Corporate Governance Report

  • 1 Corporate Governance Report (Updated on Apr.17, 2019) Sony Financial Holdings Inc. The status of corporate governance of Sony Financial Holdings Inc. (hereinafter, the “Company”) is as follows: I. Basic Stance on Corporate Governance, Capital Structure, Company Type and Other Basic Information 1. Basic Stance (updated)
  • Sony Financial Group’s Corporate Philosophy “Mission, Vision & Values” The Sony Financial Group (hereinafter, the “Group”) positions its corporate philosophy “Mission, Vision & Values” as the basic policy for formulating management strategies and decision making. Mission Create a sustainable society where people feel a sense of enrichment Vision Become the most trusted financial services group by invoking emotion through the power of technology and high-value-added products and services that meet every customer’s needs Values Customer First: Provide products and services that satisfy customers by listening sincerely to their views Originality: Work actively and purse creativity and innovation within an organization that supports a sprit of freedom and open-mindedness Integrity & Fairness: Act fairly with high ethical standards and a sense of purpose Diversity: Create new value by harnessing diversity and varying viewpoints Sustainability: Fulfill our stakeholder responsibilities through disciplined business practices
  • Basic Stance on Corporate Governance  The Company strives to meet the expectations and earn the trust of stakeholders, realize sustainable corporate growth and increase corporate value over the mediumto long-term by making effective use of the Group’s various management resources and by realizing its corporate philosophy.

As a financial holding company, the Company is aware of the highly public nature of its financial business. Accordingly, the Company has in place a governance structure that emphasizes ensuring of soundness and appropriateness of the Group’s management.  The Company is a listed subsidiary of Sony Corporation, its parent company. As such, the Company maintains managerial independence from its parent company and strives to ensure a highly transparent management.

  • 2 [Reasons for not implementing the following principles of the Corporate Governance Code]
  • [Principle 1-4] Policy on Business-related Shareholdings  The Company and its Group companies do not hold shares for the purpose of business-related investment (hereinafter, “business-related shareholdings”). However, this excludes investments having a recognized strategic significance, such as business tie-ups, that contribute to enhancing the corporate value of individual Group companies.  In the event that the Company and its Group companies hold business-related shareholdings, they regularly consider the objectives of such holdings and the effect of investment, and report these results to their respective Boards of Directors. Based on these reports, the companies’ Boards of Directors consider the liquidation of such holdings through such methods as sale or transfer in the event the significance of holding them has been lost.

With regard to the exercise of voting rights in relation to business-related shareholdings, the Company and its Group companies make comprehensive decisions to vote for or against individual proposals from the perspective of whether appropriate governance structures are in place at investee companies, whether appropriate decisions are being made to enhance corporate value over the mediumto long-term, and from the perspective of enhancing the corporate value of individual Group companies. *The Group held shares in three listed companies (balance sheet amount of ¥14.5 billion) as business-related shareholdings as of March 31, 2018.

The Group periodically confirms the investment impact of such shareholdings.

[Principle 4-11] Preconditions for Ensuring the Effectiveness of the Board of Directors and the Audit & Supervisory Board Currently, all directors are men, and all are Japanese. Taking an international perspective, the elected directors include members with extensive overseas business experience and academic familiar with international finance. We will continue to consider the topic of gender diversity. Audit & Supervisory Board members are appointed for their specialized and sophisticated expertise in finance, accounting and law and their breath of professional experience.

