Sony Group Corp (SONY) 6-K, filed Feb 9, 2021

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of February 2021

Commission File Number: 001-06439

SONY CORPORATION

(Translation of registrant’s name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN

(Address of principal executive offices)

The registrant files annual reports under cover of Form 20-F.

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,

Form 20-F X	Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SONY CORPORATION
(Registrant)
By:	/s/ Hiroki Totoki
	(Signature)
Hiroki Totoki
Executive Deputy President and
Chief Financial Officer

Date: February 9, 2021

Quarterly Securities Report

For the three months ended December 31, 2020

(TRANSLATION)

SonyCorporation

CONTENTS

	Page
Note for readers<br> of this English translation		1
Cautionary<br> Statement		1
<br>I Corporate Information		3
(1) Selected Consolidated Financial Data		3
(2) Business Overview		4
II State of Business		5
(1) Risk Factors		5
(2) Management’s Discussion<br> and Analysis of Financial Condition, Results of Operations and Status of Cash Flows		7
(3) Material Contracts		16
III Company Information		17
(1) Information on the Company’s<br> Shares		17
(2) Directors and Corporate Executive<br> Officers		21
IV Financial Statements		22
(1) Consolidated Financial Statements		23
(2) Other Information		56

Note for readers of this English translation

On February 9, 2021, Sony Corporation (the “Company” or “Sony Corporation” and together with its consolidated subsidiaries, “Sony” or “Sony Group”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended December 31, 2020 with the Director-General of the Kanto Local Finance Bureau in Japan pursuant to the Financial Instruments and Exchange Act of Japan. This document is an English translation of the Quarterly Securities Report in its entirety, except for (i) information that had been previously filed with or submitted to the U.S. Securities and Exchange Commission (the “SEC”) in a Form 20-F, Form 6-K or any other form and (ii) a description of differences between generally accepted accounting principles in the U.S. (“U.S. GAAP”) and generally accepted accounting principles in Japan (“J-GAAP”), which are required to be described in the Quarterly Securities Report under the Financial Instruments and Exchange Act of Japan if the Company prepares its financial statements in conformity with accounting principles other than J-GAAP.

Cautionary Statement

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

(i)	Sony’s ability to maintain product quality and customer satisfaction with its products and services;<br>
(ii)	Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient<br>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<br>service introductions, rapid development in technology and subjective and changing customer preferences;
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(iii)	Sony’s ability to implement successful hardware, software, and content integration strategies, and to<br>develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms;
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(iv)	the effectiveness of Sony’s strategies and their execution, including but not limited to the success<br>of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic initiatives;
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(v)	changes in laws, regulations and government policies in the markets in which Sony and its third-party<br>suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer focus on corporate social responsibility;
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(vi)	Sony’s continued ability to identify the products, services and market trends with significant growth<br>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<br>product capacity;
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(vii)	Sony’s reliance on external business partners, including for the procurement of parts, components,<br>software and network services for its products or services, the manufacturing, marketing and distribution of its products, and its other business operations;
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(viii)	the global economic and political environment in which Sony operates and the economic and political<br>conditions in Sony’s markets, particularly levels of consumer spending;
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(ix)	Sony’s ability to meet operational and liquidity needs as a result of significant volatility and<br>disruption in the global financial markets or a ratings downgrade;
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(x)	Sony’s ability to forecast demands, manage timely procurement and control inventories;<br>
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(xi)	foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in<br>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;<br>
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(xiii)	Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or<br>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;
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(xiv)	the impact of changes in interest rates and unfavorable conditions or developments (including market<br>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<br>successful asset liability management in the Financial Services segment;
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(xvi)	risks related to catastrophic disasters, pandemic disease or similar events;
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(xvii)	the ability of Sony, its third-party service providers or business partners to anticipate and manage<br>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<br>
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(xviii)	the outcome of pending and/or future legal and/or regulatory proceedings.
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Risks and uncertainties also include the impact of any future events with material adverse impact. The continued impact of the Coronavirus Disease 2019 (“COVID-19”) could heighten many of the risks and uncertainties noted above. Important information regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the SEC.

I Corporate Information

(1) Selected Consolidated Financial Data

	Yen in millions, Yen per share amounts
	Nine months ended <br> December 31, 2019		Nine months ended <br> December 31, 2020		Fiscal year ended <br> March 31, 2020
Sales and operating revenue		6,511,145		6,778,941		8,259,885
Operating income		810,012		905,385		845,459
Income before income taxes		803,433		1,096,894		799,450
Net income attributable to Sony Corporation’s stockholders		569,547		1,064,776		582,191
Comprehensive income		689,995		998,674		666,032
Total equity		4,886,586		5,433,323		4,789,535
Total assets		22,637,546		25,881,122		23,039,343
Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)		460.11		867.17		471.64
Net income attributable to Sony Corporation’s<br>stockholders per share of common stock, diluted (yen)		450.08		852.04		461.23
Ratio of stockholders’ equity to total assets (%)		18.7		20.8		17.9
Net cash provided by operating activities		834,067		1,087,508		1,349,745
Net cash used in investing activities		(1,026,082)		(1,372,187)		(1,352,278)
Net cash provided by financing activities		145,096		676,660		65,658
Cash and cash equivalents at end of the period		1,408,876		1,878,047		1,512,357
	Yen in millions, Yen per share amounts
	Three months ended <br> December 31, 2019		Three months ended<br><br><br>December 31, 2020
Sales and operating revenue		2,463,162		2,696,536
Net income attributable to Sony Corporation’s stockholders		229,538		371,891
Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)		187.02		301.09
Net income attributable to Sony Corporation’s<br>stockholders per share of common stock, diluted (yen)		182.89		297.35

Notes:

1.	The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP.<br>
2.	The Company reports equity in net income of affiliated companies as a component of operating income.<br>
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3.	Consumption taxes are not included in sales and operating revenue.
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4.	Total equity is presented based on U.S. GAAP.
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5.	Ratio of stockholders’ equity to total assets is calculated by using total equity attributable to the<br>stockholders of the Company.
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6.	The Company prepares consolidated financial statements. Therefore parent-only selected financial data is<br>not presented.
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(2) Business Overview

There was no significant change in the business of Sony during the nine months ended December 31, 2020.

As of December 31, 2020, the Company had 1,448 subsidiaries and 147 affiliated companies, of which 1,413 companies are consolidated subsidiaries (including variable interest entities) of the Company. The Company has applied the equity accounting method for 131 affiliated companies.

II State of Business

(1) Risk Factors

Note for readers of this English translation:

Except for the revised risk factor below, there was no significant change from the information presented in the Risk Factors section of the Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on June 26, 2020. The changes are indicated by underline below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

The coronavirus disease 2019 (COVID-19)pandemic has adversely affected, and is expected to continue to adversely affect, Sony’s business operations, operating results and financial condition.

The COVID-19 pandemic is adversely affecting the production, development, sale and distribution of the products and services in each of Sony’s business segments, and this negative impact is expected to continue in the future. For example, in the Game & Network Services (“G&NS”) segment, there was an adverse impact on the production of hardware due to issues in the component supply chain. In the Music segment, the release of some new music continues to be delayed around the world primarily due to artists being unable to record music, produce music videos or promote releases. Ticket and merchandising revenues are decreasing as in-person concerts and other events continue to be restricted in Japan and other areas. Additionally, due to a global reduction in advertising spending, revenue from the licensing of music in TV commercials has decreased. In the Pictures segment, box office revenue has been significantly impacted by the closure or limited capacity of movie theaters, and Sony has not been able to release most of its already completed titles in theaters. Although the production of new motion pictures and television shows by Sony has gradually resumed, production schedules continue to be delayed. Additionally, the global reduction in advertising spending led to a decrease in advertising revenue in the Pictures segment. In the Electronics Products & Solutions (“EP&S”) segment, certain of Sony’s manufacturing sites ceased production for a period of time pursuant to local government policy, and a portion of supply was temporarily insufficient to meet demand. Some partner companies that supply components to several of Sony’s businesses have reduced their operations, causing a delay in the production of some Sony products due to component shortages. Additionally, sales have decreased due to the closure of retail stores globally. In the Imaging & Sensing Solutions (“I&SS”) segment, image sensor sales have decreased primarily due to a slowdown in the smartphone market, which is the final outlet for Sony’s image sensors. In the Financial Services segment, pursuant to the announcement of a state of emergency by the Japanese government, all in-person sales activity of the Lifeplanner^®^ salespeople at Sony Life Insurance Co., Ltd. (“Sony Life”) was suspended from April 2020 through May 2020.

The timing and extent to which the pandemic further negatively impacts Sony’s business could vary greatly depending on future developments, such as the possible further spread of or a resurgence in COVID-19, as well as the state of lockdowns and other measures in various geographic areas around the world. For example, the impact of negative factors in each segment such as those listed above may continue or become more severe. With respect to the Pictures segment, major studios are postponing the release of large films, leading to the possibility that the future theatrical release schedule will become crowded and competition will increase for available screen space. This could delay the recovery of sales and profit in the Pictures segment. The EP&S segment could continue to be adversely impacted by factory shutdowns and supply chain issues, and by the closure of retail stores globally.

The continued impact of COVID-19 could heighten many of the risks and uncertainties noted below.

As a global company, Sony is subject to a widerange of laws and regulations and a growing consumer focus on corporate social responsibility in many countries. Those laws and regulations, as well as consumer focus, might change in significant ways, leading to an increase in the costs ofSony’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-competition, environmental protection, privacy, data protection, content and broadcast regulation, labor, taxation, foreign investment, government procurement, foreign exchange controls, and economic sanctions, as well as laws relating to the collection, use, retention, security and transfer of personally identifiable information.

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 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 have decreased compared to before the export restrictions came into effect, although Sony has 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 during the nine months ended December 31, 2020. 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 employees, third-party suppliers, business partners and agents may subject Sony to fines, penalties, legal judgments, restrictions on business operations and/or reputational damage. Additionally, there is a growing global regulatory and consumer focus on corporate social responsibility and sourcing practices and increasing regulatory obligations of public disclosure regarding these matters. In particular, there is increased attention on labor practices, including work environments at electronic component manufacturers and original design manufacturing/original equipment manufacturing, or ODM/OEM, 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.

(2) Management’s Discussion and Analysis of FinancialCondition, Results of Operations and Status of Cash Flows

i) Results of Operations

All amounts are presented on the basis of U.S. GAAP. “Sales and operating revenue” (“sales”) in each business segment represents sales and operating revenue 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. For details regarding each segment’s product categories, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 10. Business segment information.”

Consolidated Financial Results

	(Billions of yen)
	Nine months ended<br>December 31
	2019		2020
Sales and operating revenue	¥	6,511.1	¥	6,778.9
Operating income		810.0	****	905.4
Income before income taxes		803.4	****	1,096.9
Net income attributable to Sony Corporation’s stockholders		569.5	****	1,064.8

Sales for the nine months ended December 31, 2020 (“the current nine months”) increased 267.8 billion yen compared to the same period of the previous fiscal year (“year-on-year”) to 6 trillion 778.9 billion yen. This increase was primarily due to significant increases in sales in the G&NS and Financial Services segments, partially offset primarily by a decrease in sales in the EP&S segment and a significant decrease in sales in the Pictures segment. Sales in the same period of the previous fiscal year included 7.9 billion yen in patent royalty revenue resulting from the signing of a licensing agreement recorded within Corporate and elimination.

Operating income in the current nine months increased 95.4 billion yen year-on-year to 905.4 billion yen. This increase was primarily due to significant increases in operating income in the G&NS, Music and Pictures segments, partially offset by a significant decrease in operating income in the I&SS segment.

Operating income for the current nine months included the following:

•	Gain on the sale of a portion of shares of Pledis Entertainment Co., Ltd. (“Pledis”):<br>6.5 billion yen (Music segment)
•	Gain recorded in connection with a business transfer: 5.4 billion yen (Music segment)<br>
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•	Inventory write-downs of certain image sensors for mobile products: 9.0 billion yen (I&SS segment)<br>
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•	Expenses related to the Sony Global Relief Fund for COVID-19:<br>4.8 billion yen (Corporate and elimination)
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Operating income for the same period of the previous fiscal year included the following:

•	Remeasurement and realized gains resulting from the public listing and sale of a portion of shares of SRE<br>Holdings Corporation: 17.3 billion yen (All Other)
•	Realized and remeasurement gains resulting from the transfer of a portion of shares of NSF Engagement<br>Corporation: 6.3 billion yen (Corporate and elimination)
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During the current nine months, restructuring charges, net, decreased 6.0 billion yen year-on-year to 8.1 billion yen. Restructuring charges are recorded as an operating expense and are included in operating income.

