[Foreign Language] Ladies and gentlemen, it's time to begin this session to announce the Q3 consolidated financial results of Sony Corporation for fiscal 2016. Thank you very much for being with us despite your very busy schedules. I'd like to introduce our speakers today, Executive Chief President and CFO, Representative Corporate Executive Officer, Kenichiro Yoshida. We have Kazuhiko Takeda, Corporate Executive in Corporate Planning and Control and Accounting; the Corporate Executive, Finance and Corporate Development, Atsuko Murakami. Mr. Yoshida will make a presentation today to be followed by questions and answers. We'll be spending 45 minutes all together. With that, Mr. Yoshida, you have the floor.

I'm CFO, Kenichiro Yoshida. Today, I'd like to explain these 2 topics in the next 15 minutes. Consolidated sales for the third quarter of fiscal 2016 decreased 7% year-on-year to JPY 2,397.5 billion. Consolidated operating income decreased 54% year-on-year to JPY 92.4 billion, mainly due to the JPY 112.1 billion impairment of goodwill recorded in the Picture segment that we announced on January 30. Net income attributable to Sony Corporation's stockholders decreased 84% year-on-year to JPY 19.6 billion, primarily due to the impairment. This chart shows the cumulative results for the 9 months. This chart shows the results of each segment for the third quarter. This chart shows the 9-month cumulative results by segment. Next is a consolidated result forecast for the current fiscal year. Sales have been revised upward by JPY 200 billion, compared with the November forecast to JPY 7,600 billion, primarily due to the impact of the exchange rate. Operating income was revised downward by JPY 30 billion to JPY 240 billion. Net income attributable to Sony's stockholders is revised downward by JPY 34 billion to JPY 26 billion. This slide shows a comparison between our fiscal year forecast announced in November versus the forecast announced today. Operating income includes both the JPY 112.1 billion goodwill impairment that I mentioned earlier and a JPY 37.2 billion gain from the sale of portion of our shares of M3, Inc., which was also previously announced. Incorporating these factors and the business operational improvement, operating income has been revised from our previous forecast of JPY 270 billion to JPY 240 billion. Here, you can see the current fiscal year forecast by segment. We significantly revised downward the operating income forecast for the Pictures segment, which recorded impairment charge compared with the November forecast. But on the other hand, upward revision…

[Operator Instructions] Anyone?

Ayada of Daiwa Securities. The Semiconductors segment and the Entertainment, one each. In connection with Semiconductor segment, during the second quarter, the wafer production is 73,000 per month. What is the number of December onward? And what is the outlook for the fourth quarter January, March and next year? And also, the unit price during the second quarter [indiscernible] flat for full year. What is the current price trend and the future outlook of the price? Next, on Entertainment business, Mr. Michael Lynton steps down this time. And then in choosing his successor, what would be the qualities or attributes you would emphasize in selecting this successor as a new management? What sort of person do you think could be best fitted to that position?

Thank you. The first point, Semiconductor segment, Mr. Takeda would supplement me later. But first, my view is that, during the third quarter, there were increases than the second quarter, and there will be further increase in the fourth quarter. So on an average, 80,000 or 80K production per month. And about the price, more or less, we are able to maintain the price level. Mr. Takeda?

If I may supplement, our own capacity is operating at full capacity, and so we will look at our partner or collaborating companies for a further operation. And then the qualities we expect to see in the new CEO, so the experience and the insight into motion pictures and television productions, that would be desirable. But on the other hand, digital distribution is changing this segment very much, so the trend of change in this industry as well as the new knowledge and insight into the new technology, that would be required, in addition to leadership.

Yasui, UBS Securities. One question on Semiconductors and one on Game business. First of all, Semiconductors had large profits. It looks the sales are up with the lower inventory now and 80K is your full operation. So if we multiply it by 4, the results for October-December period, we immediately get the full year results. And on Game business, the larger PS VR -- PS4 sales have grown consistently. So during this quarters, on a year-on-year comparison basis, there has been a growth. But in Q4, do you think this momentum will continue?