  • [Disclosure based on each principle of the Corporate Governance Code] (updated)
  • [Principle 1-7] Ensuring the Appropriateness of Group Management The Company requires a resolution by the Board of Directors in the event of any competitive and conflict-of-interest transactions by directors. Furthermore, in the event of internal Group transactions (including transactions with its parent company, Sony Corporation and other Sony Group companies) that have the potential for individual Group companies to affect Group management, after the appropriateness and legality of such transactions are confirmed, they are resolved by or reported to the Board of Directors.
  • [Principle 2-6] Fulfilling the Function of Owner of Corporate Pension Assets The Company is a member of the Sony Corporate Pension Fund (hereinafter, the “Sony Fund”), which encompasses all Sony Group companies in Japan. An overview of the Sony Fund follows below. The Sony Find manages its assets in line with its Basic Pension Plan Management Policy (hereinafter, the
  • 3 “Policy”) which was set to secure beneficiaries’ rights of benefit and to stabilize company’s contribution. In order to realize prudential and appropriate asset management structure in Sony Fund, Sony Corporation appoints asset management director of Sony Fund who should have proper knowledge and skills, based on the nomination by general manager of finance department, and Sony Fund appoints external advisor to supplement their specialties in asset management. Based on the Policy, decisions on fund management are made by governing Board of Sony Fund after approval on asset management committee. Members of said committee include representative employees of Sony Corporation, by which conflict of interest between Sony Fund and Sony Corporation is properly controlled. Sony Fund issues asset management policy letter to newly appointed asset management fund and periodically reviews and evaluates funds’ compliance status based on said policy letter.
  • [Principle 3-1] (i) Corporate Philosophy and Business Plans The Group’s Corporate Philosophy are as written in “I. 1. Basic Stance” of this report. The Company has disclosed the medium-term corporate strategy on the Company’s website. https://www.sonyfh.co.jp/en/company/mid_term.html (ii) Basic Stance and Policies on Corporate Governance The Company’s basic stance is as written in “I. 1.Basic Stance” of this report. The Company has disclosed Basic Policy on Corporate Governance on the Company’s website. https://www.sonyfh.co.jp/en/company/data/governance_policy.pdf (iv) Policies and Procedures in the Nomination of Director and Audit & Supervisory Board Member Candidates and Appointment and Dismissal of the President and other Executive Directors The Company has formulated the Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates. Reflecting this policy, the Company selects as director and audit & supervisory board member candidates who have suitable knowledge, experience, capacity for judgment and other characteristics suiting them to conduct decision making and perform management oversight in relation to overall Group management. To reinforce the transparency and objectivity of the process of selecting director and audit & supervisory board member candidates, the Nomination Advisory Committee deliberates on candidates in response to inquiries by the Board of Directors. After receiving the committee’s reports, the Board of Directors decides on candidates to propose at the General Meeting of Shareholders. The Nomination Advisory Committee deliberates on the appointment and dismissal of the president and other executive directors based on the aforementioned policy, an assessment of corporate operating performance and other items. The committee then reports to the Board of Directors, which makes a decision. The Company has disclosed Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates on the Company’s website.

https://www.sonyfh.co.jp/en/company/data/nomination_policy.pdf

4 (v) Explanations with Respect to the Individual Appointment and Nomination of Director and Audit & Supervisory Board Member Candidates based on (iv) The Company has disclosed reasons for appointment on reference materials of the General Meeting of Shareholders. https://www.sonyfh.co.jp/en/financial_info/shareholder/meeting/ The reasons for appointment of Audit & Supervisory Board Members are as follows: Yasuyuki Hayase, Standing Audit & Supervisory Board Member (Outside) See “II.1. [Audit & Supervisory Board Members] Relationships with the Company (2)” of this report.

Yoshimichi Makiyama, Audit & Supervisory Board Member (Outside) See “II.1. [Audit & Supervisory Board Members] Relationships with the Company (2)” of this report. Hirotoshi Korenaga, Audit & Supervisory Board Member Mr. Korenaga has extensive knowledge about finance and accounting acquired over many years of working in accounting at Sony Corporation and Sony Corporate Services (Japan) Corporation. Accordingly, the Company has determined that Mr. Korenaga will use his professional experience to fulfill his role as audit & supervisory board member.

  • See individual executives’ biography on reference materials of Convocation of the General Meeting of Shareholders. https://www.sonyfh.co.jp/en/financial_info/shareholder/meeting/
  • [Principle 4-1 (1)] Summary of Scope of Delegation to Management In addition to items stipulated in laws and regulations and the Articles of Incorporation, the Board of Directors makes important decisions regarding management of the Group such as (i) formulation of Group corporate strategies and business plans, (ii) appointment and dismissal of directors, audit & supervisory board members and other executives of subsidiaries in which the Company holds shares directly, (iii) entry into new businesses and withdrawal from businesses, and (iv) organizational restructuring. The Board of Directors sets up an Executive Committee, to which it delegates the execution of important routine business of the Company.
  • [Principle 4-9] Independence Standards and Qualification for Independent Outside Directors In addition to the independence requirements of the Companies Act and the standards for independent directors provided by the Tokyo Stock Exchange, outside directors are people who satisfy the independence standards provided in the Company’s Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates. Outside audit & supervisory board members are people who satisfy the independence standards provided in the Company’s Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates.

The Company has disclosed Basic Policy on the Selection of Director and Audit & Supervisory Board Member Candidates on the Company’s website. https://www.sonyfh.co.jp/en/company/data/nomination_policy.pdf

  • [Principle 4-11 (1)] Composition of the Board of Directors The Board of Directors comprises 12 or fewer members (with a one year term of office). The Board of Directors is composed of members who have a broad range of knowledge and experience. To promote efficient Group management, in principle, the representative directors of principal Group subsidiaries serve concurrently as the Company’s directors. To reinforce the supervisory function and obtain general management advice for the Group, the Company appoints multiple highly independent outside directors.
  • The current composition is as written in “II. 1. Board Composition and Operations of Organizational Structure” of this report.
  • [Principle 4-11 (2)] Status of Concurrent Positions at Other Organizations of Directors and Audit & Supervisory Board Members With regard to the status of concurrent positions at other organizations of directors and audit & supervisory board members, the Company discloses the information on reference materials of the General Meetings of Shareholders. https://www.sonyfh.co.jp/en/financial_info/shareholder/meeting/
  • [Principle 4-11 (3)] Evaluation of Effectiveness of the Board of Directors According to the Company’s Basic Policy on Corporate Governance, the Board of Directors conducts self-evaluations, evaluating the effectiveness of its own decision-making and oversight, as well as its operation of meetings at least once a year.

