Sony 2015 Annual Report Download - page 192

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Weighted-average assumptions used to determine the net periodic benefit costs for the fiscal years ended
March 31, 2014, 2015 and 2016 were as follows:
Japanese plans Foreign plans
Fiscal year ended March 31 Fiscal year ended March 31
2014 2015 2016 2014 2015 2016
Discount rate 1.5% 1.4% 1.0% 4.1% 4.1% 3.1%
Expected return on plan assets 3.0 3.0 3.0 5.8 5.6 4.8
Rate of compensation increase * * * 3.1 3.1 2.9
* Substantially all of Sony’s Japanese pension plans were point-based. Point-based plans do not incorporate a
measure of compensation rate increases.
Sony reviews these assumptions for changes in circumstances.
The weighted-average rate of compensation increase is calculated based only on the pay-related plans. The
point-based plans discussed above are excluded from the calculation because payments made under the plan are
not based on employee compensation.
The mortality rate assumptions are based on life expectancy and death rates for different types of
participants. In the fiscal year ended March 31, 2016, Sony updated mortality rate assumptions to consider the
latest mortality tables and in certain instances to utilize mortality tables based on gender.
To determine the expected long-term rate of return on pension plan assets, Sony considers the current and
expected asset allocations, as well as the historical and expected long-term rates of returns on various categories
of plan assets. Sony’s pension investment policy recognizes the expected growth and the variability risk
associated with the long-term nature of pension liabilities, the returns and risks of diversification across asset
classes, and the correlation among assets. The asset allocations are designed to maximize returns consistent with
levels of liquidity and investment risk that are considered prudent and reasonable. While the pension investment
policy gives appropriate consideration to recent market performance and historical returns, the investment
assumptions utilized by Sony are designed to achieve a long-term return consistent with the long-term nature of
the corresponding pension liabilities.
The investment objectives of Sony’s plan assets are designed to generate returns that will enable the plans to
meet their future obligations. The precise amount for which these obligations will be settled depends on future
events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated
using actuarial assumptions, based on the current economic environment and other pertinent factors. Sony’s
investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as
equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income
securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that
could negatively impact the funding level of the plans, thereby increasing its dependence on contributions from
Sony. To mitigate any potential concentration risk, thorough consideration is given to balancing the portfolio
among industry sectors and geographies, taking into account interest rate sensitivity, dependence on economic
growth, currency and other factors that affect investment returns. The target allocations as of March 31, 2016,
are, as a result of Sony’s asset liability management, 29% of equity securities, 53% of fixed income securities
and 18% of other investments for the pension plans of Sony Corporation and most of its subsidiaries in Japan,
and, on a weighted average basis, 33% of equity securities, 49% of fixed income securities and 18% of other
investments for the pension plans of foreign subsidiaries.
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