity insurance

policies it has underwritten. The life insurance business has guaranteed yields on outstanding policies while its

investment portfolio could be reduced by the market changes discussed above. The banking business has invested

most of its total loan balance, or over half of its total assets, in its mortgage loans account. An increase in

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non-performing loans or a decline in prices of the real estate collateral from the market changes discussed above

or deterioration of credit quality may have an adverse effect on the operating results and financial condition

through an increase in the allowance for credit losses.

The market changes discussed above, Sony’s management of these changes or the occurrence of

earthquakes, pandemic disease or other catastrophic events in Japan could expose the life and non-life insurance

businesses to increasing costs or adverse impact on their ability to satisfy insurance contract liabilities.

Insurance contract liabilities are calculated based on many actuarial assumptions that are uncertain.

Significant changes to these actuarial assumptions and the market changes discussed above may have an adverse

effect on the operating results and financial condition of the Financial Services segment. The review of

assumptions for insurance contract liabilities is required at the end of each reporting period.

Sony’s facilities and operations are subject to damage and disruption as a result of catastrophic disasters,

outages, pandemic diseases including COVID-19, or similar events that could lead to supply chain,

manufacturing and other business disruptions and have an adverse impact on Sony’s operating results.

Sony’s headquarters and many of Sony’s most advanced manufacturing facilities, including those for image

sensors, are located in Japan, where the risk of earthquakes is relatively high. A major earthquake in Japan,

especially in Tokyo, the Tokai area or the Kyushu and Tohoku areas, where Sony headquarters, certain consumer

electronics product manufacturing sites and image sensor manufacturing sites, respectively, are located, could

cause substantial damage to Sony’s business operations, including damage to buildings, machinery, equipment

and inventories, and the interruption of production at manufacturing facilities. For example, the earthquake of

April 14, 2016 and subsequent earthquakes in the Kumamoto region in Japan caused damage to an image sensor

manufacturing site in Kyushu, which interrupted production at the site.

In addition, offices and facilities used by Sony, its suppliers, service providers and business partners, including

those used for network, telecommunications and information systems infrastructure, R&D, 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 including COVID-19, terrorist attacks,

armed conflicts, 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/or result in large expenses

to repair or replace these facilities or offices. For example, regarding the spread of COVID-19 beginning in the 2020

calendar year, although restrictions including lockdowns have been lifted and the impact on economic activities has

lessened around the world, if economic activity stagnates again due to a future resurgence of infections, it could

adversely affect the procurement of components and raw materials, production, development, sale and distribution

of Sony’s products and services, resulting in a negative impact on Sony’s operating results and financial position. In

the G&NS segment, the production of hardware could be adversely affected again due to issues in the component

supply chain. In the Music segment, in-person concerts and other events could be restricted again, causing related

revenues to decrease. In the Pictures segment, if movie theaters are once again forced to close or limit their capacity,

Sony’s theatrical revenues may decrease. Additionally, depending on the status of lockdowns or other anti-infection

measures, as well as future increases in infections, Sony may be impacted by delays in the production schedules of

new motion pictures and television programming, as well as decreased advertising revenue. The ET&S segment

could continue to be adversely impacted by factory shutdowns or declines in factory utilization, supply chain issues

and the closure of retail stores globally.

Sony may also be exposed to price increases for raw materials, parts and components, and lower demand

from commercial customers. These situations may have an adverse impact on Sony’s operating results and

financial condition. In addition, extreme weather conditions may become more severe and frequent as the

temperature rises due to the effects of climate change, and such extreme weather conditions could heighten the

risks and uncertainties noted above.

Sony’s brand image, reputation and business may be harmed and Sony may be subject to legal 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.

Sony, its third-party service providers, suppliers and other business partners make extensive use of

information technology to support business operations, and to provide network and online services to customers.

These operations and services, as well as Sony’s business information, may be intentionally or inadvertently

compromised by malicious third parties, including state-sponsored organizations, criminal organizations, Sony’s

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officers or employees, third-party service providers or other business partners. Such organizations or individuals

may use a variety and combination of techniques, such as installing malicious software, exploiting vulnerabilities

in information technology, using social engineering to mislead officers, employees and business partners into

disclosing passwords and sensitive information, and coordinating distributed denial-of-service attacks to render

services unavailable. As cyber-attacks become increasingly sophisticated and automated, and as tools and

resources become more readily available, there can be no guarantee that Sony’s actions, security measures and

controls designed to prevent, detect or respond to outside intrusion, limit access to data, prevent loss, destruction,

alteration, or exfiltration of business information, or limit the negative impact from such attacks can provide

absolute security. In addition, Sony’s officers or employees have been working both in the office and at home

following the spread of COVID-19 and this practice is expected to continue. Although Sony takes measures to

ensure that appropriate information security protections are in place for the remote workforce, there can be no

guarantee that Sony’s actions, security measures and controls designed to prevent, detect or respond to outside

intrusion, limit access to data, prevent loss, destruction, alteration, or exfiltration of business information, or limit

the negative impact from such attacks, can provide absolute security. As a result, Sony’s business information,

including personally identifiable information, may be lost, destroyed, disclosed, misappropriated, altered, or

accessed without consent, and Sony’s information technology systems or operations, or those of its service

providers or other business partners, may be disrupted. Malicious adversaries may also use unauthorized access

to Sony’s networks as a platform to compromise Sony’s third-party business partners without Sony’s knowledge.

Sony has previously been the subject of sophisticated and targeted attacks. For example, network services in the

G&NS segment, the internal network and IT infrastructure in the Pictures segment, and Sony’s websites have

been subject to cyber-attacks, resulting in unauthorized access, denial of service, and the theft and/or disclosure

of Sony’s business information, including officer and employee information, customer information, and other

information, as well as the destruction of data.

Any of the above incidents can result in significant remediation costs. In addition, a disruption to Sony’s

network and online services, information technology, or other compromise of its information security may have

serious consequences to its business and operations, including lost revenues, damage to relationships with

business partners and other third parties, disclosure, alteration, destruction or use of proprietary information and

the failure to retain or attract customers. Moreover, such disruptions and breaches may result in a diversion of

management’s attention and resources. Further, it 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. Sony’s cyber insurance may not cover all expenses and losses and, accordingly, such

breaches or other compromises of Sony’s information security or that of its third-party service providers or

business partners may have an adverse impact on Sony’s operating results and financial condition.

Sony’s reputation, operating results and financial condition may be adversely affected as a result of adverse

outcomes of litigation and regulatory actions.

Sony faces the risk of litigation and regulatory actions 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 actions 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, product security, and liability issues.

Sony’s products and services, such as consumer electronics 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. Also, many Sony products are connected to the internet, and regularly communicate with

services provided by Sony or third parties.

Sony’s efforts to adapt to rapid advancements in technologies and increased demand for mobile products

and online services, while also maintaining product quality and product security, may not be successful and may

increase exposure to product liability. As a result, Sony may incur both reputational damages 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. Moreover, cyber-attacks targeting internet-connected products have increased significantly. For

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example, customer information and Sony or third-party technical information may be misappropriated, the

functionality of Sony’s products and services may be impaired, or Sony products may be used in

denial-of-service attacks. There can be no guarantee that Sony’s security measures will prevent products from

being compromised.

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 security vulnerability, 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 financial results and condition may be adversely affected by its employee benefit obligations.

Sony recognizes a net defined benefit liability or asset for its defined benefit pension plans based on (i) the

present value of defined benefit obligations (“DBO”) under each pension plan less (ii) the fair value of plan

assets, in accordance with the accounting guidance for defined benefit plans. If the fair value of plan assets is in

excess of the present value of DBO, the amount of any asset to be recognized is limited to the present value of

any economic benefits available in the form of refunds from the plan or reductions in the future contributions to

the plan. Any decrease in the fair value of plan assets or increases in the present value of DBO due to a lower

discount rate and changes in certain other actuarial assumptions may increase or decrease the net defined benefit

liability or asset and may have an adverse effect on Sony’s financial results and condition.

Also, Sony’s financial results and condition could be adversely affected by future pension funding

requirements pursuant to the Japanese Defined Benefit Corporate Pension Plan Act (the “Pension Plan Act”).

Under the Pension Plan Act, Sony is required to conduct a periodic actuarial revaluation and to ascertain whether

certain financial criteria have been met after the annual accounting closing. In the event that the fair value of plan

assets falls below the actuarial reserve required by law and the shortfall 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 its plans, 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

plan assets, are updated for purposes of determining statutory contributions, it may have an adverse impact on

Sony’s cash flows.

Further losses in tax jurisdictions where Sony has assessed deferred tax assets as unrecognized, 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 Sony’s operating

results and financial condition.

Sony is subject to income taxes in Japan and numerous other jurisdictions, and in the ordinary course of its

business there are many situations where the ultimate tax determination can be uncertain, because of the transfer

pricing for its intercompany transactions, and because Sony is subject to continuous review by tax authorities of

numerous jurisdictions. The calculation of Sony’s tax provision and the carrying value of tax assets, including net

operating loss carryforwards and tax credit carryforwards, require significant judgment and the use of estimates,

including estimates of future taxable income. At the end of each reporting period, Sony reassesses unrecognized

deferred tax assets and determines whether these assets should be recognized. As of March 31, 2023, the

unrecognized deferred tax assets amounted to 237.3 billion yen. An increase in unrecognized deferred tax assets

may have an adverse impact on Sony’s operating results and financial condition.

Deferred tax assets are evaluated on a jurisdiction by jurisdiction basis. As of March 31, 2023, Sony and/or

its subsidiaries had unrecognized deferred tax assets, principally in Japan for local taxes. Additionally, deferred

tax assets could expire unused or otherwise not be realizable for a variety of reasons including the lack of

sufficient taxable income in the appropriate jurisdiction. Sony’s operating results and financial condition could

be adversely affected when the deferred tax assets expire unused.

In some jurisdictions, the use of net operating loss carryforwards or tax credits to reduce taxable income in a

subsequent period is limited to a fixed percentage of taxable income or may only be used to offset taxes on

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income from certain sources. Thus, it is possible that even with significant net operating loss carryforwards or tax

credits, Sony could record and pay taxes in a jurisdiction where it has taxable income.

Sony’s future effective tax rates may also 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 minimum tax requirements and limitations or restrictions on various

tax deductions and credits, including deductions for royalties and interest.

In addition to the above, Sony’s businesses may be subject to new forms of gross basis taxation and

transactional taxes, including digital service taxes. Although such taxes may not directly impact Sony’s effective

tax rate, they may nevertheless have an adverse impact on its operating results and financial condition.

Sony could incur asset impairment losses for goodwill, content assets and other intangible assets or other

non-current assets.

Sony has a significant amount of goodwill, content assets, other intangible assets and other non-current

assets, including production facilities and equipment. A decline in financial performance, market capitalization,

reduced estimates of future cash flows, changes in global economic conditions or changes in estimates and

assumptions used in the impairment analysis, which in many cases requires significant judgment, could result in

impairment losses against these assets. Events or changes in circumstances which would indicate impairment

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 losses. Any such loss

may adversely affect 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

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 Group 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 Group

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 Group 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.

Prior notification under the Foreign Exchange and Foreign Trade Act of Japan may be required in the case

of an acquisition by a foreign investor of a certain portion of our shares.

Because Sony is engaged in certain businesses designated by the Foreign Exchange and Foreign Trade Act of

Japan (the “FEFTA”) and its related cabinet orders and ministerial ordinances (collectively, the “Foreign Exchange

Regulations”), if a foreign investor intends to consummate an acquisition of shares of common stock of Sony Group

Corporation and that acquisition constitutes an “inward direct investment” under the Foreign Exchange Regulations,

the foreign investor, subject to certain exemptions, must file a prior notification of such inward direct investment

with the Minister of Finance and any other competent Ministers. Under the Foreign Exchange Regulations, an

“inward direct investment” includes an acquisition by a foreign investor of shares of common stock of Sony Group

Corporation, the consummation of which results in such foreign investor, in combination with any existing

shareholding, directly or indirectly holding 1% or more of the total number of issued shares of common stock or the

total number of voting rights of Sony Group Corporation, unless certain exemptions apply.

If such prior notification is filed, the proposed acquisition may not be consummated until the prescribed

screening period expires. In some cases, the Ministers may extend the screening period, and may recommend or

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order any modification or the abandonment of such acquisition. In addition, if certain conditions – including

those prescribed in light of the national security of Japan – under the Foreign Exchange Regulations are met, the

Ministers may order the foreign investor to divest the shares acquired or take other measures. Consequently, any

proposed acquisition by a foreign investor of shares of common stock of Sony Group Corporation that constitutes

an “inward direct investment” may not be consummated in an expected time frame in accordance with an

intended plan, or at all.

Additionally, if a foreign investor directly or indirectly holds 1% or more of the total voting rights of Sony

Group Corporation and, at a general meeting of shareholders, consents to certain proposals having a material

influence on the management of Sony Group Corporation such as the (i) election of such foreign investor or any

of its related persons (as defined in the Foreign Exchange Regulations) as a director of Sony Group Corporation

or (ii) transfer or discontinuation of its business, such consent, subject to certain exemptions, also constitutes an

“inward direct investment” requiring prior notification. If such prior notification is filed, such consent cannot be

given until the prescribed screening period expires. As a result, such foreign investors may have difficulties

giving such consent in accordance with an intended plan, or at all.

The discussion above is not exhaustive of all possible foreign exchange controls considerations that may

apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign

exchange controls consequences of the acquisition, ownership and disposition of shares of common stock or

voting rights of Sony Group Corporation by consulting their own advisors. For a more detailed discussion on the

requirements and procedures regarding the prior notifications under the Foreign Exchange Regulations, refer to

“D. Exchange Controls” in “Item 10. Additional Information.”

Item 4. Information on the Company

A. History and Development of the Company

Sony Group Corporation was established in Japan in May 1946 as Tokyo Tsushin Kogyo Kabushiki Kaisha,

a joint stock company (Kabushiki Kaisha) under Japanese law. It changed its name to Sony Kabushiki Kaisha

(“Sony Corporation” in English) in January 1958, and changed its name again to Sony Group Kabushiki Kaisha

(“Sony Group Corporation” in English) in April 2021 in order to focus on its role as the headquarters of the Sony

Group.

In December 1958, Sony Group Corporation was listed on the Tokyo Stock Exchange (the “TSE”). In June

1961, Sony Group Corporation issued American Depositary Receipts in the U.S.

In March 1968, Sony Group Corporation established CBS/Sony Records Inc. in Japan, as a 50-50 joint

venture company between Sony Group Corporation and CBS Inc. in the U.S. In January 1988, the joint venture

became a wholly-owned subsidiary of Sony Group 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 Group Corporation was listed on the New York Stock Exchange (the “NYSE”).

In August 1979, Sony Group Corporation established Sony Prudential Life Insurance Co., Ltd. in Japan, as a

50-50 joint venture company between Sony Group Corporation and The Prudential Insurance Company of

America. In April 1991, the joint venture changed its name to Sony Life Insurance Co., Ltd. (“Sony Life”). In

March 1996, Sony Life became a wholly-owned subsidiary of Sony Group Corporation.

In July 1984, Sony Magnescale Inc., a subsidiary of Sony Group 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 Group 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 Group Corporation acquired CBS Records Inc., the 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 Group 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”).

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In November 1993, Sony Group Corporation established Sony Computer Entertainment Inc. in Japan. Sony

Computer Entertainment Inc. changed its name to Sony Interactive Entertainment Inc. in April 2016.

In October 1995, Sony/ATV Music Publishing LLC (“Sony/ATV”) was formed as a 50-50 joint venture

company between Sony Group Corporation and Michael Jackson. In September 2016, the joint venture became a

wholly-owned subsidiary of Sony Group Corporation. In January 2021, Sony/ATV changed its name to Sony

Music Publishing (US) LLC.

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. (currently Sony Global Manufacturing & Operations

Corporation) — became wholly-owned subsidiaries of Sony Group Corporation. In September 2012, Sony Group

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 Group 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 Group Corporation. In December 2002, Aiwa was merged into Sony Group Corporation.

In June 2003, Sony Group 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 Group Corporation established Sony Financial Holdings, Inc. (“SFH”), a financial

holding company, in Japan. Sony Life, Sony Assurance Inc. (“Sony Assurance”), and Sony Bank Inc. (“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 Group Corporation and SFH. In

September 2020, SFH became a wholly-owned subsidiary of Sony Group Corporation through Sony’s tender

offer for the common shares and the related stock acquisition rights of SFH and the subsequent procedures for

the purchase of all of SFH’s remaining common shares. In October 2021, SFH changed its company name to

Sony Financial Group Inc. (“SFGI”).

In April 2004, S-LCD Corporation (“S-LCD”), a joint venture between Sony Group Corporation and

Samsung Electronics Co., Ltd. of Korea for the manufacture of amorphous thin film transistor LCD (liquid

crystal display) 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 Group 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. It changed its name to So-net Entertainment Corporation in October 2006, and changed its name again to

So-net Corporation (“So-net”) in July 2013. In January 2013, Sony Group 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 Group Corporation. So-net was renamed Sony

Network Communications Inc. (“SNC”) in July 2016.

In June 2012, an investor group including Sony Corporation of America (“SCA”) established DH Publishing,

L.P. (“EMI”) to own and manage EMI Music Publishing, which it then acquired. This acquisition resulted in Nile

Acquisition LLC (“Nile”), of which SCA owned 74.9% and the Estate of Michael Jackson (the “Estate”) owned

25.1%, acquiring approximately 40% of the equity interest in EMI. In July 2018, Sony completed the acquisition of

the Estate’s equity interest in Nile, resulting in Sony owning approximately 40% of the equity interest in EMI. In

November 2018, Sony completed the acquisition of the remaining approximately 60% equity interest in EMI,

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resulting in EMI becoming a wholly-owned subsidiary of Sony. In January 2021, Nile changed its name to Sony

Music Publishing LLC (“SMP”). SMP encompasses both the former Sony/ATV and EMI.

In April 2013, Sony Olympus Medical Solutions Inc. (“SOMED”), a medical business venture between

Sony Group Corporation and Olympus Corporation, was established in Japan. Sony’s stake in SOMED is 51%.

In July 2014, Sony Group 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.

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 imaging and sensing solutions business was split out and began operations as Sony

Semiconductor Solutions Corporation (“SSS”).

In April 2017, the imaging products and solutions 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.

In September 2017, Sony transferred its battery businesses to the Murata Manufacturing Co., Ltd. Group.

In April 2019, Sony Visual Products Inc. and SVS merged to become Sony Home Entertainment & Sound

Products Inc. (“SHES”).

In April 2020, Sony established Sony Electronics Corporation, an intermediate holding company

encompassing the electronics products and solutions businesses.

In April 2021, in connection with the above-mentioned launch of Sony Group Corporation, Sony

Electronics Corporation, SHES, SIPS and Sony Mobile Communications Inc. (“SOMC”) were merged into one

company, which was renamed Sony Corporation. Additionally, certain support functions for the electronics

products and solutions businesses and the imaging products and solutions business that had been carried out by

Sony Group Corporation were transferred to Sony Corporation and SSS.

In April 2022, due to a restructuring of the segments of the TSE, Sony Group Corporation moved from the

First Section to the Prime Market of the TSE.

In July 2022, Sony Interactive Entertainment LLC acquired Bungie, an independent videogame developer in

the United States.

In September 2022, Sony Honda Mobility Inc. (“Sony Honda Mobility”), a joint venture in the mobility

field between Sony Group Corporation and Honda Motor Co., Ltd., was established in Japan. Sony’s stake in

Sony Honda Mobility is 50%.

Sony Group Corporation’s registered office is located at 7-1, Konan 1-chome, Minato-ku, Tokyo 108-0075,

Japan, telephone +81-3-6748-2111. Its website is https://www.sony.com/en/.

The agent in the U.S. for purposes of this Item 4 is Sony Corporation of America, 25 Madison Avenue, 26th

Floor, New York, NY 10010-8601 (Attn: Office of the General Counsel).

Sony files reports and other information with the U.S. Securities and Exchange Commission (the “SEC”)

pursuant to the SEC’s rules and regulations that apply to foreign private issuers. The SEC maintains a website

that contains reports, proxy and information statements, and other information regarding issuers that file

electronically with the SEC. Sony’s electronic filings are available for viewing on this website, at

https://www.sec.gov.

Principal Capital Investments

In the fiscal years ended March 31, 2022 and 2023, Sony’s capital expenditures were 697.2 billion yen and

809.6 billion yen, respectively. 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.

In the fiscal year ended March 31, 2023, Sony invested approximately 381.1 billion yen in the I&SS

segment. This investment included approximately 355.9 billion yen to increase image sensor production capacity.

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B. Business Overview

The former Electronics Products & Solutions segment was renamed the Entertainment, Technology &

Services (ET&S) segment effective from April 2022. This change did not result in any reclassification of

businesses across segments.

Sony is engaged in the development, design, production, manufacture and sale of various kinds of electronic

equipment, instruments and components for consumer, professional and industrial markets such as network

services, game hardware and software, televisions, audio and video recorders and players, still and video

cameras, mobile phones, and image sensors. Sony is 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, including game applications based on animation titles. Sony is

also engaged in the production, acquisition and distribution of motion pictures and television programming and

the operation of television and digital networks. 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.

Products and Services

Game & Network Services (G&NS)

Sony Interactive Entertainment LLC 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 Digital Software and Add-on Content, Network Services and Hardware

and Others categories. Digital Software and Add-on Content includes distribution of software titles and add-on

content through the network by Sony Interactive Entertainment; Network Services includes network services

relating to game, video and music content; and Hardware and Others includes home gaming consoles, packaged

software, game software sold bundled with home gaming consoles, peripheral devices and first-party software for

third-party platforms.

Music

Recorded Music:

“Recorded Music” includes the distribution of physical and digital recorded music and revenue derived from

artists’ live performances. 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 contracts with many artists in

all music genres.

Music Publishing:

“Music Publishing” includes the management and licensing of the words and music of songs. SMP 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 and game

applications, and various service offerings for music and visual products. These businesses are operated primarily

by SMEJ.

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, TriStar Pictures, 3000 Pictures, Sony Pictures Animation, Stage 6 Films, AFFIRM Films and Sony

Pictures Classics. 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.

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Television Productions:

“Television Productions” includes the worldwide production, acquisition and distribution of programming,

including scripted series, unscripted “reality” or “light entertainment,” daytime serials, game shows, animated

series, made for television movies and miniseries and other programming.

Media Networks:

“Media Networks” includes the operation of television networks and direct-to-consumer (“DTC”) streaming

services worldwide. SPE’s television networks around the world include SPNI, which operates television

networks in India, and Game Show Network, LLC, which operates a U.S.-based network delivered on cable,

satellite and other distribution platforms. Digital networks include Crunchyroll, a streaming service based in

North America primarily focused on anime content, and SonyLIV, a general entertainment streaming service in

India.

Entertainment, Technology & Services (ET&S)

TV and Audio & Video:

Sony Corporation undertakes product research, development, design, marketing, sales, production,

distribution and customer services for televisions and video and sound products.

Still and Video Cameras:

Sony Corporation 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. Additionally, it is responsible for

the broadcast/professional solutions business and the FeliCa contactless IC (integrated circuit) card technology

business. SOMED undertakes development support to provide comprehensive medical and imaging device

solutions for operating rooms and other medical areas.

Mobile Communications:

Sony Corporation undertakes product research, development, design, marketing, sales, production,

distribution and customer services for mobile phones, 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.

Imaging & Sensing Solutions (I&SS)

SSS and its subsidiary Sony Semiconductor Manufacturing Corporation undertake product research,

development, design, manufacturing, marketing, sales, production, distribution and customer services primarily

for complementary metal oxide semiconductor (“CMOS”) image sensors, in addition to charge-coupled devices

(CCDs), large-scale integration systems (LSIs) and other semiconductors. These CMOS image sensors are used

in a wide variety of applications, primarily smartphones, as well as other products such as digital cameras and

security cameras, factory automation systems and automobiles.

Financial Services

SFGI 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 SFGI.

All Other

All Other consists of various operating activities, including the disc manufacturing business outside of

Japan, and the recording media and storage media businesses.

Sales and Distribution

G&NS, ET&S and I&SS

In the G&NS segment, PlayStation® hardware and peripheral devices, software and content and network

services are marketed and distributed by Sony Interactive Entertainment LLC, Sony Interactive Entertainment

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Inc. and Sony Interactive Entertainment Europe Ltd. Digital software, including add-on content, is primarily sold

via the PlayStation Store, while software for third-party platforms is sold via third-party distributors. Hardware

and physical software are sold both indirectly via third-party distributors as well as directly via PlayStation’s

proprietary website. Additionally, Bungie carries out marketing and distribution of its software, content and

merchandise under its own brand as an independent studio and publisher, with support from PlayStation.

Sony’s products and services in the ET&S and I&SS segments are primarily marketed throughout the world

under the trademark “Sony.”

In most cases, Sony’s products in the ET&S and I&SS segments are sold to sales subsidiaries of Sony

Group Corporation located in or responsible for sales in various countries and territories. These subsidiaries then

sell those products to unaffiliated local distributors and dealers or through direct sales, such as through the

internet. Sony Corporation brings its mobile products to market through direct and indirect channels, such as

third-party cellular network carriers and retailers, as well as through its own website. In some regions, certain

products and services are sold directly to local distributors by Sony Group Corporation.

Sales of such products and services are particularly seasonal and 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 mainly in the

G&NS and ET&S segments due to demand during the year-end holiday season.

Japan:

Sony Marketing Inc. markets consumer electronics products mainly through retailers. It also 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 in these segments through Sony Electronics Inc. and

other wholly-owned subsidiaries in the U.S.

Europe:

In Europe, Sony’s products and services in these segments are marketed through sales subsidiaries including

Sony Europe B.V., which is headquartered in the United Kingdom and has branches in European countries.

China:

Sony markets products and services in these segments through Sony (China) Limited, Sony Corporation of

Hong Kong Limited and other wholly-owned subsidiaries in China.

Asia-Pacific:

In Asia-Pacific, Sony’s products and services in these segments 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 products and services in these

segments 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.

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 under the

Sony Music Publishing name.

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SMEJ creates artwork and produces packaged home entertainment products including music and games. It

also organizes various events in Japan through Sony Music Communications Inc. and its affiliates. In addition,

SMEJ produces, markets and distributes animation products and game applications based on animation titles

under the Aniplex name.

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 and digital 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 and 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.

Outside the U.S., SPE generally distributes and markets motion pictures through one of its Sony Pictures

Releasing International subsidiaries or affiliates. 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 DiscTM and Digital Distribution. Digital Distribution includes electronic sell-through and

video-on-demand distributed on digital platforms, cable networks and direct broadcast satellite (“DBS”)

providers.

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 distributors such as broadcast television networks, digital platforms,

cable networks and DBS providers. Digital platforms include subscription and advertising supported platforms

(including Sony’s PlayStationTMNetwork, Netflix and Amazon Prime Video).

SPE’s television networks and streaming services (including Crunchyroll primarily in North America and

SonyLIV in India) are distributed through digital platforms, cable, DBS providers and telecommunications

companies to viewers around the world. These networks and services generate advertising, subscription and other

ancillary revenues.

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 specialists 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, 2023,

Sony Life employed 5,402 Lifeplanner® sales specialists. 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 recruitment of high-caliber sales professionals from industries outside the life

insurance industry, quality improvement through education and training, performance-linked compensation and

high productivity. Lifeplanner® sales specialists offer custom-made packages. Most of the agents in the

independent agent channel are corporate and non-exclusive agents, primarily 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 AEGON Sony Life Insurance Co., Ltd. (“AEGON Sony Life”) in August 2007

and SA Reinsurance (“SA Re”) in October 2009, both 50-50 joint venture companies with AEGON N.V.

AEGON Sony Life and SA Re began operations in Japan in December 2009 and in Bermuda in January 2010,

respectively. In January 2020, Sony Life acquired from AEGON International B.V. the remaining 50% stakes of

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AEGON Sony Life and SA Re, resulting in both AEGON Sony Life and SA Re becoming wholly-owned

subsidiaries of Sony Life. AEGON Sony Life changed its trade name to Sony Life With Insurance Co., Ltd.

(“Sony Life With”) on April 1, 2020. On April 1, 2021, Sony Life undertook an absorption-type merger with

Sony Life With, with Sony Life as the surviving company. Furthermore, Sony Life completed the liquidation of

SA Re in March 2023.

Sony Assurance has conducted a non-life insurance business in Japan since October 1999. Sony Assurance’s

core business is providing automobile insurance and fire insurance products, as well as medical insurance and

overseas travel insurance products, to individual customers, primarily through direct marketing via the internet

and via 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.

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 provides credit card settlement services to members of its

internet network.

All Other

Sony DADC group offers Ultra HD Blu-rayTM, Blu-ray DiscTM, DVD and CD media replication services as

well as digital and physical supply chain solutions to business customers. Sony Storage Media Solutions

Corporation sells its storage media products through its own sales forces, as well as through Sony’s sales

companies mentioned in the above description of Sales and Distribution for the G&NS, ET&S and I&SS

segments.

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

2022 2023

(Yen in millions)

Japan 2,764,321 2,691,972

United States 2,766,021 3,401,402

Europe 1,870,091 2,190,311

China 771,006 855,437

Asia-Pacific 1,149,261 1,563,414

Other Areas 600,813 837,301

Total 9,921,513 11,539,837

Sources of Supply

Sony procures parts, components and raw materials 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.

When parts, components and raw materials become scarce, it not only causes production costs to rise but

also may affect production. For example, semiconductors, LCD panels and other discrete components, which are

used in multiple applications, can influence Sony’s performance when the availability of such parts and

components is significantly limited. Additionally, rising energy costs and market prices may cause prices of

parts, components and raw materials to increase, which may adversely affect Sony’s financial results. Regarding

raw materials, the market price of resin, sheet steel and copper, which are widely used in mechanical parts,

electronic parts and components, may also fluctuate because of market factors such as the balance of supply and

demand, and such fluctuations may impact the cost of those parts and components.

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After-Sales Service

Sony provides repair and servicing functions in the areas where its G&NS, ET&S and I&SS products are

sold. Sony provides these services through its own online support network, call centers, service centers, factories,

authorized independent service centers, authorized servicing dealers and subsidiaries.

In line with industry practices of these 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.

Patents and Licenses

Sony has a number of Japanese and foreign patents relating to its products and services. Sony is licensed to

use a number of patents owned by others, covering a wide range of products and services. Certain of these

licenses are important to Sony’s business. Sony products that employ Blu-ray DiscTM player functionality,

including PlayStation®4 and PlayStation®5 (“PS5TM”) hardware, are substantially dependent upon patents that

relate to technologies specified in the Blu-ray DiscTM specifications and are licensed by MPEG LA LLC and

One-Blue, LLC. 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.”

G&NS, ET&S, I&SS and All Other

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 these highly competitive markets. Sony believes that the success of

the G&NS businesses is determined by the availability of attractive software titles and related content,

downloadable content, network services and peripherals. In the I&SS 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.

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. In addition, Sony believes that the success of the

Music segment’s animation products and game applications business, Aniplex, is largely dependent on the

creative talent of game producers and developers, and is also subject to the vagaries of public taste.

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. SPE competes with other companies, in particular technology companies, who are expanding

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into the production or distribution of film and television programing. 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 the increasing fragmentation of

audiences among broadcast and cable networks, digital platforms, DBS providers and other outlets both within

and outside of the U.S. Furthermore, broadcast networks in the U.S., or their affiliated production companies,

continue to produce their own shows internally, and major streaming services in and outside the United States are

producing more content themselves or acquiring content from affiliated production companies. This competitive

environment may result in fewer opportunities to produce shows for such networks and services, and may

contribute to shorter lifespans 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, digital

platforms and other forms of entertainment. The number of networks around the world continues to drive

competition for advertising and subscription revenues, acquisition of programming, and distribution of SPE’s

television networks by cable, DBS providers, digital platforms and other distribution systems.

Financial Services

In the Financial Services segment, Sony faces strong competition in the financial services markets in Japan.

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 internet and via

telephone.

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 sound 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.

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; economic

sanctions; 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

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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

reserve in amounts not 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 Insurance Business Act and the Banking Act that require insurance and banking 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 Services 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 laws and regulations that may affect its global operations and

purchasing activities with respect to social responsibility, such as environmental, human rights, labor, and

occupational health and safety issues. For example, Sony has taken steps to address new regulations or

governmental policies related to climate change including carbon disclosure, greenhouse gas (“GHG”) emission

reduction, carbon taxes and energy efficiency for products in the G&NS, ET&S and I&SS segments.

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, 2023, as described below,

may be disclosable pursuant to Section 13(r) of the Exchange Act.

Sony generally does not allocate profits at the level of these activities, and therefore calculates the estimated

net profit solely for the purpose of this disclosure, which in any event would not be significant. 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.

• 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.

• A non-U.S. subsidiary of Sony entered into an agreement in March 2023 for the sale of medical

instruments, namely, a medical printer and accompanying print media, to a third-party-owned distributor

in Japan, which will be delivered to a hospital in Tehran that is under the control of the Iranian Ministry

of Health and Medical Education, pursuant to Japan International Cooperation Agency’s (JICA)

provision of grant aid to supply certain medical equipment to hospitals in Tehran as part of the

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Government of Japan’s Official Development Assistance (“ODA”). The sale was completed in May

2023. Sony’s expected gross revenue from the sale is approximately 267 thousand yen, and Sony

estimates that its net profit from such sales is 50 thousand yen.

Sony is not aware of any other activity, transaction or dealing by Sony Group Corporation or any of its

affiliates during the fiscal year ended March 31, 2023 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, 2024, except as described above in

connection with the wind-down of its representative office in Iran and the sale of medical instruments pursuant to

the ODA. Nevertheless, Sony continues to monitor developments in this area as sanctions against Iran continue

to evolve, and assess whether and to what extent such sanctions may affect Sony’s business activities, which

Sony intends to conduct in accordance with applicable laws and regulations.

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.

Sustainability Disclosure

Sony’s Approach to Sustainability

Sony Group Corporation has established the following basic policy on sustainability with the approval of the

Board of Directors:

Sony manages diverse businesses with people at the core, and aims for sustainable value creation based on

such diversity and mid-to long-term growth in the Sony Group’s corporate value under its Purpose to “fill the

world with emotion, through the power of creativity and technology,” and its Corporate Direction of “getting

closer to people.” In order to have people connected to each other through emotion, it is necessary to create a

society in which everyone can live with peace of mind in a healthy global environment. Sony acts with due

consideration of the impact of its business activities on stakeholders, including shareholders, customers,

employees, suppliers, business partners, local communities and other organizations as well as the global

environment, and focuses on building trust with stakeholders through dialogue. Through innovation and sound

business practice, Sony endeavors to enhance its corporate value and contribute to the development of a

sustainable society.

(1) Organizational Structure for Sustainability Initiatives and Efforts

<Organizational structure>

Sony Group Corporation has established the Sustainability Department under the supervision of the Senior

Executive in charge of Sustainability. The Sustainability Department promotes various sustainability-related

initiatives throughout the Sony Group in cooperation with each business unit and operating company (“Business

Unit(s)”) and other corporate divisions, including Compliance, Human Resources, Corporate Planning &

Control, Finance and Legal (“Relevant Divisions”).

The Senior Executive in charge of Sustainability regularly reviews and assesses risks and engages in

detection, communication, evaluation and response for the risk of loss related to sustainability. The Sustainability

Department reports to the Board of Directors at least once a quarter on sustainability initiatives and their

progress. In addition, as part of reporting on each Business Unit’s mid-range plan, the Board of Directors

receives reports from each Business Unit on the sustainability challenges and opportunities relevant to their

respective business operations and their efforts in those areas.

<Our sustainability efforts>

The Sustainability Department, operating under the above structure and the aforementioned “Sony’s

Approach to Sustainability,” strives to spread this policy across Sony’s business operations. Through dialogue

with stakeholders and materiality analysis, the Sustainability Department identifies sustainability issues that need

to be addressed by the Sony Group as a whole. Additionally, the Sustainability Department promotes the groupwide sustainability initiatives by formulating relevant Group policies on identified sustainability issues, including

a global environmental plan, “Road to Zero,” and communicating across the Sony Group by collaborating with

the Senior Executives in charge of Sony’s headquarters functions and the Relevant Divisions.

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The Business Units consider sustainability issues and opportunities for their respective businesses, and, with

unique perspectives, implement sustainability-related initiatives that align with their respective business

characteristics. In addition, the Business Units, consulting with the Sustainability Department, have introduced

key performance indicators (“Sustainability KPIs”), which measure the Business Units’ sustainability efforts.

The Sustainability KPIs are incorporated into the Business Units’ performance evaluations, and the Sustainability

Department evaluates the status of achievement of such Sustainability KPIs. Additionally, sustainability is

incorporated into one of the Senior Executives’ performance-linked renumeration evaluation factors for

individual performance from the perspective of social value creation and ESG (Environment, Social,

Governance).

In the fiscal year ended March 31, 2023, a global sustainability conference was held, where the Senior

Executive in charge of Sustainability, the Senior Executive in charge of Human Resources, and sustainability

personnel from the Business Units came together to confirm and share the sustainability initiatives for the

Business Units and their progress on the Sustainability KPIs.

For the fiscal year ended March 31, 2023, the Sustainability KPIs included reducing the use of virgin

oil-based plastic in Sony products, introducing renewable energy at Sony’s manufacturing facilities, reducing

GHG emissions in Sony’s manufacturing processes, implementing awareness-raising activities related to the

environment and diversity, equity, and inclusion (“DE&I”) using Sony’s content IP, as well as conducting DE&I

programs and training.

<Materiality analysis as a prerequisite for the above efforts>

In order to ensure that Sony’s sustainability initiatives can address changes in the social environment and

the expectations of stakeholders from a mid- to long-term perspective, the Sustainability Department, under the

supervision of the Senior Executive in charge of Sustainability, analyzes and identifies material topics for the

Sony Group and periodically reviews their importance. Sony defines materiality as “material topics that are

related to sustainability, impact Sony’s value creation, and are determined with longer-term social change and

diverse stakeholder needs in mind.” The Sustainability Department most recently refreshed the materiality

analysis in the fiscal year ended March 31, 2023 and evaluated sustainability issues which are highly relevant to

Sony, including items that have a negative impact on Sony’s value creation from the perspectives of their

importance to both Sony and its stakeholders.

The importance of topics from Sony’s perspective is evaluated from the perspective of positive or negative

impact on Sony’s ability to create value over the mid- to long-term, while the importance of topics from the

stakeholders’ perspective is evaluated based on information published by non-governmental organizations

(NGOs), investors, rating agencies, mass media and other sources.

Based on such analysis, the most important topics that should be prioritized for Sony have been identified

after review by the Senior Executives in charge of Sony’s headquarters functions and the Board of Directors.

(2) Sustainability Strategies

As a result of the above materiality analysis conducted in the fiscal year ended March 31, 2023, Sony has

identified “Climate Change,” “DE&I,” “Respect for Human Rights,” and “Technology for Sustainability” as the

most important topics that should be prioritized across the Sony Group (collectively, the “Most Important

Topics”).

<Background for selecting the Most Important Topics>

• Climate Change: Sony acknowledges that climate change impacts are becoming more apparent and that the

transition towards a decarbonized society is a critical issue for all companies and that our stakeholders have

elevated expectations of Sony’s environmental initiatives along two axes: the first being its “responsibility,”

for instance, to reduce Sony’s environmental impact, and the second being the “contribution” it can make by

leveraging its diverse businesses and technologies. Sony’s corporate activities are only possible if the earth,

which sustains all life, is healthy. Sony believes that it is important to respond to the environment, including

by taking measures against climate change.

• DE&I: Sony recognizes that diverse organizations are more innovative in corporate activities than

non-diverse organizations. Sony believes that it is important to respect our employees’ diverse values,

remember the importance of equity, and foster an inclusive organizational culture. Expectations are also

rising for corporate initiatives to address social issues such as social justice and inequality, and Sony

believes that it is important for the Sony Group to further promote initiatives aimed at resolving issues both

inside and outside the Group.

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• Respect for Human Rights: Sony is aware of the potential human rights impacts of its global business

activities. Sony recognizes that respecting human rights throughout Sony’s value chain and addressing any

potential human rights risks, whether the relationship with Sony’s business operation is direct or indirect,

are responsibilities that a diverse range of stakeholders expect of Sony. Considering recent changes in the

external environment related to respect for human rights, Sony believes that it is important to further

strengthen its efforts in this area.

• Technology for Sustainability: Sony recognizes that our stakeholders have expectations regarding our ability

to both grow our business and solve social and environmental issues through technology. Sony believes that

it is an important mission of Sony to lead and contribute to the resolution of sustainability issues not only by

increasing business revenue through the technologies and products Sony develops, but also by having a

positive impact on society and the environment.

<Strategy and targets for the Most Important Topics, and major initiatives>

• Climate Change

Under the “Road to Zero,” a long-term environmental plan established in 2010 that aims to achieve a zero

environmental footprint for the entire Sony Group by the year 2050, Sony is promoting environmental impact

reduction activities in each of the following four perspectives: climate change, resources, chemical substances,

and biodiversity. In May 2022, Sony announced that it had determined to accelerate its environmental impact

reduction activities in the climate change area and to push its goal of achieving a net-zero footprint throughout

the entire value chain, moving the target year from 2050 to 2040. Sony’s net-zero (*1) target for 2040 was

approved as the net-zero target for the Science Based Targets initiative (“SBTi”) (*2) in August 2022.

*1 Sony’s net-zero target follows the SBTi Corporate Net-zero Standard below:

(a) reducing Scope 1, 2 and 3 emissions to zero or a residual level consistent with reaching net-zero

emissions at the global or sector level in eligible 1.5°C scenarios or sector pathways; and

(b) neutralizing any residual emissions at the net-zero target date – and any GHG emissions released into

the atmosphere thereafter.

*2 Science Based Targets initiative (SBTi) is a global initiative that encourages companies to set science-based

targets to reduce their GHG emissions toward the goal of limiting the increase in global average temperature due

to climate change to 1.5°C above pre-industrial levels.

Specific targets for achieving the above net-zero target by 2040 are as follows.

1. By 2030, Sony aims to make direct and indirect GHG emissions (Scopes 1 and 2) of its own business

operations net-zero. For other emissions originating from stages such as products, supply chains, and

logistics (Scope 3), Sony aims to reduce GHG emissions during product use by 45% compared to the

fiscal year ended March 31, 2019 by 2035. By 2040, Sony aims to achieve net-zero emissions in all

Scopes.

2. By 2030, Sony aims to achieve 100% renewable electricity used at its own business sites. The

percentage of electricity use derived from renewable energy targeted to be achieved as of 2025 has been

set at 35%.

To achieve the targets in 1 and 2 above, Sony intends to implement the following measures.

• Continuous reduction of environmental impact at Sony Group’s own business sites: Acceleration of

energy saving, installation of solar power generation equipment, and introduction of renewable energy

throughout the Sony Group. Virtual PPA (Power Purchase Agreement) using the FIP

(Feed-in-Premium) system in Japan.

• Promotion of energy-efficient products: Acceleration of initiatives to reduce annual power consumption

of Sony products.

• Strengthening efforts with partners: Encouragement of business partners engaged in parts, materials and

finished product manufacturing to manage their GHG emissions, save energy, and convert to renewable

energy.

• Contribution to carbon removal/fixation (*3): Exploration of investments in start-ups engaged in carbon

removal, and development of an index integrating biodiversity and carbon fixation associated with

augmented ecosystem businesses, such as SynecocultureTM (*4) being rolled out by SynecO, Inc.

*3 Process by which carbon from the atmosphere is converted into organic compounds.

*4 Synecoculture is a trademark of Sony Group Corporation.

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• DE&I

Refer to “(3) Human Capital Strategies, Metrics and Targets” for DE&I strategies.

• Respect for Human Rights

Sony’s policy requiring respect for human rights is set forth in the Sony Group Code of Conduct. Sony expects

all Sony Group companies to practice responsible business conduct by respecting all human rights in compliance

with the code as well as all relevant laws and regulations.

Under this policy, Sony established and implemented Group policies specific to the human rights area, such as

the “Sony Supply Chain Code of Conduct” which sets forth the code of conduct for Sony’s own manufacturing

sites and suppliers, and aims to work towards a responsible supply chain, and the “Sony Group AI Ethics

Guidelines,” which guide all Sony officers and employees to utilize artificial intelligence (“AI”) and/or conduct

AI-related R&D in a manner that conforms with our values and emerging social norms. Sony engages in

initiatives to prevent or mitigate any potential negative impact on human rights in line with the frameworks set

out in the United Nations Guiding Principles on Business and Human Rights (UNGP) issued by the United

Nations Human Rights Council and the OECD Guidelines for Multinational Enterprises. As one of our major

efforts, Sony conducts human rights risk impact assessments, which serve as the starting point for our human

rights due diligence. After identifying potential human rights risks that are highly relevant to Sony’s business

activities, the assessments further identified three areas as priority areas for enhancing initiatives throughout the

Sony Group: responsible supply chains, respect for DE&I and responsible development and use of technologies.

As a result of the assessments, Sony promotes individual initiatives for each of these areas.

• Technology for Sustainability

Sony supports technological development that helps businesses grow and innovation that betters society and

industry for the future.

For example, Sony’s R&D regarding sensing technology that measures the water content in soil, ultra-wide area

sensing network technology, and sophisticated predictive data analytics technology, is underway. Sony promoted

the practical application of TriporousTM, a plant-based porous carbon material made from rice husks, which has

now been introduced in the apparel sector, including through deodorant and antibacterial fibers, and in the

healthcare sector, including though cleaning agents. Sony is also working to reduce the environmental impact of

its products through the development of environmentally conscious materials and technologies to reduce power

consumption.

<Sony’s sustainability efforts on other sustainability issues>

Sony Group is driving initiatives to improve accessibility so that people with diverse needs can enjoy our

products and services. For example, Sony employs inclusive design, including the participation of employees

with disabilities in the planning of products and services, interviews with people with disabilities, and usability

tests. In March 2023, the Sony Group exhibited at the CSUN Assistive Technology Conference 2023 through

which Sony provided opportunities for more users to experience Sony’s accessible products and services and

received various feedback from users for further possible improvements in the accessibility of Sony’s products

and services.

In 2018, Sony established and implemented the “Sony Group Ethics Guidelines,” as described above, as

Sony has expanded its AI development and usage. In December 2019 Sony established the Sony Group AI Ethics

Committee, and in 2021 the AI Ethics Office was established within Sony Group Corporation to provide subject

matter expertise on AI ethics to all Business Units. Sony has been strengthening its framework for AI ethics with

initiatives such as establishing an internal document stipulating requirements to be complied with in the

commercialization process of electronic products and services, and starting AI ethics assessments in the product

development life cycle.

(3) Human Capital Strategies, Metrics and Targets

<Human Resources strategy — “Diversity” and “Attract talented individuals,” “Develop talented individuals,”

“Engage talented individuals.” —>

Starting from the electronics business, Sony has continued to evolve, expanding the breadth of its businesses

to include semiconductors, music, financial services, motion pictures and games. Furthermore, Sony has

developed all its businesses globally, and has tailored its organizational structure with the aim of supporting their

optimal global operation. Sony has headquartered half of its six main business segments in the U.S., and Sony’s

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diverse businesses operating across different regions are sustained by our diverse employees, one of Sony’s most

important management resources, who form the foundation for creative innovation. Sony considers the diversity

of our employees and businesses as drivers for value creation, along with creativity and technology. Sony has

approximately 110,000 employees worldwide who are diverse, not only in terms of nationality and race, but also

due to the expansion of Sony’s businesses, in terms of job types. Employee diversity constitutes the driving force

behind the growth of each business. With their diverse backgrounds and varied specialties, Sony’s employees

connect and intersect across businesses and regions, fusing technology and creativity to create new value in

alignment with Sony’s Purpose, which is to “fill the world with emotion, through the power of creativity and

technology.”

Since its founding, Sony has respected the independence and challenger’s spirit of individuals, and

cherished a corporate culture based on the partnership between Sony and each individual employee, where each

party is accountable to the needs of the other. Sony’s People Philosophy, “Special You, Diverse Sony,”

represents Sony’s approach to employees, which has taken root and been carried on as part of our corporate

culture, and conveys the desire that each unique individual and Sony embrace diversity and continue to grow

together, centered on a shared Purpose.

The group-wide HR strategy based on Sony’s People Philosophy is defined as: “Attract talented

individuals,” “Develop talented individuals,” and “Engage talented individuals.” Sony aims to maximize the

performance of the Sony Group as a whole by focusing on measures that support spontaneous employee

challenges and their willingness to grow, and in turn maximize the power of each individual employee. With

regard to specific initiatives, Business Units’ HR executives formulate and implement the most appropriate HR

measures in accordance with the characteristics of their respective businesses and regions.

(i) “Attract talented individuals”

Sony considers it important to attract diverse talent who identify with Sony’s Purpose, possess a high level

of skill and expertise, embrace the spirit of challenge, and possess the ambition to grow. In recruitment activities,

Sony strategically works with all Sony Group companies worldwide to attract world-class talent, and also focuses

on industry-academia collaboration as a mid- to long-term measure to develop diverse talent pipelines. Sony is

also globally providing opportunities that lead to the success of employees with various business, regional, and

social backgrounds. For example, in the U.S., Sony provides early training and educational support to those who

do not have sufficient opportunities and links these activities to the recruitment of diverse individuals.

(ii) “Develop talented individuals”

Sony believes that the most effective way for our employees to grow is to provide them with job

opportunities where they have autonomy and are able to demonstrate their desire to grow by taking on new

challenges. For this reason, Sony systematizes the skills required according to the roles of employees and aims to

strengthen each skill throughout the Group. Sony strongly believes that management-level employees play an

important role in the growth of the Sony Group and its employees. Sony’s management team and HR

departments discuss the direction for the mid-term development training and strengthening of the Group’s

management and provide management-level employees with various programs such as leadership development

and coaching, which aim to expand horizons and increase experience in a broad range of fields. Additionally,

Sony has established the “Sony University” program, which was designed to nurture future leaders who will play

a key role in each business segment and function. Furthermore, through the “Sony Cross-Mentoring Program,”

Sony aims to create strategic connections between the current management team and future key employees in

each business segment, to facilitate passing on the current leadership team’s wealth of experience to the next

generation and to develop new group synergies and talented individuals.

(iii) “Engage talented individuals”

To fully leverage the diversity of our employees, Sony believes that it is essential for each employee with

different personalities, lifestyles, and work styles to continue to take on challenges in pursuit of growth. Sony’s

initiatives include its diverse career development programs (including an internal job posting program, the “Free

Agent Program” and the “Career Plus” program, among others, which all provide opportunities for professional

experience within the Sony Group) and the arrangement of “PORT,” a space for learning and employee

interaction within the Sony Group, in which employee-led community activities and various training programs

are held.

Sony believes that whether our diverse employees are able to maximize their uniqueness depends on their

engagement and degree of empathy with our Purpose. At Sony, employee engagement is considered a

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particularly important indicator and is incorporated as part of the evaluation factors of remuneration linked to

business results for Senior Executives of the Corporation. Going forward, Sony aims to continue to promote

initiatives that lead to greater employee empathy with the Purpose and higher employee engagement, thereby

aiming to realize the sustainable growth of Sony.

<Policy to foster the diversity of our employees and to build an inclusive organization>

Similar to a strong stone wall built by skillfully combining stones of different shapes, Sony aims to realize

an organization in which diverse personalities, opinions, views, and values coexist in a corporate setting. Sony

has implemented priority measures that are suitable for each business, region, and social environment in order to

promote the appointment of employees with diverse backgrounds, place importance on the perspective of equity,

and achieve true inclusion, which we believe will lead to the sustainable growth of the Sony Group which is

comprised of diverse businesses.

As a group-wide initiative, Sony has established a “Diversity Statement” that emphasizes the importance of

promoting diversity. In the U.S., Sony creates a wide range of internal and external opportunities. For example,

SME has its own framework, “MILES,” for fostering DE&I that contributes to industry development, and SPE

has the “Sony Pictures Action” program, which focuses on four pillars — people, content, partners, and

community — to provide support for those who are socially disadvantaged. In addition, since 2015, Sony has

held a “Diversity Week” every year and Sony Group companies around the world hold events to promote

understanding of diversity in terms of gender, race, nationality, sexual orientation, gender identity, and

disabilities.

(i) Diversity of experience

Sony believes that adding new knowledge and perspectives gained through experience at other companies

will lead to the growth of our businesses and employees. Throughout the years, Sony has aimed to actively

promote hiring individuals with such diversity of experience, especially in areas of business need. The ratio of

employees with prior experience at other companies to all new hires at Sony Group companies in Japan was

52.5% for the fiscal year ended March 31, 2023, 49.6% for the fiscal year ended March 31, 2022, and 48.7% for

the fiscal year ended March 31, 2021. Additionally, the majority of our employees at overseas Group companies

have prior experience at other companies. During performance evaluation, Sony does not distinguish between

employees with experience at other companies and those who started their careers at Sony.

(ii) Diversity of nationality

As of March 31, 2023, half of the Senior Executive Vice Presidents at Sony Group Corporation, who are

responsible for major businesses, were non-Japanese. This demonstrates the diversity of backgrounds at the

leadership level at Sony. In addition, some of the Sony Group’s major businesses, such as the Pictures and Music

Publishing businesses, have foreign nationals playing a major role in their operations. Approximately half of all

Sony Group employees are engaged in business activities outside Japan, and more than 90% of these employees

are locally hired. In addition, Sony continues to actively recruit talented students and experienced individuals

from around the world, regardless of nationality, to become employees capable of enhancing global research and

development and cutting-edge technology development, such as AI developed at Sony Research Inc. (formerly

Sony AI Inc.).

(iii) Diversity of gender

Sony aims to globally promote greater opportunities for women as part of our efforts to ensure an inclusive

work environment in which diverse employees can play an active role. As of March 31, 2023, the ratio of women

to men in the workforce was 34.0% and the ratio of women to men in management positions was 30.0% at the

whole Sony Group. On the other hand, Sony considers increasing gender diversity as an area of focus for Japan,

where the ratio of women to men in management positions is low and the number of women majoring in the

fields of science or engineering is limited.

Sony believes that it is essential to promote greater opportunities for women through measures to improve

the working environment, as well as development programs and recruitment activities. Specifically, Sony has

programs focused on continuously developing female employees, such as development and career training

programs for female leaders as well as roundtable discussions and networking events for female employees, and

is strengthening recruitment activities geared towards female employees, such as through science programs for

female students aimed at supporting the next generation of talent. In addition, Sony Group Corporation and its

major subsidiaries in Japan have set targets for increasing both the ratio of women to men in management

positions and the ratio of male employees taking childcare leave.

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(iv) Promoting greater opportunities for LGBTQ+

Sony is working to ensure internal infrastructure inclusive of diverse employees and aiming to provide

LGBTQ+ employees globally with working environments in which they can feel comfortable being themselves,

while acknowledging various national and regional considerations and circumstances.

As a group-wide initiative, Sony introduced a pride logo, a Sony logotype displayed in rainbow colors, to

visually express Sony’s respect inside and outside Sony and support for LGBTQ+ employees and communities.

In addition to supporting LGBTQ+ employees, Sony has implemented an e-learning course for employees that

covers LGBTQ+ topics, offers LGBTQ+ workshops, organizes events designed to raise employees’ awareness,

and participates in pride parades globally. In the U.S., in partnership with GLAAD, an organization that aims to

prevent LGBTQ+ discrimination in the media, SME provided training on LGBTQ+ inclusion and sponsored the

33rd Annual GLAAD Media Awards, which recognizes media outlets for their fair, accurate, and inclusive

representation of LGBTQ+. In Japan, Sony has expanded various personnel programs to cover same-sex partners,

provides gender-neutral restrooms, makes it optional for job applicants to indicate their gender on applications,

and provides private restrooms and shower facilities in each room at corporate dormitories, all measures aimed at

ensuring a working environment inclusive of diverse employees.

(v) Promoting greater opportunities for individuals with disabilities

Sony aims to create an employment environment where disabilities do not create barriers and no employee

feels held back by their disability. Enabling every employee to thrive follows the philosophy of Masaru Ibuka,

one of Sony’s founders, who said “we had a spirit of autonomy and a belief in creating workplaces that do not

offer charity, but rather create an environment that makes it possible for individuals with disabilities to

manufacture products that exceed those manufactured by individuals without disabilities.” To this end, Sony is

focused on complying with the laws and norms of each country and region and aims to create an inclusive work

environment that enables career building regardless of disabilities, and the entire Group is working to achieve

this goal.

Sony has signed the Valuable 500, a World Economic Forum initiative focused on the inclusion of people

with disabilities, and Sony’s goal to create inclusive work environments aligns with this initiative. Sony was

named one of the Valuable 500 Iconic Leader companies, which are driving forces in their respective countries,

regions, and industries. In the U.S., Sony is actively working with Disability:IN, an organization focused on the

inclusion of people with disabilities in business, and has created an e-learning program to deepen the

understanding of accessibility and disabilities among Sony Group companies and delivered it to employees. In

Japan, Sony manages three special-purpose subsidiaries as an independent business establishment, and the knowhow regarding reasonable workplace accommodation and accessibility related to the employment of persons with

disabilities gained through the operation of these subsidiaries is being deployed throughout the Group. For

example, employees of overseas Group companies visit the manufacturing sites of the special-purpose

subsidiaries in Japan to learn about designing production lines that are accessible for people with disabilities to

work on.

Through the foregoing policy, Sony plans to continuously implement various programs to foster the

diversity of our employees and build an inclusive organization for Sony’s sustainable growth and value creation

for society.

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C. Organizational Structure

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

Corporation.

Name of company

Country of

incorporation/residence

(As of March 31, 2023)

Percentage owned

Sony Interactive Entertainment Inc. Japan 100.0

Sony Music Entertainment (Japan) Inc. Japan 100.0

Sony Corporation Japan 100.0

Sony Global Manufacturing & Operations Corporation Japan 100.0

Sony Semiconductor Solutions Corporation Japan 100.0

Sony Semiconductor Manufacturing Corporation Japan 100.0

Sony Semiconductor Energy Management Corporation Japan 100.0

Sony Network Communications Inc. Japan 100.0

Sony Marketing Inc. Japan 100.0

Sony Storage Media Solutions Corporation Japan 100.0

Sony Global Solutions Inc. Japan 100.0

Sony Financial Group Inc. Japan 100.0

Sony Life Insurance Co., Ltd. Japan 100.0

Sony Bank Inc. Japan 100.0

Sony Assurance Inc. Japan 100.0

Sony Corporation of America U.S.A. 100.0

Sony Interactive Entertainment LLC U.S.A. 100.0

Sony Music Entertainment U.S.A. 100.0

Sony Music Publishing LLC U.S.A. 100.0

Sony Pictures Entertainment Inc. U.S.A. 100.0

Columbia Pictures Industries, Inc. U.S.A. 100.0

CPT Holdings, Inc. U.S.A. 100.0

Sony Electronics Inc. U.S.A. 100.0

Sony Europe B.V. 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 (China) Limited China 100.0

Sony EMCS (Malaysia) Sdn. Bhd. Malaysia 100.0

Sony Electronics (Singapore) Pte. Ltd. Singapore 100.0

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.

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The status of major property, plants and equipment as of March 31, 2023 is as follows:

Facility or

Subsidiary Name

(Primary Location) Segment Details

Carrying Amount (Yen in millions)

Number of

employees*2

Land

(Area

(thousand

square

meters)) Buildings

Machinery,

equipment

and other

assets*1

Right-of-use

assets

In Japan (Sony Group Corporation*3):

Headquarters

(Minato-ku, Tokyo)

Corporate Headquarters facilities 1,275

(19)

21,862 14,681 — 1,435

Others*4 Corporate Headquarters facilities 6,582

(305)

34,544 3,718 — 1,010

In Japan (Subsidiaries):

Sony Interactive Entertainment

Inc.

(Minato-ku, Tokyo)

G&NS Home gaming consoles /

cloud-related software

—

(—)

1,407 168,168 11,381 1,900

Sony Corporation

(Minato-ku, Tokyo)

ET&S Research facilities for TVs, audio /

video devices, cameras, broadcasting

equipment and medical equipment

—

(—)

2,372 47,810 35,495 7,300

Sony Network

Communications Inc.*5

(Shinagawa-ku, Tokyo)

ET&S Data communication facilities —

(—)

527 69,385 5,177 1,900

Sony Global Manufacturing &

Operations Corporation

(Kohda Site, etc.)

(Minato-ku, Tokyo)

ET&S,

I&SS, All

Other

Production facilities for electronic

devices, etc.

5,543

(468)

10,870 16,430 5,517 4,000

Sony Semiconductor Solutions

Corporation

(Atsugi-shi, Kanagawa)

I&SS Research facilities for image sensors,

etc.

—

(—)

1,326 36,070 19,525 7,300

Sony Semiconductor

Manufacturing Corporation

(Nagasaki TEC, etc.)

(Kikuchi-gun, Kumamoto)

I&SS Production facilities for image

sensors, etc.

11,244

(622)

144,569 545,869 10,075 8,100

Sony Semiconductor Energy

Management Corporation

(Nagasaki TEC, etc.)

(Kikuchi-gun, Kumamoto)

I&SS Energy supply facilities for the

manufacturing of image sensors, etc.

—

(—)

25,638 87,833 35,638 100

Sony Music Entertainment

(Japan) Inc.*5

(Chiyoda-ku, Tokyo)

Music Music facilities and in-house

software

22,548

(320)

11,009 55,105 10,595 4,200

Sony Financial Group Inc.*5

(Chiyoda-ku, Tokyo)

Financial

Services

In-house software 6,324

(25)

6,290 70,064 84,023 13,500

Sony Global Solutions Inc.

(Minato-ku, Tokyo)

Corporate In-house software —

(—)

490 21,889 995 600

Outside Japan (Subsidiaries):

Sony Corporation of

America*5

(New York, United States)

ET&S,

I&SS

Production facilities for electronic

products, etc.

317

(112)

18,875 3,841 3,395 1,300

Music Music catalogs, etc. 80

(4)

9,401 797,219 41,901 6,900

Pictures Production facilities for motion

pictures, television programming,

video software, etc.

11,070

(268)

45,917 814,019 39,486 9,100

All Other,

Corporate

Office buildings and machinery, etc. 871

(142)

10,473 15,516 17,994 1,600

Sony Interactive Entertainment

LLC*5

(California, United States)

G&NS Cloud-related facilities, etc. —

(—)

6,909 150,792 104,119 6,100

Sony Europe B.V.*5

(Surrey, United Kingdom)

ET&S,

I&SS, All

Other

Office buildings and sales facilities,

etc.

2,344

(45)

3,822 11,956 9,078 3,900

Sony EMCS (Malaysia) Sdn.

Bhd.

(Selangor, Malaysia)

ET&S Production facilities for electronic

devices, etc.

—

(—)

4,589 8,482 185 4,900

Sony Electronics (Singapore)

Pte. Ltd.

(Singapore)

ET&S,

I&SS, All

Other,

Corporate

In-house software —

(—)

88 11,802 1,633 400

*1 “Machinery, equipment and other assets” represents machinery, equipment and other tangible fixed assets, as

well as content assets and other intangible assets.

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*2 Numbers of employees of subsidiaries are rounded to the nearest hundred.

*3 Includes facilities leased from subsidiaries in Japan. In addition to the listed facilities, Sony Group

Corporation leases its land, buildings and structures mainly to subsidiaries and affiliates in Japan. Furthermore,

Sony Group Corporation subleases its Right-of-use assets mainly to subsidiaries and affiliates in Japan.

*4 “Others” primarily includes Sony City Osaki and Atsugi TEC.