As in the preceding fiscal year, an independent third-party evaluation company evaluated the effectiveness of the Board of Directors by questionnaire to all directors and audit & supervisory board members for the fiscal year ended March 31, 2018. Questionnaire recipients were asked to provide a score evaluation on a variety of items, including the composition and operation of the Board of Directors, management and business strategies, corporate ethics and risk management, management team evaluation and compensation, organizational and business restructuring, dialogue with shareholders and self-assessment.

In addition, respondents were asked to describe the reasons for and comments on their responses and evaluate responses to issues raised in the previous year’s evaluation of effectiveness.

A third-party assessment company provided the following overview of evaluation results. (Evaluation results) ・As in the preceding fiscal year, a high level of overall effectiveness was maintained. ・All members contributed proactively to discussions and proceedings, a free and vigorous atmosphere was maintained, and the chair took appropriate leadership, resulting in appropriate decision-making and supervision. ・Appropriate information was provided on the Group’s principal risks and the situation regarding these risks, and necessary deliberations took place.

The size of the Board of Directors is appropriate, given the scale and fields of the Group’s business activities.

6 ・The member composition of the Compensation Advisory Committee and the Nomination Advisory Committee is appropriate. ・The frequency and duration of Board of Directors meetings is appropriate, and the minutes reflect the content of discussions and deliberation results, providing neither too much nor too little detail. On the other hand, the following opinions were received with regard to various improvements concerning issues raised in the previous year’s evaluation of effectiveness (ongoing discussion of mediumto long-term groupwide issues and business strategies, and study group and training session opportunities related to Group management and businesses).

From the perspective of optimizing the overall Group and taking lessons from the past into account, an ongoing discussion related to Group growth strategies is necessary. ・A need exists to further enhance opportunities for study groups and training sessions related to Group management and businesses. ・The need exists to further enhance compliance and risk management systems, as well as monitoring, to further instill a customer-first orientation in business operations. ・Incentive compensation systems for management have been expanded, including the introduction of a restricted stock compensation system.

However, we would ask for ongoing consideration with regard to expanding the target scope and revising the ratios.

  • Having received the above-stated evaluations, the Company’s Board of Directors judges itself to be sufficiently effective at the present time. However, the Board will strive to further enhance its effectiveness by conducting ongoing discussions related to Group growth strategies; further augmenting the level of understanding related to Group management and businesses; and strengthening compliance, monitoring and other systems.
  • [Principle 4-14 (2)] Training Policy for Directors and Audit & Supervisory Board Members Upon their appointment, the Company provides opportunities for directors and audit & supervisory board members to acquire knowledge related to laws and regulations, corporate governance and other areas necessary for appropriately fulfilling their roles and responsibilities. In particular, when outside directors and audit & supervisory board members are newly appointed, the Company creates opportunities to provide the information necessary to promote an understanding of the Group’s businesses, management strategy, management issues and other areas. The Company also has created such opportunities as necessary following their appointment.

[Principle 5-1] Policy for Constructive Dialogue with Shareholders The Company conducts sincere and proactive IR activities, led by the president and representative director, to forge trust-based relationships with shareholders, investors and other parties. Useful opinions and requests obtained from shareholders, investors and other parties through IR activities are regularly provided as feedback mainly to the Board of Directors. The Company has established its IR Policy based on this stance. IR Policy is as written in “V. 2. Other Corporate Governance Structures” of this report.

7 2.

Capital Structure Ratio of shares owned by foreign shareholders 20% or more and less than 30% [Major Shareholders] Name Number of shares held Percentage of ownership (%) Sony Corporation 283,050,000 65.06 SSBTC CLIENT OMNIBUS ACCOUNT 14,831,019 3.40 The Master Trust Bank of Japan, Ltd. (Trust Account) 14,816,600 3.40 Japan Trustee Services Bank, Ltd. (Trust Account) 9,396,300 2.16 SAJAP 3,331,200 0.76 Japan Trustee Services Bank, Ltd. (Trust Account 5) 3,158,900 0.72 CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW 2,831,497 0.65 Japan Trustee Services Bank, Ltd. (Trust Account 9) 2,775,500 0.63 STATE STREET BANK WEST CLIENT-TREATY 505234 2,654,500 0.61 Sony Financial Holdings Employees’ Shareholding Association 2,603,535 0.59 Existence of controlling shareholders (excluding the parent company) No Parent company Sony Corporation (Listed on the Tokyo Stock Exchange, and Overseas) (Code: 6758) Supplementary Explanation ― 3.

