KYOCF Kyocera Corporation (PK)

PART I

2014. For details of the stock split, please refer to “Capital Stock” in Item 10.B. “Memorandum and Articles of Association” of this annual report on Form 20-F on page 75.

The following table shows the exchange rates for Japanese yen per $1.00 based upon the noon buying rate in New York City for cash transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York:

The noon buying rate for Japanese yen on June 15, 2018 was $1.00 =110.58

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

You should carefully read the risks described below before making an investment decision.

Risks Related to Kyocera’s Business

(1) Changes in the Japanese and global economy may significantly reduce demand for Kyocera’s products

Kyocera conducts business not only in Japan but also around the world and provides products and services for a variety of markets such as the digital consumer equipment, industrial machinery, automotive and environmental and energy-related markets. In fiscal 2019, the Japanese economy is expected to maintain moderate growth. For overseas, the U.S. economy is expected to continue expanding firmly, and European economy is projected to continue recovering. The Chinese economy is likely to broadly follow a stable growth path, although its growth rate is expected to decelerate. In the event that the economies of respective countries around the world deteriorate beyond expectations, a reduction in private capital investment and a decline in personal consumption may affect production activities in Kyocera’s key markets. This may in turn lead to a decline in Kyocera’s business environment, consolidated results of operations, financial condition and cash flows.

(2) A substantial portion of Kyocera’s business activity is conducted outside Japan, exposing Kyocera to the risks of international operations

A substantial amount of Kyocera’s investment has been targeted towards expanding manufacturing and sales channels located outside Japan, such as in the United States, Europe and Asia, which includes China and

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Vietnam. Kyocera faces a variety of potential risks in international activities. Kyocera may encounter unexpected legal or regulatory changes due to unfavorable political or economic factors such as control on trade, restriction on investment, restriction on repatriation and transfer pricing issue. Kyocera may also have difficulties in human resources and managing operations at its international locations. As developing and emerging markets such as Brazil, Russia, India and China, become considerably more important, Kyocera may become even more susceptible to these risks.

(3) Since a significant percentage of Kyocera’s revenues have been derived from foreign sales in recent years, various export risks may disproportionately affect its revenues

Kyocera’s sales to customers located outside Japan accounted for approximately 60% of its total revenues in fiscal 2018. Kyocera believes that overseas sales will continue to account for a significant percentage of its revenues. Therefore, the following export risks may disproportionately affect Kyocera’s revenues:

(4) Currency exchange rate fluctuations could adversely affect Kyocera’s financial results

Kyocera conducts business in countries outside Japan, which exposes it to fluctuations in foreign currency exchange rates. Kyocera may enter into mainly short-term forward contract transaction to hedge this risk. Nevertheless, fluctuations in foreign currency exchange rates could have an adverse effect on its business. Fluctuations in foreign currency exchange rates may affect Kyocera’s consolidated results of operations, financial condition, cash flows, the value of its foreign assets and production costs, which in turn may adversely affect reported earnings and the comparability of period-to-period results of operations. Changes in currency exchange rates may affect the relative prices at which Kyocera and foreign competitors sell products in the same market. In addition, changes in the value of the relevant currencies may affect the cost of imported items required in its operations.

(5) Kyocera sells a diverse variety of products, and in each of its businesses Kyocera is subject to intense competitive pressures, including in terms of price, technological change, product development, quality and speed of delivery, and these pressures are likely to increase in the near term

Kyocera sells a wide variety of products and, therefore, faces a broad range of competitors from large international companies to relatively small, rapidly growing and highly specialized companies. Kyocera’s competitive landscape is subject to continuous change, and new and significant competitors may emerge, including competitors based in emerging markets such as China that may have competitive advantages in terms of cost structure or other factors. Kyocera has a variety of businesses in different industries while many of its competitors specialize in one or a few of these business areas. As a result, Kyocera may not fund or invest in certain of its businesses to the same degree as its competitors, or these competitors may have greater financial, technical, and marketing resources available to them than the portion of its business against which they compete. While some of the factors that drive competition vary by product area, price and speed of delivery are primary factors that impact in all areas of Kyocera’s business. Price pressure has been intense, and thus Kyocera predicts that its selling prices will continue to be lower than in fiscal 2018 depending partly on the demand and competition situation. In businesses in which Kyocera develops, produces and distributes specialized parts for its customers’ products, its competitive position depends significantly on being involved early in the process of creating a new product that fits its customers’ needs for each business. To maintain these competitive advantages,

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it is critical to maintain close ties with customers so that Kyocera can ensure that it is able to meet required specifications and be the first supplier to create and deliver the product. Kyocera’s gross margins may be reduced if the business environment changes in a way that Kyocera cannot maintain these important relationships with customers or its market share or if it is forced in the future to further reduce prices in response to the actions of its competitors.

(6) Fluctuations in the price and ability of suppliers to provide the required quantity of raw materials for use in Kyocera’s production activities

Raw materials used in the production activities of Kyocera’s respective businesses are constantly subject to price fluctuations, and as such, rising raw material prices may lead to an increase in production costs. Kyocera cannot guarantee that it will be able to maintain an appropriate differential between customer prices and Kyocera’s raw material and production costs at all times, which could lead to reduced profitability. Based on an approach that evaluates the lower of cost and net realizable value (the estimated selling price in the ordinary course of business less any estimated costs of completion and estimated variable selling expenses), Kyocera recognizes a write-down when the net realizable value of the raw material is estimated to be less than its carrying amount, and further loss may be required in the future.

Kyocera is dependent on specific suppliers for procuring certain raw materials used in Kyocera’s production cycle and any excess demand on those suppliers may cause delays and disruptions in the production cycle. If a substantial interruption should occur in the supply of such raw materials, Kyocera may not be able to obtain other sources of supply in a timely fashion or at a reasonable price. An increase in the price or an interruption in the supply of such raw materials may cause reduced demand for Kyocera’s products.

In order to attempt to ensure stable procurement and prices for certain raw materials, Kyocera on occasion enters into long-term purchase agreements with the aim of reducing the risk associated with the procurement of such raw materials. However, considerable changes in the business environment and other factors may cause the contract price under a purchase agreement to significantly exceed the market price, or may cause the amount of such raw materials that Kyocera consumes to significantly fall short of the amount based on the sales demand projections made at the time Kyocera entered into, which are thus underlying, the agreement. Such developments may adversely affect Kyocera’s production costs and profitability. In addition, Kyocera evaluates the future material purchase commitments under long-term purchase agreements at the lower of cost and net realizable value, and when the net realizable value of the material is less than the purchase prices under the agreements, Kyocera recognizes a write-down in an amount equivalent to the difference between net realizable value and purchase price.

For fiscal 2018, Kyocera recognized a write-down relating to long-term purchase agreements for procurement of polysilicon material used in its solar energy business. For detailed information regarding to this write-down, please refer to Note 5 to Kyocera’s consolidated financial statements included in this annual report on Form 20-F.

(7) Manufacturing delays or defects resulting from outsourcing or internal manufacturing processes can adversely affect Kyocera’s production yields and operating results

Kyocera ordinarily outsources the fabrication of certain components and sub-assemblies of its products, often to sole source suppliers or a limited number of suppliers. Several suppliers have manufacturing processes, which are very complex and require a long lead-time. Kyocera may be affected by occasional delays in obtaining components and sub-assemblies. Kyocera’s production of certain products will also be materially and adversely affected if Kyocera is unable to obtain high quality, reliable and timely supply of these components and sub-assemblies. In addition, any reduction in the precision of these components will cause delays and interruptions in Kyocera’s production cycle.

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Within Kyocera’s manufacturing facilities, minute impurities, difficulties in the production process or other factors can cause a substantial percentage of its products to be rejected or be non-functional. These factors can result in lower than expected production yields, which delay product shipments and may materially and adversely affect Kyocera’s operating results. Moreover, in certain operations of which fixed cost ratio is high, decreases in production volume or capacity utilization may adversely affect Kyocera’s results of operation, financial condition and cash flows.

(8) Shortages and rising costs of electricity may adversely affect Kyocera’s production and sales activities

As many nuclear power plant operations in Japan currently has ceased and remains at rest due to the damage and equipment failure of the nuclear power plant caused by the Great East Japan Earthquake in March 2011, Japan may have shortages and rising costs of electricity. Kyocera secures electric power supplies for emergency for equipment and centers, however, Kyocera’s production activity may become diminished if massive blackouts occur and electricity shortages continue in the areas in which Kyocera has facilities. Shortages of electricity in the areas in which Kyocera’s suppliers and customers have main operations may also interrupt Kyocera’s procurement and sales activities. In addition, significant rising costs of electricity may adversely affect Kyocera’s results of operations, financial condition and cash flows.

(9) Future initiatives and in-process research and development may not produce the desired results

Kyocera intends to expand its product lines and development capacity to satisfy increasing demand and customer requirement in its target markets. Unexpected technical delays in completing these initiatives or changes to Kyocera’s customers’ policies could lengthen development schedules and result in lower revenues based on the products or technologies developed from these initiatives. There can be no assurance that the products derived from Kyocera’s in-process research and development activities will achieve desired results and market acceptance.