*5 Figures for Sony Network Communications Inc., Sony Music Entertainment (Japan) Inc., Sony Financial

Group Inc., Sony Corporation of America, Sony Interactive Entertainment LLC and Sony Europe B.V. are

consolidated financial figures, which include their subsidiaries’ figures.

Item 4A. Unresolved Staff Comments

None

Item 5. Operating and Financial Review and Prospects

The following discussion covers the fiscal years ended March 31, 2022 and 2023.

A. Operating Results

Operating Performance

The following discussion covers the fiscal years ended March 31, 2022 and 2023. For the discussion

covering the fiscal year ended March 2021, refer to “Item 5.A.” of Sony’s Form 20-F for the fiscal year ended

March 31, 2022 filed with the SEC on June 28, 2022.

Fiscal year ended March 31

2022 2023

(Yen in billions)

Sales and financial services revenue 9,921.5 11,539.8

Operating income 1,202.3 1,208.2

Income before income taxes 1,117.5 1,180.3

Net income attributable to Sony Group Corporation’s stockholders 882.2 937.1

Sales

For the fiscal year ended March 31, 2023, sales increased 1 trillion 618.3 billion yen compared to the fiscal

year ended March 31, 2022 (“year-on-year”) to 11 trillion 539.8 billion yen. This significant increase was mainly

due to significant increases in sales in the G&NS, I&SS, Music and Pictures segments as well as an increase in

sales in the ET&S segment. 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 (Income) 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 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.

For the fiscal year ended March 31, 2023, cost of sales increased 1 trillion 328.9 billion yen year-on-year to

7 trillion 174.7 billion yen. The ratio of cost of sales to sales deteriorated year-on-year from 69.6% to 71.1%.

R&D costs (all R&D costs are included within cost of sales) increased 117.3 billion yen year-on-year to

735.7 billion yen. The ratio of R&D costs to sales was 7.3%, compared to 7.4% in the fiscal year ended

March 31, 2022. For further details, refer to “Research and Development” in Item 5.C.

SGA expenses increased 380.7 billion yen year-on-year to 1 trillion 969.2 billion yen. The ratio of SGA

expenses to sales deteriorated year-on-year from 18.9% to 19.5%.

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Other operating (income) expense, net, decreased 53.5 billion yen year-on-year to income of 12.0 billion

yen. This significant deterioration was mainly due to the absence of a gain of 70.0 billion yen from the transfer of

certain operations of Game Show Network, LLC in the Pictures segment in the fiscal year ended March 31, 2022.

Refer to Note 31 of the consolidated financial statements.

Share of profit of investments accounted for using the equity method

For the fiscal year ended March 31, 2023, the share of profit (loss) of investments accounted for using the

equity method was income of 24.4 billion yen, essentially flat year-on-year. This result was mainly due to

increases in the share of profit of investments in the Music and Pictures segments, substantially offset by a

decrease in the share of profit of the investment in M3 Inc. (“M3”). This decrease in the share of profit of the

investment in M3 was mainly due to the absence of the recording of 5.1 billion yen in the share of profit of the

investment in M3 related to a gain on a change in M3’s equity interest in an affiliated company in the fiscal year

ended March 31, 2022, resulting from the issuance of new shares in connection with the affiliated company’s

public listing.

Operating Income

For the fiscal year ended March 31, 2023, operating income was 1 trillion 208.2 billion yen, essentially flat

year-on-year. This result was due to significant increases in operating income in the Financial Services, I&SS

and Music segments as well as a significant decrease in the operating loss in Corporate and elimination,

substantially offset by significant decreases in operating income in the Pictures and G&NS segments and a

decrease in operating income in the ET&S segment. Operating income for the previous fiscal year included the

above-mentioned factor being recorded as other operating (income) expense, net. Operating income for the

previous fiscal year also included a loss of 16.8 billion yen recorded due to an unauthorized withdrawal of funds

at a subsidiary of Sony Life and a settlement gain of 5.5 billion yen in connection with the termination of the

defined benefit pension plan at certain U.S. subsidiaries, mainly within Corporate and elimination. Operating

income for the current fiscal year included the impact of litigation settlements, net of expenses, of 5.7 billion yen

received in relation to lawsuits for Recorded Music and Music Publishing and the recovery of 22.1 billion yen of

an unauthorized withdrawal of funds at a subsidiary of Sony Life which occurred in the previous fiscal year.

Financial Income and Expenses

For the fiscal year ended March 31, 2023, financial income increased by 11.8 billion yen year-on-year, to

31.1 billion yen, while financial expenses decreased by 45.2 billion yen year-on-year, to 59.0 billion yen. The net

effect of financial income and expenses was an expense of 27.9 billion yen, an improvement of 56.9 billion yen

year-on-year. This significant improvement was primarily due to a decrease in unrealized losses, mainly on

Sony’s shares of Spotify Technology S.A.

Income before Income Taxes

For the fiscal year ended March 31, 2023, income before income taxes increased 62.8 billion yen

year-on-year to 1 trillion 180.3 billion yen.

Income Taxes

During the fiscal year ended March 31, 2023, Sony recorded 236.7 billion yen of income tax expenses. The

effective tax rate of 20.1% in the current fiscal year was lower than the effective tax rate of 20.5% in the previous

fiscal year. The effective tax rate in the current fiscal year reflects the impact of an increase in tax credits in

Japan, and the benefit from a decrease in the deferred tax liabilities related to Japan controlled foreign company

taxation. The effective tax rate in the previous fiscal year reflected the impact of the reversal of a previous writedown of certain deferred tax assets at certain companies in Japan. Refer to Note 25 of the consolidated financial

statements.

Net Income Attributable to Noncontrolling Interests

For the fiscal year ended March 31, 2023, net income attributable to noncontrolling interests of 6.5 billion

yen was recorded, an increase of 0.3 billion yen year-on-year. Refer to Note 20 of the consolidated financial

statements.

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Net Income Attributable to Sony Group Corporation’s Stockholders

For the fiscal year ended March 31, 2023, net income attributable to Sony Group Corporation’s

stockholders, which excludes net income attributable to noncontrolling interests, increased 54.9 billion yen

year-on-year to 937.1 billion yen.

Basic net income per share and diluted net income per share, attributable to Sony Group Corporation’s

stockholders for the fiscal year ended March 31, 2023 were 758.38 yen and 754.95 yen, respectively, compared

with 711.84 yen and 705.16 yen, respectively, for the fiscal year ended March 31, 2022. Refer to Note 26 of the

consolidated financial statements.

Operating Performance by Business Segment

The following discussion is based on segment information. Sales in each business segment represents sales

recorded before intersegment transactions are eliminated. Operating income (loss) in each business segment

represents operating income (loss) reported before intersegment transactions are eliminated and excludes

unallocated corporate expenses. Refer to Note 4 of the consolidated financial statements.

Game & Network Services (G&NS)

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Sales to external customers by product category

Digital Software and Add-on Content 1,424,459 1,523,045

Network Services 409,355 464,676

Hardware & Others 840,542 1,550,812

Sales to external customers 2,674,356 3,538,533

Intersegment sales 65,407 106,065

G&NS segment total sales 2,739,763 3,644,598

G&NS segment operating income 346,089 250,006

(Units in millions)

Major product unit sales

PS5TM hardware 11.5 19.1

For the fiscal year ended March 31, 2023, sales increased 904.8 billion yen year-on-year to 3 trillion

644.6 billion yen. This significant increase in sales was mainly due to the impact of foreign exchange rates, an

increase in sales of hardware and an increase in sales of first-party titles, partially offset primarily by a decrease

in sales of non-first-party titles including add-on content.

Operating income decreased 96.1 billion yen year-on-year to 250.0 billion yen. This significant decrease

was primarily due to an increase in costs, mainly for game software development and expenses associated with

acquisitions completed in the current fiscal year, including Bungie*, in addition to the impact of the abovementioned decrease in sales of non-first-party titles. This decrease in operating income was partially offset by the

impact of the above-mentioned increase in sales of first-party titles as well as a decrease in losses from hardware.

During the current fiscal year, there was a 32.4 billion yen negative impact from foreign exchange rate

fluctuations.

* 52.7 billion yen was recorded as expenses associated with acquisitions completed in the current fiscal year. For

details regarding the acquisition of Bungie, refer to Note 30 of the consolidated financial statements.

Business Environment and Strategy

The operating performance of the G&NS segment for the fiscal year ended March 31, 2023 reflected strong

sales of hardware and peripheral devices resulting from a significant improvement in PS5TM supply in the second

half of the fiscal year and a continuous stable revenue contribution from network services resulting from the

positive impact of the launch of the new three-tiered PlayStation®Plus service. On the other hand, software sales

were impacted by a reduction in users’ game spend as opportunities to go outside increased due to a reduction in

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COVID-19 infections compared to the previous fiscal year, despite strong sales of certain new game titles such as

God of War Ragnarök. In this environment, Sony aims to achieve future growth by increasing the number of

active users in the PlayStation ecosystem through pursuit of the three strategies of console growth, portfolio

expansion and Sony Group collaboration. Regarding console growth, Sony intends to further accelerate the

penetration of PS5TM and further expand the PS5TM user base, which is driving user engagement. Regarding

portfolio expansion, Sony intends to strengthen the development of new IP and live service games by continuing

to invest proactively in PlayStation Studios, as well as investing in or acquiring third-party studios. For example,

Sony has been collaborating closely with Bungie following the completion of its acquisition in July 2022, and

intends to apply its expertise and experience as it promotes portfolio expansion in the area of live service games.

Sony is also working to extend the reach of its existing IP by deploying its first-party titles to multiple platforms

such as PC and mobile, a strategy which contributed to significant year-on-year growth in revenue from PC titles

including Marvel’s Spider-Man and The Last of Us Part 1 in the fiscal year ended March 31, 2023. Regarding

Sony Group collaboration, Sony is striving to consistently create films and television series based on PlayStation

game IP, such as the TV series The Last of Us, and continues to work towards increased levels of collaboration

within the Sony Group.

Music

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Sales to external customers by product category

Recorded Music — Streaming 462,368 598,868

Recorded Music — Others 206,412 286,270

Music Publishing 200,334 276,665

Visual Media & Platform 231,418 203,012

Sales to external customers 1,100,532 1,364,815

Intersegment sales 16,417 15,817

Music segment total sales 1,116,949 1,380,632

Music segment operating income 210,933 263,107

The Music segment results include the yen-based results of SMEJ and the yen-translated results of SME and

SMP, which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.

For the fiscal year ended March 31, 2023, sales increased 263.7 billion yen to 1 trillion 380.6 billion yen.

This significant increase in sales was primarily due to the impact of foreign exchange rates as well as increases in

sales for Recorded Music and Music Publishing, partially offset by lower sales for Visual Media and Platform

due to a decrease in sales in the anime business. The increases in sales for Recorded Music and Music Publishing

were primarily due to higher revenues from paid subscription streaming services, which also benefited from the

success of a number of new releases in Recorded Music.

Operating income significantly increased 52.2 billion yen year-on-year to 263.1 billion yen, primarily due to

the positive impact of foreign exchange rates and the impact of the above-mentioned increase in sales for

Recorded Music and Music Publishing, as well as the impact of litigation settlements, net of expenses, of

5.7 billion yen received in relation to lawsuits for Recorded Music and Music Publishing, partially offset by the

impact of the above-mentioned decrease in sales for Visual Media and Platform.

Business Environment and Strategy

As digital streaming continued to expand globally, the operating performance of the Music segment for the

fiscal year ended March 31, 2023 reflected an increase in revenues from streaming services resulting from the

enhanced discovery and development of artists, including Sony’s past proactive acquisitions such as Alamo

Records, Som Livre and AWAL. In this environment, Sony aims to achieve continuous growth that outpaces the

market by proactively making investments toward strengthening its content IP and its relationships with artists,

strengthening services for distributed labels centered around The Orchard, ensuring early contact with emerging

artists through channels such as AWAL and strengthening its approach in emerging markets by proactively

investing in local talent and collaborating with local companies. Additionally, new business opportunities in

areas such as social media and gaming continue to grow, and Sony intends to further collaborate with various

service partners in these new business areas to both expand its earnings base by creating new opportunities for

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the use of music content, and to strengthen its relationships with artists by creating opportunities for artists to

increase their own earnings. Additionally, by leveraging the diversity of the Sony Group, Sony aims to provide a

wide variety of marketing opportunities to its artists going forward. In Visual Media and Platform, Sony aims to

grow its anime business by expanding its merchandising and revenues from outside of Japan as well as

strengthening its anime production capabilities, and grow its game business by improving fan engagement and

accelerating the development of high-quality games.

Pictures

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Sales to external customers by product category

Motion Pictures 518,840 464,043

Television Productions 419,494 536,250

Media Networks 298,065 364,594

Sales to external customers 1,236,399 1,364,887

Intersegment sales 2,512 4,535

Pictures segment total sales 1,238,911 1,369,422

Pictures segment operating income 217,393 119,255

The Pictures segment results are the yen-translated results of SPE, which 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.”

For the fiscal year ended March 31, 2023, sales increased 130.5 billion yen, an 11% increase year-on-year

(an 8% decrease on a U.S. dollar basis), to 1 trillion 369.4 billion yen. This decrease on a U.S. dollar basis was

primarily due to lower theatrical revenues in Motion Pictures compared to the prior fiscal year which benefited

from the strong performance of several franchise films including Spider-Man: No Way Home and Venom: Let

There Be Carnage, lower licensing revenues in Television Productions as the prior fiscal year benefitted from the

licensing of Seinfeld, and lower licensing revenues in Motion Pictures as the prior fiscal year benefitted from a

greater number of new films licensed to digital streaming services. These decreases in sales were partially offset

primarily by an increase in series deliveries and the impact of acquisitions of Industrial Media and Bad Wolf in

Television Productions, as well as higher revenues from anime streaming services including the impact of the

acquisition of Crunchyroll.

Operating income decreased 98.1 billion yen year-on-year to 119.3 billion yen (a 54% decrease on a U.S.

dollar basis). This significant decrease in operating income on a U.S. dollar basis was primarily due to the

absence of the 70.0 billion yen gain recognized from the transfer of GSN Games, a division of Game Show

Network, LLC, in the prior fiscal year and the impact of the above-mentioned decrease in sales.

Business Environment and Strategy

Although the operating performance of the Pictures segment for the fiscal year ended March 31, 2023 was

impacted by the absence of the strong performance of franchise films as well as the impact of the recording of a

gain on the transfer of GSN Games and revenue from the licensing of Seinfeld in the previous fiscal year, it also

reflected Sony’s strengths as a strategic supplier (an independent content supplier with the ability to provide

content to any distribution platform), which was influenced by continued demand for content from video

streaming services and the continued recovery in U.S. box office revenues. In this environment, Sony aims to

continue to maximize the long-term value of its content by leveraging its strengths as a strategic supplier and

emphasizing the theatrical release of films. In Motion Pictures, Sony plans to continue to pursue both the

development of new IP and the revitalization of its existing IP. For example, in the fiscal year ending March 31,

2024, Sony aims to continue to expand the Sony Pictures Universe of Marvel Characters through the theatrical

release of films such as Spider-Man: Across the Spider-Verse and Kraven the Hunter. In Television Productions,

Sony will continue to strive to strengthen its production capabilities in a wide variety of nonfiction genres such as

documentaries and reality shows in order to meet needs for diverse content. Additionally, in Motion Pictures and

Television Productions, efforts towards collaboration within the Sony Group have continued, and, following the

success of the Uncharted film in 2022 and the TV series The Last of Us in 2023, Sony plans to further expand its

films and television shows based on PlayStation game IP. In Media Networks, Sony aims to further strengthen its

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DTC services, including Crunchyroll and SonyLIV. For example, in the fiscal year ended March 31, 2023,

Crunchyroll strengthened its eCommerce offerings to fans through the acquisition of the anime goods retailer

Right Stuf, Inc. The signing of definitive agreements for the merger of SPNI and Zee was announced in

December 2021, and Sony believes that the merger represents an opportunity to further accelerate the expansion

and digitization of its business by using the strengths of both companies to strengthen its digital distribution

service in the rapidly-growing Indian media and entertainment market. Additionally, Sony aims to proactively

seek out opportunities for revenue from its existing IP in the area of location-based entertainment.

Entertainment, Technology & Services (ET&S)

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Sales to external customers by product category

TVs 858,837 733,251

Audio & Video 326,704 391,608

Still and Video Cameras 414,898 565,018

Mobile Communications 365,864 356,771

Other 331,583 390,091

Sales to external customers 2,297,886 2,436,739

Intersegment sales 41,300 39,286

ET&S segment total sales 2,339,186 2,476,025

ET&S segment operating income 212,942 179,461

(Units in millions)

Major product unit sales

TVs 8.5 6.6

For the fiscal year ended March 31, 2023, sales increased 136.8 billion yen year-on-year to 2 trillion

476.0 billion yen. This increase in sales was primarily due to the impact of foreign exchange rates as well as an

increase in sales of digital cameras resulting from higher unit sales, partially offset by a decrease in sales of

televisions resulting from lower unit sales.

Operating income decreased 33.5 billion yen year-on-year to 179.5 billion yen. This decrease in operating

income was mainly due to the impact of the above-mentioned decrease in sales of televisions, partially offset by

the impact of the above-mentioned increase in sales of digital cameras. During the current fiscal year, there was a

9.4 billion yen positive impact from foreign exchange rate fluctuations.

Business Environment and Strategy

In the fiscal year ended March 31, 2023, in a challenging business environment impacted by disruption in

production and logistics due to the intermittent resurgence of COVID-19 in China and a slowdown in the market

mainly in Europe and the U.S., the operating performance of the ET&S segment reflected the results of various

measures implemented to respond promptly to these conditions, such as thorough supply chain management and

reduction of fixed costs, as well as the promotion of a shift to high-value-added products centered on TVs and

digital cameras. In this environment, Sony plans to conduct its business based on the direction of establishing a

business structure with two axes: the “profit axis business area,” which aims to maintain and increase

profitability, and the “growth axis business area,” which aims to realize growth through the creation and

expansion of new businesses. In the profit axis business area, Sony intends to strengthen operations by promoting

the advancement of consistent digital transformation and automation from production to sale. Additionally, by

adding creative solutions utilizing technologies such as in communications and cloud to its strengths in capturing

devices that make use of its original technologies in sound and imaging, Sony aims to create new experience

value with creators and shift to a business portfolio with a recurring business model, striving to reduce volatility.

In the growth axis business area, in order to create future entertainment together with creators, Sony plans to

evolve its business models through collaboration both within and outside of the Sony Group, aiming to build a

new business model to achieve sustainable growth. Sony also plans to promote the virtual production business

and software solutions business, which aim to free creators from the constraints of time, space and hardware

functionality to enable new video and creative expression, as well as the sports business, which aims to realize

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new sports entertainment connecting “real” and “virtual.” Additionally, in the life science business and the

network service business, Sony aims to contribute to the realization of a safe and a sustainable society by

utilizing the technologies it has cultivated until now.

Imaging & Sensing Solutions (I&SS)

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Sales to external customers 992,200 1,301,481

Intersegment sales 84,224 100,706

I&SS segment total sales 1,076,424 1,402,187

I&SS segment operating income 155,597 212,214

For the fiscal year ended March 31, 2023, sales increased 325.8 billion yen year-on-year to 1 trillion

402.2 billion yen. This significant increase in sales was mainly due to the impact of foreign exchange rates and

an increase in sales of image sensors for mobile products resulting from an improvement in the product mix,

partially offset by a decrease in unit sales.

Operating income increased 56.6 billion yen year-on-year to 212.2 billion yen. This significant increase was

mainly due to the positive impact of foreign exchange rates and the impact of the above-mentioned increase in

sales, partially offset by an increase in R&D expenses as well as depreciation and amortization expenses, and an

increase in manufacturing costs. During the current fiscal year, there was a 120.9 billion yen positive impact

from foreign exchange rate fluctuations.

Business Environment and Strategy

The operating performance of the I&SS segment in the fiscal year ended March 31, 2023 reflected the

continued trend toward larger size, higher image quality and higher performance image sensors for mobile

products, primarily in high-end smartphones, despite continued weakness in the Chinese smartphone market. In

this environment, Sony plans to continue its efforts to enhance its technical capabilities and production capacity

in order to respond to the larger size, higher image quality and higher performance of image sensors, in addition

to promoting efforts to improve sales growth and profitability over the medium term, aiming to further strengthen

its number one position in image sensors worldwide. Sony also plans to continue actively promoting initiatives in

business areas such as automotive and industrial equipment in the sensing area, and in its solutions business via

the edge AI sensing platform AITRIOSTM. The automotive area has been growing steadily, and Sony will

continue to work to build and strengthen relationships with OEMs and platformers with the aim of increasing

revenue from automotive sensors. In the area of industrial sensors, Sony plans to take advantage of its diverse

product lineup to provide solutions that can contribute to solving various on-site issues, including labor-saving

and automation, which Sony expects to lead to mid- to long-term business growth. Sony intends to continue to

invest capital to increase production capacity to meet the growing demand for image sensors over the mid- to

long-term, while also keeping in mind the uncertainty of the future and carefully examining future investment

plans.

Financial Services

The Financial Services segment results include SFGI and SFGI’s consolidated subsidiaries such as Sony

Life, Sony Assurance, and Sony Bank. The results discussed in the Financial Services segment differ from the

results that SFGI and SFGI’s consolidated subsidiaries disclose separately on a Japanese statutory basis.

Key Financial Figures

Fiscal year ended March 31

2022 2023

(Yen in millions)

Financial services revenue 1,533,829 1,454,546

Financial Services segment operating income 150,111 223,935

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For the fiscal year ended March 31, 2023, financial services revenue decreased 79.3 billion yen year-on-year

to 1 trillion 454.5 billion yen, mainly due to a decrease in revenue at Sony Life. Revenue at Sony Life decreased

108.4 billion yen year-on-year to 1 trillion 242.1 billion yen, due to a decrease in net gains on investments in the

separate accounts.

Operating income increased 73.8 billion yen year-on-year to 223.9 billion yen. This significant increase in

operating income was mainly due to the recovery of 22.1 billion yen of an unauthorized withdrawal of funds at a

subsidiary of Sony Life in the fiscal year ended March 31, 2023 which was recorded as a 16.8 billion yen loss in

the fiscal year ended March 31, 2022, as well as a significant increase in operating income at Sony Life.

Operating income at Sony Life increased 29.7 billion yen year-on-year to 177.0 billion yen. This increase in

operating income was mainly due to a gain recorded on the sale of real estate as well as an increase in profits due

to accumulation of policy amount in force, partially offset by an increase primarily in insurance payments related

to COVID-19.

Business Environment and Strategy

The operating performance of the Financial Services segment for the fiscal year ended March 31, 2023

reflected conditions in the Japanese economy and bond market. As in the previous fiscal year, the Japanese

economy faced headwinds due to the COVID-19 pandemic. In addition, rising imports prices, which accelerated

after Russia’s military invasion of Ukraine, put pressure on household budgets through rising food and gasoline

prices. However, as the normalization of economic activities progressed gradually, the economy continued on a

gradual recovery trend. In the first quarter ended June 30, 2022, as the spread of the Omicron variant that began

at the beginning of the year came to a halt, demand for outings for travel and shopping picked up, mainly during

the long holidays in May. After that, there was a period when the infection with the Omicron variant spread

again, but the Japanese government postponed the request for movement restrictions and self-restraint. As a

result, the economy was underpinned by the normalization of economic activities, including an increase in the

number of people going out and the full-scale easing of restrictions on immigration. On the other hand,

production in the manufacturing industry slowed down in the second half of the fiscal year due to factors such as

the slowdown in overseas economies and the decline in IT-related demand for semiconductors. The bond market

in Japan was affected by US and Japanese monetary policies. In this environment, Sony aims to achieve

sustainable growth in the entire financial group, including growth in profitability, by maximizing the value it

provides to its customers. Sony is carrying out initiatives focused on five strategic pillars to realize this goal:

strengthening core/unique competitive advantages, altering its profit structure to withstand low interest rates,

further evolving customer-centric management, strengthening its competitive edge through technology and

maximizing group synergies. These efforts have been proceeding as planned, and Sony has been steadily

expanding the scale of its business by taking advantage of its strengths. For example, the productivity per

Lifeplanner® sales specialist at Sony Life is improving due to the increase in the new policy amount in the

corporate business, which is an area of focus, and the number of Lifeplanner® sales specialists is steadily

increasing. Going forward, Sony will continue to work to expand profit growth by making a qualitative shift

toward higher productivity of Lifeplanner® sales specialists and improvement of profitability. Additionally, Sony

plans to promote efforts aimed at increasing the value it provides to customers by accelerating enhancement of its

technological competitiveness through collaboration within the Sony Group, strengthening its acquisition of

knowledge and technology from outside partners, and utilizing data that transcends the boundaries between the

businesses within the Financial Services segment. The Financial Services segment also intends to focus on

advancing sustainability and thoroughly enhancing governance in the financial group to fulfill its social

responsibility as part of the Sony Group. Furthermore, over the mid- to long-term, Sony plans to expand its

customer base and touchpoints with customers through wider applications of technology and strategic alliances,

as well as through its increasing efforts to deepen relationships with core customers, aiming to maximize the

lifetime customer value.

Information on Operations Separating Out the Financial Services segment

The following schedules show unaudited condensed statements of income for the Financial Services

segment and all other segments excluding the Financial Services segment. These presentations are not in

accordance with International Financial Reporting Standards (“IFRS”), which is used by Sony to prepare its

consolidated financial statements. However, because the Financial Services segment is different in nature from

Sony’s other segments, Sony believes that a comparative presentation 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 are included in those respective presentations, then eliminated in

the consolidated figures shown below.

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Fiscal year ended March 31

Financial Services segment 2022 2023

(Yen in millions)

Financial services revenue 1,533,829 1,454,546

Financial services expenses 1,383,054 1,234,758

Other operating (income) expense, net 664 (4,147)

1,383,718 1,230,611

Share of profit (loss) of investments accounted for using the equity method — —

Operating income 150,111 223,935

Financial income (expenses), net — —

Income before income taxes 150,111 223,935

Income taxes 45,402 63,865

Net income 104,709 160,070

Net income of Financial Services 104,216 159,698

Net income attributable to noncontrolling interests 493 372

Fiscal year ended March 31

Sony without Financial Services segment 2022 2023

(Yen in millions)

Sales 8,402,217 10,101,979

Costs of sales 5,856,925 7,186,767

Selling, general and administrative 1,582,850 1,961,906

Other operating (income) expense, net (66,158) (5,566)

7,373,617 9,143,107

Share of profit (loss) of investments accounted for using the equity method 23,646 24,449

Operating income 1,052,246 983,321

Financial income (expenses), net (45,698) 13,437

Income before income taxes 1,006,548 996,758

Income taxes 183,689 172,528

Net income 822,859 824,230

Net income of Sony without Financial Services 817,123 818,106

Net income attributable to noncontrolling interests 5,736 6,124

Fiscal year ended March 31

Consolidated 2022 2023

(Yen in millions)

Sales 8,396,702 10,095,841

Financial services revenue 1,524,811 1,443,996

Total sales and financial services revenue 9,921,513 11,539,837

Costs of sales 5,845,804 7,174,723

Selling, general and administrative 1,588,473 1,969,170

Financial services expenses 1,374,037 1,224,208

Other operating (income) expenses, net (65,494) (12,021)

8,742,820 10,356,080

Share of profit (loss) of investments accounted for using the equity method 23,646 24,449

Operating income 1,202,339 1,208,206

Financial income (expenses), net (84,836) (27,893)

Income before income taxes 1,117,503 1,180,313

Income taxes 229,097 236,691

Net income 888,406 943,622

Net income attributable to Sony Group Corporation’s Stockholders 882,178 937,126

Net income attributable to noncontrolling interests 6,228 6,496

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All Other

Sales for the fiscal year ended March 31, 2023 decreased 11.2 billion yen year-on-year to 87.6 billion yen.

Operating income decreased 1.1 billion yen year-on-year to 16.8 billion yen.

Foreign Exchange Fluctuations and Risk Hedging

During the fiscal year ended March 31, 2023, the average rates of the yen were 135.4 yen against the

U.S. dollar and 140.9 yen against the euro, which were 23.1 yen and 10.4 yen weaker, respectively, than the

fiscal year ended March 31, 2022.

For the fiscal year ended March 31, 2023, consolidated sales increased 1 trillion 618.3 billion yen (16%)

year-on-year to 11 trillion 539.8 billion yen. On a constant currency basis, sales increased approximately 4%

year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating

income, refer to “Note: Sales on a Constant Currency Basis and the Impact of Foreign Exchange Rate

Fluctuations” below.

The table below indicates the foreign exchange impact on sales and operating results in each of the G&NS,

ET&S and I&SS 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

2022 2023 2022 to 2023

(Yen in billions)

G&NS Sales 2,739.8 3,644.6 +419.8

Operating income 346.1 250.0 -32.4

ET&S Sales 2,339.2 2,476.0 +237.5

Operating income 212.9 179.5 +9.4

I&SS Sales 1,076.4 1,402.2 +202.7

Operating income 155.6 212.2 +120.9

During the fiscal year ended March 31, 2023, sales for the Music segment increased 24% year-on-year to

1 trillion 380.6 billion yen, while sales increased approximately 8% year-on-year on a constant currency basis. In

the Pictures segment, sales increased 11% year-on-year to 1 trillion 369.4 billion yen, while sales decreased

approximately 8% on a U.S. dollar basis. For a detailed analysis of segment performance, refer to the Music and

Pictures segments under “Operating Performance by Business Segment.” Sony’s Financial Services segment

consolidates the yen-based results of SFGI. 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, 2023, Sony estimated that a one yen appreciation against the

U.S. dollar would have decreased sales in the G&NS, ET&S and I&SS segments by approximately 29.9 billion

yen, with a corresponding decrease in operating income of approximately 0.4 billion yen. A one yen appreciation

against the euro was estimated to decrease sales in these segments by approximately 11.1 billion yen, with a

corresponding decrease in operating income of approximately 6.6 billion yen. For more details, refer to “Risk

Factors” in “Item 3. Key Information.”

Sony’s consolidated operating results are subject to foreign currency rate fluctuations primarily due to

different currency composition of revenue and costs. 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 ET&S segment, yen appreciation against the U.S. dollar has a positive

impact on operating income, mainly due to a high proportion of manufacturing and other costs for certain key

products being incurred in U.S. dollars. Meanwhile, a large portion of sales for certain key products is in

emerging markets, resulting in yen appreciation against the currencies of emerging markets having a negative

impact on operating profit in the ET&S segment. In the I&SS 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 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

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currency exchange rate fluctuations on cash flows generated or anticipated by Sony’s transactions and accounts

receivable and payable denominated in foreign currencies.

Sony Global Treasury Services Plc (“SGTS”) in the U.K. provides integrated treasury services for Sony

Group Corporation, its subsidiaries, and affiliated companies. Sony’s policy is that Sony Group Corporation and

all subsidiaries with foreign exchange exposures should enter into commitments with SGTS to hedge their

exposures. Sony Group 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 Group 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 month 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.

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 financial income and expenses. The net fair value of

all the foreign exchange derivative contracts as of March 31, 2022 and 2023 was a liability of 6.4 billion yen and

an asset of 1.4 billion yen, respectively. Refer to Note 15 of the consolidated financial statements.

Note:

Sales on a Constant Currency Basis and the Impact of Foreign Exchange Rate Fluctuations

The descriptions of sales on a constant currency basis reflect sales calculated by applying the yen’s monthly

average exchange rates from the previous fiscal year to local currency-denominated monthly sales in the current

fiscal year. For SME and SMP in the Music segment, and in the Pictures segment, the constant currency amounts

are calculated by applying the monthly average U.S. dollar / yen exchange rates after aggregation on a

U.S. dollar basis.

Results for the Pictures segment are described on a U.S. dollar basis as the Pictures segment reflects the

operations of SPE, a U.S.-based operation that aggregates the results of its worldwide subsidiaries in U.S. dollars.

The impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s

periodic weighted average exchange rate for the previous fiscal year from the current fiscal year to the major

transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on

operating income (loss) is calculated by subtracting from the impact on sales the impact on cost of sales and SGA

expenses calculated by applying the same major transactional currencies calculation process to cost of sales and

SGA expenses as for the impact on sales. The I&SS segment enters into its own foreign exchange hedging

transactions, and the impact of those transactions is included in the impact of foreign exchange rate fluctuations

on sales and operating income (loss) for that segment.

This information is not a substitute for Sony’s consolidated financial statements measured in accordance

with IFRS. However, Sony believes that these disclosures provide additional useful analytical information to

investors regarding the operating performance of Sony.

Assets, Liabilities and Stockholders’ Equity

The following schedule shows unaudited condensed statements of financial position for the Financial

Services segment and all other segments excluding the Financial Services segment. These presentations are not in

accordance with IFRS, which is used by Sony to prepare its consolidated financial statements. However, because

the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a

comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial

statements. Both financial statements include transactions between the Financial Services segment and Sony

without the Financial Services segment. The figures shown in the respective presentations for the Financial

Services segment and Sony without the Financial Services segment are prior to the elimination and/or offset of

such transactions and deferred tax assets and deferred tax liabilities of each. The “consolidated” column is

presented net of the elimination and/or offset of such intercompany balances and deferred tax assets and

liabilities.

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Condensed Statements of Financial Position

Yen in millions

Financial Services

Sony without

Financial Services Consolidated

March 31,

2022

March 31,

2023

March 31,

2022

March 31,

2023

March 31,

2022

March 31,

2023

ASSETS

Current assets:

Cash and cash equivalents *1 ¥ 889,140 ¥ 756,493 ¥ 1,160,496 ¥ 724,407 ¥ 2,049,636 ¥ 1,480,900

Investments and advances in the Financial Services segment *2 360,673 328,357 — — 360,673 328,357

Trade and other receivables, and contract assets 169,929 134,404 1,478,620 1,668,257 1,628,521 1,777,939

Inventories *3 — — 874,007 1,468,042 874,007 1,468,042

Other financial assets 81,174 47,044 68,124 63,906 149,301 110,950

Other current assets 72,441 63,025 450,953 562,442 473,070 610,330

Total current assets 1,573,357 1,329,323 4,032,200 4,487,054 5,535,208 5,776,518

Non-current assets:

Investments accounted for using the equity method — — 268,513 325,220 268,513 325,220

Investments and advances in the Financial Services segment *2 18,445,088 18,445,728 — — 18,445,088 18,445,728

Investments in Financial Services, at cost — — 550,483 550,483 — —

Property, plant and equipment 18,010 15,316 1,095,241 1,329,219 1,113,213 1,344,864

Right-of-use assets 73,774 84,023 339,658 395,210 413,430 478,063

Goodwill and intangible assets, including content assets *4 72,578 78,197 2,672,466 3,322,639 2,745,044 3,400,836

Deferred insurance acquisition costs 676,526 730,864 — — 676,526 730,864

Deferred tax assets — — 332,330 431,533 298,589 384,839

Other financial assets 37,037 46,941 663,233 789,470 696,306 832,344

Other non-current assets 77,657 75,143 284,834 319,306 289,050 321,946

Total non-current assets 19,400,670 19,476,212 6,206,758 7,463,080 24,945,759 26,264,704

Total assets ¥20,974,027 ¥20,805,535 ¥10,238,958 ¥11,950,134 ¥30,480,967 ¥32,041,222

LIABILITIES AND EQUITY

Current liabilities:

Short-term borrowings ¥ 1,964,776 ¥ 1,891,856 ¥ 183,187 ¥ 211,020 ¥ 2,147,962 ¥ 2,102,876

Trade and other payables 118,921 77,595 1,744,011 1,812,670 1,843,242 1,865,993

Deposits from customers in the banking business 2,886,361 3,163,237 — — 2,886,361 3,163,237

Income taxes payables 4,444 13,370 101,648 139,330 106,092 152,700

Participation and residual liabilities in the Pictures segment — — 190,162 230,223 190,162 230,223

Other financial liabilities 68,793 43,128 29,050 30,444 97,843 73,572

Other current liabilities 242,937 222,039 1,296,205 1,513,882 1,488,488 1,720,335

Total current liabilities 5,286,232 5,411,225 3,544,263 3,937,569 8,760,150 9,308,936

Non-current liabilities:

Long-term debt 470,498 663,353 733,148 1,104,344 1,203,646 1,767,696

Defined benefit liabilities 37,167 37,183 217,381 198,938 254,548 236,121

Deferred tax liabilities 634,576 304,838 110,715 112,938 696,492 356,324

Future insurance policy benefits and other 7,039,034 7,264,421 — — 7,039,034 7,264,421

Policyholders’ account in the life insurance business 4,791,295 5,148,579 — — 4,791,295 5,148,579

Participation and residual liabilities in the Pictures segment — — 220,113 192,952 220,113 192,952

Other financial liabilities 128,208 153,724 86,391 199,327 211,959 350,278

Other non-current liabilities 5,864 7,225 121,558 142,096 106,481 127,593

Total non-current liabilities 13,106,642 13,579,323 1,489,306 1,950,595 14,523,568 15,443,964

Total liabilities 18,392,874 18,990,548 5,033,569 5,888,164 23,283,718 24,752,900

Equity:

Stockholders’ equity of Financial Services 2,577,705 1,811,167 — — — —

Stockholders’ equity of Sony without Financial Services — — 5,156,059 6,007,177 — —

Sony Group Corporation’s stockholders’ equity — — — — 7,144,471 7,229,709

Noncontrolling interests 3,448 3,820 49,330 54,793 52,778 58,613

Total equity 2,581,153 1,814,987 5,205,389 6,061,970 7,197,249 7,288,322

Total liabilities and equity ¥20,974,027 ¥20,805,535 ¥10,238,958 ¥11,950,134 ¥30,480,967 ¥32,041,222

*1 Refer to “Cash Flows” below for details regarding the year-on-year decrease in Cash and cash equivalents as

of March 31, 2023 in all segments excluding the Financial Services segment.

*2 Refer to Note 5 of the consolidated financial statements for the fluctuations of Investments and advances in

the Financial Services segment as of March 31, 2022 and March 31, 2023, respectively.

*3 Inventories as of March 31, 2023 in all segments excluding the Financial Services segment increased

year-on-year due to an increase in inventories mainly in the G&NS segment.

*4 Goodwill and intangible assets, including content assets as of March 31, 2023 in all segments excluding the

Financial Services segment increased year-on-year mainly due to the acquisition of the shares of Bungie and an

increase in film costs.

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Cash Flows

Operating Activities: During the current fiscal year ended March 31, 2023, there was a net cash inflow of

314.7 billion yen from operating activities, a decrease of 919.0 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 415.5 billion yen,

a decrease of 397.8 billion yen year-on-year. This decrease was primarily due to a larger year-on-year increase in

inventories and content assets as well as a decrease in trade payables compared to an increase in the previous

fiscal year, partially offset by a year-on-year increase in income before income taxes after taking into account

non-cash adjustments (including depreciation and amortization, including amortization of contract costs, other

operating (income) expense, net and (gain) loss on securities, net).

The Financial Services segment had a net cash outflow of 56.3 billion yen, compared to a net cash inflow of

459.7 billion yen in the previous fiscal year. This change was mainly due to a smaller year-on-year increase in

borrowings in the life insurance business and the banking business.

Investing Activities: During the current fiscal year ended March 31, 2023, Sony used 1 trillion 52.7 billion

yen of net cash in investing activities, an increase of 323.9 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 1 trillion

32.0 billion yen, an increase of 320.9 billion yen year-on-year. This increase was mainly due to a year-on-year

increase in payments for fixed asset purchases, the acquisition of shares of Bungie, an additional investment in

Epic Games and a payment related to the acquisition of Industrial Media. Additionally, the previous fiscal year

included the purchase of the equity interest in Ellation, which operates the anime business Crunchyroll, the

purchase of all shares and related assets of certain subsidiaries of Kobalt including AWAL, Kobalt’s music

distribution business mainly for independent recording artists, and an additional investment in Epic Games.

The Financial Services segment used 23.8 billion yen of net cash in investing activities, essentially flat

year-on-year.

Financing Activities: Net cash inflow from financing activities during the current fiscal year ended

March 31, 2023 was 84.3 billion yen, compared to a net cash outflow of 336.6 billion yen in the previous fiscal

year.

For all segments excluding the Financial Services segment, there was a 95.5 billion yen net cash inflow,

compared to a net cash outflow of 325.8 billion yen in the previous fiscal year. The cash inflow in the current

fiscal year was primarily due to the procurement of long-term bank loans and the issuance of straight bonds.

In the Financial Services segment, there was a 52.6 billion yen net cash outflow, essentially flat year-on-year.

Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total

outstanding balance of cash and cash equivalents as of March 31, 2023 was 1 trillion 480.9 billion yen. Cash and

cash equivalents of all segments excluding the Financial Services segment was 724.4 billion yen as of March 31,

2023, a decrease of 436.1 billion yen compared with the balance as of March 31, 2022. Within the Financial

Services segment, the outstanding balance of cash and cash equivalents was 756.5 billion yen as of March 31,

2023, a decrease of 132.6 billion yen compared with the balance as of March 31, 2022.

Information on Cash Flows Separating Out the Financial Services Segment

The following schedule shows unaudited condensed statements of cash flows for the Financial Services

segment and all other segments excluding the Financial Services segment. These presentations are not in

accordance with IFRS, which is used by Sony to prepare its consolidated financial statements. However, because

the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a

comparative presentation 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 are included in those respective presentations, then eliminated in the consolidated figures shown below.

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Condensed Statements of Cash Flows

Yen in millions

Fiscal year ended March 31

Financial Services

Sony without

Financial Services Consolidated

2022 2023 2022 2023 2022 2023

Cash flows from operating activities:

Income (loss) before income taxes 150,111 223,935 1,006,548 996,758 1,117,503 1,180,313

Adjustments to reconcile income (loss) before income taxes

to net cash provided by (used in) operating activities:

Depreciation and amortization, including amortization of

contract costs 24,932 26,333 810,301 978,257 835,233 1,004,590

Amortization of deferred insurance acquisition costs 69,237 84,523 — — 69,237 84,523

Other operating (income) expense, net 664 (4,147) (66,158) (5,566) (65,494) (12,021)

(Gain) loss on securities, net (other than Financial

Services segment) — — 60,402 4,469 60,402 4,469

Change in future insurance policy benefits and other 458,880 234,102 — — 458,880 234,102

Change in policyholders’ account in the life insurance

business, less cash impact 238,309 15,523 — — 238,309 15,523

Net cash impact of policyholders’ account in the life

insurance business 227,262 346,455 — — 227,262 346,455

Changes in assets and liabilities:

(Increase) decrease in trade receivables and contract

assets (53,819) 35,524 (121,684) (110,668) (171,094) (70,448)

(Increase) decrease in inventories — — (194,624) (560,382) (194,624) (560,382)

(Increase) decrease in investments and advances in the

Financial Services segment (1,724,164) (1,250,078) — — (1,724,164) (1,250,078)

(Increase) decrease in content assets — — (502,253) (603,314) (502,253) (603,314)

(Increase) decrease in deferred insurance acquisition

costs (117,337) (118,096) — — (117,337) (118,096)

Increase (decrease) in trade payables 37,885 (40,071) 93,660 (64,765) 126,989 (109,336)

Increase (decrease) in deposits from customers in the

banking business 230,236 300,201 — — 230,236 300,201

Increase (decrease) in borrowings in the life insurance

business and the banking business 905,139 111,314 — — 905,139 111,314

Increase (decrease) in taxes payable other than income

taxes, net (5) 112 17,845 4,071 17,840 4,183

Other 12,380 (21,912) (290,769) (223,387) (278,421) (247,307)

Net cash provided by (used in) operating activities 459,710 (56,282) 813,268 415,473 1,233,643 314,691

Cash flows from investing activities:

Payments for property, plant and equipment and other

intangible assets (20,562) (24,195) (420,542) (590,320) (441,096) (613,635)

Payments for investments and advances (other than

Financial Services segment) — — (91,082) (191,129) (91,082) (191,129)

Proceeds from sales or return of investments and collections

of advances (other than Financial Services segment) — — 16,081 13,548 16,081 13,548

Other 2,914 393 (215,597) (264,125) (212,683) (261,448)

Net cash provided by (used in) investing activities (17,648) (23,802) (711,140) (1,032,026) (728,780) (1,052,664)

Cash flows from financing activities:

Increase (decrease) in borrowings, net (10,975) (11,226) (151,721) 273,195 (162,696) 261,969

Dividends paid (39,159) (41,335) (74,342) (86,568) (74,342) (86,568)

Other (6) (2) (99,702) (91,100) (99,540) (91,101)

Net cash provided by (used in) financing activities (50,140) (52,563) (325,765) 95,527 (336,578) 84,300

Effect of exchange rate changes on cash and cash equivalents — — 94,369 84,937 94,369 84,937

Net increase (decrease) in cash and cash equivalents 391,922 (132,647) (129,268) (436,089) 262,654 (568,736)

Cash and cash equivalents at beginning of the fiscal year 497,218 889,140 1,289,764 1,160,496 1,786,982 2,049,636

Cash and cash equivalents at end of the fiscal year 889,140 756,493 1,160,496 724,407 2,049,636 1,480,900

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 and certain subsidiaries, which secure liquidity on their own. Furthermore, the

Financial Services segment is described separately in this section.

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Liquidity Management and Market Access

An important financial objective of Sony is to maintain the strength of its financial condition, 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.

Funding requirements that arise from maintaining liquidity are principally covered by cash flow from

operating and investing activities (including asset sales) and by the available cash balance; however, Sony also

raises funds as needed from financial and capital markets through means such as corporate bonds, CP and bank

loans.

Sony Group Corporation, SGTS and Sony Capital Corporation (“SCC”), a finance subsidiary in the U.S.,

maintain CP programs with access to the Japanese, U.S. and European CP markets. The borrowing limits under

these CP programs, translated into yen, were 1,166.3 billion yen in total for Sony Group Corporation, SGTS and

SCC as of March 31, 2023. There were no amounts outstanding under the CP programs as of March 31, 2023.

If disruption and volatility occur in financial and capital markets and Sony becomes unable to 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 641.5 billion yen in unused

committed lines of credit, as of March 31, 2023. Details of those committed lines of credit are: a 275.0 billion

yen committed line of credit contracted with a syndicate of Japanese banks, a 1.7 billion U.S. dollar multicurrency committed line of credit also contracted with a syndicate of Japanese banks and a 1,050 million U.S.

dollar multi-currency committed line of credit contracted with a syndicate of foreign banks. Sony currently

believes that it can sustain sufficient liquidity through access to committed lines of credit with financial

institutions, together with its available cash balance, even in the event that financial and capital markets become

illiquid.

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. However, 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.

Cash Management

Sony manages its global cash management activities primarily through Sony Group Corporation in Japan,

SCC in the U.S. and SGTS in other regions. The excess or shortage of cash at most of Sony’s subsidiaries is

invested or funded by Sony Group Corporation, SGTS and SCC on a net basis, although Sony recognizes that

fund 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

Sony Group Corporation, SGTS and SCC, and cash shortfalls among subsidiaries are covered by loans through

Sony Group Corporation, SGTS and SCC, so that Sony can make use of excess cash balances and reduce thirdparty borrowings. Where local restrictions prevent an efficient intercompany transfer of funds, Sony’s intent is

that cash balances remain outside of Sony Group Corporation, SGTS and SCC and that Sony meets 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 SFGI, 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 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 by investing,

primarily in securities, their cash inflows, which come mainly from policyholders’ insurance premiums. Sony

Bank maintains a necessary level of liquidity for the smooth settlement of transactions by using its cash inflows,

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which come mainly from customers’ deposits in local currency, to offer mortgage loans to individuals and to

invest mainly in marketable securities. Cash inflows from customers’ deposits in foreign currencies are invested

mainly in investment instruments of the same currency.

In addition, Sony’s subsidiaries in the Financial Services segment are subject to the Insurance Business Act

and the Banking Act, which require insurance and banking 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 Services 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 Sony Group Corporation, SGTS and SCC

as mentioned above.

For further information about Sony’s views regarding utilization of cash flow from operating activities

generated within the Sony Group for strategic investments, shareholder returns and as cash on hand, refer to

“Issues Facing Sony and Management’s Response to those Issues: Fourth Mid-Range Plan — Financial Targets

and their Progress.”

Off-balance Sheet Transactions

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

support. These transactions in which Sony has relinquished control of trade receivables are accounted for as

sales. Certain trade receivable sales programs also involve structured entities. Refer to Note 28 of the

consolidated financial statements.

Contractual Obligations, Commitments, and Contingent Liabilities

Sony’s contractual obligations, commitments and contingent liabilities are summarized as follows:

Short-term borrowings and long-term debt

Refer to Note 6 and Note 14 of the consolidated financial statements.

Loan commitments, purchase commitments and litigation

Refer to Note 33 of the consolidated financial statements.

Insurance contract liabilities

Refer to Note 13 of the consolidated financial statements.

C. Research and Development

Sony’s Purpose is to “fill the world with emotion (Kando) through the power of creativity and technology,”

in which the key word is “Kando.”

For the world to continue to be filled with emotion (Kando), Sony must continue to create technologies that

unleash people’s creativity and make our civilization sustainable. To clarify this commitment, Sony has set “Push

our civilization forward and make this planet sustainable” as its R&D mission.

A wide range of technological domains are essential to realize Sony’s Purpose. The three domains of

sensing, AI and the digital virtual world, as well as integration among these, will be the core drivers toward this.

The integration of sensors and AI in the real world is expected to lead to more advanced image and voice

recognition. Sensed data and AI enhanced by learning from such data can then be used to generate high-precision

simulations and fascinating content in the virtual world. In addition, the insights gained in the virtual world can

be fed back to the AI to bolster its ability. In this way, sensing, AI, and the virtual world can be integrated to

transform Sony into an AI/Data-driven company.

The Sony Group’s research and development organization (“Corporate R&D”) carries out various R&D

activities in collaboration with multiple R&D organizations located in Japan, Europe, the United States, India and

China, utilizing the different characteristics and strengths of each area. In addition to aiming to acquire excellent

local R&D personnel, Sony will strive to promote further collaboration among the businesses within the Sony

Group, while also aiming to strengthen collaboration with external creators and academia. Sony is already

promoting various activities such as joint development with universities around the world, and plans to further

expand such activities in the future.

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R&D costs for the fiscal year ended March 31, 2023 increased by 117.3 billion yen (19%) to 735.7 billion

yen. The ratio of R&D costs to total revenue excluding the Financial Services segment was 7.3%, compared to

7.4% in the previous fiscal year.

The following table shows a breakdown of R&D costs for each business segment and Corporate R&D in the

fiscal years ended March 31, 2022 and 2023.

Fiscal year ended March 31

2022 2023

(Yen in billions)

R&D costs

G&NS 175.7 271.1

ET&S 141.8 155.7

I&SS 198.0 223.7

Corporate R&D 48.7 46.4

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

In the fiscal year ended March 31, 2023, the global economy continued to be greatly affected by inflation.

While economic activities have started to normalize following the stagnation caused by the COVID-19 pandemic

that began in 2020, the prolongation of Russia’s military invasion of Ukraine that began in February 2022

accelerated increases in global commodity prices and inflation reached historic levels. Under these

circumstances, in March 2022, the Federal Reserve Board of the United States lifted its zero interest rate policy

and began raising interest rates, resulting in the interest rate differential between Japan and the United States

widening and the yen’s exchange rate against the U.S. dollar in October 2022 hitting its weakest level in 32

years. In addition, the recent interest rate hikes in various countries have led to instability in financial systems,

particularly in Europe and the United States, and uncertainty regarding the future of the global economy has

further heightened.

Sony has a wide range of businesses globally. These changes in the global economy, in addition to increased

geopolitical risk due to tensions between the U.S. and China, the rise of new technologies such as AI, and

responses to global environmental challenges and social division, are causing major changes in the environment

surrounding each of Sony’s business segments.

Sony has responded swiftly to changes in the business environment and worked to strengthen the profit

structure of each business, while continuing to prioritize management with a long-term view, with the goal of

enhancing the corporate value of the entire Sony Group.

On May 18, 2023, Sony held its Corporate Strategy Meeting for the fiscal year ending March 31, 2024.

Chairman and CEO Kenichiro Yoshida spoke on Sony’s management direction, while President, COO and CFO

Hiroki Totoki focused on the growth strategies of each business. Kenichiro Yoshida first looked back at the

expansion of Sony’s businesses from a long-term perspective, from its founding through to recent initiatives to

reorganize Sony Group’s architecture, strengthen creativity, and expand the Kando space, based on Sony’s

Purpose (or reason for being) to “fill the world with emotion (or Kando) through the power of creativity and

technology.” He also emphasized Sony’s commitment to creativity, and stated that Sony will continue to create

Kando with creators and contribute to expanding it to the world. As an example of this, N.P. Singh, CEO, SPNI

underlined the expansion of the Sony Group’s business in India and highlighted growth opportunities.

Hiroki Totoki then provided an overarching view of growth strategies for each of Sony’s businesses from the

perspective of group management. He further explained that Sony aims to achieve further growth and enhance its

long-term value by continuing to evolve the diversity of its people and businesses and connect them organically.

The details are as follows.

1. Management from a Long-Term Perspective

Sony has continued to expand its business from a long-term perspective, from its origins of sound, to

businesses such as electronics, entertainment and semiconductors. The life insurance business within the

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Financial Services segment was started by one of Sony’s founders in 1979 with a long-term vision of 20 years.

Following the fiscal year ended March 31, 2022, sales and operating income of the three entertainment

businesses, Music, Pictures and G&NS, which were developed in the 20th century, continued to exceed 50% of

the consolidated Group in the fiscal year ended March 31, 2023. In order to help make the world sustainable,

Sony is also taking a long-term approach to sustainability, including its “Road to Zero” long-term global

environmental plan that aims to achieve a zero environmental footprint.

2. Defining Sony’s Purpose and Reorganizing Group Architecture

In 2019, Sony defined its Purpose with Kando as a keyword. Then, in 2020, Sony announced a restructuring

of its Group architecture that aimed to connect each business at an equal distance. This included spinning off the

electronics business from the Group headquarters and making the Financial Services business a wholly-owned

subsidiary. This reorganization has boosted synergies not only between electronics and entertainment, but also

between the content IP used by Sony’s entertainment businesses.

3. Enhancement of Creativity

Sony intends to strengthen its creation across business areas including content and technologies with the aim

of being the brand most chosen by creators around the world who generate Kando.

(1) Enhancing Content IP

• Investing in the ability to create Kando

In order to strengthen its creativity in areas such as music, pictures, games and anime, Sony has focused on

getting closer to creators and creating Kando, and at the same time has invested in the ability to create Kando. In

terms of content IP, Sony has invested approximately 1 trillion yen over the past five years.

• Partner collaboration and group collaboration on content IP

Together with its partners, Sony is working to deliver the Kando content developed by creators to even more

people, to “fill the world with emotion.”

• The Last of Us, a first-party PlayStation® title that was made into a TV drama, became the mostwatched show in both Europe and Latin America in the history of Sony’s distribution partner’s service,

Max (formerly known as HBO Max).

• “Communities of Interest” leading to creation

Under the long-term vision of expanding the number of people directly connected to the Sony Group to

1 billion people, Sony aims to continue delivering Kando in specific areas where communities are born, such as

anime, games, and in India, learning from its users, and making use of them in its creations.

• Crunchyroll, a DTC service specializing in anime, feeds back user viewing data to creators.

• In India, Sony is engaged in initiatives to create new value, such as local Kando creation and delivery

through SonyLIV, SPNI’s DTC service, and a joint venture between the Music and Pictures businesses

to provide opportunities for local artists and creators. Furthermore, through the expected merger of

SPNI and Zee, Sony aims to further expand creation rooted in local culture.

(2) Enhancing creation through products and services

• Sony’s “VENICE” digital cinema camera series is being widely used across Hollywood studios.

• Sony is also focusing on virtual production that supports creators’ new visual expressions with

technology.

• Hawk-Eye Innovations, renowned for its sports officiating, provides excitement through entertainment

technology services.

(3) Creation semiconductors that create Kando

• CMOS image sensors are contributing to capturing the moment and helping users around the world

become creators, through AlphaTM full-frame mirrorless cameras and smartphone cameras.

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• Over the past five years, Sony has invested more than 1 trillion yen in this area. Sony intends to

continue to focus on the business of image sensors as key devices that support creation.

4. Expansion of Kando space

Leveraging technologies such as VR and AI, Sony is also working on the challenge of expanding the field of

Kando from real space into the virtual and mobility spaces from a long-term perspective.

(1) Virtual space

• Sony is providing a place of creation where people connect with each other through live service games,

live performances by music artists and initiatives that increase sports fan engagement.

• Sony is also working to seamlessly connect the virtual and the physical worlds using technologies such

as its mobile motion capture system “mocopi,” and skeletal tracking system.

• Sony is extending the creativity of creators with AI represented by “Gran Turismo Sophy,” a racing AI

agent that enhances the value of the experience within the game space. Sony intends to continue to

promote R&D in this area, alongside social implementation.

(2) Mobility space

• Sony is contributing to the evolution of mobility in areas such as imaging and sensing technologies and

entertainment, as well as communications and networks including 5G, and also plans to provide these

technologies to the production model being developed under Sony Honda Mobility’s new brand,

“AFEELA.”

• Through its collaboration with Epic Games, Sony is pursuing new entertainment possibilities using the

Unreal Engine 3D creation tool.

(3) Outer space

• Sony will conduct exploration activities to bring emotional experiences through the STAR SPHERE

project’s nano satellite “EYE.”

5. Progress on the fourth mid-range plan

Three-year cumulative adjusted EBITDA, which is the KPI of the fourth mid-range plan (“fourth mid-range

plan”) that charts the path forward for Sony over the three fiscal years started on April 1, 2021 and ending on

March 31, 2024, has progressed significantly beyond the initial plan. In the fiscal year ending March 31, 2024,

which is the final year of its fourth mid-range plan, Sony intends to promote business operations with a focus on

risk management amidst an unstable business environment, and ensure the achievement of its KPIs. For more

detailed discussion on the fourth mid-range plan, refer to “Fourth Mid-Range Plan — Financial Targets and their

Progress” below.

6. Growth strategies for each business segment

• G&NS segment: Increasing the number of active users

• Growth and expansion of PS5TM. Shipped 6.3 million units of PS5 during the fourth quarter of the fiscal

year ended March 31, 2023. Continue to manufacture at full capacity.

• Knowledge sharing from Bungie to enhance Sony’s ability to develop and operate live service games.

Aim to increase the number of active users on PCs.

• Music segment: Outpace the market growth of streaming services and emerging media

• 1) Promote new songs from Sony Music’s wholly owned labels and signed artists to increase market

share. 2) Expand services for distributed labels centered around The Orchard. 3) Ensure early contact

with emerging artists through channels such as AWAL. 4) Further explore emerging markets, including

unearthing local artists.

• Strengthen initiatives to monetize emerging media such as social media and live concerts within games

and increase returns for artists.

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• Pictures segment: Maximize IP value over the long-term

• Leverage Sony’s strengths as a strategic supplier, limiting the burden of investment Sony would incur

by having Sony’s own distribution platform, and instead allocating these investment resources to the

creative side, enhancing production quality, and supplying content to the distribution platforms that best

understand the appeal of each product.

• Improve long-term profit by maintaining focus on theatrical releases, which are also supported by the

industry.

• Across entertainment businesses: Maximizing value by deepening the deployment of IP

• Synergies generated between entertainment businesses

• Expansion of game IP: Continue work on the production of film and TV adaptations of first-party

PlayStation® titles including The Last of Us, Gran Turismo and Twisted Metal.

• Accelerating the growth of anime: Collaboration between Demon Slayer: Kimetsu no Yaiba

producer Aniplex and Crunchyroll.

• Location Based Entertainment

• Water theme park “Columbia Pictures Aquaverse” in Thailand

• A ride attraction in Spain with projections showing the world of Uncharted

• “Sword Art Online — Anomaly Quest” at indoor interactive attraction “THE TOKYO MATRIX”

in Japan

• ET&S segment: Expand the array of solutions and services offered to a wide range of creators

• For photographers and broadcasters, expand Sony’s business in the area of services such as efficient

virtual production on the cloud, and also optimize these technologies and services for individual

creators.

• For filmmakers, evolve creation technologies such as the “VENICE” camera series and virtual

production to unleash creators from the constraints of time and space.

• I&SS segment: Further strengthen No. 1 position in image sensors.

• Shift to larger sizes and higher performance CMOS image sensors for smartphones.

• Expand business opportunities for sensors in the automotive field, where Sony can contribute to safe

mobility, and in the industrial and social infrastructure field, to contribute to the shift to smart societies.

• Financial Services segment: Brand reinforcement, leveraging Group infrastructure and investment for growth

• Reinforcement of branding, leveraging the Sony Group’s infrastructure, and investing in growth are the

keys to growth in the Financial Services business.

• To realize further growth within the Financial Services business, Sony will begin the assessment of a

partial spin-off based on the premise of the listing of the shares of SFGI that operates this business.

• Sony will proceed with its assessment based on the premise that Sony will continue to own a portion

(slightly less than 20%) of the shares of SFGI, so that the Financial Services business can continue to

utilize the Sony brand, including in their company name, and continue to generate synergies with Sony

Group companies after the execution of the spin-off.

• The timing of the execution of the spin-off has not been determined; however, Sony will proceed with

its assessment leading up to the end of the fiscal year ending March 31, 2024, giving consideration to

executing the spin-off within the next two to three years.

7. Continuous evolution of businesses and people diversity

Through diverse individuals sharing their knowledge and activities beyond boundaries, evolving Sony’s

business diversity, and connecting organically, Sony aims to achieve further growth and enhance long-term value

across the overall Sony Group.

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Fourth Mid-Range Plan — Financial Targets and their Progress

<Financial Targets>

On April 28, 2021, Sony announced the financial targets for the fourth mid-range plan. In order to continue

managing Sony with a long-term view, Sony’s management established a three-year cumulative key performance

indicator. That indicator, which is the most important metric of group performance for the fourth mid-range plan

(“Group KPI”), is Adjusted EBITDA*. Sony announced that it would target total Adjusted EBITDA of 4.3

trillion yen on a consolidated basis for the three fiscal years started on April 1, 2021 and ending on March 31,

2024. Management believes that Adjusted EBITDA is a performance metric suitable for the long-term

management that Sony prioritizes. This is because (i) it represents the sustainable earnings power of a business as

it does not include the effects of one-time gains and losses, (ii) it enables management to confirm that all the

businesses of the Sony Group, including the Financial Services business, are expanding over the mid- to longterm through cycles of investment and return, and (iii) it is often used to calculate corporate value.

Regarding the capital allocation plan in the fourth mid-range plan, Sony established a capital expenditure

target of 1.5 trillion yen and a strategic investment target of 2 trillion yen or more including share repurchases as

it aims to grow its business over the longer-term, beyond the duration of the plan. As in the past, Sony plans to

increase dividends in a stable manner over the long term. Sony expects to fund its allocation of capital through

expected cash generation of 3.8 trillion yen or more over the three fiscal years started on April 1, 2021 and

ending on March 31, 2024. The expected cash generation includes 3.1 trillion yen or more of consolidated

operating cash flow excluding the Financial Services segment, 300 billion or more of cash flow generated from

the sale of businesses and assets executed as needed as well as borrowing with a strict eye on financial discipline,

and 400 billion of cash left-over from the period of the third mid-range plan started on April 1, 2018 and ended

on March 31, 2021 and before.

<Progress>

Adjusted EBITDA for the fiscal year ended March 31, 2023 was 1 trillion 703.4 billion yen**. Three-year

cumulative adjusted EBITDA, which is the Group KPI, has progressed significantly beyond the initial plan,

mainly in the Music and Pictures segments.