Company Type Stock Exchange The First Section of the Tokyo Stock Exchange Fiscal Year End March Industry Insurance Number of employees (consolidated) More than 1,000 Sales (consolidated) More than ¥1 trillion Number of subsidiaries Fewer than 10 4. Policy Concerning the Measures to Protect Minority Shareholders in Transactions with the Controlling Shareholder The Sony Financial Group’s policy is to develop its business while maintaining a cooperative ties with the Sony Group. However, the Sony Financial Group believes that it has secured a certain degree of independence from the Sony Group, because it conducts independent business activities in line with its own management policies and strategies, and operates in different business fields than the Sony Group.

When entering into transactions with Sony Corporation (the controlling shareholder), the Sony Financial Group adequately confirms the necessity

8 for such transactions, and ensures that the conditions of such transactions do not differ markedly from the terms of ordinary transactions with third parties. 5. Other Special Issues That May Significantly Influence Corporate Governance (1) Capital relationships with Sony Corporation As of September 30, 2018, Sony Corporation holds 65.06% (excluding treasury stocks) of Sony Financial Holdings’ shares outstanding (common stock). As a result, regardless of the intentions and interests of other shareholders, Sony Corporation may have an impact on all matters requiring shareholder approval such as the appointment and dismissal of Sony Financial Holdings directors and audit & supervisory board members, mergers and other organizational restructuring, material asset and business transfers, amendments to the Articles of Incorporation, and the surplus apportionments.

(2) Senior management’s concurrent positions with the Sony Group Sony Financial Holdings has assigned Mr. Shiro Kambe (Executive Vice President, Corporate Executive Officer of Sony Corporation) as its director and has assigned Mr. Hirotoshi Korenaga (Corporate Executive, Senior General Manager, Global Accounting Division of Sony Corporate Services (Japan) Corporation) as its audit & supervisory board member. If the relationships between the Sony Financial Group and the Sony Group change due to reasons such as changes in the ratio of Sony Financial Holdings’ shares held by Sony Corporation, such personnel relationships may change.

(Sony Corporate Services (Japan) Corporation is a subsidiary of Sony Corporation). (3) Use of the “Sony” trade name and trademark Sony Financial Holdings and Group companies have entered into royalty agreements with Sony Corporation to use the “Sony” trade name and trademark. However, these agreements can be rescinded by Sony Corporation under certain conditions, such as Sony Corporation’s share of voting rights in Sony Financial Holdings falling below a majority, or Sony Financial Holdings’ percentage ownership of the voting rights of Sony Financial Group companies dropping. Based on these agreements, the Sony Financial Group Companies pays royalty fees to Sony Corporation and Sony Corporation retains pre-approval rights with respect to, among other things, any use of the relevant trademarks for purposes other than those expressly provided for in the agreements.

Sony Financial Holdings believes the “Sony” name has contributed to the Sony Financial Group’s brand recognition and its growth. The termination of these royalty agreements to use the “Sony” trade name and trademark led primarily by a decrease in Sony Corporation’s equity ownership in Sony Financial Holdings could adversely affect its business operations, marketing and operating results.

If reputations of other Sony Group Companies excluding Sony Corporation and Sony Financial Group Companies were damaged due to loses of creditworthiness or drop in earnings, operating results of Sony Financial Group Companies may be affected by worsening corporate image.

  • 9 II. Management Control Structure Pertaining to Management Decision Making, Execution and Supervision and Other Corporate Governance Structure 1. Board Composition and Operations of Organizational Structure Type of structure Company with Audit & Supervisory Board [Directors] Number of members of the Board of Directors stipulated in the Articles of Incorporation 12 Term of members of the Board of Directors stipulated in the Articles of Incorporation One year Chairman of the Board of Directors President Number of the Board of Directors Ten Election of Outside Directors Yes Number of Outside Directors Three Number of Outside Directors who are appointed as Independent Directors Three Relationships with the Company (1) Name Attribute Relationship with the Company* Isao Yamamoto From another company Shiro Kuniya Attorney Takatoshi Ito Scholar *Choices relating to relationships with the Company *○ indicates the relevant item that the person falls under as of “today or recently” △ indicates the relevant item that the person falls under as of “previously.” *
  • indicates the relevant item that the person’s close family member falls under as of “today or recently” ▲ indicates the relevant item that the person’s close family member falls under as of “previously.” (a) A person who is an executive or employee of the Company or its subsidiary (b) A person who is an executive, employee or non-executive director of the Company’s parent company (c) A person who is an executive or employee of a subsidiary of the Company’s parent company (d) A person who is an entity or, if that entity is a corporation, etc., its executive or employee for which the Company is a major client (e) A person who is a major client or if that client is a corporation, etc., its executives or employees (f) A person who in addition to executive compensation is receiving significant amounts of money or other property from the Company as consultant, accounting specialist or legal specialist (g) A person who is a major shareholder of the Company (or if that major shareholder is a corporation, etc., its executives or employees) (h) A person who is an executive or employee of an entity which is a client of the Company (does not fall under d, e and f) (only with respect to the person) (i) (j) A person who is an executive or employee of a company whose outside director assumes the post on a reciprocal basis with the Company (only with respect to the person) A person who is an executive or employee of an entity receiving contributions from the Company (only with respect to the person) (k) Other

10 Relationships with the Company (2) Name Independent Director Supplementary Information Reason for appointment Isao Yamamoto ○ ― Mr. Yamamoto possesses many years of experience as a securities analyst and an advisor for corporate finance and M&As, and has no conflict of special interest with the Company. Accordingly, the Company determined that Mr. Yamamoto can properly fulfill the duties of an outside director and an independent director. Shiro Kuniya ○ ― Mr. Kuniya works as a Managing Partner at Oh-Ebashi LPC & Partners and has specialized knowledge and experience as a lawyer, and has no conflict of special interest with the Company.