Equity in net income of affiliated companies in the current nine months, recorded within operating income, increased 0.2 billion yen year-on-year to 6.6 billion yen.

The net effect of other income and expenses was income of 191.5 billion yen, compared to an expense of 6.6 billion yen in the same period of the previous fiscal year. This was mainly due to the recording of 205.7 billion yen in unrealized gains on Sony’s shares of Spotify Technology S.A. and Bilibili Inc. (“Bilibili”) in the current nine months. For details, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 2. Marketable securities and securities investments.” The above unrealized gains included 11.2 billion yen of an unrealized gain on an equity security whose lockup restriction will expire within one year.

Income before income taxes increased 293.5 billion yen year-on-year to 1 trillion 96.9 billion yen.

During the current nine months, Sony recorded income tax expense of 12.6 billion yen, resulting in an effective tax rate of 1.2%, which was lower than the effective tax rate of 24.5% in the same period of the previous fiscal year. This lower effective tax rate was mainly due to the reversal of valuation allowances recorded against a significant portion of the deferred tax assets of Sony Corporation and its national tax filing group in Japan, which resulted in a tax benefit of 214.9 billion yen in the three months ended September 30, 2020, and the reversal of additional valuation allowances recorded against deferred tax assets for certain research and development credits of the consolidated tax filing group in the United States, which resulted in a tax benefit of 13.6 billion yen in the three months ended December 31, 2020.

Net income attributable to Sony Corporation’s stockholders increased 495.2 billion yen year-on-year to 1 trillion 64.8 billion yen.

Operating performance by business segment for the current nine months is as follows:

Game & Network Services (G&NS)

Results for the Nine Months ended December 31, 2020

Sales increased 452.0 billion yen year-on-year to 1 trillion 996.0 billion yen. This significant increase in sales was primarily due to an increase in sales of game software, including add-on content, as a result of an increase in digital consumption due to COVID-19, as well as an increase in hardware sales due to the launch of PlayStation^®^5 (“PS5^™^”). These positive factors were partially offset by a decrease in PlayStation^®^4 (“PS4^™^”) hardware sales. Operating income increased 116.9 billion yen year-on-year to 309.2 billion yen, primarily due to the impact of the above-mentioned increase in game software, as well as an increase in Network Services sales, primarily from PlayStation^®^Plus, partially offset by the impact of an increase in costs.

Music

The Music segment results include the yen-based results of Sony Music Entertainment (Japan) Inc. and the yen-translated results of Sony Music Entertainment (“SME”), Sony/ATV Music Publishing LLC (“Sony/ATV”) and EMI Music Publishing Ltd. (“EMI”), which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.

Results for the Nine Months ended December 31, 2020

Sales increased 34.0 billion yen to 672.4 billion yen. The increase in sales was primarily due to higher Visual Media and Platform and Recorded Music sales. Sales for Visual Media and Platform increased primarily due to an increase in sales for the anime business primarily reflecting the contribution of Demon Slayer – Kimetsu no Yaiba – the Movie: Mugen Train. Sales for Recorded Music increased mainly due to an increase in revenue from paid subscription streaming services. Operating income increased 35.4 billion yen year-on-year to 147.4 billion yen, primarily due to the impact of the above-mentioned increase in sales, in addition to a 6.5 billion yen gain recorded on the sale of a portion of shares of Pledis and a 5.4 billion yen gain recorded in connection with the transfer of an overseas business.

Pictures

The Pictures segment results are the yen-translated results of Sony Pictures Entertainment Inc. (“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.”

Results for the Nine Months ended December 31, 2020

Sales decreased 124.1 billion yen, an 18% decrease year-on-year (an approximate 16% decrease on a U.S. dollar basis), to 558.6 billion yen. The significant decrease in sales on a U.S. dollar basis was primarily due to a significant decrease in sales for Motion Pictures due to the absence of any major theatrical releases in the current nine months resulting from the impact of theater closures due to COVID-19, partially offset by higher home entertainment and television licensing sales of prior year and catalog titles. Operating income increased 33.6 billion yen year-on-year to 78.7 billion yen. The significant increase in operating income was primarily due to lower marketing costs in Motion Pictures as a result of the absence of major theatrical releases due to COVID-19, as well as the impact of the above-mentioned home entertainment and television licensing sales.

Electronics Products & Solutions (EP&S)

Results for the Nine Months ended December 31, 2020

Sales decreased 142.4 billion yen year-on-year to 1 trillion 485.5 billion yen. This was primarily due to a decrease in sales of digital cameras, Audio and Video and broadcast- and professional-use products resulting from lower unit sales. Operating income increased 3.9 billion yen year-on-year to 150.6 billion yen due to reductions in operating costs as well as an improvement in the product mix mainly of televisions, partially offset by the impact of the above-mentioned decrease in sales.

Imaging & Sensing Solutions (I&SS)

Results for the Nine Months ended December 31, 2020

Sales decreased 59.2 billion yen year-on-year to 780.2 billion yen. This decrease in sales was mainly due to a decrease in unit sales of image sensors and a deterioration of the product mix for mobile products primarily resulting from the impact of U.S. export restrictions, as well as a decrease in unit sales of image sensors for digital cameras primarily as a result of the impact of COVID-19. Operating income decreased 75.4 billion yen year-on-year to 125.7 billion yen. This significant decrease was mainly due to an increase in depreciation and amortization expenses as well as research and development expenses, the impact of the above-mentioned decrease in sales, and the above-mentioned 9.0 billion yen of inventory write-downs of certain image sensors for mobile products whose shipments were suspended as a result of U.S. export restrictions. The amount of the inventory write-downs is the net amount of 17.5 billion yen of write-downs recorded in the three months ended September 30, 2020 and an 8.5 billion yen gain from the reversal of write-downs recorded in the three months ended December 31, 2020.

Financial Services

The Financial Services segment results include Sony Financial Holdings Inc. (“SFH”) and SFH’s consolidated subsidiaries such as Sony Life Insurance Co., Ltd. (“Sony Life”), Sony Assurance Inc. (“Sony Assurance”), and Sony Bank Inc. (“Sony Bank”). The results of Sony Life discussed in the Financial Services segment differ from the results that SFH and Sony Life disclose separately on a Japanese statutory basis.

Results for the Nine Months ended December 31, 2020

Financial Services revenue increased 124.6 billion yen year-on-year to 1 trillion 246.0 billion yen, mainly due to an increase in revenue at Sony Life and a significant increase in revenue at Sony Bank. Revenue at Sony Life increased 81.9 billion yen year-on-year to 1 trillion 89.3 billion yen, mainly due to an increase in net gains on investments in the separate accounts, partially offset by a decrease in premiums from single premium insurance despite an increase in the policy amount in force. The increase in revenue at Sony Bank was due to an improvement in valuation gains and losses on securities. Operating income increased 20.0 billion yen year-on-year to 137.5 billion yen due to a significant increase in operating income at Sony Bank and an increase in operating income at Sony Assurance, partially offset by a decrease in operating income at Sony Life. The increase in operating income at Sony Bank was due to the above-mentioned improvement in valuation gains and losses on securities, and the increase in operating income at Sony Assurance was due to a decline in the loss ratio for automobile insurance. Operating income at Sony Life decreased 4.8 billion yen year-on-year to 97.0 billion yen, mainly due to expenses recorded for various provisions related to COVID-19, as well as an overall deterioration in the provision of policy reserves for minimum guarantees for variable life insurance and other products, resulting from market fluctuations, and net gains and losses on derivative transactions to hedge market risks. This decrease in operating income at Sony Life was partially offset by an improvement in foreign exchange gains and losses in U.S. dollar-denominated insurance.

Operating Performance by Geographic Area

For operating performance by geographic area, please refer to “sales and operating revenue attributed to countries and areas based on location of external customers” in “IV Financial Statements – Notes to Consolidated Financial Statements – 10. Business segment information.”

Foreign Exchange Fluctuations and Risk Hedging

Note for readers of this English translation:

Except for the information set forth below, there was no significant change from the information presented in the Foreign Exchange Fluctuations and Risk Hedging section of the Annual Report on Form 20-F filed with the SEC on June 26, 2020. Although foreign exchange rates have fluctuated during the nine-month period ended December 31, 2020, there has been no significant change in Sony’s risk hedging policy as described in the Annual Report on Form 20-F.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

During the current nine months, the average rates of the yen were 106.1 yen against the U.S. dollar and 122.4 yen against the euro, which were 2.6 yen higher and 1.3 yen lower year-on-year, respectively.

For the current nine months, sales were 6 trillion 778.9 billion yen, an increase of 4% year-on-year, while on a constant currency basis sales increased 5% year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating income, please refer to the below Note.

Consolidated operating income increased 95.4 billion yen year-on-year to 905.4 billion yen for the current nine months. Most of the foreign exchange rate impact was attributable to the impact of foreign exchange rates in the G&NS, EP&S and I&SS segments.

The table below indicates the impact of changes in foreign exchange rates on sales and operating results of each of the above-mentioned three segments. Also, please refer to the “Results of Operations” section, which discusses the impact of foreign exchange rates within segments and categories where foreign exchange rate fluctuations had a significant impact.

		(Billions of yen)
		Nine months ended December 31			Impact of<br>changes in<br>foreign<br>exchange rates
		2019
G&NS	Sales		1,544.0	¥1,996.0	-¥18.8
	Operating income		192.2	309.2	+7.8
EP&S	Sales		1,627.8	1,485.5	-19.3
	Operating income		146.8	150.6	+1.2
I&SS	Sales		839.4	780.2	-16.0
	Operating income		201.1	125.7	-5.0

All values are in Japanese Yen.

In addition, sales for the Music segment increased 5% year-on-year to 672.4 billion yen, an approximate 7% increase on a constant currency basis. In the Pictures segment, sales decreased 18% year-on-year to 558.6 billion yen, an approximate 16% decrease on a U.S. dollar basis. As most of the operations in Sony’s Financial Services segment are based in Japan, Sony’s management analyzes the performance of the Financial Services segment on a yen basis only.

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 same period of the previous fiscal year to local currency-denominated monthly sales in the relevant period of the current fiscal year. For SME, Sony/ATV and EMI in the Music 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.

10 -

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 same period of the previous fiscal year from the relevant period of 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 selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. 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 operating income (loss) for that segment.

This information is not a substitute for Sony’s consolidated financial statements measured in accordance with U.S. GAAP. However, Sony believes that these disclosures provide additional useful analytical information to investors regarding the operating performance of Sony.

Status of Cash Flows*

Operating Activities: During the current nine months, there was a net cash inflow of 1 trillion 87.5 billion yen from operating activities, an increase of 253.4 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 909.4 billion yen, an increase of 415.4 billion yen year-on-year. This increase was primarily due to a year-on-year increase in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating (income) expense, net and (gain) loss on securities investments, net), an increase in notes and accounts payable, trade, compared to a decrease in the same period of the previous fiscal year, as well as a smaller increase in film costs. This increase in net cash inflow was partially offset by the negative impact of an increase in other receivables from component assembly companies, included in other current assets, compared to a decrease in the same period of the previous fiscal year.

The Financial Services segment had a net cash inflow of 198.0 billion yen, a decrease of 159.4 billion yen year-on-year. This decrease was primarily due to a year-on-year decrease in net income after taking into account non-cash adjustments such as (gain) loss on marketable securities and securities investments, net.

Investing Activities: During the current nine months, Sony used 1 trillion 372.2 billion yen of net cash in investing activities, an increase of 346.1 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 453.2 billion yen, an increase of 203.7 billion yen year-on-year. This increase was mainly due to an increase in payments for fixed asset purchases including semiconductor manufacturing equipment, as well as cash outflow resulting from a payment for the purchase of shares of Bilibili. Additionally, the same period of the previous fiscal year included the cash inflow from the sale of all of Sony’s shares of Olympus Corporation.