(10) Companies or assets acquired by Kyocera and collaborations, partnerships and alliances etc., with outside organizations may require more costs than expected for integration, and may not produce returns or benefits, or bring in anticipated business opportunities

In the course of developing its business, from time to time Kyocera considers opportunities to acquire, and undertakes the acquisition of companies or assets through mergers and acquisitions. There can be no assurance that Kyocera will be able to integrate the operations, products and personnel of the acquired companies with its own in an efficient manner. Nor can there be any assurance that Kyocera will be able to achieve operational and financial returns or benefits, or bring in new business opportunities, which it expects from the acquisition. An acquired company may not be able to manufacture products or offer services in the amounts or at the efficiency levels that Kyocera plans, and the demand for such products or services may not be at the levels that Kyocera anticipates. Failure to make the most of acquisitions and meet Kyocera’s expectations could have a material adverse effect on Kyocera’s business. In addition, Kyocera faces similar risks in connection with its collaborations, partnerships and alliances etc., with outside organizations such as firms, academic institutions and governmental organizations.

(11) Industry demand for skilled employees, particularly engineering and technical personnel, exceeds the number of personnel available and we may not be able to attract and retain key personnel

Kyocera’s future success depends, in part, on its ability to attract and retain certain key personnel, including engineering, operational and management personnel. Kyocera anticipates that it will need to hire additional skilled personnel in all areas of its business. Because of recent intense competition for these skilled employees, Kyocera may be unable to retain its existing personnel or attract additional qualified employees in the future.

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(12) Risk related to information security

Kyocera holds important information in the ordinary course of business including personal and confidential information obtained from our customers. However, security measures we implement for our networks, IT assets and other information technology systems are susceptible to damage, disruptions, or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, data corruption, computer viruses, cyberattacks by computer hackers, network security breaches, telecommunication failures, user errors, or catastrophic events. If our information technology systems suffer severe damage, disruption, shutdown or other issues, there is a risk of information leakage. If such situation occurs, Kyocera could incur additional costs in connection with remediating such issues and with compensating adversely affected parties as well as reputational damages, each of which in turn may adversely affect Kyocera’s results of operations, financial condition and cash flows. Furthermore, we may incur additional costs in connection with maintaining adequate information security to prevent unauthorized access to our systems in light of continuous technological advances, and such costs could also adversely affect our financial condition and operations.

Risks Related to Legal Restrictions and Litigations

(13) Insufficient protection of Kyocera’s trade secrets and patents could have a significant adverse impact on its competitive position

Kyocera’s success and competitive position depend on protecting its trade secrets and other intellectual property. Kyocera’s strategy is to rely both on trade secrets and patents to protect its manufacturing and sales processes and products, but reliance on trade secrets is only an effective business practice insofar as trade secrets remain undisclosed and a proprietary product or process is not reverse engineered or independently developed. Kyocera takes certain measures to protect its trade secrets, including executing nondisclosure agreements with certain of its employees, joint venture partners, customers and suppliers. If parties breach these agreements or the measures Kyocera takes are not properly implemented, Kyocera may not have an adequate remedy. Disclosure of its trade secrets or reverse engineering of its proprietary products, processes or devices could materially affect Kyocera’s business, consolidated results of operations, financial condition and cash flows.

Kyocera is actively pursuing patents on some of its inventions, but these patents may not be issued. Even if these patents are issued, they may be challenged, invalidated or circumvented. In addition, the laws of certain other countries may not protect Kyocera’s intellectual property to the same extent as Japanese laws.

(14) Kyocera may require licenses to continue to manufacture and sell certain of its products, the expense of which may adversely affect its results of operations

From time to time Kyocera has received, and may receive in the future, notice of claims of infringement of other parties’ proprietary rights and licensing offers to commercialize third party’s patent rights. Accordingly, Kyocera cannot assure that:

(15) Changes in our environmental liability and compliance obligations may adversely impact our operations

Kyocera is subject to various environmental laws and regulations in Japan and the other countries, which are related to greenhouse gas mitigation, air emissions, soil contamination, wastewater discharges, the handling,

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disposal and remediation of hazardous substances, wastes and certain chemicals, product recycling, health, safety and property preservations of employees and community residents, labeling or other notifications with respect to the content or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or on design aspects of our products or product packaging, and responsibility for disposal of products or product packaging. As well as our current operations, these laws and regulations can be applied to our past operations and may be applicable to the past operations of businesses acquired from other companies even if such operations occurred before our acquisitions. In addition, these laws and regulations, which are applied to Kyocera can be more stringent or the scope of the laws and regulations can be broadened in the future due to factors including global climate change. With respect to greenhouse gas mitigation in particular, international emissions trading regime may be created based on the result of the intergovernmental dialogue on global climate change. Kyocera establishes reserves for specifically identified potential environmental liabilities when such liabilities are probable and can be reasonably estimated. In case we fail to comply with such laws and regulations, we could be required by the relevant governmental organizations to pay penalty costs or remediation compensation. Furthermore, we may make voluntary payments to compensate for environmental problems if we deem such compensation to be necessary. The cost obligations noted above may adversely affect Kyocera’s results of operations, financial condition and cash flows.

(16) Kyocera is subject to various other laws and regulations

Kyocera may unintentionally come into conflict with laws and regulations and face legal proceedings, including litigation and regulatory actions, although Kyocera believes that it is substantially in compliance with applicable laws and regulations in the countries and areas in which Kyocera operates. If laws and regulations are unexpectedly changed or introduced, Kyocera’s business operations may be limited and continuance may become difficult. If Kyocera faces enormous legal costs related to litigation and regulatory actions, Kyocera’s business operations may become significantly limited and Kyocera’s results of operations, financial condition and cash flows may be negatively affected.

Risks Related to Disasters or Unpredictable Events

(17) Kyocera’s markets or supply chains may be adversely affected by terrorism, outbreaks of disease, wars or similar events

Kyocera, as a global company, has been expanding its business worldwide. At the same time, we are increasingly exposed to risks from terrorism, outbreaks of disease, war and other similar events. In the case that those events occur, Kyocera’s operating activities would be suspended. Furthermore, there would be delay, disorder or suspension in Kyocera’s R&D, manufacturing, sales and services. If such delay or disruption occurs and continues for a long period of time, Kyocera’s business, consolidated results of operations, financial condition and cash flows may be adversely affected.

(18) Kyocera’s headquarters and major facilities as well as its suppliers and customers may suffer the devastating effects of earthquakes and other disasters

Kyocera’s headquarters and major facilities including plants, sales offices and R&D centers are located not only in Japan but also all over the world. It might be inevitable that Kyocera would suffer from natural disasters such as earthquakes, typhoons, tsunamis, heavy rains, floods, heavy snow or other disasters, as well as manmade disasters such as a major industrial accident affecting one of our facilities. For instance, if a strong earthquake devastated Kyocera’s employees, R&D or manufacturing facilities, Kyocera’s operating activities would be suspended and manufacturing and shipment would be delayed. Kyocera may also incur a great amount of expenses, such as repair expenses for the damaged machines or facilities. In addition, if the social and economic infrastructure suffers from adverse damages, traffic disturbance and electric power outages could occur and they may affect Kyocera’s supply chains or manufacturing operations. Furthermore, Kyocera may be unable to obtain raw materials if our suppliers sustain damage and Kyocera may also face difficulties shipping its products if its

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customers sustain damage. Those damages set forth above, as well as any resulting general economic slowdown and lower consumption levels, may have a material adverse effect on Kyocera’s consolidated results of operations, financial condition and cash flows.

Risks Related to Financial and Accounting

(19) Kyocera may be exposed to credit risk on trade receivables due to its customers’ worsening financial condition

Kyocera maintains allowances for doubtful accounts related to trade receivables for estimated losses resulting from customers’ inability to make timely payments. However, trade receivables in the ordinary operating activity are not covered by collateral or credit insurance. Therefore, if customers with whom Kyocera has substantial accounts receivable face difficulty in making payments due to economic downturn and if Kyocera is forced to write off those receivables, Kyocera’s consolidated results of operations, financial condition and cash flows may be adversely affected.

(20) Kyocera may have to incur impairment losses on its investments in equity securities

Kyocera holds investments in equity securities of companies not affiliated with us, which we generally hold on a long-term position for business relationship purposes. If there are certain declines in the fair value, that is, the market price, of the shares of these companies, and we determine that such declines are other-than-temporary, Kyocera will need to record an impairment loss. A substantial portion of Kyocera’s investments in equity securities consists of an investment in shares of KDDI Corporation, a Japanese telecommunication service provider. Kyocera Corporation’s equity interest in KDDI Corporation was 12.95% as of March 31, 2018. Kyocera Corporation’s investment in shares of KDDI Corporation accounts for approximately 30% of Kyocera’s total assets. Accordingly, fluctuations in the market value of the shares of KDDI Corporation may materially affect Kyocera’s financial condition. From the perspective of enhancing the corporate value of Kyocera on a mid- to long-term basis, Kyocera intends to keep its ownership of some of the equity securities as strategic investments including KDDI shares in light of attaining growth of business through strengthening, maintaining and developing trade relationship and securing profits from shareholding and consideration for the social significance of Kyocera. For equity securities including strategic investments in its portfolio, with periodical checks for the economic rationality, Kyocera may dispose of some securities, which lack merit for Kyocera, although market conditions may not permit us to do so at the time, speed or price we may wish.

