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Kyocera is exposed to market risk, including changes in foreign currency exchange rates, interest rates and equity prices. In order to hedge against these risks, Kyocera uses derivative financial instruments. Kyocera does not hold or issue derivative financial instruments for trading purposes. Kyocera regularly assesses these market risks based on policies and procedures established to protect against the adverse effects of these risks and other potential exposures, primarily by reference to the market value of financial instruments. Although Kyocera may be exposed to losses in the event of non-performance by counterparties, Kyocera believes that its counterparties are creditworthy and does not expect such losses, if any, to be significant. In the normal course of business, Kyocera also faces other risks such as country risk, credit risk, or legal risk, but they are not represented in the following tables. Foreign Currency Exchange Risk Kyocera enters into foreign currency forward contracts to hedge certain existing assets and liabilities denominated in foreign currencies, principally the U.S. dollar and the Euro. All such contracts in effect at March 31, 2018 will generally mature within four months. The following tables provide information about Kyocera’s major foreign currency forward contracts existing at March 31, 2018, which include hedge accounting 89 Table of Contents setting forth the contract amounts, fair value, weighted average exchange rates. The contract amounts are generally used to calculate the contractual payments to be exchanged under the contracts. (Pay/Receive) Forward exchange contracts to sell foreign currencies Euro/Yen US$/Yen Euro/US$ (Yen in millions except contractual rates) Contract amounts ¥ 200,948 ¥ 167,093 ¥ 4,866 Fair value 1,161 3,595 (12 ) Weighted average contractual rates 0.008 0.009 0.806 (Receive/Pay) Forward exchange contracts to purchase foreign currencies CZK/US$ US$/Yen Yen/US$ (Yen in millions except contractual rates) Contract amounts ¥ 5,280 ¥ 3,311 ¥ 2,805 Fair value (7 ) 10 3 Weighted average contractual rates 20.477 0.009 105.749 Interest Rate Risk The tables below provide information about Kyocera’s financial instruments that are sensitive to changes in interest rates. Long-term debt (including due within one year) Average pay rate Expected maturity date Total Fair value during the year ending March 31, 2019 2020 2021 2022 2023 Thereafter (Yen in millions) Loans from banks and others 3.88 % ¥ 9,293 9,732 5,195 3,419 1,544 347 ¥ 29,530 ¥ 29,530 Equity Price Risk Kyocera has marketable equity and debt securities that are classified as available-for-sale and are carried in the consolidated balance sheets at fair value. Changes in fair value are recognized as other comprehensive income, net of taxes, as a separate component of shareholders’ equity. Gross unrealized gains on marketable equity securities, which were ¥723,309 million, included ¥667,420 million derived from unrealized gain of KDDI Corporation held by Kyocera. Detailed information appears in Note 3 to Kyocera’s consolidated financial statements included in this annual report on Form 20-F. Kyocera evaluates whether declines in fair value of debt and equity securities are other-than-temporary. Other-than-temporary declines in fair value are recorded as a realized loss with a new cost basis. This evaluation is based mainly on the duration and the extent to which the fair value is less than cost and the anticipated recoverability of fair value in the future. At March 31, 2018, Kyocera held the following available-for-sale marketable equity securities. March 31, 2018 Cost Fair Value (Yen in millions) Equity securities ¥ 270,403 ¥ 993,707

A. Selected Financial Data The selected consolidated financial data set forth below for each of the five fiscal years ended March 31 have been derived from Kyocera’s consolidated financial statements that are prepared in accordance with U.S. GAAP. You should read the U.S. GAAP selected consolidated financial data set forth below together with Item 5. “Operating and Financial Review and Prospects” and Kyocera’s consolidated financial statements included in this annual report on Form 20-F. 2014 2015 2016 2017 2018 (Yen in millions and shares in thousands, except per share amounts) For the years ended March 31: Net sales ¥ 1,447,369 ¥ 1,526,536 ¥ 1,479,627 ¥ 1,422,754 ¥ 1,577,039 Profit from operations 120,582 93,428 92,656 104,542 95,575 Net income attributable to Kyocera Corporation’s shareholders 88,756 115,875 109,047 103,843 81,789 Earnings per share: Net income attributable to Kyocera Corporation’s shareholders: Basic ¥ 241.93 ¥ 315.85 ¥ 297.24 ¥ 282.62 ¥ 222.43 Diluted 241.93 315.85 297.24 282.62 222.43 Weighted average number of shares outstanding: Basic 366,872 366,864 366,859 367,428 367,709 Diluted 366,872 366,864 366,859 367,428 367,709 Cash dividends declared per share: Per share of common stock ¥ 80 ¥ 100 ¥ 100 ¥ 110 ¥ 120 Per share of common stock* $ 0.78 $ 0.81 $ 0.88 $ 0.97 $ 1.07 At March 31: Total assets ¥ 2,636,704 ¥ 3,021,184 ¥ 3,095,049 ¥ 3,110,470 ¥ 3,157,077 Long-term debt 19,466 17,881 18,115 16,409 20,237 Common stock 115,703 115,703 115,703 115,703 115,703 Kyocera Corporation’s shareholders’ equity 1,910,083 2,215,319 2,284,264 2,334,219 2,336,246 Total equity 1,987,226 2,303,623 2,373,762 2,418,909 2,424,506 Depreciation ¥ 65,760 ¥ 62,413 ¥ 65,853 ¥ 66,019 ¥ 70,137 Capital expenditures ¥ 56,611 ¥ 56,670 ¥ 68,933 ¥ 67,781 ¥ 86,519 * Translated into the U.S. dollars based on the exchange rates at each payment date in Japan. “Earnings per share” and “Cash dividends declared per share” are calculated under the assumption that the stock split undertaken by Kyocera Corporation on October 1, 2013 had been undertaken at the beginning of fiscal 6 Table of Contents 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: For the years ended March 31, High Low Average Period-end 2014 105.25 92.96 100.15 102.98 2015 121.50 101.26 109.75 119.96 2016 125.58 111.30 120.04 112.42 2017 118.32 100.07 108.25 111.41 2018 114.25 104.83 110.80 106.20 For most recent six months December 2017 113.62 111.88 112.94 112.69 January 2018 113.18 108.38 110.87 109.31 February 2018 110.40 106.10 107.97 106.62 March 2018 106.91 104.83 106.05 106.20 April 2018 109.33 105.99 107.66 109.28 May 2018 111.08 108.62 109.69 108.73 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 7 Table of Contents 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: • a strong yen may make Kyocera’s products less attractive to foreign purchasers; • political and economic instability, significant economic downturns or economic sanctions may inhibit exports of Kyocera’s products; • tariffs and other barriers may make Kyocera’s products less cost competitive; and • the laws of certain foreign countries may not adequately protect Kyocera’s trade secrets and intellectual property. (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, 8 Table of Contents 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. 9 Table of Contents 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. 10 Table of Contents (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: • infringement claims (or claims for indemnification resulting from infringement claims) will not be asserted against Kyocera, • future assertions against Kyocera will not result in an injunction against the sale of infringing or allegedly infringing products or otherwise significantly impair its business and results of operations; or • Kyocera will not be required to obtain licenses, the expense of which may adversely affect its results of operations. (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, 11 Table of Contents 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 12 Table of Contents 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. 13 Table of Contents 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. 14 Table of Contents 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. 15 Table of Contents (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.”

Kyocera Corporation and its Consolidated Subsidiaries A. History and Development of Kyocera Corporation and its Consolidated Subsidiaries Kyocera Corporation is a joint stock corporation incorporated under the laws of Japan in 1959 with the name Kyoto Ceramic Kabushiki Kaisha. Its name was changed to Kyocera Kabushiki Kaisha (or Kyocera Corporation) in 1982. Our corporate headquarters is at 6 Takeda Tobadono-cho, Fushimi-ku, Kyoto 612-8501, Japan. Our telephone number is +81-75-604-3500. Our business originally consisted of the manufacture of ceramic parts for electronic equipment. In the 1960s, we expanded our business and technology horizontally into the design and production of fine ceramic parts, ceramic integrated circuit (IC) packages and electronic components. In the 1970s, we began to produce applied ceramic products, including cutting tools, ceramic parts for medical and dental uses, jewelry and solar energy products. In the 1980s, we diversified into new strategic fields. In 1982, we merged with Cybernet Electronics Corporation, a telecommunications equipment manufacturer in which we had made an equity investment three years earlier. We also played a leading role in the establishment of DDI Corporation (currently KDDI Corporation), which has become one of Japan’s leading providers of telecommunications services. In 1989, we gained a presence in the electronic connector market through our acquisition of Elco International Corporation (later, the company changed its name to Kyocera Connector Products Corporation, which was subsequently merged with Kyocera through an absorption-type merger in April 2017). In the 1990s, we strengthened our position as a globally integrated electronic components manufacturer through our acquisition of AVX Corporation, a maker of capacitors and other passive electronic components. In the middle of the 1990s, Kyocera developed two main business categories, the “Components Business,” in which Kyocera provides parts and devices such as fine ceramic parts, semiconductor parts and electronic components and devices to mainly electronic equipment manufacturers in information and communications fields, and the “Equipment & Systems Business,” in which Kyocera manufactures and sells telecommunications equipment such as mobile phones to telecommunication carriers, information equipment such as printers and multifunctional products and products for the life and environment market, such as solar energy related products, to distributors or directly to customers. Since 2000, we have further enhanced our position in telecommunications and information equipment market. In February 2000, we acquired the code division multiple access (CDMA) mobile phone handset business from Qualcomm Inc. In April 2000, we invested in Kyocera Mita Corporation (currently Kyocera Document Solutions Inc.), a manufacturer of copier machines and other document solutions equipment, and made it a wholly-owned 16 Table of Contents 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. 