Accordingly, the Company has determined that Mr. Kuniya can properly fulfill the duties of as an outside director and independent director.

Takatoshi Ito ○ ― Mr. Ito possesses extensive knowledge and experience as an expert on subjects including macroeconomics, financial policy, international finance, and economic theory of Japan, and has no conflict of special interest with the Company. Accordingly, the Company determined that Mr. Ito can properly fulfill the duties of an outside director and an independent director. Status of the Establishment of a Discretionary Committee, Composition and Attributes of Chairperson Committee’s name All committees members Full-time members Internal Directors Outside Directors Outside Experts Others Chairperson Committee corresponding to Nomination Committee Nomination Advisory Committee Outside Director Committee corresponding to Compensation Committee Compensation Advisory Committee Outside Director Establishment or non-establishment of an optional committee which corresponds to the Nominating Committee or Compensation Committee Established

11 Supplementary Explanation Role of Nomination Advisory Committee: This committee deliberates the appointment and dismissal of directors and audit & supervisory board members of the Company, as well as the presidents of Group subsidiaries, and deliberates succession planning and other activities with regard to the Company and Group subsidiary presidents in response to inquiries by individual companies’ Boards of Directors or requests by committee members and reports to the respective Boards of Directors, if necessary.

  • Role of Compensation Advisory Committee: This committee deliberates compensation and other payments to directors of the Company and the representative directors of Group subsidiaries in response to inquiries by the individual companies’ Boards of Directors and reports to the respective Boards of Directors. Audit & Supervisory Board Members Existence of an Audit & Supervisory Board Yes Number of Audit & Supervisory Board Members stipulated by the Articles of Incorporation Five Number of Audit & Supervisory Board Members Three Cooperation between Audit & Supervisory Board Members, Independent Auditors and the Internal Audit Department Audit & supervisory board members receive regular reports on audit plans and audit results from the Company’s independent auditor (PricewaterhouseCoopers Aarata LLC) and exchange information with the independent auditor in a timely and appropriate manner. Audit & supervisory board members of the Company receive regular reports of internal audit plans and internal audit results from the internal audit department (Audit Department) and exchange information with this division in a timely and appropriate manner. The audit & supervisory board members also receive reports on each subsidiary’s internal audit results from subsidiaries’ internal audit departments. Election of Outside Audit & Supervisory Board Members Yes Number of Outside Audit & Supervisory Board Members Two Number of Outside Audit & Supervisory Board Members who are appointed as Independent Directors Two Relationships with the Company (1) Name Attribute Relationship with the Company* Yasuyuki Hayase From another company Yoshimichi Makiyama Attorney *Choices relating to relationships with the Company *○ indicates the relevant item that the person falls under as of “today or recently” △ indicates the relevant item that the person falls under as of “previously.” *
  • indicates the relevant item that the person’s close family member falls under as of “today or recently” ▲ indicates the relevant item that the person’s close family member falls under as of “previously.”

12 (a) A person who is an executive or employee of the Company or its subsidiary (b) A person who is a non - executive director or accounting advisor of the Company or its subsidiary (c) A person who is an executive, employee or non-executive director of the Company’s parent company (d) A person who is an audit & supervisory board member of the Company’s parent company (e) A person who is an executive or employee of a subsidiary of the Company’s parent company (f) A person who is an entity, if that entity is a corporation, etc., its executive or employee for which the Company is a major client (g) A person who is a major client of the Company or if that client is a corporation, etc., its executives or employees (h) A person who is in addition to executive or compensation is receiving money or other property as a consultant, accounting specialist or legal specialist from the Company (i) A person who is a major shareholder of the Company (or if that major shareholder is a corporation, etc., its executives or employees) (j) A person who is an executive or employee of an entity which is a major client of the Company (does not fall under f, g and h) (only with respect to the person) (k) (l) (m) A person who is an executive or employee of a company whose outside director assumes the post on a reciprocal basis with the Company (only with respect to the person) A person who is an executive or employee of an entity receiving contributions from the Company (only with respect to the person) Other Relationships with the Company (2) Name Independent Audit & Supervisory Board Member Supplementary Information Reason for appointment Yasuyuki Hayase ○ ― Mr.