(21) Kyocera may have to incur impairment losses on long-lived assets, goodwill and intangible assets

Kyocera has many long-lived assets, goodwill and intangible assets. Long-lived assets and intangible assets with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Goodwill and intangible assets with indefinite useful lives, rather than being amortized, are tested for impairment at least annually, and also following any events and changes in circumstances that might lead to impairment.

In case the above assets are considered to be impaired, a loss on impairment is recognized based on the amount by which the carrying value exceeds the fair value of these assets. Such losses on impairment may materially affect Kyocera’s consolidated results of operations and financial condition.

(22) Deferred tax assets may not be realized or additional liabilities for unrecognized tax benefits may be required.

Kyocera records valuation allowances against deferred tax assets based on the estimated future taxable income and feasible tax planning strategies to adjust their carrying amounts when we believe it is more likely than not that the assets will not be realized. If future taxable income is lower than expected due to future market conditions or poor operating results, significant adjustments to deferred tax assets may be required.

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Kyocera records liabilities for unrecognized tax benefits based on the premise of being subject to income tax examination by tax authorities, when it is more likely than not that tax benefits associated with tax positions will not be sustained. Actual results, such as settlements with tax authorities, may differ from Kyocera’s recognition.

(23) Changes in accounting standards may adversely impact our results of operations and financial condition.

Adoptions of new accounting standards, or changes in accounting standards may have an effect on Kyocera’s consolidated results of operations and financial condition. In addition, if Kyocera modifies its accounting software or information systems to introduce changes in accounting standards, certain investments or expenses may be required.

Other Risks

(24) As a holder of ADSs, you will have fewer rights than a shareholder has and you will have to act through the depositary to exercise those rights

The rights of shareholders under Japanese law to take various actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books and records and exercising appraisal rights, are available only to holders of record. Because the depositary, through its custodian agents, is the record holder of the shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying your ADSs as instructed by you and will pay to you the dividends and distributions collected from us. However, in your capacity as an ADS holder, you will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights through the depositary.

(25) Rights of shareholders under Japanese law may be more limited than under the law of other jurisdictions

Our Articles of Incorporation, Regulations of the Board of Directors, Regulations of the Audit & Supervisory Board and the Companies Act of Japan govern our corporate affairs. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties and shareholders’ rights may be different from those that would apply if we were a U.S. company. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the laws of the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a U.S. corporation. In addition, Japanese courts may not be willing to enforce liabilities against us in actions brought in Japan, which are based upon the securities laws of the United States or any U.S. state.

(26) We have voluntarily delisted our ADSs from the New York Stock Exchange and have filed for deregistration and termination of our ongoing reporting obligations under the U.S. Securities Exchange Act of 1934

On February 26, 2018, we announced that our Board of Directors had resolved to apply for voluntary delisting of our ADSs from the New York Stock Exchange. In connection with the delisting, we filed a Form 25 on June 15, 2018 with the Securities and Exchange Commission for such voluntary delisting and the related deregistration with the Securities and Exchange Commission. In addition, on June 26, 2018, we filed a Form 15F with the Securities and Exchange Commission to terminate our ongoing reporting obligations under the U.S. Securities Exchange Act of 1934.

While we are thus no longer subject to ongoing reporting obligations under the U.S. Securities Exchange Act of 1934, we have been making and will continue to make periodic filings thereunder on a voluntary basis, including this annual report. We plan to discontinue such voluntary filings after September 24, 2018, which is 90 days from the time of our filing of Form 15F.

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Although our ADSs have been delisted from the New York Stock Exchange, we intend to maintain our ADR program in the United States and therefore anticipate that our ADSs will continue to be traded in the United States on the over-the-counter market. The market for our ADSs may be significantly less liquid as a result of our delisting of our ADSs from the New York Stock Exchange.

Furthermore, while we currently prepare and disclose our financial statements in accordance with U.S. GAAP, we have resolved to prepare and disclose our financial statements in accordance with IFRS beginning with the three months ending June 30, 2018. As a result, there may be significant differences in the presentation of financial data in our income statements and balance sheets as well as in the notes to our financial statements prepared under IFRS as compared to those prepared under U.S. GAAP.

(27) Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of our Common Stock at a particular price on any particular trading day, or at all

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

(28) Our shareholders of record on a record date may not receive the dividend they anticipate

The customary dividend payout practice of publicly listed companies in Japan may significantly differ from the practice widely followed in foreign markets. Our dividend payout practice is no exception. The declaration and payment of year-end dividends requires the approval of shareholders of our common stock at the annual general meeting of shareholders held in June of each year. Our board of directors decides and submits a proposal for a year-end dividend declaration a few weeks before the annual general meeting. If the shareholders’ approval is given, the year-end dividend payment is made to shareholders of record as of the record date for such payment, which is March 31, whether or not the shareholders are still holding shares after such record date. The declaration and payment of interim dividends is decided by our board of directors and does not require the approval of shareholders. The interim dividend payment is made to shareholders of record as of the record date for such payment, which is September 30, whether or not the shareholders are still holding shares after such record date. Shareholders of record as of the applicable record date may sell shares in the market after the record date with the anticipation of receiving a certain dividend payment. However, the date of declaration of interim dividends is decided by our board, and the declaration of year-end dividends is approved by our shareholders only in June, based upon a proposal submitted by our board. As such, we may have announced a dividend forecast before the applicable record date; but, in making a decision on the dividend declaration, neither our shareholders nor our board of directors are legally bound by such forecast. Therefore, our shareholders of record on the record dates for interim or year-end dividends may not receive the dividend they anticipate.

(29) Foreign exchange fluctuations may affect the dollar value of our ADSs and dividends payable to holders of our ADSs

Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In addition, the U.S. dollar amount of cash dividends and other cash payments made to holders of our ADSs would be reduced if the value of the yen declines against the U.S. dollar.

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(30) We believe that we were a passive foreign investment company (PFIC) for United States federal income tax purposes for the 2016, 2017 and 2018 fiscal years and that we may be treated as a PFIC in the current or future taxable years.

Because of the passive nature of our assets and income, we believe that we were a PFIC for United States federal income tax purposes for the 2016, 2017 and 2018 fiscal years and that we may be treated as a PFIC in the current or future taxable years. Assuming that we are a PFIC, U.S. holders of our shares and ADSs may be subject to special adverse United States federal income tax consequences. See Item 10 “Additional Information—Taxation—United States Taxation” of this annual report on Form 20-F. We do not intend to provide investors with any information to assist them in determining whether we are a PFIC. In addition, the information we are required to disclose by applicable securities laws may not be sufficient to determine whether we are a PFIC. We also do not intend to provide United States holders of our shares and ADRs with the information that is required to make an election to have us treated as a “qualified electing fund” for United States federal income tax purposes. For a more comprehensive discussion of the United States federal income tax consequences of owning shares and ADSs and the application of the PFIC rules to you, see Item 10 “Additional Information—Taxation—United States Taxation.”

subsidiary. In April 2002, we transferred Kyocera Corporation’s printer business to Kyocera Document Solutions Inc. to further enhance our information equipment business by pursuing group synergies.

With the aim of becoming a more global enterprise and enhancing our profitability, we have been expanding our production in China located in Shanghai and Dongguan since the middle of the 1990s. Kyocera also established a sales company, Kyocera (Tianjin) Sales & Trading Corporation (currently Kyocera (China) Sales and Trading Corporation), in January 2003 to cultivate the Chinese market through enhancing our marketing ability for both our products manufactured in China as well as our products imported into China. In addition, we established a subsidiary, Kyocera (Tianjin) Solar Energy Co., Ltd., to assemble solar modules, production of which commenced in May 2003, and to reduce manufacturing costs.

In August 2003, we made Kinseki, Limited (later, the company changed its name to Kyocera Crystal Device Corporation, which was subsequently merged with Kyocera through an absorption-type merger in April 2017), a major producer of artificial crystal related products, a wholly-owned subsidiary through a share exchange to strengthen our Electronic Devices Group. We also established Kyocera SLC Technologies Corporation, a manufacturing and sales company of surface laminar circuitry, in order to expand organic material components business (later, the company changed its name to Kyocera Circuit Solutions, Inc., which was subsequently merged with Kyocera through an absorption-type merger in April 2016).

In September 2004, Kyocera Corporation and Kobe Steel, Ltd. established Japan Medical Materials Corporation (later, the company changed its name to Kyocera Medical Corporation, which was subsequently merged with Kyocera through an absorption-type merger in April 2017) and Kyocera Corporation transferred its medical materials business to Japan Medical Materials Corporation through corporate splits.

In April 2008, Kyocera acquired the mobile phone related business of SANYO Electric Co., Ltd. (currently Panasonic Corporation) to strengthen the Telecommunications Equipment Group.

For further enhancement of the Information Equipment Group, Kyocera made TA Triumph-Adler AG (currently TA Triumph-Adler GmbH, TA), a leading specialist in the information technology business and a distributor of printers and multifunctional products in Germany, a subsidiary through a voluntary public takeover offer in January 2009. In October 2010, Kyocera acquired all of the remaining shares of TA. As a result, TA became a wholly-owned subsidiary of Kyocera. In July 2011, we established a subsidiary, Kyocera Document Technology Vietnam Company Limited, to produce information equipment for expanding our production capacity and reducing manufacturing cost.