First of all, the inventory situation for Semiconductors, as I said, we are at a full capacity operation mode. And in third quarter, inventory was slightly higher than our expectations, so basic inventory is kept at a higher level. But in the fourth quarter, with the volume increasing in the fourth quarter toward the end of the fiscal year, basic inventory of 95 days, we will not have that level of inventory, but we will be adjusting the capacity level of the operation by looking at the demand situation. So it would be down -- the inventory is down in the fourth quarter. The inventory -- the monetary value will rise, but the turnover inventory will be lower toward the end of the year. But again, with the release or sales of PlayStation VR hasn't resulted in the increase of sales of PS4. It's very difficult to give analysis. The purchasers are many years, so many of those already possess cameras, which are needed for VR. So I think there are more positive factors than the negative. But looking at the purchasers, they are those people who already possess PS4, PlayStation 4. And has it led to the increase of Pros, PS Pro? I think the answer is affirmative. The sales of Pro is stronger than that of Slim as we see it. Yes, about the PS4, it continues to do well, about 20 million number. This remains unchanged for this fiscal year. And PS4 Pro, PS4 Pro is running as we had expected, as we have assumed, but Pro maybe is doing more than we had anticipated.

Nakane of Mizuho Securities. I have 2 questions. First, numbers. CapEx, JPY 25 billion -- no, JPY 35 billion, that was the effect of the provision. It has to do with Semiconductor. Depreciation and amortization was reduced by JPY 30 billion. Can you give the breakdown by segment and the background? And for the Semiconductor, I trust that you're increasing your capital investment towards the next fiscal year, so why is it that there was a decline this fiscal year? And what do you intend to do the next fiscal year? Now the next question is about the Pictures. Except for the impairment, you have not made any revisions. And when the first half was settled or announced, you said that it will not reach the midrange plan, it will not reach the midrange plan, but you did not comment about the impairment. You were silent about the possible impairment. So what has happened between then and now? Can you give us an explanation that we'll be able to understand? Let me ask first Mr. Takeda. Now capital investment, compared to December, why is there a decrease vis-à-vis December forecast?

This is primarily due to the reduction in the semiconductor equipment. In other words, we are using the existing equipment. And also, in the area of electronics, we're refraining from any investment that are not of immediate urgency and requirement. On the Pictures, your question about the Pictures. In December, we have put together a plan for 2017 to 2019, and as a result, we were required to make a downward revision to the earlier version of the forecast. Therefore, we are revisiting the forecast of earnings for the Pictures that led to the need to check and conduct a test to see whether we needed impairment. We have concluded that exercise in January, and we have made an announcement on the 30th of the month. So it was in the beginning of December that we have started to look at the medium-term plan and started again the testing on the need for the impairment.

Next question, please?

Ezawa of Citigroup Securities. Concerning the business, one has to do with TV, and the Others, Pictures. In connection with TV business, I think profit Picture is favorable. And in terms of the management and supervision, the stability and the profit-making would be a target, but 5% profit margin per year continues. And this year, also, you will be achieving that. Then the conventional policies of not incurring loss or to stabilize, would that be sufficient? What about the positive, aggressive growth of that business? Are you thinking of shifting the policies? And OLED TV has been announced, and are you going to be on a very aggressive side in TV business going forward? What is the profit plan and the strategy in TV business going forward? Secondly is Pictures. And this time, you only announced the noncash impairment, and the business improvement or transformation plan have not been announced together, and some thought that was disappointing. And for improvement of profitability, a short-term prescription may be a onetime impairment recording, but what about the recovery and improvement of a profitability structure or performance structure? Are you thinking about it? And if that is -- could be left in the hands of the successor, meaning, that plan cannot be formulated unless the new successor arrives, then Mr. Hirai now has a second office in Culver City, and how would that function if the plan has to wait with the arrival of the successor?