The Financial Services segment used 919.1 billion yen of net cash in investing activities, an increase of 142.5 billion yen year-on-year. This increase was mainly due to a year-on-year increase in payments for investments and advances at Sony Bank.

Financing Activities: Net cash inflow by financing activities during the current nine months was 676.7 billion yen, an increase of 531.6 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 67.0 billion yen, a decrease of 262.2 billion yen year-on-year. In order to fund the acquisition of all shares of SFH and the related stock acquisition rights for the purpose of making SFH into a wholly-owned subsidiary of Sony Corporation, a total of 396.5 billion yen in short-term bank borrowings was secured in July and October of 2020, of which 200.0 billion yen was repaid in December 2020. Additionally, a long-term bank loan of approximately 2 billion U.S. dollars was secured in July 2020. The same period of the previous fiscal year included the redemption of straight bonds, the repayment of long-term debt and a payment related to the repurchase of shares of Sony’s own common stock.

In the Financial Services segment, there was a 723.8 billion yen net cash inflow, an increase of 266.9 billion yen year-on-year. This increase was primarily due to a larger increase in deposits from customers at Sony Bank.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at December 31, 2020 was 1 trillion 878.0 billion yen.

Cash and cash equivalents of all segments excluding the Financial Services segment was 1 trillion 325.3 billion yen at December 31, 2020, an increase of 363.0 billion yen compared with the balance as of March 31, 2020, and an increase of 463.8 billion yen compared with the balance as of December 31, 2019.

11 -

Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 552.8 billion yen at December 31, 2020, an increase of 2.7 billion yen compared with the balance as of March 31, 2020, and an increase of 5.4 billion yen compared with the balance as of December 31, 2019.

* Sony’s disclosure includes information regarding cash flow for all segments excluding the Financial Services segment. This information is derived from the following condensed statement of cash flows. The condensed statement of cash flows, which includes the above-mentioned cash flow information, is not prepared in accordance with U.S. GAAP, which Sony uses 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, including noncontrolling interests, are included in those respective presentations, but are eliminated in the consolidated figures shown below.

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Condensed Statements of Cash Flows

	(Yen in millions)
	Nine months ended December 31
	Financial Services						Sony without<br>Financial Services						Consolidated
	2019			2020			2019			2020			2019			2020
Cash flows from operating activities:
Net income (loss)		83,269		****	99,839	****		540,939		****	1,004,421	****		606,517		****	1,084,253	****
Adjustments to reconcile net income (loss) to net cash provided by (used in)<br>operating activities:
Depreciation and amortization, including amortization of deferred insurance acquisition costs and<br>contract costs		60,154		****	41,519	****		221,239		****	245,044	****		281,393		****	286,563	****
Amortization of film costs		-		****	-	****		212,684		****	197,849	****		212,684		****	197,849	****
Other operating (income) expense, net		42		****	62	****		(24,073	)	****	(16,553	)		(24,017	)	****	(16,491	)
(Gain) loss on marketable securities and securities investments, net		(127,002	)	****	(339,714	)		(392	)	****	(205,721	)		(127,394	)	****	(545,435	)
Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivable, trade and contract assets		5,158		****	(12,757	)		(242,695	)	****	(312,712	)		(237,477	)	****	(300,544	)
(Increase) decrease in inventories		-		****	-	****		34,865		****	(41,039	)		34,865		****	(41,039	)
(Increase) decrease in film costs		-		****	-	****		(296,377	)	****	(193,344	)		(296,377	)	****	(193,344	)
Increase (decrease) in notes and accounts payable, trade		-		****	-	****		(12,640	)	****	277,309	****		(12,640	)	****	277,309	****
Increase (decrease) in future insurance policy benefits and other		554,596		****	619,049	****		-		****	-	****		554,596		****	619,049	****
(Increase) decrease in deferred insurance acquisition costs		(73,385	)	****	(69,433	)		-		****	-	****		(73,385	)	****	(69,433	)
(Increase) decrease in marketable securities held in the life insurance business		(103,746	)	****	(119,871	)		-		****	-	****		(103,746	)	****	(119,871	)
Other		(41,646	)	****	(20,692	)		60,410		****	(45,868	)		19,048		****	(91,358	)
Net cash provided by (used in) operating activities		357,440		****	198,002	****		493,960		****	909,386	****		834,067		****	1,087,508	****
Cash flows from investing activities:
Payments for purchases of fixed assets		(14,425	)	****	(13,851	)		(300,366	)	****	(377,654	)		(314,791	)	****	(391,439	)
Payments for investments and advances		(970,438	)	****	(1,197,359	)		(40,423	)	****	(93,368	)		(1,010,861	)	****	(1,290,727	)
Proceeds from sales or return of investments and collections of advances		208,164		****	292,090	****		93,526		****	19,604	****		301,690		****	311,694	****
Other		125		****	23	****		(2,229	)	****	(1,738	)		(2,120	)	****	(1,715	)
Net cash provided by (used in) investing activities		(776,574	)	****	(919,097	)		(249,492	)	****	(453,156	)		(1,026,082	)	****	(1,372,187	)
Cash flows from financing activities:
Increase (decrease) in borrowings, net		272,960		****	361,169	****		(73,866	)	****	390,290	****		198,773		****	751,459	****
Increase (decrease) in deposits from customers, net		211,135		****	392,891	****		-		****	-	****		211,135		****	392,891	****
Dividends paid		(27,189	)	****	(30,454	)		(49,621	)	****	(61,153	)		(49,621	)	****	(61,153	)
Other		62		****	231	****		(205,734	)	****	(396,128	)		(215,191	)	****	(406,537	)
Net cash provided by (used in) financing activities		456,968		****	723,837	****		(329,221	)	****	(66,991	)		145,096		****	676,660	****
Effect of exchange rate changes on cash and cash equivalents		-		****	-	****		(14,887	)	****	(28,538	)		(14,887	)	****	(28,538	)
Net increase (decrease) in cash and cash equivalents including restricted		37,834		****	2,742	****		(99,640	)	****	360,701	****		(61,806	)	****	363,443	****
Cash and cash equivalents, including restricted, at beginning of the fiscal year		509,595		****	550,039	****		964,218		****	965,256	****		1,473,813		****	1,515,295	****
Cash and cash equivalents, including restricted, at end of the period		547,429		****	552,781	****		864,578		****	1,325,957	****		1,412,007		****	1,878,738	****
Less – restricted cash and cash equivalents, included in other current assets and other<br>assets		-		****	-	****		3,131		****	691	****		3,131		****	691	****
Cash and cash equivalents at end of the period		547,429		****	552,781	****		861,447		****	1,325,266	****		1,408,876		****	1,878,047	****

13 -

ii) Issues Facing Sony and Management’s Response to those Issues

Note for readers of this English translation:

There was no significant change from the information presented in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 26, 2020. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

iii) Research and Development

Note for readers of this English translation:

There was no significant change from the information presented as the Research and Development in the Annual Report on Form 20-F filed with the SEC on June 26, 2020.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

Research and development costs for the nine months ended December 31, 2020 totaled 377.7 billion yen. There were no significant changes in research and development activities for the period.

iv) Liquidity Management and Market Access

Note for readers of this English translation:

Except for the information related to the committed lines of credit and others set forth below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 26, 2020. The changes are indicated by underline below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

An important financial objective of Sony is to maintain the strength of its balance sheet, while securing adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and the unused amount of committed lines of credit.

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 Corporation, Sony Global Treasury Services Plc (“SGTS”), a 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 1,044.2 billion yen in total for Sony Corporation, SGTS and SCC as of March 31, 2020. There were no amounts outstanding under the CP programs as of March 31, 2020.

Sony Corporation borrowed 322.5 billion yen in July 2020, and 74.0 billion yen in October 2020 from a Japanese private bank, in order to procure the funds necessary to acquire the common shares and related stock acquisition rights not held by Sony of SFH, a consolidated subsidiary of Sony Corporation, with the aim of making SFH a wholly-owned subsidiary of Sony Corporation. In December 2020, Sony Corporation repaid 200.0 billion yen of the outstanding balance of 396.5 billion yen.

In July 2020, in order to enhance liquidity, Sony Corporation executed an approximate 2 billion U.S. dollar bank loan from a group of lenders with eight- to ten-year maturity terms in connection with Sony’s acquisition of the remaining approximately 60% equity interest in DH Publishing, L.P., which owns EMI Music Publishing, in November 2018. This bank loan utilizes the Japan Bank for International Cooperation (“JBIC”) Facility, which was established to facilitate overseas mergers and acquisitions by Japanese companies. Approximately 60%, or 1.2 billion U.S. dollars, is from the JBIC Facility and borrowed in U.S. dollars and approximately 40%, or 86 billion yen (approximately 0.8 billion U.S. dollars), is from Japanese private banks and borrowed in yen.

14 -

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 560.5 billion yen in unused committed lines of credit, as of December 31, 2020. 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 1.05 billion U.S. dollar multicurrency committed line of credit contracted with a syndicate of foreign banks. Sony 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.

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.

v) Plan of Capital Investments and Asset Retirement

Note for readers of this English translation:

There was no significant change in Sony’s plan of capital expenditures and asset retirements from the information presented in the Quarterly Securities Report for the three months ended June 30, 2020, filed with the SEC on August 11, 2020.

URL: Quarterly Securities Report for the three months ended June 30, 2020, filed with the SEC on August 11, 2020

https://www.sec.gov/Archives/edgar/data/0000313838/000119312520215557/d62798d6k.htm

15 -

(3) Material Contracts

Sony launched PS5^™^ during the three months ended December 31, 2020, and therefore changed the description of “Material Contracts” in the Annual Securities Report for the fiscal year ended March 31, 2020 (Yukashoken Houkokusho) filed on June 26, 2020, as follows. The change is indicated below by underline. There were no material contracts executed or determined to be executed during the three months ended December 31, 2020.

“Sony has a number of Japanese and foreign patents relating to its products. Sony is licensed to use a number of patents owned by others, covering a wide range of products. Certain of these licenses are important to Sony’s business. Sony products that employ DVD player functionality, including PlayStation^®^4 (“PS4^™^”) and PlayStation^®^5 (“PS5^™^”) hardware, are substantially dependent upon patents that relate to technologies specified in the DVD specifications and are licensed from Dolby Laboratories Licensing Corporation. Sony products that employ Blu-ray Disc^™^ player functionality and DVD player functionality, including PS4^™^ and PS5^™^ hardware, are substantially dependent upon patents that relate to technologies specified in the Blu-ray Disc^™^ specifications and are licensed by MPEG LA LLC and One-Blue, LLC, in addition to the patents that relate to technologies specified in the DVD specifications, as described above. Sony considers its overall license position beneficial to its operations.”

Note for readers of this English translation:

Except for the above, there was no significant change from the information presented in the Annual Report on Form 20-F (“Patents and Licenses” in item 4) filed with the SEC on June 26, 2020. This disclosure does not correspond to or update Item 10.C of the Annual Report on Form 20-F.

URL: The Annual Report on Form 20-F filed with the SEC on June 26, 2020

https://www.sec.gov/Archives/edgar/data/313838/000119312520179707/d831343d20f.htm

16 -

III Company Information

(1) Information on the Company’s Shares

i) Total Number of Shares

1) Total Number of Shares

Class	Total number of shares authorized to be issued
Common stock	3,600,000,000
Total	3,600,000,000

2) Number of Shares Issued

Class	Number of shares issued		Name of Securities Exchanges<br>where the shares are listed or<br>authorized<br>Financial<br>Instruments Firms Association<br>where the shares are registered	Description
	As of the end of the<br><br><br>third quarterly period<br><br><br>(December 31, 2020)	As of the filing date of<br><br><br>the Quarterly<br><br><br>Securities Report<br><br><br>(February 9, 2021)
Common stock	1,261,058,781	1,261,058,781	Tokyo Stock Exchange<br><br><br>New York Stock Exchange	The number of shares constituting one full unit is one hundred (100).
Total	1,261,058,781	1,261,058,781	—	—

Note: The Company’s shares of common stock are listed on the First Section of the Tokyo Stock Exchange in Japan.

ii) Stock Acquisition Rights (“SARs”)

Note for readers of this English translation:

The Japanese-language Quarterly Securities Report includes a summary of the main terms and conditions of the SARs listed below which were issued during the three months ended December 31, 2020. A summary of such terms and conditions has previously been filed with or submitted to the SEC under Form 6-K or Form S-8. There has been no change to such terms and conditions since the applicable date of such filings or submissions.