In July 2011, Kyocera acquired Unimerco Group A/S (currently Kyocera Unimerco A/S), a Danish-based industrial cutting tool manufacturing and sales company to broaden our product lines and markets.

In August 2011, Kyocera established Kyocera Vietnam Management Company Limited (currently Kyocera Vietnam Company Limited), a manufacturing subsidiary, in order to further reduce costs and to meet with growing component demand.

In February 2012, in order to expand its liquid crystal display business, Kyocera acquired Optrex Corporation (currently Kyocera Display Corporation), a specialized manufacturer of liquid crystal displays and related products.

In October 2013, Kyocera acquired NEC Toppan Circuit Solutions, Inc., a printed wiring board manufacturing company, and changed its name to Kyocera Circuit Solutions, Inc. in order to strengthen and expand its organic substrate business. In October 2014, Kyocera integrated Kyocera SLC Technologies Corporation and Kyocera Circuit Solutions, Inc., both of which engaged in organic substrate business, into Kyocera Circuit Solutions, Inc. In April 2016, we implemented an absorption-type merger of Kyocera Circuit Solutions, Inc. into Kyocera Corporation in order to enhance the development of new products and to expand its business further.

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In September 2015, Kyocera acquired Nihon Inter Electronics Corporation (NIEC), a manufacturer of power semiconductors, in order to expand into a new business area with a combination of their respective products and made it a consolidated subsidiary. In order to further expand our power semiconductor business, we implemented an absorption-type merger of NIEC into Kyocera Corporation in August 2016.

In April 2017, we implemented separate absorption-type mergers with each of Kyocera Crystal Device Corporation, Kyocera Connector Products Corporation and Kyocera Medical Corporation, through which each company was merged into Kyocera Corporation, in order to expand the electronic devices business and the business in medical and health care through sharing each company’s respective management resources and maximizing synergy.

We acquired Senco Holdings, Inc., a U.S.-based pneumatic tools manufacturing company (currently Kyocera Senco Industrial Tools, Inc.), in August 2017 and we acquired 80% of shares in Kyocera Industrial Tools Corporation, which was established from the company split of Ryobi Limited’s power tool business under a share transfer agreement in January 2018, in order to promote diversification and expand our industrial tool business.

For a discussion of recent and current capital expenditures, please see Item 5. “Operating and Financial Review and Prospects” of this annual report on Form 20-F. We have had no recent significant divestitures nor are any significant divestitures currently being made.

In addition, for a discussion of our voluntary delisting of our ADSs from the New York Stock Exchange, which became effective on June 26, 2018, please see Item 9.A. “Offer and Listing Details—Price Range of Shares” of this annual report on Form 20-F.

B. Business Overview

Overview

Kyocera is engaged in numerous high-tech fields, from fine ceramic components to electronic devices, equipment, services and networks. Our manufacturing and distribution operations are conducted worldwide. As of March 31, 2018, we had 230 subsidiaries, 4 affiliates outside Japan, 23 subsidiaries and 7 affiliates in Japan. Our customers include individuals, corporations, governments and governmental agencies. For information on our sales by category of activity and information on our sales by geographic area and product segment, please see Item 5.A. “Operating Results” of this annual report on Form 20-F.

Operations

Starting from fiscal 2018, Kyocera has changed the classification of its reporting segments. The new six reporting segments are (1) Industrial & Automotive Components Group, (2) Semiconductor Components Group, (3) Electronic Devices Group, (4) Communications Group, (5) Document Solutions Group, and (6) Life & Environment Group.

Our principal products and services offered in each reporting segment are shown below.

(1) Industrial & Automotive Components Group

Fine Ceramic Components

Automotive Components

Liquid Crystal Displays

Industrial Tools

In this reporting segment, Kyocera provides fine ceramic parts made from a variety of ceramic materials such as alumina and zirconia, utilizing the characteristics of heat, wear and corrosion resistance as well as camera

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modules infused with optical lens and sensing technology, and liquid crystal displays, primarily in the small- to mid-size range. These products are supplied mainly to the industrial machinery and automotive markets. We also provide industrial tools such as cutting tools for metallic processing and pneumatic and power tools to the automotive, general industrial and construction markets.

(2) Semiconductor Components Group

Ceramic Packages

Organic Multilayer Substrates and Boards

This reporting segment develops, manufactures and sells both inorganic (ceramic) and organic packages and multilayer printed wiring boards for various electronic components and devices such as crystal components, SAW devices and CMOS/CCD sensors for communication infrastructures and for the automotive-related markets.

(3) Electronic Devices Group

Electronic Components (Capacitors, Crystal Devices, Connectors, Power Semiconductor Devices, etc.)

Printing Devices

This reporting segment develops, manufactures and sells a wide variety of electronic components and devices for diverse fields that include information and communications equipment, industrial equipment and automotive-related markets.

(4) Communications Group

Mobile Phones

M2M Modules

Information Systems and Telecommunication Services

This reporting segment develops, manufactures and sells smartphones and mobile phones embedded with our unique functions as well as develops communication modules with expectations of growing demand in the IoT (Internet of Things) society as well as information systems and telecommunication services such as ICT (Information and Communication Technology) solutions, engineering services businesses and so on.

(5) Document Solutions Group

Printers

Multifunctional Products

Document Solutions

Supplies

This reporting segment supplies printers and multifunctional products (MFPs) that realize long life cycle and low running costs thanks to the use of our amorphous silicon photoreceptor drums. We are also rolling out document solutions worldwide that support the optimization of a customer’s document environment through the provision of application software enabling connection between a customer’s document management system and mobile terminals or cloud environments. We are also strengthening our ECM (Enterprise Contents Management) business that computerizes a company’s data so that it can be controlled and managed in a more comprehensive and efficient manner as well as Document BPO that provides outsourcing services for document-related business.

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(6) Life & Environment Group

Solar Power Generating System related Products

Medical Devices

Jewelry and Ceramic Knives

This reporting segment develops, manufactures and sells products related life and environment such as solar modules for commercial and residential uses, solar energy related products including storage batteries and energy management systems, medical devices including prosthetic joints and dental prosthetics, jewelry, and kitchen accessories including ceramic knives.

Sales and Distributions

Kyocera’s products and services are supplied worldwide through our sales personnel as well as by sales companies within our group and by third-party distributors.

We have regional sales and design application personnel in strategic locations to provide technical and sales support for customers and distributors. We believe that this combination of distribution channels leads to a high level of market penetration and efficient coverage of services for our customers.

A wide range of component, device and equipment products in the Industrial & Automotive Components Group are sold to various industrial equipment and automotive-related industries worldwide that include the semiconductor industry through our distributors in addition to direct sales.

Most sales in the Semiconductor Components Group are made directly to device, component and equipment manufacturers in Japan and overseas.

Sales in the Electronic Devices Group are made directly to device and equipment manufacturers in Japan and overseas as well as through active use of distributors.

In the Communications Group, we supply smartphones and mobile phones to telecommunications carriers in Japan and North America in the mobile handset business. In the communication modules (M2M modules) business, we supply products mainly through telecommunications carriers to automobile manufacturers and power companies. In the information and communication services business, we provide ICT and management consulting businesses primarily to general companies and public institutions centered on Japan, as well as engineering business to telecommunications carriers, wireless equipment vendors and solar power generation operators.

In the Document Solutions Group, we provide document solutions that resolve customers’ management issues, including Kyocera brand printers and MFPs that boast long life and produce minimal waste, mainly via 35 sales companies in over 140 countries. We primarily deal with major customers around the world by way of direct sales.

In the solar energy business in the Life & Environment Group, solar modules and solar power generating systems are sold to global users via direct sales, sales subsidiaries and other methods, including through distributors. In addition, we sell power storage systems and energy management systems through distributors, franchises and home builders in Japan.

In the medical and dental implant business, prosthetic joints, artificial bones and dental implants are sold to hospitals and dental clinics through distributors.

Jewelry and applied ceramic products such as ceramic knives are sold through direct retail shops and general retailers as well as the internet.

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Domestic sales are made predominantly in the Japanese yen, while overseas sales are made in a variety of currencies, but predominantly in the U.S. dollar and the Euro.

Sources and Availability of Raw Materials and Supplies

We purchase a variety of raw materials and other materials for our business activities.

The principal raw materials include alumina, zirconia, silicon nitride, polycrystalline silicon, nickel powder and epoxy resins. These raw materials are used mainly in the manufacturing of products for the Components Business. The main materials supplied for use as key components are chip sets and liquid crystal displays in the Equipment & Systems Business. The Kyocera Group procures some of the materials and components that it uses in its respective businesses from within the Group since it develops a wide range of products spanning from materials to systems and services. The internally manufactured components also include core components that contribute to the differentiation of parts and equipment.

Our basic policy is to procure raw materials and other materials from several companies to ensure stable procurement at a fair price. We may limit the number of suppliers as an exception (1) if the final customer selects the material supplier or (2) to maintain the quality of a final product.

The purchase price of these raw materials and other materials fluctuates depending on the supply-demand situation, the impact of such things as the rising cost of raw materials and fuel, and foreign currency exchange rates in the case purchases are made in foreign currencies from suppliers overseas. Kyocera’s businesses are many and varied, and we are working to enhance our price negotiating power when procuring raw materials and other materials through the ties we have inside the Group. We are also striving to absorb the rising cost of raw materials and other materials in each business by making internal improvements that include cost reductions.