About the TV business, basically, our policy is to place emphasis on profitability rather than pursuing the volume. But 12 million units, depending on the exchange rate situation, the sales of JPY 700 billion to JPY 800 million and maximize the profit, that is the basic policy. But this time, we announced that the OLED TV and especially the large-screen TV would be a focus. So the product mix as well as -- there may be some strong or weak or up and down in the areas, so in some areas, we place emphasis. And also, we will look at the profitability per channel in terms of allocation. So we will continue to focus on operations to improve the profitability rather than increasing the volume per se. About the Pictures segment. Your question is that if we are not thinking about a restructuring plan. Over the short term, the structural reform of a major improvement may not be in place, but we are thinking of a improvement in some extent if [indiscernible], our new CFO, is now implementing the project. For instance, what we do with the too heavy corporate cost, and we are formulating the plan to reduce such corporate cost. And then the successor, the new CEO, it's not that we cannot implement such a project unless the successor arrives. But as regard to President Hirai, he will be working to enhance and strengthen the management bases as well as the selection of SPE CEO. Those would be the highest priority areas. One point to supplement in TV, 12 million units and JPY 700 billion to JPY 800 billion size, we are not going to enlarge it, but when the operation is improved, then profit it would increase. Basically, it's that direction. But whenever there is opportunity in business, we will be flexible and agile. But we will not simply pursue volumes for the sake of increased volume.

Hirakawa, Merrill Lynch Securities. I have one question concerning Semiconductors. There's been discussion over this already, the heavy investment [indiscernible], whether it's a recurring business is not a factor. But your margin target for next year is between 6% and 8%. So 6% and 8% profit level seems to be very low. Do you think that is still the adequate and appropriate level of profitability for this business? If so, between 6% and 8%, if you think this is a realistic level, what are you going to do to make further improvements on this? And what results are you achieving through this improvement initiatives?

Thank you for the questions. So as we've said now, we are in the midst of budget formulation, so we cannot say anything definite. But ideally, the Semiconductor margin should be higher. The current level is too low. We have to try to improve the level of margin, and there's room for improvement. And for the next particular year, how much percentage would that be? I will hesitate -- refrain from mentioning percentages, but I think we'll be able to raise the level of profitability. The current business condition is such that there are some positive factors. For instance, in terms of sales mix, the previous [indiscernible] for smartphones, dual camera module is solidly increasing or likely to increase as we've expected. And for the improved pixel size of the front camera for selfies, it's also increasing. So the Chinese market, which is more than 500 million or so, high refraction [ph] cameras are becoming mainstays instead of low-cost models. So these developments are all helping us, starting as tailwind for us. I'm not sure if I adequately answered your questions. But...

SMBC Nikko Securities. Katsura is my name. I would like to ask about the free cash flow of the Financial Services, and the next question is about Mobile Communication. The free cash flow is additional JPY 200 billion for December. So it has shrunk to JPY 160 billion on a cumulative basis, but still, it's fairly a large relative size. In the fourth quarter, you have the proceeds of the sales of the shares of M3, JPY 50 billion. So I think this period it'll be in black. But the Pictures, I think, is a big factor, and I think that is affecting the free cash flow. So therefore, what would the operations be like in the future? Will there be a change in the direction? That is to say, Tim Rothman, who work on franchise and animation and increase or realized the pipeline generating returns. That has been the approach taken by the company for the past several years. So again, free cash flow is the question that I have. Another is Mobile Communication. And I think it's in black, JPY 50 million in volume. I think our ForEx market is helping, and I think you said that you needed JPY 20 million. So what is your thoughts about the next fiscal year for the Mobile business?

Thank you. Let me comment first on the first question and have Murakami supplement. Free cash flow and you pointed -- referred to the Pictures business as well. We have the second region midrange business plan, and we focus on the investment and creating the opportunities and return profits. There was a major investment to be made that is why there has been a negative cash flow for 2 consecutive periods. But in the third region of midrange plan, I think we should be focusing more on cash flow and also on the recurring-revenue business. Therefore, internally, we will not just look at P&L, but we'll be more attentive to the cash flow and have the people fully realize -- be conscious about [indiscernible] The overall cash flow for this fiscal year approach our thought. 2015 free cash flow was minus JPY 72.1 billion, excluding the Financial Services, and I think this figure will be improved for this fiscal year somewhat, but one point of caution. Last year, of the Semiconductor capital investment that was implemented the year before, the JPY 90 billion of investment was deferred to or was carried over. And even with that, we believe that the figure would be better than the previous year. Now for the Pictures free cash flow, it's a topic very difficult to discuss. I think the direction is for the better improvement, but the timing of the Pictures production and the recovery, there's some volatility or some fluctuation. So we are hoping that it will be improved. But again, given the volatility of the business, it's very difficult to give you a clear-cut answer. On the Mobile business, Communication, we have a large mobile conference. We have to strengthen the product, the merchandising. And also, we have to strengthen the sales and marketing, particularly in Europe because last year, we did not do well in Europe last year. So reflecting upon what we did last year, we would like to strengthen the business and we will maintain a certain profit. And also, we'll continue to improve the overall profit structure. Thank you.