Regarding capital allocation, capital expenditures are expected to increase from the initial plan to 1.9 trillion

yen, with an additional 0.4 trillion yen mainly allocated to image sensor capital expenditures in the I&SS

segment and server investments in Corporate R&D and G&NS. In terms of strategic investment, since Sony

decided to increase working capital and capital expenditures, and in consideration of the current M&A market

environment, Sony reduced the amount from the initial plan of 2 trillion yen to 1.8 trillion yen.

* Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) = Net income

attributable to Sony Group Corporation’s stockholders + Net income attributable to noncontrolling interests +

Income taxes + Interest expenses, net, recorded in Financial income and Financial expense — Gain on

revaluation of equity instruments, net, recorded in Financial income and Financial expense + Depreciation and

amortization expense excluding amortization for film costs, broadcasting rights and internally developed game

content and master recordings included in Content assets as well as for deferred insurance acquisition costs —

the profit and loss amount that Sony deems non-recurring****.

Adjusted EBITDA is not a measure in accordance with IFRS. However, Sony believes that this disclosure

may be useful information to investors. Adjusted EBITDA should be considered in addition to, not as a substitute

for, Sony’s results in accordance with IFRS.

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** The following table shows a reconciliation of net income attributable to Sony Group Corporation’s

stockholders reported in accordance with IFRS to Adjusted EBITDA for the fiscal year ended March 31, 2023.

Fiscal year ended March 31

2023

(Yen in billions)

Net income attributable to Sony Group Corporation’s stockholders 937.1

Net income attributable to noncontrolling interests 6.5

Income taxes 236.7

Interest expenses, net, recorded in Financial income and Financial expense 4.0

Gain on revaluation of equity instruments, net, recorded in Financial income and

Financial expense 4.6

Depreciation and amortization expense*** 542.2

Profit and loss amount that Sony deems non-recurring  (27.8)

Adjusted EBITDA 1,703.4

** * Depreciation and amortization expense excludes amortization of film costs, broadcasting rights and

internally developed game content and master recordings included in Content assets, as well as for deferred

insurance acquisition costs.

**** The table below shows the details of the profit and loss amount that Sony deems non-recurring for the

fiscal year ended March 31, 2023.

Fiscal year ended March 31

2023

(Yen in billions)

Impact of litigation settlements, net of expenses, received in relation to lawsuits for

Recorded Music and Music Publishing (Music segment) 5.7

Recovery of an unauthorized withdrawal of funds at a subsidiary of Sony Life which

occurred in the previous fiscal year (Financial Services segment) 22.1

Total 27.8

For details on the performance of each business segment in the fiscal year ended March 31, 2023, as well as

the business environment and strategy of each business segment, also refer to “Operating Results” in “Item 5.

Operating and Financial Review and Prospects.”

E. Critical Accounting Estimates

The preparation of the consolidated financial statements in conformity with IFRS 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 estimate 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 estimates.

The critical accounting estimates should be read in conjunction with Note 3 of the consolidated financial

statements regarding Sony’s significant accounting policies.

Financial instruments

Sony recognizes a financial instrument as a financial asset or a financial liability when Sony becomes party

to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at

fair value.

Financial instruments held by Sony are classified according to the measurement method, and for financial

instruments measured at fair value, future fluctuations in fair value may have a significant impact on the

consolidated financial statements.

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The assessment of credit losses for debt securities is often subjective in nature and involves certain

assumptions and estimates concerning the credit risk ratings, expected operating results, business plans and

future cash flows of the issuer of the security. Accordingly, it is possible that Sony will record an allowance for

credit losses for debt securities in the future, where such an allowance for credit losses is not currently recorded

based on the assessment of subsequently available information such as a deterioration in the credit risk rating,

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, downward adjustments in income may be recorded in the future

due to the recording of such allowance for credit losses.

Impairment of non-financial assets

Sony reviews the recoverability of its non-financial assets, except for inventories, contract costs and

deferred tax assets, whenever there is any indication that an asset or a cash-generating unit (“CGU”) may be

impaired. In addition, an annual impairment test for goodwill, intangible assets with indefinite useful lives or

intangible assets not yet available for use is performed during the fourth quarter of the fiscal year for each CGU

or group of CGUs to which the carrying amount of these assets is allocated.

For all CGUs or groups of CGUs with goodwill, the recoverable amount exceeded the carrying amount, and

therefore no impairment existed in the fiscal year ended March 31, 2023. Also, the recoverable amount of each

CGU or group of CGUs with significant goodwill exceeded their respective carrying values by at least 10.0%.

For intangible assets with indefinite useful lives or intangible assets not yet available for use, the recoverable

amount exceeded the carrying amount, and therefore no impairment existed.

A discussion of the significant assumptions, other than the mid-range plan, including a sensitivity analysis

with respect to their impact, of the recoverable amount of each CGU or group of CGUs for the impairment

analysis for goodwill performed for the fiscal year ended March 31, 2023 is included below:

• The post-tax discount rates ranged from 2.6% to 15.0%. A hypothetical one percentage point increase in

the discount rate, holding all other assumptions constant, would not have resulted in an impairment.

• The growth rates applied to the terminal values for the CGUs within the G&NS, ET&S, I&SS and

Financial Services segments ranged from approximately 1.0% to 1.5%. The growth rates beyond the

mid-range plan period for the CGUs in the Music segment ranged from 1.0% to 3.0%, and in the

Pictures segment ranged from (5.0%) to 21.0%. A hypothetical one percentage point decrease in the

growth rate, holding all other assumptions constant, would not have resulted in an impairment.

• The earnings multiple used to calculate the terminal value in the Pictures CGU was 1.5x to 12.0x and

the revenue multiple was 1.3x to 1.5x. A hypothetical reduction in earnings multiple by 1.0x and

revenue multiple by 0.25x, respectively, holding all other assumptions constant, would not have resulted

in a significant impairment.

Management believes that the assumptions used in the impairment tests are reasonable. However, in the

future, changes in estimates resulting in lower recoverable amounts due to unforeseen changes in assumptions

could negatively affect the valuations, which may result in Sony recognizing impairment losses for non-financial

assets.

Business combinations

Sony recognizes identifiable assets acquired and the liabilities assumed of an acquiree at their fair values at

the acquisition date with limited exceptions. Sony recognizes goodwill when the aggregate of the consideration

transferred in a business combination, the amount of any non-controlling interests in the acquiree and the fair

value of Sony’s previously held equity interest in the acquiree exceeds the net amount of the identifiable assets

and liabilities of the acquiree at the acquisition date. If the aggregate above is less than the net amount of

identifiable assets and liabilities, the difference is recognized as a gain.

Due to the inherent uncertainties involved in making the estimates and assumptions, the consideration

transferred could be valued and allocated to the identifiable assets acquired and liabilities assumed differently.

Actual results may differ, or unanticipated events and circumstances may affect such estimates, which could

require Sony to record an impairment of an identifiable asset acquired and goodwill, or an increase in the

amounts recorded for identifiable liabilities assumed.

Estimation of ultimate revenue in the Pictures segment

An aspect of film accounting that requires the exercise of management’s 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

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revenue is important for the measurement of film costs and participation and residual liabilities in the Pictures

segment.

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. In addition, 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 on the ratio of current

period actual revenues to the estimated remaining 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, 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 with 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. Also, participation and residual liabilities are accrued based on the ratio of

current period actual revenues to the estimated remaining total revenues.

Valuation of deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against

which the assets can be utilized. Accordingly, the valuation of deferred tax assets is assessed periodically with

available evidence related to the realizability of the deferred tax assets.

The valuation of deferred tax assets, which is based on currently enacted tax laws and rates as of the end of

the reporting period, 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

business 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 the results of tax examinations or the negotiations of

advance pricing agreements covering transfer pricing of intercompany transactions 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, outstanding deferred tax

assets may be required to be written down in the future. On the other hand, a forecasted improvement and

consistency in future earnings or other factors, such as business reorganizations, could lead in the future, as a

result of a review of all relevant factors, to the reversal of the previous write down of the deferred tax assets

which would be recorded as a reduction to tax expense. These possible 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.

Deferred insurance acquisition costs

Costs that vary with and are directly related to the acquisition or renewal of 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 future insurance policy benefits. The deferred insurance

acquisition costs for non-traditional life insurance contracts are amortized over the expected life at a constant rate

based on the present value of the estimated gross profit. Investment yields, mortality rates, lapse rates and

discount rates are used as important assumptions for the present value of the estimated gross profit.

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

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assumptions as to future investment yield, morbidity rates, mortality rates, lapse rates and other factors. These

assumptions are reviewed on a periodic basis. Liabilities for future policy benefits include the liabilities for the

minimum guarantee benefits of individual variable annuities and variable life insurance contracts.

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 end of the reporting period. This liability is generally equal to

the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges

assessed against the account balances. Liabilities for policyholders’ account in the life insurance business include

the liabilities related to the individual variable annuities and variable life insurance contracts with minimum

guarantee benefits.

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

Group Corporation (the “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 20, 2023.

Board of Directors

Kenichiro Yoshida

Responsibility as a Director: —

Date of Birth: October 20, 1959

Number of Years Served as a Director: 9 years

Principal Business Activities Outside the Corporation: Outside Director, M3, Inc.

Brief Personal History:

April 1983 Joined the Corporation

July 2000 Joined Sony Communication Network Corporation (currently Sony Network

Communications Inc.)

September 2000 Outside Director, So-net M3, Inc. (currently M3, Inc.) (present)

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, the Corporation

April 2014 EVP and CFO, Representative Corporate Executive Officer, the Corporation

June 2014 Director, the Corporation (present)

April 2015 Executive Deputy President and CFO, Representative Corporate Executive Officer, the

Corporation

April 2018 President and CEO, Representative Corporate Executive Officer, the Corporation

June 2020 Chairman, President and CEO, Representative Corporate Executive Officer, the

Corporation

April 2023 Chairman and CEO, Representative Corporate Executive Officer, the Corporation

(present)

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Hiroki Totoki

Responsibility as a Director: —

Date of Birth: July 17, 1964

Number of Years Served as a Director: 4 years

Principal Business Activities Outside the Corporation: Outside Director, Recruit Co., Ltd.

Brief Personal History:

April 1987 Joined the 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 Entertainment Corporation (currently Sony Network Communications Inc.)

April 2013 Representative Director, Corporate Executive Officer, Deputy President and CFO,

So-net Entertainment Corporation

December 2013 SVP, Corporate Executive, the Corporation

November 2014 President and CEO, SOMC (currently Sony Corporation)

June 2015 Director, Chairman, So-net Corporation (currently Sony Network Communications

Inc.)

April 2016 EVP, Corporate Executive Officer, the Corporation

Officer in charge of New Business Platform Strategy, the Corporation

President and Representative Director, So-net Corporation

June 2017 CSO, the Corporation

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

April 2018 Representative Corporate Executive Officer, CFO, the Corporation

June 2018 Senior EVP, the Corporation

Outside Director, Recruit Holdings Co., Ltd. (present)

June 2019 Director, the Corporation (present)

June 2020 Executive Deputy President and CFO, Representative Corporate Executive Officer, the

Corporation

April 2023 President, COO and CFO, Representative Corporate Executive Officer, the Corporation

(present)

Yoshihiko Hatanaka

Responsibility as a Director: Chairman of the Board

Chair of the Nominating Committee

Date of Birth: April 20, 1957

Number of Years Served as a Director: 4 years

Brief Personal History and Principal Business Activities Outside the Corporation:

April 1980 Joined Fujisawa Pharmaceutical Co., Ltd. (currently Astellas Pharma Inc.)

June 2005 Corporate Executive, Vice President, Corporate Planning, Corporate Strategy, Astellas

Pharma Inc.

April 2006 Corporate Executive of Astellas Pharma Inc. and President & CEO, Astellas US LLC

and President & CEO, Astellas Pharma US, Inc.

June 2008 Senior Corporate Executive of Astellas Pharma Inc. and President & CEO, Astellas US

LLC and President & CEO, Astellas Pharma US, Inc.

April 2009 Senior Corporate Executive, Chief Strategy Officer and Chief Financial Officer,

Astellas Pharma Inc.

June 2011 Representative Director, President & CEO, Astellas Pharma Inc.

April 2018 Representative Director, Chairman of the Board, Astellas Pharma Inc.

June 2019 Director, the Corporation (present)

March 2023 Outside Director, Shiseido Company, Limited (present)

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Toshiko Oka

Responsibility as a Director: Chair of the Audit Committee

Member of the Nominating Committee

Date of Birth: March 7, 1964

Number of Years Served as a Director: 5 years

Brief Personal History and Principal Business Activities Outside the Corporation:

April 1986 Joined Tohmatsu Touche Ross Consulting Limited

July 2000 Joined Asahi Arthur Anderson Limited

September 2002 Principal, Deloitte Tohmatsu Consulting Co., Ltd. (currently ABeam Consulting Ltd.)

April 2005 President and Representative Director, ABeam M&A Consulting Ltd. (currently PwC

Advisory LLC)

April 2016 Partner, PwC Advisory LLC

June 2016 CEO, Oka & Company Ltd. (present)

June 2018 Director, the Corporation (present)

June 2019 Outside Director, Happinet Corporation (present)

June 2020 Outside Director, ENEOS Holdings, Inc. (present)

April 2021 Professor, Professional Graduate School, Graduate School of Global Business, Meiji

University (present)

June 2021 Outside Director, Hitachi Construction Machinery Japan Co., Ltd. (present)

Sakie Akiyama

Responsibility as a Director: Member of the Compensation Committee

Date of Birth: December 1, 1962

Number of Years Served as a Director: 4 years

Brief Personal History and Principal Business Activities Outside the Corporation:

April 1987 Joined Arthur Andersen & Co.

April 1994 Founder and CEO, Saki Corporation

October 2018 Founder, Saki Corporation (present)

June 2019 Director, the Corporation (present)

Outside Director, Japan Post Holdings Co., Ltd. (present)

Outside Director, Orix Corporation (present)

June 2020 Outside Director, Mitsubishi Corporation (present)

Wendy Becker

Responsibility as a Director: Chair of the Compensation Committee

Member of the Nominating Committee

Date of Birth: November 2, 1965

Number of Years Served as a Director: 4 years

Brief Personal History and Principal Business Activities Outside the Corporation:

September 1987 Brand Manager, Procter & Gamble Company

September 1993 Consultant, McKinsey & Company, Inc.

December 1998 Partner, McKinsey & Company, Inc.

February 2008 Managing Director, Residential, TalkTalk, The Carphone Warehouse Ltd.

Board member, Member of Remuneration Committee, Whitbread plc

September 2009 Chief Marketing Officer, Vodafone Group plc

September 2012 Chief Operating Officer, Jack Wills Ltd.

October 2013 CEO, Jack Wills Ltd.

February 2017 Board member, Chair of Remuneration Committee, Great Portland Estates plc

September 2017 Board member, Logitech International S.A. (present)

June 2019 Director, the Corporation (present)

September 2019 Chair of the Board, Chair of Nominating Committee, Logitech International S.A.

(present)

June 2021 Board member, Chair of Remuneration Committee, Oxford Nanopore Technologies plc

(present)

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Keiko Kishigami

Responsibility as a Director: Member of the Audit Committee

Date of Birth: January 28, 1957

Number of Years Served as a Director: 3 years

Brief Personal History and Principal Business Activities Outside the Corporation:

October 1985 Joined Peat Marwick Minato (currently Ernst & Young ShinNihon LLC)

August 1989 Registered as Certified Public Accountant (present)

December 1997 Partner, Century Audit Corporation (currently Ernst & Young ShinNihon LLC)

May 2004 Representative Partner (Senior Partner), Ernst & Young ShinNihon (currently Ernst &

Young ShinNihon LLC)

September 2018 Board Member, WWF Japan (present)

June 2019 Outside Auditor, Okamura Corporation (present)

June 2020 Director, the Corporation (present)

June 2021 Outside Director, Sumitomo Seika Chemicals Company, Limited (present)

March 2023 Outside Auditor, DIC Corporation (present)

Joseph A. Kraft Jr.

Responsibility as a Director: Member of the Audit Committee

Director in charge of Information Security

Date of Birth: May 12, 1964

Number of Years Served as a Director: 3 years

Brief Personal History and Principal Business Activities Outside the Corporation:

July 1986 Joined Morgan Stanley Inc.

January 2000 Managing Director, Morgan Stanley Inc.

April 2007 Managing Director, Head of Capital Markets Division, Dresdner Kleinwort Japan

March 2010 Deputy Branch Manager & Managing Director, Bank of America Merrill Lynch Japan

July 2015 CEO, Rorschach Advisory Inc. (present)

June 2020 Director, the Corporation (present)

Neil Hunt

Responsibility as a Director: Director in charge of Information Security

Date of Birth: January 12, 1962

Number of Years Served as a Director: —

Brief Personal History and Principal Business Activities Outside the Corporation:

June 1989 Founder, CTO, Iconicon

October 1991 Director of Engineering, Pure Atria, Inc.

December 1999 Chief Product Officer, Netflix, Inc.

September 2010 Board member, Member of Compensation Committee, Logitech, Inc.

June 2017 Board member, Member of Compensation Committee, Roku, Inc. (present)

January 2020 Founder and Chief Product Officer, Vibrant Planet, PBC (present)

June 2023 Director, the Corporation (present)

William Morrow

Responsibility as a Director: Member of the Compensation Committee

Date of Birth: July 2, 1959

Number of Years Served as a Director: —

Brief Personal History and Principal Business Activities Outside the Corporation:

September 1980 Director, Pacific Bell Inc.

November 2001 President, Japan Telecom Holdings Co. Ltd

February 2004 CEO, Vodafone UK Limited

April 2005 President, VODAFONE K.K. Limited

May 2006 CEO Europe, Vodafone Limited

August 2006 President & CEO, Pacific Gas and Electric Company

June 2008 Outside Director, Broadcom Inc.

March 2009 CEO, Clearwire Incorporated

March 2012 CEO, Vodafone Hutchison Australia

April 2014 CEO, NBN Co, Limited

December 2018 Outside Director, IkeGPS Group Limited

February 2021 CEO, DirecTV LLC (present)

June 2023 Director, the Corporation (present)

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Corporate Executive Officers

In addition to Kenichiro Yoshida and Hiroki Totoki, the four individuals set forth below are the current

Corporate Executive Officers of Sony Group Corporation as of June 20, 2023. Refer to “Board Practices” below.

Toshimoto Mitomo

Responsibility as an Officer: Executive Deputy President and CSO, Officer in charge of Intellectual Property,

Business Strategy, Business Development and Business Incubation Platform

Date of Birth: January 6, 1963

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

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1985 Joined the Corporation

June 2013 SVP, Corporate Executive, the Corporation

June 2019 EVP, the Corporation

April 2022 Senior EVP, Corporate Executive Officer, the Corporation

April 2023 Executive Deputy President and CSO, Corporate Executive Officer, the Corporation

(present)

Shiro Kambe

Responsibility as an Officer: Senior EVP, Officer in charge of Legal, Compliance, Privacy, Corporate

Communications, Brand, Sustainability, External Relations, Quality

Management, and the Board Secretariat

Date of Birth: December 18, 1961

Number of Years Served as a Corporate Executive Officer: 9 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1984 Joined the Corporation

June 2010 SVP, Corporate Executive, the Corporation

June 2014 EVP, Corporate Executive Officer, the Corporation

June 2020 Senior EVP, Corporate Executive Officer, the Corporation (present)

Kazushi Ambe

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

Group Diversity, Equity & Incubation and the Corporate Executive Office and

Sony Group China Representative

Date of Birth: April 23, 1961

Number of Years Served as a Corporate Executive Officer: 7 years

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1984 Joined the Corporation

October 2001 Vice President, Sony Ericsson Mobile Communications

April 2006 Senior Vice President, Sony Corporation of America

November 2014 SVP, Corporate Executive, the Corporation

June 2016 EVP, Corporate Executive Officer, the Corporation

June 2020 Senior EVP, Corporate Executive Officer, the Corporation (present)

Hiroaki Kitano

Responsibility as an Officer: Senior EVP and CTO, Officer in charge of R&D and AI Collaboration

Date of Birth: March 16, 1961

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

Principal Business Activities Outside Sony: None

Brief Personal History:

April 1984 Joined NEC Corporation

August 1993 Joined Sony Computer Science Laboratories, Inc.

June 2002 Director, Deputy Head of Research, Sony Computer Science Laboratories, Inc.

July 2008 Director, Head of Research, Sony Computer Science Laboratories, Inc.

July 2011 President and CEO, Sony Computer Science Laboratories, Inc. (present)

June 2016 Corporate Executive, the Corporation

June 2018 SVP, the Corporation

April 2020 CEO, Sony AI Inc. (currently Sony Research Inc.) (present)

June 2020 EVP, the Corporation

April 2022 Senior EVP and CTO, Corporate Executive Officer, the Corporation (present)

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Kenichiro Yoshida, Hiroki Totoki, Toshimoto Mitomo, Shiro Kambe, Kazushi Ambe and Hiroaki Kitano are

engaged on a full-time basis by Sony Group 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 Group

Corporation is required to disclose the total remuneration paid by Sony Group 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 Group Corporation has disclosed in its annual Securities Report for the fiscal year ended March 31, 2023

filed on June 20, 2023 with the Director General of the Kanto Local Finance Bureau of the Ministry of Finance in

Japan.

(1) Total amounts of remuneration for Directors and Corporate Executive Officers and the number thereof

Fixed remuneration Remuneration linked to

business results

Stock acquisition rights

(*6)

Restricted stock

(*8/*9)

Phantom Restricted Stock

Plan (*9/*10)

Number of

persons

Amount

(Yen in

millions)

Number of

persons

Amount

(Yen in

millions)

Number

of persons

Amount

(Yen in

millions)

Number of

persons

Amount

(Yen in

millions)

Number of

persons

Amount

(Yen in

millions)

Directors 8 186 — — — — 8 46 1 95

(*3) (*7) (*11)

(Outside Directors)

(*1) (7) (159) (—) (—) (—) (—) (7) (41) (—) (—)

Corporate Executive

Officers 8 574 7 751 6 681 6 1,131 1 221

(*2) (*4) (*5) (*12)

Total 16 760 7 751 6 681 14 1,178 2 316

*1 The number of persons does not include two Directors who concurrently serve as Corporate Executive

Officers, because Sony Group Corporation does not pay any additional remuneration for services as a Director to

Directors who concurrently serve as Corporate Executive Officers.

*2 The number of persons includes two Corporate Executive Officers who resigned on the day of the Ordinary

General Meeting of Shareholders held on June 28, 2022.

*3 Sony Group Corporation does not pay remuneration linked to business results to Directors who do not

concurrently serve as Corporate Executive Officers.

*4 The number of persons includes one Corporate Executive Officer who resigned on the day of the Ordinary

General Meeting of Shareholders held on June 28, 2022.

*5 This is the amount of remuneration linked to business results for the fiscal year ended March 31, 2023 that

was paid in June 2023.

*6 This is the amount of expenses Sony Group Corporation recorded during the fiscal year ended March 31, 2023

applicable to the stock acquisition rights that were granted.

*7 Sony Group Corporation does not grant stock acquisition rights to Directors who do not concurrently serve as

Corporate Executive Officers.

*8 This is the amount of expenses Sony Group Corporation recorded during the fiscal year ended March 31, 2023

applicable to restricted stock.

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

*10 The phantom restricted stock plan referenced above includes the amount which is to be paid to one Director

who resigned on the day of the Ordinary General Meeting of Shareholders held on June 20, 2023 and one former

Corporate Executive Officer who resigned on March 31, 2023. Sony Group Corporation recorded 69 million yen

in expenses during the fiscal year ended March 31, 2023 applicable to the phantom restricted stock plan for

Directors and Corporate Executive Officers.

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*11 The amount above is equivalent to points accumulated during the terms of the Director up to the fiscal year

ended March 31, 2017, when Sony had granted points under the phantom restricted stock plan to certain

Directors.

*12 The amount above is equivalent to points accumulated during the terms of the Corporate Executive Officers

from April 2015 to June 2018 and from June 2020 to June 2022.

(2) Amounts of remuneration for Directors and Corporate Executive Officers on an individual basis

Name Position (*1) Fixed

Remuneration

(*2)

(Yen in millions)

Remuneration

linked to

business results

(*2) (*3)

(Yen in millions)

Phantom restricted

stock plan

(*2)

(Yen in millions)

Total (*2)

(Yen in millions)

Granted number of

stock acquisition

rights (*4)

(Ten thousand shares)

Granted number of

restricted stock

(*5)

(Ten thousand shares)

Tim Schaaff Former Director

(Until June 20, 2023) 27 — 95

(*6) 122 — 0.1

Kenichiro Yoshida

Director, Chairman,

CEO, and

Representative

Corporate Executive

Officer (*7) (*8)

240 411 — 651 16 8.0

Hiroki Totoki

Director, President,

COO, CFO, and

Representative

Corporate Executive

Officer (*7) (*8)

80 143 — 223 5 2.5

Shigeki Ishizuka

Former Vice

Chairman,

Former Representative

Corporate Executive

Officer (Until

March 31, 2023)

17 13 221

(*9) 251 — —

Toshimoto Mitomo

Executive Deputy

President, CSO, and

Corporate Executive

Officer (*8)

52 49 — 101 2 0.6

Shiro Kambe

Senior Executive

Vice President, and

Corporate Executive

Officer (*8)

52 51 — 103 2 0.6

Kazushi Ambe

Senior Executive

Vice President, and

Corporate Executive

Officer (*8)

52 50 — 102 2 0.6

Hiroaki Kitano

Senior Executive

Vice President, CTO

and Corporate

Executive Officer

52

(*10)

49

(*10) — 101

(*10) 2 1.0

*1 This chart shows remuneration for Directors and Corporate Executive Officers who received, or who became

likely to receive, total remuneration exceeding 100 million yen from Sony Group Corporation and its subsidiaries

during the fiscal year ended March 31, 2023. Titles are as of the date of submission of this document.

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

*3 For the metrics and actual financial results used to determine the amount of remuneration linked to business

results, refer to “Corporate Executive Officer remuneration linked to business results for the fiscal year ended

March 31, 2023” below.

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*4 The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the

fiscal year ended March 31, 2023 was 3,123 yen and was estimated using the Black-Scholes option-pricing

model with several assumptions. Refer to Note 21 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 Group 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, 2023 for accounting

purposes and should not be regarded as any indication or prediction of Sony with respect to its future stock

performance.

*5 This indicates the total number of shares of restricted stock granted in the fiscal year ended March 31, 2023

for Directors and Corporate Executive Officers. The issue price per share of restricted stock was 11,586 yen.

*6 As noted above, the amount is equivalent to points accumulated during the terms of the Director up to the

fiscal year ended March 31, 2017, when Sony had granted points under the phantom restricted stock plan to

certain Directors.

*7 As noted above, Sony Group Corporation does not pay any remuneration for services as a Director to

Directors who concurrently serve as Corporate Executive Officers.

*8 Apart from the remuneration contained in the table, Sony Group Corporation also provided certain personal

benefits and perquisites, including fringe benefits and in some instances amounts to pay income taxes related to

perquisites, totaling 7 million yen to Kenichiro Yoshida, 1 million yen to Hiroki Totoki, 18 million yen to

Toshimoto Mitomo, 1 million yen to Shiro Kambe, and 1 million yen to Kazushi Ambe during the fiscal year

ended March 31, 2023.

*9 As noted above, the amount is equivalent to points accumulated during the terms of the Corporate Executive

Officers from April 2015 to June 2018 and from June 2020 to June 2022.

*10 Remuneration paid to Hiroaki Kitano includes 10 million yen in fixed compensation and 10 million yen in

performance-based compensation from Sony Computer Science Laboratories, Inc. and 5 million yen in fixed

compensation and 5 million yen in performance-based compensation from Sony Research Inc. (formerly Sony AI

Inc.).

(3) Basic policy regarding Director and Senior Executive remuneration

The basic policy regarding remuneration for respective Directors and Senior Executives determined by the

Compensation Committee is as follows:

(a) Basic policy regarding Director remuneration

The primary duty of Directors is to supervise the performance of business operations of Sony 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 Directors.

Based on the above, Director remuneration shall consist of the following components. The amount of each

component and its percentage of total remuneration shall be at an appropriate level determined in accordance

with the basic policy above and based on research conducted by a third party regarding remuneration of directors

of both Japanese and non-Japanese companies.

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Type of remuneration Description

Fixed remuneration • The amount of fixed remuneration shall be at an appropriate level

determined in accordance with the basic policy above and based

on research conducted by a third party regarding remuneration of

directors of both Japanese and non-Japanese companies.

Stock-based compensation

(restricted stock or restricted stock

units)

• Restricted stock or restricted stock units (“RSUs”) are granted to

further promote shared values between Directors and shareholders

and incentivize Directors to develop and maintain a sound and

transparent management system.

• Any Director to whom restricted stock is granted may not sell or

transfer the granted shares during his/her tenure, and in principle,

such restriction is to be released when such Director resigns.

• In principle, RSUs held by Directors will be vested when he/she

resigns, and the Common Stock of the company will then be

delivered to the Directors.

Phantom restricted stock plan • Points determined every year by the Compensation Committee

and granted to certain Directors every year during their term in

office, with the remuneration amount calculated at the time of

resignation by multiplying the Common Stock price (closing

price) by the individual’s accumulated points.

* Because Sony replaced the phantom restricted stock plan for

Directors with restricted stock as from the fiscal year ended March 31,

2018, Sony did not grant new points to Directors during the fiscal year

ended March 31, 2023.

(b) Basic policy regarding Senior Executive remuneration

Senior Executives are key members of management responsible for executing the operations of Sony as a whole,

or their respective businesses of Sony. In order to further improve the business results of Sony, the following two

elements have been established as the basic policy for the determination of remuneration of Senior Executives.

• Attracting and retaining an adequate talent pool 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 on the above, Senior Executive remuneration shall basically consist of the following components. The

amount of each component and its percentage of total remuneration shall be at an appropriate level determined in

accordance with the above basic policy and the individual’s level of responsibility and based on research

conducted by a third party regarding remuneration of management of both Japanese and non-Japanese

companies, with emphasis on linking Senior Executive remuneration to business results and shareholder value.

Type of remuneration Description

Fixed remuneration • The amount of fixed remuneration shall be at an appropriate level

determined based on research conducted by a third party

regarding remuneration of management of both Japanese and

non-Japanese companies, according to his/her responsibility, and

in order to maintain competitiveness in recruiting talent.

Remuneration linked to business

results

• Structured appropriately and based on appropriate indicators to

ensure that such remuneration effectively incentivizes Senior

Executives to achieve the medium- to long-term as well as the

corresponding fiscal year’s, corporate targets.

• Specifically, the amount to be paid to Senior Executives shall be

determined based on the level of achievements of the targets of

indicators of (1) and (2) below, and can fluctuate, in principle,

within the range from 0% to 200% of the standard payment

amount (“Business Results Linked Standard Payment Amount”)

based on the achievement of the below-mentioned targets.

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Type of remuneration Description

(1) Certain key performance indicators linked to consolidated or

individual business results of Sony during the corresponding

fiscal year, such as Adjusted EBITDA and Adjusted EPS

(net income attributable to Sony Group Corporation’s

stockholders per share), and which indicators are selected

based on the areas for which each Senior Executive is

responsible.

(2) The individual performance of the area(s) for which each

Senior Executive is responsible.

• Efforts to accelerate value creation through collaborations among

businesses of Sony, sustainability initiatives related to social

value creation and ESG and engagement indicators based on

employee surveys shall be included in the evaluation factors for

individual performance.

• The Business Results Linked Standard Payment Amount shall be

determined so that such amount is within a certain percentage of

the cash compensation (total of the fixed remuneration and the

remuneration linked to business results), which percentage shall

be determined in accordance with each individual’s level of

responsibility.

Stock-based compensation

(Stock acquisition rights, and

restricted stock or restricted stock

units)

• Stock acquisition rights, and restricted stock or RSUs are granted

to incentivize Senior Executives to increase mid- to long-term

shareholder value.

• The exercise of the stock acquisition rights is, in principle,

restricted during a one-year period from the allotment date, and

one-third of the total number of exercisable stock acquisition

rights will be vested and exercisable each year thereafter. (All of

the allocated stock acquisition rights will be exercisable on and

after three years from the allotment date.)

• The Senior Executives to whom restricted stock is granted, in

principle, may not sell or transfer the granted stock before the

third anniversary date of the Ordinary General Meeting of

Shareholders of the fiscal year when the subject restricted stock

was granted.

• In principle, all RSUs held by the Senior Executives will be

vested after three years have passed since the date of grant of the

RSUs, and the Common Stock of the company will be delivered

to the Senior Executives.

• As a general policy, remuneration for a Senior Executive who has

greater management responsibility and influence over Sony as a

whole has a higher proportion of stock-based compensation,

which is directly linked to the corporate value. (Please see below

Reference: Executive Compensation Package Design to Focus on

Long-Term Management.)

• The amount of stock-based compensation shall be determined so

that the amount is within a certain percentage of the total cash

compensation (total of the fixed remuneration and the

remuneration linked to business results) and stock-based

compensation.

Phantom restricted stock plan • Points determined every year by the Compensation Committee

shall be granted to Senior Executives every year during his/her

tenure, and at the time of resignation, the remuneration amount

shall be calculated by multiplying the Common Stock price

(closing price) by the individual’s accumulated points.

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(Reference: Executive Compensation Package Designed to Focus on Long-Term Management)

The bar chart below shows the components of remuneration for Corporate Executive Officers for the fiscal year

ended March 31, 2023. For this chart, the remuneration linked to business results is based on the Business

Results Linked Standard Payment Amount for each Corporate Executive Officer. As to the stock-based

compensation, the underlying amount is calculated based on the fair value of a stock acquisition right as of the

date such stock acquisition right was granted in the fiscal year ended March 31, 2023 and the issue price of the

restricted stock when granted. Accordingly, the components of remuneration based on the amounts actually paid

will be different from the chart below.

CEO

CFO

CTO

Other Corporate executive officers

Base Performance-linked compensation Stock-based Compensation

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

13%

13%

20%

24% 14% 61%

12% 68%

13% 74%

13% 75%

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

(Reference: Stock-based Compensation)

Sony Group Corporation introduced stock acquisition rights, restricted stock and RSUs as forms of stockbased compensation, granted to the Directors and the Senior Executives including Corporate Executive Officers.

The purpose of the stock-based compensation for the non-executive Directors including outside Directors is

to incentivize these Directors to develop and maintain a sound and transparent management system by further

promoting shared values between the shareholders and these Directors. Furthermore, the purpose of the stockbased compensations for the Senior Executives including Corporate Executive Officers 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 details of such stock-based compensation, including vesting conditions, recipients and number of

grants, are determined or supervised by the Compensation Committee based on research conducted by a third

party regarding stock-based compensation of both Japanese and non-Japanese companies. In addition, in

determining the number of shares or units to be granted, the impact on dilution of the value of the shares of Sony

Group Corporation is monitored.

(4) Procedures to determine remuneration of Directors and Senior Executives

Based on the policy outlined above, the amount and content of the compensation for each Director and

Senior Executive including Corporate Executive Officers are determined by the Compensation Committee or

otherwise under the supervision of the Compensation Committee.

Specifically, in principle, as for Directors, each year at the meeting of the Compensation Committee held

after the Ordinary General Meeting of the Shareholders, the amount of basic remuneration and the content of

compensation for the corresponding fiscal year are determined. Thereafter, at the meeting of the Compensation

Committee held after the corresponding fiscal year end, the final amount of compensation of each Director is

determined. As for the Senior Executives, each year at the meeting of the Compensation Committee held at the

end of the previous fiscal year, in principle, the amount of basic remuneration and the content of compensation

for the corresponding fiscal year are determined or supervised. Thereafter, at the meeting of the Compensation

Committee held after the corresponding fiscal year end, the final amount of compensation for each Senior

Executive is determined or supervised.

For determining the amount of the remuneration linked to business results for each Senior Executive, the

Business Results Linked Standard Payment Amount, the targets for the Financial Performance KPIs and the targets

for the individual performance of the areas(s) for which each Senior Executive is responsible are determined and

thereafter, the amount of such remuneration is determined based on the level of achievement of such targets for the

Financial Performance KPIs and the individual performance at the meeting of the Compensation Committee held

after the corresponding fiscal year end for Corporate Executive Officers or otherwise under supervision by

Compensation Committee for Senior Executives other than Corporate Executive Officers.

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The amount of compensation of each Director and Senior Executive including Corporate Executive Officers

for the fiscal year ended March 31, 2023 was also determined by the Compensation Committee or otherwise

under supervision by the Compensation Committee according to the procedure above. The Compensation

Committee concluded that the amount and content of the compensation was in accordance with the policy set

forth in section (3) above.

(5) Corporate Executive Officer remuneration linked to business results for the fiscal year ended March 31, 2023

The Business Results Linked Standard Payment Amount for each Corporate Executive Officer for the fiscal

year ended March 31, 2023 was determined to be in the range between 60% and 100% of the amount of the fixed

remuneration of such Corporate Executive Officer according to his/her responsibility.

The formula to calculate the amount of the remuneration linked to business results to be paid to Corporate

Executive Officers is as follows.

The amount of the 

remuneration linked to 

business results to be paid to 

Corporate Executive Officers 

The payment rate of the

remuneration linked to

business results **

Business Results Linked

Standard Payment Amount*

* Business Results Linked Standard Payment Amount: Determined to be in the range between 60% and 100% of

the amount of the fixed remuneration of each Corporate Executive Officer.

** Payment rate of the remuneration linked to business results: Determined in principle, within the range from

0 percent to 200 percent based on the achievement of (i) Financial Performance KPIs based on the areas for

which each Corporate Executive Officer is responsible and (ii) the individual performance of the area(s) for

which each Corporate Executive Officer is responsible.

The financial performance KPIs and the weighting of such financial performance KPIs used for Corporate

Executive Officers in the fiscal year ended March 31, 2023 were as follows:

KPI Weight

Target to be achieved for the fiscal year ended

March 31, 2023 (Consolidated)

Result for the fiscal year ended

March 31, 2023 (Consolidated)

Adjusted

EBITDA (*1) 50%

Amount determined in order to achieve the Adjusted

EBITDA (defined below) target of 4.3 trillion yen for

the three-year period from the fiscal year ended

March 31, 2022

1,703.4 billion

yen

Adjusted

EPS (*2)

50% 659.3 yen 737.06 yen

(*3)

Adjusted EBITDA, which is determined as the most important performance KPI under the fourth mid-range

plan, was selected as a Financial Performance KPI to enhance the growth potential of the entire Sony Group

under the fourth mid-range plan. Adjusted EPS was selected in order to incentivize awareness of shareholder

value and capital efficiency.

For the target to be achieved for Adjusted EBITDA for the fiscal year ended March 31, 2023, an amount

that the Compensation Committee determined as appropriate was set in order to achieve the Adjusted EBITDA

target under Sony’s fourth mid-range plan of 4.3 trillion yen for the three-year period from the fiscal year ended

March 31, 2022. The target for Adjusted EPS for the fiscal year ended March 31, 2023 was 659.3 yen, which was

obtained by dividing the forecast of net income attributable to Sony Group Corporation’s stockholders for the

fiscal year ended March 31, 2023, which was disclosed in May, 2022 (830 billion yen) by the number of diluted

shares outstanding at the beginning of such fiscal year. The results for the Financial Performance KPIs for the

fiscal year ended March 31, 2023 were as follows: Adjusted EBITDA: 1,703.4 billion yen (while net income

attributable to Sony Group Corporation’s stockholders for the fiscal year ended March 31, 2023 was

937.1 billion), and Adjusted EPS: 737.06 yen, each exceeding the targeted amount. For reconciliation of

Adjusted EBITDA to net income attributable to Sony Group Corporation’s stockholders, refer to “Issues Facing

Sony and Management’s Response to those Issues: Fourth Mid-Range Plan — Financial Targets and their

Progress” in “Item 5.D Trend Information.”

As outlined above under “(3) Basic policy regarding Director and Senior Executive remuneration”

remuneration linked to business results for Senior Executives for the fiscal year ended March 31, 2023 was

determined based on the level of achievement of the indicators which were selected based on the areas of

responsibility of the relevant Senior Executive and the individual performance of such areas of responsibility.

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The amounts to be paid to the Senior Executives were, in principle, determined within the range from 0% to

200% of the Business Results Linked Standard Payment Amount. As a result, the ratio of remuneration linked to

business results of Corporate Executive Officers for the fiscal year ended March 31, 2023 varied from 155.2% to

178.5% of the Business Results Linked Standard Payment Amount.

*1 “Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)” = Net income

attributable to Sony Group Corporation’s stockholders + Net income attributable to noncontrolling interests +

Income taxes + Interest expenses, net, recorded in Financial income and Financial expense — Gain on revaluation

of equity instruments, net, recorded in Financial income and Financial expense + Depreciation and amortization

expense excluding amortization for film costs, broadcasting rights and internally developed game content and

master recordings included in Content assets, as well as for deferred insurance acquisition costs — the profit and

loss amount that Sony deems non-recurring.

*2 “EPS (Earning Per Share)” means net income attributable to Sony Group Corporation’s stockholders per

share.

“Adjusted EPS” is calculated by using the value excluding the profit and loss amount that Sony deems

non-recurring from the value of the net income attributable to Sony Group Corporation’s stockholders.

*3 Adjusted EPS result for the fiscal year ended March 31, 2023 is calculated by dividing adjusted net income

attributable to Sony Group Corporation’s stockholders for the fiscal year ended March 31, 2023 by diluted

weighted average number of shares during the fiscal year. The following table shows a reconciliation of net

income attributable to Sony Group Corporation’s stockholders for diluted EPS computation reported in

accordance with IFRS to Adjusted EPS for the fiscal year ended March 31, 2023.

Fiscal year ended March 31

2023

(Yen in billions,

yen per share amounts)

Net income attributable to Sony Group Corporation’s stockholders for diluted

EPS computation* 937.2

Profit and loss amount that Sony deems non-recurring, including adjustments for

income taxes and non-controlling interests** (22.2)

Adjusted Net income attributable to Sony Group Corporation’s stockholders for

diluted EPS computation 915.0

Weighted-average shares for diluted EPS computation (thousands of shares)* 1,241,377

Adjusted EPS (yen) 737.06

* Refer to Note 26 of the consolidated financial statements.

** This amount is calculated by subtracting the tax effect of 5.6 billion yen from 27.8 billion yen, the total

amount of profit and loss that Sony deems non-recurring, included in income before income tax. For further

information about the profit and loss amount that Sony deems non-recurring, refer to “Issues Facing Sony and

Management’s Response to those Issues: Fourth Mid-Range Plan — Financial Targets and their Progress” in

“Item 5. Operating and Financial Review and Prospects.”

C. Board Practices

General

Sony Group Corporation continuously strives to strengthen its corporate governance system based on the

understanding that corporate governance is an essential basis to promote our management in order to fulfill the

company’s corporate social responsibility and increase corporate value over the mid- to long-term. To operate

Sony effectively, Sony Group Corporation continues to approach 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 maintains a sound and

transparent governance framework by utilizing the Nominating Committee, the Audit Committee and the

Compensation Committee; and (b) the Board determines Sony’s fundamental management policies and other

material matters and delegates to the Senior Executives (including Corporate Executive Officers), who assume

important roles for the management of Sony, 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

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and efficient decision-making within Sony. In furtherance of these efforts, Sony Group 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, Sony Group

Corporation 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 Group 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: a Nominating Committee, an Audit Committee and a Compensation Committee, each

consisting of Directors appointed by the Board. The Companies Act also requires the Board to appoint 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. Sony Group Corporation has appointed its

Chief Executive Officer (“CEO”), who is responsible for Sony’s overall management, and other officers who are

responsible for important and extensive headquarters functions as Corporate Executive Officers. Sony Group

Corporation has also appointed Corporate Executive Officers, including the CEO and other executives, that

assume important roles for the management of Sony as Senior Executives. In addition, Sony grants titles, such as

Senior Executive Vice President, Executive Vice President and Senior Vice President, to management team

members in accordance with their respective roles and responsibilities.

A summary of the governance system adopted by Sony Group Corporation is set forth below. For an

explanation of the significant differences between the NYSE’s corporate governance standards and Sony’s

corporate governance practices, refer to “Item 16G. Corporate Governance.”

Board of Directors

(1) Members: 10 Directors including 8 outside Directors (as of June 20, 2023)

Name Position

Kenichiro Yoshida Director

Hiroki Totoki Director

Yoshihiko Hatanaka Chairman of the Board

Outside Director

Toshiko Oka Outside Director

Sakie Akiyama Outside Director

Wendy Becker Outside Director

Keiko Kishigami Outside Director

Joseph A. Kraft Jr. Outside Director

Neil Hunt Outside Director

William Morrow Outside Director

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.

(2) Purpose/Authority

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 Sony’s management; (c) appoint

and dismiss the statutory committee members; (d) appoint and dismiss Corporate Executive Officers and oversee

the status of appointment/dismissal of Senior Executives other than Corporate Executive Officers; and

(e) appoint and dismiss Representative Corporate Executive Officers.

For the matters to be decided by the Board and the matters to be reported to the Board, refer to Appendices

1 and 2 of the Charter of the Board of Directors (the “Board Charter”) attached as Exhibit 1.3 hereto.

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(3) Policy Regarding Composition of the Board

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

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 work and other experience, achievements

and expertise), availability, and independence, as well as diversity, including gender and internationality, in the

boardroom, the appropriate size of the Board, and the knowledge, experience and talent needed for the role.

Under the Board Charter, Sony Group Corporation also requires that the Board consist of not fewer than 8

Directors and not more than 14 Directors. In addition, since 2005 the majority of the members of the Board have

been outside Directors.

(4) Qualifications for Directors and Limitation of Re-election

The qualifications for Directors of Sony Group Corporation under the Board Charter are generally as

summarized below. As of the date of this report, all Directors satisfy the qualifications for Directors as set forth

below, and all outside Directors satisfy the additional qualifications for outside Directors and are also qualified

and designated as Independent Directors under the Securities Listing Regulations of the TSE. 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 an executive director, 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 2% of the annual

consolidated sales of such company.

For additional requirements for outside Directors under the Companies Act, refer to “Item 16G. Corporate

Governance”.

Also, each outside Director may be nominated as a Director candidate for re-election up to five times (six

years, in total), and thereafter by resolution of the Nominating Committee and by consent of all of the Directors.

Even with the consent of all of the Directors, in no event may any outside Director be re-elected more than eight

times (nine years, in total).

(5) Matters related to Outside Directors

Sony Group Corporation expects that each outside Director plays 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. Considering these expectations, the policy and procedures on the election of Director candidates,

including independent outside Director candidates, are set forth as described above. As of the date of this report,

the Board has 10 Directors, eight of whom are outside Directors. The Chairman of the Board is an outside

Director; all members of the Nominating Committee, the Compensation Committee and the Audit Committee are

outside Directors.

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Pursuant to the Articles of Incorporation, Sony Group Corporation has entered into a liability limitation

agreement with all outside Directors. A summary of such liability limitation agreement is as follows:

(i) In a case where an outside Director is liable to the company after the execution of the liability

limitation agreement for damages pursuant to Article 423, Paragraph 1 of the Companies Act, such

liabilities shall be limited 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, only

where the outside Director acted in good faith without any gross negligence in performing his/her

duties as a Director of the company.

(ii) In a case where an outside Director is reelected as an outside Director of the company and reassumes

his/her office as such on the expiration of the term of his/her office as an outside Director of the

company, the liability limitation agreement shall continue to be effective after the reelection and

re-assumption without any action or formality.

In addition, Sony Group Corporation has a directors and officers liability insurance policy covering all

Directors as insured parties. For an outline of the directors and officers liability insurance policy, refer to

“Outline of the Terms of Directors and Officers Liability Insurance Policy”.

(6) Policy and Procedure for Selection and Dismissal of Senior Executives

Sony Group Corporation appoints Corporate Executive Officers including the CEO and other officers that

assume important roles for the management of Sony as “Senior Executives.”

The Board has the authority to appoint and dismiss and assign the roles and responsibilities of, or to request

a report regarding such matters for Senior Executives, including the CEO, and exercises such authority as

necessary. In making decisions on the appointment of Corporate Executive Officers, including the CEO, the

Board considers whether candidates for CEO meet certain qualifications for the CEO position which are set by

the Nominating Committee and whether candidates for other Corporate Executive Officer positions have the

necessary skills, capabilities, experiences and achievements that correspond to such Corporate Executive

Officers’ expected roles and responsibilities. The Board also receives a report on the status of appointment and

dismissal of Senior Executives other than Corporate Executive Officers.

The term of office of Senior Executives, including the CEO, is one year. The Board discusses, determines

and/or oversees their re-appointment upon the expiration of each term considering the factors described above as

well as their latest performance. The Board dismisses a Corporate Executive Officer, as necessary, in the event

that the Board recognizes such Corporate Executive Officer is disqualified after discussions amongst the

members of the Board or the Nominating Committee, even in the middle of the term for such Corporate

Executive Officer.

Nominating Committee

(1) Members: 3 outside Directors (as of June 20, 2023)

Name Position

Yoshihiko Hatanaka Chair of the Nominating Committee

(Outside Director)

Toshiko Oka Nominating Committee Member

(Outside Director)

Wendy Becker Nominating Committee Member

(Outside Director)

(2) Purpose/Authority

The primary roles of the Nominating Committee are to: (a) determine the content of proposals regarding the

appointment/dismissal of Directors to be submitted for approval at a General Meeting of Shareholders and

(b) evaluate management succession plans, which the CEO develops, for the CEO and other executives

designated by the Nominating Committee.

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The Nominating Committee determines the content of proposals regarding the appointment and dismissal of

Directors, considering the policy on composition of the Board, the qualifications for Directors and the limitation

of re-election of Directors described above.

(3) Policy Regarding Composition of the Nominating Committee

Under the Companies Act, the Nominating Committee shall consist of at least three Directors, the majority

of whom shall be outside Directors. In addition, under the Board Charter, 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. As of the date of this report, the

Nominating Committee is comprised of three outside Directors.

(4) Management Succession Plans

The Nominating Committee evaluates the succession plans, and the implementation of such plans, for the

CEO and other executives designated by the Nominating Committee and reports the results of its evaluation to

the Board, as appropriate.

Evaluations are conducted by having the CEO periodically submit draft succession plans to the Nominating

Committee, which it reviews. As a part of such review, the Nominating Committee considers the development or

promotion of the next generation of management and evaluates whether the succession plans have been prepared

in a reasonable manner in light of Sony’s purpose to create sustainable social value and to enhance corporate

value over the mid- to long-term.

Audit Committee

(1) Members: 3 outside Directors (as of June 20, 2023)

Name Position

Toshiko Oka Chair of the Audit Committee

(Outside Director)

Keiko Kishigami Audit Committee Member

(Outside Director)

Joseph A. Kraft Jr. Audit Committee Member

(Outside Director)

(2) Purpose/Authority

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.

(3) Policy Regarding Composition of the Audit Committee

Under the Companies Act, the Audit Committee shall consist of at least three Directors, the majority of

whom shall be outside Directors. In addition, under the Board Charter, each member of the Audit Committee

(“Audit Committee Member”) shall satisfy all of the following qualifications: (a) he/she shall not be a Director

engaged in the business operations of Sony Group Corporation 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 Group Corporation. The chair is to be selected from among the

outside Directors. The Audit Committee Members shall be selected from among the persons who possess

appropriate experience and talent as well as the necessary finance, accounting and legal knowledge to serve on

the Audit Committee. In determining whether to appoint or remove the Audit Committee Member, continuity of

the Audit Committee shall be duly taken into account.

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

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to time be applicable to Sony Group Corporation. The Board makes a determination on whether or not such

Audit Committee Members meet these requirements. As of the date of this report, the Audit Committee is

comprised of three outside Directors, two of whom (Toshiko Oka and Keiko Kishigami) are “audit committee

financial experts” within the meaning of Item 16A of Form 20-F under the Exchange Act, as amended.

(4) Policy on Selection of Independent Auditor Candidates and Independence of the Independent Auditor

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 independence, the qualification and the reasonableness as well as

the performance of the independent auditor so appointed.

Compensation Committee

(1) Members: 3 outside Directors (as of June 20, 2023)

Name Position

Wendy Becker Chair of the Compensation Committee

(Outside Director)

Sakie Akiyama Compensation Committee Member

(Outside Director)

William Morrow Compensation Committee Member

(Outside Director)

(2) Purpose/Authority

The primary roles of the Compensation Committee are to: (a) set policy on the content of individual

compensation for Directors, Corporate Executive Officers and other officers and (b) determine the amount and

content of individual compensation of Directors and Corporate Executive Officers in accordance with the policy,

and oversee the determination regarding the amount and content of individual compensation of Senior Executives

other than Corporate Executive Officers.

For the basic policy regarding Director and Corporate Executive Officer compensation, refer to “Item 6B.

Compensation”.

(3) Policy Regarding Composition of the Compensation Committee

Under the Companies Act, the Compensation Committee shall consist of at least three Directors, the

majority of whom shall be outside Directors. In addition, under the Board Charter, a Director who is a CEO, a

Chief Operating Officer (“COO”) or a Chief Financial Officer (“CFO”) of Sony Group Corporation 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. As of the date of this report, the Compensation Committee is comprised of three

outside Directors.

Senior Executives (Corporate Executive Officer, Senior Executive Vice President and Executive Vice

President)

(1) Total number of Senior Executives: 15 (including 6 Corporate Executive Officers) (as of June 20, 2023)

(2) Purpose/Authority

The primary roles of Senior Executives are to determine and execute Sony’s business activities in

accordance with their roles and responsibilities.

(3) Delegation of Authority from the Board

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, including the CEO,

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by determining the areas over which each Corporate Executive Officer is in charge and by determining the scope

of Senior Executives. Then, it delegates its decision-making authority to the CEO with a view to promoting

timely and efficient decision-making within Sony. The CEO further subdelegates a part of such authority to other

Senior Executives.

Other Officers (Senior Vice President)

(1) Total number of other officers: 10 (as of June 20, 2023)

(2) Purpose/Authority

The primary roles of other officers are to carry out their assignments within designated areas, such as

headquarters functions and/or R&D, in accordance with the fundamental policies determined by the Board

and Senior Executives.

Outline of the Terms of Directors and Officers Liability Insurance Policy

Sony Group Corporation has, at its expense in respect of insurance premiums, entered into a directors and

officers liability insurance policy for all Directors, Corporate Executive Officers, corporate auditors, and persons

in equivalent positions (the “Executives”) of itself and its subsidiaries over which Sony Group Corporation has a

direct or indirect ownership more than 50%. The outline of the terms of such liability insurance policy is as

follows:

(i) The insurance policy covers compensation for damages, litigation costs (including attorney’s fees) and

other costs that may be incurred by the Executives as a result of assuming responsibility for the

execution of their duties or receiving claims related to such responsibility.

(ii) As a measure to ensure the appropriateness of the execution of duties by the Executives, there are

certain exemptions, such as in the case of an act committed by the Executives with the knowledge that

it constitutes a violation of laws or regulations.

Support for Activities of Directors, the Board and the Committees

Sony Group Corporation engages in various activities to enhance the oversight function of the Board over

management’s operation of Sony’s business as follows:

(1) Outside Director Initiatives

The Chairman of the Board, who is an outside Director, leads the Board’s activities and secures the

appropriate cooperation, communication and arrangement among outside Directors and Senior Executives. As an

example of such initiatives, the outside Directors’ meetings have been held, generally on the same day as each

Board Meeting, for the purpose of exchanging information and sharing information with respect to recognized

issues among outside Directors. The Board also conducted Directors’ corporate strategic workshops with

management, business site visits by Directors, and meetings with the Chairman and the CEO. All of these

activities were aimed at securing better understanding by outside Directors of Sony’s business and management’s

challenges and encouraging corporate strategic discussions among Directors. In September 2022, the Directors

visited the Kumamoto Technology Centre of SSS located in Kumamoto Prefecture, Japan, where they observed

manufacturing lines of image sensor products and discussed with the image sensor business’s management the

current challenges and future strategies of the business. At a workshop held over two days in December 2022,

through direct dialogue with executives in charge of Sony’s main business segments, the Directors intensively

discussed a variety of matters, including the business environment and challenges surrounding each of Sony’s

businesses and corresponding strategies, as well as Sony’s internal and external conditions related to

sustainability and geopolitical risks, which are becoming increasingly important, in addition to Sony’s business

portfolio.

(2) Secretariat Offices for the Board and each Committee

The company has established the secretariat offices of the Board and each Committee to support the

activities of the members and encourage constructive and proactive discussion at the meetings of the Board and

each Committee. Each secretariat office endeavors to distribute necessary materials for the meetings in advance

and to provide other information such as accounting information, organizational charts, press releases, external

analyst reports and credit rating reports, as appropriate. Each secretariat office explains the meeting agenda to the

members and provides them with presentation materials in advance of each meeting date and facilitates

deliberation in separate meetings or briefing sessions depending on the nature of matters to be discussed. Each

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secretariat office also provides the absent members with a follow up briefing, as appropriate. In addition, each

secretariat office shares the annual schedule of the meetings and anticipated agenda items in advance with the

members in order to appropriately set the frequency of meetings and the number of agenda items to be

deliberated at each meeting.

(3) Provision of Necessary Information

When the company is requested to provide additional information, each secretariat office endeavors to

provide the members such information promptly. Also, each secretariat office verifies appropriately whether

requested information is provided smoothly. In the event that the members consult with external specialists,

participate in various seminars and so on to perform their duties, the costs and expenses in connection with such

activities are borne by the company in accordance with applicable internal rules.

(4) Audit Committee Aide

With the approval of the Board and with the Audit Committee’s consent, the company has established the

Audit Committee Aide to support the activities of the Audit Committee. The Audit Committee Aide does not

concurrently hold positions related to the business operations of Sony and, upon instruction by each Audit

Committee member, conducts investigations into and analyzes auditing matters and engages in physical

inspections or visiting audits either by him/herself or by cooperating with relevant departments in order to

support the Audit Committee.

(5) Policy on Director Training

Newly appointed Directors receive briefings by Senior Executives and outside experts regarding their

expected roles and responsibilities, including their legal duties as a Director or as a member of the Committees,

as well as briefings about the business, financial status, organization and governance structure of Sony. Also,

throughout their tenure, each Director receives compliance-related training in accordance with internal protocols

and briefings on matters relevant to each Director’s fulfillment of his/her roles and responsibilities including the

current status of Sony’s business.

Evaluation of the Board and the Committees’ Effectiveness

(1) Policy for Evaluation

Sony Group Corporation believes that it is important to endeavor to improve the effectiveness of the Board

and each Committee in order to support Sony’s business operations and enhance the corporate value of Sony. To

achieve this goal, Sony Group Corporation conducts evaluations of the effectiveness of the Board and of each

Committee (the “Evaluation”) at least annually.

(2) Recent Evaluation

From February through April 2023, under the leadership of the Chairman and the Vice Chairman of the

Board, the Board conducted the Evaluation mainly in respect of Board and Committee activities in the fiscal year

ended March 31, 2023 after confirming that actions proposed in response to the results of the previous Evaluation

were appropriately taken. The recent Evaluation was conducted, with the support of a third-party outside counsel

with expertise in Japanese and global corporate governance practices (the “Outside Counsel”) in order to ensure

transparency and objectivity and to obtain professional advice.

(3) Procedure of the Recent Evaluation

First, the Board confirmed that the actions proposed to be taken in response to the results of the previous

Evaluation were taken, and it discussed and confirmed the proposed procedures for the Evaluation for the fiscal

year ended March 31, 2023. Thereafter, the third-party evaluation was conducted by the Outside Counsel in

accordance with the following steps:

• Reviewed relevant material, such as the minutes of Board meetings, and attended a Board meeting;

• Confirmed with the Board secretariat office and each Committee’s secretariat office how meetings of

the Board and Committees were conducted;

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• Gathered responses to a questionnaire from each Director about the current status and practices of the

Board and each Committee, such as the composition of the Board, operation of the Board, commitments

of each Director, activities of each Committee and procedures of the previous Evaluation;

• Interviewed all the Directors including through the Peer Review(*); and

• Researched other global companies’ practices in Japan, the United States and Europe, and compared

them with the company’s practices.

The Board then received, reviewed and discussed the Outside Counsel’s report on the results of its

evaluation. The Board confirmed the effectiveness of the Board and the Committees.

* Peer Review: Mutual evaluation by Directors. We conducted the Evaluation through interviews in the

presence of the Chairman or Vice Chairman of the Board.

(4) Summary of the Results of the Recent Evaluation

Based on the following findings, the Outside Counsel reported that, as assessed in the previous Evaluation,

the Board is established and operated in a manner sufficient to be highly evaluated:

• The results of the questionnaire and interviews show that many Directors rate the effectiveness of the

Board highly overall.

• Outward factors such as the composition of the Board are comparable with global companies in Europe

and North America as well as Japan.

• In addition, the Peer Review was conducted in the fiscal year ended on March 31, 2023, and the

involvement of the Board in the process of appointment of the new president was appropriate.

• The Board also received a favorable assessment on its response to the suggestions made by the Outside

Counsel in the previous Evaluation and on its overall operations.

Following discussions and analysis based on the Outside Counsel’s report, the Board re-affirmed that the

Board and each Committee were functioning effectively as of April 2023.

The Outside Counsel also suggested several possible options for the Board and Committees to further

improve their own effectiveness.

(5) Actions in Response to the Results of the Evaluation

In order to increase the corporate value of Sony, Sony Group Corporation will take appropriate actions to

further enhance functions of the Board and the Committees in response to the results of the Evaluation, as well as

various comments and opinions given by Directors and the Outside Counsel during the Evaluation process.

For reference, after the previous Evaluation conducted from February through May 2022, Sony Group

Corporation took the following actions, among others, to help improve the effectiveness of the Board:

• Continuously made periodic reports to the Board on sustainability (Environment and Social) related

matters;

• Enhanced Board’s supervision over risks regarding geopolitics and information security;

• Conducted deep discussions about Sony’s strategies on growth areas and new businesses (gaming,

metaverse and mobility) ; and

• Promoted engagement between outside Directors and investors.

Internal Control and Governance Framework

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 Board meetings held on May 13, 2009 and April 30, 2015, the

Board amended and updated the internal control and governance framework, and at a Board meeting held on

April 28, 2023, the Board reaffirmed that such framework was in effect and determined 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.

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A summary of the principal framework of the internal control and governance framework based on the

Board determination above is as follows:

(1) Disclosure Control Framework

The securities of Sony Group Corporation are listed for trading on exchanges in Japan and the U.S. As a result,

Sony is obligated to make various disclosures to the public in accordance with applicable securities laws,

regulations and rules in those countries and listing standards of the stock exchanges on which Sony Group

Corporation’s shares are listed. Sony is committed to full compliance with all requirements applicable to its public

disclosures. Sony Group Corporation’s policy on investor relations activities is to aim to disclose accurate

information in a timely and fair manner, as well as to endeavor to promote constructive dialogue with shareholders

and investors, with a view to maximizing the corporate value by building a relationship of trust with shareholders

and investors. Sony Group Corporation has established disclosure controls and procedures as an approach to

implement this policy. All personnel responsible for the preparation of submissions to and filings with the TSE, the

SEC and other regulatory entities, or for other public communications made on behalf of Sony, or who provide

information as part of that process, have a responsibility to ensure that such disclosures and information are full,

fair, accurate, timely and understandable, and in compliance with the established disclosure controls and procedures.