In addition, we may also conclude long-term agreements with suppliers for certain raw materials in consideration of the future supply-demand balance.

In fiscal 2018, we were able to procure raw materials and other materials in line with our production plans.

Kyocera has entered into long-term purchase agreements with a specific supplier for purchasing polysilicon material used in its solar energy business. For detailed information regarding these purchase agreements, please refer to “Long-term purchase agreements for the supply of raw materials” in Item 5.F. “Tabular Disclosure of Contractual Obligations.”

For details on Kyocera’s supply chain management and dealing with conflict minerals, please refer to the following websites, respectively.

“Kyocera Supply-Chain CSR Deployment Guideline”

https://global.kyocera.com/ecology/social/images/csr_guide.pdf

“Conflict Minerals Report”

https://global.kyocera.com/ir/financial/cmr.html

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Patents and Licenses

Our success and competitive position depend on a number of significant patents, licenses and trade secrets relating to our manufacturing and sales processes and products. All of Kyocera’s intellectual properties are considered to be important. However, Kyocera believes that neither its expiration nor termination of any specific intellectual properties would have significant impact on Kyocera’s entire operation. The following table sets forth information, as of March 31, 2018, with respect to our significant patents and license agreements.

(a) License permitted to produce products

(b) License—cross agreements

Competitive Position

(1) Industrial & Automotive Components Group

Kyocera has continued to cultivate new markets since our founding through the development of fine ceramic materials and products. At present, we supply fine ceramic parts to a wide array of markets such as the information and communications market and the industrial machinery market, which includes semiconductors. We boast production technology and production capacity for these products that enable us to meet customer requirements, which include ceramic materials technology and design expertise accumulated in the process of cultivating new markets. This is one of the key reasons that we have been able to differentiate our products from those of our rivals, and through this, we have established a position as a global leading manufacturer.

In automotive components, we have products that boast the top market share in powertrain parts that utilize fine ceramic technology. In addition, we are striving to increase our share of automotive cameras, an area on the rise to boost automotive safety, by developing new products and technologies.

In liquid crystal displays, we are focusing on the development of small- and medium-sized products and are seeking to expand business mainly for automotive and industrial applications. In particular, we are working to further strengthen our competitiveness by concentrating on the development of new liquid crystal displays for automotive use.

In the industrial tool business, Kyocera’s products are used primarily for metallic processing in automotive-related markets. Although we have many competitors globally, we provide a diverse array of cutting tools for processing machinery based on advanced materials technology that contribute to enhanced productivity for our customers. We are also developing products for a wide range of markets in addition to the automotive industry, including the aviation and energy markets, and are expanding our lineup of pneumatic tools and power tools, for example, through aggressive merger and acquisition activity, in an effort to expand business as a comprehensive tool manufacturer.

(2) Semiconductor Components Group

In this reporting segment, we are working to strengthen global competitiveness by developing business for ceramic material components such as ceramic packages, and business for organic multilayer packages, multilayer printed wiring boards (PWBs) and organic packaging materials.

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In the ceramic material components business, Kyocera has established its position as a leader in the global market through sophisticated development, production technology and supply capabilities. We will maximize use of these outstanding management resources and work to broadly expand the application of ceramic material components for the digital consumer equipment market as well as the automotive-related markets, optical communications market, medical market, IoT-related markets and other areas. We are also working to maintain and improve our high market position by actively expanding production capacity in response to growing market needs. Our main competitors in this domain are Japanese manufacturers.

In the organic multilayer package and multilayer PWB business, our main competitors are Japanese and Asian manufacturers. Kyocera has become a leading supplier of high-end flip-chip packages and advanced multilayer PWBs used in communications infrastructure such as servers and routers demanding exceptional electrical properties and reliability. In addition, we are working to develop new products that leverage our capabilities in thin substrate technology amassed over the years, for smartphones and other mobile terminals requiring smaller, thinner packages, to bolster our business competitiveness.

(3) Electronic Devices Group

Kyocera develops and manufactures a wide variety of capacitors, crystal components, connectors, thermal printheads, inkjet printheads, power semiconductors, sensors, and wireless communications antennas. We develop our business with our extensive product lineup for diverse applications worldwide.

Kyocera is a leading supplier of parts for high-end smartphones by focusing on the development of products in cutting-edge fields that meet needs such as for miniaturization and high performance in capacitors, crystal components and connectors. In particular, we are striving to expand our market share in multilayer ceramic capacitors (MLCCs), where demand is growing, by actively introducing new products and increasing production capacity. AVX Corporation (AVX), our subsidiary, is a world-class supplier in the tantalum capacitor market that develops products for a broad array of fields, including general industry, automotive-related and communications infrastructure. AVX is seeking to expand its product lineup and market share through aggressive merger and acquisition activity.

In addition, we boast high market share in thermal printheads used for barcode printing and in inkjet printheads used in industries such as the textile printing market. We are striving to further boost our market share by actively releasing new products and expanding applications.

(4) Communications Group

Kyocera supplies smartphones and feature phones in Japan and overseas. Our main competitors are mobile phone manufacturers in the United States, Asia and Japan. Kyocera is focusing on developing products that provide a level of differentiation such as by adding waterproof and robustness features. In particular, we are developing an array of products, from simple mobile phones to sophisticated smartphones, for the Japanese market, and by doing so, we are meeting diverse user needs. Additionally, we are developing communication modules (M2M modules), an area of growing demand, for automobiles and the IoT and thus striving to expand business fields by developing applications for communications technology. In the communication module field, we have been able to release products ahead of the competition by utilizing relationships with major carriers in Japan that we have built up in our mobile phone business and this has become a strength in terms of enabling response to the increasing sophistication of technology.

In the information and communications services business, Kyocera develops business mainly in Japan. In the ICT business, which primarily involves the development of application-related software and security-related software, we are developing and supplying products that meet user needs in line with the proliferation of the IoT. We have also become a leading company in the LPWA (Low Power Wide Area) communications services field in Japan by securing license as the only operator in Japan that can deploy Sigfox, an LPWA network where there are growing needs.

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(5) Document Solutions Group

In this reporting segment, Kyocera manufactures and sells printers and MFPs, and provides solution services in the global market. Our competitors are mainly leading Japanese and U.S. manufacturers of document equipment.

Kyocera develops environmentally friendly products through unique, long-life photoreceptor drums, including amorphous silicon drums and a positive single layer photoconductor (PLSP) drums, and low-power-consumption systems. Our products have been differentiated from the competition by realizing lower running costs. Kyocera is also increasing efficiency in development through the use of platforms and module-based design for equipment, which has heightened cost competitiveness. In addition, we have expanded our product lineup through broad-reaching product development, from high-end to low-end products, and are meeting customer needs.

In addition to expanding equipment development, Kyocera is working to further enhance competitiveness by bolstering our document solutions business. We are building up our MDS (Managed Document Services) business to provide the optimal document environment for each customer through unique HyPAS (Hybrid Platform for Advanced Solutions), which enables users to embed various applications and software that meet user needs in document equipment to connect with a cloud computing environment or mobile terminals. Aside from this, we are further heightening the value we provide to customers in our document solutions business by adding companies that handle ECM (Enterprise Contents Management) and document BPO (Business Process Outsourcing) via merger and acquisition activity.

(6) Life & Environment Group

In this reporting segment, Kyocera mainly provides solar modules and power generating systems. The solar energy industry has a high number of competitors and competition is becoming increasingly severe from the perspectives of price and technology. Despite this, Kyocera is working to expand business by leveraging competitive advantages in products that realize high conversion efficiency and long-term reliability based on technology backed up by experience accumulated over more than 40 years as one of the pioneering companies in the industry.

Kyocera manufactures crystalline silicon solar cells and, in particular, we have an integrated production system for the entire manufacturing process from silicon ingots to solar modules for multicrystalline silicon solar cells, thus allowing thorough quality control and cost reductions in each process. As a result, we can realize exceptional reliability and enhance cost competitiveness. In addition, Kyocera has generated top-class results in installing solar power generating systems for public and commercial use in Japan by providing system design, construction and maintenance. Kyocera is actively seeking to expand its energy solutions business by strengthening development, particularly for power storage batteries and an Energy Management System (EMS), by utilizing the Group’s management resources and knowhow with the aim of capturing demand for home electricity self-consumption, an area that continues to grow. Further, a strong financial base enabling the provision of after-sales service and maintenance over a long period serves as a competitive advantage for us.

In the medical device business, our main products are prosthetic joints and dental implants, and we deal primarily with the Japanese market. Kyocera commands top-class competitiveness as a manufacturer in Japan. In prosthetic joints, we are working to further strengthen competitiveness by leveraging the properties of fine ceramics, which feature high biocompatibility, and developing products with longer life and enhanced antibacterial characteristics. We are also striving to expand business scale as we eye foray into overseas markets.

Apart from the aforementioned strengths in each business, Kyocera also pursues greater synergies within the Group to further strengthen business. In particular, we are promoting the use of artificial intelligence (AI) and robots with the aim of increasing productivity. In addition, we are working to strengthen our competitiveness by aggressively utilizing external management resources, which includes merger and acquisition activity and collaborations.

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Government Regulation

There are various governmental regulations specifically applicable to industries in which Kyocera operates, including regulations relating to business and investment approvals, export regulations, tariffs, intellectual properties, consumer and business taxation, exchange controls, and material procurement in public works. Kyocera does not believe that such governmental regulations currently have significant effects on its business.