Next question?

Ono of Morgan Stanley. One question concerning Semiconductor business. In the slide, you showed this graph or the quarterly change, and you also explained that for the fourth quarter, in others subsegment, extent of loss is incorporated. And what's your view on this? I'd like to confirm it. At the time of settlement of the second quarter, have you foreseen this or is this something you consider that would require some working out or disposal and you come to realize that now? Or simply, is it onetime items and would lead to the factors improving the profit in coming fiscal year?

Takeda-san to explain.

Thank you. About the Others subsegment in Semiconductors segment, the composition of it analog, LSI and optical pickup, such existing business is one, and another is that we exposed -- exhibited in CES an IoT set new business, and then common R&D expense or common expense for Semiconductor segment as a whole. The fourth quarter, due to the seasonality, and there will be the expense handling for the year-end and that happens during the fourth quarter. And in addition to that, in case of fiscal 2016, as Mr. Yoshida mentioned, some of the business is was brought to a closure and that effect is included. So in total, about 20% of total expense is related to the expense related to closing of the business. For other new business, that mean an investment for the future, so that would continue into the next fiscal year. And the common expense for R&D, it is a fixed expense.

Sugiyama, Goldman Sachs Securities. Pictures and M3, I have questions. First of all, Motion Pictures, the Motion Pictures, particularly. You've cited 3 initiatives, improvement: international reach, and financial discipline, so you must have actions. But leveraging of IP and particularly creation of new IPs, what actions do you have in store? And secondly, this is about M3. You've sold part of the M3 ownership, so M3's positioning in terms of your corporate strategy, what is it? And also, what is the use of the gain from the sales of these shares?

First of all, the creation of new IPs for Pictures business what actions do we have in plan, in our plan? Well, there are new scenarios that we purchased. So in Pictures we are selling anew. For example, Stephen King's Dark Tower, we'll release this year, and this is one example. Whether this will become IP, as such, we'll have to see whether the pictures will attract audiences, so it will be decided by the audiences at the end of the day. But another hopeful thinking is that leveraging of the IPs that we have in Game, this is something we can do only because we have the Game business and the Pictures business. And your question about M3, the positioning of M3 within total Sony. We are continuing to own 34%, so our positioning remains unchanged in terms of importance of M3. But currently, the genome analysis servicing done by P5, which is a joint venture, we have that operation that we do with M3. So in the medical service field, there will be a lot more of our collaborating opportunities, and the future potential for these businesses in the medical services field, medical field. To add value, bring added value to the medical field, I think, potential is very high. So the positioning of M3 for us remains unchanged. The use of the gains from the sale, Ms. Murakami, can you explain?

No particular use of the fund has been identified. Thank you.

We have very little time left, so the next question will be the final question that we can take.

Nishimura of Crédit Suisse. One question in the semiconductor production capacity, I think you're running at the fullest capacity. That's what you have said. Therefore, in the next fiscal year, the year after, would you be making investments to increase your capacity? What is your thoughts on this? Or maybe you could take advantage of the Toshiba Oida [ph] plant. There could be different options.

As you have rightly pointed out, we are in discussion. We are in consideration. Production capacity, I think the overall direction is to increase the capacity. So we are -- we are discussing with the partner companies or the supporting members. Oida [ph] plant, we could not -- we could use it -- just we could use it for masses in addition to for the use of logics, for the logics. So we will be discussing what we like to do in the future.

Thank you very much. We would like to close this. Thank you very much for your kind attention.