URL: The list of documents previously filed or submitted by the Company

https://www.sec.gov/Archives/edgar/data/313838/000115752320001353/a52314732.htm

https://www.sec.gov/Archives/edgar/data/313838/000115752320001520/a52330127.htm

Stock acquisition rights issued during the three months ended December 31, 2020.

Name<br> <br>(Date of resolution of the<br>Board of Directors)	Number of<br><br><br>SARs issued		Number of shares of<br>common stock to be issued<br>or transferred
The<br>forty-third series of Common Stock Acquisition Rights<br> <br>(October 28, 2020)		22,599		2,259,900
The<br>forty-fourth series of Common Stock Acquisition Rights<br> <br>(October 28, 2020)		22,547		2,254,700

iii) Status of the Exercise of Moving Strike Convertible Bonds

Not applicable.

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iv) Changes in the Total Number of Shares Issued and the Amount of Common Stock, etc.

Period	Change in<br>the <br>total number<br> <br>of shares<br>issued <br>(Thousands)	Balance of<br>the <br>total number<br> <br>of shares<br><br><br>issued <br>(Thousands)	Change in<br><br><br>the amount of<br><br><br>common stock <br>(Yen in Millions)	Balance of<br><br><br>the amount of<br><br><br>common stock <br>(Yen in Millions)	Change in the <br>legal capital <br>surplus <br>(Yen <br>in Millions)	Balance of the <br>legal<br>capital <br>surplus <br>(Yen in Millions)
From October 1 to December 31, 2020	—	1,261,059	—	880,214	—	1,093,907

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v) Status of Major Shareholders

(As of December 31, 2020)

Name	Address	Number<br>of<br>shares held<br> <br>(Thousands)	Percentage<br><br><br>of shares held<br>to total shares<br>(Excluding<br>treasury<br>shares) issued<br>(%)
Citibank as Depositary Bank for Depositary<br><br><br>Receipt Holders *1<br><br><br>(Local Custodian: MUFG Bank, Ltd.)	388 Greenwich St., 14th fl., New York,<br><br><br>NY 10013, U.S.A.<br> <br>(2-7-1, Marunouchi, Chiyoda-ku, Tokyo)	114,553	9.27
The Master Trust Bank of Japan, Ltd.<br><br><br>(Trust account)^^*2	2-11-3,<br>Hamamatsu-cho, Minato-ku, Tokyo	108,001	8.74
Custody Bank of Japan, Ltd.<br><br><br>(Trust account) *2	1-8-12, Harumi,<br>Chuo-ku, Tokyo	64,363	5.21
JP Morgan Chase Bank 385632 *3<br><br><br>(Local Custodian: Mizuho Bank, Ltd.)	25 Bank Street, Canary Wharf, London, E14<br>5JP, United Kingdom<br> <br>(Shinagawa Intercity Tower A,<br> <br>2-15-1, Konan, Minato-ku, Tokyo)	29,768	2.41
Ssbtc Client Omnibus Account *3<br><br><br>(Local Custodian: The Hongkong and Shanghai<br><br><br>Banking Corporation Limited, Tokyo Branch)	One Lincoln Street, Boston MA USA 02111<br><br><br>(3-11-1, Nihonbashi,<br>Chuo-ku, Tokyo)	25,473	2.06
Custody Bank of Japan, Ltd.<br><br><br>(Trust account 7)^^*2	1-8-12, Harumi,<br>Chuo-ku, Tokyo	24,389	1.97
State Street Bank West Client – Treaty 505234 *3<br><br><br>(Local Custodian: Mizuho Bank, Ltd.)	1776 Heritage Drive, North Quincy, MA 02171,<br>U.S.A.<br> <br>(Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)	20,211	1.63
Custody Bank of Japan, Ltd.<br><br><br>(Trust account 5)^^*2	1-8-12, Harumi,<br>Chuo-ku, Tokyo	19,882	1.61
Government of Norway<br><br><br>(Local Custodian: Citibank, N.A., Tokyo Branch)	Bankplassen 2, 0107 Oslo 1 Oslo 0107 No<br><br><br>(6-27-30 Shinjuku, Shinjuku-ku, Tokyo<br>)	19,140	1.55
Custody Bank of Japan, Ltd.<br><br><br>(Trust account 6)^^*2	1-8-12, Harumi,<br>Chuo-ku, Tokyo	17,946	1.45
Total		443,726	35.89

Notes:

*1.	Citibank as Depositary Bank for Depositary Receipt Holders is the nominee of Citibank, N.A.<br>
*2.	The shares held by each shareholder are held in trust for investors, including shares in securities<br>investment trusts.
---	---
*3.	Each shareholder provides depositary services for shares owned by institutional investors, mainly in<br>Europe and North America. They are also the nominees for these investors.
---	---

19 -

4.	Nomura Asset Management Co., Ltd. filed its “Bulk Shareholding Report” with the Director-General<br>of Kanto Local Financial Bureau in Japan as of October 6, 2020 and reported that Nomura Asset Management Co., Ltd. and three joint holders held shares of the Company as of September 30, 2020 as provided in the below table. As of December<br>31, 2020, the Company has not been able to confirm the entry of such parties in the register of shareholders.
Name	Number of shares, etc. held<br><br><br>(Thousands)	Percentage of shares, etc. held<br><br><br>to total shares issued (%)
---	---	---
Nomura Asset<br>Management Co., Ltd. and 3 Joint Holders	63,157	5.01
5.	Sumitomo Mitsui Trust Asset Management Co., Ltd. filed its “Amendment to the Bulk Shareholding<br>Report” with the Director-General of Kanto Local Financial Bureau in Japan as of September 20, 2019 and reported that Sumitomo Mitsui Trust Asset Management Co., Ltd. and one joint holder held shares of the Company as of September 13,<br>2019 as provided in the below table. As of December 31, 2020, the Company has not been able to confirm the entry of such parties in the register of shareholders.
---	---
Name	Number<br>of shares, etc. held<br> <br>(Thousands)	Percentage of shares, etc. held<br><br><br>to total shares issued (%)
---	---	---
Sumitomo Mitsui Trust Asset Management Co., Ltd. and 1 Joint<br>Holder	72,546	5.70
6.	BlackRock Japan Co., Ltd. filed its “Amendment to the Bulk Shareholding Report” with the<br>Director-General of Kanto Local Financial Bureau in Japan as of March 22, 2017 and reported that BlackRock Japan Co., Ltd. and eight joint holders held shares of the Company as of March 15, 2017 as provided in the below table. As of<br>December 31, 2020, the Company has not been able to confirm the entry of such parties in the register of shareholders.
---	---
Name	Number<br>of shares, etc. held<br> <br>(Thousands)	Percentage of shares, etc. held<br><br><br>to total shares issued (%)
---	---	---
BlackRock Japan Co., Ltd. and 8 Joint<br>Holders	79,185	6.27

20 -

vi) Status of Voting Rights

1) Shares Issued

(As of December 31, 2020)

Classification	Number of shares of <br> common stock	Number of voting rights<br><br><br>(Units)	Description
Shares without voting rights	—	—	—
Shares with restricted voting rights<br><br><br>(Treasury stock, etc.)	—	—	—
Shares with restricted voting rights (Others)	—	—	—
Shares with full voting rights<br><br><br>(Treasury stock, etc.)	24,670,700	—	—
Shares with full voting rights (Others)	1,234,535,000	12,345,350	—
Shares constituting less than one full unit	1,853,081	—	Shares constituting <br><br>less than one full unit <br>(100 shares)
Total number of shares issued	1,261,058,781	—	—
Total voting rights held by all shareholders	—	12,345,350	—
Note:	Included in “Shares with full voting rights (Others)” under “Number of shares of<br>common stock” are 18,900 shares of common stock held under the name of Japan Securities Depository Center, Incorporated. Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are<br>189 units of voting rights relating to the shares of common stock with full voting rights held under the name of Japan Securities Depository Center, Incorporated.
---	---

2) Treasury Stock, etc.

(As of December 31, 2020)

Name of shareholder	Address of shareholder	Number of <br>shares held <br>under own <br>name	Number of <br>shares held <br>under the names <br>of<br>others	Total number <br>of shares <br>held	Percentage of <br>shares held to<br><br><br>total shares <br>issued (%)
Sony<br>Corporation<br> <br>(Treasury stock)	1-7-1, Konan, Minato-ku, <br>Tokyo	24,670,700	—	24,670,700	1.96
Total	—	24,670,700	—	24,670,700	1.96

Notes:

1.	In addition to the 24,670,700 shares listed above, there are 300 shares of common stock held in the name<br>of the Company in the register of shareholders that the Company does not beneficially own. These shares are included in “Shares with full voting rights (Others)” in Table 1) “Shares Issued” above.
2.	Upon the disposal of treasury shares mainly due to the exercise of SARs (including the exercise of<br>unsecured convertible bonds with SARs (6th series)) from January 1, 2021 to January 31, 2021, the number of shares held decreased by 809 thousand shares.
---	---

(2) Directors and Corporate Executive Officers

There was no change in directors or corporate executive officers in the period from the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2020 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho).

21 -

IV Financial Statements

	Page
(1) Consolidated Financial Statements		23
(i) <br> Consolidated Balance Sheets		23
(ii) <br> Consolidated Statements of Income		25
(iii) <br> Consolidated Statements of Comprehensive Income		27
(iv) <br> Consolidated Statements of Cash Flows		28
(2) Other Information		56

22 -

(1) Consolidated Financial Statements

(i) Consolidated Balance Sheets (Unaudited)

Sony Corporation and Consolidated Subsidiaries

	Yen in<br>millions
	At<br>March 31,<br> 2020			At<br>December 31,<br> 2020
ASSETS
Current assets:
Cash and cash equivalents		1,512,357			1,878,047
Marketable securities (including assets pledged that secured parties are permitted to sell or repledge of<br>17,521 million yen and 20,548 million yen at March 31, 2020 and December 31, 2020)		1,847,772			2,771,000
Notes and accounts receivable, trade and contract assets		1,028,793			1,310,227
Allowance for credit losses		(25,873	)		(25,143	)
Inventories		589,969			605,437
Other receivables		188,106			308,178
Prepaid expenses and other current assets		594,021			540,302
Total current assets		5,735,145			7,388,048
Film costs		427,336			421,382
Investments and advances:
Affiliated companies		207,922			220,221
Securities investments and other (including assets pledged that secured parties are permitted to sell or repledge of<br>930,882 million yen and 1,602,797 million yen at March 31, 2020 and December 31, 2020)		12,526,210			13,635,160
Allowance for credit losses		-			(8,370	)
		12,734,132			13,847,011
Property, plant and equipment:
Land		81,482			78,285
Buildings		659,556			659,679
Machinery and equipment		1,725,720			1,683,264
Construction in progress		76,391			126,502
		2,543,149			2,547,730
Less – Accumulated depreciation		1,634,505			1,584,620
		908,644			963,110
Other assets:
Operating lease right-of-use<br>assets		359,510			336,112
Finance lease right-of-use<br>assets		33,100			43,763
Intangibles, net		906,310			920,148
Goodwill		783,888			791,000
Deferred insurance acquisition costs		600,901			639,831
Deferred income taxes		210,372			182,494
Other		340,005			348,223
		3,234,086			3,261,571
Total assets		23,039,343			25,881,122

(Continued on following page.)