Sony Group Corporation has established “Disclosure Controls and Procedures” outlining the process through

which potentially material information is reported from important business units, subsidiaries, affiliated companies and

corporate divisions and is reviewed and considered for disclosure in light of its materiality to Sony. As a body to assist

the CEO and the CFO of Sony Group Corporation in designing, implementing and evaluating the Disclosure Controls

and Procedures, Sony Group Corporation has established the “Disclosure Committee,” which is comprised of members

of senior management who are in charge of a part of Sony’s headquarters functions. In order to assure appropriate and

timely disclosure, the Disclosure Committee shall evaluate events that are reported from the important business units,

subsidiaries, affiliated companies and corporate divisions in accordance with Sony’s internal rules in light of their

materiality to Sony. Based on such evaluation, the Disclosure Committee shall review the necessity of disclosure in

accordance with applicable securities laws, regulations and rules, as well as the listing standards of the relevant stock

exchanges, and report to the CEO and CFO for their determination.

(2) Risk Management Framework

Each business unit, subsidiary/affiliated company and corporate division of Sony periodically reviews and

assesses risks and establishes and maintains necessary risk management systems (such as detection,

communication, evaluation and response) for the area for which they are responsible. In addition, Senior

Executives, including the Corporate Executive Officers, of Sony Group Corporation have established and

currently maintain a system to identify and control risks that may cause losses to Sony regarding the areas for

which they are responsible. The Corporate Executive Officer in charge of group risk control shall

comprehensively promote and manage the establishment and maintenance of the systems as stated above.

Details of Actions Taken by the Board and the Committees

(1) Details of Actions Taken by the Board

During the fiscal year ended on March 31, 2023, the Board convened 9 times. The attendance records of

respective Directors are as follows.

Name *2 Meeting Records *1 Attendance Records *1

Kenichiro Yoshida 9 Times 9 Times (100%)

Hiroki Totoki 9 Times 9 Times (100%)

Shuzo Sumi 9 Times 9 Times (100%)

Yoshihiko Hatanaka 9 Times 9 Times (100%)

Tim Shaaff 9 Times 9 Times (100%)

Toshiko Oka 9 Times 9 Times (100%)

Sakie Akiyama 9 Times 9 Times (100%)

Wendy Becker 9 Times 9 Times (100%)

Keiko Kishigami 9 Times 9 Times (100%)

Joseph A. Kraft Jr. 9 Times 9 Times (100%)

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*1 The numbers of the Meeting Records and the Attendance Records are those applicable to the fiscal year ended

on March 31, 2023.

*2 Shuzo Sumi and Tim Shaaff, who were Directors during the fiscal year ended on March 31, 2023, retired as

Directors at the conclusion of the Ordinary General Meeting of Shareholders on June 20, 2023. Accordingly, Neil

Hunt and William Morrow were newly appointed as Directors at the Ordinary General Meeting of Shareholders

on June 20, 2023.

During the fiscal year ended on March 31, 2023, the Board of Directors discussed a variety of matters, such

as supervision of the progress of the fourth mid-range plan, formulation of a business plan for the fiscal year

ending on March 31, 2024, enhancement of Sony’s management structure (including the appointment of Hiroki

Totoki as President, COO and CFO), Sony’s business portfolio, strategically important M&A and capital

investments, effectiveness of internal control (including the ethics and compliance program and information

security), approach to new risks (including geopolitical risks), and Sony’s situation and initiatives related to

sustainability and environment as well as Sony’s strategy related to new technologies (including generative AI).

(2) Details of Actions Taken by the Nomination Committee

During the fiscal year ended on March 31, 2023, the Nomination Committee convened 5 times. The

attendance records of respective Directors are as follows.

Name Meeting Records *1 Attendance Records *1

Shuzo Sumi *2 5 Times 5 Times (100%)

Yoshihiko Hatanaka 5 Times 5 Times (100%)

Wendy Becker 5 Times 5 Times (100%)

*1 The numbers of the Meeting Records and the Attendance Records are those applicable to the fiscal year ended

on March 31, 2023.

*2 Shuzo Sumi, who was a member of the Nomination Committee during the fiscal year ended on March 31,

2023, retired both as a Director and a member of the Nomination Committee at the conclusion of the Ordinary

General Meeting of Shareholders on June 20, 2023. Accordingly, Toshiko Oka was newly appointed as a

member of the Nomination Committee pursuant to the resolution at the Board meeting held on June 20, 2023.

During the fiscal year ended on March 31, 2023, the matters given consideration by the Nominating

Committee included policies on selecting outside Director candidates, exploring Director prospects, and CEO

succession. In addition, the Nominating Committee assessed succession plans for Senior Executives with key

management responsibilities for individual business units and headquarters functions, based on management,

including CEO, reports. With respect to the selection of candidates for outside Directors, as a priority item for the

current fiscal year, the Nominating Committee confirmed the policy that candidates for outside Directors should

be selected from persons who have experience as CEOs of major global companies, backgrounds in technology

and/or knowledge of the entertainment industry, and the Nomination Committee held discussions based on such

policy. As a result, two new outside Director candidates were appointed based on this policy. Regarding the

appointment of Senior Executives, Kenichiro Yoshida, Representative Corporate Executive Officer, Chairman,

President and CEO, proposed to the Nominating Committee that Hiroki Totoki, Representative Corporate

Executive Officer, Executive Deputy President and CFO, assume the position of President, COO and CFO. After

a multifaceted review and discussion, including interviews by the Nominating Committee members, the proposal

was shared with the outside Directors other than the Nominating Committee members and confirmed.

(3) Details of Actions Taken by the Audit Committee

During the fiscal year ended on March 31, 2023, the Audit Committee convened 6 times. The attendance

records of respective Directors are as follows.

Name Meeting Records *1 Attendance Records *1

Toshiko Oka 6 Times 6 Times (100%)

Keiko Kishigami 6 Times 6 Times (100%)

Joseph A. Kraft Jr. 6 Times 6 Times (100%)

*1 The numbers of the Meeting Records and the Attendance Records are those applicable to the fiscal year ended

on March 31, 2023.

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Specific considerations by the Audit Committee include review of audit plans in three-way audits,

identification and audit of priority audit items for each fiscal year, review of financial results and disclosure

documents related to financial results, review of development and operation of internal control systems, audit of

financial reports and SOX 404-related activities, audit of internal audit activities, review of the content and

process for determining the compensation of the independent auditors, audit of the appropriateness of audit by

the independent auditors and evaluation of the independent auditors. In addition to these, the Audit Committee

held interviews with Senior Executives to receive reports on matters such as the recognition of issues and the

status of risk management in the respective areas of responsibility of each business and headquarter function, and

engaged in dialogue.

The priority audit items for the fiscal year ended on March 31, 2023 were disclosure of non-financial

information and risk management. Through audit activities conducted in cooperation with the internal audit

division and the divisions of the Sony Group responsible for internal control, the Audit Committee was informed

about the latest trends in Japan and overseas regarding the disclosure of non-financial information such as

climate change disclosure and risk management such as information security, and confirmed the status of internal

responses.

(4) Details of Actions Taken by the Compensation Committee

During the fiscal year ended on March 31, 2023, the Compensation Committee convened 5 times. The

attendance records of respective Directors are as follows.

Name Meeting Records *1 Attendance Records *1

Wendy Becker 5 Times 5 Times (100%)

Yoshihiko Hatanaka *2 5 Times 5 Times (100%)

Sakie Akiyama 5 Times 5 Times (100%)

*1 The numbers of the Meeting Records and the Attendance Records are those applicable to the fiscal year ended

on March 31, 2023.

*2 Yoshihiko Hatanaka, who was a member of the Compensation Committee during the fiscal year ended on

March 31, 2023, retired as a member of the Compensation Committee on June 20, 2023. Accordingly, William

Morrow was newly appointed as a member of the Compensation Committee pursuant to the resolution at the

Board meeting held on June 20, 2023.

The specific matters given consideration by the Compensation Committee included the Corporation’s policy

regarding the determination of individual remuneration for Directors and Senior Executives, including Corporate

Executive Officers, for each fiscal year, and the amount and content of such remuneration. The Committee also

considered the total number of stock acquisition rights to be issued for the purpose of granting stock options to

Corporate Executive Officers, employees of the Corporation, Directors and other officers of the Corporation’s

subsidiaries, and other stock-based compensation utilizing shares of the Corporation’s stock. In the fiscal year

ended March 31, 2023, the Corporation newly introduced RSUs for the purpose of giving the recipients an

incentive to contribute towards the improvement of the business performance of the Sony Group, and the

Committee confirmed and discussed the scope of and plans for the recipients and the decision-making authority

for the grant of RSUs. For the fiscal year ending March 31, 2024 and beyond, the Committee conducted a

comprehensive review and discussion on the ideal KPIs for remuneration linked to business results and the ideal

governance of executive compensation, with consideration of other companies’ trends and regulatory

developments in Japan and other countries.

D. Employees

As of March 31, 2023, Sony had approximately 113,000 employees, an increase of approximately 4,100

employees from March 31, 2022. During the fiscal year ended March 31, 2023, although there was a decrease of

employees mainly in the ET&S segment (outside of Japan) due to closure of manufacturing sites in Malaysia,

employees of the G&NS, I&SS, and Pictures (outside of Japan) segments increased due to the expansion of these

businesses, including through mergers and acquisitions. Approximately 9% of the total number of employees

were members of labor unions.

As of March 31, 2022, Sony had approximately 108,900 employees, a decrease of approximately 800

employees from March 31, 2021. During the fiscal year ended March 31, 2022, although there was an increase of

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employees mainly in the I&SS, Music (outside of Japan) and G&NS (outside of Japan) segments, there was a

decrease of employees in the ET&S segment (outside of Japan) and All Other (outside of Japan). In the ET&S

segment, this was mainly due to closure of manufacturing sites in Malaysia. Approximately 9% of the total

number of employees were members of labor unions.

As of March 31, 2021, Sony had approximately 109,700 employees, a decrease of approximately 2,000

employees from March 31, 2020. During the fiscal year ended March 31, 2021, although there was an increase of

employees in the I&SS and Financial Services segments, there was a decrease of employees in the ET&S and

Pictures segments, as well as in All Other. In the ET&S segment, this was mainly due to closure of

manufacturing sites in Malaysia and Brazil. Approximately 10% 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, 2021,

2022 and 2023.

Number of Employees by Segment and Region

March 31

2021 2022 2023

By segment:

G&NS .......................................................... 9,600 10,200 12,700

Music .......................................................... 9,900 10,800 11,100

Pictures ......................................................... 8,000 8,100 9,100

ET&S .......................................................... 43,700 40,200 38,400

I&SS ........................................................... 16,800 18,100 20,300

Financial Services ................................................ 12,900 13,200 13,500

All Other ........................................................ 2,800 2,300 2,100

Unallocated — Corporate employees ................................. 6,000 6,000 5,800

By region:

Japan ........................................................... 54,500 55,100 56,400

Outside of Japan .................................................. 55,200 53,800 56,600

Total ............................................................. 109,700 108,900 113,000

In addition, the average number of employees for the fiscal years ended March 31, 2021, 2022 and 2023

calculated by averaging the total number of employees at the end of each quarter, was approximately 110,700,

109,600 and 112,300 respectively.

Sony generally considers its labor relations to be good.

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

In the G&NS, ET&S and I&SS segments, 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.

Sony has generally maintained good relationships with these labor unions. In Europe, Sony also maintains good

labor relations with the European Works Council and the local Unions and Works Councils.

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

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, 2023, negotiations were

conducted and agreements reached with a number of unions. Negotiations were successfully concluded with the

International Alliance of Theatrical and Stage Employees (“IATSE”) for agreements with three-year terms

covering The Animation Guild as well as for additional local agreements in New York. Negotiations were also

completed with Teamsters for agreements for three-year terms covering Location Managers in New York,

Casting Directors in New York and Los Angeles and drivers in Miami. Agreements were also reached for new

three-year deals with Screen Actors Guild-American Federation of Television and Radio Artists

(“SAG-AFTRA”) on the Network Code and The Animation Guild Agreement and with the Communications

Workers of America, AFL-CIO for parking production assistants in New York. Negotiations were completed

with Directors Guild of Canada, British Columbia District Council for a three-year agreement. An agreement was

reached with the American Federation of Musicians to extend the Theatrical and Television Agreements through

November 13, 2023. During the fiscal year, amendments to the COVID-19 Return to Work Agreement with the

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Directors Guild of America (“DGA”), IATSE, SAG-AFTRA, Teamsters and Basic Crafts covering COVID-19

safety protocols were negotiated and were in effect through May 11, 2023. The WGA agreement expired on

May 1, 2023 and the parties have not reached agreement on the terms of a new deal. The WGA went on strike

effective May 2, 2023. Negotiations have been completed with the DGA for new three-year deals on the Basic

Agreement and the Film Live Tape Television Agreement subject to ratification by the DGA. Negotiations have

commenced with SAG-AFTRA for the Codified Basic Agreement and the Television Basic Agreement which

expire on June 30, 2023. If negotiations to renew expiring collective bargaining agreements are not successful or

become unproductive, the affected unions could take actions such as strikes, work slowdowns or work stoppages.

Strikes, work slowdowns, work stoppages or the possibility of such actions could result in delays in the

production of television programs and feature films or otherwise disrupt operations. The Pictures segment could

also incur higher costs from such actions or new collective bargaining agreements that include rate increases.

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 listed in “Directors and Senior Management” above (out of whom 12 people own shares) was

approximately 0.043% of the total shares outstanding as of June 2, 2023.

During the fiscal year ended March 31, 2023, Sony Group Corporation granted stock acquisition rights,

which represent rights to subscribe for shares of Common Stock, to Corporate Executive Officers and employees

of Sony Group Corporation as well as directors, officers and employees of its subsidiaries. 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 Group Corporation to Directors and

Corporate Executive Officers as of June 2, 2023 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)

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 11,390 yen

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 14,350 yen

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 9,237 yen

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 6,705 yen

2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 6,440 yen

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5,231 yen

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 3,364 yen

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3,404 yen

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 2,410.5 yen

Regarding the above compensation plans, refer to Note 21 of the consolidated financial statements.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

As of March 31, 2023, there were 1,261,081,781 shares of Common Stock outstanding, including

26,584,521 shares of treasury stock. Out of the total outstanding shares, 117,871,924 shares were in the form of

American Depositary Receipts (“ADRs”) and 215,074,779 shares were held of record in the form of Common

Stock by residents in the U.S. As of March 31, 2023, the number of registered ADR holders was 4,697 and the

number of registered holders of Common Stock in the U.S. was 389.

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 Kanto

Local Finance Bureau (the “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.

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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**

October 6, 2020 Nomura Asset Management Co.,

Ltd. and 3 Joint Holders

63,156,882 5.01

June 6, 2022 Sumitomo Mitsui Trust Asset

Management Co., Ltd. and 1 Joint

Holder

82,189,224 6.52

May 18, 2023 BlackRock Japan Co., Ltd. and 9

Joint Holders

93,769,348 7.43

* 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 Group 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 Group Corporation, there are no arrangements the operation of which may, at a

subsequent date, result in a change in control of Sony Group Corporation.

To the knowledge of Sony Group 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 Group 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.

Refer to Note 32 of the consolidated financial statements for account balances and transactions with

associates and joint ventures accounted for under the equity method.

C. Interests of Experts and Counsel

Not Applicable

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

Sony Group Corporation and certain of its subsidiaries are defendants or otherwise involved in 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 40 yen per share of Common Stock of Sony Group Corporation was approved

at the Board of Directors meeting held on April 28, 2023 and the payment of such dividend started on June 5,

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2023. Sony Group Corporation has already paid an interim dividend for Common Stock of 35 yen per share to

each shareholder; accordingly, the total annual dividend per share of Common Stock for the fiscal year ended

March 31, 2023 is 75 yen.

B. Significant Changes

Not applicable

Item 9. The Offer and Listing

A. Offer and Listing Details

Trading Markets

The principal trading markets for Sony Group Corporation’s ordinary shares are the TSE in the form of

Common Stock and the NYSE in the form of ADSs evidenced by ADRs. Each ADS represents one share of

Common Stock.

Sony Group Corporation’s Common Stock, with no par value per share, has been listed on the TSE since

1958 under the stock code “6758.”

Sony Group Corporation’s ADRs have been traded in the U.S. since 1961 and have been listed on the NYSE

since 1970. As of April 1, 2021, the ticker symbol changed from “SNE” to “SONY.” Sony Group Corporation’s

ADRs are issued and exchanged by Citibank, N.A., as the Depositary.

B. Plan of Distribution

Not Applicable

C. Markets

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 Group 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 Group 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;

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(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.

Directors

Under the Companies Act, because Sony Group Corporation has adopted the “Company with Three

Committees” system, Directors have no power to execute the business of Sony Group 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 Group Corporation in the capacity of Corporate

Executive Officer. Under the Companies Act, Directors must refrain from engaging in any business competing

with Sony Group 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 Group 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 Group 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 Group Corporation’s capital

stock, including brief summaries of the relevant provisions of Sony Group Corporation’s Articles of

Incorporation and Share Handling Regulations, currently in effect, and of the Companies Act and related

regulations.

The central book-entry transfer system for shares of Japanese listed companies under the Act Concerning

Book-entry Transfer of Corporate Bonds, Shares, etc. (including regulations promulgated thereunder, “Bookentry Transfer Act”) is applied to the shares of Common Stock of Sony Group 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

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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 Group 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 Group Corporation, a shareholder of shares must have its name and address registered in Sony Group

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 Group Corporation’s Share Handling Regulations, including their names

and addresses, and the registration on Sony Group Corporation’s register of shareholders is updated upon receipt

by Sony Group Corporation of necessary information from JASDEC (as described in “(Record date)”). On the

other hand, in order to assert, against Sony Group 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 Group 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 Group

Corporation.

Thereafter, such shareholder shall provide Sony Group Corporation with written notice that he or she

exercises such shareholder’s right in accordance with the Sony Group 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 Group Corporation.

Mitsubishi UFJ Trust and Banking Corporation is the transfer agent for Sony Group Corporation’s capital

stock. As such, it keeps Sony Group 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 Group 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 Group Corporation.

(Authorized capital)

Under the Articles of Incorporation of Sony Group Corporation, Sony Group Corporation may only issue

shares of Common Stock. Sony Group Corporation’s Articles of Incorporation provide that the total number of

shares authorized to be issued by Sony Group Corporation is 3.6 billion shares.

All shares of capital stock of Sony Group 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 distribution of Surplus”). Sony Group Corporation may make distributions of Surplus to

shareholders any number of times per business year, subject to certain limitations described in “— Restriction on

distribution of Surplus.” Distributions of Surplus are required in principle to be authorized by a resolution of a

General Meeting of Shareholders, but Sony Group 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.

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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 Group 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 Group 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 Group Corporation, year-end dividends and interim dividends

may be distributed in cash to shareholders appearing in Sony Group 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 Group 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

business day immediately prior to the record date (or if the record date is not a business day, the second business

day prior thereto).

Distribution of Surplus — Restriction on distribution of Surplus

In making a distribution of Surplus, Sony Group 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.

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 Group 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

Group Corporation less the book value thereof

“C” = (if Sony Group 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 Group 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 Group Corporation has cancelled its treasury stock after the end of the last business

year) the book value of such treasury stock

“F” = (if Sony Group 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

Group 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 Group 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 Group Corporation may not exceed a prescribed

distributable amount (the “Distributable Amount”), as calculated on the effective date of such distribution. The

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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 Group 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 Group 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 Group 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 Group 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 Group

Corporation, during the period in respect of which such interim financial statements have been prepared. Sony

Group 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

Group 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.

(Capital and reserves)

Sony Group 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 Group 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 Group 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 Group 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 Group 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 Group 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 Group Corporation’s shareholders at

account managing institutions or JASDEC will be increased in accordance with the applicable ratio.

(Consolidation of shares)

Sony Group 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 Group Corporation must

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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 Group 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 Group Corporation’s shareholders at account managing institutions or JASDEC will be

decreased in accordance with the applicable ratio. Sony Group 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 Group Corporation for each business year is

normally held in June of each year in Tokyo, Japan. In addition, Sony Group 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 the consent of the

relevant shareholders. The record date for voting rights at an Ordinary General Meeting of Shareholders is

March 31 of each year.

Under the Companies Act and the Articles of Incorporation, Sony Group Corporation shall take measures to

electronically provide to its shareholders (“Electronic Provision”) the contents of reference materials for a

General Meeting of Shareholders, etc.

Notice of a shareholders meeting must set forth the contents of reference materials for a General Meeting of

Shareholders, etc. to be provided by way of Electronic Provision and the URL of the website used for Electronic

Provision, in addition to the place, time and purpose of the meeting. The contents of reference materials for a

General Meeting of Shareholders, etc. must be posted on the website from the earlier of the date three weeks

prior to the date set for the meeting or the date on which the notice of the shareholders meeting is dispatched

until the date on which three months have elapsed from the meeting. Any shareholder (other than those

shareholders consenting to receipt of notice of shareholders’ meeting by electronic means) is entitled to request

printed paper copies of the contents of reference materials for a General Meeting of Shareholders, etc. by the

record date for voting rights at the relevant General Meeting of Shareholders.

Any shareholder or group of shareholders holding at least 3% 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 that is

to be held no later than eight weeks from the day of such request is dispatched, the shareholder requesting the

holding of the meeting may, upon obtaining a court’s approval, convene such a shareholders’ meeting.

Any shareholder or group of shareholders holding at least 300 voting rights or 1% 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 Group Corporation at least eight weeks prior to the date set

for such meeting, provided that Sony Group Corporation may limit the number of such matters requested by each

shareholder to 10.

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 Group Corporation’s Articles of Incorporation currently do not include any such

provisions.

(Voting rights)

So long as Sony Group 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 Group

Corporation are afforded to Sony Group 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 Group Corporation. If Sony

Group 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

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Articles of Incorporation of Sony Group 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 Group 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

Group 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 Group Corporation.

The Companies Act and the Articles of Incorporation of Sony Group 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 Group 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;

(11) share exchange or share transfer for the purpose of establishing 100% parent-subsidiary relationships

with certain exceptions; or

(12) partial share exchange for the purpose of establishing 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 Group Corporation’s shares of capital stock have no pre-emptive rights under its Articles of

Incorporation. Authorized but unissued shares may be issued, or existing shares held by Sony Group Corporation

as treasury stock may be transferred, 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 or transfer of existing shares held by Sony

Group Corporation as treasury stock at a “specially favorable” price mentioned under “(Voting rights)” above.

In the case of an issuance of shares (including a transfer of existing shares held by Sony Group Corporation

as treasury stock) or stock acquisition rights whereby any subscriber will hold more than 50% of the voting rights

of all shareholders, generally Sony Group Corporation shall give public notice at least two weeks prior to the

payment date for such issuance, and if shareholders who hold one-tenth or more of the voting rights of all

shareholders dissent from the issuance 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 existing shares held by Sony Group

Corporation as treasury stock) or stock acquisition rights by way of an allotment to a third party which would

dilute the outstanding voting shares by 25% or more or change the controlling shareholder, in addition to a

resolution of the Board of Directors or a determination by the CEO, the approval of the shareholders or an

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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 Group 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 Group 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 Group 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 Group 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 Group Corporation’s year-end dividends, if declared. So long as Sony

Group Corporation maintains the unit share system, shareholders who are registered as the holders of one or

more unit of stock in Sony Group 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 Group 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 Group Corporation notice of the names and addresses of Sony

Group 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 business

day immediately prior to a record date (or if the record date is not a business day, the second business day prior

thereto), for the purpose of dividends or rights offerings.

(Acquisition by Sony Group Corporation of its capital stock)

Under the Companies Act and the Articles of Incorporation of Sony Group Corporation, Sony Group

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

resolution of the Board of Directors), or (iii) by way of purchase on any Japanese stock exchange on which Sony

Group 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 Group Corporation that such

other shareholder be included as a seller in the proposed purchase, provided that no such right will be available if

the 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 distribution of

Surplus.”

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Shares acquired by Sony Group Corporation may be held for any period or may be retired at the

determination of the CEO. Sony Group Corporation may also transfer (by public or private sale or otherwise) to

any person the treasury stock held by it, at such times and upon such terms as the Board of Directors or the CEO

determines, 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 Group 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, partial 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 Group 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% 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 Group 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 Group Corporation to purchase such

shares at their market value in accordance with the provisions of the Share Handling Regulations of Sony Group

Corporation. In addition, the Articles of Incorporation of Sony Group Corporation provide that a holder of shares

constituting less than one full unit may request Sony Group 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 Group Corporation must be made in accordance with the

provisions of the Share Handling Regulations of Sony Group 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 central book-entry transfer system described in “(General).” Under the rules of the Japanese 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 Group Corporation of shares held by shareholders whose location is unknown)

Sony Group 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 Group Corporation’s register of shareholders or at

the address otherwise notified to Sony Group Corporation continuously for five years or more.

In addition, Sony Group 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 Group Corporation’s register of shareholders or

at the address otherwise notified to Sony Group 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 Group

Corporation’s register of shareholders or at the address otherwise notified to Sony Group Corporation, Sony

Group 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.

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 5% 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

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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 1% 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.

Ownership restrictions

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 Group 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 Group 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 Group Corporation.

There is no provision in Sony Group Corporation’s Articles of Incorporation or internal regulations that

would have an effect of delaying, deferring or preventing a change in control of Sony Group Corporation and that

would operate only with respect to a merger, acquisition or corporate restructuring involving Sony Group

Corporation.

C. Material Contracts

None

D. Exchange Controls

Japanese Foreign Exchange Controls Regulations

The following is a general summary of major Japanese foreign exchange controls regulations applicable to

holders of shares of capital stock or voting rights of Sony Group Corporation or holders of ADSs who are

“exchange non-residents” or “foreign investors,” as described below. The statements regarding Japanese

foreign exchange control regulations set forth below are based on the laws and regulations in force and as

interpreted by the Japanese authorities as of the date of this annual report and are subject to subsequent changes

in the applicable Japanese laws or interpretations thereof. This summary is not exhaustive of all possible foreign

exchange controls considerations that may apply to a particular investor, and potential investors are advised to

satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and

disposition of shares of capital stock or voting rights of Sony Group Corporation or ADSs by consulting their

own advisors.

The Foreign Exchange and Foreign Trade Act of Japan (the FEFTA) and its related cabinet orders and

ministerial ordinances (collectively, the “Foreign Exchange Regulations”) govern certain aspects relating to the

acquisition and holding of shares of capital stock and voting rights of Sony Group Corporation by “exchange

non-residents” and by “foreign investors” (as these terms are defined below). The Foreign Exchange Regulations

also apply to the acquisition and holding of ADSs and the exercise of voting rights by holders of ADSs who are

“foreign investors” that constitute an “inward direct investment” (as defined below).

Capital Transaction

Except as described below with respect to an “inward direct investment” by a “foreign investor”, the

Foreign Exchange Regulations currently in effect do not affect transactions between exchange non-residents to

purchase or sell shares of a Japanese listed corporation outside Japan using currencies other than Japanese yen.

In general, the acquisition of shares of a Japanese corporation (such as the shares of capital stock of Sony

Group Corporation) by an exchange non-resident from an exchange resident requires post facto reporting by the

exchange resident to the Minister of Finance. No such reporting requirement is imposed, however, if:

(i) the aggregate purchase price of the relevant shares is 100 million yen or less;

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(ii) the acquisition is effected through any bank, financial instruments business operator or other entity

prescribed by the Foreign Exchange Regulations acting as an agent or intermediary; or

(iii) the acquisition constitutes an “inward direct investment” described below (in which case a prior

notification requirement may apply).

Exchange residents are defined in the Foreign Exchange Regulations as:

(i) individuals who reside within Japan; or

(ii) corporations whose principal offices are located within Japan.

Exchange non-residents are defined in the Foreign Exchange Regulations as:

(i) individuals who do not reside in Japan; or

(ii) 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 exchange residents. Conversely, branches and other offices of Japanese corporations located outside Japan are

regarded as exchange non-residents.

Inward Direct Investment in Shares of Listed Corporations

Definition of Foreign Investor

Foreign investors are defined in the Foreign Exchange Regulations as:

(i) individuals who are exchange non-residents;

(ii) corporations or other entities that are organized under the laws of foreign countries or whose principal

offices are located outside Japan;

(iii) corporations of which 50% or more of the total voting rights are held, directly or indirectly, by

individuals and/or corporations falling within (i) and/or (ii) above;

(iv) partnerships under the Civil Code of Japan established to invest in corporations, limited partnerships

for investment under the Limited Partnership Act for Investment of Japan or any other similar

partnerships under foreign law of which (a) 50% or more of the total contributions are made by

individuals and/or corporations falling within (i), (ii), (iii) above and/or (v) below or any other persons

prescribed under the Foreign Exchange Regulations or (b) a majority of the general partners are

individuals and/or corporations falling within (i), (ii), (iii) above and/or (v) below or any other persons

prescribed under the Foreign Exchange Regulations; or

(v) corporations or other entities, a majority of whose directors or other officers (or directors or other

officers having the power of representation) are individuals who are exchange non-residents.

Definition of Inward Direct Investment

If a foreign investor acquires shares or voting rights of a Japanese corporation that is listed on a Japanese

stock exchange (such as the shares of capital stock of Sony Group 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 1% or more of the total number of issued shares or the total number

of voting rights of the relevant corporation, such acquisition constitutes an “inward direct investment.” In

addition, the acquisition of the authority to exercise, either directly or through instructions, voting rights held by

other shareholders that results in the foreign investor, in combination with any existing shareholding, directly or

indirectly holding 1% or more of the total number of voting rights of the relevant corporation constitutes an

“inward direct investment.”

In addition to the acquisitions of shares or voting rights described above, if a foreign investor (i) is granted

the authority to exercise voting rights on behalf of other shareholders of a Japanese listed corporation regarding

certain matters which may give such foreign investor the power to control, or may have a material influence on

the management of such corporation, such as the election or removal of directors, or (ii) obtains consent from

another foreign investor holding the voting rights of the relevant corporation to exercise the voting rights of such

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corporation held by such other foreign investor jointly, and, in each case, as a result of these arrangements, the

number of the voting rights directly or indirectly held by the foreign investor, including the total number of the

voting rights subject to such authorization to exercise, or the sum of the number of the voting rights directly or

indirectly held by the foreign investor and such other foreign investor subject to such joint voting agreement, as

the case may be, is 10% or more of the total number of voting rights of the relevant corporation, each such

arrangement regarding voting rights (hereinafter referred to as a “voting arrangement”) also constitutes an

“inward direct investment”.

Additionally, if a foreign investor directly or indirectly holds 1% or more of the total voting rights of a

Japanese listed corporation and, at a general meeting of shareholders, consents to certain proposals having a

material influence on the management of such corporation such as the (i) election of such foreign investor or any

of its related persons (as defined in the Foreign Exchange Regulations) as a director or corporate auditor of the

relevant corporation or (ii) transfer or discontinuation of its business, such consent also constitutes an “inward

direct investment.”

Prior Notification Requirements regarding Inward Direct Investment

If a foreign investor intends to consummate an acquisition of shares or voting rights of a Japanese listed

corporation or the authority to exercise, either directly or through instructions, voting rights held by other

shareholders that constitutes an “inward direct investment” as described above, unless certain exemptions apply

(such as where the foreign investor is in a country that is listed on an exemption schedule in the Foreign

Exchange Regulations and where that Japanese corporation is not engaged in certain businesses (the “Designated

Businesses”) designated by the Foreign Exchange Regulations), a prior notification of the relevant inward direct

investment is required to be filed with the Minister of Finance and any other competent Ministers.

However, if a foreign investor is seeking to acquire shares or voting rights of a Japanese listed corporation

or the authority to exercise, either directly or through instructions, voting rights held by other shareholders and

such acquisition would constitute an “inward direct investment”, such foreign investor may be eligible for the

exemptions if certain conditions are met. In the case of an acquisition of shares or voting rights or the authority to

exercise, either directly or through instructions, voting rights of a Japanese listed corporation that is engaged in a

Designated Business other than certain Designated Business designated by the Foreign Exchange Regulations as

a core sector business (the “Core Sector Designated Businesses”), the foreign investor may be exempted from the

prior notification requirement if such foreign investor complies with the following conditions (the “Exemption

Conditions”):

(i) the foreign investor or its related persons will not become directors or corporate auditors of the relevant

corporation;

(ii) the foreign investor will not make certain proposals (as prescribed in the Foreign Exchange

Regulations) at the general meeting of shareholders, including transfer or discontinuation of the

Designated Businesses of the relevant corporation; and

(iii) the foreign investor will not access non-public technical information in relation to the Designated

Businesses of the relevant corporation, or take certain other actions that may lead to the leak of such

non-public technical information (as prescribed in the Foreign Exchange Regulations).

In addition, in the case of an acquisition of shares or voting rights or the authority to exercise, directly or

through instructions, voting rights of a Japanese listed corporation that is engaged in the Core Sector Designated

Businesses, the foreign investor may be exempted from the prior notification requirement, if, as a result of such

acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly holds less than

10% of the total number of issued shares or voting rights of the relevant corporation and such foreign investor

complies with the Exemption Conditions and the following additional conditions:

(i) the foreign investor will not attend, or not cause any persons designated by it to attend, meetings of the

relevant corporation’s board of directors, or meetings of committees having authority to make

important decisions, in respect of the Core Sector Designated Businesses of the relevant corporation;

and

(ii) the foreign investor will not make, or not cause any persons designated by it to make, proposals to such

board or committees or their members in writing or electronic form requesting any response or actions

by certain deadlines in respect of the Core Sector Designated Businesses of the relevant corporation.

Notwithstanding the above, if a foreign investor falls under a category of disqualified investors designated

by the Foreign Exchange Regulations (including (a) investors who have been sanctioned during the previous five

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years due to violations of the FEFTA and (b) certain investors that are state-owned enterprises or other related

entities that are not otherwise accredited by the Minister of Finance), in no event may such foreign investor be

eligible for the exemptions described above. On the other hand, if a foreign investor, excluding the disqualified

investors described in the foregoing sentence, falls under a category of certain foreign financial institutions (as

prescribed in the Foreign Exchange Regulations) and complies with the Exemption Conditions, such foreign

investor may be eligible for the exemptions described above, even if the acquisition results in such foreign

investor’s directly or indirectly holding 10% or more of the total number of issued shares or voting rights of the

corporation engaged in the Core Sector Designated Businesses.

For reference purposes only, the Minister of Finance publishes, and may update from time to time, a list that

classifies Japanese listed corporations into the following categories: (i) corporations engaged only in businesses

other than the Designated Businesses, (ii) corporations engaged in Designated Businesses other than Core Sector

Designated Businesses and (iii) corporations engaged in the Core Sector Designated Businesses. According to the

list published by the Minister of Finance, as of May 19, 2023, Sony Group Corporation is classified as category

(iii) above.

In addition, if a foreign investor intends to make a voting arrangement with respect to a Japanese listed

corporation engaged in the Designated Businesses or consents to a proposal at the general meeting of

shareholders of such corporation, in each case, that constitutes an “inward direct investment” as described in

“Definition of Inward Direct Investment” above, in certain circumstances, prior notification of the relevant

inward direct investment must be filed with the Minister of Finance and any other competent Ministers. In such

cases, the exemptions from the prior notification requirements may not be available, except for cases where the

relevant voting arrangement is a joint voting agreement with other foreign investors to exercise voting rights

regarding matters other than certain matters which may give such foreign investor the power to control, or may

have a material influence on the management of the relevant corporation, such as the election or removal of

directors.

Acquisitions of shares by foreign investors by way of stock split are not subject to the foregoing notification

requirements.

Procedures for Prior Notification regarding Inward Direct Investment

If such prior notification is filed, the proposed inward direct investment may not be consummated until 30

days after the date of filing during which time the Ministers will review the proposed inward direct investment,

although this screening period may be shortened by such Ministers if they no longer deem it necessary to review

the proposed inward direct investment, or may be shortened to five business days, if the proposed inward direct

investment is determined not to raise concerns from the perspective of national security or certain other factors.

The Ministers may extend the screening period up to five months if they deem it necessary to continue to review

the proposed inward direct investment, and may recommend any modification or abandonment of the proposed

inward direct investment and, if the foreign investor does not accept such recommendation, the Ministers may

order the modification or abandonment of such inward direct investment. In addition, if the Ministers consider

the proposed inward direct investment to be an inward direct investment that is likely to cause damage to the

national security of Japan, to interfere with the maintenance of public order or to pose an obstacle to the

preservation of public safety, and, if a foreign investor (i) consummates such inward direct investment without

filing the prior notification described above; (ii) consummates such inward direct investment before the

expiration of the screening period described above; (iii) in connection with such inward direct investment, makes

false statements in the prior notification described above; or (iv) does not follow the recommendation or order

issued by the Ministers to modify or abandon such inward direct investment, the Ministers may order such

foreign investor to divest all or part of the shares acquired or take other measures.

Post Facto Reporting Requirements regarding Inward Direct Investment

A foreign investor who consummates an inward direct investment as described above through an acquisition

of shares or voting rights or the authority to exercise, directly or through instructions, voting rights of a Japanese

listed corporation that is engaged in the Designated Businesses, but is not subject to the prior notification

requirements described above due to the exemptions from such prior notification requirements, in general, must

file a post facto report of the relevant inward direct investment with the Minister of Finance and any other

competent Ministers having jurisdiction over such Japanese corporation within 45 days of the date when, as a

result of such acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly

holds (i) 1% or more but less than 3% of the total number of issued shares or voting rights, for the first time, (ii)

3% or more but less than 10% of the total number of issued shares or voting rights, for the first time, or (iii) 10%

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or more of the total number of issued shares or voting rights (excluding, in the cases of (i) and (ii) above, a

foreign investor who falls under a category of certain foreign financial institutions (as prescribed in the Foreign

Exchange Regulations)). In addition, if a foreign investor consummates the inward direct investment described

above through the acquisition of shares or voting rights or the authority to exercise, directly or through

instructions, voting rights of a Japanese listed corporation that is not engaged in the Designated Businesses

(which is, in general, not subject to the prior notification requirements described above) and, as a result of such

inward direct investment, such foreign investor, in combination with any existing holdings, directly or indirectly

holds 10% or more of shares or voting rights of the total number of issued shares or voting rights of the relevant

corporation, such foreign investor, in general, must file a post facto report of the relevant inward direct

investment with the Minister of Finance and any other competent Ministers having jurisdiction over such

Japanese corporation within 45 days of such inward direct investment.

In addition, if a foreign investor consummates the inward direct investment described above through a

voting arrangement with respect to a Japanese listed corporation that is not engaged in the Designated Businesses

(which is, in general, not subject to the prior notification requirements described above), such foreign investor, in

general, must file a post facto report of the relevant inward direct investment with the Minister of Finance and

any other competent Ministers having jurisdiction over such Japanese corporation within 45 days of such inward

direct investment.

Acquisitions of shares by foreign investors by way of stock split are not subject to the foregoing reporting

requirements.

Dividends and Proceeds of Sale

Under the Foreign Exchange Regulations, dividends paid on and the proceeds from sales in Japan of shares

of capital stock of Sony Group Corporation held by exchange non-residents 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 Group Corporation and of ADRs

evidencing ADSs representing shares of Common Stock of Sony Group 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 Group 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 Group 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 Group 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 Group

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 Group 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 Group Corporation or of ADRs evidencing ADSs

representing shares of Common Stock of Sony Group 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

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authorities as of June 20, 2023. Tax laws and tax treaties as well as their interpretations may change at any time,

possibly with retroactive effect. Sony Group 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.

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%, 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 Group Corporation) to non-resident Holders other than any non-resident Holder who is

an individual holding 3% or more of the total shares issued by the relevant Japanese corporation, the

aforementioned 20.42% withholding tax rate is reduced to 15.315% for dividends due and payable on or before

December 31, 2037. Due to the imposition of a special additional withholding tax (2.1% of the original

withholding tax amount) to secure funds for reconstruction from the Great East Japan Earthquake, the original

withholding tax rates of 15% and 20% as applicable, have been effectively increased to 15.315% and 20.42%,

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%, 10% or 5% for portfolio investors

(15% under the income tax treaties with, among other countries, Canada, Denmark, Finland, Germany, Iceland,

Ireland, Italy, Luxembourg, New Zealand, Norway and Singapore, 10% under the income tax treaties with,

among other countries, Australia, Austria, Belgium, France, Hong Kong, the Netherlands, Portugal, Sweden,

Switzerland, the U.K. and the United States, and 5% under the income tax treaties with, among other countries,

Spain). 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% of the voting

stock of the Japanese corporation is generally reduced to 10% 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 Group

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 Group 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 Group

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.

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Gains derived from the sale of shares of Common Stock or ADSs of Sony Group 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 Group Corporation as a legatee, heir or donee

even though neither the acquiring individual nor the deceased nor donor is a Japanese resident.

Holders of shares of Common Stock or ADSs of Sony Group 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 Group 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 Group

Corporation as determined for U.S. federal income tax purposes. 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.” Subject to certain exceptions for short-term and hedged

positions, dividends paid on the ADSs or Common Stock will be treated as qualified dividends if Sony Group

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 Group Corporation’s

audited financial statements and relevant market and shareholder data, Sony Group Corporation believes that it

was not treated as a PFIC for U.S. federal income tax purposes with respect to its taxable year ended March 31,

2023. In addition, based on Sony Group Corporation’s audited financial statements and Sony Group

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 Group Corporation does not anticipate becoming a PFIC

for the taxable year ending March 31, 2024. Holders of ADSs and Common Stock of Sony Group 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. Dividends paid by Sony Group

Corporation to U.S. corporate holders of ADSs or Common Stock of Sony Group Corporation will not be eligible

for the dividends-received deduction.

Subject to applicable limitations and special considerations discussed below, a U.S. holder of ADSs or

Common Stock of Sony Group Corporation may be entitled to a credit for Japanese tax withheld in accordance

with the Treaty from dividends paid by Sony Group Corporation. The applicable limitations include new

requirements recently adopted by the U.S. Internal Revenue Service that any Japanese tax will need to satisfy in

order to be eligible to be a creditable tax for a U.S. holder. In the case of a U.S. holder that properly elects the

benefits of the Treaty, the Japanese tax on dividends will be treated as meeting the new requirements and

therefore as a creditable tax. In the case of all other U.S. holders, the application of these requirements to the

Japanese tax on dividends is uncertain and Sony Group Corporation has not determined whether these

requirements have been met. 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. If the Japanese dividend tax is not a creditable tax for a U.S. holder

or the U.S. holder does not elect to claim a foreign tax credit for any foreign income taxes paid or accrued in the

same taxable year, the U.S. holder may be able to deduct the Japanese tax in computing such U.S. holder’s

taxable income for U.S. federal income tax purposes. Holders of ADSs and Common Stock of Sony Group

Corporation should consult their own tax advisors regarding the implications of these rules in light of their

particular circumstances.

For purposes of the foreign tax credit limitation, dividends will be foreign source income, and will generally

constitute “passive” income.

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 Group 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 longterm 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.

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Under the Code, a U.S. holder of ADSs or Common Stock of Sony Group 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 Agents

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 (https://www.sec.gov).

I. Subsidiary Information

Not Applicable

J. Annual Report to Security Holders

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. For risk management policies and exposures for each risk, refer to Note 6 of

the consolidated financial statements. For risk inherent in the insurance business, which is included in the

Financial Services segment, refer to Note 13 of the consolidated financial statements. For derivative instruments

and hedging activities utilized by Sony to reduce such risk, refer to Note 15 of the consolidated financial

statements. For credit risk exposure for financial assets of debt instruments designated to be measured at fair

value through profit or loss, refer to Note 6 of the consolidated financial statements.

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 Group Corporation’s ADSs pursuant to a

deposit agreement between Sony Group Corporation, the Depositary, and the holders and beneficial owners of

ADSs issued thereunder from time to time (the “Deposit Agreement”) (attached as Exhibit 2.1 to this report).

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 between Sony Group 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 Group Corporation’s

Common Stock

Up to 5.00 U.S. dollar per 100

ADSs (or fraction thereof) issued

Person depositing Sony Group

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

Holders will also be responsible for paying certain charges such as: (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 Group Corporation’s Common Stock or other deposited securities on the share

register and applicable to transfer of Sony Group 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 Group 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 Group 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.

ADS fees and charges payable upon (i) deposit of shares against issuance of ADSs and (ii) surrender of

ADSs for cancellation and withdrawal of deposited securities will be payable by the person to whom the ADSs

so issued are delivered by the Depositary (in the case of ADS issuances) or by the person who delivers the ADSs

for cancellation to the Depositary (in the case of ADS cancellations). In the case of ADSs issued by the

Depositary into the Depository Trust Company or presented to the Depositary via the Depository Trust

Company, the ADS issuance and cancellation fees and charges will be payable by the Depository Trust Company

participant(s) receiving the ADSs from the Depositary or the Depository Trust Company

participant(s) surrendering the ADSs to the Depositary for cancellation, as the case may be, on behalf of the

beneficial owner(s) and will be charged by the Depository Trust Company participant(s) to the account(s) of the

applicable beneficial owner(s) in accordance with the procedures and practices of the Depository Trust Company

participant(s) as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee

are payable by Holders as of the applicable ADS record date established by the Depositary. In the case of

distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being

distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, the applicable Holders as

of the ADS record date established by the Depositary will be invoiced for the amount of the ADS fees and

charges. For ADSs held through the Depository Trust Company, the ADS fees and charges for distributions other

than cash and the ADS service fee are charged to the Depository Trust Company participants in accordance with

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the procedures and practices prescribed by the Depository Trust Company from time to time and the Depository

Trust Company participants in turn charge the amount of such ADS fees and charges to the beneficial owners for

whom they hold ADSs.

In the event of refusal by a Holder to pay the Depositary fees, the Depositary may, under the terms of the

Deposit Agreement, refuse the requested service until payment is received or may set off the amount of the

Depositary fees from any distribution to be made to the Holder. Note that the fees and charges Holders may be

required to pay may vary over time and may be changed by Sony Group Corporation and by the Depositary.

Holders will receive prior notice of such changes. The Depositary may reimburse Sony Group Corporation for

certain expenses incurred by Sony Group Corporation in respect of the ADR program, by making available a

portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as

Sony Group Corporation and the Depositary agree from time to time.

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, 2023, such reimbursements totaled 3,399,247.27 U.S.

dollars.

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, 2023,

the amount of such indirect payments was estimated to total 5,000 U.S. dollars.

Item 13. Defaults, Dividend Arrearages and Delinquencies

None

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None

Item 15. Controls and Procedures

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 Exchange Act, as of March 31, 2023.

Disclosure controls and procedures require that information to be disclosed in the reports Sony Group

Corporation 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, 2023, 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 Exchange Act. 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 IFRS. 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;

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(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 excluded Bungie, which became a wholly-owned subsidiary of Sony on July 15, 2022,

from its assessment of the effectiveness of Sony’s internal control over financial reporting as of March 31, 2023.

Bungie’s total assets and total sales excluded from its assessment represented less than 1% of (i) Sony’s total

consolidated assets as of March 31, 2023 and (ii) Sony’s total consolidated sales and financial services revenue

for the fiscal year ended March 31, 2023. The Bungie acquisition is discussed in Note 30 to the consolidated

financial statements.

Sony’s management evaluated the effectiveness of Sony’s internal control over financial reporting as of

March 31, 2023 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, 2023.

Sony’s independent registered public accounting firm, PricewaterhouseCoopers Aarata LLC, has issued an

audit report on the effectiveness of Sony’s internal control over financial reporting as of March 31, 2023,

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, 2023 that has materially affected, or is reasonably likely to materially affect, Sony’s internal control

over financial reporting.

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

Sony Group Corporation’s Board of Directors has determined that Toshiko Oka and Keiko Kishigami each

qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act,

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 Exchange Act, as

amended. The code of ethics applies to all directors, officers and employees of Sony. The code of ethics is

available at:

https://www.sony.com/en/SonyInfo/csr_report/compliance/code_of_conduct_En.pdf

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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, 2022 and 2023.

Fiscal year ended

March 31

2022 2023

Yen in millions

Audit Fees (1) ......................................................... 4,514 4,901

Audit-Related Fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 334

Tax Fees (3) ........................................................... 0 28

All Other Fees (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 9

4,705 5,272

(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 SEC rules regarding auditor independence, Sony Group 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 Group 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 Group

Corporation is listed.

Prior to the engagement of the independent auditor for the following fiscal year’s audit, management in

charge of accounting or other relevant areas (“Accounting Management”) submits an application form to the

Audit Committee for comprehensive pre-approval of all recurring services expected to be rendered during that

year, other than services that are classified as “Tax” related services (“Tax Services”). In order to obtain

comprehensive pre-approval, Accounting Management must designate in which of two categories (Audit and

Non-Audit) the services will be classified as well as fees expected, both for each category in the aggregate and

for each individual service, and detailed back-up information regarding each service to the extent possible to

ensure that the Audit Committee knows precisely what particular service and the expected fees it is being asked

to pre-approve and that the scope of any service or the expected fees approved is unambiguous. Any additional

services not within the scope of comprehensive pre-approval and Tax Services 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,

with respect to both services that are subject to comprehensive and individual pre-approval. 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.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not Applicable

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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets out information concerning purchases made by Sony Group Corporation during the

fiscal year ended March 31, 2023.

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*1,2,3,4

(d) Maximum

number of shares that

may yet be purchased

under the plans or

programs*1,2,3,4

April 1 — 30, 2022 ..................... 620,533 11,365.92 619,300 N/A

May 1 — 31, 2022 ..................... 495,331 10,882.17 494,200 24,692,800

June 1 — 30, 2022 ..................... 33,008 10,973.15 31,300 24,661,500

July 1 — 31, 2022 ...................... 1,867 11,395.93 0 24,661,500

August 1 — 31, 2022 ................... 2,070,093 11,279.85 2,068,600 22,592,900

September 1 — 30, 2022 ................ 1,519,072 10,468.75 1,517,500 21,075,400

October 1 — 31, 2022 .................. 2,810,154 9,655.97 2,808,900 18,266,500

November 1 — 30, 2022 ................ 1,331 11,139.33 0 18,266,500

December 1 — 31, 2022 ................. 1,143,106 10,565.40 1,084,400 17,182,100

January 1 — 31, 2023 ................... 738,822 10,553.67 727,700 16,454,400

February 1 — 28, 2023 .................. 6,297 11,693.43 0 16,454,400

March 1 — 31, 2023 .................... 6,056 11,560.96 0 16,454,400

Total ................................ 9,445,670 10,507.22 9,351,900 N/A

Column (a) represents the combined total number of shares purchased during the fiscal year ended

March 31, 2023, including both fractional shares purchased from fractional shareholders in accordance with the

Companies Act, and shares purchased in accordance with publicly announced plans, as shown in column (c).

Under the Companies Act, a holder of shares constituting less than one full unit may require Sony Group

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, 2023, Sony Group Corporation purchased 93,770 shares of common stock for a total purchase price of

1,028,945,637 yen upon such requests from holders of shares constituting less than one full unit.

*1 Sony approved on April 28, 2021 by resolution of the Board of Directors the setting of the following

parameters for repurchase of its own common stock pursuant to the Companies Act and Sony Group

Corporation’s Articles of Incorporation

• Total number of shares for repurchase: 25 million shares (maximum) (2.02% of total number of shares

issued and outstanding (excluding treasury stock))

• Total purchase price for repurchase of shares: 200 billion yen (maximum)

• Period of repurchase: From April 30, 2021 to April 28, 2022

*2 The repurchase of shares of common stock based on the approval at the Board of Directors set forth in Note 1

above was completed. The details are as follows.

• Total number of shares repurchased: 8,206,900 shares

• Total purchase price for repurchased shares: 97,381,577,700 yen

• Period of repurchase: April 30, 2021 to April 28, 2022

*3 Sony approved on May 10, 2022 by resolution of the Board of Directors the setting of the following

parameters for repurchase of its own common stock pursuant to the Companies Act and Sony Group

Corporation’s Articles of Incorporation

• Total number of shares for repurchase: 25 million shares (maximum) (2.02% of total number of shares

issued and outstanding (excluding treasury stock))

• Total purchase price for repurchase of shares: 200 billion yen (maximum)

• Period of repurchase: From May 11, 2022 to May 10, 2023

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*4 The repurchase of shares of common stock based on the approval at the Board of Directors set forth in Note 3

above was completed. The details are as follows.

• Total number of shares repurchased: 9,343,600 shares

• Total purchase price for repurchased shares: 99,118,323,800 yen

• Period of repurchase: May 11, 2022 to May 10, 2023

Item 16F. Change in Registrant’s Certifying Accountant

Not Applicable

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Item 16G. 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 Group Corporation is exempt from most of the exchange’s corporate governance standards

requirements. For further information on Sony’s corporate governance practices and history, refer to “Board

Practices” in “Item 6. Directors, Senior Management and Employees.”

NYSE Standards Sony’s Corporate Governance Practices

Board Independence. A majority of board directors

must be independent.

Sony Group Corporation has adopted the “Company

with Three Committees” corporate governance

system under the Companies Act. Sony Group

Corporation’s Board Charter requires its board to

consist of between 8 to 14 directors.

The Companies Act does not require Sony Group

Corporation to have a majority of “independent” (in

the meaning given by the NYSE Corporate

Governance Standards) directors on its board; rather,

it requires Sony Group Corporation 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;

(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

“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 Group

Corporation or any of its subsidiaries engaged in the

business operations of Sony Group 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

Group Corporation or any of its subsidiaries and who

has not been a Group Executive Director, etc. of

Sony Group 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 Group 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 Group 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 Group

Corporation; (iv) a person who is not a Group

Executive Director, etc. of a direct/indirect subsidiary

of Sony Group Corporation or any entity the

management of which is directly or indirectly

controlled by Sony Group Corporation; and (v) 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

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NYSE Standards Sony’s Corporate Governance Practices

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% of

such other company’s consolidated gross revenues

employee of Sony Group 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 Group Corporation’s Board Charter 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 an executive director, 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% of the

annual consolidated sales of such company;

In addition, the Securities Listing Regulations of the

TSE require Sony Group Corporation 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

TSE as an “outside” director who is unlikely to have

conflicts of interest with shareholders. According to

the guidelines of the TSE, 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

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;

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NYSE Standards Sony’s Corporate Governance Practices

(4) A person who has fallen in any of categories

(1) through (3) listed above until recently;

(5) A person who has fallen in any of categories

(a) or (b) listed below for ten years prior to

assuming his/her office:

(a) 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; or

(b) A person who executes business of a fellow

subsidiary of the listed company.

(6) A close relative of a person who falls in any of

categories (a) through (f) listed below (only if

such person is significant):

(a) A person who falls in any of (1) through

(5) listed above;

(b) A person who executes business of a

subsidiary of the listed company;

(c) A director who does not execute business

of a subsidiary of the listed company;

(d) 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;

(e) A person who executes business of a fellow

subsidiary of the listed company; or

(f) A person who has fallen in any of

categories (b) or (c) listed above or a

person who has executed business of the

listed company until recently.

As of June 20, 2023, 8 of the 10 members of Sony

Group Corporation’s Board of Directors qualified as

“outside” directors. In addition, all 8 “outside”

directors are qualified and designated as

“Independent Directors” under the Securities Listing

Regulations of the TSE.

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 Group

Corporation’s Board Charter 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.

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NYSE Standards Sony’s Corporate Governance Practices

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 Group Corporation’s Nominating Committee

shall consist 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 shall be “outside” directors, as

defined under the Companies Act.

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 DoddFrank 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 Group Corporation’s Compensation Committee

shall consist of at least three Directors. Under the

Companies Act, a majority of its members shall be

“outside” directors, as defined under the Companies

Act. Sony Group Corporation’s Board Charter

prohibits the CEO, the COO and/or the CFO (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.

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 Group Corporation’s Audit Committee shall

consist of at least three Directors. Under the

Companies Act, a majority of its members shall 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 Group Corporation’s Board

Charter 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 Group Corporation’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.

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NYSE Standards Sony’s Corporate Governance Practices

Equity Compensation Plans. Equity compensation plans

require shareholder approval, subject to limited

exemptions.

Under the Companies Act, if Sony Group Corporation

wishes to adopt an equity compensation plan under

which stock acquisition rights or shares of common

stock are granted on specially favorable conditions,

except where all of its shareholders are granted rights

to subscribe for such stock acquisition rights/shares of

common stock or such stock acquisition rights/shares

of common stock are gratuitously allocated to all of its

shareholders, each on a pro rata basis, then Sony

Group Corporation must obtain shareholder approval

by a “special resolution” at 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 Group

Corporation’s Articles of Incorporation.

On the other hand, under the Companies Act, if Sony

Group Corporation 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 Group Corporation’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.

Corporate Governance Guidelines. Corporate

governance guidelines must be adopted and disclosed.

Sony Group Corporation 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 TSE; however, Sony

Group Corporation 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 Group Corporation. Refer to “Board Practices”

in “Item 6. Directors, Senior Management and

Employees.”

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 Group

Corporation, Sony Group Corporation has adopted a

code of conduct to be observed by all its directors,

officers and other employees. The code of conduct is

available at:

https://www.sony.com/en/SonyInfo/csr_report/

compliance/code_of_conduct_En.pdf

The code’s content covers principal items described

in the NYSE Corporate Governance Standards.

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Item 16H. Mine Safety Disclosure

Not Applicable

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable

Item 17. Financial Statements

Not Applicable

Item 18. Financial Statements

Refer to the consolidated financial statements.

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Item 19. Exhibits

Documents filed as exhibits to this annual report:

1.1 Amended Articles of Incorporation of Sony Group Corporation (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,

2022 (Commission file number 001-06439) filed on June 28, 2022

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), incorporated by reference to

Exhibit 1.3 of Sony’s annual report on Form 20-F for the fiscal year ended March 31, 2021

(Commission file number 001-06439) filed on June 22, 2021

2.1 Amended and Restated Deposit Agreement, dated as of October 15, 2014, by and among Sony Group

Corporation, Citibank, N. A. and the holders and beneficial owners of American Depositary Shares

issued thereunder, incorporated by reference to Exhibit 99. A to Sony’s registration statement on

Form F-6 (Commission file number 333-198953) filed on September 26, 2014

2.2 Form of American Depositary Receipt for American Depositary Shares representing Deposited

Shares of Common Stock of Sony Group Corporation, incorporated by reference to Sony’s

prospectus filed pursuant to Rule 424(b)(3) on April 1, 2021, to the registration statement on Form

F-6 (Commission file number 333-198953)

2.3 Description of Rights of each Class of Securities Registered under Section 12 of the Securities

Exchange Act of 1934 (the “Exchange Act”), incorporated by reference to Exhibit 2.3 to Sony’s

annual report on Form 20-F for the fiscal year ended March 31, 2022 (Commission file number

001-06439) filed on June 28, 2022

8.1 Significant subsidiaries (as defined in §210.1-02(w) of Regulation S-X) of Sony Group Corporation,

including additional subsidiaries that management has deemed to be significant, as of March 31,

2022: 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.INS Inline XBRL Instance Document — the instance document does not appear in the Interactive Data

File because its XBRL tags are embedded within the Inline XBRL document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 The cover page for the Company’s Annual Report on Form 20-F for the fiscal year ended March 31,

2023, has been formatted in Inline XBRL

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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 GROUP CORPORATION

(Registrant)

By: /s/ HIROKI TOTOKI

(Signature)

Hiroki Totoki

President, Chief Operating Officer and

Chief Financial Officer

Date: June 20, 2023

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 2743) . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

Index to Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13

All other schedules are omitted because they are not applicable or the required information is shown in the

financial statements or the notes thereto.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sony Group Corporation (Sony Group Kabushiki Kaisha)

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Sony Group Corporation and

its subsidiaries (the “Company”) as of March 31, 2023 and 2022, and the related consolidated statements of

income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the

period ended March 31, 2023, including the related notes (collectively referred to as the “consolidated financial

statements”). We also have audited the Company’s internal control over financial reporting as of March 31,

2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the

financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash

flows for each of the three years in the period ended March 31, 2023 in conformity with International Financial

Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the

Company maintained, in all material respects, effective internal control over financial reporting as of March 31,

2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective

internal control over financial reporting, and for its assessment of the effectiveness of internal control over

financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting

appearing under Item 15(b). Our responsibility is to express opinions on the Company’s consolidated financial

statements and on the Company’s internal control over financial reporting based on our audits. We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and

are required to be independent with respect to the Company in accordance with the U.S. federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan

and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are

free of material misstatement, whether due to error or fraud, and whether effective internal control over financial

reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall presentation of

the consolidated financial statements. 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.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has

excluded Bungie, Inc. from its assessment of internal control over financial reporting as of March 31, 2023

because it was acquired by the Company in a purchase business combination during the year ended March 31,

2023. We have also excluded Bungie, Inc. from our audit of internal control over financial reporting. Bungie, Inc.

is a wholly-owned subsidiary whose total assets and total sales excluded from management’s assessment and our

audit of internal control over financial reporting represent less than 1% of the related total consolidated assets

and total consolidated sales and financial services revenue as of and for the year ended March 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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

F-2

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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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the

consolidated financial statements that was communicated or required to be communicated to the audit committee

and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and

(ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit

matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we

are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit

matter or on the accounts or disclosures to which it relates.

Valuation of liabilities for future insurance policy benefits and deferred acquisition costs

As described in Notes 3 and 13 to the consolidated financial statements, liabilities for future insurance policy

benefits include liabilities for minimum guarantee benefits related to certain variable life insurance contracts. For

these contract features, the liabilities for minimum guarantee benefits are calculated using current best-estimate

assumptions and are based on the ratio of the present value of expected total excess payments divided by the

present value of expected total assessments over the life of the contract. The significant assumptions in the

valuation include mortality rates, lapse rates, discount rates and investment yields. As of March 31, 2023, the

liabilities for minimum guarantee benefits for the variable life contracts were 76,012 million yen.

Also, the Company defers acquisition costs that vary with and are directly related to the acquisition or renewal of

insurance policies as long as they are recoverable. Among them, the deferred insurance acquisition costs for

non-traditional life insurance contracts such as interest sensitive whole life contracts, variable life insurance

contracts, individual variable annuity contracts and other contracts without life contingencies are amortized over

the expected life at a constant rate based on the present value of the estimated gross profit. The present value of

the estimated gross profit is affected by a number of significant assumptions, including investment yields,

mortality rates, lapse rates and discount rates. As of March 31, 2023, deferred insurance acquisition costs for

non-traditional life insurance contracts were 324,862 million yen.

The principal considerations for our determination that performing procedures relating to the valuation of

liabilities for future insurance policy benefits and deferred acquisition costs is a critical audit matter are

(i) management’s significant judgment involved in developing the aforementioned assumptions, (ii) this in turn

led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit

evidence related to management’s significant assumptions, and (iii) the audit effort involved the use of

professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming

our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness

of controls relating to the valuation of: (i) liabilities for minimum guarantee benefits for certain variable life

insurance contracts and (ii) deferred insurance acquisition costs for non-traditional life insurance contracts;

including controls over the determination of significant assumptions related to mortality rates, lapse rates,

discount rates, and investment yields, and controls over the completeness and accuracy of data used by

management to develop the assumptions, such as past claims, lapses, discount rates, and investment yields. These

procedures also included, among others, testing the completeness and accuracy of data used by management to

develop the significant assumptions; and considering the reasonableness of the significant assumptions across

products, in relation to prior periods, and in relation to management’s historical experience or industry

knowledge. Professionals with specialized skill and knowledge were used to assist in evaluating the

reasonableness of the methodology used by management to determine their assumptions and the reasonableness

of the aforementioned assumptions used in the valuation of liabilities for minimum guarantee benefits for certain

variable life contracts and deferred insurance acquisition costs for non-traditional life insurance contracts based

on industry knowledge and the Company’s historical data and experience.

/s/ PricewaterhouseCoopers Aarata LLC

Tokyo, Japan

June 20, 2023

We have served as the Company’s auditor since 2006.