17 Table of Contents 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 18 Table of Contents 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. 19 Table of Contents (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. 20 Table of Contents 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 21 Table of Contents 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 Counterparty Country Contents Period Qualcomm Incorporated United States License under patents regarding mobile phone From August 31, 1996 to patent expiration (b) License—cross agreements Counterparty Country Contents Period Canon Inc. Japan License under patents regarding electric photo printer From April 1, 2012 to patent expiration 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. 22 Table of Contents 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. 23 Table of Contents (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. 24 Table of Contents 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. 25 Table of Contents The following table sets forth information, as of March 31, 2018, with respect to our significant subsidiaries. Name Country of Incorporation Percentage held by Kyocera Main Business (1) Industrial & Automotive Components Group Kyocera Display Corporation Japan 100.00% Development, manufacture and sale of Liquid Crystal Displays Kyocera Industrial Tools Corporation Japan 80.00% Development, manufacture and sale of Industrial Tools Dongguan Shilong Kyocera Co.,Ltd. China 90.00% Manufacture of Liquid Crystal Displays and Industrial Tools Kyocera Precision Tools Korea Co.,Ltd. Korea 90.00% Manufacture and sale of Industrial Tools Kyocera Senco Industrial Tools, Inc. United States 100.00% Development, manufacture and sale of Industrial Tools Kyocera Fineceramics GmbH Germany 100.00% Sale of Fine Ceramic Components, Semiconductor Components and Printing Devices mainly in Europe Kyocera Unimerco A/S Denmark 100.00% Development, manufacture and sale of Industrial Tools (2) Semiconductor Components Group Shanghai Kyocera Electronics Co.,Ltd. China 100.00% Manufacture of Ceramic Packages Kyocera Korea Co.,Ltd. Korea 100.00% Sale of Semiconductor Components mainly in Korea Kyocera Asia Pacific Pte. Ltd. Singapore 100.00% Sale of Industrial Tools and Semiconductor Components mainly in Asia Kyocera Vietnam Co.,Ltd. Vietnam 100.00% Manufacture of Ceramic Packages (3) Electronic Devices Group Kyocera (China) Sales & Trading Corporation China 90.00% Sale of Industrial Tools, Ceramic Packages and Electronic Components mainly in China AVX Corporation United States 72.31% Development, Manufacture and sale of Electronic Components (4) Communications Group Kyocera Communication Systems Co.,Ltd. Japan 76.30% Information Systems and Telecommunication Services Kyocera International, Inc. United States 100.00% Manufacture and sale of Fine Ceramic Components and Semiconductor Components, and sale of Mobile Phones 26 Table of Contents Name Country of Incorporation Percentage held by Kyocera Main Business (5) Document Solutions Group Kyocera Document Solutions Inc. Japan 100.00% Development, manufacture and sale of Printers and Multifunctional Products Kyocera Document Solutions Japan Inc. Japan 100.00% Sale of Printers and Multifunctional Products mainly in Japan Kyocera Document Technology (Dongguan) Co.,Ltd. China 92.76% Manufacture of Printers and Multifunctional Products Kyocera Document Technology Vietnam Co.,Ltd. Vietnam 100.00% Manufacture of Printers and Multifunctional Products Kyocera Document Solutions America, Inc. United States 100.00% Sale of Printers and Multifunctional Products mainly in North America Kyocera Document Solutions Europe B.V. Netherlands 100.00% Sale of Printers and Multifunctional Products mainly in Europe Kyocera Document Solutions Deutschland GmbH Germany 100.00% Sale of Printers and Multifunctional Products mainly in Europe TA Triumph-Adler GmbH Germany 100.00% Sale of Printers and Multifunctional Products mainly in Europe (6) Life & Environment Group Kyocera Solar Corporation Japan 100.00% Construction of Solar Power Generating System related Products Kyocera (Tianjin) Solar Energy Co.,Ltd. China 90.00% Manufacture of Solar Power Generating System related Products 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. 27 Table of Contents 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. Name of Plant Location Status Floor Space Principal Products Manufactured (in thousands of square feet) Japan Hokkaido Kitami Plant Kitami, Hokkaido Owned 295 Mobile Phones, M2M Modules, Ceramic Packages, Fine Ceramic Components Yamagata Higashine Plant Higashine, Yamagata Owned 388 Electronic Components Niigata Shibata Plant Shibata, Niigata Owned 330 Organic Multilayer Substrates and Boards Toyama Nyuzen Plant Shimoniikawa, Toyama Owned 327 Organic Multilayer Substrates and Boards Nagano Okaya Plant Okaya, Nagano Owned 386 Fine Ceramic Components, Industrial Tools, Printing Devices Tamaki Plant Watarai, Mie Owned 393 Toner Shiga Gamo Plant Higashi-Ohmi, Shiga Owned 692 Fine Ceramic Components, Ceramic Packages Shiga Yokaichi Plant Higashi-Ohmi, Shiga Owned 1,511 Fine Ceramic Components, Industrial Tools, Solar Power Generating System related Products Shiga Yasu Plant Yasu, Shiga Owned 1,810 Solar Power Generating System related Products, Liquid Crystal Displays Kyoto Ayabe Plant Ayabe, Kyoto Owned 843 Organic Multilayer Substrates and Boards Hirakata Plant Hirakata, Osaka Owned 593 Toner Kagoshima Sendai Plant Satsuma-Sendai, Kagoshima Owned 2,006 Fine Ceramic Components, Industrial Tools, Semiconductor Components 28 Table of Contents Name of Plant Location Status Floor Space Principal Products Manufactured (in thousands of square feet) Kagoshima Kokubu Plant Kirishima, Kagoshima Owned 2,462 Fine Ceramic Components, Automotive Components Ceramic Packages, Electronic Components, Printing Devices Kagoshima Hayato Plant Kirishima, Kagoshima Owned 278 Printing Devices United States Balboa Plant San Diego, California Owned 258 Ceramic Packages Fountain Inn Plant Fountain Inn, South Carolina Owned 370 Electronic Components Broadwell Plant Cincinnati, Ohio Owned 541 Industrial Tools Mexico Tijuana Plant Tijuana Owned 362 Semiconductor Components El Salvador San Salvador Plant San Salvador Owned 420 Electronic Components France Saint-Apollinaire Plant Saint-Apollinaire Leased 322 Electronic Components Czech Republic Lanskroun Plant Lanskroun Owned 542 Electronic Components Uherske Hradiste Plant Uherske Hradiste Owned 336 Electronic Components China Tianjin Plant Tianjin Owned 520 Electronic Components Tianjin Plant Tianjin Owned 308 Solar Power Generating System related Products Shanghai Pudong Plant Shanghai Owned 1,026 Ceramic Packages Zhangjiagang Plant Zhangjiagang, Jiangsu Owned 365 Liquid Crystal Displays Shilong Plant Dongguan, Guangdong Owned 2,331 Printers, Multifunctional Products Shilong Plant Dongguan, Guangdong Owned 697 Industrial Tools, Liquid Crystal Displays, Printing Devices Dalian Plant Dalian Owned 518 Industrial Tools Thailand Lamphun Plant Lamphun Owned 264 Electronic Components Vietnam Hung Yen Plant Hung Yen Owned 959 Ceramic Packages Hai Phong Plant Hai Phong Owned 794 Printers, Multifunctional Products 29 Table of Contents

A. Operating Results You should read the discussion of our financial condition and results of operations together with our consolidated financial statements and information included in this annual report on Form 20-F. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under Item 3.D. “Risk Factors” and elsewhere in this annual report on Form 20-F. Overview Kyocera develops new technologies and new products and cultivates new markets based on fine ceramic technologies since establishment. Kyocera also promotes growth through the diversified management resources from components technologies to electronic devices, equipment, systems and services. Kyocera develops, produces and distributes worldwide various kinds of products primarily for the following markets: information and communications, industrial machinery, automotive-related and environment and energy. For fiscal 2017, Kyocera’s operations were categorized into six reporting segments: (1) Fine Ceramic Parts Group, (2) Semiconductor Parts Group, (3) Applied Ceramic Products Group, (4) Electronic Device Group, (5) Telecommunications Equipment Group, and (6) Information Equipment Group. In addition, separate from its six reporting segments, Kyocera groups other businesses into “Others.” For fiscal 2017, Kyocera grouped the Fine Ceramic Parts Group, the Semiconductor Parts Group, the Applied Ceramic Products Group and the Electronic Device Group into one main business referred to as the “Components Business” and grouped the Telecommunications Equipment Group and the Information Equipment Group into another main business referred to as the “Equipment Business.” Starting from fiscal 2018, Kyocera has changed the classification of its reporting segments to “Industrial & Automotive Components Group,” “Semiconductor Components Group,” “Electronic Devices Group,” “Communications Group,” “Document Solutions Group,” and “Life & Environment Group.” For detailed information on the new reporting segment classification, please refer to Note 17 in Kyocera’s consolidated financial statements included in this annual report on Form 20-F. For fiscal 2018, sales increased in the Components Business due to strong component demand in information and communications, automotive-related and industrial machinery markets, coupled with vigorous expansion of production capacity. Sales in the Document Solutions Group also increased due to the launch of new products and aggressive sales promotion activities. Merger and acquisition activities also contributed. As a result, consolidated net sales for fiscal 2018 increased by ¥154,285 million, or 10.8%, compared with fiscal 2017, to ¥1,577,039 million. This result is a record high for fiscal year sales. Profit from operations decreased by ¥8,967 million, or 8.6%, to ¥95,575 million, income before income taxes decreased by ¥5,983 million, or 4.3%, to ¥131,866 million and net income attributable to Kyocera Corporation’s shareholders decreased by ¥22,054 million, or 21.2%, to ¥81,789 million, compared with fiscal 2017. These results were due to 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, included within the Life & Environment Group, which more than offset improvements in profitability in the Components Business and the Document Solutions Group resulting from the sales growth and efforts to reduce costs and raise productivity. Tax expenses primarily resulting from amendments to U.S. tax law and incurred by subsidiaries such as our U.S. subsidiary AVX Corporation pushed down net income attributable to Kyocera Corporation’s shareholders by approximately ¥11 billion. 