23 -

Consolidated Balance Sheets(Unaudited)

	Yen in<br>millions
	At March 31,<br> 2020			At December 31,<br> 2020
LIABILITIES
Current liabilities:
Short-term borrowings		810,176			1,320,595
Current portion of long-term debt		29,807			119,192
Current portion of long-term operating lease liabilities		68,942			73,203
Notes and accounts payable, trade		380,810			657,458
Accounts payable, other and accrued expenses		1,630,197			1,660,096
Accrued income and other taxes		145,996			208,063
Deposits from customers in the banking business		2,440,783			2,723,808
Other		733,732			1,108,847
Total current liabilities		6,240,443			7,871,262
Long-term debt		634,966			737,258
Long-term operating lease liabilities		314,836			286,235
Accrued pension and severance costs		324,655			314,559
Deferred income taxes		549,538			340,015
Future insurance policy benefits and other		6,246,047			6,463,972
Policyholders’ account in the life insurance business		3,642,271			4,159,852
Other		289,285			266,611
Total liabilities		18,242,041			20,439,764
Redeemable noncontrolling interest		7,767			8,035
Commitments and contingent liabilities
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value –
At March 31, 2020–Shares authorized: 3,600,000,000, shares issued:<br>1,261,058,781		880,214
At December 31, 2020–Shares authorized: 3,600,000,000, shares issued:<br>1,261,058,781					880,214
Additional paid-in capital		1,289,719			1,486,104
Retained earnings		2,768,856			3,788,596
Accumulated other comprehensive income –
Unrealized gains on securities, net		161,191			139,369
Unrealized gains on derivative instruments, net		1,248			1,916
Pension liability adjustment		(235,520	)		(229,625	)
Foreign currency translation adjustments		(509,872	)		(536,902	)
Debt valuation adjustments		1,973			1,195
		(580,980	)		(624,047	)
Treasury stock, at cost
Common stock
At March 31, 2020–40,898,841 shares		(232,503	)
At December 31, 2020–24,670,705 shares					(140,307	)
		4,125,306			5,390,560
Noncontrolling interests		664,229			42,763
Total equity		4,789,535			5,433,323
Total liabilities and equity		23,039,343			25,881,122

The accompanying notes are an integral part of these statements.

24 -

(ii) Consolidated Statements of Income(Unaudited)

Sony Corporation and Consolidated Subsidiaries

	Yen in millions
	Nine months ended December 31
	2019			2020
Sales and operating revenue:
Net sales		5,318,782			5,481,349
Financial services revenue		1,115,291			1,240,455
Other operating revenue		77,072			57,137
		6,511,145			6,778,941
Costs and expenses:
Cost of sales		3,629,246			3,753,504
Selling, general and administrative		1,105,115			1,040,308
Financial services expenses		997,211			1,102,877
Other operating income, net		(24,017	)		(16,491	)
		5,707,555			5,880,198
Equity in net income of affiliated companies		6,422			6,642
Operating income		810,012			905,385
Other income:
Interest and dividends		14,658			7,109
Gain on equity securities, net		372			205,727
Other		4,441			4,210
		19,471			217,046
Other expenses:
Interest expenses		8,793			7,265
Foreign exchange loss, net		9,376			8,684
Loss on pension plan amendment		6,358			-
Other		1,523			9,588
		26,050			25,537
Income before income taxes		803,433			1,096,894
Income taxes		196,916			12,641
Net income		606,517			1,084,253
Less - Net income attributable to noncontrolling interests		36,970			19,477
Net income attributable to Sony Corporation’sstockholders		569,547			1,064,776
	Yen
	Nine months ended December 31
	2019			2020
Per share data:
Net income attributable to Sony Corporation’s stockholders
– Basic		460.11			867.17
– Diluted		450.08			852.04

The accompanying notes are an integral part of these statements. ****

25 -

Consolidated Statements ofIncome (Unaudited)

Sony Corporation and Consolidated Subsidiaries

	Yen in millions
	Three months ended<br>December 31
	2019			2020
Sales and operating revenue:
Net sales		2,034,826			2,252,904
Financial services revenue		405,382			423,432
Other operating revenue		22,954			20,200
		2,463,162			2,696,536
Costs and expenses:
Cost of sales		1,411,228			1,554,843
Selling, general and administrative		400,032			409,835
Financial services expenses		372,540			376,833
Other operating (income) expense, net		(18,056	)		295
		2,165,744			2,341,806
Equity in net income of affiliated companies		2,714			4,496
Operating income		300,132			359,226
Other income:
Interest and dividends		3,900			1,753
Gain on equity securities, net		13,392			120,234
Foreign exchange gain, net		-			60
Other		1,286			1,413
		18,578			123,460
Other expenses:
Interest expenses		1,129			2,756
Foreign exchange loss, net		427			-
Loss on pension plan amendment		6,358			-
Other		475			2,559
		8,389			5,315
Income before income taxes		310,321			477,371
Income taxes		69,977			103,661
Net income		240,344			373,710
Less - Net income attributable to noncontrolling interests		10,806			1,819
Net income attributable to Sony Corporation’sstockholders		229,538			371,891
	Yen
	Three months ended<br>December 31
	2019			2020
Per share data:
Net income attributable to Sony Corporation’s stockholders
– Basic		187.02			301.09
– Diluted		182.89			297.35

The accompanying notes are an integral part of these statements. ****

26 -

(iii) Consolidated Statements ofComprehensive Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

	Yen in millions
	Nine months ended<br>December 31
	2019			2020
Net income		606,517			1,084,253
Other comprehensive income, net of tax —
Unrealized gains (losses) on securities		14,757			(64,428	)
Unrealized gains on derivative instruments		60			668
Pension liability adjustment		86,162			6,805
Foreign currency translation adjustments		(17,501	)		(26,787	)
Debt valuation adjustments		-			(1,837	)
Total comprehensive income		689,995			998,674
Less – Comprehensive income attributable to noncontrolling<br>interests		41,635			6,866
Comprehensive income attributable to SonyCorporation’s stockholders		648,360			991,808
	Yen in millions
	Three months ended<br>December 31
	2019			2020
Net income		240,344			373,710
Other comprehensive income, net of tax —
Unrealized losses on securities		(25,168	)		(26,546	)
Unrealized gains on derivative instruments		368			1,539
Pension liability adjustment		80,122			2,346
Foreign currency translation adjustments		46,249			(3,317	)
Debt valuation adjustments		-			(644	)
Total comprehensive income		341,915			347,088
Less – Comprehensive income attributable to noncontrolling<br>interests		2,538			1,758
Comprehensive income attributable to SonyCorporation’s stockholders		339,377			345,330

The accompanying notes are an integral part of these statements.

27 -

(iv) Consolidated Statements of Cash Flows(Unaudited)

Sony Corporation and Consolidated Subsidiaries

	Yen in millions
	Nine months ended December 31
	2019			2020
Cash flows from operating activities:
Net income		606,517			1,084,253
Adjustments to reconcile net income to net cash provided by operating activities–
Depreciation and amortization, including amortization of deferred insurance acquisition costs and<br>contract costs		281,393			286,563
Amortization of film costs		212,684			197,849
Accrual for pension and severance costs, less payments		4,714			1,748
Other operating income, net		(24,017	)		(16,491	)
Gain on securities investments, net (other than financial services business)		(392	)		(205,721	)
Gain on marketable securities and securities investments held in the financial services business,<br>net		(127,002	)		(339,714	)
Deferred income taxes		23,594			(155,881	)
Equity in net income of affiliated companies, net of dividends		(2,737	)		(2,211	)
Changes in assets and liabilities:
Increase in notes, accounts receivable, trade and contract assets		(237,477	)		(300,544	)
(Increase) decrease in inventories		34,865			(41,039	)
Increase in film costs		(296,377	)		(193,344	)
Increase (decrease) in notes and accounts payable, trade		(12,640	)		277,309
Increase in accrued income and other taxes		34,419			136,263
Increase in future insurance policy benefits and other		554,596			619,049
Increase in deferred insurance acquisition costs		(73,385	)		(69,433	)
Increase in marketable securities held in the life insurance business		(103,746	)		(119,871	)
Increase in other current assets		(15,047	)		(150,801	)
Increase (decrease) in other current liabilities		(16,443	)		66,950
Other		(9,452	)		12,574
Net cash provided by operating activities		834,067			1,087,508

(Continued on following page.)

28 -

Consolidated Statements of CashFlows (Unaudited)

	Yen in millions
	Nine months ended December 31
	2019			2020
Cash flows from investing activities:
Payments for purchases of fixed assets		(314,791	)		(391,439	)
Proceeds from sales of fixed assets		12,445			13,699
Payments for investments and advances by financial services business		(970,438	)		(1,197,359	)
Payments for investments and advances (other than financial services business)		(40,423	)		(93,368	)
Proceeds from sales or return of investments and collections of advances by financial services<br>business		208,164			292,090
Proceeds from sales or return of investments and collections of advances (other than financial<br>services business)		13,169			19,604
Proceeds from sales of businesses		13,404			1,605
Proceeds from sales of Olympus Corporation Shares		80,357			-
Other		(27,969	)		(17,019	)
Net cash used in investing activities		(1,026,082	)		(1,372,187	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		110,535			336,960
Payments of long-term debt		(189,790	)		(93,913	)
Increase in short-term borrowings, net		278,028			311,912
Proceeds from issuance of short-term borrowings in connection with payment for purchase of<br>noncontrolling interest in Sony Financial Holdings Inc.		-			396,500
Payments of short-term borrowings in connection with payment for purchase of noncontrolling<br>interest in Sony Financial Holdings Inc.		-			(200,000	)
Increase in deposits from customers in the financial services business, net		211,135			392,891
Dividends paid		(49,621	)		(61,153	)
Payments for purchase of treasury stock		(156,187	)		(211	)
Payment for purchase of noncontrolling interest in Game Show Network, LLC		(39,894	)		-
Payment for purchase of noncontrolling interest in Sony Financial Holdings Inc.		-			(396,698	)
Other		(19,110	)		(9,628	)
Net cash provided by financing activities		145,096			676,660
Effect of exchange rate changes on cash and cash equivalents, including<br>restricted		(14,887	)		(28,538	)
Net increase (decrease) in cash and cash equivalents, including restricted		(61,806	)		363,443
Cash and cash equivalents, including restricted, at beginning of the fiscal<br>year		1,473,813			1,515,295
Cash and cash equivalents, including restricted, at end of the period		1,412,007			1,878,738
Less - restricted cash and cash equivalents, included in other current assets<br>and other assets		3,131			691
Cash and cash equivalents at end of the period		1,408,876			1,878,047

The accompanying notes are an integral part of these statements.

29 -

Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

Notes to Consolidated Financial Statements	Page
1. Summary of significant accounting policies		31
2. Marketable securities and securities investments		34
3. Fair value measurements		36
4. Supplemental equity and comprehensive income<br>information		38
5. Reconciliation of the differences between basic and diluted<br>EPS		41
6. Revenue		42
7. <br>Reversal of valuation allowances for deferred tax assets of Sony Corporation and its national tax filing group in Japan		43
8. Unconsolidated variable interest entities		44
9. Commitments, contingent liabilities and other		45
10. Business segment information		46
11. Subsequent event		55

30 -

Notes to Consolidated Financial Statements (Unaudited)

Sony Corporation and Consolidated Subsidiaries

1.	Summary of significant accounting policies

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for certain disclosures which have been omitted. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP. These adjustments were not recorded in the statutory books and records as Sony Corporation and its subsidiaries in Japan maintain their records and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domiciles.

(1)	Recently adopted accounting pronouncements:

Measurement of credit losses on financial instruments -

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, which amends the accounting guidance for credit losses on financial instruments. The ASU requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts and their implications for expected credit losses. This ASU was effective for Sony as of April 1, 2020. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

Improvements to Accounting for Costs of Films and License Agreements for ProgramMaterials -

In March 2019, the FASB issued ASU 2019-02, which updates the guidance for the capitalization of film costs associated with episodic television series, requires the use of fair value rather than net realizable value when determining potential impairments of broadcasting rights, and modifies the presentation and disclosure requirements for films and broadcasting rights. In addition, upon capitalization of film costs entities are required to determine qualitatively whether the predominant monetization strategy is on a title-by-title basis or together with other films and/or broadcast rights as part of a film group, such as in the case of a release of a film as part of a library of content on a streaming service. In the case of a film group, impairments are evaluated at the overall film group level rather than the individual title level. This ASU was effective for Sony as of April 1, 2020 and was applied on a prospective basis. Upon adoption, Sony reclassified broadcasting rights in the Pictures segment and animation film production costs in the Music segment included in inventories to film costs.