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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position

Yen in millions

Note

March 31,

2022

March 31,

2023

ASSETS

Current assets:

Cash and cash equivalents 27 2,049,636 1,480,900

Investments and advances in the Financial Services segment

(including assets pledged that secured parties are permitted to sell or

repledge of 94,147 million yen, and 85,494 million yen as of March 31,

2022 and 2023, respectively) 5, 14 360,673 328,357

Trade and other receivables, and contract assets 5, 22 1,628,521 1,777,939

Inventories 7 874,007 1,468,042

Other financial assets 5 149,301 110,950

Other current assets 19 473,070 610,330

Total current assets 5,535,208 5,776,518

Non-current assets:

Investments accounted for using the equity method 8 268,513 325,220

Investments and advances in the Financial Services segment

(including assets pledged that secured parties are permitted to sell or

repledge of 2,700,603 million yen and 2,427,446 million yen as of

March 31, 2022 and 2023, respectively) 5, 14 18,445,088 18,445,728

Property, plant and equipment 9 1,113,213 1,344,864

Right-of-use assets 10 413,430 478,063

Goodwill 11 952,895 1,275,112

Content assets 11 1,342,046 1,561,882

Other intangible assets 11 450,103 563,842

Deferred insurance acquisition costs 13 676,526 730,864

Deferred tax assets 25 298,589 384,839

Other financial assets 5 696,306 832,344

Other non-current assets 19 289,050 321,946

Total non-current assets 24,945,759 26,264,704

Total assets 30,480,967 32,041,222

F-4

(Continued on the following page.)

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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position (Continued)

Yen in millions

Note

March 31,

2022

March 31,

2023

LIABILITIES

Current liabilities:

Short-term borrowings 5, 14 1,976,553 1,914,934

Current portion of long-term debt 5, 14 171,409 187,942

Trade and other payables 5 1,843,242 1,865,993

Deposits from customers in the banking business 5 2,886,361 3,163,237

Income taxes payables 106,092 152,700

Participation and residual liabilities in the Pictures segment 18 190,162 230,223

Other financial liabilities 5 97,843 73,572

Other current liabilities 19 1,488,488 1,720,335

Total current liabilities 8,760,150 9,308,936

Non-current liabilities:

Long-term debt 5, 14 1,203,646 1,767,696

Defined benefit liabilities 17 254,548 236,121

Deferred tax liabilities 25 696,492 356,324

Future insurance policy benefits and other 13 7,039,034 7,264,421

Policyholders’ account in the life insurance business 13 4,791,295 5,148,579

Participation and residual liabilities in the Pictures segment 18 220,113 192,952

Other financial liabilities 5 211,959 350,278

Other non-current liabilities 19 106,481 127,593

Total non-current liabilities 14,523,568 15,443,964

Total liabilities 23,283,718 24,752,900

EQUITY

Sony Group Corporation’s stockholders’ equity: 20

Common stock 880,365 880,365

Additional paid-in capital 1,461,053 1,463,807

Retained earnings 3,760,763 4,614,637

Accumulated other comprehensive income 1,222,332 494,407

Treasury stock, at cost (180,042) (223,507)

Equity attributable to Sony Group Corporation’s stockholders 7,144,471 7,229,709

Noncontrolling interests 52,778 58,613

Total equity 7,197,249 7,288,322

Total liabilities and equity 30,480,967 32,041,222

The accompanying notes are an integral part of these statements.

F-5

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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income

Yen in millions

Fiscal year ended March 31

Note 2021 2022 2023

Sales and financial services revenue:

Sales 22 7,333,670 8,396,702 10,095,841

Financial services revenue 5, 13 1,664,991 1,524,811 1,443,996

Total sales and financial services revenue 8,998,661 9,921,513 11,539,837

Costs and expenses:

Cost of sales 7, 17, 23 5,065,879 5,845,804 7,174,723

Selling, general and administrative 17, 23 1,473,154 1,588,473 1,969,170

Financial services expenses 5, 13, 17 1,501,674 1,374,037 1,224,208

Other operating (income) expense, net 23, 31 14,250 (65,494) (12,021)

Total costs and expenses 8,054,957 8,742,820 10,356,080

Share of profit (loss) of investments accounted for using

the equity method 8 11,551 23,646 24,449

Operating income 955,255 1,202,339 1,208,206

Financial income 24 83,792 19,304 31,058

Financial expenses 24 41,082 104,140 58,951

Income before income taxes 997,965 1,117,503 1,180,313

Income taxes 25 (45,931) 229,097 236,691

Net income 1,043,896 888,406 943,622

Net income attributable to

Sony Group Corporation’s stockholders 1,029,610 882,178 937,126

Noncontrolling interests 14,286 6,228 6,496

Yen

Fiscal year ended March 31

Note 2021 2022 2023

Per share data: 26

Net income attributable to Sony Group Corporation’s

stockholders

— Basic 836.75 711.84 758.38

— Diluted 823.77 705.16 754.95

The accompanying notes are an integral part of these statements.

F-6

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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Yen in millions

Fiscal year ended March 31

Note 2021 2022 2023

Net income 1,043,896 888,406 943,622

Other comprehensive income, net of tax — 20

Items that will not be reclassified to profit or loss

Changes in equity instruments measured at fair value

through other comprehensive income 144,740 (106,426) (36,862)

Remeasurement of defined benefit pension plans 11,555 33,641 18,891

Share of other comprehensive income of investments

accounted for using the equity method 87 577 145

Items that may be reclassified subsequently to profit or

loss

Changes in debt instruments measured at fair value

through other comprehensive income (205,549) (416,904) (884,678)

Cash flow hedges 51 4,735 12,379

Insurance contract valuation adjustments (3,120) 599 1,714

Exchange differences on translating foreign operations 115,321 226,275 178,275

Share of other comprehensive income of investments

accounted for using the equity method 798 1,501 3,554

Total other comprehensive income, net of tax 63,883 (256,002) (706,582)

Comprehensive income 1,107,779 632,404 237,040

Comprehensive income attributable to

Sony Group Corporation’s stockholders 1,118,628 623,678 227,794

Noncontrolling interests (10,849) 8,726 9,246

The accompanying notes are an integral part of these statements.

F-7

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1001
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

Yen in millions

Note

Common

stock

Additional

paid-in

capital

Retained

earnings

Accumulated

other

comprehensive

income

Treasury

stock, at

cost

Sony Group

Corporation’s

stockholders’

equity

Noncontrolling

interests

Total

equity

Balance at April 1, 2020 880,214 1,297,554 1,949,697 979,476 (232,503) 4,874,438 1,120,038 5,994,476

Comprehensive income:

Net income 1,029,610 1,029,610 14,286 1,043,896

Other comprehensive income,

net of tax 20 89,018 89,018 (25,135) 63,883

Total comprehensive income 1,029,610 89,018 1,118,628 (10,849) 1,107,779

Transfer to retained earnings 5,472 (5,472) — —

Transactions with stockholders

and other:

Exercise of stock acquisition

rights (354) (735) 18,074 16,985 16,985

Conversion of convertible

bonds (3,671) (8,198) 89,402 77,533 77,533

Stock-based compensation 1,577 1,577 1,577

Dividends declared (50.00 yen

per share) (61,343) (61,343) (12,996) (74,339)

Purchase of treasury stock (366) (366) (366)

Reissuance of treasury stock 354 1,165 1,519 1,519

Transactions with

noncontrolling interests

shareholders and other 20 194,137 457,235 651,372 (1,052,197) (400,825)

Balance at March 31, 2021 880,214 1,489,597 2,914,503 1,520,257 (124,228) 6,680,343 43,996 6,724,339

Yen in millions

Note

Common

stock

Additional

paid-in

capital

Retained

earnings

Accumulated

other

comprehensive

income

Treasury

stock, at

cost

Sony Group

Corporation’s

stockholders’

equity

Noncontrolling

interests

Total

equity

Balance at April 1, 2021 880,214 1,489,597 2,914,503 1,520,257 (124,228) 6,680,343 43,996 6,724,339

Comprehensive income:

Net income 882,178 882,178 6,228 888,406

Other comprehensive income,

net of tax 20 (258,500) (258,500) 2,498 (256,002)

Total comprehensive income 882,178 (258,500) 623,678 8,726 632,404

Transfer to retained earnings 39,425 (39,425) — —

Transactions with stockholders

and other:

Issuance of new shares 151 151 302 302

Exercise of stock acquisition

rights 547 12,785 13,332 13,332

Conversion of convertible

bonds (2,805) (958) 18,278 14,515 14,515

Stock-based compensation 6,643 6,643 6,643

Dividends declared (60.00 yen

per share) (74,385) (74,385) (4,955) (79,340)

Purchase of treasury stock 20 (88,624) (88,624) (88,624)

Reissuance of treasury stock 1,544 1,747 3,291 3,291

Transactions with

noncontrolling interests

shareholders and other (34,624) (34,624) 5,011 (29,613)

Balance at March 31, 2022 880,365 1,461,053 3,760,763 1,222,332 (180,042) 7,144,471 52,778 7,197,249

F-8

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1002
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

Yen in millions

Note

Common

stock

Additional

paid-in

capital

Retained

earnings

Accumulated

other

comprehensive

income

Treasury

stock, at

cost

Sony Group

Corporation’s

stockholders’

equity

Noncontrolling

interests

Total

equity

Balance at April 1, 2022 880,365 1,461,053 3,760,763 1,222,332 (180,042) 7,144,471 52,778 7,197,249

Comprehensive income:

Net income 937,126 937,126 6,496 943,622

Other comprehensive income,

net of tax 20 (709,332) (709,332) 2,750 (706,582)

Total comprehensive income 937,126 (709,332) 227,794 9,246 237,040

Transfer to retained earnings 18,593 (18,593) — —

Transactions with stockholders

and other:

Exercise of stock acquisition

rights (14) (1,352) 10,364 8,998 8,998

Conversion of convertible

bonds (2,588) (13,858) 42,993 26,547 26,547

Stock-based compensation 11,064 11,064 11,064

Dividends declared (70.00 yen

per share) (86,635) (86,635) (5,980) (92,615)

Purchase of treasury stock 20 (99,248) (99,248) (99,248)

Reissuance of treasury stock 1,242 2,426 3,668 3,668

Transactions with

noncontrolling interests

shareholders and other (6,950) (6,950) 2,569 (4,381)

Balance at March 31, 2023 880,365 1,463,807 4,614,637 494,407 (223,507) 7,229,709 58,613 7,288,322

The accompanying notes are an integral part of these statements.

F-9

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1003
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows

Yen in millions

Fiscal year ended March 31

Note 2021 2022 2023

Cash flows from operating activities:

Income before income taxes 997,965 1,117,503 1,180,313

Adjustments to reconcile income before income taxes to net

cash provided by operating activities:

Depreciation and amortization, including amortization of

contract costs 687,373 835,233 1,004,590

Amortization of deferred insurance acquisition costs 44,738 69,237 84,523

Other operating (income) expense, net 23 14,250 (65,494) (12,021)

(Gain) loss on securities, net (other than Financial Services

segment) 24 (62,704) 60,402 4,469

Share of profit of investments accounted for using the

equity method, net of dividends (5,012) (13,934) (17,696)

Change in future insurance policy benefits and other 358,666 458,880 234,102

Change in policyholders’ account in the life insurance

business, less cash impact 558,539 238,309 15,523

Net cash impact of policyholders’ account in the life

insurance business 134,299 227,262 346,455

Changes in assets and liabilities:

Increase in trade receivables and contract assets (137,939) (171,094) (70,448)

Increase in inventories (56,509) (194,624) (560,382)

Increase in investments and advances in the Financial

Services segment (1,977,092) (1,724,164) (1,250,078)

Increase in content assets (309,178) (502,253) (603,314)

Increase in deferred insurance acquisition costs (98,122) (117,337) (118,096)

Increase (decrease) in trade payables 288,854 126,989 (109,336)

Increase in deposits from customers in the banking

business 333,075 230,236 300,201

Increase in borrowings in the life insurance business and

the banking business 462,751 905,139 111,314

Increase in taxes payable other than income taxes, net 19,164 17,840 4,183

(Increase) decrease in other financial assets and other

current assets (9,703) (17,681) 5,965

Increase in other financial liabilities and other current

liabilities 23,906 66,407 122,878

Income taxes paid 25 (102,732) (269,885) (297,881)

Other (24,372) (43,328) (60,573)

Net cash provided by operating activities 1,140,217 1,233,643 314,691

(Continued on the following page.)

F-10

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1004
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

Yen in millions

Fiscal year ended March 31

Note 2021 2022 2023

Cash flows from investing activities:

Payments for property, plant and equipment and other

intangible assets (477,931) (441,096) (613,635)

Proceeds from sales of property, plant and equipment and

other intangible assets 15,893 11,409 11,595

Payments for investments and advances (other than Financial

Services segment) (103,351) (91,082) (191,129)

Proceeds from sales or return of investments and collections

of advances (other than Financial Services segment) 20,352 16,081 13,548

Payments for purchases of businesses (15,260) (277,618) (283,402)

Proceeds from sales of businesses 3,151 64,609 1,221

Other (6,764) (11,083) 9,138

Net cash used in investing activities (563,910) (728,780) (1,052,664)

Cash flows from financing activities:

Increase (decrease) in short-term borrowings, net 14, 27 (18,334) 408 32,391

Proceeds from issuance of long-term debt 14, 27 236,935 31,458 361,776

Payments of long-term debt 14, 27 (89,918) (194,562) (132,198)

Proceeds from issuance of short-term borrowings in

connection with payment for purchase of noncontrolling

interest in Sony Financial Group Inc. 396,500 — —

Payments of short-term borrowings in connection with

payment for purchase of noncontrolling interest in Sony

Financial Group Inc. (396,500) — —

Dividends paid (61,288) (74,342) (86,568)

Payments for purchases of treasury stock 20 (366) (88,624) (99,248)

Payment for purchase of noncontrolling interest in Sony

Financial Group Inc. 20 (396,698) — —

Other (8,864) (10,916) 8,147

Net cash provided by (used in) financing activities (338,533) (336,578) 84,300

Effect of exchange rate changes on cash and cash equivalents 36,685 94,369 84,937

Net increase (decrease) in cash and cash equivalents 274,459 262,654 (568,736)

Cash and cash equivalents at beginning of the fiscal year 27 1,512,523 1,786,982 2,049,636

Cash and cash equivalents at end of the fiscal year 27 1,786,982 2,049,636 1,480,900

The accompanying notes are an integral part of these statements.

F-11

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1005
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Index to Notes to Consolidated Financial Statements

Sony Group Corporation and Consolidated Subsidiaries

Page

Notes to Consolidated Financial Statements

1. Reporting entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13

2. Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13

3. Summary of significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

4. Business segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38

5. Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-43

6. Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-53

7. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-64

8. Investments in associates and joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65

9. Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-66

10. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67

11. Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-68

12. Impairment of non-financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-72

13. Insurance-related accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-72

14. Short-term borrowings and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-79

15. Derivative instruments and hedging activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-81

16. Offsetting of financial assets and financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-84

17. Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-85

18. Participation and residual liabilities in the Pictures segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-91

19. Other assets and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-91

20. Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-92

21. Stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-97

22. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-99

23. Supplemental consolidated statements of income information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-100

24. Financial income and expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-101

25. Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-101

26. Reconciliation of the differences between basic and diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-106

27. Supplemental cash flow information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-106

28. Structured entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-109

29. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-111

30. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-111

31. Divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-114

32. Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-114

33. Purchase commitments, contingent liabilities and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-115

34. Subsequent event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-116

F-12

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1006
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements

Sony Group Corporation and Consolidated Subsidiaries

1. Reporting entity

Sony Group Corporation is a public company domiciled in Japan. Sony Group Corporation and its

consolidated subsidiaries (hereinafter collectively referred to as “Sony” or “Sony Group”) 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 network services, home

gaming consoles and software, televisions, audio and video recorders and players, still and video cameras,

smartphones, and image sensors. 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 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 and game applications. Sony is also engaged in the production, acquisition and distribution of

motion pictures and television programming and the operation of television networks and direct-to-consumer

(“DTC”) streaming services. Further, Sony is also engaged in various financial services businesses, including life

and non-life insurance businesses through its Japanese insurance subsidiaries and banking business through a

Japanese internet-based banking subsidiary.

2. Basis of preparation

Compliance with International Financial Reporting Standards

The consolidated financial statements of Sony have been prepared in accordance with International

Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

The term “IFRS” also includes International Accounting Standards (IASs) and the related interpretations of the

interpretations committees (Standard Interpretations Committee (SIC) and International Financial Reporting

Interpretations Committee (IFRIC)).

Approval of consolidated financial statements

The consolidated financial statements were approved by Kenichiro Yoshida, Chairman and Chief Executive

Officer and Representative Corporate Executive Officer, and Hiroki Totoki, President, Chief Operating Officer

and Chief Financial Officer and Representative Corporate Executive Officer, on June 20, 2023.

Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for items such as

financial instruments measured at fair value as separately described in Note 3.

Functional currency and presentation currency

The consolidated financial statements have been presented in Japanese yen, which is the functional currency

of Sony Group Corporation. All financial information presented in Japanese yen has been rounded to the nearest

million Japanese yen.

Use of estimates and judgments

The preparation of the consolidated financial statements in accordance with IFRS requires management to

make judgments, estimates and assumptions that affect the application of accounting policies, the reported

amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual

results could differ from these estimates and assumptions. These estimates and assumptions are reviewed on a

continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are

revised and in any future periods affected.

Information about judgments that have been made in the process of applying accounting policies that have

significant effects on the amounts reported in the consolidated financial statements is as follows:

• Classification of financial instruments (Note 3 I (5))

F-13

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SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

Information about accounting estimates and assumptions that have significant effects on the amounts

reported in the consolidated financial statements is as follows:

• Fair value of financial instruments (Note 3 I (5) and (15) and Note 5)

• Impairment of non-financial assets (Note 3 I (10) and Note 12)

• Measurement of deferred insurance acquisition costs, future insurance policy benefits, and

policyholders’ account in the life insurance business (Note 3 I (11) and Note 13)

• Measurement of film costs and participation and residual liabilities in the Pictures segment (Note 3 I

(9) and (12), Note 11, and Note 18)

• Recoverability of deferred tax assets (Note 3 I (23) and Note 25)

• Measurement of fair value of assets acquired and liabilities assumed in business combinations (Note 3 I

(2) and Note 30)

Change in presentation

Consolidated Statements of Cash Flows

Adjustments for foreign exchange fluctuations related to investments in the Financial Services segment and

adjustments for foreign exchange fluctuations related to content assets, which were included in “Other” in cash

flows from operating activities in the previous fiscal year, have been reclassified to “Increase in investments and

advances in the Financial Services segment” and “Increase in content assets,” respectively, of cash flows from

operating activities from the current fiscal year considering the materiality and the nature of the adjustments.

Also, adjustments for changes in taxes payable other than income taxes, net, which were included in “Other” in

cash flows from operating activities in the previous fiscal year, have been presented separately as “Increase in

taxes payable other than income taxes, net” in cash flows from operating activities from the current fiscal year

considering, among other things, the increase in materiality of the adjustments during the fiscal year ended

March 31, 2023. As a result of these changes in presentation, reclassifications within cash flows from operating

activities in the consolidated statements of cash flows for the fiscal years ended March 31, 2021 and 2022 have

been made to conform to the presentation for the fiscal year ended March 31, 2023.

As a result, in the consolidated statements of cash flows for the fiscal year ended March 31, 2021

(39,514) million yen, which was previously included in “Other” in cash flows from operating activities, has been

reclassified to (75,164) million yen of “Increase in investments and advances in the Financial Services segment”

and 16,486 million yen of “Increase in content assets,” and also has been presented separately in 19,164 million

yen of “Increase in taxes payable other than income taxes, net” of cash flows from operating activities. In the

consolidated statements of cash flows for the fiscal year ended March 31, 2022 (189,295) million yen, which was

previously included in “Other” in cash flows from operating activities, has been reclassified to (194,499) million

yen of “Increase in investments and advances in the Financial Services segment” and (12,636) million yen of

“Increase in content assets,” and also has been presented separately in 17,840 million yen of “Increase in taxes

payable other than income taxes, net” of cash flows from operating activities.

3. Summary of significant accounting policies

I. Significant accounting policies

(1) Basis of consolidation -

i) Subsidiaries

A subsidiary is an entity controlled by Sony Group Corporation. Control is obtained when Sony

Group Corporation is exposed, or has rights to variable returns from its involvement with the entity and

has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements of

Sony from the date on which control is obtained until the date on which control is lost.

All intercompany transactions and balances are eliminated in the preparation of the consolidated

financial statements.

F-14

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1008
SONY GROUP CORPORATION AND CONSOLIDATED SUBSIDIARIES

If any accounting policies applied by a subsidiary differ from those applied by Sony, adjustments

are made to the financial statements of the subsidiary as necessary.

Any changes in ownership interest in a subsidiary that do not result in a loss of control are

accounted for as equity transactions. The difference between the amount by which the non-controlling

interests are adjusted and the fair value of the consideration is directly recognized in equity and

attributed to the owners of Sony. When control over a subsidiary is lost, the investment retained in the

former subsidiary is remeasured at fair value as of the date when control is lost, and any gain or loss

resulting from the loss of control is recognized in profit or loss.

ii) Associates and joint ventures

An associate is an entity over which Sony has significant influence, but does not have control or

joint control, in terms of financial and operating policies.

A joint venture is an investee whereby two or more parties including Sony have the rights to the

net assets of the investee in accordance with the terms of the joint arrangement. Joint control is the

contractually agreed sharing of control of an arrangement, which exists only when decisions about the

relevant activities require the unanimous consent of the parties sharing control.

Investments in associates and joint ventures are accounted for using the equity method from the

date on which significant influence or joint control is obtained until the date on which significant

influence or joint control is lost. Under the equity method, investments in associates and joint ventures

are recognized at cost, adjusted for Sony’s share of the profit or loss and other comprehensive income

of the associates and joint ventures from the date on which Sony obtains significant influence or joint

control to the date on which Sony loses such significant influence or joint control. Sony recognizes its

share of profit or loss of the investees, net of income taxes after the elimination of unrealized

intercompany profits, in the consolidated operating income (loss) to the extent of Sony’s interest in

these entities.

For investments accounted for using the equity method, the carrying amount of each investment is

tested for impairment as a single asset, when there is objective evidence that the investments may be

impaired.

If any accounting policies applied by an associate or a joint venture differ from those applied by

Sony, adjustments are made to the financial statements of the associate or the joint venture as

necessary.

When an investment ceases to be an associate or a joint venture and the use of the equity method

is discontinued, any gain or loss arising from discontinuation of the equity method is recognized in

profit or loss.

iii) Joint operations

A joint operation is a joint arrangement whereby two or more parties including Sony have the

rights to the assets, and obligations for the liabilities, relating to the investee in accordance with the

terms of the joint arrangement.

Sony recognizes its share of the assets, liabilities, revenue and expenses related to joint operations.

iv) Structured entities

A structured entity is an entity designed so that voting or similar rights are not the dominant factor

in deciding who controls the entity.

Sony has control and, therefore, consolidates a structured entity when Sony has exposure or rights

to variable returns and has the ability to use its power over the structured entity to affect returns.

(2) Business combinations -

Sony recognizes identifiable assets acquired and the liabilities assumed of an acquiree at their fair values at

the acquisition date with limited exceptions.

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Sony recognizes goodwill when the aggregate of the consideration transferred in a business combination, the

amount of any non-controlling interests in the acquiree and the fair value of Sony’s previously held equity

interest in the acquiree exceeds the net amount of the identifiable assets and liabilities of the acquiree at the

acquisition date. If the aggregate above is less than the net amount of identifiable assets and liabilities, the

difference is recognized as a gain. The consideration transferred is calculated as the sum of the fair values of the

assets transferred, liabilities assumed and equity interest issued. Non-controlling interests are measured either at

fair value or based on the non-controlling interests’ proportionate share of the acquiree’s net identifiable assets

for each business combination transaction.

Acquisition-related costs are recognized as expenses in the period they are incurred.

(3) Foreign currency translation -

i) Foreign currency transactions

Foreign currency transactions are translated at the exchange rates prevailing at the transaction date

or rates that approximate such rates. Monetary assets and liabilities denominated in foreign currencies

are translated into the functional currency using the exchange rate at the end of the period. Foreign

exchange gains and losses resulting from translation and settlement are generally recognized in profit

or loss. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges.

ii) Foreign operations

Assets and liabilities of foreign operations such as overseas subsidiaries and associates are

translated using the exchange rates at the end of the period, and revenue and expense items are

translated using the average exchange rates for the period unless the exchange rates fluctuate

significantly. Exchange differences arising from the translation are recognized in other comprehensive

income.

On the disposal of a foreign operation, the cumulative amount of exchange differences relating to

that foreign operation is reclassified to profit or loss.

(4) 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 which are subject to an insignificant risk of

changes in value.

(5) Financial instruments -

Sony recognizes a financial instrument as a financial asset or a financial liability when Sony becomes party

to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Except for financial assets and

financial liabilities measured at fair value through profit or loss, transaction costs that are directly attributable to

the acquisition or issuance of the financial asset or financial liability are added to the fair value of financial assets

or subtracted from the fair value of financial liabilities at initial recognition.

i) Non-derivative financial assets

a. Classification and measurement

Non-derivative financial assets held by Sony are classified as either financial assets measured at

amortized cost, debt instruments measured at fair value through other comprehensive income, equity

instruments measured at fair value through other comprehensive income or financial assets measured at

fair value through profit or loss.

Financial assets measured at amortized cost

Sony classifies a financial asset as measured at amortized cost if the financial asset is held within a

business model whose objective is to collect contractual cash flows and the contractual terms of the

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financial asset give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding. The financial asset is measured at amortized cost by using

the effective interest method after initial recognition. On derecognition of a financial asset measured at

amortized cost, the difference between the carrying amount and the consideration received or receivable

is recognized in profit or loss.

Debt instruments measured at fair value through other comprehensive income

A debt instrument is classified as a financial asset measured at fair value through other

comprehensive income if the debt instrument is held within a business model whose objective is

achieved by both collecting contractual cash flows and selling the financial asset and the contractual

terms of the financial asset give rise on specified dates to cash flows that are solely payments of

principal and interest on the principal amount outstanding. Changes in the fair value of the financial

asset after initial recognition, except for impairment gains or losses and foreign exchange gains or

losses, are recognized in other comprehensive income. Interest income from these financial assets is

recognized in profit or loss using the effective interest method. On derecognition of a debt instrument

measured at fair value through other comprehensive income, the cumulative amount previously

recognized in other comprehensive income is reclassified to profit or loss.

In the life insurance business, the financial assets are held mainly from the perspective of assetliability management (“ALM”). The objective of holding financial assets in the life insurance business

is to match the interest rate sensitivity (duration) of financial assets and insurance contract liabilities

(which mainly consist of future insurance policy benefits and the policyholders’ account in the life

insurance business) as much as possible, in order to ensure sufficient cash flows are available to settle

insurance claims when they come due. Sony manages these assets as one portfolio, based on the overall

objective of managing duration and liquidity needs in a capital efficient manner. While some assets

within the portfolio may be held for a longer period of time, Sony considers, because of its overall

objective for these assets, that all the financial assets are held within one business model whose

objective is achieved by both collecting cash flows and selling financial assets.

Equity instruments measured at fair value through other comprehensive income

For investments in equity instruments which are not held for trading, Sony may make an irrevocable

election at initial recognition to present subsequent changes in fair value of the investments in other

comprehensive income.

These financial assets are measured at fair value and subsequent changes in the fair value are

recognized in other comprehensive income. Dividends from financial assets are recognized in profit or

loss, and the cumulative amount recognized in other comprehensive income is transferred to retained

earnings upon derecognition.

Financial assets measured at fair value through profit or loss

Financial assets other than those measured at amortized cost or fair value through other

comprehensive income are classified as financial assets measured at fair value through profit or loss.

Financial assets measured at fair value through profit or loss include financial assets held for trading.

In the life insurance business, investments held for variable life insurance and individual variable

annuity contracts mainly consist of equity securities, debt securities and investment funds, which are

measured at fair value through profit or loss.

For certain financial assets that would not normally be measured at fair value through profit or loss,

Sony may, at initial recognition, choose the irrevocable option to measure such financial assets at fair

value through profit or loss in order to eliminate or significantly reduce an accounting mismatch.

In the banking business, Sony has made the irrevocable election as mentioned above for some fixedrate debt securities. In relation to such debt securities, Sony utilizes derivatives to hedge the risk arising

from the changes in the fair value of the debt securities due to unfavorable fluctuations of interest rates.

Thus, this election is made to mitigate accounting mismatches derived from the changes in the fair

value of the debt securities and derivatives used as hedging instruments by recognizing gains and losses

from the changes in the fair value of the debt securities in profit or loss.

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b. Derecognition

Sony derecognizes a financial asset when the contractual rights to the cash flows from the financial

asset expire, or when Sony transfers the contractual rights to receive the cash flows of the financial

asset and transfers substantially all of the risks and rewards of the financial asset.

c. Impairment

Sony estimates expected credit losses and recognizes loss allowances for financial assets measured

at amortized cost and debt instruments measured at fair value through other comprehensive income. At

each reporting date, Sony measures the loss allowance for a financial instrument at an amount equal to

the lifetime expected credit losses if the credit risk on that financial instrument has increased

significantly since initial recognition. If, at the reporting date, the credit risk on a financial instrument

has not increased significantly since initial recognition, Sony measures the loss allowance for that

financial instrument at an amount equal to 12-month expected credit losses. In assessing whether the

credit risk has increased significantly or not, Sony uses the change in the risk of a default occurring

over the expected life of the financial instrument and estimates expected credit losses by using the

method which reflects the past loss rate and other reasonable and supportable forward-looking

information on macroeconomic factors affecting the ability of the customers to settle the receivables.

Sony measures the expected credit losses of a financial asset in a way that reflects an unbiased and

probability-weighted amount incorporating the time value of money and reasonable and supportable

information that is available at the reporting date about past events, current conditions and forecasts of

future economic conditions.

However, for trade and other receivables, and contract assets including non-current other receivables

in the Pictures segment, the loss allowance is measured at an amount equal to lifetime expected credit

losses irrespective of the change of credit risk on a collective basis or an individual basis incorporating

factors such as the past-due status and the attributes of the counterparties.

Sony determines a financial asset is credit-impaired when one or more events that have a detrimental

impact on the estimated future cash flows of that financial asset have occurred. The criteria that Sony

uses to determine that a financial asset is credit-impaired include a default or delinquency of more than

90 days past due in interest or principal payments.

Sony writes off the gross carrying amount of a financial asset when it cannot reasonably expect to

recover all or part of the asset.

Debt securities and housing loans in the Financial Services segment

The expected credit losses for debt securities and housing loans in the Financial Services segment

are the product of the probability of default (“PD”), loss given default (“LGD”) and exposure at default

(“EAD”), by leveraging the Basel III regulatory framework or based on the external information

published by major credit rating agencies. Forward-looking economic information is also included in

determining the PD.

Assessments on significant increases in credit risk are performed at the reporting date by comparing

the risk of default occurring with that at initial recognition. Sony recognizes and measures the expected

credit losses on a collective basis or an individual basis using reasonable and supportable information

that is available without undue cost or effort, such as asset type, credit ratings, collateral collectability,

past-due status and other relevant characteristics of financial instruments.

In addition, Sony has applied the low credit risk exemption for certain debt securities rated

“investment grade” by major credit rating agencies at the reporting date. For such instruments, Sony

assumes that the credit risk has not increased significantly since initial recognition.

If contractual terms of a loan have been modified, it is necessary to recalculate the gross carrying

amount of that loan by using the original effective interest rate and recognize a modification gain or

loss in profit or loss.

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ii) Non-derivative financial liabilities

Sony classifies non-derivative financial liabilities as either financial liabilities subsequently

measured at amortized cost by using the effective interest method or financial liabilities measured at

fair value through profit or loss.

Sony derecognizes a financial liability when it is extinguished, meaning when the obligation

specified in the contract is discharged, cancelled or expired.

iii) Derivative financial instruments and hedge accounting

All derivatives are recognized as either assets or liabilities in the consolidated statements of

financial position at fair value. Changes in the fair value of derivative financial instruments are either

recognized periodically through profit or loss or other comprehensive income, depending on whether

the derivative financial instrument qualifies as a hedge and the derivative is being used to hedge

changes in cash flows.

Derivative financial instruments held by Sony are accounted for as described below.

Cash flow hedges

Changes in the fair value of derivatives that are designated and determined to be 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 to profit or loss when the hedged

transaction affects profit or loss. Changes in the fair value of the ineffective portion are immediately

recognized in profit or loss.

Derivatives not designated as hedges

Changes in the fair value of derivatives not designated as hedges are immediately recognized in

profit or loss.

Assessment of hedge effectiveness

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 cash

flow hedges to specific assets or liabilities in the consolidated statements of financial position 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 have an economic relationship

with the hedged item in offsetting changes in fair value or cash flows of hedged items. The effect of

credit risk does not dominate the value changes that result from the underlying economic relationship.

In addition, the hedge ratio of the hedging relationship is designed to be the same as that resulting from

the quantity of the hedged item that Sony actually hedges and the quantity of the hedging instrument

that Sony actually uses to hedge that quantity of the hedged item. When it is determined that a

derivative no longer has an economic relationship with the hedged item, Sony discontinues hedge

accounting.

iv) Offsetting a financial asset and a financial liability

Sony offsets a financial asset and a financial liability and presents the net amount in the consolidated

statements of financial position when Sony currently has a legally enforceable right to set off the

recognized amounts and intends either to settle on a net basis or to realize the asset and settle the

liability simultaneously.

(6) Inventories -

Inventories are measured at the lower of cost or net realizable value. The cost of inventories is determined

on the “weighted average cost” basis. Net realizable value is the estimated selling price in the ordinary course of

business less the estimated costs of completion and the estimated costs necessary to make the sale.

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(7) Property, plant and equipment and depreciation -

Sony has adopted the cost model for the measurement of property, plant and equipment and presents an item

of property, plant and equipment at its cost less any accumulated depreciation and any accumulated impairment

losses. The cost of an item of property, plant and equipment includes any costs directly attributable to the

acquisition of the asset as well as costs of its dismantlement, removal or restoration. Property, plant and

equipment are depreciated on a straight-line basis over their useful lives (depreciation period ranging

from 2 to 50 years for buildings and from 2 to 10 years for machinery and equipment). Sony reviews the residual

values and the useful lives at each fiscal year-end, or sooner if circumstances require.

(8) Leases -

When entering into a contract, Sony determines whether an arrangement contains a lease at its inception. An

arrangement contains a lease if it conveys the right to control the use of an identified asset for a period of time in

exchange for consideration. Assets and liabilities recognized from leases are included in right-of-use (“ROU”)

assets, the current portion of long-term debt, and long-term debt in Sony’s consolidated statements of financial

position.

ROU assets represent Sony’s right to use an underlying asset for the lease term and lease liabilities represent

Sony’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized

at the commencement date based on the present value of lease payments over the lease term. ROU assets also

include any lease payments and initial direct costs incurred on or before the commencement date and exclude

lease incentives. In determining the present value of lease payments, Sony generally uses its incremental

borrowing rate, as the implicit rate is not available for most of its leases. Sony determines its incremental

borrowing rate based on the estimated rate of interest for collateralized borrowings, taking into account the lease

term and the economic conditions of each country or region at commencement date. The lease terms may include

options to extend or terminate the lease when it is reasonably certain that Sony will exercise that option. If the

lease transfers ownership of the underlying asset to the lessee by the end of the lease term or the purchase option

is reasonably certain to be exercised, Sony depreciates the ROU assets from the commencement date to the end

of the useful life of the underlying assets. Otherwise, Sony depreciates the ROU assets from the commencement

date to the earlier of the end of the useful life of the ROU assets or the end of the lease term. Sony accounts for

the lease and non-lease components as a single lease component. Sony has applied the short-term lease exception

for leases with a term of one year or less, where ROU assets and lease liabilities are not recognized and the

expense is recognized on a straight-line basis.

(9) Intangible assets and amortization, including content assets -

Intangible assets are measured using the cost model and stated at cost less accumulated amortization and

impairment losses. Intangible assets acquired separately are initially recognized at cost.

Intangible assets with finite useful lives mainly consist of patent rights, know-how, license agreements,

customer relationships, trademarks, software, television carriage contracts (broadcasting agreements), film costs,

broadcasting rights, music catalogs, artist contracts, music distribution rights and game content. Patent rights,

know-how, license agreements, trademarks and software are generally amortized on a straight-line basis over

3 to 10 years. Customer relationships, television carriage contracts (broadcasting agreements), music catalogs,

artist contracts, music distribution rights and game content are generally amortized on a straight-line basis, over

10 to 44 years. Film costs are amortized using an ultimate revenue method based on the ratio of current period

actual revenues to the estimated remaining total revenues. Sony considers that amortization pursuant to the

ultimate revenue method reflects the rate at which it plans to consume the future economic benefits related to the

asset, and there is a high correlation between revenue and the consumption of the economic benefits embodied in

the intangible assets. Broadcasting rights are generally amortized based on estimated usage or on a straight-line

basis over the useful life.

Amortization of intangible assets is included in cost of sales and selling, general and administrative

expenses in the consolidated statements of income. Certain intangible assets are assessed to have indefinite lives

because there is no foreseeable limit to the period over which such assets are expected to generate net cash flows

for Sony.

Film costs, broadcasting rights, music catalogs, artist contracts, music distribution rights and game content

are collectively classified and presented as content assets in the consolidated statements of financial position.

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Film costs include direct production costs, production overhead, and costs for acquisition and distribution rights

for both motion picture and television productions. Broadcasting rights, consisting of acquired programming to

be aired on Sony’s television networks and DTC streaming services, are recognized when the license period

begins and the program is available for use. Music catalogs are exclusive rights to the recorded music master or

music copyrights, which consist of melodies and lyrics of songs, that can be exploited and marketed in various

markets. Artist contracts are contracts with recorded music artists or songwriters that provide Sony with

exclusive rights to musical works. Music distribution rights are agreements to distribute music content owned by

third parties. Game content includes internally developed content, content developed through a third-party

arrangement where Sony owns the rights to the content, content acquired externally through contracts with third

parties, and agreements to distribute game content owned by third parties.

(10) Impairment of non-financial assets -

Sony reviews the recoverability of its non-financial assets, except for inventories, contract costs and

deferred tax assets, whenever there is any indication that an asset or a cash-generating unit (“CGU”) may be

impaired. In addition, an annual impairment test for goodwill, intangible assets with indefinite useful lives or

intangible assets not yet available for use is performed during the fourth quarter of the fiscal year for each CGU

or group of CGUs to which the carrying amount of these assets is allocated.

A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent

of the cash inflows from other assets or group of assets. Goodwill is allocated to each CGU or group of CGUs

that is expected to benefit from the synergies of a business combination. A CGU or group of CGUs to which

goodwill is allocated is not larger than an operating segment.

The recoverable amount of an asset, a CGU or group of CGUs is the higher of its value in use and fair value

less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present

value using a pre-tax discount rate that reflects current market assessments of the time value of money and the

risks specific to the assets. This approach uses significant estimates and assumptions, including estimated future

cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows,

perpetual growth rates, earnings or revenue multiples, the determination of appropriate comparable entities and

the determination of whether a premium or discount should be applied to comparables. The assumptions used for

estimated future cash flows and the timing of such cash flows for each CGU are generally based on the three-year

mid-range plan (“MRP”) and take into account such factors as historical experience, market and industry

information, and current and forecasted economic conditions. Perpetual growth rates are generally utilized to

determine a terminal value and are generally set after the three-year forecasted period for the MRP.

If the recoverable amount is determined to be less than the carrying amount of a CGU or group of CGUs, an

impairment loss would be recognized equal to the amount by which the carrying amount exceeds the recoverable

amount. Such impairment losses are recognized by first reducing the carrying amount of any allocated goodwill

and then are allocated to the other assets of the CGU on a pro rata basis of the carrying amount of each asset in

the CGU. Impairment losses except for content assets are included in other operating (income) expense, net, and

impairment losses for content assets are included in cost of sales in the consolidated statements of income.

Assets other than goodwill are reviewed to assess whether there is any indication that an impairment loss

recognized in prior periods may no longer exist or may have decreased. If any such indication exists, the

recoverable amount of the asset is determined and a reversal of an impairment loss is recognized when the

recoverable amount of the asset exceeds the carrying amount. Any increase in the carrying amount of an asset

attributable to the reversal of an impairment loss does not exceed the carrying amount of the asset, net of

depreciation and amortization, which would have been determined if an impairment loss had never been

recognized for the asset in prior periods.

(11) Insurance-related accounts -

In accordance with IFRS 4 “Insurance Contracts” (“IFRS 4”), insurance contracts are recognized and

measured according to the same accounting principles previously applied under generally accepted accounting

principles in the United States.

i) Deferred insurance acquisition costs

Costs that vary with and are directly related to the acquisition or renewal of insurance policies are

deferred as long as they are recoverable. The deferred insurance acquisition costs include such items as

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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 future insurance policy benefits. The deferred insurance acquisition costs for

non-traditional life insurance contracts are amortized over the expected life at a constant rate based on

the present value of the estimated gross profit. Investment yields, mortality rates, lapse rates and

discount rates are used as significant assumptions for the present value of the estimated gross profit.

ii) 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 rates, mortality rates,

lapse rates and other factors. These assumptions are reviewed on a periodic basis. Liabilities for future

insurance policy benefits include the liabilities for the minimum guarantee benefits of individual

variable annuity and variable life insurance contracts.

iii) 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 end of the reporting period. This liability is

generally equal to the accumulated account deposits, plus interest credited, less policyholder

withdrawals and other charges assessed against the account balances. Liabilities for policyholders’

account in the life insurance business include the liabilities related to the individual variable annuity

and variable life insurance contracts with minimum guarantee benefits.

iv) Insurance-related accounts measured at fair value

Sony measures at fair value certain future insurance policy benefits and policyholders’ account in

the life insurance business. The fair value measurement mitigates accounting mismatches related to the

changes in the fair value between liabilities for those future insurance policy benefits and

policyholders’ account due to changes in the minimum guarantee risk of individual variable annuity

contracts with minimum guarantee benefits, and the underlying investment managed for policyholders

and derivatives entered into related to such investments. Changes in fair value resulting from changes

in instrument-specific credit risk were estimated by incorporating the certain subsidiary’s current credit

spreads, and are recognized in other comprehensive income, net of tax. The amount recognized in other

comprehensive income is reclassified to profit or loss when the insurance contract liabilities are

derecognized.

v) Shadow accounting in the life insurance business

When holding financial assets that are measured at fair value through other comprehensive income

and which correspond to insurance contract liabilities, shadow accounting is applied to evaluate

insurance-related accounts as if the financial assets were sold as of the end of reporting period and

realized valuation gains or losses for the purpose of reducing the accounting mismatches between the

insurance contract liabilities and the financial assets.

Sony performs a shadow liability adequacy test on life insurance contracts quarterly. In a shadow

liability adequacy test, mainly, future insurance policy benefits minus deferred insurance acquisition

costs in the consolidated statements of financial position are compared to the present value of future

cash flow on a best-estimate basis as of the end of reporting period to determine that the future

insurance policy benefits are recorded at a sufficient level. If there is a shortage compared to the

present value of future cash flows on a best-estimate basis at the time, the deferred insurance

acquisition costs will be decreased to the extent of the shortage through other comprehensive income.

If the deferred insurance acquisition costs are decreased to zero and the shortage remains, the future

insurance policy benefits are increased by the remaining shortage through other comprehensive

income.

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Shadow accounting is an accounting treatment that affects the measurement of the insurancerelated accounts in response to unrealized gains or losses recognized for the assets in a manner

consistent with realized gains or losses. When the gains or losses from the assets are recognized in

other comprehensive income, the fluctuations in the carrying amount of insurance-related accounts are

also recognized in other comprehensive income.

(12) Provisions -

Provisions are recognized when Sony has present legal or constructive obligations as a result of past events,

it is probable that outflows of resources embodying economic benefits will be required to settle the obligations,

and reliable estimates can be made of the amount of obligations.

Provisions mainly consist of participation and residual liabilities in the Pictures segment and product

warranties.

i) Participation and residual liabilities in the Pictures segment

Parties involved in the production or exploitation of film and television content may be

compensated in part by contingent payments based on the financial results of a film or television show

pursuant to contractual formulas (participations) and by contingent amounts due under provisions of

collective bargaining agreements (residuals). Such parties are collectively referred to as participants,

and such costs are referred to collectively as participation and residual costs. Participation and residual

costs may be given to creative talent, such as actors or writers, investors or to entities from whom

distribution rights are licensed.

Participation and residual liabilities are accrued based on the ratio of current period actual

revenues to the estimated remaining total revenues. The participation and residual liabilities are

expected to be relieved when the contingent payments are fixed and paid. The majority of the

non-current portion of participation and residual liabilities is expected to be paid within the next

10 years.

Sony also enters into arrangements with other studios to jointly produce and distribute films,

under which each partner is responsible for the distribution of the film in specific territories or

distribution windows. The partners’ shares in the profits and losses of the films under these

arrangements are included within participation and residual costs.

ii) Product warranties

Sony issues contractual product warranties under which it generally guarantees the performance of

products delivered and services rendered for a certain period or term. Product warranties are calculated

based upon product sales, estimated probability of failure and estimated cost per claim. The estimates

and forecasts used in the calculation of product warranties are reviewed on a periodic basis.

(13) Employee benefits -

i) Post-employment benefits

Sony adopts defined benefit plans and defined contribution plans.

Defined benefit plans

Sony recognizes the net defined benefit liability or asset of defined benefit plans in the

consolidated statements of financial position as the amount of the present value of defined benefit

obligations less the fair value of plan assets.

The present value of defined benefit obligations is calculated by discounting the expected future

benefit, and service costs are determined by using the projected unit credit method. If the fair value of

plan assets is in excess of the present value of defined benefit obligations, the amount of any asset to be

recognized is limited to the present value of any economic benefits available in the form of refunds

from the plan or reductions in the future contributions to the plan. The discount rate is determined by

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reference to market yields at each fiscal year-end on high-quality corporate bonds which have

approximately the same term as the defined benefit obligations and are payable in the same currency as

the benefit payments. Net interest on the net defined benefit liability or asset is calculated by

multiplying the net defined benefit liability or asset by the discount rate.

Past service cost, which is the change in the present value of the defined benefit obligation

resulting from a plan amendment or curtailment, is recognized in profit or loss.

Remeasurements of the net defined benefit liability or asset are recognized in other

comprehensive income when they occur and transferred to retained earnings immediately.

Defined contribution plans

Sony recognizes contributions to defined contribution plans as expenses when employees have

rendered related services.

ii) Short-term employee benefits

Sony recognizes short-term employee benefits, such as salaries, bonuses and annual paid

absences, as expenses at the amount expected to be paid in exchange for services when employees have

rendered such services.

(14) Stock-based compensation -

i) Stock option plan

Sony estimates the cost of stock options at their fair value on the grant date and recognizes the

expense over the vesting period with a corresponding increase in equity. The fair value of options

granted is calculated using the Black-Scholes option-pricing model with consideration for terms and

conditions of the stock options.

ii) Restricted stock plan

Sony estimates the cost of restricted stock by the fair value of the stock granted on the grant date

and recognizes the expense over the vesting period with a corresponding increase in equity.

iii) Restricted stock unit plan

Sony estimates the cost of restricted stock units by the fair value of the units granted on the grant

date and recognizes the expense over the vesting period with a corresponding increase in equity.

(15) 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 determines 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 assumptions which Sony developed using the information

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.

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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.

Transfers between levels are deemed to have occurred at the beginning of the interim period in which the

transfers occur.

(16) Revenue recognition -

Sony recognizes revenue in an amount that reflects the consideration Sony expects in exchange for

satisfying performance obligations to transfer the goods or services promised in contracts with customers. This is

in accordance with the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) Sony satisfies a performance obligation.

Sony owns a variety of intellectual property throughout its segments and recognizes revenue through the

licensing of such intellectual property. Sony licenses rights to use its intellectual property and rights to access its

intellectual property. When Sony grants a customer the right to use Sony’s intellectual property, Sony satisfies its

performance obligation at the point in time when the customer obtains control and is entitled to benefit from the

license. When Sony grants a customer the right to access Sony’s intellectual property, Sony satisfies its

performance obligation over the license period.

Incremental costs of obtaining a contract and costs to fulfill a contract are recognized as assets when Sony

expects to recover these costs. The incremental costs of obtaining a contract are those costs that would not have

been incurred if the contract had not been obtained. Costs to fulfill a contract are those costs that are directly

related to a contract or to an anticipated contract and that generate or enhance resources for Sony to satisfy its

performance obligations. Sony applies a practical expedient and recognizes the incremental costs of obtaining a

contract as an expense when incurred if the amortization period of the asset that would have been recognized is

one year or less.

Performance obligations in contracts for the Entertainment, Technology & Services (“ET&S”) and

Imaging & Sensing Solutions (“I&SS”) segments are primarily to deliver various kinds of electronic equipment,

instruments and devices to customers. Revenues from these performance obligations are generally recognized

when a promised good is delivered to a customer. However, if the sales contract contains a customer acceptance

provision, then revenues are recognized when the customer accepts the promised good or when a deemed

acceptance occurs by the lapse of time. Revenues are also recognized over time, primarily from the provision of

internet broadband network services to subscribers over the subscription period. Revenues are recognized net of

anticipated returns and sales incentives.

Within the Game & Network Services (“G&NS”) segment, revenues from hardware, peripherals and

software discs are recognized when performance obligations are satisfied by transferring control to the retailer/

distributor, net of anticipated returns, sales incentives and cooperative advertising obligations. Revenues from

platform licensing to publishers are recognized when physical software discs are delivered. Revenues from

digital game content, which is a right to use Sony’s intellectual property, are recognized when the digital content

is made available for use by the licensee via an online platform, net of anticipated sales incentives and credit card

chargebacks. Revenues from digital game content involving multiple performance obligations, such as

obligations to make content available on future dates, are allocated to each performance obligation based on the

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relative standalone selling prices that are observable in the market or Sony’s best estimate. Revenues from

subscription fees for digital subscription services are recognized over the subscription period.

Within the Music segment, Sony licenses intellectual property that transfer to a customer either a right to

use Sony’s intellectual property, or a right to access Sony’s intellectual property. Revenues are recognized when

the customer has the right to use or access the intellectual property and obtains control of the use or access of that

license. Digital revenues include revenues from contracts with digital streaming services typically recognized as

a single performance obligation, which is ongoing access to intellectual property in an evolving library of content

over the contract term, predicated on: (1) the business practice and contractual ability to remove specific content

without a requirement to replace the content and without impact to minimum royalty guarantees and (2) the

contracts not containing a specific listing of content subject to the license. For these contracts, revenues are

recognized based on sales and usage royalties, except where there is a minimum royalty guarantee that is not

expected to be recouped, or a fixed fee, which is recognized on a straight-line basis over the term of the contract.

Revenues from the sale of physical products such as CDs, net of anticipated returns and sales incentives, are

recognized when delivery has occurred and the product is available for sale to the public.

Within the Pictures segment, 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 use by the

licensee. Revenues for motion picture and television program licensing arrangements involving multiple

performance obligations, for example a fee for multiple titles, territories or availability dates, are allocated based

on the relative standalone selling price of each performance obligation using Sony’s best estimate based on

available information such as market conditions and internal pricing guidelines. Each individual motion picture

or television programming product delivered generally represents a separate performance obligation. Licensing

revenue associated with renewals or extensions of existing agreements for motion pictures and television

programming is recognized when the licensee can use and benefit from the content under the renewal or

extension. Licensing revenue associated with minimum guarantees for a right to access Sony’s intellectual

property is recognized ratably over the license term. For home entertainment distribution, revenues from the sale

of physical products such as DVDs and Blu-ray DiscTM, net of anticipated returns and sales incentives, are

recognized when delivery has occurred and the product is available for sale to the public. Revenues from

electronic sell-through and video-on-demand are recognized when the product is made available for viewing via

digital distribution platforms. Revenues from the sale of broadcast advertising are recognized when the

advertisement is aired, and the performance obligation in these arrangements is the delivery of advertising spots

and may include a guaranteed amount of impressions. When a guarantee for a number of impressions is not

achieved, revenues are not recognized until additional advertising spots are delivered to provide the guaranteed

impressions. Revenues from subscription fees received by television networks and DTC streaming services are

recognized when the service is provided. The performance obligation under network subscription arrangements is

a right to use Sony’s intellectual property that is satisfied as programming is provided over the term of the

arrangement.

Within the Financial Services segment, traditional life insurance policies that Sony underwrites in the life

insurance business, most of which are categorized as long-duration contracts, mainly consist of whole life, term

life, and disease 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, variable life insurance contracts, individual variable 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. Property and casualty insurance policies

that Sony underwrites in the non-life insurance business 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.

(17) 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 property, plant and equipment, amortization of

intangible assets including content assets, employee benefits expenses and research and development costs.

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(18) Research and development expenditures -

Research and development expenditures include items such as employee benefits expenses and other direct

and indirect expenses associated with research and product development. Development expenditures are

capitalized only when technical feasibility is achieved, Sony has the intention, ability and sufficient resources to

use or sell the outcome of the development, it is probable that the outcome will generate a future economic

benefit, and the cost can be reliably measured. Capitalized development costs are measured as the sum of total

expenditures for development upon achieving the foregoing conditions for capitalization until development is

completed. Research expenditures and other development expenditures that do not meet the foregoing conditions

are expensed as incurred and included in the cost of sales in the consolidated statements of income.

(19) 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 employee benefits expenses, depreciation of property, plant and equipment, office rental for sales,

marketing and administrative divisions, loss allowance for trade receivables and amortization of intangible

assets.

(20) Financial services expenses -

Financial services expenses include a provision for policy reserves and amortization of deferred insurance

acquisition costs, interest expenses in the banking business, and all other operating costs, such as employee

benefits expenses, depreciation of property, plant and equipment, and office rental of subsidiaries, in the

Financial Services segment.

(21) Advertising costs -

Advertising costs are expensed as incurred.

(22) 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. However, in the Pictures segment, certain 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. Shipping and handling activities that occur after control of the related good

transfers are treated as separate performance obligations. Amounts paid by customers for shipping and handling

costs are included in sales.

(23) Income taxes -

Income taxes consist of current and deferred taxes. Current and deferred taxes are recognized in profit or

loss, except to the extent that the tax arises from a business combination, or a transaction or event which is

recognized, in the same or a different period, outside profit or loss, either in other comprehensive income or

directly in equity.

Current taxes are computed based on taxable profit or loss for the year, using the tax rates enacted or

substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are recognized for temporary differences between the tax bases of assets

and liabilities and their carrying amounts at the end of the reporting period. Deferred tax liabilities include the

liabilities being recognized for undistributed profits of subsidiaries and associates accounted for under the equity

method that are expected to be remitted in the foreseeable future. Deferred income taxes are determined using tax

rates and laws that have been enacted or substantively enacted by the end of the reporting period and are

expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is

settled. Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise from

the initial recognition of an asset or liability in a transaction which is not a business combination and which, at

the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

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Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against

which the assets can be utilized. Accordingly, the valuation of the deferred tax assets is assessed periodically

with available evidence related to the recoverability of the deferred tax assets. Management’s judgment related to

this assessment considers 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 resulting from uncertain tax positions taken or expected to be taken in a

tax return. 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 and expenses for all years subject to examinations based upon the

evaluation of the facts, circumstances and information available at that reporting date.

(24) Net income (loss) attributable to Sony Group 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 Group Corporation’s stockholders.

II. Recently adopted accounting standards

Amendments to IAS 12 “Income taxes”

In May 2023, the IASB issued “International Tax Reform-Pillar Two Model Rules”. The amendments (i)

introduce a temporary exception to the accounting for deferred taxes arising from the implementation of the

Pillar Two model rules published by the Organization for Economic Co-operation and Development (OECD) and

(ii) require additional disclosures. Sony retrospectively adopted the provision of the temporary exception to the

accounting for deferred taxes from the fiscal year ended March 31, 2023. The additional disclosure requirements

will be effective for Sony from the fiscal year ending March 31, 2024.

III. New accounting standards and interpretations not yet adopted

Major new or amended standards and interpretations that have been issued as of the date of approval of the

consolidated financial statements which are not effective and have not yet been adopted by Sony as of March 31,

2023 are as follows:

IFRS 17 “Insurance Contracts”

The IASB issued IFRS 17 “Insurance Contracts” (“IFRS 17”) in May 2017 and Amendments to IFRS 17 in

June 2020 and December 2021. IFRS 17 replaces IFRS 4 and sets out principles for the recognition,

measurement, presentation and disclosure of insurance contracts within the scope of IFRS 17. IFRS 17 provides a

general model, supplemented by a specific approach for contracts with direct participation features (the variable

fee approach) and a simplified approach (the premium allocation approach) mainly for short-duration contracts.

IFRS 17 becomes effective for Sony as of April 1, 2023. On transition, Sony is required to apply IFRS 17

retrospectively unless such application is impracticable. If it is impracticable to apply IFRS 17 retrospectively for

a group of insurance contracts, either the modified retrospective approach, which uses reasonable and

supportable information, or the fair value approach, which uses the fair value as of April 1, 2022, the transition

date for IFRS 17, may be applied. If Sony cannot obtain reasonable and supportable information necessary to

apply the modified retrospective approach, Sony will apply the fair value approach. Sony adopted IFRS 9

“Financial Instruments” (“IFRS 9”) before its initial application of IFRS 17 and will redesignate the

measurement method of certain financial assets based on the facts and circumstances existing at the date of the

initial application of IFRS 17 (April 1, 2023) in order to mitigate accounting mismatches arising from the assets

and liabilities in the insurance business.

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Applying IFRS 17 affects the measurement and presentation of insurance-related accounts, which are

primarily included in future insurance policy benefits and other, policyholders’ account in the life insurance

business, and deferred insurance acquisition costs in the consolidated statements of financial position under the

currently applied standard, IFRS 4. These insurance-related accounts, after applying IFRS 17, are primarily

recorded as insurance contracts liability in the consolidated statements of financial position. The financial

services revenue, after applying IFRS 17, consists of insurance revenue and other financial services revenue,

which are separately presented in the consolidated statements of income. The insurance revenue differs from

insurance premium revenue under IFRS 4 mainly because the insurance revenue excludes any investment

components that are deposits, as described in “(1) Significant accounting policies of IFRS 17, which Sony will

apply from the fiscal year ending March 31, 2024.”

The estimated effect of adopting IFRS 17 on Sony’s total equity as of April 1, 2022, the transition date for

IFRS 17, is expected to be a reduction of approximately 1.5 trillion yen mainly due to the effect of the changes in

discount rate used in measuring insurance contract liabilities.

These assessments and expectations above are preliminary and the actual result may differ upon adoption, as

not all of the transition work has been finalized.

(1) Significant accounting policies of IFRS 17, which Sony will apply from the fiscal year ending

March 31, 2024

Insurance contract liabilities -

i) Definition and classification of insurance contracts

Sony defines insurance contracts as the contracts under which Sony accepts significant insurance

risk by agreeing to compensate the policyholder if a specified uncertain future event adversely affects

the policyholder. In making this assessment, all substantive rights and obligations, including those

arising from laws and regulations, are considered on a contract-by-contract basis. Sony uses judgment

in assessing whether there is a scenario with commercial substance in which there is the possibility of a

loss on a present value basis and whether the accepted insurance risk is significant. Contracts that have

a legal form of an insurance contract but do not transfer significant insurance risk to Sony are classified

as investment contracts and accounted for as financial liabilities.

Insurance contracts that Sony underwrites in the life insurance business, which is included in the

Financial Services segment, mainly consist of whole life, term life, disease and health insurance,

variable life insurance, and individual variable annuity contracts. Sony classifies certain variable life

insurance and individual variable annuity contracts as insurance contracts with direct participation

features, if they meet all of the following conditions on initial recognition:

• the contractual terms specify that the policyholder participates in a share of a clearly

identified pool of underlying items;

• Sony expects to pay to the policyholder an amount equal to a substantial share of the fair

value returns on the underlying items; and

• Sony expects a substantial proportion of any change in the amounts to be paid to the

policyholder to vary with the change in the fair value of the underlying items.

All other insurance contracts are classified as insurance contracts without direct participation

features.

ii) Aggregation of insurance contracts

In measuring insurance contracts, Sony aggregates the insurance contracts into groups. Each

group of insurance contracts is determined by identifying portfolios of insurance contracts. Each

portfolio is comprised of contracts that are subject to similar risks and are managed together, and Sony

divides each portfolio by each quarterly accounting period (to which the issue date of the insurance

contracts belongs). The portfolios are then classified into one of the following three groups based on

the profitability of contracts:

• any contracts that are onerous on initial recognition;

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• any contracts that, on initial recognition, have no significant possibility of becoming onerous

subsequently; and

• any remaining contracts.

iii) Recognition and derecognition of insurance contracts

A group of insurance contracts issued by Sony is recognized from the earliest of:

• the beginning of the coverage period of the group of insurance contracts;

• when the first payment from the policyholder in the group of insurance contracts becomes

due; and

• when facts and circumstances indicate that the group to which the insurance contract belongs

is onerous.

If there is no contractual due date, the due date is considered as the day when the first payment is

received from the policyholder.

In addition, only contracts that individually meet the recognition criteria by the end of the

reporting period are included in the groups. When contracts individually meet the recognition criteria

after the end of the reporting period, they are added to the groups in the reporting period in which they

meet the recognition criteria. Composition of the groups is not reassessed in subsequent periods.

Insurance acquisition cash flows are allocated to groups of insurance contracts using a systematic

and rational method and considering, in an unbiased way, all reasonable and supportable information

that is available without undue cost or effort.

If insurance acquisition cash flows are directly attributable to a group of insurance contracts, they

are allocated to that group. If insurance acquisition cash flows are directly attributable to a portfolio but

not to a group of insurance contracts, then they are allocated to the groups in that portfolio using a

systematic and rational method.

Sony derecognizes an insurance contract when it is extinguished, i.e., when the obligation

specified in the insurance contract expires or is discharged or canceled. When an insurance contract is

derecognized, Sony:

• adjusts the fulfillment cash flows allocated to the group of insurance contracts to eliminate

those relating to the derecognized rights and obligations;

• adjusts the contractual service margin (“CSM”) of the group of insurance contracts for the

change in the fulfillment cash flows; and

• adjusts the number of coverage units expected for the remaining insurance contract services

to reflect the number of coverage units derecognized from the group of insurance contracts.

iv) Contract boundaries

In measuring groups of insurance contracts, Sony includes all of the future cash flows within the

boundary of each contract in the group. Cash flows are within the contract boundary if they arise from

substantive rights and obligations that exist during the reporting period in which the policyholder is

obliged to pay premiums or Sony has a substantive obligation to provide services (including insurance

coverage and any investment services).

A substantive obligation to provide services ends when Sony:

(a) has the practical ability to reassess the risks of the particular policyholder and can set a price

or level of benefits that fully reflects those reassessed risks; or

(b) has the practical ability to reassess the risks of the portfolio that contains the contract and can

set a price or level of benefits that fully reflects the risks of that portfolio, and the pricing of

the premiums up to the reassessment date does not take into account risks that relate to

periods after the reassessment date.