Hayase possesses many years of experience at a financial institution, and as a standing audit & supervisory board member there. Accordingly, the Company has determined that Mr. Hayase will use his professional experience to fulfill his role as an outside audit & supervisory board member as well as an independent audit & supervisory board member. Yoshimichi Makiyama ○ ― Mr. Makiyama qualified as an attorney and patent attorney in Japan and as an attorney in the U.S. state of New York, with expertise in many areas including information security and compliance, and has a breadth of professional experience both at home and abroad.

Accordingly, the Company has determined that Mr. Makiyama will draw on his professional experience to fulfill his role as an outside audit & supervisory board member as well as an independent audit & supervisory board member.

13 [Independent Directors and Independent Audit & Supervisory Board Members] Other information regarding independent directors and independent audit & Supervisory board member The Company has appointed all qualified members as independent directors or independent audit & supervisory board members. (Three outside directors and two outside audit & supervisory board members) [Incentive-related Matters] Supplementary explanations Compensation of executive directors comprises a fixed portion depending on the position, a results-linked portion depending on the entire Group’s performance and individual responsibilities, and a mediumto long-term incentive portion in the form of a stock-type compensation.

The results-linked portion could range from 0% to 200% of the standard amount subject to achievement of management targets of the Group and fulfillment of responsibilities. The mediumto long-term incentive portion is based on restricted stock compensation and stock-type compensation stock options. The stock-type compensation stock options, in principle, account for 20% of total annual compensation. Supplementary explanations In the aims of sharing with shareholders the benefits and risks of stock price fluctuations and enhancing the motivation to contribute to sustainable increases in the corporate value of the Group, grantees shall be the executive directors of the Company and its principal subsidiaries (Sony Life, Sony Assurance and Sony Bank).

Note: With regard to restricted stock compensation, guarantees shall be executive directors and executive officers of the Company and its principal subsidiaries.

  • [Compensation of Directors] Supplementary explanations Although the Company does not disclose the compensation of individual directors, we disclose the compensation of directors who receive ¥100 million or more for a fiscal year in Yukashoken Hokokusho. (There was no applicable director for the fiscal year ended March 31, 2018.) Disclosure of policy on determining compensation amount and its calculation method
  • Policy for Determining the Compensation of Directors The compensation of directors is determined according to the following policy within the limit set by a General Meeting of Shareholders.

Number of independent directors and independent audit & supervisory board members Five Status of incentives granted to directors Implemented a results-linked compensation and Introduced a stock-type compensation stock options program. Eligible persons for stock options Executive directors of the Company and executive directors of principal subsidiaries Disclosure for compensation of individual directors Partial disclosure only of individual amounts Policy on compensation amount or calculation method Yes

14 [General Provision] Compensation of individual directors is determined by the resolution of the Board of Directors, based on a report from the Compensation Advisory Committee.

Directors with no executive duties, except outside directors, are paid no compensation. (1) Executive Directors A balance between a fixed portion, a results-linked portion and a mediumto long-term incentive portion shall be considered. The objective of this is to secure talented executives for business execution and ensure that compensation serves as an effective incentive for improving the business performance and corporate value of the entire Group.

  • a. Compensation
  • Compensation comprises a fixed portion depending on the position, a results-linked portion depending on the entire Group’s performance for the year and individual responsibilities, and a mediumto long-term incentive portion in the form of a stock-type compensation stock options program.
  • The results-linked portion could range from 0% to 200% of the standard amount subject to achievement of management targets of the Group and fulfillment of responsibilities.
  • The mediumto long-term incentive portion shall comprise restricted stock compensation and stock-type compensation stock options, and stock-type compensation stock option, in principle, account for 20% of total annual compensation.
  • b. Level
  • A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determined in consideration of the results of third-party surveys on the compensation levels of corporate managers and other relevant information. (2) Outside Directors The main responsibility of outside directors is to enhance the transparency and objectivity of corporate management through the oversight and supervision of executive directors’ execution of duties. Consequently, compensation shall be fixed with the objective of securing talented individuals and ensuring that the supervisory and oversight function is working effectively.
  • a. Compensation
  • A fixed amount is paid according to the role. b. Level
  • A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determined in consideration of the results of third-party surveys on the compensation levels of corporate managers and other relevant information.
  • Policy for Determining the Compensation of Audit & Supervisory Board Members The compensation of audit & supervisory board members is determined according to the following policy within the limit set by a General Meeting of Shareholders.

The main responsibility of audit & supervisory board members is to ensure the transparency and objectivity of corporate management by conducting operational and accounting audits. Consequently, compensation for audit & supervisory board members is determined as fixed compensation with a focus on securing talented individuals and

  • 15 ensuring that the audit function is working effectively. a. Compensation
  • A fixed amount is paid according to the respective role of standing audit & supervisory board members and non-executive audit & supervisory board members. b. Level
  • A suitable level of compensation shall be paid in order to secure talented individuals. The level of compensation is determined through discussion of audit & supervisory board members by giving consideration to the results of third-party surveys of the compensation levels of audit & supervisory board members and other relevant information.