31 -

Changes to the opening balances resulting from the adoption of the above ASUs were as follows:

	Yen in millions
	March 31,<br><br><br>2020			Impact of Adoption							April 1,<br><br><br>2020
		ASU<br>2016-13			ASU<br>2019-02		Total
ASSETS
Current assets:
Notes and accounts receivable, trade and contract assets		1,028,793			-		-		-			1,028,793
Allowance for credit losses *		(25,873	)		(280	)	-		(280	)		(26,153	)
Inventories		589,969			-		(31,517	)	(31,517	)		558,452
Other receivables		188,106			(30	)	-		(30	)		188,076
Prepaid expenses and other current assets		594,021			(12	)	-		(12	)		594,009
Total current assets		5,735,145			(322	)	(31,517	)	(31,839	)		5,703,306
Film costs		427,336			-		31,517		31,517			458,853
Investments and advances:
Securities investments and other		12,526,210			780		-		780			12,526,990
Allowance for credit losses		-			(6,341	)	-		(6,341	)		(6,341	)
Total investments and advances		12,734,132			(5,561	)	-		(5,561	)		12,728,571
Other assets:
Deferred income taxes		210,372			45		-		45			210,417
Other		340,005			(721	)	-		(721	)		339,284
Total other assets		3,234,086			(676	)	-		(676	)		3,233,410
Total assets		23,039,343			(6,559	)	-		(6,559	)		23,032,784
LIABILITIES
Deferred income taxes		549,538			(1,504	)	-		(1,504	)		548,034
Total liabilities		18,242,041			(1,504	)	-		(1,504	)		18,240,537
EQUITY
Sony Corporation’s stockholders’ equity:
Retained earnings		2,768,856			(3,669	)	-		(3,669	)		2,765,187
Total Sony Corporation’s stockholders’ equity		4,125,306			(3,669	)	-		(3,669	)		4,121,637
Noncontrolling interests		664,229			(1,386	)	-		(1,386	)		662,843
Total equity		4,789,535			(5,055	)	-		(5,055	)		4,784,480
Total liabilities and equity		23,039,343			(6,559	)	-		(6,559	)		23,032,784
*	Under ASU 2016-13, Sony changed the presentation from<br>“Allowance for doubtful accounts” to “Allowance for credit losses” on the consolidated balance sheets.
---	---

Disclosures for Fair Value Measurement -

In August 2018, the FASB issued ASU 2018-13, which amends disclosure requirements related to fair value measurement. This ASU was effective for Sony as of April 1, 2020. Since this ASU only impacts disclosures, the adoption had no impact on Sony’s results of operations and financial position.

Disclosures for Defined Benefit Plans -

In August 2018, the FASB issued ASU 2018-14, which amends disclosure requirements related to defined benefit pension and other postretirement plans. This ASU was effective for Sony as of April 1, 2020. Since this ASU only impacts disclosures, the adoption had no impact on Sony’s results of operations and financial position.

(2)	Accounting methods used specifically for interim consolidated financial statements:

Income Taxes -

Sony estimates the annual effective tax rate (“ETR”) derived from a projected annual net income before taxes and calculates the interim period income tax provision based on the year-to-date income tax provision computed by applying the ETR to the year-to-date net income before taxes at the end of each interim period. The income tax provision based on the ETR reflects anticipated income tax credits and net operating loss carryforwards; however, it excludes the income tax provision related to significant unusual or infrequent items. Such income tax provision is separately reported from the provision based on the ETR in the interim period in which it occurs.

32 -

(3)	Reclassifications:

Certain reclassifications of the financial statements and accompanying footnotes for the nine and three months ended December 31, 2019 have been made to conform to the presentation for the nine and three months ended December 31, 2020.

33 -

2.	Marketable securities and securities investments

Marketable securities and securities investments, primarily held in the Financial Services segment, include debt securities for which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows.

	Yen in millions
	March 31, 2020								December 31, 2020
	Cost		Gross<br>unrealized<br>gains		Gross<br>unrealized<br>losses		Fair value		Cost		Gross<br>unrealized<br>gains		Gross<br>unrealized<br>losses		Fair value
Debt securities:
Available-for-sale securities:
Japanese national government bonds 1, 2		1,552,036		210,459		(566)		1,761,929		2,260,356		171,613		(16,521)		2,415,448
Japanese local government bonds		69,132		73		(33)		69,172		75,475		75		(24)		75,526
Japanese corporate bonds		202,164		19,112		(567)		220,709		260,819		14,075		(1,060)		273,834
Foreign government bonds *1		198,777		81,014		(14)		279,777		299,974		51,678		(5,912)		345,740
Foreign corporate bonds		361,422		507		(2,179)		359,750		354,910		996		(278)		355,628
Securitized products		205,223		0		-		205,223		221,463		-		-		221,463
Other		14,398		1,867		(12)		16,253		24,531		3,131		(7)		27,655
		2,603,152		313,032		(3,371)		2,912,813		3,497,528		241,568		(23,802)		3,715,294
Held-to-maturity securities:
Japanese national government bonds *2		6,204,505		2,098,885		(1,397)		8,301,993		6,223,506		1,720,015		(12,141)		7,931,380
Japanese local government bonds		2,504		331		-		2,835		1,766		307		-		2,073
Japanese corporate bonds		482,050		61,176		(4,754)		538,472		542,204		39,863		(13,636)		568,431
Foreign government bonds 1,3		723,937		302,297		-		1,026,234		775,601		221,695		(2,149)		995,147
Foreign corporate bonds		98		7		-		105		25,870		825		-		26,695
Securitized products		5,418		-		(421)		4,997		34,627		29		(13)		34,643
		7,418,512		2,462,696		(6,572)		9,874,636		7,603,574		1,982,734		(27,939)		9,558,369
Total		10,021,664		2,775,728		(9,943)		12,787,449		11,101,102		2,224,302		(51,741)		13,273,663
*1	As of December 31, 2020,<br>available-for-sale securities and held-to-maturity securities include<br>330,059 million yen of pledged foreign government bonds as collateral for short-term lending transactions. Also, Japanese national government bonds include 426,467 million yen as receipt of collateral, and the same amount is recorded in<br>other current liabilities of the consolidated balance sheets for the debt of these transactions.
---	---
*2	As of December 31, 2020,<br>available-for-sale securities and held-to-maturity securities include<br>438,652 million yen of pledged Japanese national government bonds as collateral for short-term lending transactions.
---	---

34 -

*3	As of December 31, 2020,<br>held-to-maturity securities include 238,399 million yen of pledged foreign government bonds as collateral for short-term repurchase agreements.<br>

During the nine months ended December 31, 2019 and 2020, respectively, with respect to equity securities included in marketable securities and securities investments, Sony recorded net realized gains of 9,976 million yen and 29,906 million yen due to the sale of equity securities and net unrealized gains of 116,667 million yen and 516,174 million yen due to revaluation of equity securities held at the end of the period for the third quarter of the fiscal years ended March 31, 2020 and ending March 31, 2021, respectively. Gains or losses arising from equity securities held in the Financial Services segment are recorded in financial services revenue, and gains or losses arising from equity securities held in all segments other than the Financial Services segment are recorded in gain (loss) on equity securities, net in the consolidated statements of income. Included in the gains and (losses) noted above were gains and (losses) recorded by Sony with respect to the equity securities held by Sony in Spotify Technology S.A. (“Spotify”).

During the nine months ended December 31, 2019, the revaluation of the Spotify shares owned as of December 31, 2019 resulted in a pre-tax unrealized gain, net of costs to be paid to Sony’s artists and distributed labels, of 3,998 million yen (36 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statements of income.

During the nine months ended December 31, 2020, the revaluation of the Spotify shares owned as of December 31, 2020 resulted in a pre-tax unrealized gain, net of costs to be paid to Sony’s artists and distributed labels, of 68,050 million yen (638 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statements of income.

35 -

3.	Fair value measurements

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis are as follows.

	Yen in millions
	March 31, 2020
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Marketable securities		Securitiesinvestments and other		Othercurrent assets		Other assets
Assets:
Debt securities
Trading securities		24,330		245,790		-		270,120		270,120		-		-		-
Available-for-sale securities
Japanese national government bonds		-		1,761,929		-		1,761,929		10,011		1,751,918		-		-
Japanese local government bonds		-		69,172		-		69,172		15,334		53,838		-		-
Japanese corporate bonds		-		220,679		30		220,709		14,774		205,935		-		-
Foreign government bonds		-		279,777		-		279,777		2,690		277,087		-		-
Foreign corporate bonds		-		343,980		15,770		359,750		94,156		265,594		-		-
Securitized products		-		33,383		171,840		205,223		-		205,223		-		-
Other		-		4,152		12,101		16,253		-		16,253		-		-
Equity securities		950,744		581,642		-		1,532,386		1,434,612		97,774		-		-
Other investments *1		7,162		816		9,242		17,220		-		17,220		-		-
Derivative assets 2,3		1,310		41,073		-		42,383		-		-		40,784		1,599
Total assets		983,546		3,582,393		208,983		4,774,922		1,841,697		2,890,842		40,784		1,599
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Futureinsurancepolicy benefits		Policyholders’ account		Othercurrent liabilities		Othernoncurrent liabilities
Liabilities:
Future insurance policy benefits and policyholders’ account in the life insurance<br>business *4		-		-		532,191		532,191		64,045		468,146		-		-
Derivative liabilities 2,3		2,077		33,789		-		35,866		-		-		16,814		19,052
Total liabilities		2,077		33,789		532,191		568,057		64,045		468,146		16,814		19,052

36 -

	Yen in millions
	December 31, 2020
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Marketable securities		Securitiesinvestments and other		Othercurrent assets		Other assets
Assets:
Debt securities
Trading securities		29,993		260,538		-		290,531		290,531		-		-		-
Available-for-sale securities
Japanese national<br><br><br>government bonds		-		2,415,448		-		2,415,448		446,497		1,968,951		-		-
Japanese local government bonds		-		75,526		-		75,526		19,830		55,696		-		-
Japanese corporate bonds		-		266,639		7,195		273,834		20,488		253,346		-		-
Foreign government bonds		-		345,740		-		345,740		300		345,440		-		-
Foreign corporate bonds		-		337,907		17,721		355,628		115,319		240,309		-		-
Securitized products		-		45,701		175,762		221,463		-		221,463		-		-
Other		-		5,397		22,258		27,655		-		27,655		-		-
Equity securities		1,588,999		659,963		144		2,249,106		1,875,185		373,921		-		-
Other investments *1		6,544		3,390		8,540		18,474		-		18,474		-		-
Derivative assets 2,3		-		18,813		-		18,813		-		-		14,015		4,798
Total assets		1,625,536		4,435,062		231,620		6,292,218		2,768,150		3,505,255		14,015		4,798
									Presentation in the consolidated balance sheets
	Level 1		Level 2		Level 3		Total		Futureinsurancepolicy benefits		Policyholders’ account		Othercurrent liabilities		Othernoncurrent liabilities
Liabilities:
Future insurance policy benefits and policyholders’ account in the life insurance<br>business *4		-		-		539,656		539,656		52,644		487,012		-		-
Derivative liabilities 2,3		1,900		29,468		-		31,368		-		-		16,051		15,317
Total liabilities		1,900		29,468		539,656		571,024		52,644		487,012		16,051		15,317
*1	Other investments include certain hybrid financial instruments and certain private equity investments.<br>
---	---
*2	Derivative assets and liabilities are recognized and disclosed on a gross basis.
---	---
*3	The potential effect of offsetting on assets and liabilities, which primarily consists of derivatives<br>subject to master netting agreements and/or collateral, is insignificant.
---	---
*4	Future insurance policy benefits and policyholders’ account in the life insurance business are those<br>for which the fair value
---	---

option has been elected.