Environmental Regulation

Kyocera is also subject to various regulations concerning the environment of the countries where it operates. These regulations cover air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in Kyocera’s manufacturing process, employee health and safety, labeling or other notifications with respect to the content or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or on design aspects of its products or product packaging, and responsibility for disposal of products or product packaging. They also include several regulations for chemical substance in products, such as the European Union Directive on the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS Directive), the European Union Directive on Waste Electrical and Electronic Equipment (WEEE Directive), the European Union’s Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), and similar regulations required in other countries and areas including China. Based on our periodic reviews of the operating policies and practices at all of our facilities, Kyocera believes that it is not involved in any pending or threatened proceedings that would require curtailment of its business, and its operations are currently in substantial compliance, in all material respects, with all applicable environmental laws and regulations. Accordingly, the cost of continuing compliance will not be considered to have a material effect on our financial condition or results of operations.

In addition to the above environmental regulations, AVX Corporation, a U.S. based subsidiary, has been identified by the United States Environmental Protection Agency (EPA), state governmental agencies or other private parties as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or equivalent state or local laws for clean-up and response costs associated with certain sites at which remediation is required with respect to prior contamination. Because CERCLA has generally been construed to authorize joint and several liability, the EPA could seek to recover all clean-up costs from any one of the PRPs at a site despite the involvement of other PRPs. At certain sites, financially responsible PRPs other than AVX Corporation also are, or have been, involved in site investigation and clean-up activities. AVX Corporation believes that liability resulting from these sites will be apportioned between AVX Corporation and other PRPs.

To resolve its liability at the sites at which AVX Corporation has been named a PRP, AVX Corporation has entered into various administrative orders and consent decrees with federal and state regulatory agencies governing the timing and nature of investigation and remediation. As is customary, the orders and decrees regarding sites where the PRPs are not themselves implementing the chosen remedy contain provisions allowing the EPA to reopen the agreement and seek additional amounts from settling PRPs in the event that certain contingencies occur, such as the discovery of significant new information about site conditions.

Other Regulation

Kyocera did not conduct any transactions with Iran-related organizations within the scope of Section 13(r) of the U.S. Securities Exchange Act of 1934 in fiscal 2016, 2017 and 2018.

C. Organizational Structure

We had 264 subsidiaries and affiliates as of March 31, 2018. Our management structure is based on a business segment structure. Therefore, the management of each segment is conducted uniformly regardless of whether our operations are conducted by the parent company or by one of our subsidiaries.

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The following table sets forth information, as of March 31, 2018, with respect to our significant subsidiaries.

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In addition to the above consolidated subsidiaries, Kyocera had 227 other consolidated subsidiaries as of March 31, 2018. Kyocera also had interests in one subsidiary accounted for by the equity method and 11 affiliates accounted for by the equity method as of March 31, 2018.

At a meeting of Board of Directors held on May 25, 2018, Kyocera Corporation made a resolution to conduct an absorption-type merger with Kyocera Display Corporation.

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D. Property, Plants and Equipment

As of March 31, 2018, we had property, plants and equipment with a net book value of ¥300,924 million. During the five years ended March 31, 2018, we invested a total of ¥336,514 million for additions to property, plants and equipment. Our property, plants and equipment are subject to some material encumbrances or environmental issues. See Item 5.A. “Operating Results” of this annual report on Form 20-F.

The following table sets forth information with respect to our principal manufacturing facilities as of March 31, 2018.

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Average exchange rates for fiscal 2018 were ¥111 to the U.S. dollar, marking depreciation of ¥3 (2.8%), and ¥130 to the Euro, marking depreciation of ¥11 (9.2%), from fiscal 2017. As a result, net sales and income before income taxes after translation into yen for fiscal 2018 were pushed up by approximately ¥39 billion and ¥16 billion, respectively, compared with fiscal 2017.

Adoption of IFRS and Voluntary Delisting of ADSs from the New York Stock Exchange

On February 26, 2018, we decided to adopt IFRS for our consolidated financial statements in place of the current U.S. GAAP following a resolution at a meeting of the Board of Directors on that same date to further strengthen and improve the efficiency of our financial reporting. We plan to begin disclosing our consolidated financial statements according to IFRS from the three months ending June 30, 2018.

On June 15, 2018, we filed a Form 25 with the Securities and Exchange Commission for the voluntary delisting of our ADSs from the New York Stock Exchange and the related deregistration with the Securities and Exchange Commission. In addition, on June 26, 2018, we also filed a Form 15F with the Securities and Exchange Commission to terminate our reporting obligations under the U.S. Securities Exchange Act of 1934.

Net sales in the Components Business in fiscal 2018 increased by ¥133,248 million, or 18.6%, to ¥850,002 million, compared with ¥716,754 million in fiscal 2017. Sales of industrial tools and display products for automotive markets as well as sales of capacitors and crystal components used in smartphones increased due to strong demand, and M&As also contributed.

Net sales in the Equipment & Systems Business increased by ¥12,945 million, or 1.8%, to ¥738,805 million, compared with ¥725,860 million in fiscal 2017. Sales increased due mainly to the expansion of sales volume by successful launching of new products in the Document Solutions Group and a contribution of increased sales of information and communications services business in spite of a negative impact caused by the downsizing of the solar energy business in the United States and the decline in sales of the U.S. market in the telecommunications equipment business.

Due mainly to the impact of the yen’s depreciation against the U.S. dollar and Euro, net sales after translation into the yen in fiscal 2018 were pushed up by approximately ¥39 billion, compared with fiscal 2017.

For details regarding net sales, please refer to page 35, “Business Overview by Reporting Segment.”

Net Sales by Geographic Segment

(1) Japan

Sales in Japan in fiscal 2018 increased by ¥15,404 million, or 2.6%, to ¥614,043 million, compared with ¥598,639 million in fiscal 2017. This was due mainly to an increase in sales of the Communications Group.

(2) Asia

Sales in Asia in fiscal 2018 increased by ¥59,636 million, or 19.6%, to ¥363,649 million, compared with ¥304,013 million in fiscal 2017. This was due mainly to an increase in sales of the Electronic Devices Group and the Semiconductor Components Group.

(3) Europe

Sales in Europe in fiscal 2018 increased by ¥77,314 million, or 32.8%, to ¥312,669 million, compared with ¥235,355 million in fiscal 2017. This was due mainly to an increase in sales of the Document Solutions Group and the Electronic Devices Group, which were affected by M&As.

(4) United States of America

Sales in the United States of America in fiscal 2018 decreased by ¥4,177 million, or 1.8%, to ¥224,791 million, compared with ¥228,968 million in fiscal 2017. This was due mainly to the downsizing of the solar energy business and the decline in sales of the Communications Group.

(5) Others

Sales in Others in fiscal 2018 increased by ¥6,108 million, or 11.0%, to ¥61,887 million, compared with ¥55,779 million in fiscal 2017. This was due mainly to an increase in sales of the Document Solutions Group.

Cost of Sales and Gross Profit

In fiscal 2018, cost of sales increased by ¥151,439 million, or 14.4%, to ¥1,200,911 million from ¥1,049,472 million in fiscal 2017. The increase was caused primarily by the recording of a write-down in the amount of ¥50,165 million relating to long-term purchase agreements for procurement of polysilicon material in the solar energy business, in addition to the higher sales and the effect of M&As.

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Raw material costs of ¥477,299 million accounted for 39.7% of total cost of sales in fiscal 2018, which increased by ¥73,224 million, or 18.1%, from ¥404,075 million in fiscal 2017. Labor costs of ¥235,454 million accounted for 19.6% of total cost of sales in fiscal 2018, which increased by ¥16,463 million, or 7.5%, from ¥218,991 million in fiscal 2017. Depreciation expense of ¥62,220 million accounted for 5.2% of total cost of sales in fiscal 2018, which increased by ¥6,205 million, or 11.1%, from ¥56,015 million in fiscal 2017.

As a result, gross profit in fiscal 2018 increased by ¥2,846 million, or 0.8%, to ¥376,128 million from ¥373,282 million in fiscal 2017. The gross profit ratio to net sales decreased by 2.3 percentage points from 26.2% to 23.9%.

With respect to the recording of a write-down relating to long-term purchase agreements for procurement of polysilicon material in the solar energy business, please refer to “Write-down of Long-term Purchase Agreements” in Item 5.F. “Tabular Disclosure of Contractual Obligations.”

Selling, General & Administrative Expenses and Profit from Operations

In fiscal 2018, selling, general and administrative expenses increased by ¥11,813 million, or 4.4%, to ¥280,553 million from ¥268,740 million in fiscal 2017.

Labor costs of ¥159,981 million accounted for 57.0% of total selling, general and administrative expenses in fiscal 2018, an increase of ¥10,295 million, or 6.9%, from ¥149,686 million in fiscal 2017. Sales promotion and advertising costs of ¥44,835 million accounted for 16.0% of total selling, general and administrative expenses in fiscal 2018, an increase of ¥621 million, or 1.4%, from ¥44,214 million in fiscal 2017. Depreciation expense of ¥14,763 million accounted for 5.3% of total selling, general and administrative expenses in fiscal 2018, an increase of ¥1,786 million, or 13.8%, from ¥12,977 million in fiscal 2017.