[Support Structure of Outside Directors / Outside Audit & Supervisory Board Members] The Corporate Planning Department of the Company provides information to outside directors and outside audit & supervisory board members and distributes Board of Directors meeting materials prior to the meetings. [Status of Persons who have retired from Representative Director and President, etc.] Name of Consultants, Advisors, etc. who have retired from Representative Director and President, etc. Not applicable Others Not applicable 2. Functions on Execution of Operation, Audits and Supervision, Nomination, Determining Compensation and Other The Company has adopted the organization of a “Company with Audit & Supervisory Board”.

The Company appoints outside directors who work with the audit & supervisory board members to strengthen corporate governance. An overview of the current corporate governance system is provided below. (1) Board of Directors a. The Company is a pure holding company that owns direct subsidiaries, Sony Life Insurance Co., Ltd., Sony Assurance Inc., Sony Bank Inc. and Sony Lifecare Inc. From the perspective of group-wide efficiency in business operations, one representative director and two of the Company’s executive directors out of ten directors serve as directors of its subsidiaries. Furthermore, the three representative directors of its subsidiaries (Sony Life Insurance Co., Ltd., Sony Assurance Inc.

and Sony Bank Inc.) serve as non-executive directors of the Company. b. The Company has appointed three highly independent outside directors out of ten directors to introduce external perspectives and to protect minority shareholders’ interests. These outside directors are deemed as independent directors based on the Tokyo Stock Exchange regulations.

c. The Board of Directors of the Company delegates to the Executive Committee the authority to deliberate and determine the execution of certain daily activities. The Executive Committee is composed of standing directors as well as executives and employees who are selected by resolution of the Board of Directors. This committee meets twice a month, in principle. Non-executive directors and audit & supervisory board members may also attend meetings of the Executive Committee. Total number of Consultants, Advisors, etc. who have retired from Representative Director and President, etc.

zero

16 (2) Audit & Supervisory Board Members a. The Audit & Supervisory Board of the Company has three members, two of whom are outside audit & supervisory board members and deemed as independent directors based on Tokyo Stock Exchange regulations. We elect one substitute audit & supervisory board member in case of a vacancy. b. The standing audit & supervisory board member of the Company cooperates with outside directors (independent directors), the corporate executive in charge of its Audit Department and employees in the Audit Department to enhance the supervisory function in corporate management.

(3) Internal Audits The Company has established an Audit Department, which is independent of the Company’s operating divisions and is composed of dedicated internal audit personnel. (4) Accounting Audits The Company has appointed PricewaterhouseCoopers Aarata as its independent auditor. (5) Establishment of Discretionary Committees To increase management transparency, the Company has established the Nomination Advisory Committee and the Compensation Advisory Committee as advisory bodies to the Board of Directors. The composition of these committees is described in this report in “II. 1 [Directors] Status of the Establishment of a Discretionary Committee, Composition and Attributes of Chairperson” 3.

Reason for choosing current corporate governance structure As the Company is a pure holding company, the Group believes that the current structure, in which directors and audit & supervisory board members hold concurrent positions in the parent company and subsidiaries, is efficient from the perspective of Group management. As the Company is also a subsidiary of a listed parent company, Sony Corporation, the Company has appointed highly independent three outside directors and two outside audit & supervisory board members (These outside directors and outside audit & supervisory board members are deemed as independent directors and independent audit & supervisory board members based on Tokyo Stock Exchange regulations, respectively) to ensure an outside perspective and to protect the interests of minority shareholders.

Furthermore, the Company also has established a Nomination Advisory Committee and a Compensation Advisory Committee as advisory bodies to the Board of Directors to increase management transparency. In addition to protecting the interests of minority shareholders, the Company believes that the current structure is optimal from the standpoints of ensuring Group management efficiency and enhancing corporate value.

III. Implementation of Measures for Shareholders and Other Stakeholders 1. Efforts towards Activation of Shareholders’ Meeting and Facilitation of Exercising Voting Rights Supplementary explanations Early Delivery of Notice of Convocation for The Company sent the Notice of Convocation for the General

17 the General Meeting of Shareholders Meeting of Shareholders 22 days before the meeting. (The Company held its General Meeting of Shareholders on June 22, 2018, and sent the Notice of Convocation on May 31, 2018, for the fiscal year ended March 31, 2018.) Setting the Date for the General Meeting of Shareholders on a Date That Avoids the Day When General Meetings Tend to be Concentrated The Company held its General Meeting of Shareholders on June 22, 2018 and avoided the day when general meetings tend to be concentrated.

Exercise of Voting Rights via Electronic Means a. The Company has introduced the exercise of voting rights over the Internet. b. The Company has introduced the exercise of voting rights via the electronic voting platform for institutional investors operated by ICJ, Inc. Participation in a Platform for the Electronic Exercise of Voting Rights and Other Initiatives to Enhance the Environment for the Exercise of Voting Rights by Institutional Investors The Company participates in a platform for the electronic exercise of voting rights in order to enhance the environment for the exercise of voting rights by institutional investors.