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For cash flows arising during the period after the renewal of the insurance contract, which has

automatic renewal clauses, Sony assesses the contract boundaries and determines that they are within

the existing contract boundaries when Sony does not have the above practical ability to reassess the

risks.

v) Initial measurement of insurance contracts not measured under the premium allocation approach

(“PAA”)

On initial recognition, Sony measures a group of insurance contracts as the total of the following:

(a) Fulfillment cash flows

The fulfillment cash flows of the groups of insurance contracts consist of estimates of the

future cash flows and risk adjustments for non-financial risk. The estimates of the future cash

flows are adjusted to reflect the time value of money and the associated financial risks, and do not

reflect Sony’s non-performance risk. The discount rates reflect the characteristics of the cash

flows arising from the groups of insurance contracts, including timing, currency and liquidity of

cash flows. The determination of the discount rate that reflects the characteristics of the cash flows

and liquidity characteristics of the insurance contracts involves significant estimation. The risk

adjustment for non-financial risk, determined separately from the other estimates, is designed to

reflect the compensation required for bearing uncertainty about the amount and timing of the cash

flows that arises from non-financial risk.

(b) CSM

The CSM of a group of insurance contracts represents the unearned profit that Sony will

recognize as it provides insurance contract services under those contracts.

vi) Subsequent measurement of insurance contracts not measured under the PAA

The carrying amount of a group of insurance contracts at each reporting date is the sum of the

liability for incurred claims and the liability for remaining coverage. The liability for incurred claims

comprises the fulfillment cash flows for incurred claims and expenses that have not yet been paid,

including claims that have been incurred but not yet reported. The liability for remaining coverage

comprises the items described below.

(a) Fulfillment cash flows

The fulfillment cash flows of groups of insurance contracts are measured at the reporting date

using current estimates of future cash flows, current discount rates and current estimates of the

risk adjustment for non-financial risk.

(b) CSM

The carrying amount of the CSM of contracts without direct participation features at each

reporting date is the carrying amount at the beginning of the fiscal year, adjusted for the following

items (among these, (2) and (3)1, (3)2 and (3)4 are measured using the discount rate determined at

initial recognition (locked-in discount rate):

(1) the effect of any new contracts that are added to the group during the current fiscal year;

(2) interest accreted on the carrying amount of the CSM during the current fiscal year;

(3) the changes in fulfillment cash flows relating to future service including the following

items below:

1. experience adjustments arising from premiums received in the current fiscal year

that relate to future services (including those for related cash flows such as

insurance acquisition cash flows and premium-based taxes);

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2. changes in estimates of the present value of future cash flows in the liability for

remaining coverage (excluding the effect of the time value of money, financial risk

and changes therein);

3. differences between any investment component expected to become payable in the

current fiscal year and the actual investment component that becomes payable in

the current fiscal year; and

4. changes in the risk adjustment for non-financial risk that relate to future services;

(4) the effect of any currency exchange differences; and

(5) the amount recognized as insurance revenue for insurance contract services provided

during the current fiscal year, which is determined after all the adjustments above.

The carrying amount of the CSM of contracts with direct participation features at each

reporting date is the carrying amount at the beginning of the fiscal year, adjusted for the following

items:

(1) the effect of any new contracts that are added to the group during the current fiscal year;

(2) changes in Sony’s share of the fair value of the underlying items;

(3) changes in the fulfillment cash flows that do not vary based on the returns of underlying

items including the following items below:

1. changes in the effect of the time value of money and financial risks including the

effect of financial guarantees;

2. experience adjustments arising from premiums received in the current fiscal year

that relate to future services (including those for related cash flows such as

insurance acquisition cash flows and premium-based taxes);

3. changes in estimates of the present value of future cash flows in the liability for

remaining coverage (excluding the effect of the time value of money, financial risk

and changes therein);

4. differences between any investment component expected to become payable in the

current fiscal year and the actual investment component that becomes payable in

the current fiscal year; and

5. changes in the risk adjustment for non-financial risk that relate to future services;

(4) the effect of any currency exchange differences; and

(5) the amount recognized as insurance revenue for insurance contract services provided

during the current fiscal year, which is determined after all the adjustments above.

Sony selects an accounting policy to update accounting estimates related to insurance

contracts made in the previous interim consolidated financial statements in the subsequent annual

and interim consolidated financial statements and to measure the annual results using the

year-to-date approach.

Changes in the fulfillment cash flows that relate to current or past services are recognized as

profit or loss. Changes in the fulfillment cash flows that relate to future services are adjusted to the

extent of the CSM carrying amount as follows:

• when an increase in the fulfillment cash flows exceeds the carrying amount of the CSM,

the CSM is reduced to zero and the excess is recognized as insurance service expenses

and such excess is recorded as a loss component of the liability for the remaining

coverage;

• when the CSM is zero, changes in the fulfillment cash flows adjust the loss component

within the liability for remaining coverage with correspondence to insurance service

expenses; and

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• the excess of any decrease in the fulfillment cash flows over the loss component reduces

the loss component to zero and reinstates the CSM.

When a loss component exists, Sony allocates the following items between the loss

component and the remaining component of the liability for the remaining coverage for the

respective group of insurance contracts, based on the ratio of the loss component to the fulfillment

cash flows relating to the expected future cash outflows:

(1) expected incurred claims and expenses for the period;

(2) changes in the risk adjustment for non-financial risk for the risk expired; and

(3) finance income (expenses) from insurance contracts issued.

The amounts of loss component allocation in (1) and (2) above reduce the respective

components of insurance revenue and are reflected in insurance service expenses.

vii) Application of the PAA

For certain insurance contracts in a group with a coverage period of one year or less at initial

recognition, Sony uses the PAA to simplify the measurement of the group of insurance contracts.

Under the PAA, on initial recognition of each group of insurance contracts, the carrying amount of

the liability for remaining coverage is measured at the premiums received on initial recognition, minus

any insurance acquisition cash flows allocated to the group at the date of the receipt of the premiums.

Sony amortizes insurance acquisition cash flows over the coverage period of the group of insurance

contracts.

Subsequently, the carrying amount of the liability for remaining coverage is increased by any

premiums received and the amortization of insurance acquisition cash flows recognized as expenses,

and decreased by the amount recognized as insurance revenue for services provided and any additional

insurance acquisition cash flows allocated after initial recognition.

viii) Presentation

Portfolios of insurance contracts that are assets and those that are liabilities are presented

separately in the consolidated statements of financial position. If no insured event has occurred and the

surrender option has not been exercised as of the reporting date, the insurance contract liabilities are

classified as non-current liabilities. However, if an insured event occurs or the surrender option is

exercised, Sony loses its rights to postpone the payment of these liabilities. In this case, the insurance

contract liabilities are classified as current liabilities, as they are due to be settled within 12 months

after the end of the reporting period.

Sony disaggregates amounts recognized in the consolidated statements of income and the

consolidated statements of comprehensive income into an insurance service result, which is comprised

of insurance revenue and insurance service expenses, and insurance finance income or expenses. Sony

does not disaggregate changes in the risk adjustment for non-financial risk between the insurance

service result and insurance finance income or expenses and includes them in the insurance service

result.

(a) Insurance revenue

Insurance revenue excludes any investment components and is recognized as follows:

(1) Contracts not measured under the PAA

Sony recognizes insurance revenue as it provides insurance contract services. For contracts

not measured under the PAA, the insurance revenue relating to services provided for each period

represents the total of the changes in the liability for remaining coverage that relate to services for

which Sony expects to receive consideration, and primarily comprises the following items:

• a release of the CSM, measured based on coverage units provided during the fiscal year;

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• changes in the risk adjustment for non-financial risk relating to current services;

• claims and other insurance service expenses incurred during the year, measured at the

amounts expected at the beginning of the fiscal year; and

• allocation of the amount of insurance acquisition cash flows in a systematic way based

on the passage of time.

The release amount of the CSM of a group of insurance contracts that is recognized as

insurance revenue in each fiscal year is determined by identifying the coverage units in the group

and recognizing in profit or loss the amount of the CSM allocated to the coverage units provided

during the fiscal year. The number of coverage units is the quantity of services provided based on

the insurance contracts in the group, determined by considering the quantity of benefits to be

provided by each insurance contract in the group and the expected coverage period.

Services provided based on insurance contracts include insurance coverage and, for all direct

participating contracts, investment related services for managing underlying items on behalf of

policyholders. Insurance contracts other than direct participating contracts include investment

return services for generating an investment return for the policyholder.

(2) Contracts measured under the PAA

For contracts measured under the PAA, the insurance revenue for each period is the amount

of expected premium receipts for providing services during the period. Sony allocates the

expected premium receipts to each period based mainly on the passage of time.

(b) Insurance service expenses

Insurance service expenses arising from insurance contracts comprise the following items:

(1) incurred claims and benefits excluding investment components and reduced by the loss

component allocation;

(2) other incurred and directly attributable insurance service expenses (reduced by the loss

component allocation);

(3) amortization of insurance acquisition cash flows;

(4) changes that relate to past services (e.g., changes in the fulfillment cash flows relating to the

liability for incurred claims; and

(5) changes that relate to future services (e.g., losses on onerous insurance contracts and reversal

of those losses arising from changes in the loss components).

For contracts not measured under the PAA, amortization of insurance acquisition cash flows is

reflected in insurance service expenses in the same amount as insurance acquisition cash flows

recovery reflected within insurance revenue as described above.

(c) Insurance finance income and expenses

Insurance finance income and expenses comprise changes in the carrying amounts of groups of

insurance contracts arising from the effects of the time value of money, financial risk and changes

therein. Sony has chosen to disaggregate insurance finance income or expenses between profit or loss

and other comprehensive income for contracts without direct participation features, excluding certain

variable life insurance and individual variable annuity contracts. The amount included in profit or loss

is determined by a systematic allocation of the expected total insurance finance income or expenses

over the duration of the group of insurance contracts. The amount of systematic allocation is

determined using the discount rates determined on initial recognition of the group of insurance

contracts. For insurance finance income or expenses arising from the CSM, the discount rates

determined on initial recognition of the group of insurance contracts are used. As a result of this

systematic allocation, the total amounts recognized in other comprehensive income is equal to zero

over the duration of the group of insurance contracts. In addition, the cumulative amount recognized in

other comprehensive income at any point in time is the difference between the carrying amount of the

group of insurance contracts and the amount measured by this systematic allocation.

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For contracts with direct participation features, the insurance finance income or expenses include

changes in the value of underlying items (excluding additional premium payments and withdrawals),

all of which are recognized in profit or loss.

(2) Significant judgments and estimates for IFRS 17, which Sony will apply from the fiscal year ending

March 31, 2024

i) Measurement methods and inputs for insurance contracts

Sony estimates the mortality and morbidity rates based on the most recent actual outcomes and

analyzes the historical experience and trends in data using statistical methods. When estimating the

mortality and morbidity rates for each group of insurance contracts, Sony takes into account the

characteristics of policyholders including gender, health conditions and smoking habits and the

characteristics of the group of insurance contracts such as the selective effects over time. The estimates

are revised in a timely manner to reflect changes in lifestyle, as well as changes in social conditions

such as improvement of mortality and morbidity rates in the future.

Sony estimates the lapse and surrender rates based on the most recent actual outcomes and

determines the probability-weighted lapse and surrender rates for each group of insurance contracts by

analyzing historical experience and trends in data using statistical methods. Lapse and surrender rates

are estimated, taking into account both ordinary and dynamic lapses, and reflect the tendency to higher

surrender rates when the yield on contracts increases or exceeds the guaranteed minimum for certain

insurance contracts. In determining the lapse and surrender rates, historical actual data is considered. If

no clear correlation is found in historical actual data, the actual results of similar products as well as

domestic and overseas practical trends are used as reference.

Sony projects estimates of future expenses based on the current expense levels. The expenses

comprise expenses directly attributable to the group of insurance contracts, including the allocation of

fixed and variable overhead expenses. In addition, Sony applies inflation adjustments to the estimated

claims to be paid in future.

ii) Discretionary participation features of future cash flows

For certain participating insurance contracts other than direct participating contracts, the effect of

discretionary changes on the fulfillment cash flows is adjusted in the contractual service margin.

Although Sony has discretionary participation features related to the investment policy for these

contracts, the investment policy is established based on the market conditions. Therefore, the effect of

changes in assumptions that relate to financial risk on the investment policy is included in insurance

finance income or expenses. In addition, since the dividend policy can be changed at Sony’s discretion,

the effect of changes in the dividend policy on the fulfillment cash flows is adjusted in the contractual

service margin.

iii) Risk adjustments for non-financial risk

Risk adjustments for non-financial risk are determined to reflect the compensation that each

insurance subsidiary would require for bearing non-financial risk, and are allocated to groups of

insurance contracts based on an analysis of the risk profiles of the groups. Risk adjustments for

non-financial risk reflect the diversification benefits, in a way that is consistent with the compensation

that the insurance company would require and that reflects its degree of risk aversion.

The risk adjustments for non-financial risk are determined mainly using a cost of capital

technique. In applying a cost of capital technique, Sony determines the risk adjustment for

non-financial risk by applying a cost-of-capital rate to the amount of capital required for each future

reporting date and discounting the result using risk-free rates adjusted for illiquidity. The required

capital is determined by estimating the probability distribution of the present value of future cash flows

from insurance contracts at each future reporting date and calculating the capital that Sony would

require to meet its contractual obligations to pay claims and expenses arising over the duration of the

contracts at a 99.5% confidence level. The cost-of-capital rate represents the additional reward that

investors would require for exposure to the non-financial risk.

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iv) Discount rates

All cash flows are discounted using risk-free yield curves adjusted to reflect the characteristics of

the cash flows and the liquidity of the insurance contracts. Sony determines the risk-free yield curves

using the yields on government bonds. The yield curve is determined by incorporating long-term real

interest rate and inflation expectations. For extrapolation for the periods in which market data is not

available, a method using an ultimate forward rate is used. To be specific, the method uses an ultimate

forward rate of 3.5% and starts extrapolation in the 40th year (or the 30th year for U.S. dollar). The

forward rates for the 41st year (or the 31st year for U.S. dollar) and onwards are extrapolated so that

they will converge to the level of the ultimate forward rate in 30 years, using the Smith-Wilson

method. To reflect the liquidity characteristics of the insurance contracts, the risk-free yield curves are

adjusted by an illiquidity premium. Illiquidity premiums are determined by setting up a reference

portfolio of Sony’s assets.

v) Investment components

Sony identifies the investment component of an insurance contract by determining the amount that

it would be required to repay to the policyholder in all circumstances, regardless of whether an insured

event occurs or not. These include circumstances in which an insured event occurs or the contract

matures or is terminated without an insured event occurring. Investment components are excluded from

insurance revenue and insurance service expenses.

vi) Determination of coverage units

The amount of the CSM of a group of insurance contracts that is recognized as insurance revenue

in each year is determined by identifying the coverage units in the group and recognizing in profit or

loss the amount of the CSM allocated to the coverage units provided during the year. The number of

coverage units is determined by considering for each contract the quantity of benefits provided and its

expected coverage period. To be specific, Sony determines the quantity of benefits based on:

• the death benefit amount in the case of contracts for which the death benefit amount increases

or decreases based on the period (e.g., whole life, term life and variable life insurance

contracts);

• the premium amount proportionate to the insurance period in the case of contracts whose host

contract and riders have different coverage types (e.g., disease and health insurance

contracts); and

• the cash surrender value (or the premium reserve during the annuity payment period) in the

case of annuity contracts with investment-related services (e.g., individual variable annuity

contracts).

Sony considers the characteristics of insurance contracts and aggregates quantities of benefits

related to insurance coverage, investment-return services and investment-related services when

determining the relative weighting of the benefits provided to the policyholder by these services.

(3) Disclosure of transition to IFRS 17

Upon transition to IFRS 17 as of April 1, 2022, Sony determined that it was impracticable to apply the full

retrospective approach to certain groups of insurance contracts, as the necessary information was unavailable due

to restrictions of contract data and systems in the past or it was impossible to recreate past estimation without the

use of hindsight. Sony will apply alternative transition methods (the modified retrospective approach or the fair

value approach) to groups of insurance contracts for which the full retrospective approach is impracticable as of

the date of the transition.

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Sony will apply the following approaches on transition to IFRS 17:

Year of issue (fiscal year) Transition approach

2015 and thereafter For all groups of insurance contracts: Full retrospective approach

1993 – 2014

For groups of insurance contracts with direct participation features and certain

groups of insurance contracts without direct participation features: Fair value

approach

For other groups of insurance contracts: Modified retrospective approach

In and before 1992 For all groups of insurance contracts: Fair value approach

Modified retrospective approach

The objective of the modified retrospective approach is to achieve the closest outcome to retrospective

application possible using reasonable and supportable information available without undue cost or effort. Sony

will apply each of the following modifications only to the extent that it does not have reasonable and supportable

information to apply IFRS 17 retrospectively.

Sony will apply the following modifications to certain groups of insurance contracts:

• For groups of contracts issued, initiated or acquired from April 1, 1993 to March 31, 2015, the future

cash flows on initial recognition are estimated by adjusting the amount as of April 1, 2015, which can

be determined retrospectively, for the cash flows that are known to have occurred before that date;

• For groups of contracts issued, initiated or acquired from April 1, 1993 to March 31, 2013, the

illiquidity premiums applied to the observable risk-free yield curves on initial recognition are estimated

by determining an average spread between the observable risk-free yield curves and the discount rates,

which can be determined retrospectively, for the period from April 1, 2013 to March 31, 2022. The

amount of insurance finance income or expenses recognized in accumulated other comprehensive

income as of April 1, 2022 is calculated by using this discount rate; and

• The risk adjustment for non-financial risk on initial recognition is determined by adjusting the amount

as of April 1, 2022 for the expected release of risk before April 1, 2022.

After applying such modifications to fulfillment cash flows, the CSM (or the loss component) on initial

recognition is determined as follows:

• the amount of the CSM recognized as profit or loss before April 1, 2022 is determined by comparing

the remaining coverage units as of the date of the transition and the coverage units provided based on

groups of insurance contracts before the date of the transition; and

• the amount allocated to the loss component before April 1, 2022 is determined using the proportion of

the loss component relative to the total estimate of the present value of the future cash outflows plus

the risk adjustment for non-financial risk on initial recognition.

Fair value approach

Under the fair value approach, the CSM (or the loss component) as of April 1, 2022 is determined as the

difference between the fair value of a group of insurance contracts at that date and the fulfillment cash flows at

that date.

For all insurance contracts measured under the fair value approach, Sony uses reasonable and supportable

information available as of April 1, 2022 to determine the following matters:

• how to identify groups of contracts;

• whether a contract meets the definition of an insurance contract with direct participation features; and

• how to identify discretionary cash flows for contracts without direct participation features.

For groups of contracts measured under the fair value approach, the discount rates on initial recognition are

determined as of April 1, 2022 instead of at the date of initial recognition.

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For all insurance contracts measured under the fair value approach, the amount of insurance finance income

or expenses recognized in accumulated other comprehensive income as of April 1, 2022 is determined to be zero.

Amendments to IAS 1 “Presentation of Financial Statements”

In January 2020, the IASB issued “Classification of Liabilities as Current or Non-current” (“Amendments to

IAS 1”). The amendments clarify the right to defer settlement, which is one of the existing requirements when

classifying a liability to current or non-current. The amendments will be effective for Sony as of April 1, 2024.

The impact of the amendments on Sony’s results of operations and financial position is being evaluated.

In October 2022, the IASB issued “A Non-current Liability with Covenants” (“Amendments to IAS 1”).

The amendments were issued to improve the information a company provides about long-term debt with

covenants by enabling investors to understand the risk that such debt could become repayable within twelve

months. The amendments will be effective for Sony as of April 1, 2024. The impact of the amendments on

Sony’s results of operations and financial position is being evaluated.

4. Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information

is available and for which operating income 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 Chairman, President and Chief

Executive Officer.

The former Electronics Products & Solutions segment has been renamed the Entertainment, Technology &

Services (ET&S) segment effective from April 2022. This change has not resulted in any reclassification of

businesses across segments.

The G&NS segment includes the network services businesses, the manufacture and sales of home gaming

products and the production and sales of software. The Music segment includes the Recorded Music, Music

Publishing and Visual Media and Platform businesses. The Pictures segment includes the Motion Pictures,

Television Productions and Media Networks businesses. The ET&S segment includes the Televisions business,

the Audio and Video business, the Still and Video Cameras business, the smartphone business and the internetrelated service business. The I&SS segment includes the image sensors business. The Financial Services segment

primarily represents individual life insurance and non-life insurance businesses in the Japanese market and the

banking business in Japan. All Other consists of various operating activities, including the disc manufacturing

and recording media businesses. Sony’s products and services are generally unique to a single operating segment.

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Segment sales and financial services revenue:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Sales and financial services revenue:

Game & Network Services —

Customers 2,604,713 2,674,356 3,538,533

Intersegment 51,565 65,407 106,065

Total 2,656,278 2,739,763 3,644,598

Music —

Customers 927,250 1,100,532 1,364,815

Intersegment 12,617 16,417 15,817

Total 939,867 1,116,949 1,380,632

Pictures —

Customers 751,800 1,236,399 1,364,887

Intersegment 1,187 2,512 4,535

Total 752,987 1,238,911 1,369,422

Entertainment, Technology & Services —

Customers 2,016,887 2,297,886 2,436,739

Intersegment 51,200 41,300 39,286

Total 2,068,087 2,339,186 2,476,025

Imaging & Sensing Solutions —

Customers 937,859 992,200 1,301,481

Intersegment 74,638 84,224 100,706

Total 1,012,497 1,076,424 1,402,187

Financial Services —

Customers 1,664,991 1,524,811 1,443,996

Intersegment 9,011 9,018 10,550

Total 1,674,002 1,533,829 1,454,546

All Other —

Customers 84,202 82,264 72,338

Intersegment 16,534 16,519 15,285

Total 100,736 98,783 87,623

Corporate and elimination (205,793) (222,332) (275,196)

Consolidated total 8,998,661 9,921,513 11,539,837

G&NS intersegment amounts primarily consist of transactions with the ET&S segment. ET&S intersegment

amounts primarily consist of transactions with the G&NS segment. I&SS intersegment amounts primarily consist

of transactions with the G&NS segment and the ET&S segment. Corporate and elimination includes certain

brand and patent royalty income.

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Segment profit (loss):

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Operating income (loss):

Game & Network Services 341,718 346,089 250,006

Music 184,786 210,933 263,107

Pictures 79,851 217,393 119,255

Entertainment, Technology & Services 127,859 212,942 179,461

Imaging & Sensing Solutions 145,884 155,597 212,214

Financial Services 154,765 150,111 223,935

All Other 7,178 17,981 16,849

Total 1,042,041 1,311,046 1,264,827

Corporate and elimination (86,786) (108,707) (56,621)

Consolidated operating income 955,255 1,202,339 1,208,206

Financial income 83,792 19,304 31,058

Financial expenses (41,082) (104,140) (58,951)

Consolidated income before income taxes 997,965 1,117,503 1,180,313

Operating income (loss) is sales and financial services revenue less costs and expenses, and includes the

share of profit (loss) of investments accounted for using the equity method.

Other significant items:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Share of profit (loss) of investments accounted for using the

equity method:

Game & Network Services — 14 144

Music 570 4,073 7,063

Pictures 123 (664) 515

Entertainment, Technology & Services 57 1,103 1,076

Imaging & Sensing Solutions (123) (603) (1,128)

Financial Services — — —

All Other 10,924 19,723 16,779

Consolidated total 11,551 23,646 24,449

Depreciation and amortization:

Game & Network Services 52,987 61,219 87,201

Music 46,217 61,465 67,240

Pictures 290,895 396,251 506,697

Entertainment, Technology & Services 82,174 91,759 97,448

Imaging & Sensing Solutions 159,469 172,842 196,674

Financial Services, including deferred insurance acquisition

costs 68,598 94,169 110,856

All Other 7,686 4,300 4,376

Total 708,026 882,005 1,070,492

Corporate 24,085 22,465 18,621

Consolidated total 732,111 904,470 1,089,113

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Sales to customers by product category:

The following table is a breakdown of sales and financial services revenue to external customers by product

category for each segment. Sony management views each segment as a single operating segment.

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Sales and financial services revenue:

Game & Network Services

Digital Software and Add-on Content 1,454,654 1,424,459 1,523,045

Network Services 382,950 409,355 464,676

Hardware and Others 767,109 840,542 1,550,812

Total 2,604,713 2,674,356 3,538,533

Music

Recorded Music — Streaming 337,100 462,368 598,868

Recorded Music — Others 179,167 206,412 286,270

Music Publishing 156,862 200,334 276,665

Visual Media and Platform 254,121 231,418 203,012

Total 927,250 1,100,532 1,364,815

Pictures

Motion Pictures 265,301 518,840 464,043

Television Productions 267,123 419,494 536,250

Media Networks 219,376 298,065 364,594

Total 751,800 1,236,399 1,364,887

Entertainment, Technology & Services

Televisions 709,007 858,837 733,251

Audio and Video 313,975 326,704 391,608

Still and Video Cameras 338,694 414,898 565,018

Mobile Communications 358,580 365,864 356,771

Other 296,631 331,583 390,091

Total 2,016,887 2,297,886 2,436,739

Imaging & Sensing Solutions 937,859 992,200 1,301,481

Financial Services 1,664,991 1,524,811 1,443,996

All Other 84,202 82,264 72,338

Corporate 10,959 13,065 17,048

Consolidated total 8,998,661 9,921,513 11,539,837

In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and

add-on content through the network by Sony Interactive Entertainment; Network Services includes network

services relating to game, video and music content; Hardware and Others includes home gaming consoles,

packaged software, game software sold bundled with home gaming consoles, peripheral devices and first-party

software for third-party platforms. In the Music segment, Recorded Music — Streaming includes the distribution

of digital recorded music by streaming; Recorded Music — Others includes the distribution of recorded music by

physical media and digital download as well as revenue derived from artists’ live performances; Music

Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform

includes the production and distribution of animation titles and game applications, and various service offerings

for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production,

acquisition and distribution of live-action and animated motion pictures; Television Productions includes the

production, acquisition and distribution of television programming; Media Networks includes the operation of

television networks and DTC streaming services worldwide. In the ET&S segment, Televisions includes LCD

and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones

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and memory-based portable audio devices; Still and Video Cameras includes interchangeable lens cameras,

compact digital cameras, consumer video cameras and video cameras for broadcast; Mobile Communications

includes smartphones and an internet-related service business; Other includes display products such as projectors

and medical equipment.

Geographic Information:

Sales and financial services revenue attributed to countries and areas based on location of external

customers for the fiscal years ended March 31, 2021, 2022 and 2023 and non-current assets (property, plant and

equipment, ROU assets, goodwill, content assets and other intangible assets) as of March 31, 2022 and 2023 are

as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Sales and financial services revenue:

Japan 2,965,936 2,764,321 2,691,972

United States 2,147,686 2,766,021 3,401,402

Europe 1,817,854 1,870,091 2,190,311

China 762,766 771,006 855,437

Asia-Pacific 861,623 1,149,261 1,563,414

Other Areas 442,796 600,813 837,301

Total 8,998,661 9,921,513 11,539,837

Yen in millions

March 31

2022 2023

Non-current assets (property, plant and equipment,

right-of-use assets, goodwill, content assets and other

intangible assets):

Japan 1,592,981 1,875,354

United States 1,830,602 2,417,228

Europe 565,044 603,338

China 34,029 34,322

Asia-Pacific 158,030 186,359

Other Areas 91,001 107,162

Total 4,271,687 5,223,763

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 Italy

(2) Asia-Pacific: India, South Korea, Oceania, Thailand and Malaysia

(3) Other Areas: The Middle East/Africa, Brazil, Mexico and Canada

There are no individually material countries with respect to sales and financial services revenue or

non-current assets (property, plant and equipment, ROU assets, goodwill, content assets and other intangible

assets) included in Europe, Asia-Pacific and Other Areas. As of March 31, 2023, Sony has suspended its business

in Russia.

Transfers between reportable business segments or geographic areas are made at individually negotiated

prices that are intended to reflect a market-based transfer price.

There were no sales or financial services revenue with any single major external customer for the fiscal

years ended March 31, 2021, 2022 and 2023.

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5. Financial instruments

(1) Financial instruments by measurement method

The carrying amount of Sony’s assets and liabilities by measurement method as of March 31, 2022 and

2023 are as follows:

Yen in millions

March 31

2022 2023

Assets:

Financial assets required to be measured at amortized cost (“AC”)

Investments and advances in the Financial Services segment

Debt securities 358,238 422,025

Housing loans in the banking business 2,752,985 3,129,393

Other loans 230,516 229,666

Trade and other receivables *

Trade receivables 1,617,323 1,761,025

Other receivables 2,736 2,712

Other financial assets

Time deposit 39,223 36,671

Security deposit 121,856 95,813

Non-current other receivables in the Pictures segment 166,279 152,619

Other 16,425 19,582

Financial assets required to be measured at fair value through profit or

loss (“FVPL”)

Investments and advances in the Financial Services segment

Debt securities 1,012,057 1,059,718

Equity securities 1,798,536 2,123,062

Other financial assets

Debt securities 16,013 20,905

Equity securities 120,274 125,590

Derivative assets 61,023 70,144

Financial assets designated to be measured at FVPL

Investments and advances in the Financial Services segment

Debt securities 267,169 188,906

Financial assets required to be measured at fair value through other

comprehensive income (“FVOCI”)

Investments and advances in the Financial Services segment

Debt securities 12,378,244 11,615,862

Other financial assets

Debt securities 522 125

Financial assets designated to be measured at FVOCI

Investments and advances in the Financial Services segment

Equity securities 8,016 5,453

Other financial assets

Equity securities 303,992 421,845

Total assets 21,271,427 21,481,116

Current assets 2,130,033 2,203,044

Non-current assets 19,141,394 19,278,072

* The amounts of trade and other receivables exclude contract assets within trade and other receivables, and

contract assets in the consolidated statements of financial position.

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Cash and cash equivalents are excluded from the table above. Refer to Note 27.

Yen in millions

March 31

2022 2023

Liabilities:

Financial liabilities required to be measured at AC

Short-term borrowings 1,976,553 1,914,934

Current portion of long-term debt 171,409 187,942

Trade and other payables

Trade payables 1,716,316 1,701,598

Other payables 126,926 162,475

Deposits from customers in the banking business *1 3,004,215 3,306,981

Long-term debt 1,203,646 1,767,696

Deferred consideration *2 — 87,937

Other financial liabilities 63,281 61,128

Financial liabilities required to be measured at FVPL

Other financial liabilities

Derivative liabilities 72,120 34,123

Contingent consideration 21,552 51,512

Financial liabilities designated to be measured at FVPL

Other financial liabilities

Redeemable noncontrolling interests 34,995 47,326

Total liabilities 8,391,013 9,323,652

Current liabilities 6,975,408 7,205,678

Non-current liabilities 1,415,605 2,117,974

*1 Deposits from customers in the banking business include the non-current portion that is recorded within

other financial liabilities in the consolidated statements of financial position.

*2 Deferred consideration is recorded within other financial liabilities or trade and other payables in the

consolidated statements of financial position.

(2) Financial instruments 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.

Debt instruments and equity instruments

Where quoted prices of financial instruments are available in an active market, these instruments are

classified in Level 1 of the fair value hierarchy. Level 1 financial instruments include exchange-traded equity

instruments. If quoted market prices are not available for the specific financial instruments or the market is

inactive, then fair values are estimated by using pricing models, quoted prices of financial instruments with

similar characteristics or discounted cash flows and mainly classified in Level 2 of the fair value hierarchy.

Level 2 financial instruments include debt instruments with quoted prices that are not traded as actively as

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, these instruments are classified

within Level 3 of the fair value hierarchy. Level 3 financial instruments primarily include certain private equity

investments, investment funds, securitized products which are not classified within Level 1 or Level 2 and

domestic and foreign corporate bonds for which quoted prices are not available in a market and where there is

less transparency around inputs. Sony estimates the fair value for private equity investments primarily by using

comparable company analysis and discounted cash flow method. The price book-value ratio and price earnings

ratio of comparable companies, as well as cost of capital and EBITDA multiples for the terminal value used in

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discounted cash flow method, are primarily used as significant unobservable inputs in the fair value measurement

of equity securities classified as Level 3. The fair value increases (decreases) as the price book-value ratio and

price earnings ratio of comparable companies rise (decline). In addition, the fair value increases (decreases), as

the cost of capital declines (rises) and EBITDA multiples rise (decline), both of which are used in discounted

cash flow. Sony estimates the fair value for certain investment funds by using the net asset value. Sony estimates

the fair value for securitized products and domestic and foreign corporate bonds for which quoted prices are not

available in a market and where there is less transparency around inputs by using third-party information such as

indicative quotes from dealers without adjustment or discounted cash flows. For validating the fair values of

Level 3 financial instruments, Sony primarily uses internal models which include management judgment or

estimation of assumptions that market participants would use in pricing the asset.

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, meaning parameters that are actively quoted and can be validated to external sources,

including 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. For derivative products that 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 valuation models

employing market observable inputs, such as spot currency rates and time value. 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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The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis as of

March 31, 2022 and 2023 is as follows:

Yen in millions

March 31, 2022

Presentation in the consolidated statements of

financial position

Level 1 Level 2 Level 3 Total

Investments

and advances

in the

Financial

Services

segment

(Current)

Other

financial

assets

(Current)

Investments

and advances

in the

Financial

Services

segment

(Non-current)

Other

financial

assets

(Non-current)

Assets:

Financial assets required to be

measured at FVPL

Debt securities

Japanese national government

bonds — 368,273 — 368,273 — — 368,273 —

Japanese local government bonds — 600 — 600 — — 600 —

Japanese corporate bonds — 15,350 18 15,368 — — 15,317 51

Foreign government bonds 29,237 185,238 — 214,475 — — 214,475 —

Foreign corporate bonds — — 117 117 — — — 117

Securitized products — — 3,713 3,713 — — 3,713 —

Investment funds — 377,004 48,520 425,524 3 — 409,676 15,845

Equity securities 1,906,244 9,349 3,217 1,918,810 — — 1,798,536 120,274

Derivative assets

Interest rate contracts — 26,795 — 26,795 — 32 — 26,763

Foreign exchange contracts — 30,204 — 30,204 — 28,147 — 2,057

Equity contracts — — 4,024 4,024 — 3,669 — 355

Financial assets designated to be

measured at FVPL

Debt securities

Japanese national government

bonds — 48,711 — 48,711 4,002 — 44,709 —

Japanese local government bonds — 26,612 — 26,612 5,315 — 21,297 —

Japanese corporate bonds — 7,228 — 7,228 3,907 — 3,321 —

Foreign government bonds — 17,598 — 17,598 1,466 — 16,132 —

Foreign corporate bonds — 163,395 3,625 167,020 33,690 — 133,330 —

Financial assets required to be

measured at FVOCI

Debt securities

Japanese national government

bonds — 9,667,158 — 9,667,158 — — 9,667,158 —

Japanese local government bonds — 36,369 — 36,369 12,435 — 23,934 —

Japanese corporate bonds — 746,223 154,245 900,468 10,257 — 890,211 —

Foreign government bonds — 1,353,394 — 1,353,394 — — 1,353,277 117

Foreign corporate bonds — 318,699 20,837 339,536 65,000 — 274,131 405

Securitized products — 41,982 39,859 81,841 — — 81,841 —

Financial assets designated to be

measured at FVOCI

Equity securities 106,499 — 205,509 312,008 — — 8,016 303,992

Total assets 2,041,980 13,440,182 483,684 15,965,846 136,075 31,848 15,327,947 469,976

Presentation in the

consolidated statements

of financial position

Level 1 Level 2 Level 3 Total

Other

financial

liabilities

(Current)

Other

financial

liabilities

(Non-current)

Liabilities:

Financial liabilities required to be

measured at FVPL

Derivative liabilities

Interest rate contracts — 7,530 — 7,530 471 7,059

Foreign exchange contracts — 36,582 — 36,582 36,582 —

Equity contracts 11,903 16,105 — 28,008 28,008 —

Contingent consideration — — 21,552 21,552 1,475 20,077

Financial liabilities designated to be

measured at FVPL

Redeemable noncontrolling interests — — 34,995 34,995 2,435 32,560

Total liabilities 11,903 60,217 56,547 128,667 68,971 59,696

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Yen in millions

March 31, 2023

Presentation in the consolidated statements of

financial position

Level 1 Level 2 Level 3 Total

Investments

and advances

in the

Financial

Services

segment

(Current)

Other

financial

assets

(Current)

Investments

and advances

in the

Financial

Services

segment

(Non-current)

Other

financial

assets

(Non-current)

Assets:

Financial assets required to be

measured at FVPL

Debt securities

Japanese national government

bonds — 422,739 — 422,739 — — 422,739 —

Japanese local government bonds — 600 — 600 — — 600 —

Japanese corporate bonds — 16,872 38 16,910 — — 16,872 38

Foreign government bonds 30,100 173,393 — 203,493 — — 203,493 —

Foreign corporate bonds — 5,515 3,377 8,892 — — 5,515 3,377

Securitized products — — — — ————

Investment funds — 367,193 60,796 427,989 — — 410,499 17,490

Equity securities 2,236,646 5,217 6,789 2,248,652 — — 2,123,062 125,590

Derivative assets

Interest rate contracts — 43,844 — 43,844 — 438 — 43,406

Foreign exchange contracts — 21,318 — 21,318 — 19,978 — 1,340

Equity contracts 290 — 4,692 4,982 — 4,982 — —

Financial assets designated to be

measured at FVPL

Debt securities

Japanese national government

bonds — 8,830 — 8,830 1,001 — 7,829 —

Japanese local government bonds — 16,038 — 16,038 2,010 — 14,028 —

Japanese corporate bonds — 3,315 — 3,315 — — 3,315 —

Foreign government bonds — 15,325 — 15,325 — — 15,325 —

Foreign corporate bonds — 141,857 3,541 145,398 21,227 — 124,171 —

Financial assets required to be

measured at FVOCI

Debt securities

Japanese national government

bonds — 9,095,550 — 9,095,550 — — 9,095,550 —

Japanese local government bonds — 43,655 — 43,655 1,369 — 42,286 —

Japanese corporate bonds — 736,204 171,622 907,826 6,815 — 901,011 —

Foreign government bonds — 1,166,279 — 1,166,279 — — 1,166,154 125

Foreign corporate bonds — 307,717 24,672 332,389 46,367 — 286,022 —

Securitized products — 29,697 40,591 70,288 — — 70,288 —

Financial assets designated to be

measured at FVOCI

Equity securities 103,270 — 324,028 427,298 — — 5,453 421,845

Total assets 2,370,306 12,621,158 640,146 15,631,610 78,789 25,398 14,914,212 613,211

Presentation in the

consolidated statements

of financial position

Level 1 Level 2 Level 3 Total

Other

financial

liabilities

(Current)

Other

financial

liabilities

(Non-current)

Liabilities:

Financial liabilities required to be

measured at FVPL

Derivative liabilities

Interest rate contracts — 5,656 — 5,656 427 5,229

Foreign exchange contracts — 19,876 — 19,876 18,679 1,197

Equity contracts 3,321 5,270 — 8,591 8,591 —

Contingent consideration — — 51,512 51,512 14,790 36,722

Financial liabilities designated to be

measured at FVPL

Redeemable noncontrolling interests — — 47,326 47,326 — 47,326

Total liabilities 3,321 30,802 98,838 132,961 42,487 90,474

Cash and cash equivalents are excluded from the tables above. Refer to Note 27.

Transfers of debt securities from Level 2 to Level 1 were 1,953 million yen and 2,704 million yen for the

fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices in active markets for certain debt

securities became available. Transfers of debt securities from Level 1 to Level 2 were 2,523 million yen and

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1,982 million yen for the fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices in active

markets for certain debt securities were not available.

Transfers of equity securities from Level 2 to Level 1 were 12,276 million yen and 24,958 million yen for

the fiscal years ended March 31, 2022 and 2023, respectively, as quoted prices in active markets for certain

equity securities became available.

The valuation techniques used to measure the fair value of assets and liabilities classified as Level 3,

significant unobservable inputs, and their range are as follows:

Valuation

technique(s)

Significant

unobservable

inputs

Range

March 31, 2022 March 31, 2023

Financial assets required to be measured at

FVOCI

Debt securities

Japanese corporate bonds Discounted cash

flow Credit spread *

26bp-67bp 34bp-63bp

Foreign corporate bonds 0bp-170bp 10bp

Securitized products 100bp-160bp 150bp-190bp

* bp = basis point

The decrease (increase) in fair value is the result of rise (decline) of credit spreads.

For the above assets classified as Level 3, the fair value would not change significantly, even if one or more

of the significant unobservable inputs are changed to reflect reasonably possible alternative assumptions.

The changes in fair value of Level 3 assets and liabilities for the fiscal years ended March 31, 2022 and

2023 are as follows:

Yen in millions

Fiscal year ended March 31, 2022

Total gains (losses)*1

Beginning

balance

Net

income*2

Other

comprehensive

income*3 Purchases

Sales and

settlements

Transfers

into

Level 3*4

Transfers

out of

Level 3*5 Other

Ending

balance

Assets:

Financial assets required to be

measured at FVPL

Debt securities

Japanese corporate bonds 62 — — 20 — — (34) (30) 18

Foreign corporate bonds 213 5 — 10 — — — (111) 117

Securitized products 6,142 — — — (2,429) — — — 3,713

Investment funds 37,254 5,678 394 22,079 (16,885) — — — 48,520

Equity securities 3,172 (395) (15) 477 (22) — — — 3,217

Derivative assets

Equity contracts 10,176 (6,629) 477 — — — — — 4,024

Financial assets designated to be

measured at FVPL

Debt securities

Foreign corporate bonds — 337 — — — 3,288 — — 3,625

Financial assets required to be

measured at FVOCI

Debt securities

Japanese corporate bonds 93,288 (1) (13,006) 73,964 — — — — 154,245

Foreign corporate bonds 18,066 700 (5) 12,000 (9,868) — — (56) 20,837

Securitized products 9,402 279 (82) 41,763 (10,625) 3,166 (4,044) — 39,859

Financial assets designated to be

measured at FVOCI

Equity securities 104,541 — 25,614 89,274 (5,825) 63 (7,884) (274) 205,509

Liabilities:

Financial liabilities required to

be measured at FVPL

Contingent consideration 6,161 297 1,645 15,221 (1,762) — — (10) 21,552

Financial liabilities designated

to be measured at FVPL

Redeemable noncontrolling

interests 8,179 2,008 2,978 27,240 (5,285) — — (125) 34,995

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Yen in millions

Fiscal year ended March 31, 2023

Total gains (losses)*1

Beginning

balance

Net

income*2

Other

comprehensive

income*3 Purchases

Sales and

settlements

Transfers

to

Level 3*4

Transfers

out of

Level 3*5 Other

Ending

balance

Assets:

Financial assets required to be

measured at FVPL

Debt securities

Japanese corporate bonds 18 — — 20 — — — — 38

Foreign corporate bonds 117 (14) — 3,434 (70) — — (90) 3,377

Securitized products 3,713 — — — (3,713) — — — —

Investment funds 48,520 (2,541) 395 17,254 (2,832) — — — 60,796

Equity securities 3,217 (413) — 4,021 (36) — — — 6,789

Derivative assets

Equity contracts 4,024 (393) 356 705 — — — — 4,692

Financial assets designated to be

measured at FVPL

Debt securities

Foreign corporate bonds 3,625 (84) — — — — — — 3,541

Financial assets required to be

measured at FVOCI

Debt securities

Japanese corporate bonds 154,245 6 (30,203) 47,574 — — — — 171,622

Foreign corporate bonds 20,837 598 — 24,362 (21,125) — — — 24,672

Securitized products 39,859 (389) 6 13,575 (15,048) 6,712 (4,124) — 40,591

Financial assets designated to be

measured at FVOCI

Equity securities 205,509 — (24,913) 143,611 (126) 146 (600) 401 324,028

Liabilities:

Financial liabilities required to

be measured at FVPL

Contingent consideration 21,552 (475) 1,240 43,455 (13,951) — — (309) 51,512

Financial liabilities designated

to be measured at FVPL

Redeemable noncontrolling

interests 34,995 (1,410) 2,877 13,670 (2,802) — — (4) 47,326

*1 For liability items, gains are presented as negative and losses are presented as positive.

*2 Gains (losses) recognized in net income are included in financial services revenue, other operating (income)

expense, net, financial income and financial expenses in the consolidated statements of income.

*3 Gains (losses) recognized in other comprehensive income are included in changes in equity instruments

measured at fair value through other comprehensive income, changes in debt instruments measured at fair

value through other comprehensive income and exchange differences on translating foreign operations in the

consolidated statements of comprehensive income.

*4 Certain financial assets were transferred to Level 3 because the observability of the inputs used decreased.

*5 Certain financial assets were transferred from Level 3 because observable market data became available.

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The changes in unrealized gains (losses) recognized in net income for Level 3 assets and liabilities held as

of March 31, 2022 and 2023 are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Assets:

Financial assets required to be measured at FVPL

Debt securities

Foreign corporate bonds 5 (14)

Investment funds 4,562 (2,420)

Equity securities 98 (413)

Derivative assets

Equity contracts (6,629) (393)

Financial assets designated to be measured at FVPL

Debt securities

Foreign corporate bonds 337 (84)

Financial assets required to be measured at FVOCI

Debt securities

Japanese corporate bonds — 6

Foreign corporate bonds 700 598

Securitized products 238 (389)

Liabilities:

Financial liabilities required to be measured at FVPL

Contingent consideration (513) (2,683)

Financial liabilities designated to be measured at FVPL

Redeemable noncontrolling interests (1,878) 1,410

Gains (losses) recognized in net income are included in financial services revenue, other operating (income)

expense, net, financial income and financial expenses in the consolidated statements of income.

Sony generally elects to designate investments in equity instruments held to promote its businesses and to

maintain and enhance the business relationship as financial assets measured at fair value through other

comprehensive income based on the purposes of holding the investments.

Equity instruments measured at fair value through other comprehensive income as of March 31, 2022 and

2023 comprise the following:

Yen in millions

March 31

2022 2023

Marketable equity instruments 106,499 103,270

Non-marketable equity instruments 205,509 324,028

Total 312,008 427,298

Significant marketable equity instruments measured at fair value through other comprehensive income as of

March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Bilibili Inc. 54,162 54,214

Toei Animation Co., Ltd. 8,371 10,407

ANYCOLOR Inc. — 10,061

KADOKAWA Corporation 9,161 8,017

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The balances of the non-marketable instruments measured at fair value through other comprehensive

income by major sector categories as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Entertainment*1 148,283 259,214

Manufacturing*2 35,406 35,182

Information technology, Communication and Service*3 20,327 27,136

*1 Major investments included Epic Games, Inc. and Scopely, Inc.

*2 Major investments included Nichia Corporation.

*3 Major investments included Semiconductor Energy Laboratory Co., Ltd.

In order to enhance the efficiency of using assets held effectively, Sony derecognizes equity instruments

measured at fair value through other comprehensive income upon the sale of the investment. Information relating

to investments derecognized during the fiscal years ended March 31, 2022 and 2023 is as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Fair value at derecognition 11,015 625

Cumulative amount recognized in other comprehensive income, net of tax * 5,784 (298)

Dividend received 70 8

* The cumulative amount recognized in other comprehensive income, net of tax, was transferred to retained

earnings upon derecognition of the equity instruments.

(3) Financial instruments measured at amortized cost

The fair values by fair value hierarchy level of certain financial instruments that are measured at amortized

cost as of March 31, 2022 and 2023 are summarized as follows:

Yen in millions

March 31, 2022

Fair value

Carrying

amount

Level 1 Level 2 Level 3 Total Total

Assets:

Debt securities

Japanese national government bonds — 86,622 — 86,622 75,634

Japanese local government bonds — 1,963 — 1,963 1,717

Japanese corporate bonds — 3,727 — 3,727 3,583

Foreign corporate bonds — 5,121 — 5,121 5,047

Securitized products — — 269,376 269,376 271,308

Other — 41 909 950 949

Housing loans in the banking business — — 2,837,349 2,837,349 2,752,985

Total assets — 97,474 3,107,634 3,205,108 3,111,223

Liabilities:

Long-term debt including the current portion — 841,249 60,873 902,122 909,706

Total liabilities — 841,249 60,873 902,122 909,706

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Yen in millions

March 31, 2023

Fair value

Carrying

amount

Level 1 Level 2 Level 3 Total Total

Assets:

Debt securities

Japanese national government bonds — 83,357 — 83,357 79,550

Japanese local government bonds — 1,803 — 1,803 1,618

Japanese corporate bonds — 3,337 — 3,337 3,483

Foreign corporate bonds — 4,814 — 4,814 4,796

Securitized products — — 324,153 324,153 331,354

Other — 41 1,173 1,214 1,224

Housing loans in the banking business — — 3,184,060 3,184,060 3,129,393

Total assets — 93,352 3,509,386 3,602,738 3,551,418

Liabilities:

Long-term debt including the current portion — 1,343,077 67,844 1,410,921 1,423,392

Total liabilities — 1,343,077 67,844 1,410,921 1,423,392

The table above does not include financial instruments measured at amortized cost whose carrying amounts

approximate their fair values mainly due to their short-term nature.

The fair values of long-term debt, including the current portion classified as Level 2, were estimated mainly

based on discounted future cash flows using Sony’s current rates for similar liabilities.

Financial instruments classified as Level 3 mainly include housing loans in the banking business, securitized

products and certain bonds issued by Sony. In determining the fair value of such financial instruments, Sony uses

the present value of expected cash flows based on risk-free interest rate yield curves with certain credit risk.

(4) Income and expenses related to financial instruments in the Financial Services segment

Income and expenses related to financial instruments in the Financial Services segment are recorded in

financial services revenue and financial services expenses in the consolidated statements of income. Income and

expenses related to financial instruments in all segments other than Financial Services segment are recorded in

Financial income and Financial expenses in the consolidated statements of income. Refer to Note 24.

The breakdown of income and expenses related to financial instruments in the Financial Services segment

for the fiscal years ended March 31, 2021, 2022 and 2023 is as follows:

Yen in millions

March 31, 2021

Financial

instruments

required to be

measured at

FVPL

Financial

instruments

designated to

be measured

at FVPL

Financial

assets

measured at

AC

Financial

liabilities

measured at

AC

Debt

instruments

measured at

FVOCI

Equity

instruments

measured at

FVOCI Total

Income

Net gains (losses) recognized

in profit or loss 412,957 4,936 (14,069) (5,569) 51,194 — 449,449

Total interest income — — 26,141 — 169,072 — 195,213

Dividend income — ———— 22

Expenses

Total interest expenses — — — 4,577 — — 4,577

Impairment losses (gains) on

financial assets — — (15) — 18 — 3

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Yen in millions

March 31, 2022

Financial

instruments

required to be

measured at

FVPL

Financial

instruments

designated to

be measured

at FVPL

Financial

assets

measured at

AC

Financial

liabilities

measured at

AC

Debt

instruments

measured at

FVOCI

Equity

instruments

measured at

FVOCI Total

Income

Net gains (losses) recognized

in profit or loss 225,922 (6,673) 14,765 (49,110) 148,813 — 333,717

Total interest income — — 32,839 — 180,006 — 212,845

Dividend income — — — — — 85 85

Expenses

Total interest expenses — — — 3,838 — — 3,838

Impairment losses (gains) on

financial assets — — 19 — 24 — 43

Yen in millions

March 31, 2023

Financial

instruments

required to be

measured at

FVPL

Financial

instruments

designated to

be measured

at FVPL

Financial

assets

measured at

AC

Financial

liabilities

measured at

AC

Debt

instruments

measured at

FVOCI

Equity

instruments

measured at

FVOCI Total

Income

Net gains (losses) recognized

in profit or loss 47,709 (2,493) 14,944 (58,484) 140,589 — 142,265

Total interest income — — 47,054 — 198,549 — 245,603

Dividend income — — — — — 195 195

Expenses

Total interest expenses — — — 29,774 — — 29,774

Impairment losses (gains) on

financial assets — — 144 — 8 — 152

6. Financial risk management

(1) Capital risk

Sony uses Return on Equity (“ROE”) as an indicator for capital risk management.

March 31

2022 2023

ROE* 12.8% 13.0%

* ROE is calculated using equity attributable to Sony Group Corporation’s stockholders.

Sony manages capital separately for the Financial Services segment and the Sony Group without the

Financial Services segment because certain subsidiaries in the Financial Services segment are subject to the

below restrictions. Sony also refers to the ratio of stockholders’ equity to total assets of the Sony Group without

the Financial Services segment to ensure financial soundness.

In the Financial Services segment, Sony is required to maintain the capital adequacy ratio and net assets at a

certain level or higher based on the Insurance Business Act and the Banking Act in Japan. Material requirements

which Sony is subject to are as follows:

Insurance business: Maintain solvency margin ratio

The life insurance subsidiary and the non-life insurance subsidiary have maintained a high solvency

margin ratio, relative to the Japanese domestic minimum solvency margin ratio requirements.

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Banking business: Maintain capital adequacy ratio

The banking subsidiary has maintained a capital adequacy ratio relative to the Japanese domestic

criteria.

Accordingly, lending and borrowing between subsidiaries in the Financial Services segment and the other

companies within Sony Group is strictly limited. The carrying amounts of total assets of Sony Financial Group

Inc. (“SFGI”) as of March 31, 2022 and 2023 are 20,974,027 million yen and 20,805,535 million yen,

respectively. Total liabilities of SFGI as of March 31, 2022 and 2023 are 18,392,874 million yen and

18,990,548 million yen, respectively.

(2) Interest rate risk

For interest rate risk inherent in the insurance business, which is included in the Financial Services segment,

refer to Note 13. For interest rate risk inherent in the banking business, which is included in the Financial

Services segment, refer to (7) Market risks for the banking business.

Risk management policy and exposure

Interest rate risk is the risk the fair value of a financial instrument or future cash flows of the financial

instrument will fluctuate because of changes in market interest rates.

Sony without the Financial Services segment is exposed to interest rate risk that is mainly related to its

liabilities such as short-term borrowings and long-term debt as well as bonds. The amount of interest will be

affected by changes in market interest rates; therefore, Sony is exposed to the interest rate risk that the future

cash outflows for interest payments will fluctuate.

Sony raises funds by issuing fixed-rate bonds in order to avoid an increase in future interest payments that is

mainly resulting from an increase in interest rates.

Also, Sony utilizes interest rate swap agreements to reduce funding costs, to diversify sources of funding,

and to hedge the downside risk on borrowings and debt securities resulting from unfavorable fluctuations of

interest rates and currency exchange rates, and from changes in the fair value of financial instruments. Therefore,

the interest rate risk associated with cash flows of Sony without the Financial Services segment is not significant.

(3) Price risk

For price risk inherent in the insurance business, which is included in the Financial Services segment, refer

to Note 13. For price risk inherent in the banking business, which is included in the Financial Services segment,

refer to (7) Market risks for the banking business.

Risk management policy and exposure

Sony is exposed to securities price risk inherent in holding of equities in other entities in Japan and overseas

countries. Sony periodically assesses fair values of equity instruments and the financial conditions of the issuers

of such equity instruments, and reviews its portfolio on a regular basis.

Price sensitivity analysis

The table below shows the effects on income before income taxes and other comprehensive income (before

considering the tax effects) as of March 31, 2022 and 2023 if market prices of marketable equity instruments

(e.g., stocks) had decreased by 10%.

Yen in millions

March 31

2022 2023

Income before income taxes (11,604) (11,734)

Other comprehensive income (before considering the tax effects) (9,871) (9,800)

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(4) Liquidity risk

For liquidity risk inherent in the insurance business, which is included in the Financial Services segment,

refer to Note 13. This section does not include information regarding the insurance business other than maturity

analysis for financial liabilities.

Risk management policy

The description below covers basic financial policy and figures for Sony’s consolidated operations except

for the Financial Services segment and certain subsidiaries, which secure liquidity on their own. Furthermore, the

banking business in 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 financial condition, 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. Funding requirements that arise from maintaining liquidity are

principally covered by cash flow from operating and investing activities (including asset sales) and by the

available cash balance; however, Sony also raises funds as needed from financial and capital markets through

means such as corporate bonds, commercial paper (“CP”) and bank loans. Sony Group Corporation, Sony Global

Treasury Services Plc (“SGTS”), a finance subsidiary in the U.K. and Sony Capital Corporation (“SCC”), a

finance subsidiary in the U.S., maintain CP programs with access to the Japanese, U.S. and European CP

markets. The borrowing limits under these CP programs, translated into yen, were 1,166.3 billion yen in total for

Sony Group Corporation, SGTS and SCC as of March 31, 2023. There were no amounts outstanding under the

CP programs as of March 31, 2023. If disruption and volatility occur in financial and capital markets and Sony

becomes unable to 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 641.5 billion

yen in unused committed lines of credit, as of March 31, 2023. Details of those committed lines of credit are: a

275.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, a 1.7 billion U.S. dollar

multi-currency committed line of credit also contracted with a syndicate of Japanese banks and a 1,050 million

U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks. Sony currently

believes that it can sustain sufficient liquidity through access to committed lines of credit with financial

institutions, together with its available cash balance, even in the event that financial and capital markets become

illiquid. 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. However, 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.

Cash Management

Sony manages its global cash management activities primarily through Sony Group Corporation in Japan,

SCC in the U.S. and SGTS in other regions. The excess or shortage of cash at most of Sony’s subsidiaries is

invested or funded by Sony Group Corporation, SGTS and SCC on a net basis, although Sony recognizes that

fund 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

Sony Group Corporation, SGTS and SCC, and cash shortfalls among subsidiaries are covered by loans through

Sony Group Corporation, SGTS and SCC, so that Sony can make use of excess cash balances and reduce thirdparty borrowings. Where local restrictions prevent an efficient intercompany transfer of funds, Sony’s intent is

that cash balances remain outside of Sony Group Corporation, SGTS and SCC and that Sony meets 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.

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Banking business in the Financial Services segment

In the banking business in the Financial Services segment, by formulating and conforming with liquidity

risk management policies, Sony manages a variety of liquidity risks. Sony defines liquidity risk as cash flow risk

and market liquidity risk. Cash flow risk is the risk associated with losses due to Sony’s inability to make cash

payments because of a failure to maintain sufficient cash reserves at settlement, as well as risks associated with

losses if Sony is forced to raise funds under unfavorable conditions in order to fulfill cash payment obligations.

The levels of cash flow risks are classified into phases based on the degree of pressure, and methods of risk

management and reporting are set out for each phase, while guidelines are formulated and reviewed as necessary.

Market liquidity risk is the risk associated with losses due to Sony’s inability to conduct market transactions, in

particular due to an inability to unwind its market position at a given time, or due to Sony being forced to

complete transactions under unfavorable market conditions, due to market turmoil or other factors. To manage

market liquidity risk, Sony works to understand market liquidity conditions that pertain to the types of products it

handles. Sony formulates and revises guidelines on a product-by-product basis, as necessary. To manage liquidity

risk and ensure a robust liquidity buffer, Sony carries out stress tests regularly. Sony estimates potential cash

outflow and determines the required buffer, if the liquidity stress scenario would happen. The liquidity buffer

consists of highly liquid assets, such as cash and government bonds, which can be immediately converted to cash

even in a liquidity crisis. The aforementioned liquidity risk management is carried out by the risk management

division. The division periodically reports risk management conditions to the banking subsidiary’s Board of

Directors and Executive Committee. In addition, the banking subsidiary’s internal audit division conducts regular

audits.

Maturity analysis

The following table summarizes Sony’s financial liabilities as of March 31, 2022 and 2023.

Yen in millions

March 31, 2022

Carrying

amount Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years 5+ years

Deposits from customers in

the banking business*1 3,004,215 3,004,215 2,886,361 48,676 15,860 3,038 1,186 49,094

Bonds 216,103 218,676 36,976 25,363 40,326 20,303 35,243 60,465

Borrowings 2,670,156 2,687,135 2,053,340 58,767 76,434 115,460 23,813 359,321

Loan commitments — 33,587 33,587 — — — — —

Derivative liabilities*2 72,120 72,118 66,017 688 718 753 721 3,221

Guarantee deposits

received 39,296 39,296 28,872 345 27 8 8 10,036

Redeemable noncontrolling

interests 34,995 37,046 2,435 19,927 9,046 2,381 — 3,257

Yen in millions

March 31, 2022

Carrying

amount Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years

Lease liabilities 465,349

511,883 81,421 69,791 59,214 45,063 37,363

5 years to

6 years

6 years to

7 years

7 years to

8 years

8 years to

9 years

9 years to

10 years 10+ years

35,841 32,369 30,593 27,864 19,913 72,451

*1 Demand deposits are included in the “Within 1 year” category.

*2 Breakdown of net settlements and gross settlements in the derivative liabilities are presented below.

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Yen in millions

March 31, 2022

Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years 5+ years

Derivative contracts

—Net settled

Paid 72,118 66,017 688 718 753 721 3,221

Derivative contracts

—Gross settled

Received — — — — — — —

Paid — — — — — — —

Yen in millions

March 31, 2023

Carrying

amount Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years 5+ years

Deposits from customers in

the banking business*1 3,306,981 3,316,556 3,171,377 30,215 14,933 1,060 2,410 96,561

Bonds 349,332 354,169 26,039 40,986 110,862 35,591 80,416 60,275

Borrowings 2,988,994 3,025,480 1,998,315 70,690 147,447 270,268 62,571 476,189

Loan commitments — 35,831 35,831 — — — — —

Derivative liabilities*2 34,123 33,766 28,886 623 1,041 912 918 1,386

Guarantee deposits

received 40,568 40,568 31,085 272 19 58 13 9,121

Redeemable noncontrolling

interests 47,326 48,616 — 24,844 10,397 4,572 198 8,605

Yen in millions

March 31, 2023

Carrying

amount Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years

Lease liabilities 532,246

593,967 90,244 80,476 68,143 55,189 47,665

5 years to

6 years

6 years to

7 years

7 years to

8 years

8 years to

9 years

9 years to

10 years 10+ years

56,603 37,539 34,588 25,798 18,384 79,338

*1 Demand deposits are included in the “Within 1 year” category.

*2 Breakdown of net settlements and gross settlements in the derivative liabilities are presented below.

Yen in millions

March 31, 2023

Total

Within

1 year

1 year to

2 years

2 years to

3 years

3 years to

4 years

4 years to

5 years 5+ years

Derivative contracts

—Net settled

Paid 32,881 27,820 769 1,076 912 918 1,386

Derivative contracts

—Gross settled

Received 29,092 25,894 156 3,042 — — —

Paid 29,977 26,960 10 3,007 — — —

(5) Foreign exchange risk

For foreign exchange risk inherent in the insurance business, which is included in the Financial Services

segment, refer to Note 13. For foreign exchange risk inherent in the banking business, which is included in the

Financial Services segment, refer to (7) Market risks for the banking business.

Risk management policy and exposure

Costs and prices of products and services in transactions denominated in foreign currencies are affected by

currency exchange rate fluctuation, which may have adverse impacts on Sony’s business, operating results, and

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financial condition. Sony seeks to reduce its exposure to foreign exchange risk mainly by using derivatives such

as currency forward contracts or investing in securities denominated in the same currency.

The net amount of Sony’s exposure to foreign exchange risk mainly includes the following. Foreign

exchange risk exposures that are mitigated by the use of derivatives are excluded.

Yen in millions

March 31

2022 2023

U.S. dollar (6,384) 45,316

Euro (22,713) 1,459

* Net exposures resulting in a liability are presented as negative and net exposures resulting in an asset are

presented as positive.

Sensitivity analysis

The table below shows the effects on the income before income taxes regarding the financial instruments

denominated in foreign currencies held by Sony as of March 31, 2022 and 2023 if the Japanese yen had

strengthened by 10% against the U.S. dollar or euro. If the Japanese yen had weakened by 10% against the U.S.

dollar or euro, there would be an opposite impact on income before income taxes in the same amount. This

analysis was performed based on the assumption that all other variables stay the same.