As a result, profit from operations in fiscal 2018 decreased by ¥8,967 million, or 8.6%, to ¥95,575 million, compared with ¥104,542 million in fiscal 2017. The operating margin decreased by 1.2 percentage points to 6.1% in fiscal 2018, compared with 7.3% in fiscal 2017.

Interest and Dividend Income

Interest and dividend income in fiscal 2018 increased by ¥8,134 million, or 25.1%, to ¥40,498 million, compared with ¥32,364 million in fiscal 2017. This was due mainly to an increase in dividend income from KDDI Corporation.

Interest Expense

Interest expense in fiscal 2018 increased by ¥494 million, or 54.8%, to ¥1,395 million, compared with ¥901 million in fiscal 2017.

Foreign Currency Transaction

The average exchange rates for fiscal 2018 were ¥111 to the U.S. dollar, marking depreciation of ¥3 (2.8%), and ¥130 to the Euro, marking depreciation of ¥11 (9.2%), from fiscal 2017. The exchange rates at March 31, 2018 were ¥106 to the U.S. dollar, marking appreciation of ¥6 (5.4%), and ¥131 to the Euro, marking depreciation of ¥11 (9.2%), from March 31, 2017. Kyocera recorded foreign currency transaction losses of ¥827 million in fiscal 2018.

Kyocera typically enters into forward exchange contracts to reduce currency exchange risks on foreign currency denominated receivables and payables. Kyocera confines its use of forward exchange contracts for hedging its foreign exchange rate exposures, and does not utilize forward exchange contracts for trading purposes.

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Gains and Losses from Investments

Gains on sales of securities in fiscal 2018 increased by ¥1,436 million, or 744.0%, to ¥1,629 million, compared with ¥193 million in fiscal 2017.

Income before Income Taxes

Income before income taxes in fiscal 2018 decreased by ¥5,983 million, or 4.3%, to ¥131,866 million compared with ¥137,849 million in fiscal 2017. Margin of income before income taxes against net sales decreased by 1.3 percentage points to 8.4% compared with 9.7% in fiscal 2017.

Operating profit in the Components Business in fiscal 2018 increased by ¥34,008 million, or 43.4%, to ¥112,318 million, compared with ¥78,310 million in fiscal 2017. The significant increase was caused by the increase in sales and cost reductions.

Operating profit in the Equipment & Systems Business for fiscal 2018 decreased by ¥46,761 million, compared with profit of ¥37,953 million posted in fiscal 2017 and operating loss of ¥8,808 million was posted. This was due mainly to the recording of a write-down relating to long-term purchase agreements for procurement of polysilicon material in the solar energy business, which was partly offset by significant increases in profits of the Document Solutions Group and the information and communications services business.

Due mainly to the impact of the yen’s depreciation against the U.S. dollar and Euro, income before income taxes after translation into the yen in fiscal 2018 were pushed up by approximately ¥16 billion, compared with fiscal 2017.

For a detail of income before income taxes, please refer to “Business Overview by Reporting Segment” below.

Income Taxes

Current and deferred income taxes in fiscal 2018 increased by ¥18,439 million, or 64.8% to ¥46,881 million, of which the effective tax rate was 35.6%, compared with ¥28,442 million in fiscal 2017, of which the effective tax rate was 20.6%. This was due mainly to recording one-time tax expenses of ¥13,860 million in our U.S. subsidiaries such as AVX Corporation, caused by the tax reform in U.S.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests in fiscal 2018 decreased by ¥2,368 million, or 42.6%, to ¥3,196 million compared with ¥5,564 million in fiscal 2017. This was due mainly to a decrease in net income of AVX Corporation, for which there is a noncontrolling interest of approximate 30% in fiscal 2018.

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(1) Industrial & Automotive Components Group

Sales in the Industrial & Automotive Components Group for fiscal 2018 increased by ¥57,391 million, or 24.9%, to ¥287,620 million, compared with ¥230,229 million for fiscal 2017. Sales of industrial tools increased due to growing demand in automotive-related markets and merger and acquisition activities. Sales of automotive displays and fine ceramic parts also increased steadily. Sales in this reporting segment were buoyed by merger and acquisition activities, which increased sales by approximately ¥21 billion, and the yen’s depreciation, which added approximately ¥8 billion.

Operating profit for fiscal 2018 increased by ¥10,115 million, or 45.1%, to ¥32,557 million, compared with ¥22,442 million for fiscal 2017. The operating profit ratio improved from 9.7% in fiscal 2017 to 11.3% in fiscal 2018. The significant increase in operating profit can be attributed to several factors, namely sales growth, enhanced profitability and improved profit margins due primarily to cost reductions, and the addition of approximately ¥1.5 billion owing to the yen’s depreciation.

(2) Semiconductor Components Group

Sales in the Semiconductor Components Group for fiscal 2018 increased by ¥11,510 million, or 4.7%, to ¥257,237 million, compared with ¥245,727 million for fiscal 2017. This increase was due to an increase in sales of ceramic packages for smartphones and organic packages for automotive applications as well as the addition of approximately ¥5 billion owing to the yen’s depreciation.

Operating profit increased by ¥7,166 million, or 28.3%, to ¥32,476 million, compared with ¥25,310 million for fiscal 2017. The operating profit ratio improved to 12.6% from 10.3% in fiscal 2017. The increase in profit was due to sales growth, enhanced profitability and improved profit margins owing mainly to cost reductions, and the addition of approximately ¥3 billion owing to the yen’s depreciation.

(3) Electronic Devices Group

Sales in the Electronic Devices Group for fiscal 2018 increased by ¥64,347 million, or 26.7%, to ¥305,145 million, compared with ¥240,798 million for fiscal 2017. Sales of capacitors and crystal components increased due to the launch of new products and expansion of production capacity on the back of solid demand for smartphone parts. In addition, increased demand for printing devices for industrial equipment also contributed to this result. Sales in this reporting segment were buoyed by merger and acquisition activities at AVX Corporation, which increased sales by approximately ¥23 billion compared with fiscal 2017, as well as the addition of approximately ¥6 billion owing to the yen’s depreciation.

Operating profit increased by ¥16,727 million, or 54.7%, to ¥47,285 million, compared with ¥30,558 million for fiscal 2017. The operating profit ratio improved to 15.5% from 12.7% in fiscal 2017. The significant increase in operating profit can be attributed to several factors, namely sales growth, the effect of new products, increased sales of highly profitable components, and enhanced profitability due mainly to cost reductions, coupled with the addition of approximately ¥2 billion owing to the yen’s depreciation.

(4) Communications Group

Sales in the Communications Group for fiscal 2018 increased by ¥2,894 million, or 1.1%, to ¥255,535 million, compared with ¥252,641 million for fiscal 2017. Despite sales growth in the information and communications services business, primarily in the engineering business, sales decreased in the telecommunications equipment business due mainly to a decline in sales volume of mobile phones through a reduction of production ratio for low-end handsets for the U.S. market. Additionally, total sales volume of mobile phones in fiscal 2018 decreased by approximately 20% compared with fiscal 2017.

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Operating profit decreased by ¥3,467 million, or 40.7%, to ¥5,061 million, compared with ¥8,528 million for fiscal 2017. Despite an increase in profit in the information and communications services business due to sales growth, operating profit was down due to the impact of lower sales in the telecommunications equipment business combined with a total increase of around ¥1 billion in depreciation and R&D expenses in this reporting segment.

(5) Document Solutions Group

Sales in the Document Solutions Group for fiscal 2018 increased by ¥47,046 million, or 14.5%, to ¥371,058 million, compared with ¥324,012 million for fiscal 2017. Sales volume increased by approximately 10% due to the introduction of new products and aggressive sales promotion activities. In addition, merger and acquisition activities conducted in the fiscal 2018 lifted sales by around ¥12 billion compared with fiscal 2017, while the yen’s depreciation added approximately ¥19 billion to the total.

Operating profit increased by ¥13,061 million, or 46.5%, to ¥41,141 million, compared with ¥28,080 million for fiscal 2017. The operating profit ratio improved to 11.1% from 8.7% in fiscal 2017. The considerable increase in operating profit can be attributed to cost reductions and enhanced productivity coupled with the addition of approximately ¥10 billion owing to the yen’s depreciation.

(6) Life & Environment Group

Sales in the Life & Environment Group for fiscal 2018 decreased by ¥36,995 million, or 24.8%, to ¥112,212 million, compared with ¥149,207 million for fiscal 2017. This decrease was due to the downsizing of the solar energy business in the United States and lower sales in the key solar energy market of Japan.

In addition to the impact of the decrease in sales in the solar energy business, operating loss of ¥55,010 million was recorded due primarily to a write-down relating to the long-term purchase agreements for the procurement of polysilicon material in the solar energy business.

As a result of a decline in the profitability of the solar energy business, the net realizable value of polysilicon material was less than the purchase price under the agreements and pursuant to the lower of cost or net realizable value approach, Kyocera recorded a write-down in an amount equivalent to the difference between net realizable value and purchase price. The total amount of the write-down was ¥50,165 million, including a write-down of future material purchase commitments and the current polysilicon materials already purchased pursuant to the agreements, and the write-down was included in “cost of sales” in Kyocera’s consolidated income statements for fiscal 2018.