30 Table of Contents 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. Results of Operations Fiscal 2018 compared with Fiscal 2017 The following table shows a summary of Kyocera’s results of operations for fiscal 2017 and fiscal 2018: Years ended March 31, Increase (Decrease) 2017 2018 Amount % Amount % Amount % (Yen in millions) Net sales ¥ 1,422,754 100.0 ¥ 1,577,039 100.0 ¥ 154,285 10.8 Cost of sales 1,049,472 73.8 1,200,911 76.1 151,439 14.4 Gross profit 373,282 26.2 376,128 23.9 2,846 0.8 Selling, general and administrative expenses 268,740 18.9 280,553 17.8 11,813 4.4 Profit from operations 104,542 7.3 95,575 6.1 (8,967 ) (8.6 ) Other income (expenses): Interest and dividend income 32,364 2.3 40,498 2.6 8,134 25.1 Interest expense (901 ) (0.0 ) (1,395 ) (0.1 ) (494 ) — Foreign currency transaction gains (losses), net 1,278 0.1 (827 ) (0.1 ) (2,105 ) — Gains on sales of securities, net 193 0.0 1,629 0.1 1,436 744.0 Other, net 373 0.0 (3,614 ) (0.2 ) (3,987 ) — Total other income (expenses) 33,307 2.4 36,291 2.3 2,984 9.0 Income before income taxes 137,849 9.7 131,866 8.4 (5,983 ) (4.3 ) Income taxes 28,442 2.0 46,881 3.0 18,439 64.8 Net income 109,407 7.7 84,985 5.4 (24,422 ) (22.3 ) Net income attributable to noncontrolling interests (5,564 ) (0.4 ) (3,196 ) (0.2 ) 2,368 — Net income attributable to Kyocera Corporation’s shareholders ¥ 103,843 7.3 ¥ 81,789 5.2 ¥ (22,054 ) (21.2 ) Net Sales Net sales in fiscal 2018 increased by ¥154,285 million, or 10.8%, to ¥1,577,039 million, compared with ¥1,422,754 million in fiscal 2017. 31 Table of Contents 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. 32 Table of Contents 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. 33 Table of Contents 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. 34 Table of Contents Business Overview by Reporting Segment The following table shows a breakdown of Kyocera’s total consolidated net sales in fiscal 2017 and fiscal 2018 by the six reporting segments: Years ended March 31, Increase (Decrease) 2017 2018 Amount % Amount % Amount % (Yen in millions) Industrial & Automotive Components Group ¥ 230,229 16.2 ¥ 287,620 18.2 ¥ 57,391 24.9 Semiconductor Components Group 245,727 17.3 257,237 16.3 11,510 4.7 Electronic Devices Group 240,798 16.9 305,145 19.4 64,347 26.7 Total Components Business 716,754 50.4 850,002 53.9 133,248 18.6 Communications Group 252,641 17.7 255,535 16.2 2,894 1.1 Document Solutions Group 324,012 22.8 371,058 23.5 47,046 14.5 Life & Environment Group 149,207 10.5 112,212 7.1 (36,995 ) (24.8 ) Total Equipment & Systems Business 725,860 51.0 738,805 46.8 12,945 1.8 Others 22,066 1.5 18,827 1.2 (3,239 ) (14.7 ) Adjustments and eliminations (41,926 ) (2.9 ) (30,595 ) (1.9 ) 11,331 — Net sales ¥ 1,422,754 100.0 ¥ 1,577,039 100.0 ¥ 154,285 10.8 The following table shows a breakdown of Kyocera’s total consolidated income before income taxes, and operating profit for fiscal 2017 and fiscal 2018 by the six reporting segments: Years ended March 31, Increase (Decrease) 2017 2018 Amount %* Amount %* Amount % (Yen in millions) Industrial & Automotive Components Group ¥ 22,442 9.7 ¥ 32,557 11.3 ¥ 10,115 45.1 Semiconductor Components Group 25,310 10.3 32,476 12.6 7,166 28.3 Electronic Devices Group 30,558 12.7 47,285 15.5 16,727 54.7 Total Components Business 78,310 10.9 112,318 13.2 34,008 43.4 Communications Group 8,528 3.4 5,061 2.0 (3,467 ) (40.7 ) Document Solutions Group 28,080 8.7 41,141 11.1 13,061 46.5 Life & Environment Group 1,345 0.9 (55,010 ) — (56,355 ) — Total Equipment & Systems Business 37,953 5.2 (8,808 ) — (46,761 ) — Others (1,759 ) — 1,621 8.6 3,380 — Operating profit 114,504 8.0 105,131 6.7 (9,373 ) (8.2 ) Corporate gains and equity in earnings of affiliates and an unconsolidated subsidiary 24,636 — 28,460 — 3,824 15.5 Adjustments and eliminations (1,291 ) — (1,725 ) — (434 ) — Income before income taxes ¥ 137,849 9.7 ¥ 131,866 8.4 ¥ (5,983 ) (4.3 ) * % to net sales of each corresponding segment Kyocera has changed the classification of its reporting segments from fiscal 2018. Business results for fiscal 2017 have been reclassified in line with the change to reporting segment classifications. 35 Table of Contents (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. 36 Table of Contents 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. 37 Table of Contents Results of Operations Fiscal 2017 compared with Fiscal 2016 The following table shows a summary of Kyocera’s results of operations for fiscal 2016 and fiscal 2017: Years ended March 31, Increase (Decrease) 2016 2017 Amount % Amount % Amount % (Yen in millions) Net sales ¥ 1,479,627 100.0 ¥ 1,422,754 100.0 ¥ (56,873 ) (3.8 ) Cost of sales 1,093,467 73.9 1,049,472 73.8 (43,995 ) (4.0 ) Gross profit 386,160 26.1 373,282 26.2 (12,878 ) (3.3 ) Selling, general and administrative expenses 279,361 18.9 268,740 18.9 (10,621 ) (3.8 ) Loss on impairment of goodwill 14,143 0.9 — — (14,143 ) — Profit from operations 92,656 6.3 104,542 7.3 11,886 12.8 Other income (expenses): Interest and dividend income 28,609 1.9 32,364 2.3 3,755 13.1 Interest expense (1,814 ) (0.1 ) (901 ) (0.0 ) 913 — Foreign currency transaction gains, net 3,820 0.2 1,278 0.1 (2,542 ) (66.5 ) Gains on sales of securities, net 20,600 1.4 193 0.0 (20,407 ) (99.1 ) Other, net 1,712 0.1 373 0.0 (1,339 ) (78.2 ) Total other income (expenses) 52,927 3.5 33,307 2.4 (19,620 ) (37.1 ) Income before income taxes 145,583 9.8 137,849 9.7 (7,734 ) (5.3 ) Income taxes 31,392 2.1 28,442 2.0 (2,950 ) (9.4 ) Net income 114,191 7.7 109,407 7.7 (4,784 ) (4.2 ) Net income attributable to noncontrolling interests (5,144 ) (0.3 ) (5,564 ) (0.4 ) (420 ) — Net income attributable to Kyocera Corporation’s shareholders ¥ 109,047 7.4 ¥ 103,843 7.3 ¥ (5,204 ) (4.8 ) 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.” 38 Table of Contents 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. 39 Table of Contents 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. 40 Table of Contents 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. Business Overview by Reporting Segment The following table shows a breakdown of Kyocera’s total consolidated net sales in fiscal 2016 and fiscal 2017 by the six reporting segments: Years ended March 31, Increase (Decrease) 2016 2017 Amount % Amount % Amount % (Yen in millions) Industrial & Automotive Components Group ¥ 221,978 15.0 ¥ 230,229 16.2 ¥ 8,251 3.7 Semiconductor Components Group 236,265 16.0 245,727 17.3 9,462 4.0 Electronic Devices Group 245,985 16.6 240,798 16.9 (5,187 ) (2.1 ) Total Components Business 704,228 47.6 716,754 50.4 12,526 1.8 Communications Group 285,608 19.3 252,641 17.7 (32,967 ) (11.5 ) Document Solutions Group 336,308 22.7 324,012 22.8 (12,296 ) (3.7 ) Life & Environment Group 174,076 11.8 149,207 10.5 (24,869 ) (14.3 ) Total Equipment & Systems Business 795,992 53.8 725,860 51.0 (70,132 ) (8.8 ) Others 23,374 1.6 22,066 1.5 (1,308 ) (5.6 ) Adjustments and eliminations (43,967 ) (3.0 ) (41,926 ) (2.9 ) 2,041 — Net sales ¥ 1,479,627 100.0 ¥ 1,422,754 100.0 ¥ (56,873 ) (3.8 ) 41 Table of Contents The following table shows a breakdown of Kyocera’s total consolidated income before income taxes, and operating profit for fiscal 2016 and fiscal 2017 by the six reporting segments: Years ended March 31, Increase (Decrease) 2016 2017 Amount %* Amount %* Amount % (Yen in millions) Industrial & Automotive Components Group ¥ 3,684 1.7 ¥ 22,442 9.7 ¥ 18,758 509.2 Semiconductor Components Group 41,707 17.7 25,310 10.3 (16,397 ) (39.3 ) Electronic Devices Group 33,368 13.6 30,558 12.7 (2,810 ) (8.4 ) Total Components Business 78,759 11.2 78,310 10.9 (449 ) (0.6 ) Communications Group 3,065 1.1 8,528 3.4 5,463 178.2 Document Solutions Group 27,106 8.1 28,080 8.7 974 3.6 Life & Environment Group (43 ) — 1,345 0.9 1,388 — Total Equipment & Systems Business 30,128 3.8 37,953 5.2 7,825 26.0 Others (2,729 ) — (1,759 ) — 970 — Operating profit 106,158 7.2 114,504 8.0 8,346 7.9 Corporate gains and equity in earnings of affiliates and an unconsolidated subsidiary 39,534 — 24,636 — (14,898 ) (37.7 ) Adjustments and eliminations (109 ) — (1,291 ) — (1,182 ) — Income before income taxes ¥ 145,583 9.8 ¥ 137,849 9.7 ¥ (7,734 ) (5.3 ) * % to net sales of each corresponding segment Kyocera has changed the classification of its reporting segments from fiscal 2018. Business results for fiscal 2016 and 2017 have been reclassified in line with the change to reporting segment classifications. (1) Industrial & Automotive Components Group Sales in the Industrial & Automotive Components Group with fiscal 2017 increased compared for fiscal 2016, due to an increase in sales of automotive components, automotive displays and industrial tools, despite the negative impact of yen’s appreciation. Operating profit for fiscal 2017 has increased compared with fiscal 2016, due mainly to the absence of impairment loss on goodwill in the amount of ¥14,143 million and non-current assets in the amount of ¥3,814 million in the display business recorded in fiscal 2016. (2) Semiconductor Components Group Sales in the Semiconductor Components Group for fiscal 2017 increased compared with fiscal 2016, due to an increase in sales of ceramic packages for optical communications and other applications, despite the negative impact of the yen’s appreciation and sluggish demand for organic multilayer boards for communications infrastructure. Operating profit for fiscal 2017 decreased compared with fiscal 2016 due to the absence of a gain on the sale of an asset in the amount of approximately ¥12 billion recorded in fiscal 2016, as well as to the negative impact of the yen’s appreciation and a decline in profit from the organic materials business. (3) Electronic Devices Group Sales in Electronic Devices Group for fiscal 2017 decreased compared with fiscal 2016. The decrease in this reporting segment was due to a decline in sales for printing devices and connectors, and price erosion in 42 Table of Contents capacitors and other products, despite sales contribution of crystal components and display business. The yen’s appreciation also pushed down the amount of sales in the Electronic Devices Group. (4) Communications Group Sales in the Communications Group for fiscal 2017 