Yen in millions

March 31

2022 2023

U.S. dollar 638 (4,532)

Euro 2,271 (146)

(6) Credit risk

Risk management policy and exposure

Sony is exposed to credit risk in relation to its customers with outstanding trade receivables and the

financial institutions who are the counterparties of derivative instruments that Sony holds to hedge the foreign

exchange risk related to such trade receivables.

In order to manage risks inherent in trade receivables, Sony assesses management conditions and

creditworthiness of prospective customers and sets credit limits before commencement of business in accordance

with Sony’s internal rules regarding credit management. After commencement of business, in accordance with

Sony’s internal rules regarding receivable management, Sony seeks to promptly identify and mitigate the risk of

uncollectible receivables due to deterioration in the financial conditions of customers by managing payment due

dates and outstanding balances by customer, consistently reviewing the status of transactions, payment history,

and trends in the outstanding balance of customers, and actively monitoring their management and business

conditions. Sony makes judgments about the creditworthiness of customers based on past collection experience,

the current conditions, forecasts of future economic conditions and ongoing credit risk evaluations when

calculating the loss allowances for the expected credit losses from trade receivables.

In addition, the credit risk inherent in derivative transactions is considered low since Sony enters into

derivative transactions only with financial institutions with high creditworthiness or central clearing house

counterparties, and such derivative transactions are collateralized.

The Financial Services segment formulates Fundamental Principles for Risk Management and manages

risks depending on its subsidiaries’ size, characteristics and business. Risk Management Guidelines in the

Financial Services segment establish a detailed framework for risk management, and each of the subsidiaries in

the Financial Services segment has developed a framework for risk management on its own depending on the

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characteristics of financial assets, including issuer credit risk on debt securities, counterparty risks, credit

screenings, the management of credit information, credit ratings, the setting of guarantees or collateral and

handling of problem assets on a case-by-case basis. Relevant departments of subsidiaries in the Financial

Services segment periodically report risk management conditions to their Boards of Directors and their Executive

Committees.

Risk exposure analysis

(a) Changes in the loss allowances

Trade and other receivables, and contract assets including non-current other receivables in the Pictures

segment

Yen in millions

Lifetime expected credit losses

Fiscal year ended March 31

2022 2023

Balance at beginning of the fiscal year 30,066 31,341

Changes due to financial assets recognized at beginning of the fiscal

year:

— Financial assets that have been derecognized (935) (4,568)

New financial assets originated or purchased 5,998 6,401

Write-offs (9,501) (6,647)

Changes in models/risk parameters 4,269 (1,409)

Foreign exchange and other movements 1,444 2,416

Balance at end of the fiscal year 31,341 27,534

Debt Securities

Yen in millions

12-month expected credit losses *

Fiscal year ended March 31

2022 2023

Balance at beginning of the fiscal year 29 53

Changes due to financial assets recognized at beginning of the fiscal

year:

— Financial assets that have been derecognized (6) (4)

New financial assets originated or purchased 44 13

Changes in models/risk parameters (14) (1)

Foreign exchange and other movements — —

Balance at end of the fiscal year 53 61

* For all debt securities, Sony considers that the credit risk has not increased significantly since initial

recognition, and therefore the loss allowance is measured at an amount equal to 12-months of expected credit

losses.

Substantially all of the loss allowances for debt securities are for debt securities measured at fair value

through other comprehensive income as of March 31, 2022 and 2023.

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Loans

Yen in millions

12-month

expected

credit

losses

Lifetime

expected

credit

losses Total

Balance as of April 1, 2021 122 946 1,068

Changes due to financial assets recognized as of April 1, 2021:

— Transfer to lifetime expected credit losses (1) 1 —

— Transfer to 12-month expected credit losses 103 (103) —

— Financial assets that have been derecognized (59) (97) (156)

New financial assets originated or purchased 33 17 50

Changes in models/risk parameters (34) 163 129

Foreign exchange and other movements — — —

Balance as of March 31, 2022 164 927 1,091

Changes due to financial assets recognized as of March 31, 2022:

— Transfer to lifetime expected credit losses (1) 1 —

— Transfer to 12-month expected credit losses 80 (80) —

— Financial assets that have been derecognized (6) (285) (291)

New financial assets originated or purchased 51 20 71

Changes in models/risk parameters 25 241 266

Foreign exchange and other movements — — —

Balance as of March 31, 2023 313 824 1,137

Loans that are credit-impaired as of March 31, 2022 and 2023 were not significant.

(b) Description of collateral held as security and other credit enhancements

Sony assesses creditworthiness of each customer on an individual project basis. When it is determined to

extend credit to a customer, the amount of collateral to be obtained will be based on the credit assessment for the

customer by management. Collateral held as security includes, but is not limited to the following:

• Floating charges on all assets and businesses of the customer

• Specific or related guarantees

• Debt guarantees from customers and loan agreements with favorable and unfavorable covenant terms

The carrying amount of the financial assets, without taking into account any collateral held or credit

enhancements, represents Sony’s maximum exposure to credit risk on these assets. For maximum exposure to

credit risk of securities to which impairment requirements in IFRS 9 are not applied without taking into account

any collateral held or other credit enhancements, refer to Note 5.

In the Financial Services segment, housing loans have sufficient collateral, which results in no significant

loss allowance being recognized. In addition, certain securities received as collateral for short-term lending

transactions are permitted to be sold or repledged. The fair value of the securities which were not sold or

repledged as collateral was 530,589 million yen and 4,691 million yen as of March 31, 2022 and 2023,

respectively. None of the securities were sold or repledged as collateral as of March 31, 2022 or 2023. The

securities are not recognized in the consolidated statements of financial position until being sold or repledged as

collateral.

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(c) Credit risk exposure by risk rating grades

Credit risk exposure by risk rating grades as of March 31, 2022 and 2023, is as follows:

Trade and other receivables, and contract assets including non-current other receivables in the Pictures segment

Yen in millions

March 31

2022 2023

Outstanding receivables by overview period of overdue

(Gross carrying amount)

Not past due or due within 30 days 1,732,371 1,849,112

Due over 30 to 90 days 52,895 46,332

Due over 90 days 45,269 63,519

Total 1,830,535 1,958,963

Debt securities

Debt securities held in the Financial Services segment are substantially all composed of investment grade

debt securities, and, as a financial instrument subject to IFRS 9 impairment requirements, 12-month expected

losses are recorded.

The following table shows an analysis of the gross carrying amount for debt securities measured at

amortized cost or at fair value through other comprehensive income based on a credit rating system in the

Financial Services segment, which is primarily a composite of external credit ratings as of March 31, 2022 and

2023.

Yen in millions

March 31

2022 2023

Debt securities by credit ratings (Gross carrying amount)

AAA 488,275 559,271

AA 2,431,758 2,807,508

A 8,560,523 8,695,883

BBB 12,948 9,625

Other 32,422 6,434

Total 11,525,926 12,078,721

Loans

Loans held in the banking business in the Financial Services segment are regularly reassessed by the credit

ratings of debtors, and as a financial instrument subject to IFRS 9 impairment requirements, 12-month or lifetime

expected credit losses are recorded depending on whether or not the credit risk has increased significantly since

initial recognition or not.

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The following table shows an analysis of the gross carrying amount for loans measured at amortized cost

based on credit ratings by debtors in the banking business in the Financial Services segment as of March 31,

2022 and 2023.

Yen in millions

March 31, 2022

Normal* Other than Normal

Total

12-month

expected

credit

losses

Lifetime

expected

credit

losses Sub total

12-month

expected

credit

losses

Lifetime

expected

credit

losses Sub total

Loans

Housing loans 2,747,406 156 2,747,562 2,532 3,423 5,955 2,753,517

Other 24,522 282 24,804 11 85 96 24,900

Total 2,771,928 438 2,772,366 2,543 3,508 6,051 2,778,417

Yen in millions

March 31, 2023

Normal* Other than Normal

Total

12-month

expected

credit

losses

Lifetime

expected

credit

losses Sub total

12-month

expected

credit

losses

Lifetime

expected

credit

losses Sub total

Loans

Housing loans 3,124,410 140 3,124,550 2,173 3,350 5,523 3,130,073

Other 16,852 242 17,094 4 74 78 17,172

Total 3,141,262 382 3,141,644 2,177 3,424 5,601 3,147,245

* Normal is defined as borrowers who have strong results and no particular problems with their financial

position.

(d) Credit risk for debt securities designated to be measured at fair value through profit or loss

The credit risk exposures for debt securities designated to be measured at fair value through profit or loss

were 267,169 million yen, and 188,906 million yen as of March 31, 2022 and 2023, respectively. The change in

the fair value attributable to the changes in credit risk was an increase of 1,425 million yen for the fiscal year

ended March 31, 2022 and an increase of 509 million yen for the fiscal year ended March 31, 2023. The

cumulative changes are 2,026 million yen and 2,535 million yen as of March 31, 2022 and 2023, respectively.

(7) Market risks for the banking business

In the banking business, by formulating and conforming with market risk management policies, Sony

manages the risk of loss for when the value of assets and liabilities (including off-balance-sheet items), and

income from assets and liabilities could be adversely affected by changes in various market risk factors, such as

interest rates, exchange rates and stock prices. Market risk management policies specify details such as risk

management methods and procedures. ALM and risk management policies are determined by the banking

subsidiary’s Board of Directors. Based on these policies, an ALM committee and a risk management committee

typically meet once each month to understand and confirm actual conditions and deliberate future measures and

risk conditions. On a daily basis, the risk management division maintains an overall understanding of interest,

exchange rates and duration of financial assets and liabilities, and monitors Value at Risk (“VaR”), which

quantifies the maximum expected loss which could occur during a given holding period and at a given

probability, and interest rate sensitivity analysis, and confirms regulatory compliance. Sony also conducts interest

rate swaps and other derivative transactions to hedge against interest and exchange rate fluctuation risks. In the

measurement of VaR, the historical method (time period: 250 days, confidence level: 99.0%) is used, and interest

rate risk, exchange rate risk, and price risk are measured as the amount of market risk. The total market risk

volume as of March 31, 2022 and 2023 was 8,230 million yen and 21,433 million yen, respectively. VaR

employs statistical methods to estimate the maximum loss that could occur in a defined period of time in the

future based on market fluctuation data for a defined period of time in the past; therefore, VaR may not capture

the risk in situations in which the market environment undergoes drastic changes that are unpredictable under

normal circumstances.

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(8) Effect of IBOR reform

Due to the reform and replacement of benchmark interest rates such as the London Interbank Offered Rate

(“LIBOR”), the use of other interbank offered rates (“IBORs”) has become a priority for global regulators. The

use of panel-based LIBOR ceased as of December 2021, except for the use of certain U.S. dollar (“USD”)

LIBORs. The 1-, 3-, and 6-months panel-based USD LIBOR settings are expected to be abolished and lose their

representativeness at the end of June 2023. The overnight and 12 months USD LIBOR settings will permanently

cease immediately after June 2023. As of March 31, 2023, Sony has contracts that reference USD LIBOR.

As mentioned above, the JPY and GBP IBORs have been abolished on December 31, 2021 and replaced by

alternative interest rates such as the Tokyo Overnight Average rate and the Sterling Overnight Index Average.

Currently, the Secured Overnight Financing Rate (“SOFR”) is gradually replacing USD LIBOR as a reference

rate. There remains key differences between USD LIBOR and SOFR. USD LIBOR is a “term rate,” which means

that it is published for a specific borrowing period (such as three months or six months) and is “forwardlooking,” because it is published at the beginning of the borrowing period. On the other hand, SOFR is currently

a “backward-looking” rate, based on overnight rates from actual transactions, and is published at the end of the

borrowing period. Furthermore, LIBOR includes a credit spread over the risk-free rate, while SOFR currently

does not include such a spread. To transition existing contracts and agreements that reference USD LIBOR to

SOFR, adjustments for term differences and credit differences need to be applied to SOFR, to enable the two

benchmark rates to be economically equivalent on transition.

As of March 31, 2023, the Alternative Reference Rates Committee, a working group for a transition from

USD LIBOR to a more robust reference rate, recommends SOFR instead of LIBOR. However, some market

participants are calling for the use of credit sensitive rates (“CSRs”) that include a credit spread, and these rates

might be used in addition to SOFR.

After 2021, Sony established a LIBOR transition project plan in the banking business. In the initial stages of

this transition project, Sony planned for the transition out of LIBOR, including USD LIBOR. As the cessation

date for the publication of major tenors of USD LIBOR has been set as the end of June 2023, the transition out of

USD LIBOR has not been completed as of March 31, 2023. Sony is continuing to drive the transition project to

meet the objective of moving out of LIBOR prior to the cessation date for the publication of USD LIBOR. This

transition project considered changes to business processes, risk management and valuation models, as well as

managing any related tax and accounting implications. As of March 31, 2023, changes to business processes and

risk management are largely complete, except for some valuation model changes. However, some contractual

changes, such as securities and derivatives transactions that reference USD LIBOR, have not yet been

implemented. Therefore, there is a risk that Sony will not be able to make the necessary contractual changes

before the end of June 2023, when the 1-, 3-, and 6-months panel-based USD LIBOR are abolished. In addition,

CSRs, rather than SOFR, might be used as an alternative interest rate for debt securities, which would require the

implementation of system changes in a short period of time. To avoid the above risks, Sony communicates

closely with its counterparty. Sony is also flexible in responding to systemic issues through collaboration among

project members and other departments.

Sony has a loan contract and interest swap agreement, related to the loan contract, aiming to manage certain

borrowing costs, both of which reference USD LIBOR. From March 31, 2023 to the date of submission of this

document, Sony has completed the execution of amendment agreements for the transition to alternative interest

rate benchmarks for contracts that used USD LIBOR as a reference rate.

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The following table contains details of all of the financial instruments that Sony holds at March 31, 2023 which

reference USD LIBOR and SOFR and have not yet transitioned to SOFR or an alternative interest rate benchmark:

Yen in millions

March 31, 2023

Carrying

Value

Of which

have yet to

transition to an

alternative

benchmark

interest rate

Debt securities

Financial assets required to be measured at FVOCI 18,529 3,291

Financial assets required to be measured at AC 290,178 223,111

Long-term debt (159,918) (159,918)

Derivatives* 35,483 34,375

Total 184,272 100,859

* Derivatives are presented on a net basis.

7. Inventories

Inventories are comprised of the following:

Yen in millions

March 31

2022 2023

Finished products 533,612 1,028,614

Work in process 163,206 244,140

Raw materials, purchased components and supplies 177,189 195,288

Inventories 874,007 1,468,042

For the fiscal years ended March 31, 2021, 2022 and 2023 the write-downs of inventories were

73,594 million yen, 80,546 million yen and 110,901 million yen, respectively.

For the fiscal years ended March 31, 2021, 2022, and 2023 the amounts of inventories expensed and

included in cost of sales were 2,057,248 million yen, 2,495,769 million yen, and 3,317,553 million yen,

respectively. Included within these amounts for the fiscal years ended March 31, 2021, 2022 and 2023 were

employee benefits expenses of 269,428 million yen, 282,765 million yen and 238,133 million yen, respectively,

and depreciation and amortization expenses of 192,760 million yen, 201,860 million yen and 189,230 million

yen, respectively. Other cost of sales mainly consists of material costs, subcontractor costs and other professional

service fees.

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8. Investments in associates and joint ventures

There are no associates or joint ventures that are individually material to Sony.

The carrying amounts of investments in associates and joint ventures that are not individually material to

Sony, as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Investments accounted for using the equity method

Associates 235,671 279,640

Joint ventures 32,842 45,580

Total 268,513 325,220

Sony’s share of comprehensive income, profit or loss and other comprehensive income, of associates and

joint ventures that are not individually material to Sony for the fiscal years ended March 31, 2021, 2022 and 2023

are as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Share of profit or loss

Associates 14,086 21,920 22,637

Joint ventures (2,535) 1,726 1,812

Total 11,551 23,646 24,449

Share of other comprehensive income

Associates 884 2,077 3,659

Joint ventures 1 1 40

Total 885 2,078 3,699

Share of comprehensive income

Associates 14,970 23,997 26,296

Joint ventures (2,534) 1,727 1,852

Total 12,436 25,724 28,148

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9. Property, plant and equipment

The changes in property, plant and equipment for the fiscal years ended March 31, 2022 and 2023 are as

follows:

Yen in millions

Land Buildings

Machinery

and

equipment

Construction

in progress Total

Balance as of April 1, 2021:

Cost 76,077 755,115 1,864,034 102,310 2,797,536

Accumulated depreciation and impairment losses (37) (491,156) (1,314,220) (1,582) (1,806,995)

Carrying amount 76,040 263,959 549,814 100,728 990,541

Changes in carrying amount:

Additions 2,461 25,434 91,189 229,094 348,178

Acquisitions through business combinations — 1,946 1,437 — 3,383

Reclassifications 24 48,600 134,660 (185,979) (2,695)

Disposals or classified as held for sale*1 (1,628) (2,248) (4,690) (158) (8,724)

Depreciation*2 — (29,906) (205,920) — (235,826)

Impairment losses — (235) (579) (74) (888)

Translation adjustment 1,226 9,640 7,032 1,036 18,934

Other — 282 22 6 310

Total changes 2,083 53,513 23,151 43,925 122,672

Balance as of March 31, 2022:

Cost 78,160 832,785 1,953,985 145,940 3,010,870

Accumulated depreciation and impairment losses (37) (515,313) (1,381,020) (1,287) (1,897,657)

Carrying amount 78,123 317,472 572,965 144,653 1,113,213

Changes in carrying amount:

Additions 700 17,369 112,351 364,450 494,870

Acquisitions through business combinations — 168 2,480 5,939 8,587

Reclassifications 75 75,608 232,218 (314,742) (6,841)

Disposals or classified as held for sale*1 (876) (1,610) (2,793) (644) (5,923)

Depreciation*2 — (33,682) (234,530) — (268,212)

Impairment losses — (317) (570) (52) (939)

Translation adjustment 1,232 8,931 5,315 531 16,009

Other — (4,636) (1,264) — (5,900)

Total changes 1,131 61,831 113,207 55,482 231,651

Balance as of March 31, 2023:

Cost 79,291 921,156 2,202,010 201,299 3,403,756

Accumulated depreciation and impairment losses (37) (541,853) (1,515,838) (1,164) (2,058,892)

Carrying amount 79,254 379,303 686,172 200,135 1,344,864

*1 An asset or disposal group for which the cash flows are expected to arise principally from sale rather than

continuing use is classified to current asset as an asset held for sale.

*2 Depreciation expenses are allocated to the cost of inventory and are recognized in cost of sales as inventory is

sold, or are directly recognized in selling, general and administrative expenses and research and development

expenditures in the consolidated statements of income, depending on the use of the asset.

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10. Leases

Sony leases communication and commercial equipment, plant, office space, warehouses, employees’

residential facilities and other assets.

(1) Right-of-use assets as a lessee

The changes in right-of-use assets for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Land Buildings

Machinery and

equipment Total

Balance as of April 1, 2021:

Carrying amount 15,394 327,350 15,290 358,034

Changes in the carrying amount

Increase due to new lease agreements and

remeasurement of lease liabilities 2,908 104,456 12,816 120,180

Decrease due to termination of lease agreements

and remeasurement of lease liabilities (159) (5,685) (356) (6,200)

Depreciation (1,140) (72,944) (7,700) (81,784)

Other 797 22,091 312 23,200

Net changes 2,406 47,918 5,072 55,396

Balance as of March 31, 2022:

Carrying amount 17,800 375,268 20,362 413,430

Changes in the carrying amount

Increase due to new lease agreements and

remeasurement of lease liabilities 1,533 90,395 36,604 128,532

Decrease due to termination of lease agreements

and remeasurement of lease liabilities (3,323) (10,654) (214) (14,191)

Depreciation (1,171) (77,368) (7,808) (86,347)

Other 399 35,422 818 36,639

Net changes (2,562) 37,795 29,400 64,633

Balance as of March 31, 2023:

Carrying amount 15,238 413,063 49,762 478,063

(2) Income, expenses, and cash flows (except for depreciation) arising from lease contracts as a lessee and

lessor are as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Interest expenses on lease liabilities 8,292 8,223 10,382

Expenses related to short-term leases accounted for

applying an exemption 17,805 19,764 36,807

Income from subleases (2,256) (2,256) (1,784)

Net cash outflows for leases 81,399 83,546 89,681

Refer to Note 6 for the maturity analysis of Sony’s financial liabilities including lease liabilities.

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11. Goodwill and intangible assets

(1) Goodwill

The changes in goodwill for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Balance at beginning of the fiscal year

Cost 1,073,178 1,312,615

Accumulated impairments (347,069) (359,720)

Carrying amount 726,109 952,895

Increase (decrease) due to:

Acquisitions 197,644 274,499

Disposals or classified as held for sale * (40,201) (445)

Impairments — —

Translation adjustments 69,343 48,163

Other — —

Balance at end of the fiscal year

Cost 1,312,615 1,649,041

Accumulated impairments (359,720) (373,929)

Carrying amount 952,895 1,275,112

* Disposals or classified as held for sale for the fiscal year ended March 31, 2022 relate mainly to the transfer

of certain operations of Game Show Network, LLC, a wholly-owned subsidiary in the Pictures segment.

Refer to Note 31 for the details of the transfer.

The carrying amounts of goodwill by segment as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Game & Network Services*1 200,206 407,121

Music*2 539,055 579,969

Pictures*3 187,658 259,055

Entertainment, Technology & Services 11,949 14,654

Imaging & Sensing Solutions 3,193 3,479

Financial Services 10,834 10,834

All Other — —

Total 952,895 1,275,112

*1 Game & Network Services

All of the goodwill shown in the G&NS line of the table above is allocated to a group of CGUs which

comprise the entire G&NS segment.

Intangible assets with indefinite useful lives related to the G&NS business have carrying amounts of

57,217 million yen and 57,409 million yen, as of March 31, 2022 and 2023, respectively, which are included

in “Other intangible assets.” Intangible assets with indefinite useful lives include the trademark for

PlayStation®, which is assessed to have an indefinite useful life as the trademark for PlayStation® is utilized

as the core trademark for Sony’s products and services throughout the G&NS segment and Sony expects to

continue using the trademark in the foreseeable future as well.

The recoverable amount of the group of CGUs is determined by the value in use. The value in use is

calculated by discounting the estimated future cash flows including a terminal value. The estimated future

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cash flows are prepared based on the MRP. A terminal value after the final year of the total forecasted

period is determined by utilizing a perpetual growth rate. The growth rate and the pre-tax discount rate were

1.5% and 9.6% as of March 31, 2022, and 1.5% and 10.8% as of March 31, 2023, respectively.

*2 Music

Goodwill shown in the Music line of the table above is primarily allocated to the worldwide recorded

music and the worldwide music publishing CGUs excluding operations in Japan.

Goodwill related to the worldwide recorded music CGU has carrying amounts of 235,746 million yen

and 255,834 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU

is determined by the value in use. The value in use is calculated by discounting the estimated future cash

flows including a terminal value. The estimated future cash flows are prepared based on the MRP. A

terminal value after the final year of the total forecasted period is determined by utilizing a perpetual growth

rate. The growth rate and the pre-tax discount rate were 1.0% and 8.9% as of March 31, 2022, and 1.0% and

12.8% as of March 31, 2023, respectively.

Goodwill related to the music publishing CGU has carrying amounts of 270,116 million yen and

290,833 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU is

determined by the value in use. The value in use is calculated by discounting the estimated future cash flows

including a terminal value. The estimated future cash flows are prepared based on the MRP. A terminal

value after the final year of the total forecasted period is determined by utilizing a perpetual growth rate.

The growth rate and the pre-tax discount rate were 2.5% and 8.5% as of March 31, 2022, and 3.0% and

11.1% as of March 31, 2023, respectively.

*3 Pictures

Goodwill shown in the Pictures line of the table above is primarily allocated to the animation

distribution CGU.

Goodwill related to the animation distribution CGU has carrying amounts of 102,590 million yen and

124,265 million yen, as of March 31, 2022 and 2023, respectively. The recoverable amount of the CGU is

determined by the value in use. The value in use is calculated by discounting the estimated future cash flows

including a terminal value. The estimated future cash flows are prepared based on the MRP, with revenues

in years beyond the MRP based on declining growth rates. A terminal value is based on a revenue multiple

applied to the final year of the total forecasted period. The growth rates beyond the MRP period were 5.0%

to 15.0% and 5.0% to 15.0%, and the pre-tax discount rate were 13.5% and 16.2% as of March 31, 2022 and

2023, respectively.

The value in use calculation uses key assumptions such as the pre-tax discount rate, perpetual growth

rate, competitive and regulatory environment, and technology trends. For each assumption, historical

experience, external information, competitors and industry trends are taken into account. Sony does not

expect the recoverable amounts to be lower than the carrying amounts even when the growth rate and

pre-tax discount rate that are used in the evaluation of the recoverable amounts change within a reasonably

predictable range.

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(2) Content assets

The changes in content assets for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Film costs

Broadcasting

rights

Music

catalogs

Artist

contracts

Music

distribution

rights

Game

content

Content

assets Total

Balance as of April 1, 2021:

Cost 2,909,102 304,036 724,513 26,709 32,019 14,178 4,010,557

Accumulated amortization

and impairment losses (2,514,627) (239,403) (167,761) (14,232) (7,008) (4,979) (2,948,010)

Carrying amount 394,475 64,633 556,752 12,477 25,011 9,199 1,062,547

Changes in carrying amount:

Additions* 313,648 75,841 87,350 2,209 — 20,997 500,045

Acquisitions through

business combinations 11,724 32,124 28,194 — 9,760 10,797 92,599

Disposals or classified as

held for sale (932) (4,747) — — — — (5,679)

Amortization (294,350) (70,514) (25,182) (604) (1,648) (8,602) (400,900)

Impairment losses (13,870) (738) — — — — (14,608)

Translation adjustment 42,782 4,619 57,676 1,161 938 866 108,042

Other — — — — — — —

Total changes 59,002 36,585 148,038 2,766 9,050 24,058 279,499

Balance as of March 31, 2022:

Cost 3,549,934 395,045 914,418 30,278 43,219 46,086 4,978,980

Accumulated amortization

and impairment losses (3,096,457) (293,827) (209,628) (15,035) (9,158) (12,829) (3,636,934)

Carrying amount 453,477 101,218 704,790 15,243 34,061 33,257 1,342,046

Changes in carrying amount:

Additions* 526,273 83,491 27,839 942 35 10,725 649,305

Acquisitions through

business combinations 419 7 607 — 1,171 46,079 48,283

Disposals or classified as

held for sale (38,899) — — — — (7) (38,906)

Amortization (381,753) (76,824) (31,686) (1,285) (2,755) (15,820) (510,123)

Impairment losses (13,815) — (236) — — (152) (14,203)

Translation adjustment 27,228 4,665 50,980 1,086 937 294 85,190

Other — — — — — 290 290

Total changes 119,453 11,339 47,504 743 (612) 41,409 219,836

Balance as of March 31, 2023:

Cost 4,320,022 419,025 1,008,942 32,484 45,988 97,386 5,923,847

Accumulated amortization

and impairment losses (3,747,092) (306,468) (256,648) (16,498) (12,539) (22,720) (4,361,965)

Carrying amount 572,930 112,557 752,294 15,986 33,449 74,666 1,561,882

* The additions in Film costs include the cost of films internally produced and acquired from third party

projects. Film costs acquired from third party projects are not a significant portion of Film costs recorded by

Sony. The additions in Broadcasting rights, Music catalogs, Artist contracts and Music distribution rights

mainly represent acquisitions through contracts with third parties. The additions in Game content primarily

include externally acquired game content for the fiscal year ended March 31, 2022 and internally developed

game content for the fiscal year ended March 31, 2023.

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(3) Other intangible assets

The changes in other intangible assets for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Patent rights,

know-how

and license

agreements

Customer

relationships Trademarks Software

Television

carriage

contracts Other Total

Balance as of April 1, 2021:

Cost 218,192 41,494 24,250 827,210 55,752 148,729 1,315,627

Accumulated amortization

and impairment losses (200,406) (36,775) (6,397) (582,875) (27,162) (70,957) (924,572)

Carrying amount 17,786 4,719 17,853 244,335 28,590 77,772 391,055

Changes in carrying amount:

Additions 4,668 639 158 93,642 — 3,538 102,645

Acquisitions through

business combinations 2,488 19,121 7,076 6,895 — 8,132 43,712

Internal development — — — 15,681 — — 15,681

Disposals or classified as

held for sale (49) (565) (550) (2,599) — (107) (3,870)

Amortization (5,576) (4,975) (1,875) (87,113) (3,361) (6,904) (109,804)

Impairment losses (6) — (313) (3,218) — (202) (3,739)

Translation adjustment 216 2,146 2,280 5,534 2,829 1,577 14,582

Other 140 — 1 819 — (1,119) (159)

Total changes 1,881 16,366 6,777 29,641 (532) 4,915 59,048

Balance as of March 31, 2022:

Cost 213,649 58,427 32,683 952,153 61,939 155,479 1,474,330

Accumulated amortization

and impairment losses (193,982) (37,342) (8,053) (678,177) (33,881) (72,792) (1,024,227)

Carrying amount 19,667 21,085 24,630 273,976 28,058 82,687 450,103

Changes in carrying amount:

Additions 6,432 — 17 117,019 — 3,323 126,791

Acquisitions through

business combinations 2,056 9,237 16,655 26,298 — 38,394 92,640

Internal development — — — 19,835 — — 19,835

Disposals or classified as

held for sale (8) (112) (14) (2,907) — (129) (3,170)

Amortization (8,152) (9,437) (4,290) (94,821) (3,954) (14,566) (135,220)

Impairment losses (8) (93) — (342) — (66) (509)

Translation adjustment 156 1,483 1,516 3,715 2,176 613 9,659

Other (1,121) 158 699 4,299 — (322) 3,713

Total changes (645) 1,236 14,583 73,096 (1,778) 27,247 113,739

Balance as of March 31, 2023:

Cost 201,243 66,593 51,747 1,045,743 66,583 199,311 1,631,220

Accumulated amortization

and impairment losses (182,221) (44,272) (12,534) (698,671) (40,303) (89,377) (1,067,378)

Carrying amount 19,022 22,321 39,213 347,072 26,280 109,934 563,842

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12. Impairment of non-financial assets

There were no material impairment losses for the fiscal years ended March 31, 2021, 2022 and 2023.

13. Insurance-related accounts

(1) Assets, liabilities, revenues and expenses included in the insurance business

Insurance policies

Life insurance policies that Sony underwrites in the life insurance business, which are included in the

Financial Services segment, most of which are categorized as long-duration contracts, mainly consist of whole

life, term life, disease and health insurance, variable life insurance and individual variable annuity contracts. The

life insurance revenues for the fiscal years ended March 31, 2021, 2022 and 2023 were 913,361 million yen,

943,092 million yen and 975,799 million yen, respectively. Property and casualty insurance policies that Sony

underwrites in the non-life insurance business, which is included in the Financial Services segment, are primarily

automotive insurance contracts, which are categorized as short-duration contracts. The non-life insurance

revenues for the fiscal years ended March 31, 2021, 2022 and 2023 were 123,574 million yen, 132,908 million

yen and 139,678 million yen, respectively.

The insurance contract liability in which an insured event has not occurred or a surrender option has not

been exercised at the reporting date is classified as non-current. However, if either the insured event has occurred

or the surrender option has been exercised, Sony would no longer have the right to defer payment of these

amounts. Since the insurance contract liability would be due to be settled within twelve months after the

reporting period, it is classified as current.

Deferred insurance acquisition costs

As of March 31, 2022 and 2023, the balances of deferred insurance acquisition costs for non-traditional life

insurance contracts were 261,475 million yen and 324,862 million yen, respectively.

Future insurance policy benefits

Liabilities for future insurance policy benefits, except the portion of liabilities for minimum guarantee

benefits described below, 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 rates, lapse rates and other factors. Future

insurance policy benefits are computed using interest rates ranging from 0.5% to 4.5% and are based on factors

such as market conditions and expected investment returns. Morbidity, mortality rates and lapse rates used as

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

contracts, although significant changes in experience or assumptions may require Sony to provide for expected

future losses.

Liabilities for future insurance policy benefits include the liabilities for the minimum guarantee benefits of

individual variable annuity and variable life insurance contracts. The details regarding the minimum guarantee

benefits are presented in “Minimum guarantee benefit for individual variable annuity and variable life insurance

contracts” below. Sony measures certain of these liabilities for future insurance policy benefits at fair value.

Refer to (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 in the life insurance

business includes universal life insurance and investment contracts. Investment contracts are defined by the

previous accounting practices in accordance with the provisions of IFRS 4. Universal life insurance includes

interest sensitive whole life contracts and variable life insurance contracts. The credited rates associated with

interest sensitive whole life contracts range from 1.7% to 2.0%. For variable life insurance contracts, policy

values are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit

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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 annuity

contracts and policies after the start of annuity payments. The credited rates associated with investment contracts,

except for individual variable annuity contracts, range from 0.01% to 6.3%. For individual variable annuity

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. The liabilities for

policyholders’ account in the life insurance business includes the liabilities related to the individual variable

annuity and variable life insurance contracts with minimum guarantee benefits. Sony measures certain of these

liabilities for policyholders’ account in the life insurance business at fair value. Refer to Note (4).

Policyholders’ account in the life insurance business is comprised of the following:

Yen in millions

March 31

2022 2023

Universal life insurance 3,278,148 3,348,137

Investment contracts 1,393,257 1,715,921

Other 119,890 84,521

Total 4,791,295 5,148,579

Minimum guarantee benefit for individual variable annuity and variable life insurance contracts

Regarding individual variable annuity and variable life insurance contracts, minimum guarantee benefits

(minimum death benefit, minimum accumulation benefit, etc.) are provided, and Sony bears the risk of fulfilling

the minimum guarantee benefits prescribed in the contracts to policyholders. The fair value measurement is

applied to the liability for individual variable annuity contracts with minimum guarantee benefits. Refer to

Note (4). Excluding the portion of the liability measured at fair value, the liabilities for the minimum guarantee

benefits are calculated using current best-estimate assumptions and are based on the ratio of the present value of

expected total excess payments divided by the present value of expected total assessments over the life of the

contract. Mortality rates, lapse rates, discount rates and investment yield are used as significant assumptions for

this calculation. The policyholders’ account value, net amount at risk, liability for the minimum guarantee

benefit, and average attained age as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31, 2022

Individual variable

annuity contracts

Variable life

insurance contracts Total

Policyholders’ account value 467,924 1,686,488 2,154,412

Net amount at risk 58,961 6,361,770 6,420,731

Liability for minimum guarantee benefit 37,382 63,392 100,774

Age

March 31, 2022

Individual variable

annuity contracts

Variable life

insurance contracts

Average attained age 63 45

Yen in millions

March 31, 2023

Individual variable

annuity contracts

Variable life

insurance contracts Total

Policyholders’ account value 419,628 1,778,451 2,198,079

Net amount at risk 78,322 7,727,061 7,805,383

Liability for minimum guarantee benefit 41,214 76,012 117,226

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Age

March 31, 2023

Individual variable

annuity contracts

Variable life

insurance contracts

Average attained age 64 45

Shadow liability adequacy test in the life insurance business

When holding financial assets that are measured at fair value through other comprehensive income and

correspond to insurance contract liabilities, shadow accounting is applied to evaluate insurance-related accounts

as if the financial assets were sold as of the end of reporting period and valuation gains or losses were realized

for the purpose of reducing the accounting mismatches between the insurance contract liabilities and the financial

assets. Sony performs a shadow liability adequacy test on life insurance contracts quarterly.

Mortality rates, morbidity rates, lapse rates and discount rates are used as significant assumptions for this

shadow liability adequacy test.

As a result of the shadow liability adequacy test, the net amounts of future insurance policy benefits minus

deferred insurance acquisition costs were recorded at a sufficient level as of March 31, 2022 and 2023, and

accordingly, a decrease of deferred insurance acquisition costs and an increase of future insurance policy benefits

were not recorded as of those dates.

(2) Changes in insurance contract liabilities and deferred insurance acquisition costs

Changes in insurance contract liabilities

The changes in insurance contract liabilities are as follows:

Yen in millions

Future insurance

policy benefits

and other

Policyholders’

account in the life

insurance business Total

Balance as of April 1, 2021 6,749,450 4,328,894 11,078,344

Current portion*1 134,865 — 134,865

Non-current portion 6,614,585 4,328,894 10,943,479

Net premiums 813,856 468,299 1,282,155

Insurance liabilities released (539,586) (251,169) (790,755)

Unwind of discount and actuarial items*2 149,869 201,797 351,666

Changes in valuation of expected future

benefits (11,144) 946 (10,198)

Shadow accounting adjustments (15,692) (3,169) (18,861)

Other (65,198) 29,328 (35,870)

Currency exchange rate fluctuations 110,485 16,369 126,854

Balance as of March 31, 2022 7,192,040 4,791,295 11,983,335

Current portion*1 153,006 — 153,006

Non-current portion 7,039,034 4,791,295 11,830,329

Net premiums 821,226 594,239 1,415,465

Insurance liabilities released (778,728) (261,212) (1,039,940)

Unwind of discount and actuarial items*2 151,058 (31,604) 119,454

Changes in valuation of expected future

benefits 7,378 12,142 19,520

Shadow accounting adjustments 2,083 (4,694) (2,611)

Other (76,745) 38,177 (38,568)

Currency exchange rate fluctuations 108,200 10,236 118,436

Balance as of March 31, 2023 7,426,512 5,148,579 12,575,091

Current portion*1 162,091 — 162,091

Non-current portion 7,264,421 5,148,579 12,413,000

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*1 The current portion of future insurance policy benefits and other is included in other current liabilities in

the consolidated statements of financial position.

*2 Mainly includes interests credited to reserves, expenses and mortality charges.

Changes in deferred insurance acquisition costs

The changes in deferred insurance acquisition costs are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Balance at beginning of the fiscal year 631,231 683,836

Current portion* 7,245 7,310

Non-current portion 623,986 676,526

New deferred insurance acquisition costs 109,320 110,108

Amortization amount for current period (69,237) (84,523)

Shadow accounting adjustments 4,505 20,604

Currency exchange rate fluctuations 8,017 7,988

Balance at end of the fiscal year 683,836 738,013

Current portion* 7,310 7,149

Non-current portion 676,526 730,864

* The current portion of deferred insurance acquisition costs is included in other current assets in the

consolidated statements of financial position.

(3) Significant assumptions regarding insurance contracts

Significant assumptions

The significant assumptions and the ranges used to measure the insurance contract liabilities as of March 31,

2022 and 2023 are as follows:

Fiscal year ended March 31

2022 2023

Discount rate (0.075%)-6.25% (0.115%)-6.25%

Other significant assumptions are mortality rates and lapse rates.

Impact from changes made to assumptions

Yen in millions

Fiscal year ended March 31

2022 2023

Impact on gains (losses) 6,643 15,640

Changes in economic assumptions 7,091 15,378

Changes in non-economic assumptions (448) 262

Impact on capital 18,087 31,244

Changes in economic assumptions 16,874 30,858

Changes in non-economic assumptions 1,213 386

Economic assumptions including discount rates and non-economic assumptions including mortality rates

and morbidity rates, lapse rates, and operating expense rates are developed based on best estimates by product as

of each cutoff date. Best-estimate assumptions are developed to reflect past and current experiences as well as

expected experiences in the future. Expected future changes in assumptions should be reflected only when they

are supported by sufficient rationales. Except for a deteriorating trend in mortality rates and morbidity rates, no

other expected future changes are assumed in the best-estimate assumptions applied.

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(4) Insurance-related accounts measured at fair value

In determining the fair value of future insurance policy benefits and policyholders’ account in the life

insurance business to which Sony measures at fair value, Sony uses the present value of future expected cash

flows based on mortality rates, lapse rates, discount rates, investment yield and various actuarial assumptions.

These are classified within Level 3 of the fair value hierarchy since Sony primarily uses unobservable inputs in

its valuation.

The fair value of future insurance policy benefits and policyholders’ account in the life insurance business

as of March 31, 2022 and 2023 is as follows:

Yen in millions

Fair value

Presentation in the consolidated statements of

financial position

Future insurance

policy benefits and other

Policyholders’ account

in the life insurance business

March 31, 2022 507,699 37,382 470,317

March 31, 2023 462,684 41,214 421,470

The valuation techniques, significant unobservable inputs, and the ranges used to measure the fair value of

the future insurance policy benefits and policyholders’ account in the life insurance business as of March 31,

2022 and 2023 are as follows:

Valuation techniques

Significant

unobservable inputs

Range

March 31, 2022 March 31, 2023

Present value of future expected cash flows

Credit spread* 47.5bp 83.6bp

Mortality rates 0.003%-35.693% 0.003%-37.438%

Lapse rates 0%-7.500% 0%-7.500%

* bp = basis point

The decrease (increase) in fair value is the result of higher (lower) credit spreads, mortality rates or lapse

rates. The fair value of the future insurance policy benefits and policyholders’ account in the life insurance

business measured at fair value would not change significantly, even if one or more of the significant

unobservable inputs are changed to reflect reasonably possible alternative assumptions.

The changes in fair value of future insurance policy benefits and policyholders’ account in the life insurance

business measured at fair value for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Balance at beginning of the fiscal year 536,189 507,699

Total (gains) losses*1:

Included in net income*2 830 (11,740)

Included in other comprehensive income*3 (797) (2,380)

Issuances — —

Settlements (28,523) (30,895)

Balance at end of the fiscal year 507,699 462,684

Changes in unrealized gains (losses) relating to future insurance policy

benefits and policyholders’ account in the life insurance business still

held as of the end of the reporting period included in net income*2 (13,638) (501)

*1 Gains presented as negative and losses presented as positive.

*2 Included in financial services revenue and financial services expenses in the consolidated statements of

income.

*3 Included in insurance contract valuation adjustments in the consolidated statements of comprehensive

income.

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(5) Insurance and market risks

Risk management policy and exposure

In the life insurance business, Sony manages various market-related risks in the following manner:

(a) Insurance risk management

Insurance risk

With respect to insurance underwriting risk, based on the level of policy reserves and capital levels, the life

insurance subsidiary manages the insurance portfolio appropriately, such as setting policy limits for each type of

insurance as necessary. In addition, underwriting standards and standards for revising and abolishing each

product are clearly defined as internal rules and are regularly reviewed.

Concentration of insurance risk

The insurance contract portfolio does not have excessive concentration risk.

(b) Market risk management

Interest rate risk management

Interest rate risk is managed by the risk management division of the life insurance subsidiary based on the

policies for interest rate risk management that specify details such as risk management methods and procedures.

Based on ALM policies that are determined through such methods as deliberation by the life insurance

subsidiary’s Executive Committee, the subsidiary determines and confirms actual risk conditions with its Board

of Directors. The division maintains an overall understanding of the interest rates and durations of financial

instruments, monitors them based on the analysis of the quantity of risk using VaR, and periodically reports the

status of each risk to the life insurance subsidiary’s Board of Directors and the Executive Committee. As part of

the ALM management, the life insurance subsidiary invests in financial assets that match the characteristics of

the insurance contract obligations, and thereby reduces interest rate risk as much as possible. Through the

purchase and sale of financial assets included in their portfolio, the interest rate sensitivity (duration) of financial

assets and insurance contract obligations is matched as much as possible so that they ensure sufficient cash flow

to settle insurance claims as they come due.

Exchange rate risk

Exchange rate risk is managed by the risk management division of the life insurance subsidiary based on the

policies for exchange rate risk management that specify details such as risk management methods and

procedures. The division periodically reports the status of each risk to the life insurance subsidiary’s Board of

Directors and Executive Committee.

Equity market price fluctuation risk

Equity market price fluctuation risk is managed by the risk management division of the life insurance

subsidiary based on the policies for equity market price fluctuation risk management that specify details such as

risk management methods and procedures. The division periodically reports the status of each risk to the life

insurance subsidiary’s Board of Directors and Executive Committee.

Derivative transactions

Derivative transactions are managed by the risk management division of the life insurance subsidiary based

on the policies for derivative transactions that specify details such as risk management methods and procedures.

The division periodically reports the status of each risk to the life insurance subsidiary’s Board of Directors and

Executive Committee.

Sensitivity analysis

Market risk

For the purpose of pursuing a stable and sustainable increase of corporate value, in the life insurance

business, Sony uses Market Consistent Embedded Value (“MCEV”), which is an indicator used to support the

analysis of the value of a life insurance business and is compliant with the European Insurance CFO Forum

Market Consistent Embedded Value Principles© (“MCEV Principles”). MCEV is also used for sensitivity

analysis of market risk and insurance risk.

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MCEV represents the present value of the current and future distributable earnings to shareholders

generated from assets allocated to the covered business after sufficient allowance for the aggregate risks in the

covered business. MCEV consists of the adjusted net worth and the value of the existing business. Adjusted net

worth is the amount of assets allocated to the covered business as of the valuation date and is calculated as the

amount of its market value in excess of statutory policy reserves and other liabilities. The value of the existing

business consists of the present value of certainty-equivalent profit, the time value of options and guarantees,

frictional costs and the cost of non-hedgeable risks. The main assumptions, including mortality rates, morbidity

rates, lapse and surrender rates, and operating expense rates, were developed based on best estimates by product.

The Board of Directors of the life insurance subsidiary has confirmed that, with the exception of certain

noncompliance items, the MCEV presented below has been produced following the methodology set out in the

MCEV Principles. The main noncompliance item referred to above is the reference rate, which is used in the

calculations and has been defined as the government bond nominal spot rate curve rather than the swap rate curve

as stipulated in the MCEV Principles.

MCEV is not an estimate of “fair value” as it does not include the value of new businesses to be sold in the

future and does not include the non-life insurance business, such as the property and casualty insurance business

and the banking business. The calculation of MCEV is based on numerous assumptions with respect to economic

conditions, operating conditions, taxes and other matters, many of which are beyond Sony’s control. In general,

deviations between projection assumptions and actual experience in the future are to be expected and such

deviations may materially impact the value calculated.

The tables below show the sensitivities of changing the underlying assumptions of MCEV as of March 31,

2022 and 2023.

March 31, 2022

Assumption Changes in assumptions, etc.

Yen in millions

MCEV Change in amount Rate of change

Base No change 2,066,357 — —

Interest rates* 50bp decrease 2,107,521 41,164 1.99%

50bp increase 2,004,841 (61,516) (2.98%)

Stock / Real estate market value 10% decrease 2,049,089 (17,268) (0.84%)

Maintenance expenses 10% decrease 2,097,153 30,796 1.49%

Lapse and surrender rate 10% decrease 2,083,260 16,903 0.82%

Mortality rates (death protection) 5% decrease 2,136,304 69,948 3.39%

Mortality rates (third sector /

annuity products) 5% decrease 2,052,870 (13,487) (0.65%)

Morbidity rates 5% decrease 2,136,413 70,057 3.39%

Foreign exchange rates 10% appreciation of the Yen 2,051,249 (15,108) (0.73%)

* bp = basis point

March 31, 2023

Assumption Changes in assumptions, etc.

Yen in millions

MCEV Change in amount Rate of change

Base No change 2,121,135 — —

Interest rates* 50bp decrease 2,244,971 123,836 5.84%

50bp increase 1,990,132 (131,003) (6.18%)

Stock / Real estate market value 10% decrease 2,103,460 (17,675) (0.83%)

Maintenance expenses 10% decrease 2,158,765 37,630 1.77%

Lapse and surrender rate 10% decrease 2,182,037 60,902 2.87%

Mortality rates (death protection) 5% decrease 2,191,177 70,042 3.30%

Mortality rates (third sector /

annuity products) 5% decrease 2,110,640 (10,495) (0.49%)

Morbidity rates 5% decrease 2,184,127 62,992 2.97%

Foreign exchange rates 10% appreciation of the Yen 2,118,499 (2,636) (0.12%)

* bp = basis point

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Liquidity risk

(a) Risk management policy and exposure

In line with liquidity risk management policies, the accounting division of each insurance subsidiary

prepares and updates cash flow plans in a timely manner based on the reports from departments and manages

cash flows, and the risk management division of each insurance subsidiary manages the liquidity risk. The

accounting division and risk management division periodically or as needed report such information to each

insurance subsidiary’s Board of Directors and Executive Committee.

(b) Maturity analysis

The following table summarizes the estimated timing of the remaining undiscounted net cash flows from

insurance contract liabilities and the contractual timing of the remaining undiscounted cash flows arising from

securities held in the insurance business as of March 31, 2022 and 2023. The cash flows of insurance liabilities

are based on assumptions regarding morbidity rates, mortality rates, and lapse rates, which are consistent with the

estimates used for the carrying amounts.

Yen in millions

March 31, 2022

Total

Indefinite

Terms

Within

1 year

1 to 2

years

2 to 3

years

3 to 4

years

4 to 5

years

More than

5 years

Insurance contract liabilities 25,561,549 — 165,028 155,586 198,370 234,987 263,679 24,543,899

Securities held in the

insurance business 18,536,483 2,008,071 656,948 223,111 348,527 335,791 311,466 14,652,569

Yen in millions

March 31, 2023

Total

Indefinite

Terms

Within

1 year

1 to 2

years

2 to 3

years

3 to 4

years

4 to 5

years

More than

5 years

Insurance contract liabilities 27,737,139 — 165,746 153,881 198,154 224,698 263,708 26,730,952

Securities held in the

insurance business 19,640,244 2,408,401 636,352 367,283 345,113 322,176 428,997 15,131,922

Since the total of the above estimated amounts is the amount before discounting, it exceeds the amount of

insurance contract liabilities and securities which is included in investments and advances in the Financial

Services segment shown in the consolidated statements of financial position.

14. Short-term borrowings and long-term debt

Short-term borrowings and long-term debt are comprised of the following:

March 31, 2022

Book value

(Yen in millions)

Weighted average

interest rate Due

Short-term borrowings 1,976,553 0.18%

Long-term debt

Long-term loans 693,603 0.70% 2022-2056

Unsecured bonds 189,608 0.25% 2022-2029

Unsecured zero coupon convertible bonds 26,495 —% 2022

Lease liabilities 465,349 2.10%

1,375,055

Less — Portion due within one year 171,409

1,203,646

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March 31, 2023

Book value

(Yen in millions)

Weighted average

interest rate Due

Short-term borrowings 1,914,934 1.89%

Long-term debt

Long-term loans 1,074,060 1.70% 2023-2056

Unsecured bonds 349,332 0.30% 2023-2029

Lease liabilities 532,246 2.35%

1,955,638

Less — Portion due within one year 187,942

1,767,696

In the Financial Services segment, Sony pledged assets as collateral for short-term borrowings and longterm debt and the pledged assets are comprised of the following:

Yen in millions

March 31

2022 2023

Securities 1,490,663 1,678,553

Housing loans in the banking business 782,175 829,659

In addition to the above, in the Financial Services segment, Sony pledged securities for securities-for-securities

lending transactions and the pledged securities are as follows:

Yen in millions

March 31

2022 2023

Securities 521,912 4,728

Furthermore, in the Financial Services segment, Sony pledged securities as collateral for cash settlements,

variation margins of futures markets and certain other purposes and the pledged securities are as follows:

Yen in millions

March 31

2022 2023

Securities 21,271 80,328

On July 21, 2015, Sony issued 120,000 million yen of 130% Callable Unsecured Zero Coupon Convertible

Bonds due on September 28, 2022 (the “Zero Coupon Convertible Bonds”). The bondholders were entitled to

convert the Zero Coupon Convertible Bonds into shares of common stock from September 1, 2015 to

September 28, 2022, and the initial conversion price was 5,008 yen per share. The conversion price is subject to

anti-dilution provisions, where the conversion price is adjusted in certain cases such as the issuance or disposal of

the shares of Sony Group Corporation’s common stock at below market price, stock splits, bonus issues of

shares, and dividends in excess of 25 yen per common share per fiscal year. In addition, an early redemption is

triggered upon the occurrence of certain corporate events including a merger or corporate split, and the

completion of a takeover bid resulting in the delisting of the shares of common stock of Sony Group Corporation.

The conversion price is reduced for a certain period prior to the early redemption date, which is determined by a

formula that is based on time to maturity and Sony’s common stock price, in order to compensate bondholders

for the time value up to the original maturity date. The reduced conversion price ranged from 3,526.5 yen to

5,008 yen per share. The conversion price has been adjusted to 4,952.8 yen per common share since June 10,

2022 because the payment of the total annual dividend per common share for the fiscal year ended March 31,

2022 was 65 yen, which is in excess of 25 yen. At the early redemption date, the remaining Zero Coupon

Convertible Bonds would be redeemed at 100% of the principal amount. The conversion right is bifurcated from

the host contract and classified as equity.

Sony had the option to redeem all of the Zero Coupon Convertible Bonds outstanding at 100% of the

principal amount on or after July 21, 2020, if the closing price per share of Sony Group Corporation’s common

stock on the Tokyo Stock Exchange was 130% or more of the conversion price of the Zero Coupon Convertible

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Bonds applicable on each trading day for 20 consecutive trading days. As the option is considered closely related

to the host contract, Sony does not bifurcate the option from the host contract.

There were no significant adverse debt covenants under the Zero Coupon Convertible Bonds.

Sony redeemed the Zero Coupon Convertible Bonds at maturity on September 30, 2022.

In August and October 2022, in order to enhance liquidity, Sony executed an approximate 1,175 million

U.S. dollar bank loan from a group of banks with three, five and ten-year maturity terms for the purpose of

covering the consideration for the acquisition of 100% of the equity interest in Ellation, a subsidiary of AT&T

Inc., which operates the anime business “Crunchyroll,” in August 2021. This bank loan utilizes the co-financing

facility of Japan Bank for International Cooperation (“JBIC”), which aims to facilitate overseas mergers and

acquisitions by Japanese companies. Approximately 60%, or 705 million U.S. dollars, is from the JBIC and was

borrowed in U.S. dollars in October 2022, and approximately 40%, or 70,000 million yen (approximately

470 million U.S. dollars) is from Japanese private banks and was borrowed in yen in August 2022.

In December 2022, Sony Group Corporation issued unsecured straight bonds in the total principal amount of

150,000 million yen. Sony Group Corporation used all of the proceeds of the issued bonds for the repayment of

CP by the end of December 2022.

There are no significant adverse debt covenants or cross-default provisions related to the other short-term

borrowings and long-term debt.

15. 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, swap

agreements, 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 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. 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.

A description of the purpose and classification of the derivative financial instruments held by Sony is as

follows:

Foreign exchange forward contracts, swap agreements and currency option contracts

Foreign exchange forward contracts, swap agreements 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 or anticipated by Sony’s transactions and 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 and foreign exchange range forward contracts

which effectively fixed the cash flows from certain forecasted purchase and sale transactions denominated in

foreign currencies for the fiscal years ended March 31, 2021, 2022 and 2023. The ineffective portions of the

hedging relationships were not significant. 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

measured at fair value with changes in value recognized in financial income and financial expenses.

Foreign exchange forward contracts, foreign currency option contracts and swap agreements held by certain

subsidiaries in the Financial Services segment are measured at fair value 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 borrowings and 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 debt securities.

Certain subsidiaries in the Financial Services segment have interest rate swap agreements as part of their

ALM, which are measured at fair value with changes in value recognized in financial services revenue.

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 measured at fair value with changes in value recognized in

financial income and financial expenses.

Other agreements

Certain subsidiaries in the Financial Services segment have equity future contracts, equity swap agreements,

bond future contracts, commodity future contracts, interest rate swaption agreements, 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 5 as debt securities,

contained embedded derivatives that are not required to be bifurcated because the entire instruments are

measured at fair value.

The estimated fair values of Sony’s outstanding derivative instruments are summarized as follows:

Yen in millions

March 31, 2022 March 31, 2023

Asset

derivatives

Liability

derivatives

Asset

derivatives

Liability

derivatives

Interest rate contracts

Interest rate swap agreements 26,795 6,455 43,464 3,139

Interest rate swaptions agreements — 1,075 380 2,517

Foreign exchange contracts

Foreign exchange forward contracts 14,687 34,284 12,496 12,257

Swap agreements 11,897 925 3,774 5,781

Currency option contracts purchased 42 — 508 835

Currency option contracts written — 172 — 5

Other currency contracts 3,578 1,201 4,540 998

Equity contracts

Equity future contracts — 11,903 290 3,321

Equity swap agreements — 16,105 — 5,270

Option contracts purchased 4,024 — 4,692 —

Total derivatives 61,023 72,120 70,144 34,123

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The estimated fair values and maturity analysis for notional amounts of Sony’s outstanding derivative

instruments which are designated as hedging instruments are summarized as follows:

Yen in millions

March 31, 2022

Notional amounts Fair Value

Within 1

Year

Over 1

Year Total

Asset

derivatives

Liability

derivatives Balance sheet location

Cash flow hedging relationships

Foreign exchange forward

contracts 138,135 — 138,135 — 7,618

Current liabilities:

Other financial

liabilities

Average rate (JPY/USD) 115.3 —

Currency option bought

contracts 4,830 — 4,830 28 —

Current assets: Other

financial assets

Average rate (JPY/USD) 115.0 —

Currency option sold contracts 4,975 — 4,975 — 161 Current liabilities:

Other financial

liabilities

Average rate (JPY/USD) 118.5 —

Interest rate swap agreements — 146,778 146,778 17,987 — Non-current assets:

Other financial assets

Average rate — 1.5%

Yen in millions

March 31, 2023

Notional amounts Fair Value

Within 1

Year

Over 1

Year Total

Asset

derivatives

Liability

derivatives Balance sheet location

Cash flow hedging relationships

Foreign exchange forward

contracts 70,125 — 70,125 458 —

Current assets: Other

financial assets

Average rate (JPY/USD) 131.3 —

Currency option bought

contracts 45,789 — 45,789 502 —

Current assets:

Other financial assets

Average rate (JPY/USD) 125.8 —

Currency option sold contracts 47,995 — 47,995 — 835 Current liabilities:

Other financial

liabilities

Average rate (JPY/USD) 131.9 —

Interest rate swap agreements — 159,918 159,918 28,513 — Non-current assets:

Other financial assets

Average rate — 1.5%

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Changes in the fair value of hedging instruments related to cash flow hedges are recorded in accumulated

other comprehensive income for the fiscal years ended March 31, 2022 and 2023.

Yen in millions

Foreign exchange

contracts

Interest rate

contracts Total

Balance as of April 1, 2021 (4,282) 5,581 1,299

Changes in fair value of hedging instruments recognized in other

comprehensive income (14,645) 6,942 (7,703)

Reclassification adjustments to profit (loss) for the year*1,2 12,886 1,643 14,529

Deferred tax 538 (2,629) (2,091)

Balance as of March 31, 2022 (5,503) 11,537 6,034

Changes in fair value of hedging instruments recognized in other

comprehensive income (26,950) 13,975 (12,975)

Reclassification adjustments to profit (loss) for the year*1,2 34,825 (4,012) 30,813

Deferred tax (2,408) (3,051) (5,459)

Balance as of March 31, 2023 (36) 18,449 18,413

*1 In the consolidated statements of income, the amount reclassified to profit (loss) is included in sales for

hedges of foreign exchange contracts and in financial expenses for hedges of interest rate contracts.

*2 For the fiscal years ended March 31, 2022 and 2023, hedge ineffectiveness recognized in profit or loss was

not material.

16. Offsetting of financial assets and financial liabilities

Tables below show the gross amounts of financial assets and liabilities, amounts offset, and net amounts

presented in the consolidated statements of financial position, as well as the financial assets and liabilities that

are subject to enforceable master netting agreements or similar agreements, as of March 31, 2022 and 2023.

Yen in millions

March 31, 2022

Gross amounts

recognized

financial assets

and financial

liabilities

Amounts offset

in the

consolidated

statements of

financial position

Net amounts

presented in the

consolidated

statements of

financial position

Gross amounts not offset in the

consolidated statements of

financial position

Financial

instruments

Cash

collateral

Net

amounts

Derivative assets*1 37,847 — 37,847 24,504 10,782 2,561

Trade receivables*2 30,370 26,739 3,631 — — 3,631

Total assets 68,217 26,739 41,478 24,504 10,782 6,192

Derivative liabilities*1 72,004 — 72,004 33,514 29,530 8,960

Trade payables*2 60,056 26,739 33,317 — — 33,317

Short-term borrowings*3 1,272,040 — 1,272,040 1,269,188 — 2,852

Total liabilities 1,404,100 26,739 1,377,361 1,302,702 29,530 45,129

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Yen in millions

March 31, 2023

Gross amounts

recognized

financial assets

and financial

liabilities

Amounts offset

in the

consolidated

statements of

financial position

Net amounts

presented in the

consolidated

statements of

financial position

Gross amounts not offset in the

consolidated statements of

financial position

Financial

instruments

Cash

collateral

Net

amounts

Derivative assets*1 34,382 — 34,382 16,430 13,852 4,100

Trade receivables*2 175,872 174,930 942 — — 942

Total assets 210,254 174,930 35,324 16,430 13,852 5,042

Derivative liabilities*1 31,997 — 31,997 21,700 5,216 5,081

Trade payables*2 281,295 174,930 106,365 — — 106,365

Short-term borrowings*3 1,557,652 — 1,557,652 1,556,595 — 1,057

Total liabilities 1,870,944 174,930 1,696,014 1,578,295 5,216 112,503

*1 Certain subsidiaries have entered into master netting agreements or other similar agreements, which are

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. Master netting agreements create a right of set off, but the master netting agreements do not

automatically provide for such set off.

*2 Amounts offset in the consolidated statements of financial position are related to repurchase agreements of

products.

*3 Short-term borrowings relate to repurchase agreements (repos).

17. Employee benefits

(1) Defined benefit and severance plans

Upon terminating employment, employees of Sony Group Corporation and its subsidiaries in Japan are

entitled, under most circumstances, to lump-sum indemnities or pension payments as described below. Sony

Group 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 Group 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.

From October 1, 2019, Sony Group Corporation and substantially all of its subsidiaries in Japan have

amended their defined benefit pension plans and have implemented defined contribution plans for all employees

other than those employees that had retired before the amendments.

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.

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Net defined benefit liability (asset) recognized in the consolidated statements of financial position

Amounts recognized in the consolidated statements of financial position are as follows:

Yen in millions

Japanese plans Foreign plans

March 31 March 31

2022 2023 2022 2023

Present value of defined benefit obligations 614,763 573,143 277,903 124,702

Fair value of plan assets (474,933) (447,747) (198,791) (56,987)

The impact of minimum funding requirement and

asset ceiling 4,870 6,897 2,491 3,455

Net amount 144,700 132,293 81,603 71,170

Amount recognized in the consolidated statements of

financial position

Net defined benefit asset (21,057) (28,334) (6,544) (1,775)

Net defined benefit liability 165,757 160,627 88,147 72,945

Net amount 144,700 132,293 81,603 71,170

Present value of defined benefit obligations

The changes in the defined benefit obligations for the fiscal years ended March 31, 2022 and 2023 are as

follows:

Yen in millions

Japanese plans Foreign plans

Fiscal year ended March 31 Fiscal year ended March 31

2022 2023 2022 2023

Beginning balance of the fiscal year 640,061 614,763 371,239 277,903

Current service cost 12,868 12,660 2,424 2,319

Past service cost 4 5 (34) (365)

Interest cost 3,751 4,367 5,117 4,623

Remeasurements:

Change in demographic assumptions (536) 2,974 630 (458)

Change in financial assumptions (8,594) (27,314) (16,789) (60,179)

Other (95) (569) (91) (940)

Translation adjustments — — 19,372 11,213

Plan participants’ contributions — — 333 516

Benefits paid (32,909) (33,741) (38,923) (9,798)

Curtailments and settlements * — — (65,375) (100,132)

Other 213 (2) — —

Ending balance of the fiscal year 614,763 573,143 277,903 124,702

* Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to

the termination of the defined benefit pension plan at certain U.S. subsidiaries. Curtailments and settlements

of the foreign plans for the fiscal year ended March 31, 2023 relate mainly to the termination of the defined

benefit pension plan at certain U.K. subsidiaries.