37 -

4.	Supplemental equity and comprehensive income information
(1)	Stockholders’ Equity
---	---

A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests and the total equity for the nine months ended December 31, 2019 and 2020 are as follows:

	Yen in millions
	Sony Corporation’s<br> stockholders’ equity			Noncontrolling<br>interests			Total equity
Balance at March 31, 2019		3,746,377			690,313			4,436,690
Cumulative effect of ASU 2016-02		(7,472	)		-			(7,472)
Issuance of new shares		1,058			-			1,058
Exercise of stock acquisition rights		7,121			-			7,121
Conversion of convertible bonds		42			-			42
Stock-based compensation		1,637			-			1,637
Comprehensive income:
Net income		569,547			36,970			606,517
Other comprehensive income, net of tax —
Unrealized gains on securities		9,563			5,194			14,757
Unrealized gains on derivative instruments		60			-			60
Pension liability adjustment		86,143			19			86,162
Foreign currency translation adjustments		(16,953	)		(548	)		(17,501)
Total comprehensive income		648,360			41,635			689,995
Dividends declared		(24,607	)		(25,577	)		(50,184)
Purchase of treasury stock		(156,187	)		-			(156,187)
Transactions with noncontrolling interests shareholders and other		15,275			(51,389	)		(36,114)
Balance at December 31, 2019		4,231,604			654,982			4,886,586
	Yen in millions
	Sony Corporation’s<br>stockholders’ equity			Noncontrolling<br>interests			Total equity
Balance at March 31, 2020		4,125,306			664,229			4,789,535
Cumulative effect of ASU 2016-13		(3,669	)		(1,386	)		(5,055)
Exercise of stock acquisition rights		11,544			-			11,544
Conversion of convertible bonds		68,819			-			68,819
Stock-based compensation		1,006			-			1,006
Comprehensive income:
Net income		1,064,776			19,477			1,084,253
Other comprehensive income, net of tax —
Unrealized losses on securities		(52,457	)		(11,971	)		(64,428)
Unrealized gains on derivative instruments		668			-			668
Pension liability adjustment		6,804			1			6,805
Foreign currency translation adjustments		(26,729	)		(58	)		(26,787)
Debt valuation adjustments		(1,254	)		(583	)		(1,837)
Total comprehensive income		991,808			6,866			998,674
Dividends declared		(30,839	)		(12,996	)		(43,835)
Purchase of treasury stock		(211	)		-			(211)
Reissuance of treasury stock		1,516			-			1,516
Transactions with noncontrolling interests shareholders and other		225,280			(613,950	)		(388,670)
Balance at December 31, 2020		5,390,560			42,763			5,433,323

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the nine months ended December 31, 2019.

38 -

In the quarter ended September 30, 2020, Sony Corporation acquired all the common shares and the related stock acquisition rights not held by Sony Corporation of Sony Financial Holdings Inc. (“SFH”), a consolidated subsidiary of Sony Corporation, and SFH has become a wholly-owned subsidiary of Sony Corporation. Consideration for this acquisition is 396,698 million yen. The net difference between the consideration, the decrease in the carrying amount of the noncontrolling interests of 622,364 million yen and the increase in accumulated other comprehensive income of 30,203 million yen was recognized as an increase to additional paid-in capital of 195,463 million yen.

39 -

(2)	Other Comprehensive Income

Changes in accumulated other comprehensive income, net of tax by component for the nine months ended December 31, 2019 and 2020 are as follows:

	Yen in millions
	Unrealized<br>gains (losses)<br>on securities			Unrealized<br>gains<br>(losses) on<br>derivative<br>instruments			Pension<br>liability<br>adjustment			Foreign<br>currency<br>translation<br>adjustments			Total
Balance at March 31, 2019		135,035			(19	)		(310,457	)		(435,229	)		(610,670)
Other comprehensive income before reclassifications		14,899			464			(3,668	)		(17,427	)		(5,732)
Amounts reclassified out of accumulated other comprehensive income		(142	)		(404	)		89,830			(74	)		89,210
Net current-period other comprehensive income		14,757			60			86,162			(17,501	)		83,478
Less: Other comprehensive income attributable to noncontrolling interests		5,194			-			19			(548	)		4,665
Balance at December 31, 2019		144,598			41			(224,314	)		(452,182	)		(531,857)
	Yen in millions
	Unrealized<br>gains (losses)<br>on securities			Unrealized<br>gains<br>(losses) on<br>derivative<br>instruments			Pension<br>liability<br>adjustment			Foreign<br>currency<br>translation<br>adjustments			Debt<br>valuation<br>adjustments		Total
Balance at March 31, 2020		161,191			1,248			(235,520	)		(509,872	)		1,973		(580,980)
Other comprehensive income before reclassifications		(64,518	)		6,167			(3,704	)		(26,900	)		(1,812)		(90,767)
Amounts reclassified out of accumulated other comprehensive income		90			(5,499	)		10,509			113			(25)		5,188
Net current-period other comprehensive income		(64,428	)		668			6,805			(26,787	)		(1,837)		(85,579)
Less: Other comprehensive income attributable to noncontrolling interests		(11,971	)		-			1			(58	)		(583)		(12,611)
Transactions with noncontrolling interests shareholders and other		30,635			-			(909	)		(301	)		476		29,901
Balance at December 31, 2020		139,369			1,916			(229,625	)		(536,902	)		1,195		(624,047)

40 -

5.	Reconciliation of the differences between basic and diluted EPS

Reconciliation of the differences between basic and diluted net income attributable to Sony Corporation’s stockholders per share (“EPS”) for the nine and three months ended December 31, 2019 and 2020 is as follows:

	Yen in millions
	Nine months ended December 31
	2019		2020
Net income attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		569,547		1,064,776
	Thousands of shares
Weighted-average shares outstanding		1,237,842		1,227,879
Effect of dilutive securities:
Stock acquisition rights		3,570		4,229
Zero coupon convertible bonds		24,009		17,564
Weighted-average shares for diluted EPS computation		1,265,421		1,249,672
	Yen
Basic EPS		460.11		867.17
Diluted EPS		450.08		852.04

Potential shares of common stock that were excluded from the computation of diluted EPS for the nine months ended December 31, 2019 and 2020 were 4,777 thousand shares and 4,515 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the nine months ended December 31, 2019 and 2020 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

	Yen in millions
	Three months ended December 31
	2019		2020
Net income attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		229,538		371,891
	Thousands of shares
Weighted-average shares outstanding		1,227,355		1,235,162
Effect of dilutive securities:
Stock acquisition rights		3,669		4,460
Zero coupon convertible bonds		24,006		11,071
Weighted-average shares for diluted EPS computation		1,255,030		1,250,693
	Yen
Basic EPS		187.02		301.09
Diluted EPS		182.89		297.35

Potential shares of common stock that were excluded from the computation of diluted EPS for the three months ended December 31, 2019 and 2020 were 4,777 thousand shares and 4,515 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended December 31, 2019 and 2020 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

41 -

6.	Revenue
(1)	Contract balances
---	---

Receivables from contracts with customers, contract assets and contract liabilities are comprised of the following:

	Yen in millions
	March 31, 2020		December 31, 2020
Receivables from contracts with customers *1		1,126,597		1,390,987
Contract assets *1		13,985		15,433
Contract liabilities *2		271,286		295,167
*1	Receivables from contracts with customers and contract assets are included in the consolidated balance<br>sheets as “Notes and accounts receivable, trade and contract assets” and “Other”, non-current.
---	---
*2	Contract liabilities are included in the consolidated balance sheets as “Other”, both current<br>and non-current.
---	---

Contract liabilities principally relate to customer advances received prior to performance. Revenues of 184,423 million yen were recognized during the nine months ended December 31, 2020, which were included in the balance of contract liabilities at March 31, 2020.

(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 certain information about the remaining performance obligations, primarily related to contracts with an expected original duration of less than one year, and sales-based or usage-based royalty revenue on licenses of intellectual property. After applying practical expedients, revenue from contracts with remaining performance obligations, which primarily relate to licensing of theatrical and television content in the Pictures segment, is expected to be recognized primarily within three years.

(3)	Disaggregation of revenue

For the breakdown of sales and operating revenue by segments, product categories and geographies, refer to Note 10.

42 -

7.	Reversal of valuation allowances for deferred tax assets of Sony Corporation and its national taxfiling group in Japan

Sony provides a valuation allowance for its deferred tax assets, which includes temporary differences, net operating losses and tax credits, when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the relevant tax jurisdiction. Despite the spread of COVID-19, as a result of the acquisition of SFH, the taxable income of Sony Corporation and its national tax filing group has increased and is expected to be stable going forward. Based on an assessment of the available positive and negative evidence, in particular recent profit history and forecasted profitability, in the quarter ended September 30, 2020, Sony reversed the valuation allowances recorded against a significant portion of the deferred tax assets in Japan, primarily for temporary differences and certain net operating losses. As a result, Sony recorded a tax benefit of 214,900 million yen in the quarter ended September 30, 2020. Valuation allowances continue to be recorded on the remaining Japan deferred tax assets, primarily foreign tax credits, due to restrictions on the use of such assets and their relatively short remaining carryforward periods.

43 -

8.	Unconsolidated variable interest entities

Certain accounts receivable sales programs also involve variable interest entities (“VIEs”). These VIEs are all special purpose entities associated with the sponsor banks. Based on a qualitative assessment, Sony is not the primary beneficiary and therefore does not consolidate these entities as Sony does not have the power to direct the activities, an obligation to absorb losses, or the right to receive the residual returns of these VIEs. Sony’s maximum exposure to losses from these VIEs is considered insignificant.

In the Financial Services segment, Sony has variable interests in VIEs where Sony is not the primary beneficiary. Sony’s variable interests in such VIEs include equity securities, securitized products, foreign corporate bonds and other investments. The following tables present the carrying value of the variable interests of unconsolidated VIEs in the Finacial Services segment, the presentation in the consolidated balance sheet, and the maximum exposure to loss associated with these variable interests as of March 31, 2020 and December 31, 2020. 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 VIEs in which Sony is involved are limited to the amount recorded in the consolidated balance sheets and the amount of commitments.

	Yen in millions
	March 31, 2020
	Presentation in the consolidated balance sheets						Maximum exposureto loss
	Marketable<br>securities		Securities<br>investments<br>and other		Prepaid expensesand other currentassets
Equity securities *1		579,773		6,229		-		587,602
Securitized products		-		210,641		-		210,641
Foreign corporate bonds *2		41,452		41,036		-		82,488
Other investments		-		16,253		21,000		43,719
Total		621,225		274,159		21,000		924,450
	Yen in millions
---	---	---	---	---	---	---	---	---
	December 31, 2020
	Presentation in the consolidated balance sheets						Maximum exposureto loss
	Marketable<br>securities		Securities<br>investments<br>and other		Prepaid expensesand other currentassets
Equity securities *1		656,602		6,624		-		663,854
Securitized products		-		256,090		-		256,090
Foreign corporate bonds *2		50,748		37,031		-		87,779
Other investments		-		27,655		21,000		66,239
Total		707,350		327,400		21,000		1,073,962
*1	Equity securities primarily include investment funds.
---	---
*2	Foreign corporate bonds primarily include repackaged bonds.
---	---

44 -

9.	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 December 31, 2020, the total unused portion of the lines of credit extended under these contracts was 35,186 million yen. Based upon the information currently available, it is not possible to estimate the aggregate amounts of future year-by-year payments for these loan commitments.

(2)	Purchase commitments and other

Purchase commitments and other outstanding as of December 31, 2020 amounted to 720,856 million yen. The major components of these commitments are as follows:

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within three years. As of December 31, 2020, these subsidiaries were committed to make payments under such contracts of 105,027 million yen.

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 product. These contracts cover various periods mainly within five years. As of December 31, 2020, these subsidiaries were committed to make payments of 145,884 million yen under such contracts.

In December 2020, Funimation Global Group, LLC, a joint venture between a subsidiary in the Pictures segment and a subsidiary in the Music segment, entered into a definitive agreement to acquire 100% of the equity interest in Ellation Holdings, Inc., a subsidiary of AT&T Inc., which operates the anime business Crunchyroll. The purchase price of this transaction is 1,175 million U.S. dollars subject to customary working capital and other adjustments. This transaction is subject to customary closing conditions, including regulatory approvals.

Certain subsidiaries in the Game & Network Services (“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 seven years. As of December 31, 2020, these subsidiaries were committed to make payments of 34,360 million yen under such contracts.

Sony has entered into purchase contracts for fixed assets. As of December 31, 2020, Sony has committed to make payments of 140,262 million yen under such contracts.

Sony has entered into purchase contracts for materials. As of December 31, 2020, Sony has committed to make payments of 97,949 million yen under such contracts.

Sony has entered into sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within one year. As of December 31, 2020, Sony has committed to make payments of 2,711 million yen under such contracts.

(3)	Litigation

Sony 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 December 31, 2020 amounted to 554 million yen.

45 -

10.	Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chairman, President and Chief Executive Officer.