decreased compared with fiscal 2016. The decrease in sales in this reporting segment was due to a decline in sales volume of a reduction in the production ratio of low-end mobile phones for the overseas market, which was pursuant to Kyocera’s product strategy to specialize in distinctive mobile phones with unique features, such as high durability. On the other hand, operating profit for fiscal 2017 improved compared with fiscal 2016 due to the effect of the product strategy and the improvement in the cost of sales ratio as results of structural reforms such as consolidation of production sites. (5) Document Solutions Group Sales in the Document Solutions Group for fiscal 2017 decreased compared with fiscal 2016 due to the negative impact of the yen’s appreciation, which was more than enough to offset solid sales volume for equipment supported by aggressive sales activities for new products. Operating profit for fiscal 2017 increased compared with fiscal 2016 due to the effect of cost reduction and improvement in operating profit ratio through an increase in sales volume of new products, despite the negative impact of the yen’s appreciation. (6) Life & Environment Group Sales in the Life & Environment Group for fiscal 2017 decreased compared with fiscal 2016 as a result of the decline in sales from the solar energy business due to a reduction in product prices worldwide and a decline in purchase price under the feed-in tariff system in Japan. However, operating profit for fiscal 2017 increased compared with fiscal 2016, as results of structural reforms. (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 decreased by ¥14,898 million, or 37.7%, to ¥24,636 million, compared with ¥39,534 million in fiscal 2016. This was due mainly to the absence of the gain of ¥20,000 million on a sale of a part of shares issued by KDDI Corporation in fiscal 2016, despite an increase in dividends received from KDDI Corporation. Critical Accounting Policies and Estimates Kyocera’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ from these estimates, judgments and assumptions. An accounting estimate in Kyocera’s consolidated financial statements is a critical accounting estimate if it requires Kyocera to make assumptions about matters that are highly uncertain at the time the accounting estimate is made and if either different estimates that Kyocera reasonably could have used in the current period or changes in the accounting estimate that are reasonably likely to occur from period to period would have a material impact on the presentation of Kyocera’s financial condition, changes in financial condition or results of operations. Kyocera has identified the following critical accounting policies. 43 Table of Contents Allowances for Doubtful Accounts Kyocera maintains allowances for doubtful accounts related to trade notes receivables, trade accounts receivables and finance receivables for estimated losses resulting from customers’ inability to make timely payments, including interest on finance receivables. Kyocera’s estimates are based on various factors, including the length of past due payments, historical experience and current business environments. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, a specific allowance against these amounts is provided considering the fair value of assets pledged by the customer as collateral. Inventory Valuation Kyocera estimates the amount of write-downs required to properly value inventory. Inventories aged over certain holding periods are considered to be slow-moving or obsolete, for which write-downs are accrued as well as valuation losses required to adjust recorded cost to its net realizable value. Kyocera also records inventory write-downs based on its projections of future demand, market conditions and related management’s judgment even though the age of corresponding inventory is shorter than certain holding periods. Kyocera recognized inventory write-downs of ¥9,215 million in fiscal 2017 and ¥28,721 million in fiscal 2018. The write-downs in fiscal 2018 included ¥19,280 million of the write-down of current polysilicon materials already purchased pursuant to the long-term purchase agreements in the solar energy business. Kyocera also evaluated the future material purchase commitments under the agreements at the lower of cost and net realizable value, and recognized the write-down in the amount of ¥30,885 million in fiscal 2018. For detailed information regarding the write-down, please refer to Note 5 in Kyocera’s consolidated financial statements included in this annual report on Form 20-F. Impairment of Securities and Investments Kyocera records impairment charges for debt and equity securities when it believes that the decline in fair value is other-than-temporary. Kyocera regularly reviews each security and investment for impairment based on the extent to which the fair value is less than cost, the duration of the decline, the anticipated recoverability of fair value in the future and the financial conditions of the issuer. Poor operating results of the issuers of these securities or adverse changes in the market may cause impairment losses in future periods. The impairment losses are mainly recorded as corporate losses. Kyocera recognized losses on impairment of debt and equity securities of ¥31 million and ¥873 million in fiscal 2017 and 2018. Kyocera is currently a major shareholder of KDDI Corporation. The price fluctuation of the shares of KDDI Corporation may affect Kyocera’s financial conditions. The unrealized gain on the shares of KDDI Corporation held by Kyocera at March 31, 2018 had decreased by ¥68,863 million, or 9.4%, to ¥667,420 million compared with ¥736,283 million at March 31, 2017, due to a fluctuation of the market price of the shares of KDDI Corporation. For detailed information on the gross unrealized gain or loss, see Note 3 to Kyocera’s consolidated financial statements in this annual report on Form 20-F. Impairment of Long-Lived Assets Kyocera reviews its long-lived assets and intangible assets with definite useful lives for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Long-lived assets and intangible assets with definite useful lives are considered to be impaired when the expected undiscounted cash flows from the asset group is less than its carrying value. A loss on impairment is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets and intangible assets with definite useful lives. 44 Table of Contents Goodwill and Other Intangible Assets 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. Intangible assets with definite useful lives are amortized straight line over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Kyocera recognized an impairment loss on goodwill in the amount of ¥14,143 million which was included in loss on impairment of goodwill in the consolidated statement of income for fiscal 2016 in the liquid crystal displays business included in the Industrial & Automotive Components Group due to a decline in the fair value of its business based on its updated future estimated cash flows, reflecting the deterioration of the profitability. For detailed information of these acquisitions, see Note 9 to Kyocera’s consolidated financial statements in this annual report on Form 20-F. Deferred Tax Assets Kyocera records deferred tax assets with valuation allowances to adjust their carrying amounts when it believes that it is more likely than not that the assets will not be realized. The valuation of deferred tax assets principally depends on the estimation of future taxable income and feasible tax planning strategies. 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. At March 31, 2018, deferred tax assets amounted to ¥111,585 million, which Kyocera considers will more likely than not be realized in the future. Kyocera considers the reasonableness of the recoverability of the deferred tax assets in the future, considering the comparison between the amounts of income from continuing operations before income taxes and income taxes in fiscal 2018. Benefit Plans The over-funded or under-funded status of defined benefit postretirement plans, which depends on projected benefit obligations and plan assets, are recognized as an asset or liability in our consolidated balance sheets and changes in that funded status are recognized through comprehensive income in the year in which the changes occur. Projected benefit obligations are determined on an actuarial basis and are significantly affected by the assumptions used in their calculation, such as the discount rates, the rate of increase in compensation levels and other assumptions. The expected long-term rate of return on plan assets is also used as an assumption. Kyocera determines the discount rate by referencing the yield on high quality fixed income securities. The rate of increase in compensation levels is determined based mainly on results of operations and inflation. The expected return on plan assets is determined based on the rate of historical earnings and Kyocera’s expectation of future performance of the funds in which plan assets are invested. Kyocera annually reviews the assumptions underlying its actuarial calculations, making adjustments based on current market conditions, if necessary. If Kyocera is required to decrease its assumptions of the discount rate and the expected long-term rate of return on plan assets because of a stagnation of Japanese and global economies, projected benefit obligations and net periodic pension costs will be increased. 