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The weighted average duration of defined benefit obligations for the fiscal years ended March 31, 2022 and

2023 is as follows:

Japanese plans Foreign plans

March 31 March 31

2022 2023 2022 2023

Weighted average duration of defined benefit

obligations 11.5 years 11.2 years 15.7 years 12.2 years

The significant actuarial assumptions used to determine the present value of defined benefit obligations as

of March 31, 2022 and 2023 are as follows:

Japanese plans Foreign plans

March 31 March 31

2022 2023 2022 2023

Discount rate 0.7% 1.1% 2.5% 4.3%

The sensitivities of the defined benefit obligations to changes in the significant weighted-average actuarial

assumptions are as follows:

Yen in millions

Japanese plans Foreign plans

March 31 March 31

Change in assumptions 2022 2023 2022 2023

Discount rate

0.25% decrease 18,069 16,042 11,055 3,487

0.25% increase (15,372) (13,201) (10,439) (3,316)

The sensitivity analyses are calculated using the same method used to determine the defined benefit liability

recognized in the consolidated statements of financial position while holding all other assumptions consistent.

Fair value 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 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 current economic conditions 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 their dependence on contributions from

Sony. To mitigate any potential concentration risk of plan assets, 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, 2023, are, as a result of Sony’s asset liability management, 15% (2022: 16%) of equity securities, 53%

(2022: 52%) of fixed income securities and 32% (2022: 32%) of other investments for the pension plans of Sony

Group Corporation and most of its subsidiaries in Japan, and, on a weighted average basis, 1% (2022: 1%) of

equity securities, 28% (2022: 22%) of fixed income securities and 71% (2022: 77%) of other investments for the

pension plans of foreign subsidiaries.

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The changes in the plan assets for the fiscal years ended March 31, 2022 and 2023 are as follows:

Yen in millions

Japanese plans Foreign plans

Fiscal year ended

March 31

Fiscal year ended

March 31

2022 2023 2022 2023

Beginning balance of the fiscal year 476,411 474,933 288,394 198,791

Interest income 3,026 3,649 3,955 2,804

Remeasurements:

Return on plan assets excluding interest income 17,617 (13,378) (10,121) (43,173)

Translation adjustments — — 13,880 5,760

Employer contribution 2,476 5,650 4,573 3,444

Plan participants’ contributions — — 333 516

Benefits paid (24,597) (23,107) (37,545) (8,240)

Refunds from the plans — — (5,005) —

Curtailments and settlements * — — (59,673) (102,915)

Ending balance of the fiscal year 474,933 447,747 198,791 56,987

* Curtailments and settlements of the foreign plans for the fiscal year ended March 31, 2022 relate mainly to

the termination of the defined benefit pension plan at certain U.S. subsidiaries. Curtailments and settlements

of the foreign plans for the fiscal year ended March 31, 2023 relate mainly to the termination of the defined

benefit pension plan at certain U.K. subsidiaries.

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 defined benefit

obligations. Sony expects to contribute approximately 2 billion yen to the Japanese plans and approximately

5 billion yen to the foreign plans during the fiscal year ending March 31, 2024.

The fair values of the assets held by Japanese and foreign plans are as follows:

Yen in millions

Japanese plans

March 31

2022

Market price in active

market

Asset class Quoted Unquoted

Cash and cash equivalents 13,843 13,843 —

Equity securities*1 31,660 28,175 3,485

Fixed income:

Government bonds*2 10,005 1,122 8,883

Corporate bonds*3 4,222 31 4,191

Commingled funds*4 316,319 — 316,319

Private equity 49,777 — 49,777

Hedge funds 49,107 — 49,107

Total 474,933 43,171 431,762

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Yen in millions

Japanese plans

March 31

2023

Market price in active

market

Asset class Quoted Unquoted

Cash and cash equivalents 18,060 18,060 —

Equity securities*1 37,562 33,335 4,227

Fixed income:

Government bonds*2 10,369 975 9,394

Corporate bonds*3 4,587 25 4,562

Commingled funds*4 287,978 — 287,978

Private equity 40,612 — 40,612

Hedge funds 48,579 — 48,579

Total 447,747 52,395 395,352

*1 Represents primarily Japanese equity securities.

*2 Includes approximately 84% and 85% of debt securities issued by Japanese national and local

governments, and 16% and 15% of debt securities issued by foreign national and local governments as

of the fiscal years ended March 31, 2022 and 2023, respectively.

*3 Includes debt securities issued by Japanese and foreign corporations and government related agencies.

*4 Commingled funds represent pooled institutional investments, including primarily investment trusts.

Yen in millions

Foreign plans

March 31

2022

Market price in active

market

Asset class Quoted Unquoted

Cash and cash equivalents 2,350 2,350 —

Equity securities*1 61 61 —

Fixed income:

Government bonds*2 19,141 — 19,141

Corporate bonds*3 23,546 — 23,546

Asset-backed securities 63 — 63

Insurance contracts*4 129,084 432 128,652

Commingled funds*5 22,316 — 22,316

Real estate and other 2,230 8 2,222

Total 198,791 2,851 195,940

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Yen in millions

Foreign plans

March 31

2023

Market price in active

market

Asset class Quoted Unquoted

Cash and cash equivalents 2,403 2,403 —

Equity securities*1 65 65 —

Fixed income:

Government bonds*2 2,135 — 2,135

Corporate bonds*3 12,052 — 12,052

Asset-backed securities 61 — 61

Insurance contracts*4 19,401 341 19,060

Commingled funds*5 18,113 — 18,113

Real estate and other 2,757 8 2,749

Total 56,987 2,817 54,170

*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 and bulk insurance contracts.

*5 Commingled funds represent pooled institutional investments, including primarily investment trusts.

The impact of minimum funding requirement and asset ceiling

The impact of minimum funding requirement and asset ceiling for the fiscal years ended March 31, 2022

and 2023 is as follows:

Yen in millions

Japanese plans Foreign plans

Fiscal year ended March 31 Fiscal year ended March 31

2022 2023 2022 2023

Beginning balance of the fiscal year 3,990 4,870 13,156 2,491

Interest income 25 39 187 65

Remeasurements:

Change in asset ceiling excluding

interest income 855 1,988 (11,018) 811

Translation adjustments — — 166 88

Ending balance of the fiscal year 4,870 6,897 2,491 3,455

(2) Defined contribution plans

Total defined contribution expenses for the fiscal years ended March 31, 2021, 2022 and 2023 are as

follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Japanese plans 10,992 11,137 11,461

Foreign plans 9,639 11,154 17,271

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(3) Employee benefits expenses

Employee benefits expenses included in cost of sales, selling, general and administrative, and financial

services expenses in the consolidated statements of income for the fiscal years ended March 31, 2021, 2022 and

2023 are as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Total employee benefits expenses 1,187,119 1,253,148 1,539,965

Employee benefits expenses include salaries, bonuses, stock-based compensation, social security, welfare

and expenses relating to post-employment benefits.

18. Participation and residual liabilities in the Pictures segment

The changes in participation and residual liabilities for the fiscal year ended March 31, 2023 are as follows:

Yen in millions

Fiscal year ended

March 31

2023

Balance at beginning of the fiscal year 410,275

Current portion 190,162

Non-current portion 220,113

Additional participation and residual liabilities 210,226

Amounts paid during the year (220,415)

Unpaid amounts reversed during the year (13,605)

Translation adjustment 36,694

Balance at end of the fiscal year 423,175

Current portion 230,223

Non-current portion 192,952

There was no material change due to discounting during the fiscal year.

19. Other assets and other liabilities

(1) Other assets

Components of other assets as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Advance payments and prepaid expenses 384,299 481,080

Income taxes receivable and other taxes receivable 169,580 243,569

Other 208,241 207,627

Total 762,120 932,276

Current assets 473,070 610,330

Non-current assets 289,050 321,946

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(2) Other liabilities

Components of other liabilities as of March 31, 2022 and 2023 are as follows:

Yen in millions

March 31

2022 2023

Contract liabilities 366,227 508,454

Accrued short-term employee benefits 347,023 395,110

Refund liabilities 197,791 197,836

Taxes payable other than income taxes 163,316 185,224

Accrued expenses 177,404 177,789

Future insurance policy benefits and other 153,006 162,091

Other long-term employee benefit obligations 15,030 64,684

Product warranties 28,606 26,167

Other 146,566 130,573

Total 1,594,969 1,847,928

Current liabilities 1,488,488 1,720,335

Non-current liabilities 106,481 127,593

(Changes in presentation)

Other long-term employee benefit obligations, which were included within Other as of March 31, 2022, are

now reclassified and presented as part of a separate caption due to an increase in materiality. Other long-term

employee benefit obligations of 15,030 million yen, which were included within Other as of March 31, 2022

have been reclassified to conform to this change in presentation.

The changes in product warranties for the fiscal year ended March 31, 2023 are as follows:

Yen in millions

Fiscal year ended

March 31

2023

Balance at beginning of the fiscal year 28,606

Additional product warranties 22,963

Amounts used during the year (20,442)

Unused amounts reversed during the year (6,359)

Translation adjustment 1,399

Balance at end of the fiscal year 26,167

20. Stockholders’ equity

(1) Common stock

The number of shares of common stock authorized as of March 31, 2021, 2022 and 2023 was

3,600,000,000.

The following table shows the changes in the number of shares of common stock issued and outstanding

during the fiscal years ended March 31, 2021, 2022 and 2023. All of the shares of common stock of Sony Group

Corporation are issued with no par value, and the issued stock was fully paid.

Number of shares

Fiscal year ended March 31

2021 2022 2023

Balance at beginning of the fiscal year 1,261,058,781 1,261,058,781 1,261,081,781

Issuance of new shares — 23,000 —

Balance at end of the fiscal year 1,261,058,781 1,261,081,781 1,261,081,781

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As of March 31, 2021, 2022 and 2023, the number of shares of treasury stock, which was included in the

balance of common stock shares issued above, were 21,831,206 shares, 24,078,136 shares and 26,584,221 shares,

respectively.

Sony Group 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 of

Japan.

Although Sony Group Corporation approved on August 4, 2020 by resolution of the Board of Directors the

setting of parameters for the repurchase of shares of its own common stock pursuant to the Companies Act of

Japan and Sony Group Corporation’s Articles of Incorporation, no common stock was acquired based on these

parameters.

Sony Group Corporation’s Board of Directors resolved and approved the setting of parameters for the

repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group

Corporation’s Articles of Incorporation at the meeting of the Board of Directors held on April 28, 2021. Under

the above resolution, Sony Group Corporation repurchased 7,400,600 shares of its common stock for an amount

of 88,281 million yen during the fiscal year ended March 31, 2022, and repurchased 806,300 shares of its

common stock for an amount of 9,100 million yen during the fiscal year ended March 31, 2023.

Sony Group Corporation’s Board of Directors resolved and approved the setting of parameters for the

repurchase of shares of its own common stock pursuant to the Companies Act of Japan and Sony Group

Corporation’s Articles of Incorporation at the meeting of the Board of Directors held on May 10, 2022. Under the

above resolution, Sony Group Corporation repurchased 8,545,600 shares of its common stock for an amount of

89,118 million yen during the fiscal year ended March 31, 2023.

(2) Additional paid-in capital

Additional paid-in capital consists of surplus that is derived from equity transactions and not recorded in

common stock, and its primary component is capital reserves. The Companies Act of Japan provides that no less

than 50% of the paid-in amount or proceeds of issuance of shares shall be incorporated in common stock, and

that the remaining shall be incorporated in capital reserves. Capital reserves may be incorporated in common

stock upon approval of the General Meeting of Shareholders.

(3) Retained earnings

Retained earnings consist of legal reserves and accumulated earnings. The Companies Act of Japan provides

that earnings in an amount equal to 10% of cash dividends from retained earnings shall be appropriated as a

capital reserve or a legal reserve on the date of distribution of retained earnings until an aggregated amount of

capital reserve and legal reserve equals 25% of common stock. Legal reserves may be used upon approval of the

General Meeting of Shareholders.

Dividends whose record date falls in the fiscal years ended March 31, 2022 and 2023, and whose effective

date falls in the subsequent period are as follows:

(Resolution)

Type of

shares

Total amount of

dividends

(Yen in millions)

Source of

dividends

Dividends

per share (Yen) Record date

Effective

date

Board of Directors’ meeting

held on May 10, 2022 Common stock 43,295 Retained earnings 35.00 March 31, 2022 June 3, 2022

Board of Directors’ meeting

held on April 28, 2023 Common stock 49,380 Retained earnings 40.00 March 31, 2023 June 5, 2023

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(4) Other comprehensive income

Changes in accumulated other comprehensive income, net of tax, by component for the fiscal years ended

March 31, 2021, 2022 and 2023 are as follows:

Yen in millions

Balance at

April 1, 2020

Other

comprehensive

income

attributable to

Sony Group

Corporation’s

stockholders

Transfer to

retained

earnings

Transactions

with

noncontrolling

interests

shareholders

and other

Balance at

March 31, 2021

Changes in equity instruments measured at fair

value through other comprehensive income (8,882) 144,544 6,085 (2,125) 139,622

Changes in debt instruments measured at fair

value through other comprehensive income 985,234 (179,251) — 458,754 1,264,737

Cash flow hedges 1,248 51 — — 1,299

Remeasurement of defined benefit pension

plans — 11,555 (11,555) — —

Exchange differences on translating foreign

operations — 113,771 — 130 113,901

Insurance contract valuation adjustments 1,973 (2,537) — 476 (88)

Share of other comprehensive income of

investments accounted for using the equity

method (97) 885 (2) — 786

Total 979,476 89,018 (5,472) 457,235 1,520,257

Yen in millions

Balance at

April 1, 2021

Other

comprehensive

income

attributable to

Sony Group

Corporation’s

stockholders

Transfer to

retained

earnings

Balance at

March 31, 2022

Changes in equity instruments measured at fair

value through other comprehensive income 139,622 (106,426) (5,784) 27,412

Changes in debt instruments measured at fair

value through other comprehensive income 1,264,737 (416,904) — 847,833

Cash flow hedges 1,299 4,735 — 6,034

Remeasurement of defined benefit pension

plans — 33,641 (33,641) —

Exchange differences on translating foreign

operations 113,901 223,777 — 337,678

Insurance contract valuation adjustments (88) 599 — 511

Share of other comprehensive income of

investments accounted for using the equity

method 786 2,078 — 2,864

Total 1,520,257 (258,500) (39,425) 1,222,332

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Yen in millions

Balance at

April 1, 2022

Other

comprehensive

income

attributable to

Sony Group

Corporation’s

stockholders

Transfer to

retained

earnings

Balance at

March 31, 2023

Changes in equity instruments measured at fair

value through other comprehensive income 27,412 (36,862) 298 (9,152)

Changes in debt instruments measured at fair

value through other comprehensive income 847,833 (884,678) — (36,845)

Cash flow hedges 6,034 12,379 — 18,413

Remeasurement of defined benefit pension

plans — 18,891 (18,891) —

Exchange differences on translating foreign

operations 337,678 175,525 — 513,203

Insurance contract valuation adjustments 511 1,714 — 2,225

Share of other comprehensive income of

investments accounted for using the equity

method 2,864 3,699 — 6,563

Total 1,222,332 (709,332) (18,593) 494,407

Each component of other comprehensive income and the related tax effect including noncontrolling interests

for the fiscal years ended March 31, 2021, 2022 and 2023 are as follows:

Yen in millions

Fiscal year ended March 31

Comprehensive income components 2021 2022 2023

Items that will not be reclassified to profit or loss

Changes in equity instruments measured at fair value through other

comprehensive income

Amount incurred during the year 191,122 (139,511) (45,708)

Total before tax 191,122 (139,511) (45,708)

Tax expense or (benefit) (46,382) 33,085 8,846

Net of tax 144,740 (106,426) (36,862)

Remeasurement of defined benefit pension plans

Amount incurred during the year 17,856 43,134 27,136

Total before tax 17,856 43,134 27,136

Tax expense or (benefit) (6,301) (9,493) (8,245)

Net of tax 11,555 33,641 18,891

Share of other comprehensive income of investments accounted for

using the equity method

Amount incurred during the year 98 869 197

Total before tax 98 869 197

Tax expense or (benefit) (11) (292) (52)

Net of tax 87 577 145

Total 156,382 (72,208) (17,826)

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Yen in millions

Fiscal year ended March 31

Comprehensive income components 2021 2022 2023

Items that may be reclassified subsequently to profit or loss

Changes in debt instruments measured at fair value through other

comprehensive income

Amount incurred during the year (285,504) (572,692) (1,223,450)

Reclassification to profit or loss (98) (6,408) (5,300)

Total before tax (285,602) (579,100) (1,228,750)

Tax expense or (benefit) 80,053 162,196 344,072

Net of tax (205,549) (416,904) (884,678)

Cash flow hedges

Amount incurred during the year 7,481 (7,703) (12,975)

Reclassification to profit or loss (7,228) 14,529 30,813

Total before tax 253 6,826 17,838

Tax expense or (benefit) (202) (2,091) (5,459)

Net of tax 51 4,735 12,379

Insurance contract valuation adjustments

Amount incurred during the year (3,081) 807 2,463

Reclassification to profit or loss (39) (10) (83)

Total before tax (3,120) 797 2,380

Tax expense or (benefit) — (198) (666)

Net of tax (3,120) 599 1,714

Exchange differences on translating foreign operations

Amount incurred during the year 115,304 227,017 177,645

Reclassification to profit or loss 17 (742) 630

Total before tax 115,321 226,275 178,275

Tax expense or (benefit) — — —

Net of tax 115,321 226,275 178,275

Share of other comprehensive income of investments accounted for

using the equity method

Amount incurred during the year 798 1,501 3,554

Reclassification to profit or loss — — —

Total before tax 798 1,501 3,554

Tax expense or (benefit) — — —

Net of tax 798 1,501 3,554

Total (92,499) (183,794) (688,756)

Total other comprehensive income 63,883 (256,002) (706,582)

(5) Equity transactions with noncontrolling interests shareholders

During the fiscal year ended March 31, 2021, Sony Group Corporation acquired all the common shares and

the related stock acquisition rights not held by Sony Group Corporation of SFGI, a consolidated subsidiary of

Sony Group Corporation, and SFGI became a wholly-owned subsidiary of Sony Group Corporation.

Consideration for this acquisition was 396,698 million yen. The net difference between the consideration, the

decrease in the carrying amount of the noncontrolling interests of 1,046,380 million yen and the increase in

accumulated other comprehensive income of 457,072 million yen was recognized as an increase to additional

paid-in capital of 192,610 million yen.

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21. Stock-based compensation plans

The stock-based compensation expense for the fiscal years ended March 31, 2021, 2022 and 2023 was

8,892 million yen, 11,105 million yen and 15,781 million yen, respectively.

Sony Group Corporation principally has a stock-based compensation incentive plan for the corporate

executive officers and employees of Sony Group Corporation, and the directors, other officers and employees of

its subsidiaries in the form of a stock option plan. The stock acquisition rights granted under the stock option plan

generally have three-year vesting schedules and are exercisable up to 10 years from the date of grant. Sony

Group Corporation either issues new shares of common stock or reissues existing treasury stock upon the

exercise of these rights.

The weighted-average fair value per share at the date of grant of stock acquisition rights granted during the

fiscal years ended March 31, 2021, 2022 and 2023 was 2,207 yen, 2,994 yen and 3,123 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, 2021, 2022 and 2023 was estimated using the Black-Scholes option-pricing

model with the following weighted-average assumptions:

Fiscal year ended March 31

2021 2022 2023

Weighted-average assumptions

Share price at the grant date 9,202 yen 14,361 yen 11,389 yen

Risk-free interest rate 0.17% 0.60% 1.88%

Expected lives 5.41 years 5.33 years 5.46 years

Expected volatility* 26.97% 22.47% 26.55%

Expected dividends 0.34% 0.29% 0.47%

* Expected volatility was based on the historical volatilities of Sony Group Corporation’s common stock over

the expected life of the stock acquisition rights.

A summary of the activities regarding the stock option plan during the fiscal years ended March 31, 2021,

2022 and 2023 is as follows:

Fiscal year ended March 31

2021 2022 2023

Number of

shares

Weightedaverage exercise

price

Number of

shares

Weightedaverage exercise

price

Number of

shares

Weightedaverage exercise

price

Yen Yen Yen

Outstanding at beginning of the

fiscal year 12,876,700 4,982 14,022,400 6,653 16,544,300 9,397

Granted 4,534,600 9,221 4,876,400 14,188 4,744,300 10,979

Exercised 3,178,300 3,911 1,944,900 5,313 1,260,800 5,565

Forfeited or expired 210,600 6,280 409,600 9,484 336,300 12,654

Outstanding at end of the fiscal

year 14,022,400 6,653 16,544,300 9,397 19,691,500 10,312

Exercisable at end of the fiscal

year 5,800,700 4,535 7,044,700 5,883 9,683,000 8,033

The weighted-average stock price at the time when the stock acquisition rights were exercised during the

fiscal years ended March 31, 2021, 2022 and 2023 was 9,311 yen, 12,627 yen and 11,404 yen, respectively.

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A summary of unexercised stock acquisition rights as of March 31, 2021, 2022 and 2023 is as follows:

Series Date of grant Exercise term

Exercise

price

Outstanding at end of the

fiscal year

(shares)

2021 2022 2023

22nd November 22, 2011 November 22, 2012

to November 21, 2021

¥ 1,523 24,700 — —

23rd November 22, 2011 November 22, 2012

to November 21, 2021

$ 19.44 77,500 — —

24th December 4, 2012 December 4, 2013

to December 3, 2022

¥ 932 24,000 14,700 —

25th December 4, 2012 December 4, 2013

to December 3, 2022

$ 11.23 102,600 77,900 —

26th November 20, 2013 November 20, 2014

to November 19, 2023

¥ 2,007 88,500 47,000 14,400

27th November 20, 2013 November 20, 2014

to November 19, 2023

$ 20.01 140,900 127,300 110,700

28th November 20, 2014 November 20, 2015

to November 19, 2024

¥2,410.5 243,700 190,900 132,500

29th November 20, 2014 November 20, 2015

to November 19, 2024

$ 20.67 167,300 154,100 135,500

30th November 19, 2015 November 19, 2016

to November 18, 2025

¥ 3,404 323,900 252,600 186,900

31st November 19, 2015 November 19, 2016

to November 18, 2025

$ 27.51 218,800 170,800 148,200

32nd November 22, 2016 November 22, 2017

to November 21, 2026

¥ 3,364 672,100 516,300 390,400

33rd November 22, 2016 November 22, 2017

to November 21, 2026

$ 31.06 446,200 367,900 330,500

34th November 21, 2017 November 21, 2018

to November 20, 2027

¥ 5,231 872,800 572,500 434,200

35th November 21, 2017 November 21, 2018

to November 20, 2027

$ 45.73 787,200 676,400 620,500

36th February 28, 2018 February 28, 2019

to February 27, 2028

¥ 5,442 5,800 4,500 3,900

38th November 20, 2018 November 20, 2019

to November 19, 2028

¥ 6,440 1,290,600 977,800 839,900

39th November 20, 2018 November 20, 2019

to November 19, 2028

$ 56.22 987,300 826,800 760,500

40th November 20, 2019 November 20, 2020

to November 19, 2029

¥ 6,705 1,645,300 1,389,700 1,210,100

41st November 20, 2019 November 20, 2020

to November 19, 2029

$ 60.99 1,393,400 1,190,800 1,076,300

42nd April 17, 2020 April 17, 2021

to April 16, 2030

$ 63.75 20,000 13,300 13,300

43rd November 18, 2020 November 18, 2021

to November 17, 2030

¥ 9,237 2,252,000 2,193,000 2,060,400

44th November 18, 2020 November 18, 2021

to November 17, 2030

$ 87.48 2,222,800 1,974,800 1,862,100

45th November 18, 2021 November 18, 2022

to November 17, 2031

¥ 14,350 — 2,399,100 2,367,500

46th November 18, 2021 November 18, 2022

to November 17, 2031

$ 124.90 — 2,391,100 2,277,100

47th November 16, 2022 November 16, 2023

to November 15, 2032

¥ 11,390 — — 2,427,100

48th November 16, 2022 November 16, 2023

to November 15, 2032

$ 77.89 — — 2,289,500

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22. Revenue

(1) Contract balances

Receivables from contracts with customers, contract assets and contract liabilities are comprised of the

following:

Yen in millions

April 1 March 31

2021 2022

Receivables from contracts with customers*1 1,177,027 1,382,377

Contract assets*2 12,204 16,785

Contract liabilities*3 294,911 366,227

Yen in millions

April 1 March 31

2022 2023

Receivables from contracts with customers*1 1,382,377 1,679,106

Contract assets*2 16,785 19,355

Contract liabilities*3 366,227 508,454

*1 Receivables from contracts with customers are included in the consolidated statements of financial

position as “Trade and other receivables, and contract assets” and “Other financial assets,” non-current.

*2 Contract assets are included in the consolidated statements of financial position as “Trade and other

receivables, and contract assets” and “Other non-current assets.”

*3 Contract liabilities are included in the consolidated statements of financial position as “Other current

liabilities” and “Other non-current liabilities.”

Contract liabilities principally relate to customer advances received prior to performance. Revenues of

216,931 million yen, 231,274 million yen and 303,779 million yen were recognized during the fiscal years ended

March 31, 2021, 2022 and 2023, which were included in the balance of contract liabilities as of April 1, 2020,

2021 and 2022. Revenues of 76,405 million yen, 78,149 million yen and 45,645 million yen were recognized

during the fiscal years ended March 31, 2021, 2022 and 2023 respectively, from performance obligations

satisfied prior to April 1, 2020, 2021 and 2022 respectively.

(2) Performance obligations

Remaining (unsatisfied or partially unsatisfied) performance obligations represent future revenues not yet

recorded for firm orders that have not yet been performed. Sony applies practical expedients to exclude contracts

with an expected original duration of one year or less. The following table shows the summary of the transaction

prices allocated to remaining performance obligations that are unsatisfied as of March 31, 2022 and 2023,

respectively, of which more than half are expected to be recognized within one year and substantially all within

three years. The amount of the transaction price related to variable consideration is included only to the extent

that it is highly probable that a significant reversal in the amount of cumulative revenue to be recognized will not

occur.

Yen in millions

March 31

2022 2023

Pictures — Motion Pictures and Television Productions*1 705,974 796,690

Pictures — Media Networks 17,568 8,120

Music*2 127,530 140,842

Others 57,948 68,708

*1 For Motion Pictures and Television Productions in the Pictures segment, Sony has included all contracts

regardless of duration.

*2 The amount included in the Music segment primarily consists of minimum royalty guarantees or fixed

fees in contracts related to license revenue for ongoing access to an evolving library of content.

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(3) Contract costs

Contract costs are comprised as follows:

Yen in millions

March 31

2022 2023

Incremental costs of obtaining a contract 7,336 6,110

Sony applies practical expedients to recognize the incremental costs of obtaining a contract as an expense if

the amortization period of the asset that otherwise would have been recognized is one year or less. The

amortization of 7,271 million yen, 6,917 million yen and 4,686 million yen was recognized during the fiscal

years ended March 31, 2021, 2022 and 2023, respectively. The incremental costs of obtaining a contract are

primarily recognized in the ET&S segment for the internet-related service business and amortized to expense

over the contract period.

(4) Disaggregation of revenue

For the breakdown of sales and financial services revenue by segments, product categories and geographies,

refer to Note 4.

23. Supplemental consolidated statements of income information

(1) Other operating (income) expense, net

Sony records transactions in other operating (income) 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 (income) expense, net is comprised of the following:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Gain on transfer of GSN Games shares*1 — (70,020) —

(Gain) loss on purchase/sale of interests in subsidiaries and

associates, net (18,868) (4,593) (4,318)

(Gain) loss on sale, disposal or impairment of assets, net*2 32,122 8,316 (417)

Other 996 803 (7,286)

14,250 (65,494) (12,021)

*1 Refer to Note 31.

*2 Refer to Notes 9 and 11.

(2) Research and development expenditures

Research and development expenditures recognized as an expense for the fiscal years ended March 31,

2021, 2022 and 2023 were 545,357 million yen, 618,368 million yen and 735,698 million yen, respectively.

(3) Advertising costs

Advertising costs included in selling, general and administrative expenses for the fiscal years ended

March 31, 2021, 2022 and 2023 were 261,391 million yen, 347,709 million yen and 391,131 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, 2021, 2022 and 2023 were 82,708 million yen, 70,858 million yen and

95,208 million yen, respectively, which included the internal transportation costs of finished goods.

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24. Financial income and expense

Financial income

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Interest income

Financial assets measured at AC 7,610 6,996 22,399

Dividends

Financial assets measured at FVOCI 1,566 2,792 3,488

Gain on revaluation of equity instruments

Financial assets measured at FVPL*2 61,259 — —

Other 13,357 9,516 5,171

Total 83,792 19,304 31,058

Financial expenses

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Interest expense

Financial liabilities measured at AC 5,916 6,377 16,016

Other 8,292 8,223 10,382

Foreign exchange loss, net*1 16,191 1,612 14,489

Loss on revaluation of equity instruments

Financial assets measured at FVPL*2 — 66,177 4,623

Other 10,683 21,751 13,441

Total 41,082 104,140 58,951

*1 Foreign exchange loss, net includes gains or losses from foreign exchange contracts.

*2 Shares of Spotify Technology S.A. (“Spotify”) held by Sony are classified as equity securities required

to be measured at fair value through profit or loss. The revaluation of the Spotify shares, net of costs to

be paid to Sony’s artists and distributed labels, owned as of March 31, 2021, March 31, 2022 and

March 31, 2023 resulted in an unrealized gain of 51,310 million yen (480 million U.S. dollars), an

unrealized loss of 45,017 million yen (395 million U.S. dollars), and an unrealized loss of 7,787 million

yen (58 million U.S. dollars), respectively.

25. Income taxes

Income (loss) before income taxes and the provision for current and deferred income taxes attributable to

such income are as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Income (loss) before income taxes: 997,965 1,117,503 1,180,313

Income tax expenses

Current 156,592 238,602 302,379

Deferred (202,523) (9,505) (65,688)

Total income tax expense (45,931) 229,097 236,691

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A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as

follows:

Fiscal year ended March 31

2021 2022 2023

Statutory tax rate 31.5% 31.5% 31.5%

Non-deductible expenses 0.2 0.2 0.2

Income tax credits (1.4) (1.9) (3.2)

Change in statutory tax rate (0.1) (0.2) (0.1)

Change in unrecognized tax assets (other than the reversal

of a previous write-down of the deferred tax assets

below) (5.5) (3.7) (1.1)

Reversal of a previous write-down of the deferred tax assets

of the consolidated tax filing group in the United States (6.6) — —

Reversal of a previous write-down of the deferred tax assets

relating to the national tax of Sony Group Corporation

and its national tax filing group in Japan (21.5) — —

Change in deferred tax liabilities on undistributed earnings

of foreign subsidiaries and corporate joint ventures 0.7 1.0 1.6

Lower tax rate applied to life and non-life insurance

business in Japan (0.5) (0.4) (0.6)

Foreign income tax differential (4.4) (5.5) (6.4)

Recording or reversal of liabilities for uncertain tax

positions (0.4) 0.8 (0.3)

Controlled Foreign Company taxation in Japan 3.0 (1.8) (2.1)

Other 0.4 0.5 0.6

Effective income tax rate -4.6% 20.5% 20.1%

Sony recognizes deferred tax assets, which include temporary differences, net operating losses and tax

credits, to the extent that it is probable that taxable profit will be available against which the assets can be

utilized. The realization of deferred tax assets is dependent upon the generation of future taxable income in the

relevant tax jurisdiction.

During the fiscal year ended March 31, 2021, Sony assessed the recoverability of deferred tax assets, and

reversed a previous write-down of the deferred tax assets for general business tax credits and foreign tax credits

of the consolidated tax filing group in the United States. The impact of such reversal of a previous write-down of

the deferred tax assets resulted in deferred tax benefits.

Despite the spread of COVID-19, as a result of the acquisition of SFGI in the three months ended

September 30, 2020, the taxable income of Sony Group Corporation and its national tax filing group in Japan has

increased and is expected to be stable going forward. Based on an assessment of the available evidence, in

particular recent profit history and forecasted profitability, in the three months ended September 30, 2020, Sony

reversed a previous write-down of a significant portion of the deferred tax assets of the consolidated tax filing

group in Japan, primarily for temporary differences and certain net operating losses. As a result, Sony recorded a

tax benefit of 214,346 million yen in the three months ended September 30, 2020. Remaining deferred tax assets

in Japan, primarily foreign tax credits, are continuously not recognized due to restrictions on the use of such

assets and their relatively short remaining carryforward periods.

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The schedules of deferred tax assets and liabilities by major cause of their occurrence are as follows:

Yen in millions

Fiscal year ended March 31, 2022

Beginning

balance

Recognized

in profit or

loss

Recognized in

other

comprehensive

income

Changes

accompanying

business

combination

Recognized

directly in

equity Other*

Ending

balance

Deferred tax assets:

Operating loss

carryforwards for tax

purposes 86,170 (16,573) — — — 1,490 71,087

Defined benefit liabilities 62,426 20,721 (9,493) — 1,640 (2,729) 72,565

Amortization including

content assets 44,251 (20,323) — — — 2,831 26,759

Lease liabilities 90,818 5,091 — 1,244 — (1,053) 96,100

Warranty reserves and

accrued expenses 129,649 8,389 — 134 — 3,172 141,344

Inventories 29,714 (547) — — — 379 29,546

Depreciation 40,231 2,539 — 161 — 258 43,189

Tax credit carryforwards 48,315 (12,007) — — — 2,576 38,884

Loss allowances 7,165 98 — 2 — 483 7,748

Impairment of investments 6,800 3,418 — — — (402) 9,816

Deferred revenue 24,502 3,779 — — — 2,904 31,185

Other 152,242 (32,131) (538) 13,304 (125) 7,842 140,594

Total deferred tax assets 722,283 (37,546) (10,031) 14,845 1,515 17,751 708,817

Deferred tax liabilities:

Insurance acquisition costs (176,745) (13,182) (1,261) — — (286) (191,474)

Insurance contract liabilities (151,061) (10,796) (5,480) — — — (167,337)

Non-current other

receivables in the

Pictures segment (7,894) 8,009 — — — (115) —

Right-of-use assets (84,728) 25,955 — (1,245) — 452 (59,566)

Equity securities measured

at FVOCI (51,011) 1,841 33,085 — — 116 (15,969)

Equity securities measured

at FVPL (87,718) 36,915 — — — (2,336) (53,139)

Debt securities measured at

FVOCI (505,914) 9,822 168,937 — — (204) (327,359)

Intangible assets acquired

through stock exchange

offerings (23,949) — — — — — (23,949)

Intangible assets derived

from EMI Music

Publishing acquisition (93,481) (1,209) — — — (6,904) (101,594)

Undistributed earnings of

foreign subsidiaries and

corporate joint ventures (39,166) (15,031) — — — (1,834) (56,031)

Investment in M3 (41,347) (1,345) — — — — (42,692)

Other (60,187) 6,072 (292) (15,230) 765 1,262 (67,610)

Total deferred tax liabilities (1,323,201) 47,051 194,989 (16,475) 765 (9,849) (1,106,720)

* Other mainly consists of exchange differences on translating foreign operations.

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Yen in millions

Fiscal year ended March 31, 2023

Beginning

balance

Recognized

in profit or

loss

Recognized in

other

comprehensive

income

Changes

accompanying

business

combination

Recognized

directly in

equity Other*

Ending

balance

Deferred tax assets:

Operating loss

carryforwards for tax

purposes 71,087 (5,756) — 10,157 — 5,600 81,088

Defined benefit liabilities 72,565 5,826 (8,245) (28) (1,881) (1,102) 67,135

Amortization including

content assets 26,759 (1,675) — (25,695) — 2,828 2,217

Lease liabilities 96,100 12,628 — 221 — 4,378 113,327

Warranty reserves and

accrued expenses 141,344 4,240 — 1,599 — 2,644 149,827

Inventories 29,546 15,479 — — — (302) 44,723

Depreciation 43,189 (3,566) — — — 429 40,052

Debt securities measured at

FVOCI — — 28,658 — — — 28,658

Tax credit carryforwards 38,884 (12,297) — 5,792 — 3,845 36,224

Loss allowances 7,748 (1,857) — — — 259 6,150

Impairment of investments 9,816 (3,709) — — — (55) 6,052

Deferred revenue 31,185 22,076 — (2,299) — 2,478 53,440

Other 140,594 45,871 (2,408) 21,427 (985) 6,099 210,598

Total deferred tax assets 708,817 77,260 18,005 11,174 (2,866) 27,101 839,491

Deferred tax liabilities:

Insurance acquisition costs (191,474) (8,914) (5,769) — — (487) (206,644)

Insurance contract liabilities (167,337) (12,317) (1,398) — — 7,220 (173,832)

Non-current other

receivables in the

Pictures segment — — — — — — —

Right-of-use assets (59,566) (24,365) — (208) — (6,328) (90,467)

Equity securities measured

at FVOCI (15,969) 923 8,846 — — 1,823 (4,377)

Equity securities measured

at FVPL (53,139) 31,952 — — — (3,380) (24,567)

Debt securities measured at

FVOCI (327,359) 5,024 322,581 — — (246) —

Intangible assets acquired

through stock exchange

offerings (23,949) — — — — — (23,949)

Intangible assets derived

from EMI Music

Publishing acquisition (101,594) 2,277 — — — (6,639) (105,956)

Undistributed earnings of

foreign subsidiaries and

corporate joint ventures (56,031) (15,318) — — — 1,759 (69,590)

Investment in M3 (42,692) (4,646) — — — — (47,338)

Other (67,610) 13,812 (52) (3,120) (159) (7,127) (64,256)

Total deferred tax liabilities (1,106,720) (11,572) 324,208 (3,328) (159) (13,405) (810,976)

* Other mainly consists of exchange differences on translating foreign operations.

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As of March 31, 2022 and 2023, based on the assessment of recoverability of deferred tax assets, Sony

continued not to recognize the deferred tax assets at some entities in Japan, Sony Mobile Communications AB in

Sweden, Sony Europe B.V. in the United Kingdom, certain subsidiaries in Brazil, and certain subsidiaries in

other tax jurisdictions.

As of March 31, 2022 and 2023, the deductible temporary differences, operating loss carryforwards and tax

credit carryforwards for which no deferred tax asset is recognized are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Deductible temporary differences 154,581 126,406

Operating loss carryforwards 1,437,551 1,384,658

Tax credit carryforwards 19,066 18,853

As of March 31, 2022 and 2023, the expected expiration period of the operating loss carryforwards for

which no deferred tax asset is recognized are as follows:

Yen in millions

Fiscal year ended March 31

2022 2023

Within 5 years 599,333 602,799

Over 5 years to 10 years 277,418 250,587

Over 10 years to 15 years 23,974 25,786

Over 15 years 2,930 13,245

No expiration period 533,896 492,241

Total 1,437,551 1,384,658

As of March 31, 2022 and 2023, the expected expiration period of the tax credit carryforwards for which no

deferred tax asset is recognized is mostly within 5 years except for the amount with no expiration period. The

amount of tax credit carryforwards with no expiration date as of March 31, 2022 and March 31, 2023 was

1,803 million yen and 1,047 million yen, respectively.

Deferred income taxes have not been provided on taxable temporary differences for undistributed earnings

of certain foreign subsidiaries and corporate joint ventures which are not expected to be remitted in the

foreseeable future. As of March 31, 2022 and March 31, 2023, such taxable temporary differences amounted to

365,925 million yen and 560,888 million yen, respectively. The tax basis of these undistributed earnings was

approximately 5,855 million yen and 8,974 million yen, respectively. In addition, deferred income taxes have not

been provided on the taxable temporary differences in subsidiaries, including a 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 and the remeasurement gain on 116,939 million yen for the

pre-owned equity interest in EMI Music Publishing acquired in November 2018. Sony does not anticipate any

significant tax consequences on the possible future disposition of these investments based on its tax planning

strategies.

In addition, the deductible temporary differences arising from the translation adjustments for the foreign

operations for which deferred tax assets are not recognized as of March 31, 2022 and March 31, 2023 amounted

to 92,252 million yen and 181,037 million yen, respectively. The taxable temporary differences arising from the

translation adjustments for the foreign operations for which deferred tax liabilities are not recognized as of

March 31, 2022 and March 31, 2023 amounted to 429,930 million yen and 694,240 million yen, respectively.

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26. 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, 2021,

2022 and 2023 is as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Net income attributable to Sony Group Corporation’s

stockholders 1,029,610 882,178 937,126

Adjustment amount to net income attributable to Sony Group

Corporation’s stockholders for diluted EPS computation:

Zero coupon convertible bonds 385 163 51

Net income attributable to Sony Group Corporation’s

stockholders for diluted EPS computation 1,029,995 882,341 937,177

Thousands of shares

Fiscal year ended March 31

2021 2022 2023

Weighted-average shares outstanding for basic EPS

computation 1,230,480 1,239,299 1,235,701

Effect of dilutive securities:

Stock acquisition rights and other 4,474 5,470 3,646

Zero coupon convertible bonds 15,392 6,491 2,030

Weighted-average shares for diluted EPS computation 1,250,346 1,251,260 1,241,377

Yen

Fiscal year ended March 31

2021 2022 2023

Basic EPS 836.75 711.84 758.38

Diluted EPS 823.77 705.16 754.95

Potential shares of common stock which were excluded from the computation of diluted EPS for the fiscal

years ended March 31, 2021, 2022 and 2023 were 4,475 thousand shares, 4,790 thousand shares and

11,223 thousand shares, respectively, which primarily consisted of stock options.

27. Supplemental cash flow information

(1) Classification of cash flows in Financial Services segment

Sony classifies the cash flows from changes in assets and liabilities associated with the insurance business

and banking business, such as investments and advances, deposits from customers, policyholders’ account and

borrowings/debt, as cash flows from operating activities in the consolidated statements of cash flows.

(2) Classification of cash flows of content assets

Sony classifies the cash flows from the additions and disposals of content assets as cash flows from

operating activities in the consolidated statements of cash flows because the additions and disposals of content

assets are derived from the principal revenue-producing activities of Sony.

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(3) Interest and dividends

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Interest received

Financial services revenue 198,310 208,170 224,137

Financial income 8,409 6,988 20,872

Dividends received

Financial services revenue 19,299 27,075 23,409

Financial income 1,559 2,800 3,488

Interest paid

Financial services expenses 9,659 6,607 27,352

Financial expenses 8,172 8,843 11,663

The above are items presented in the consolidated statements of income, which include cash flows for

interest and dividends.

Sony classifies the cash flows from interest and dividends of the above as cash flows from operating

activities in the consolidated statements of cash flows.

(4) Non-cash investing and financing activities

There was an increase in ROU assets as a result of entering into lease contracts and the conversion of

convertible bonds during the fiscal years ended March 31, 2021, 2022 and 2023. Refer to (5) Reconciliation of

liabilities arising from financing activities for more details.

In addition, during the fiscal year ended March 31, 2022, a portion of the consideration received as a result

of the transfer of certain operations of Game Show Network, LLC was in the form of stock. Refer to Note 31 for

more details.

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(5) Reconciliation of liabilities arising from financing activities

Yen in millions

Short-term

borrowings

Long-term

debt

Balance as of April 1, 2020 66,631 817,919

Net cash flows from financing activities (18,334) 147,017

Acquisitions through business combinations — 59

Non-cash items:

Conversion of convertible bonds — (78,342)

Obtaining assets by entering into lease contracts — 56,247

Translation adjustment 106 15,514

Other 4,134 10,630

Total changes (14,094) 151,125

Balance as of March 31, 2021 52,537 969,044

Net cash flows from financing activities 408 (163,104)

Acquisitions through business combinations — 8,346

Non-cash items:

Conversion of convertible bonds — (14,597)

Obtaining assets by entering into lease contracts — 121,937

Translation adjustment 1,659 35,652

Other 1,487 (6,045)

Total changes 3,554 (17,811)

Balance as of March 31, 2022 56,091 951,233

Net cash flows from financing activities 32,391 229,578

Acquisitions through business combinations — 32,009

Non-cash items:

Conversion of convertible bonds — (26,563)

Obtaining assets by entering into lease contracts — 127,322

Translation adjustment 4,533 22,684

Other (369) (13,936)

Total changes 36,555 371,094

Balance as of March 31, 2023 92,646 1,322,327

The amount of short-term borrowings and long-term debt associated with the insurance business and

banking business operations, which are classified as cash flows from operating activities in the consolidated

statements of cash flows, is excluded from the amount above.

(6) Components of cash and cash equivalents

Yen in millions

March 31

2021 2022 2023

Cash and demand deposits 902,036 1,824,912 1,227,541

Time deposits with original maturities of three months or less 635,848 72,270 76,452

Money market funds 249,098 71,554 116,607

Call loans — 80,900 60,300

Total 1,786,982 2,049,636 1,480,900

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Cash and demand deposits, time deposits with original maturities of three months or less and call loans are

classified as financial assets required to be measured at amortized cost, whose carrying amounts approximate

their fair values mainly due to their short-term nature. Money market funds are short-term and highly liquid

investments with insignificant risk of changes in value. Money market funds are classified as financial assets

required to be measured at fair value through profit or loss and classified within Level 1 of the fair value

hierarchy.

28. Structured entities

Sony has, from time to time, entered into various arrangements with structured entities.

(1) Consolidated structured entities

Sony consolidates investment funds as structured entities in the Financial Services segment. The investment

funds are designed so that voting or similar rights are not the dominant factor in deciding who controls these

entities, but it is determined that Sony has control over these structured entities. Sony has not provided and does

not intend to provide any significant financial or other support to any of the consolidated structured entities

without contractual obligations to the investment funds. The assets and liabilities of structured entities that are

consolidated in the Financial Services segment are limited in their intended use by contractual arrangements. As

of March 31, 2022 and 2023, the total assets of these structured entities are 628,297 million yen and

2,486,836 million yen, respectively. The increase in the fiscal year ended March 31, 2023 is primarily due to the

transfer of equity securities which were previously directly held into investment funds.

Sony also consolidates several structured entities in the Music and Pictures segment. Sony has not provided

and does not intend to provide any significant financial or other support to these structured entities without

contractual obligation. The total assets and liabilities for these structured entities were insignificant to Sony’s

financial position.

(2) Unconsolidated structured entities

Certain trade receivable sales programs also involve structured entities. These structured entities are all

special purpose entities associated with the sponsor banks. Based on a qualitative assessment, Sony 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 structured entities. Sony’s maximum exposure to losses from

these structured entities is considered insignificant.

In the Financial Services segment, Sony enters into securitization transactions for certain housing loans,

involving unconsolidated structured entities. Sony derecognizes a financial asset when the contractual right to

receive the cash flows from the financial asset is transferred, or when Sony retains the contractual right to receive

the cash flows from the financial asset, but assumes a contractual obligation to pay the cash flows without

reinvestment or material delay to other recipients in an arrangement, and substantially all the risks and rewards of

ownership of the financial asset are transferred to another entity. Since the above securitization transactions do

not meet the requirements for derecognition of financial assets, such transferred assets are not derecognized.

Sony recorded 182,417 million yen and 168,173 million yen of transferred assets that do not meet the

requirement for derecognition of financial assets included in investments and advances in the Financial Services

segment as of March 31, 2022 and 2023, respectively. As of March 31, 2022 and 2023, the liabilities recorded

from these securitization transactions were 183,886 million yen and 169,500 million yen, respectively, which are

included in the current portion of long-term debt and long-term debt. The liabilities will be settled when the

payment for the transferred assets is executed and until this time, Sony is unable to utilize the transferred assets.

The transferee of the transferred assets has recourse only to the transferred asset, and as of March 31, 2022 and

2023, the fair value of the transferred assets are 187,555 million yen and 170,695 million yen, respectively and

the associated liabilities are 186,702 million yen and 169,931 million yen, respectively.

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In addition to the above, in the Financial Services segment, Sony makes investments in structured entities.

Sony’s investments in such structured entities include securitized products, foreign corporate bonds and other

investments. The following tables present the carrying amount of the investments of unconsolidated structured

entities, the presentation in the consolidated statements of financial position, and the maximum exposure to loss

associated with these investments as of March 31, 2022 and 2023. Maximum exposure to loss does not reflect

Sony’s estimate of the actual losses that could result from adverse changes, nor does it reflect the economic

hedges Sony enters into to reduce its exposure. The risks associated with structured entities in which Sony is

involved are limited to the amount recorded in the consolidated statements of financial position and the amount

of commitments.

Yen in millions

March 31, 2022

Presentation in the consolidated statements of financial position

Maximum exposure

to loss

Investments and

advances in the

Financial Services

segment

(Current assets)

Investments and

advances in the

Financial Services

segment

(Non-current assets)

Other financial assets

(Current assets)

Securitized products — 356,862 — 356,862

Foreign corporate bonds*1 28,412 168,167 — 196,579

Other investments*2 2 247,394 24,697 286,662

Total 28,414 772,423 24,697 840,103

Yen in millions

March 31, 2023

Presentation in the consolidated statements of financial position

Maximum exposure

to loss

Investments and

advances in the

Financial Services

segment

(Current assets)

Investments and

advances in the

Financial Services

segment

(Non-current assets)

Other financial assets

(Current assets)

Securitized products — 401,642 — 401,642

Foreign corporate bonds*1 20,806 186,878 — 207,684

Other investments*2 — 286,066 25,464 332,076

Total 20,806 874,586 25,464 941,402

*1 Foreign corporate bonds primarily include repackaged bonds.

*2 Other investments primarily include investment funds.

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29. Subsidiaries

The following table sets forth the major consolidated subsidiaries owned, directly or indirectly, by Sony

Group Corporation.

Name of company

Country of

incorporation

/residence

(As of March 31, 2023)

Percentage owned

Sony Interactive Entertainment Inc. Japan 100.0

Sony Music Entertainment (Japan) Inc. Japan 100.0

Sony Corporation Japan 100.0

Sony Global Manufacturing & Operations Corporation Japan 100.0

Sony Semiconductor Solutions Corporation Japan 100.0

Sony Semiconductor Manufacturing Corporation Japan 100.0

Sony Network Communications Inc. Japan 100.0

Sony Marketing Inc. Japan 100.0

Sony Storage Media Solutions Corporation Japan 100.0

Sony Financial Group Inc. Japan 100.0

Sony Life Insurance Co., Ltd. Japan 100.0

Sony Bank Inc. Japan 100.0

Sony Assurance Inc. Japan 100.0

Sony Corporation of America U.S.A. 100.0

Sony Interactive Entertainment LLC U.S.A. 100.0

Sony Music Entertainment U.S.A. 100.0

Sony Music Publishing LLC U.S.A. 100.0

Sony Pictures Entertainment Inc. U.S.A. 100.0

Sony Electronics Inc. U.S.A. 100.0

Sony Europe B.V. 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 (China) Limited China 100.0

Sony EMCS (Malaysia) Sdn. Bhd. Malaysia 100.0

Sony Electronics (Singapore) Pte. Ltd. Singapore 100.0

30. Acquisitions

(1) Fiscal year ended March 31, 2022

Acquisition of Ellation Holdings, Inc.

On August 9, 2021, Sony Pictures Entertainment Inc. (“SPE”), a wholly-owned subsidiary of Sony, through

Funimation Global Group, LLC (“Funimation”), acquired 100% of the equity interest in Ellation Holdings, Inc.

(“Ellation”), a subsidiary of AT&T Inc., which operates the anime business “Crunchyroll.” Funimation is a joint

venture between SPE and Aniplex Inc., a subsidiary of Sony Music Entertainment (Japan) Inc. The consideration

for the acquisition of 135,938 million yen (1,237 million U.S. dollars) was paid in cash. As a result of the

acquisition, Ellation has become a wholly-owned subsidiary of Sony. On February 24, 2022, Funimation changed

its company name to Crunchyroll, LLC.

Crunchyroll is a DTC service, connecting anime and manga fans across more than 200 countries and

territories. Crunchyroll provides services including subscription video-on-demand, advertising-based

video-on-demand, mobile games, manga, events, merchandise and distribution. The acquisition has brought

together two animation distribution brands, Funimation and Crunchyroll, allowing Sony to expand fan-centric

offerings. The global unification and integration of the two brands and services under the Crunchyroll brand

started in March 2022.

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As a result of the acquisition, Sony consolidated Ellation by using the acquisition method of accounting and

recorded the fair value of the identifiable assets acquired, liabilities assumed and residual goodwill of Ellation.

The following table summarizes the final fair values assigned to the assets and liabilities of Ellation that were

recorded in the Pictures segment.

Yen in millions

Cash and cash equivalents 8,379

Trade and other receivables, and contract assets 3,714

Inventories 3,295

Right-of-use assets 4,962

Goodwill 81,250

Content assets 36,266

Other intangible assets 35,697

Other 2,512

Total assets 176,075

Trade and other payables 17,365

Other current liabilities 7,723

Long-term debt 4,386

Deferred tax liabilities 9,408

Other 659

Total liabilities 39,541

Content assets and other intangible assets mainly consist of license agreements and customer relationships.

Goodwill represents unidentifiable intangible assets, such as future growth from new revenue streams and

synergies with existing Sony assets and businesses, and is calculated as the excess of the purchase price over the

estimated fair value of the tangible and intangible assets acquired and is not deductible for tax purposes. The

goodwill recorded in connection with the acquisition is included in the Pictures segment.

Revenue and net income attributable to Ellation since the date of acquisition included in Sony’s

consolidated statements of income for the fiscal year ended March 31, 2022 and pro forma results of operations

have not been presented because the effect of the acquisition was not material.

(2) Fiscal year ended March 31, 2023

Acquisition of Bungie, Inc.

On July 15, 2022, Sony Interactive Entertainment LLC (“SIE”), a wholly-owned subsidiary of Sony,

completed the acquisition of 100% of the shares of Bungie, Inc. (“Bungie”), an independent videogame

developer in the United States. As a result of this acquisition, Bungie has become a wholly-owned subsidiary of

Sony. This acquisition gives SIE access to Bungie’s approach to live game services and technology expertise.

The total consideration of this acquisition, which was determined after customary working capital and other

adjustments, was 510,459 million yen (3,701 million U.S. dollars), inclusive of the purchase price and committed

employee incentives. Of the total consideration, 347,768 million yen (2,522 million U.S. dollars) was allocated to

the purchase consideration of this acquisition, and the remaining 162,691 million yen (1,179 million U.S. dollars)

was mainly allocated to deferred payments to employee shareholders that are conditional upon their continuous

employment, and other retention incentives. The deferred payments and other retention incentives will be

expensed over the required post-acquisition service periods.

The fair value of the purchase consideration of this acquisition as of the acquisition date was

333,859 million yen (2,421 million U.S. dollars) which consisted of upfront cash consideration of

207,511 million yen (1,505 million U.S. dollars), deferred consideration of 84,410 million yen (612 million

U.S. dollars), and contingent consideration of 41,938 million yen (304 million U.S. dollars) that is subject to

employee shareholders’ continuous employment and represents the vested portion of the total vesting term of

replacement awards that existed as of the acquisition date. Deferred consideration and contingent consideration

are included in other financial liabilities (current and non-current) in the consolidated statements of financial

position.

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Sony’s consolidated statements of income for the fiscal year ended March 31, 2023 include net loss after

income taxes of 47,420 million yen (338 million U.S. dollars), attributable to Bungie since the acquisition date,

including the deferred payments and other retention incentives arising out of this acquisition and amortization of

intangible assets recognized as of the acquisition date. Revenue after elimination of intercompany transactions

attributable to Bungie since the acquisition date for the fiscal year ended March 31, 2023 has not been presented

because the revenue was not material.

Sony consolidated Bungie by using the acquisition method of accounting and recorded the fair value of the

identifiable assets acquired, liabilities assumed and residual goodwill of Bungie. The following table summarizes

the final fair values assigned to the assets and liabilities of Bungie that were recorded in the G&NS segment. The

measurement period adjustments were not material.

Yen in millions

Cash and cash equivalents 37,800

Trade and other receivables, and contract assets 5,093

Other current assets 3,412

Property, plant and equipment 7,481

Right-of-use assets 15,540

Goodwill 193,801

Content assets 45,512

Other intangible assets 66,257

Deferred tax assets 7,297

Other 3,564

Total assets 385,757

Trade and other payables 3,060

Other current liabilities 12,195

Long-term debt 30,944

Other 5,699

Total liabilities 51,898

Content assets and other intangible assets mainly consist of license agreements and software. Goodwill

mainly represents future growth from new revenue streams and synergies with existing Sony businesses and is

not deductible for tax purposes. Goodwill recorded in connection with the acquisition is included in the G&NS

segment.

Pro forma results of operations have not been presented because the effect of the acquisition is not material.

(3) Other acquisitions

During the fiscal year ended March 31, 2021, Sony completed other acquisitions for a total consideration of

18,258 million yen which was paid for primarily in cash and there was no material contingent consideration

subject to future change. As a result of these acquisitions, Sony recorded 15,679 million yen of goodwill and

6,061 million yen of intangible assets.

During the fiscal year ended March 31, 2022, Sony completed other acquisitions for a total consideration of

175,878 million yen which was paid for primarily in cash and there was no material contingent consideration

subject to future change. As a result of these acquisitions, Sony recorded 116,394 million yen of goodwill and

64,348 million yen of intangible assets.

During the fiscal year ended March 31, 2023, Sony completed other acquisitions for a total consideration of

92,743 million yen which was paid for primarily in cash and there was no material contingent consideration

subject to future change. As a result of these acquisitions, Sony recorded 80,698 million yen of goodwill and

29,154 million yen of intangible assets.

No significant amounts were 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.

Other information including pro forma results of operations has not been presented because the effects of other

acquisitions, individually and in aggregate, were not material.

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31. Divestiture

Fiscal year ended March 31, 2022

Transfer of certain operations of Game Show Network, LLC

On December 6, 2021, Sony completed the transfer of GSN Games, a division of Game Show Network,

LLC, a wholly-owned subsidiary in the Pictures segment, to Scopely, Inc. (“Scopely”). The consideration for the

transaction was 115,054 million yen (1,011 million U.S. dollars), of which Sony received 58,131 million yen

(511 million U.S. dollars) in cash and 56,923 million yen (500 million U.S. dollars) in preferred stock of

Scopely.

This preferred stock is measured at fair value as an equity instrument and subsequent changes in the fair

value will be recognized in other comprehensive income. As a result of the completion of this transfer, Sony

recognized a gain of 70,020 million yen (615 million U.S. dollars) within other operating (income) expense, net

in the consolidated statements of income for the fiscal year ended March 31, 2022.

32. Related party transactions

(1) Account balances and transactions with associates and joint ventures accounted for under the equity

method

Primary account balances and transactions with associates and joint ventures accounted for under the equity

method are as follows:

Yen in millions

March 31

2022 2023

Trade and other accounts receivable

Associates 9,587 7,779

Joint ventures 5,143 6,326

Total 14,730 14,105

Other current assets

Associates 7,042 7,747

Joint ventures — —

Total 7,042 7,747

Accounts payable, trade

Associates 1,219 1,425

Joint ventures 157 228

Total 1,376 1,653

Short-term borrowings

Associates 2,131 3,124

Joint ventures 20,132 25,218

Total 22,263 28,342

Lease liabilities and other

Associates 64,552 74,955

Joint ventures — —

Total 64,552 74,955

Accounts payable for property, plant and equipment

Associates 7,189 12,050

Joint ventures — —

Total 7,189 12,050

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Yen in millions

Fiscal year ended March 31

2021 2022 2023

Sales

Associates 15,087 20,385 15,040

Joint ventures 17,985 27,374 30,220

Total 33,072 47,759 45,260

Purchases

Associates 3,083 3,271 4,450

Joint ventures 1 785 649

Total 3,084 4,056 5,099

Lease payments and other

Associates 8,028 11,180 13,720

Joint ventures — — —

Total 8,028 11,180 13,720

Payments for property, plant and equipment

Associates 1,272 12,052 20,553

Joint ventures — — —

Total 1,272 12,052 20,553

Sony has agreements with shareholders of associates to make cash investments in the associates in the

future. The investment commitments as of March 31, 2022 and 2023, amounted to 39,231 million yen and

39,047 million yen, respectively.

(2) Compensation for key management personnel

Compensation for key management personnel for the fiscal years ended March 31, 2021, 2022 and 2023 is

presented as follows:

Yen in millions

Fiscal year ended March 31

2021 2022 2023

Short-term employee benefits 1,202 1,480 1,831

Stock-based compensation 2,329 1,597 1,928

Total 3,531 3,077 3,759

Compensation for key management personnel is the remuneration for Directors (including outside

Directors) and Corporate executive officers of Sony Group Corporation.

33. Purchase commitments, contingent liabilities and other

(1) Loan commitments

Subsidiaries in the Financial Services segment have lines of credit in accordance with loan agreements with

their customers. As of March 31, 2022 and 2023, the total unused portion of the lines of credit extended under

these contracts was 33,587 million yen and 35,831 million yen, respectively.

(2) Purchase commitments

Purchase commitments as of March 31, 2022 and 2023 amounted to 1,000,833 million yen and

1,084,774 million yen, respectively. The amount of these purchase commitments covers the purchase

consideration for property, plant and equipment, intangible assets, other goods and other services. The major

components of these commitments are as follows:

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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 four years from the

end of each period. As of March 31, 2022 and 2023, these subsidiaries were committed to make payments under

such contracts of 101,284 million yen and 125,098 million yen, respectively.

Certain subsidiaries in the Music segment have entered into contracts with recording artists, songwriters and

companies for the future production, distribution and/or licensing of music products. These contracts cover

various periods, mainly within five years from the end of each period. As of March 31, 2022 and 2023, these

subsidiaries were committed to make payments of 153,920 million yen and 193,576 million yen, respectively,

under such contracts.

Certain subsidiaries in the G&NS segment have entered into long-term contracts for the development,

distribution and publishing of game software. These contracts cover various periods, mainly within six years

from the end of each period. As of March 31, 2022 and 2023, these subsidiaries were committed to make

payments of 34,842 million yen and 31,298 million yen, respectively, under such contracts.

In addition to the above, Sony has entered into purchase contracts for property, plant and equipment and

intangible assets. As of March 31, 2022 and 2023, Sony has committed to make payments of 246,263 million yen

and 292,608 million yen, respectively, under such contracts.

Sony has entered into purchase contracts for materials. As of March 31, 2022 and 2023, Sony has

committed to make payments of 265,518 million yen and 288,260 million yen, respectively, under such

contracts.

(3) Litigation

Sony Group Corporation and certain of its subsidiaries are defendants or otherwise involved in 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, 2022 and 2023 amounted to 501 million yen and 458 million yen, respectively.

34. Subsequent event

Setting of parameters for repurchase of shares of its own common stock

Sony Group Corporation approved the setting of the following parameters for repurchase of its own

common stock pursuant to the Companies Act of Japan and Sony Group Corporation’s Articles of Incorporation

by the resolution of its Board of Directors as of May 17, 2023:

1. Total number of shares for repurchase: 25 million shares (maximum)

2. Total purchase price for repurchase of shares: 200 billion yen (maximum)

3. Period of repurchase: May 18, 2023 to May 17, 2024

F-116

Case 2:23-cv-00576-JRG-RSP Document 26-11 Filed 01/29/24 Page 235 of 235 PageID #:

1110