The G&NS segment includes network services businesses, the manufacture and sales of home gaming products and 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 Electronics Products & Solutions (“EP&S”) segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and internet-related service business. The Imaging & Sensing Solutions (“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 a bank 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.

46 -

Business segments -

Sales and operating revenue:

	Yen in millions
	Nine months ended December 31
	2019			2020
Sales and operating revenue:
Game & Network Services -
Customers		1,496,372			1,959,383
Intersegment		47,609			36,590
Total		1,543,981			1,995,973
Music -
Customers		630,641			663,878
Intersegment		7,825			8,567
Total		638,466			672,445
Pictures -
Customers		681,848			557,534
Intersegment		858			1,063
Total		682,706			558,597
Electronics Products & Solutions -
Customers		1,612,785			1,472,634
Intersegment		15,058			12,858
Total		1,627,843			1,485,492
Imaging & Sensing Solutions -
Customers		774,570			726,134
Intersegment		64,839			54,074
Total		839,409			780,208
Financial Services -
Customers		1,115,291			1,240,455
Intersegment		6,053			5,523
Total		1,121,344			1,245,978
All Other -
Customers		181,704			150,434
Intersegment		29,057			25,362
Total		210,761			175,796
Corporate and elimination		(153,365	)		(135,548	)
Consolidated total		6,511,145			6,778,941

47 -

	Yen in millions
	Three months ended December 31
	2019			2020
Sales and operating revenue:
Game & Network Services -
Customers		616,576			865,790
Intersegment		15,554			17,436
Total		632,130			883,226
Music -
Customers		213,861			261,724
Intersegment		3,077			2,738
Total		216,938			264,462
Pictures -
Customers		235,702			191,118
Intersegment		312			57
Total		236,014			191,175
Electronics Products & Solutions -
Customers		645,818			644,558
Intersegment		4,611			4,430
Total		650,429			648,988
Imaging & Sensing Solutions -
Customers		277,816			243,809
Intersegment		20,191			23,129
Total		298,007			266,938
Financial Services -
Customers		405,382			423,432
Intersegment		1,846			1,841
Total		407,228			425,273
All Other -
Customers		63,129			63,995
Intersegment		9,144			8,505
Total		72,273			72,500
Corporate and elimination		(49,857	)		(56,026	)
Consolidated total		2,463,162			2,696,536

G&NS intersegment amounts primarily consist of transactions with All Other.

I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment.

All Other intersegment amounts primarily consist of transactions with the G&NS segment, the Music segment and the Pictures segment.

Corporate and elimination includes certain brand and patent royalty income.

48 -

Segment profit or loss:

	Yen in millions
	Nine months ended December 31
	2019			2020
Operating income (loss):
Game & Network Services		192,241			309,152
Music		112,007			147,435
Pictures		45,116			78,700
Electronics Products & Solutions		146,789			150,649
Imaging & Sensing Solutions		201,088			125,657
Financial Services		117,518			137,516
All Other		20,505			14,849
Total		835,264			963,958
Corporate and elimination		(25,252	)		(58,573	)
Consolidated operating income		810,012			905,385
	Yen in millions
	Three months ended December 31
	2019			2020
Operating income (loss):
Game & Network Services		53,450			80,183
Music		36,250			59,692
Pictures		5,422			22,207
Electronics Products & Solutions		80,336			105,772
Imaging & Sensing Solutions		75,182			50,396
Financial Services		32,634			46,595
All Other		20,673			8,126
Total		303,947			372,971
Corporate and elimination		(3,815	)		(13,745	)
Consolidated operating income		300,132			359,226

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

49 -

Sales to Customers by Product Category :

The following table is a breakdown of sales and operating revenue to external customers by product category for each segment. Sony management views each segment as a single operating segment.

	Yen in millions
	Nine months ended December 31
Sales and operating revenue:	2019		2020
Game & Network Services
Digital Software and Add-on Content		747,835		1,124,487
Network Services		253,467		284,966
Hardware and Others		495,070		549,930
Total		1,496,372		1,959,383
Music
Recorded Music – Streaming		206,091		235,790
Recorded Music – Others		144,012		127,732
Music Publishing		117,413		113,653
Visual Media and Platform		163,125		186,703
Total		630,641		663,878
Pictures
Motion Pictures		322,586		208,871
Television Productions		180,604		190,895
Media Networks		178,658		157,768
Total		681,848		557,534
Electronics Products & Solutions
Televisions		550,099		559,056
Audio and Video		284,239		247,942
Still and Video Cameras		321,891		258,212
Mobile Communications		291,764		284,430
Other		164,792		122,994
Total		1,612,785		1,472,634
Imaging & Sensing Solutions		774,570		726,134
Financial Services		1,115,291		1,240,455
All Other		181,704		150,434
Corporate		17,934		8,489
Consolidated total		6,511,145		6,778,941

50 -

	Yen in millions
	Three months ended December 31
Sales and operating revenue:	2019		2020
Game & Network Services
Digital Software and Add-on Content		304,982		432,789
Network Services		85,484		95,774
Hardware and Others		226,110		337,227
Total		616,576		865,790
Music
Recorded Music – Streaming		72,812		88,063
Recorded Music – Others		53,127		54,049
Music Publishing		39,716		44,997
Visual Media and Platform		48,206		74,615
Total		213,861		261,724
Pictures
Motion Pictures		101,345		52,633
Television Productions		72,572		75,656
Media Networks		61,785		62,829
Total		235,702		191,118
Electronics Products & Solutions
Televisions		235,859		247,870
Audio and Video		121,742		116,974
Still and Video Cameras		122,031		121,570
Mobile Communications		113,500		111,061
Other		52,686		47,083
Total		645,818		644,558
Imaging & Sensing Solutions		277,816		243,809
Financial Services		405,382		423,432
All Other		63,129		63,995
Corporate		4,878		2,110
Consolidated total		2,463,162		2,696,536

Sony has realigned its product category configuration in the Music segment with a more detailed breakdown in Recorded Music from the fourth quarter of the fiscal year ended March 31, 2020. In connection with the realignment, all prior period sales amounts by product category in the table above have been reclassified to conform to the current presentation.

In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and add-on content through 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 and peripheral devices. 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, including game applications based on the animation titles, 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 and digital networks worldwide. In the EP&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones 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.

51 -

Within the EP&S segment, the operating income of Mobile Communications for the nine months ended December 31, 2019 and 2020 was 8,639 million yen and 41,786 million yen, respectively. In addition, the operating income of Mobile Communications for the three months ended December 31, 2019 and 2020 was 6,965 million yen and 21,292 million yen, respectively.

	Yen in millions
	Nine months ended December 31
	2019		2020
Depreciation and amortization:
Game & Network Services		20,920		27,493
Music		21,223		23,723
Pictures		16,266		13,467
Electronics Products & Solutions, including contract costs		44,846		45,502
Imaging & Sensing Solutions		96,228		114,973
Financial Services, including deferred insurance acquisition costs		60,154		41,519
All Other		3,639		2,886
Total		263,276		269,563
Corporate		18,117		17,000
Consolidated total		281,393		286,563
	Yen in millions
	Nine months ended December 31, 2019
	Total net<br> restructuring <br>charges		Depreciation<br>associated with<br> restructured assets		Total
Restructuring charges and associated depreciation:
Game & Network Services		-		-		-
Music		890		-		890
Pictures		278		-		278
Electronics Products & Solutions		9,376		-		9,376
Imaging & Sensing Solutions		-		-		-
Financial Services		-		-		-
All Other and Corporate		3,296		245		3,541
Consolidated total		13,840		245		14,085
	Yen in millions
	Nine months ended December 31, 2020
	Total net<br> restructuring <br>charges		Depreciation<br>associated with<br> restructured assets		Total
Restructuring charges and associated depreciation:
Game & Network Services		482		-		482
Music		646		-		646
Pictures		740		-		740
Electronics Products & Solutions		3,307		-		3,307
Imaging & Sensing Solutions		1,237		-		1,237
Financial Services		-		-		-
All Other and Corporate		1,669		-		1,669
Consolidated total		8,081		-		8,081

Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activities refers to the increase in depreciation expense caused by revising the useful life and the salvage value of depreciable fixed assets under an approved restructuring plan. Any impairment of the assets is recognized immediately in the period it is identified.

52 -

	Yen in millions
	Three months ended December 31
	2019		2020
Depreciation and amortization:
Game & Network Services		7,230		9,799
Music		7,176		8,352
Pictures		5,151		4,586
Electronics Products & Solutions, including contract costs		15,215		15,700
Imaging & Sensing Solutions		34,661		37,400
Financial Services, including deferred insurance acquisition costs		14,919		15,761
All Other		986		1,042
Total		85,338		92,640
Corporate		6,116		6,195
Consolidated total		91,454		98,835
	Yen in millions
	Three months ended December 31, 2019
	Total net<br> restructuring <br>charges		Depreciation<br>associated with<br> restructured assets		Total
Restructuring charges and associated depreciation:
Game & Network Services		-		-		-
Music		405		-		405
Pictures		87		-		87
Electronics Products & Solutions		2,776		-		2,776
Imaging & Sensing Solutions		-		-		-
Financial Services		-		-		-
All Other and Corporate		939		-		939
Consolidated total		4,207		-		4,207
	Yen in millions
	Three months ended December 31, 2020
	Total net<br> restructuring <br>charges		Depreciation<br>associated with<br> restructured assets		Total
Restructuring charges and associated depreciation:
Game & Network Services		482		-		482
Music		(477)		-		(477)
Pictures		705		-		705
Electronics Products & Solutions		1,992		-		1,992
Imaging & Sensing Solutions		1,237		-		1,237
Financial Services		-		-		-
All Other and Corporate		(213)		-		(213)
Consolidated total		3,726		-		3,726

53 -

Geographic Information –

Sales and operating revenue attributed to countries and areas based on location of external customers are as follows:

	Yen in millions
	Nine months ended December 31
Sales and operating revenue:	2019		2020
Japan		2,026,005		2,210,809
United States		1,410,544		1,624,525
Europe		1,313,715		1,363,893
China		696,530		595,193
Asia-Pacific		696,167		649,006
Other Areas		368,184		335,515
Total		6,511,145		6,778,941
	Yen in millions
	Three months ended December 31
Sales and operating revenue:	2019		2020
Japan		729,225		802,586
United States		545,581		652,346
Europe		543,709		635,873
China		246,122		182,729
Asia-Pacific		263,026		280,300
Other Areas		135,499		142,702
Total		2,463,162		2,696,536

Major countries and areas in each geographic segment excluding Japan, United States and China are as follows:

(1) Europe:	United Kingdom, France, Germany, Russia, Spain and Sweden
(2) Asia-Pacific:	India, South Korea and Oceania
(3) Other Areas:	The Middle East/Africa, Brazil, Mexico and Canada

There are no individually material countries with respect to sales and operating revenue included in Europe, Asia-Pacific and Other Areas.

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 and operating revenue with any single major external customer for the nine and three months ended December 31, 2019 and 2020.

54 -

11.	Subsequent event

Acquisition of certain of Kobalt Music Group Limited’s operations

On January 31, 2021, Sony Music Entertainment (“SME”), a wholly-owned subsidiary of Sony, entered into a definitive agreement with Kobalt Music Group Limited (“Kobalt”) to acquire 100% of the shares and related assets of certain Kobalt subsidiaries in order to obtain AWAL, Kobalt’s recorded music label and distribution business mainly for independent recording artists, and Kobalt Neighbouring Rights, Kobalt’s music neighboring rights management business. The purchase price of this transaction is 430 million U.S. dollars, subject to customary working capital and other adjustments. This transaction is subject to customary closing conditions, including regulatory approvals.

55 -

(2) Other Information

(i) Dividends declared

An interim cash dividend for Sony Corporation’s common stock was approved at the Board of Directors meeting held on October 28, 2020 as below:

Total amount of interim cash dividends:

30,839 million yen

Amount of interim cash dividends per share:

25.00 yen

Payment date:

December 1, 2020

Note: Interim cash dividends were distributed to the shareholders recorded or registered as the holders or pledgees of shares in Sony Corporation’s register of shareholders at the end of September 30, 2020.

(ii) Litigation

For the legal proceedings, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 9. Commitments, contingent liabilities and other”.

56 -

Sony Group Corp 6-K, filed Feb 9, 2021

About this 6-K

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