Furthermore, a portion of the convocation notice is translated into English, and the convocation notice is disseminated early.

Provision of a Convocation Notice (Summary) in English A portion of the convocation notice is translated into English. 2. IR Activities Supplementary explanations Explanations by representatives Disclosure Policy The Company has established the “IR Policy” which indicates the Purpose of IR Activities, Basic Approach to IR Activities, Disclosure of IR Information, Framework for Disclosure of IR Information and Quiet Period for IR Activities. The Company has also disclosed the IR Policy onto its website.

Regular Meetings for Individual Investors The Company holds meetings for individual investors correspondingly.

The Company will continue to hold meetings for individual investors. Yes Regular Meetings for Analysts and Institutional Investors Every quarter, the Company holds a teleconference with analysts and institutional investors on the day it announces quarterly financial results. The teleconference is hosted by a director of the Company and subsidiaries’ senior executives in charge of finance. In addition, Sony Financial Holding holds a Corporate Yes

18 Strategy Meeting once a year, hosted by the Group top managements. Regular Meetings for Overseas Investors The Company top managements visit overseas investors in each region once a year to hold one-on-one meetings in Europe, North America and Asia. Yes Uploading IR Materials onto Website The Company uploads earnings releases, annual reports and other disclosure materials onto its website. The Company has also enhanced disclosure in English to ensure there are no material disclosure gaps between the English and Japanese languages.

IR-related Division The Company has established the Investor Relations Department.

3. Efforts to Adopt a Stakeholder Standpoint Supplementary explanations Provisions within Internal Regulations for Respecting the Standpoint of Stakeholders The Group recognizes that taking stakeholders’ concerns into account in management decision making is an important part of ensuring sound business operations. Accordingly, the Group has established an activity charter that it endeavors to follow in its operations. Environmental Protection and CSR Activities The Company has established a CSR Basic Policy. Each of the companies in the Group conducts voluntary and fund-raising activities, has acquired ISO 14001 certification (the international standard for environmental management systems), has introduced a Green Power Certification system and participates in various other social contribution and environmental activities.

IV. Basic Stance on Internal Control System and the Status of Establishment 1. Basic Policy on an Internal Control System The Company’ Board of Directors formulated a Basic Policy on Establishing an Internal Control System in compliance with Companies Act of Japan and associated enforcement regulations to ensure the appropriateness of the Group company business activities. The Company has implemented and operates an internal control system in line with this policy.

[Basic Policy on Establishing an Internal Control System] (1) System to ensure that the execution of duties by directors and employees complies with laws and the Articles of Incorporation

19 i. The Board of Directors establishes a code of conduct as a basic policy for compliance and makes this code clear to the Company' executives, employees and subsidiaries. ii. The Board of Directors creates a compliance manual that provides specific compliance guidelines and a compliance program that defines specific plans. iii. The Board of Directors creates a compliance supervisory department to promote its compliance program.

The compliance supervisory department regularly reports to the Board of Directors on the progress of the compliance program.

iv. The Board of Directors formulates the Basic Group Policy on Eradicating Anti-social Forces. This policy describes the firm stance the Group takes to counter anti-social forces and build the structure necessary to fulfill this policy. v. The Board of Directors establishes an internal hotline system and informs the Company' executives, employees and subsidiaries about the system. This system allows employees or others who become aware of corporate strategies, operations or other activities that contravene (or are in danger of contravening) laws and regulations to report directly to a hotline desk.

The system prohibits any action from being taken against employees or others who provide such notification.

vi. The Board of Directors creates the Group Information Security Policies and streamlines a structure to properly control Group information assets, including customer information. vii. The Board of Directors creates the Conflicts of Interest Policy within the Group and ensures that the necessary formats are in place to properly control transactions which have the potential to harm the interests of customers. viii. The Board of Directors establishes an internal audit supervisory department, which is independent from other operating departments. The internal audit supervisory department liaises and cooperates with the audit & supervisory board members and the independent auditor; monitors and verifies, from an independent and objective viewpoint, the implementation and operational status of the internal control system; and reports regularly to the Board of Directors the status of internal audits.

ix. The Board of Directors formulates the Basic Policy related to Group’s Internal Audits as well as Regulations on Internal Audit, and informs the Company’s executives and employees and subsidiaries of these. (2) System for storing and managing information related to the execution of duties by directors The Company establishes the Record-keeping Regulations to ensure that documents pertaining to the execution of duties by directors, such as records of decisions at Board of Directors and Executive Committee meetings, are appropriately stored and managed in accordance with these laws and regulations.

(3) Systems of regulations related to risk management i.The Board of Directors formulates the Fundamental Principles for Risk Management Activities as a basic policy on Group risk management and informs the Company’s executives, employees and subsidiaries of these.

ii. The Board of Directors establishes a risk management supervisory department to manage risks

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