45 Table of Contents Sensitivity Analysis of Benefit Plans The following table illustrates the effect of assumed changes in discount rates and the expected long-term rate of return on plan assets, while holding assuming all other assumptions consistent, for the benefit plan at Kyocera Corporation and its major domestic subsidiaries which accounts for a significant portion of Kyocera’s projected benefit obligations and net periodic pension costs. Effect on projected benefit obligations as of March 31, 2018 (Yen in millions) Discount rates: 0.1% decrease ¥ 2,329 0.1% increase (2,296 ) Effect on income before income taxes for the year ending March 31, 2019 (Yen in millions) Discount rates: 0.1% decrease ¥ 15 0.1% increase (13 ) Expected long-term rate of return on plan assets: 0.1% decrease (180 ) 0.1% increase 180 Contingencies Kyocera is subject to various lawsuits and claims which arise in the ordinary course of business. Kyocera consults with legal counsel and assesses the likelihood of adverse outcomes of these contingencies. Kyocera records liabilities for these contingencies when the likelihood of an adverse outcome is probable and the amount can be reasonably estimated. In making these estimates, Kyocera considers the progress of the lawsuits, the situations of other companies that are subject to similar lawsuits and other relevant factors. The amounts of liabilities accrued are based on estimates and may be significantly affected by further developments or the resolution of these contingencies in the future. Revenue Recognition Kyocera generates revenue principally through the sale of the following markets: information and communications, industrial machinery, automotive-related and environment and energy. Kyocera’s operations consisted of the following reporting segments: (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. Kyocera recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have been transferred to the customer or services have been rendered, the sales price is fixed or determinable and collectability is reasonably assured in accordance with ASC 605, “Revenue Recognition.” Sales to customers in each of the above segments are based on the specific terms and conditions contained in basic contracts with customers and firm customer orders which detail the price, quantity and timing of the transfer of ownership (such as risk of loss and title) of the products. For most customer orders, the transfer of ownership and revenue recognition occurs at the time of shipment of the products to the customer. For the remainder of customer orders, the transfer of ownership and revenue recognition occurs at the time of receipt of the products by the customer, with the exception of sales of printers and multifunctional products in the Document Solutions Group and solar power generating system related products in the Life & Environment Group for which sales are made to end users together with installation 46 Table of Contents services. The transfer of ownership and revenue recognition in these cases occur at the completion of installation and customer acceptance, as Kyocera have no further obligations under the contracts and all revenue recognition criteria under ASC 605, “Revenue Recognition,” are met. When Kyocera provides a combination of products and services, the arrangement is evaluated under ASC 605-25, “Multiple-Element Arrangements.” In addition, in the Document Solutions Group, Kyocera may enter into sales contracts and lease agreements ranging from one to seven years directly with end users. Sales contracts and lease agreements may include installation services and have customer acceptance clauses. For sales and sales-type lease agreements, revenue is recognized at the completion of installation and customer acceptance which usually occurs on the same business day as delivery. For sales-type leases, unearned income (which represents interest) is amortized over the lease term using the effective interest method in accordance with ASC 840, “Leases.” For all sales in the above segments, product returns are only accepted if the products are determined to be defective. There are no price protections, stock rotation or returns provisions, except for certain programs in the Electronic Devices Group as noted below. Sales Incentives In the Electronic Devices Group, sales to independent electronic component distributors may be subject to various sale programs for which a provision for incentive programs is recorded as a reduction of revenue at the time of sale, as further described below in accordance with ASC 605-50, “Customer Payments and Incentives” and ASC 605-15, “Products.” (a) Distributor Stock Rotation Program Stock rotation is a program whereby distributors are allowed to return for credit qualified inventory, semi-annually, equal to a certain percentage of the previous six months net sales. In accordance with ASC 605-15, “Products,” an estimated sales allowance for stock rotation is recorded at the time of sale based on a percentage of distributor sales using historical trends, current pricing and volume information, other market specific information and input from sales, marketing and other key management personnel. These procedures require the exercise of significant judgments. Kyocera believes that these procedures enable Kyocera to make reliable estimates of future returns under the stock rotation program. Kyocera’s actual results have historically approximated its estimates. When the products are returned and verified, the distributor is given credit against their accounts receivables. (b) Distributor Ship-from-Stock and Debit Program Ship-from-Stock and Debit (ship and debit) is a program designed to assist distributors in meeting competitive prices in the marketplace on sales to their end customers. Ship and debit programs require a request from the distributor for a pricing adjustment of a specific part for a sale to the distributor’s end customers from the distributor’s stock. Ship and debit authorizations may cover current and future distributor activity for a specific part for a sale to their customers. In accordance with ASC 605, “Revenue Recognition,” at the time Kyocera records the sales to distributors, an allowance for the estimated future distributor activities related to such sales is provided since it is probable that such sales to distributors will result in ship and debit activities. In accordance with ASC 605-15,“Products,” Kyocera records an estimated sales allowance based on sales during the period, credits issued to distributors, distributor inventory levels, historical trends, market conditions, pricing trends noted in direct sales activity with original equipment manufacturers and other customers, and input from sales, marketing and other key management personnel. These procedures require the exercise of significant judgments. Kyocera believes that these procedures enable Kyocera to make reliable estimates of future credits under the ship and debit program. Kyocera’s actual results have historically approximated its estimates. 47 Table of Contents Sales Rebates In the case of sales to distributors in the Industrial & Automotive Components Group and Document Solutions Group, Kyocera provides cash rebates when predetermined sales targets are achieved during a certain period. Provisions for sales rebates are recorded as a reduction of revenue at the time of revenue recognition based on the best estimate of forecasted sales to each distributor in accordance with ASC 605-50, “Customer Payments and Incentives.” Sales Returns Kyocera records an estimated sales returns allowance at the time of sales based on historical return experience. Products Warranty For after-service costs to be paid during warranty periods, Kyocera accrues a product warranty liability for claims under warranties relating to the products that have been sold. Kyocera records an estimated product warranty liability based on its historical repair experience with consideration given to the expected level of future warranty costs. In the Document Solutions Group, Kyocera provides a standard one year manufacturer’s warranty on its products. For sales directly to end users, Kyocera offers extended warranty plans that may be purchased and that are renewable in one year incremental periods at the end of the warranty term. Service revenues are recognized over the term of the related service maintenance contracts in accordance with ASC 605-20, “Services.” Uncertainty in Income Taxes 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 taxing authorities may differ from the recognition accounted for under ASC 740, “Income Taxes.” At March 31, 2018, gross unrecognized tax benefits amounted to ¥1,407 million. Kyocera does not anticipate the final resolution of procedures to have a material impact on the consolidated statements of income in the future. Recently Adopted Accounting Standards On April 1, 2017, Kyocera adopted Accounting Standards Update (“ASU”) No. 2016-07, “Investments—Simplifying the Transition to the Equity Method of Accounting.” The accounting standard eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations, financial condition and cash flows. 48 Table of Contents New standards and interpretations not yet adopted Kyocera plans to voluntary adoption of IFRS to its consolidated financial statements in place of the current U.S. GAAP from the fiscal year ending March 31, 2019. As of March 31, 2018, the following list is newly established or amended IFRS standards and interpretations that are mandatory adopted by Kyocera from the fiscal year ending March 31, 2019 and 2020. IFRS Mandatory adoption (From the year beginning) To be adopted by Kyocera Outline of the new / revised standards IFRS 9 Financial Instruments January 1, 2018 From the fiscal year ending March 31, 2019 Revised accounting standard for financial instruments IFRS 15 Revenue from contracts with customers January 1, 2018 From the fiscal year ending March 31, 2019 Revised accounting standard for revenue recognition IFRS 16 Leases January 1, 2019 From the fiscal year ending March 31, 2020 Revised accounting standard for leases Kyocera is currently assessing the possible impacts that these applications will have on Kyocera’s consolidated financial statements. B. Liquidity and Capital Resources Capital Resources Kyocera’s net cash provided by operating activities in fiscal 2018 was ¥158,953 million, and cash and cash equivalents at March 31, 2018 were ¥424,938 million. In addition, Kyocera also held significant amount of highly-liquid financial assets. Based on those facts, Kyocera does not expect to face any liquidity issue in the foreseeable future. In the short term, Kyocera expects cash demands for funds for capital expenditures, R&D activities and payments of dividends to shareholders in addition to working capital of operational activities. Kyocera’s primary source of short-term liquidity is cash generated by operations. Certain subsidiaries also generate capital in the form of loans from financial institutions. At March 31, 2018, Kyocera’s short-term borrowings and long-term debt including current portion totaled ¥29,675 million. The ratio to total assets of 0.9% continues to reflect a low level of dependence. Most borrowings were denominated in the Euro and certain borrowings were denominated in other currencies. Details of these borrowings are described in “Tabular Disclosure of Contractual Obligations,” which also includes the information regarding obligations for the acquisition or construction of property, plant and equipment. Capital expenditures in fiscal 2018 increased by ¥18,738 million, or 27.6%, to ¥86,519 million, compared with ¥67,781 million in fiscal 2017. In fiscal 2018, capital expenditures in the Industrial & Automotive Components Group and the Electronic Devices Group increased due mainly to capital expenditures in the products for the industrial machinery and to expand its