(7) Corporate gains and equity in earnings of affiliates and an unconsolidated subsidiary

Corporate gains and losses mainly constitute gains or losses related to financial assets and income related to management supporting service provided by Kyocera’s head office to each reporting segment. Such income increased by ¥3,824 million, or 15.5%, to ¥28,460 million, compared with ¥24,636 million in fiscal 2017. This was due mainly to an increase in dividends received from KDDI Corporation, despite recording loss relating liquidation of a subsidiary.

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Net Sales

Net sales in fiscal 2017 decreased by ¥56,873 million, or 3.8%, to ¥1,422,754 million, compared with ¥1,479,627 million in fiscal 2016.

Net sales in the Components Business in fiscal 2017 increased by ¥12,526 million, or 1.8%, to ¥716,754 million, compared with ¥704,228 million in fiscal 2016. Net sales in the Industrial & Automotive Components Group and the Semiconductor Components Group increased compared with the fiscal 2016 supported by increases in automobile sales in Asia and investment in communications infrastructure.

Net sales in the Equipment & Systems Business in fiscal 2017 decreased by ¥70,132 million, or 8.8%, to ¥725,860 million, compared with ¥795,992 million in fiscal 2016. Net sales in the Communications Group decreased due to a decline in sales volume as a result of a revision in product strategy. And sales in the solar energy business decreased due primarily to market price erosion.

Due mainly to the impact of the yen’s appreciation against the U.S. dollar and Euro, net sales after translation into the yen in fiscal 2017 were pushed down by approximately ¥94 billion, compared with fiscal 2016.

For details regarding net sales, please refer to page 41, “Business Overview by Reporting Segment.”

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Net Sales by Geographic Segment

(1) Japan

Sales in Japan in fiscal 2017 decreased by ¥9,003 million, or 1.5%, to ¥598,639 million, compared with ¥607,642 million in fiscal 2016. This was due mainly to a decline in sales in the Communications Group.

(2) Asia

Sales in Asia in fiscal 2017 decreased by ¥3,731 million, or 1.2%, to ¥304,013 million, compared with ¥307,744 million in fiscal 2016. This was due primarily to the declines in sales in the Industrial & Automotive Components Group and the Semiconductor Components Group, which were affected by the negative impact of the yen’s appreciation.

(3) Europe

Sales in Europe in fiscal 2017 decreased by ¥18,027 million, or 7.1%, to ¥235,355 million, compared with ¥253,382 million in fiscal 2016. This was due mainly to a decline in sales in the Electronic Devices Group and the Document Solutions Group, which were affected by the negative impact of the yen’s appreciation.

(4) United States of America

Sales in the United States of America in fiscal 2017 decreased by ¥21,235 million, or 8.5%, to ¥228,968 million, compared with ¥250,203 million in fiscal 2016. This was due mainly to the negative impact of the yen’s appreciation as well as to a decline in sales in the solar energy business.

(5) Others

Sales in Others in fiscal 2017 decreased by ¥4,877 million, or 8.0%, to ¥55,779 million, compared with ¥60,656 million in fiscal 2016. This was due mainly to a decline in sales in the Semiconductor Components Group and the Document Solutions Group, which were affected by the negative impact of the yen’s appreciation.

Cost of Sales and Gross Profit

In fiscal 2017, cost of sales decreased by ¥43,995 million, or 4.0%, to ¥1,049,472 million from ¥1,093,467 million in fiscal 2016.

Raw material costs of ¥404,075 million accounted for 38.5% of total cost of sales in fiscal 2017, which decreased by ¥46,579 million, or 10.3%, from ¥450,654 million in fiscal 2016. Labor costs of ¥218,991 million accounted for 20.9% of total cost of sales in fiscal 2017, which decreased by ¥320 million, or 0.1%, from ¥219,311 million in fiscal 2016. Depreciation expense of ¥56,015 million accounted for 5.3% of total cost of sales in fiscal 2017, which increased by ¥1,749 million, or 3.2%, from ¥54,266 million in fiscal 2016.

As a result, gross profit in fiscal 2017 decreased by ¥12,878 million, or 3.3%, to ¥373,282 million from ¥386,160 million in fiscal 2016. The gross profit ratio to net sales increased by 0.1 percentage points from 26.1% to 26.2%.

Selling, General & Administrative Expenses, Loss on Impairment of Goodwill and Profit from Operations

In fiscal 2017, selling, general and administrative expenses decreased by ¥10,621 million, or 3.8%, to ¥268,740 million from ¥279,361 million in fiscal 2016. The decrease was caused primarily by the recording of ¥4,575 million of patent litigation cost at AVX Corporation and an impairment loss on non-current assets in the amount of ¥3,814 million recognized in the liquid crystal displays business in fiscal 2016, despite the recording of gains on sales of property, plant and equipment, net in the amount of ¥12,039 million in fiscal 2016, and a decrease in miscellaneous expenses due to the effect of the yen’s appreciation.

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The ratio of selling, general and administrative expenses to net sales was 18.9% in fiscal 2017, as the same as it was in fiscal 2016.

Labor costs of ¥149,686 million accounted for 55.7% of total selling, general and administrative expenses in fiscal 2017, a decrease of ¥6,937 million, or 4.4%, from ¥156,623 million in fiscal 2016. Sales promotion and advertising costs of ¥44,214 million accounted for 16.5% of total selling, general and administrative expenses in fiscal 2017, a decrease of ¥2,420 million, or 5.2%, from ¥46,634 million in fiscal 2016. Depreciation expense of ¥12,977 million accounted for 4.8% of total selling, general and administrative expenses in fiscal 2017, a decrease of ¥618 million, or 4.5%, from ¥13,595 million in fiscal 2016.

In fiscal 2016, impairment loss on goodwill in the amount of ¥14,143 million was recognized in the liquid crystal displays business included in the Industrial & Automotive Components Group.

As a result, profit from operations in fiscal 2017 increased by ¥11,886 million, or 12.8%, to ¥104,542 million, compared with ¥92,656 million in fiscal 2016. The operating margin increased by 1.0 percentage points to 7.3% in fiscal 2017, compared with 6.3% in fiscal 2016.

Interest and Dividend Income

Interest and dividend income in fiscal 2017 increased by ¥3,755 million, or 13.1%, to ¥32,364 million, compared with ¥28,609 million in fiscal 2016. This was due mainly to an increase in dividend income from KDDI Corporation.

Interest Expense

Interest expense in fiscal 2017 decreased by ¥913 million, or 50.3%, to ¥901 million, compared with ¥1,814 million in fiscal 2016.

Foreign Currency Transaction

During fiscal 2017, the average exchange rate for the yen appreciated by ¥12, or 10.0%, against the U.S. dollar and appreciated by ¥14, or 10.5%, against the Euro, as compared with fiscal 2016. At March 31, 2017, the yen appreciated by ¥1, or 0.9%, against the U.S. dollar, and appreciated by ¥8, or 6.3%, against the Euro, as compared with March 31, 2016. Kyocera recorded foreign currency transaction gains of ¥1,278 million in fiscal 2017.

Kyocera typically enters into forward exchange contracts to reduce currency exchange risks on foreign currency denominated receivables and payables. Kyocera confines its use of forward exchange contracts for hedging its foreign exchange rate exposures, and does not utilize forward exchange contracts for trading purposes.

Gains and Losses from Investments

Gains on sales of securities in fiscal 2017 decreased by ¥20,407 million, or 99.1%, to ¥193 million, compared with ¥20,600 million in fiscal 2016. This was due mainly to the gain of ¥20,000 million on a sale of a part of shares issued by KDDI Corporation in fiscal 2016.

Income before Income Taxes

Income before income taxes in fiscal 2017 decreased by ¥7,734 million, or 5.3%, to ¥137,849 million compared with ¥145,583 million in fiscal 2016. Margin of income before income taxes against net sales decreased by 0.1 percentage points to 9.7% compared with 9.8% in fiscal 2016.

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Despite an increase of profit from operations, income before income taxes decreased due primarily to the gain of ¥20,000 million from a sale of a part of shares issued by KDDI Corporation in fiscal 2016. Income before income taxes after translation into the yen for fiscal 2017 was pushed down by approximately ¥26 billion due to the impact of appreciation of the yen against the U.S. dollar and Euro compared with fiscal 2016.

Operating profit in the Components Business in fiscal 2017 decreased by ¥449 million, or 0.6%, to ¥78,310 million, compared with ¥78,759 million in fiscal 2016. Operating profit in the Equipment & Systems Business in fiscal 2017 increased by ¥7,825 million, or 26.0%, to ¥37,953 million, compared with ¥30,128 million in fiscal 2016.

For a detail of income before income taxes, please refer to “Business Overview by Reporting Segment” below.

Income Taxes

Current and deferred income taxes in fiscal 2017 decreased by ¥2,950 million, or 9.4% to ¥28,442 million, of which the effective tax rate was 20.6%, compared with ¥31,392 million, of which the effective tax rate was 21.6% in fiscal 2016. This was due mainly to the fact that income before income taxes decreased in fiscal 2017 compared with fiscal 2016.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests in fiscal 2017 increased by ¥420 million, or 8.2%, to ¥5,564 million compared with ¥5,144 million in fiscal 2016. This was due mainly to an increase in net income of AVX Corporation, for which there is a noncontrolling interest of approximate 30% in fiscal 2017.