production capacity compared with fiscal 2017. R&D expenses in fiscal 2018 increased by ¥2,862 million, or 5.2%, to ¥58,273 million, compared with ¥55,411 million in fiscal 2017. Almost all capital and R&D expenditures were funded by using cash at hand. During fiscal 2019, Kyocera expects total capital expenditures to be approximately ¥110,000 million and R&D expenses to be approximately ¥70,000 million. Kyocera expects that total capital expenditures will increase due mainly to capital expenditures in the products for the industrial machinery and to expand its production capacity. Kyocera also expects that R&D expenses will increase compared with fiscal 2018. Kyocera will promote R&D activities of new products and technologies in order to expand the business. Nearly all capital and R&D expenditures will be funded by using cash on hand. Kyocera intends to increase the proportion of capital and 49 Table of Contents R&D expenditures to sales in fiscal 2019 as compared with fiscal 2018. Kyocera believes that it needs to invest its resources continuously in the development of new business areas and enhancement of technology in order to create new products and commercialize advanced technologies, and thereby secure future earnings streams. During fiscal 2018, Kyocera made several acquisitions of businesses to develop existing businesses and to advance into new businesses. The total acquisition costs in fiscal 2018, net cash acquired, were ¥75,322 million and were all funded by using cash in hand. Kyocera contributed ¥12,321 million to its benefit pension plans in fiscal 2018 and Kyocera expects to contribute ¥12,025 million to its benefit pension plans in fiscal 2019. At March 31, 2018, Kyocera’s funded status of its benefit pension plans ensured the sources of funds sufficient to cover the pension benefits paid to participants and beneficiaries, and large amounts of additional contributions are not considered to be necessary. Kyocera expects contributions to pension plan assets will be made by using cash on hand. In fiscal 2018, Kyocera Corporation paid cash dividends totaling ¥44,125 million, at ¥120 per share. Kyocera Corporation received approval at the general meeting of shareholders held on June 26, 2018 for the payment of year-end dividends totaling ¥22,062 million, or ¥60 per share, on June 27, 2018 to all shareholders of record on March 31, 2018. At March 31, 2018, Kyocera’s working capital totaled ¥1,056,630 million, a decrease of ¥17,406 million, or 1.6%, compared with ¥1,074,036 million at March 31, 2017. This was mainly due to an increase in trade payables. Our working capital requirements, capital expenditures, debt repayments and other obligations were funded by using cash on hand. Undistributed earnings of foreign subsidiaries which are intended to be reinvested indefinitely amounted to ¥311,877 million as of March 31, 2018. Accordingly, cash and cash equivalents and investments in securities amounts held by Kyocera’s foreign subsidiaries, totaling ¥245,622 million as of March 31, 2018, are not intended to be used as dividend distributions to Kyocera for use in Japan at present. Kyocera currently believes it does not need the cash and investments held by its foreign subsidiaries to be repatriated back to Japan at least in fiscal 2019 as it has adequate liquidity within Japan to support its Japanese operations. Kyocera believes cash on hand will be sufficient to fund all cash requirements outlined above during fiscal 2019. Consequently, Kyocera does not currently intend to use any other external financing sources that might affect its credit agency ratings. If cash generated by operations are insufficient for funding purposes, Kyocera retains other financing options, including external sources, such as short-term borrowings or long-term debts, as well as financing directly in the capital markets through issuances of debt or equity securities. As evidenced by equity to assets ratio of 74.0% at March 31, 2018, Kyocera maintains a strong financial position, which leads Kyocera to believe that any capital requirements could be secured from external sources at a relatively low cost. Kyocera also maintains good business relationships with several major financial institutions. Any future significant deterioration in market demand for Kyocera’s products, or a slump in product prices to levels substantially below those projected by Kyocera, could adversely affect Kyocera’s operating results and financial condition, possibly resulting in reduced liquidity. 50 Table of Contents Cash flows Fiscal 2018 compared with Fiscal 2017 The following table shows a summary of Kyocera’s cash flows for fiscal 2017 and fiscal 2018: Years ended March 31, Increase (Decrease) 2017 2018 Amount Amount Amount (Yen in millions) Cash flows from operating activities ¥ 164,231 ¥ 158,953 ¥ (5,278 ) Cash flows from investing activities (112,089 ) (53,128 ) 58,961 Cash flows from financing activities (47,972 ) (51,620 ) (3,648 ) Effect of exchange rate changes on cash and cash equivalents (1,995 ) (5,462 ) (3,467 ) Net increase in cash and cash equivalents 2,175 48,743 46,568 Cash and cash equivalents at beginning of year 374,020 376,195 2,175 Cash and cash equivalents at end of year ¥ 376,195 ¥ 424,938 ¥ 48,743 Net cash provided by operating activities for fiscal 2018 decreased by ¥5,278 million, or 3.2%, to ¥158,953 million from ¥164,231 million for fiscal 2017. This was due mainly to a decrease in net income, which exceeded cash flow adjustments related to an increase in accrued income taxes. Net cash used in investing activities for fiscal 2018 decreased by ¥58,961 million, or 52.6%, to ¥53,128 million from ¥112,089 million for fiscal 2017. This was due mainly to a decrease in purchases of held-to-maturity securities, which was partly offset by an increase in payments for acquisitions of businesses. Net cash used in financing activities for fiscal 2018 increased by ¥3,648 million, or 7.6%, to ¥51,620 million from ¥47,972 million for fiscal 2017. This was due mainly to an increase in dividends paid. A decrease in cash and cash equivalents due to the effect of exchange rate changes of ¥5,462 million for fiscal 2018 was caused mainly by the yen’s appreciation against the U.S. dollar between March 31, 2017 and March 31, 2018. Cash and cash equivalents at March 31, 2018 totaled ¥424,938 million, an increase of ¥48,743 million, or 13.0%, from ¥376,195 million at March 31, 2017. Most of Kyocera’s cash and cash equivalents were denominated in the yen but certain cash and cash equivalents, mainly in overseas subsidiaries, were denominated in foreign currencies, such as the U.S. dollar. Fiscal 2017 compared with Fiscal 2016 The following table shows a summary of Kyocera’s cash flows for fiscal 2016 and fiscal 2017: Years ended March 31, Increase (Decrease) 2016 2017 Amount Amount Amount (Yen in millions) Cash flows from operating activities ¥ 194,040 ¥ 164,231 ¥ (29,809 ) Cash flows from investing activities (106,809 ) (112,089 ) (5,280 ) Cash flows from financing activities (50,608 ) (47,972 ) 2,636 Effect of exchange rate changes on cash and cash equivalents (13,966 ) (1,995 ) 11,971 Net increase in cash and cash equivalents 22,657 2,175 (20,482 ) Cash and cash equivalents at beginning of year 351,363 374,020 22,657 Cash and cash equivalents at end of year ¥ 374,020 ¥ 376,195 ¥ 2,175 51 Table of Contents Net cash provided by operating activities for fiscal 2017 decreased by ¥29,809 million, or 15.4%, to ¥164,231 million from ¥194,040 million for fiscal 2016. This was mainly because receivables, which decreased for fiscal 2016, increased for fiscal 2017. Net cash used in investing activities for fiscal 2017 increased by ¥5,280 million, or 4.9%, to ¥112,089 million from ¥106,809 million for fiscal 2016. This was due mainly to decreases in proceeds from sales of available-for-sale securities and sales of property, plant and equipment. Net cash used in financing activities for fiscal 2017 decreased by ¥2,636 million, or 5.2%, to ¥47,972 million from ¥50,608 million for fiscal 2016. This was due mainly to a decrease in year-end dividends paid. A decrease in cash and cash equivalents due to the effect of exchange rate changes of ¥1,995 million for fiscal 2017 was caused mainly by the yen’s appreciation against the Euro and the U.S. dollar between March 31, 2016 and March 31, 2017. Cash and cash equivalents at March 31, 2017 totaled ¥376,195 million, an increase of ¥2,175 million, or 0.6%, from ¥374,020 million at March 31, 2016. Most of Kyocera’s cash and cash equivalents were denominated in the yen but certain cash and cash equivalents, mainly in overseas subsidiaries, were denominated in foreign currencies, such as the U.S. dollar. Assets, Liabilities and Equity Kyocera’s total assets at March 31, 2018 increased by ¥46,607 million, or 1.5%, to ¥3,157,077 million, compared with ¥3,110,470 million at March 31, 2017. Cash and cash equivalents increased by ¥48,743 million, or 13.0%, to ¥424,938 million, due mainly to withdrawal of certificate deposits, redemption from maturities of held-to-maturity investments and increases from net cash gained by operating activities. Short-term investments in debt securities decreased by ¥46,680 million, or 55.1%, to ¥38,023 million, due mainly to redemption from maturities of held-to-maturity investments. Other short-term investments decreased by ¥53,889 million, or 25.3%, to ¥158,779 million, due mainly to withdrawal of time deposits. Trade accounts receivables increased by ¥40,085 million, or 13.8%, to ¥331,570 million, due mainly to the effect of M&As in fiscal 2018 and increase in sales for the three months ended March, 2018 compared with the three months ended March, 2017. Inventories increased by ¥33,720 million, or 10.2%, to ¥364,875 million due mainly to the effect of M&As in fiscal 2018 as well as increases in demand, despite recording of a write-down in the amount of ¥19,280 million relating to the current polysilicon material already purchased pursuant to long-term purchase agreements. Long-term investments in debt and equity securities decreased by ¥80,219 million, or 7.1%, to ¥1,050,537 million, due mainly to declines in market value of shares of KDDI Corporation and other equity securities at March 31, 2018 compared with March 31, 2017. Total property, plant and equipment at cost, net of accumulated depreciation, at March 31, 2018 increased by ¥34,320 million, or 12.9%, to ¥300,924 million compared with March 31, 2017. Capital expenditure was ¥86,519 million and depreciation was ¥70,137 million in fiscal 2018. Goodwill increased by ¥33,798 million, or 30.6%, to ¥144,268 million, and intangible assets increased by ¥18,951 million, or 30.9%, to ¥80,186 million, due mainly to the effect of M&As in fiscal 2018. 52 Table of Contents Kyocera’s total liabilities at March 31, 2018 increased by ¥41,010 million, or 5.9%, to ¥732,571 million, compared with ¥691,561 million at March 31, 2017. Trade notes and accounts payable increased by ¥20,274 million, or 15.7%, to ¥149,734 million, due mainly to the effect of M&As in fiscal 2018 and increase in purchases in line with an increase in sales compared with March 31, 2017. Other current liabilities increased by ¥18,760 million, or 51.7%, to ¥55,017 million, due mainly to the provision of a reserve of ¥18,340 million relating to long-term purchase agreements for procurement of polysilicon material in the solar energy business. Deferred tax liabilities decreased by ¥35,329 million, or 13.6%, to ¥223,530 million, due mainly to decreases in market value of shares of KDDI Corporation and other equity securities at March 31, 2018 compared with March 31, 2017. Other non-current liabilities increased by ¥20,183 million, or 101.4%, to ¥40,095 million, due mainly to the provision of a reserve of ¥12,545 million relating to long-term purchase agreements for procurement of polysilicon material in the solar energy business and accounting for taxation on overseas retained earnings due to incurred by subsidiaries such as our U.S. subsidiary AVX Corporation. Total equity at March 31, 2018 increased by ¥5,597 million, or 0.2%, to ¥2,424,506 million, compared with ¥2,418,909 million at March 31, 2017. Retained earnings at March 31, 2018 increased by ¥37,664 million, or 2.3%, to ¥1,675,780 million, compared with ¥1,638,116 million at March 31, 2017 due to net income attributable to Kyocera Corporation’s shareholders for fiscal 2018 of ¥81,789 million offset in cash dividend payments of ¥44,125 million. Accumulated other comprehensive income decreased by ¥35,499 million, or 7.9%, to ¥411,980 million. Net unrealized gains on securities decreased by ¥40,091 million, or 8.0%, due to decreases in market values of the shares of KDDI Corporation and other equity securities at March 31, 2018 compared with March 31, 2017. Foreign currency translation adjustments decreased by ¥1,551 million to ¥(17,911) million, due mainly to the effect of the yen’s appreciation. Kyocera Corporation’s shareholders’ equity ratio at March 31, 2018 was 74.0%, decreased by 1.1 percentage points compared with 75.1% at March 31, 2017. Noncontrolling interests in subsidiaries increased by ¥3,570 million, or 4.2%, to ¥88,260 million, due mainly to the acquisition of Ryobi Limited’s power tool business, compared with ¥84,690 million at March 31, 2017. C. Research and Development, Patents and Licenses, etc. Kyocera seeks to create businesses that will become core to the group in the future by developing new technologies and products in each business and integrating group-wide management resources. In particular, we are focusing on R&D of new high-value-added technologies and products in the information and communications market, the automotive-related markets, the environment and energy market and the medical and healthcare market, where there is high growth potential. Kyocera is strengthening the development of new products that leverage communications technology and of other technologies with the aim of taking advantage of all new business opportunities in respective fields alongside the proliferation of the IoT. In addition, we are working to strengthen R&D toward the greater use of AI (Artificial intelligence) and robots that contribute to enhanced productivity, among other benefits. 53 Table of Contents An outline of R&D activities in the reporting segments follows. (1) Industrial & Automotive Components Group In this reporting segment, Kyocera is engaged in the R&D of various products and systems mainly for the industrial machinery and automotive-related markets. Kyocera is engaged in fundamental research to further enhance our fine ceramic materials technology, processing technology and design technology that we have accumulated since our earliest days. We are working to develop new products in a wide range of markets by leveraging these core technologies. In addition, we are working on the development of components and materials for next-generation equipment, which is characterized by advanced integration that includes micro wiring and 3D structures, for the buoyant semiconductor processing equipment market. We also actively utilize external resources, which includes starting development of nitride ceramics boasting exceptional heat conductivity and mechanical properties enabling use in higher temperatures, in conjunction with an outside company. Further, we are working to enhance the efficiency of cell stacks for SOFC (Solid Oxide Fuel Cell) systems for residential use where there are expectations for proliferation as new clean energy supply systems in the environment and energy market, by leveraging fine ceramics technology. We are also strengthening the development of an SOFC system for industrial use and parts for various next-generation high-efficiency devices. In automotive-related markets, business opportunity is expected to increase along with the progress in areas such as ADAS (Advanced Driving Assistant System). We are developing high-value-added products for this market. This includes strengthening development of software aimed at achieving more sophisticated image recognition technology for automotive camera systems. We are also developing TFT liquid crystal displays, differentiated particularly with ultra-low-power-consumption products and high-permeability products, as well as products that apply TFT deposition technology, for various industrial markets in addition to automotive-related markets. In industrial tools, we are working to expand business domain to the industrial machinery and construction markets in addition to automotive-related markets, and our products are used for metallic processing in a wide array of markets such as the automotive, energy and infrastructure, and aircraft business fields. Kyocera is strengthening the development of high-quality and high-precision cutting tools from the materials technology stage that contribute to increased productivity for users as well as developing new products in power and pneumatic tools with increased product appeal by leveraging various technologies held within the Kyocera Group. (2) Semiconductor Components Group In the digital consumer equipment market, which is typified by smartphones and tablet terminals, needs are growing for equipment that is more sophisticated as well as smaller and thinner. In line with this, electronic components used in such equipment are getting smaller while semiconductors are becoming more refined. In the information and communications network market, there is demand for the creation of fast, large-capacity communications infrastructure partly spurred by progress in the IoT. In the automotive market, there is a need to further respond to advancements in electrifications and lower power consumption. Demand for various sensors is also increasing, for use in these core markets. In order to respond to these market trends and expand the business, Kyocera is working to develop new high-value-added products that leverage our own unique material, design and processing technologies. In the ceramic package business, we are working on the development of high-strength, high-rigidity, ultra-small and thin ceramic packages for electronic devices that employ micro wiring as well as ceramic packages for 54 Table of Contents optical communications that are capable of even higher frequency and ceramic packages for LEDs boasting thermal dissipation and exceptional durability. In the organic multilayer package business, we are strengthening the development of fine-pitch, thin, highly precise flip-chip packages and module substrates capable of high-speed signal and high bandwidth memory. In addition, we are working on the development of products that employ new materials that respond to high frequency in the organic multilayer board business. In the chemical business, which supports these businesses through material technology, we are working on the synthesis of new materials and strengthening the development of new material compounding technologies to meet needs for enhanced functionality for information and communications market and automotive-related markets in addition to improving electrical properties such as insulating reliability. This functionality includes thermal hardening, photo-reactivity, and shape and stress stability. (3) Electronic Devices Group Along with the increasing demand for device sophistication and the shift to multi-bands for communications terminals such as smartphones, it is necessary to make components smaller and more reliable for those terminals. To meet these market needs, Kyocera is developing such products as small, high-capacitance ceramic capacitors with enhanced reliability relative to temperature and humidity, as well as small, low-loss and highly reliable SAW devices, small, high-performance crystal components, fine-pitch, low-profile connectors enabling high-speed transmission, and high-efficiency antennas. In the automotive and industrial equipment markets, we are developing ceramic capacitors and connectors with enhanced high-temperature reliability and pressure resistance, power semiconductors including discrete products and power modules, and various control devices. In addition to further enhancing the properties of each component, we are pushing ahead with the development of high-value-added modules that combine various components. Additionally, in inkjet printheads mainly for the commercial printing market, we are working on the development of products with enhanced durability on top of enabling higher speed and higher image quality required in digital printing. Further, we are developing products that apply piezoelectric and other technologies for the medical and healthcare market, which includes digital healthcare. (4) Communications Group In the mobile phone business, Kyocera is strengthening the development of communications terminals with exceptional waterproof, dust prevention and shock-resistant features. We are also working to shorten development time of such distinctive terminals by promoting the standardization of platforms and modules for terminals. In the information and communication services business, we are actively working on the development of products that support the proliferation of the IoT. We are striving to develop platforms and security-related software related to the collection, management and use of data taken from diverse terminals and networks in line with increasingly complex and sophisticated customer needs alongside use of the IoT. We are also strengthening the development of platforms and software that leverage deep learning for services that utilize AI (Artificial Intelligence) in image and text analysis as use of AI grows in corporate and other business fields. 55 Table of Contents In addition, we are strengthening the development of communications modules (M2M modules) for telematics as well as the IoT market, which includes LPWA (Low Power Wide Area) technology enabling wireless communications over a wide area yet with low power consumption, through the integration of Kyocera’s component, terminal and system technology. We are also vigorously pushing ahead with development to expand and boost the convenience of wireless network systems through LPWA technology, efforts that include tie-ups with outside organizations. (5) Document Solutions Group Kyocera is developing printers and MFPs that have exceptional environmental performance and economic efficiency, which are key features of Kyocera, in order to ensure differentiation from competitors. In terms of equipment, we are focusing on the development of printers and MFPs with long life and minimal waste and are working to provide products that feature reduced running costs and excellent environmental friendliness by minimizing consumable components that lead to waste. We also continue to work on improving toner in the pursuit of high image quality and more energy savings in an effort to increase added value. In terms of document solution services, we are pushing ahead with the development of products including application software that contributes to information sharing and business efficiency by connecting with mobile equipment, the cloud environment and document management systems owned by customers. By way of merger and acquisition activity, we are also strengthening our ECM (Enterprise Contents Management) business that computerizes a company’s data so that it can be managed and run in a more comprehensive and efficient manner together with document BPO (Business Process Outsourcing) business, an outsourcing service for document-related operations. We are striving to develop new services by integrating these acquired businesses with existing businesses. (6) Life & Environment Group In the solar energy business, we are working to improve product performance and quality as well as enhance the degree of freedom in installation, which includes efforts to enhance the conversion efficiency of monocrystalline and multicrystalline silicon solar cells, boost the output and durability of modules, and develop products that enable installation on roofs, the surface of the water and agricultural land of varying shapes and sizes, for instance. We are also focusing on the development of efficient energy management systems that enable the use of power generated from solar power systems as well as peripheral solar energy equipment and systems, which includes increasing the capacity and decreasing the size of battery storage systems, amid changing needs in power usage from bought power to self-consumption. We are also strengthening development aimed at expanding our business into the total energy solution field by pushing ahead with the development of technology for the purpose of increasing business in the demand response and virtual power plant markets in line with the deregulation of electric power. In the medical equipment business, we mainly deal with prosthetic joints and dental implants, and are actively developing products that reduce burden on the user based on fine ceramics, which boast exceptional biocompatibility. Specifically, we are working on the development of surface treatment technology realizing long life by minimizing wear to the prosthetic joints, as well as products with enhanced antibacterial properties, in collaboration with external institutions. 56 Table of Contents The following table shows a break down of Kyocera’s total R&D expenses in fiscal 2016, 2017 and 2018 by the six reporting segments: Years ended March 31, Increase (Decrease) 2016 2017 2018 Amount Amount Amount % (Yen in millions) Industrial & Automotive Components Group ¥ 9,416 ¥ 10,728 ¥ 10,571 (1.5 ) Semiconductor Components Group 3,557 3,743 3,550 (5.2 ) Electronic Devices Group 9,015 9,297 10,898 17.2 Total Components Business 21,988 23,768 25,019 5.3 Communications Group 4,289 2,953 3,849 30.3 Document Solutions Group 24,021 21,674 22,259 2.7 Life & Environment Group 3,923 3,157 4,268 35.2 Total Equipment & Systems Business 32,233 27,784 30,376 9.3 Others 4,534 3,859 2,878 (25.4 ) R&D expenses ¥ 58,755 ¥ 55,411 ¥ 58,273 5.2 % to net sales 4.0 % 3.9 % 3.7 % Note: Kyocera has changed the classification of its reporting segments from fiscal 2018. R&D expenses for fiscal 2016 and for fiscal 2017 have been reclassified in line with the change to reporting segment classifications. We have a variety of patents in Japan and other countries, and we hold licenses for the use of patents from others. Details are set forth in “Patents and Licenses” included in Item 4.B. “Business Overview” in this annual report on Form 20-F. D. Trend Information Kyocera is working to expand sales in the four key markets of “information and communications,” “automotive-related,” “environment and energy” and “medical and healthcare” with the aim of generating further growth. In the information and communications market, there was solid demand for components embedded in smartphones in the context of device proliferation and increased sophistication. Despite a softening in growth rate in the smartphone market, there is expected to be ongoing need in the 2018 calendar year for smaller and more sophisticated components for smartphones alongside the enhanced performance of these devices. As a result of these trends, we project an increase in sales of Kyocera’s high-value-added components in the next fiscal year as well. In addition, we expect an increase in business opportunities for Kyocera’s components, systems and services for various communications infrastructure that includes optical communications and LPWA (Low Power Wide Area) on the back of a forecast increase in wireless communication needs such as for higher speeds following proliferation and expansion of the IoT. In automotive-related markets, automobile sales volume in the 2018 calendar year is projected to be solid due to growing needs for automated driving, safety and enhanced environmental performance. In line with this, we forecast continued growth in demand for our camera modules, displays, communication modules, electronic components and parts for LED headlights. Kyocera’s main products in the environment and energy market are solar cells and modules. The core Japanese market is projected to slump due to the impact of a decline in purchase price in the feed-in tariff system. In contrast, demand is increasing for power storage batteries and EMS in the context of movement toward self-consumption of electricity, and as such, we are forecasting an increase in demand for the equipment that Kyocera handles. Overseas, demand is expected to increase in the Thai market for solar power generation systems on the back of measures to encourage investment aimed at reducing environmental burden. 57 Table of Contents Kyocera is developing an actual SOFC system in addition to the system’s core components following expectations of proliferation and expansion as new clean energy supply systems. Kyocera projects demand to increase for these growth-potential products over the medium term. In addition, we are witnessing a trend to build ADR (Automated Demand Response) systems enabling the efficient use of energy, particularly renewable energy, and we forecast needs in this field to grow going forward. Kyocera’s main products in the medical and healthcare market are prosthetic joints. We command the top market share in the market for prosthetic joints in Japan among Japanese manufacturers and have gained a high degree of trust from medical personnel. Going forward, we will strive to expand business in overseas markets with large market volume. We will also continue striving to increase sales of dental implants and other products. Moreover, Kyocera participates in projects related to regenerative medicine based on collaboration with external organizations and is working to create new businesses for the future in such fields as digital healthcare. E. Off-Balance Sheet Arrangements Refer to Note 13 in Kyocera’s consolidated financial statements included in this annual report on Form 20-F. As a part of our ongoing business, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations. F. Tabular Disclosure of Contractual Obligations The following table provides information about Kyocera’s contractual obligations and other commercial commitments that will affect Kyocera’s liquidity for the next several years, as of March 31, 2018. Kyocera anticipates that the funds required to fulfill these debt obligations and commitments will be cash at hand. Contractual obligations Less than 1 year 2-3 years 4-5 years Thereafter Total (Yen in millions) Short-term borrowings ¥ 145 ¥ — ¥ — ¥ — ¥ 145 Interest payments for short-term borrowings* 12 — — — 12 Long-term debt (including due within one year) 9,293 14,927 4,963 347 29,530 Interest payments for long-term debt* 966 905 183 7 2,061 Long-term purchase agreements for the supply of raw material** 60,100 54,305 — — 114,405 Operating leases 6,753 7,851 3,140 2,981 20,725 Obligations for the acquisition or construction of property, plant and equipment 34,524 200 7 — 34,731 Total contractual obligations ¥ 111,793 ¥ 78,188 ¥ 8,293 ¥ 3,335 ¥ 201,609 * For Kyocera’s variable interest rate of borrowings and debt, Kyocera utilized the rates in effect as of March 31, 2018 when estimating schedule of interest payments. ** Kyocera recorded a write-down relating to the long-term purchase agreements for the procurement of polysilicon material in the solar energy business in fiscal 2018. For detailed information regarding the write-down, please refer to Note 5 in Kyocera’s consolidated financial statements included in this annual report on Form 20-F. In addition to contractual obligations shown in the above tables, Kyocera forecasts to contribute ¥12,025 million to its defined benefit pension plans in fiscal 2019. Kyocera recorded liabilities of ¥1,407 million for gross unrecognized tax benefits in accordance with FASB’s ASC 740, “Income Taxes” at March 31, 2018, which are not included in the above table because we are unable to make reasonable estimates of the period of settlements. For detailed information, see Note 15 to Kyocera’s consolidated financial statements in this annual report on Form 20-F. 58 Table of Contents