SONY ANNUAL REPORT 1972 SONY CORPORATION TOKYO, JAPAN HIGHLIGHTS For the years ended October 31 Thousands of U.S. dollars) ( except per share amounts 1972 1971 Net sales: Domestic . $ 391,062 $ 289,481 Export 404,727 340,341 Total . 795,789 629,822 Income before income taxes . 123,438 77,614 Income taxes . 60,993 37,254 Net income . 62,445 40,360 Per Depositary Share. 97 . 64 Note-Each Depositary Share represents 2 shares of Common Stock. Per share amounts are based on the average number of shares outstanding during each period, adjusted for all stock distributions. TO THE HOLDERS OF SONY DEPOSITARY SHARES: The fiscal year ended October 31, 1972 was highly satisfactory to Sony. Despite the adverse effects of the difficult economic environment resulting from the realignment of currencies, including the revaluation of the yen, the company's consolidated net sales and net income rose to new heights. This is attributable to the public's acceptance of the company's products, as well as the company's effective measures to reduce production costs. Masaru Ibuka Akio Morita Chairman President The consolidated net sales for fiscal 1972 amounted to $795,789,000, a 26 percent increase above the net sales of $629,822,000 for fiscal 1971. The consolidated net income for fiscal 1972 rose to $62,445,000, a 55 percent increase above the net income of $40,360,000 for fiscal 1971. Earnings per Depositary Share (each Depositary Share represents 2 shares of Common Stock), adjusted for the free distribution of one new share for each four shares effected November 1, 1972, were 97 cents compared with 64 cents for fiscal 1971. Domestic sales during fiscal 1972 increased 35 percent above the previous fiscal year and accounted for 49 percent of net sales. Export sales during fiscal 1972 were 19 percent greater than during the previous fiscal year and accounted for 51 percent of net sales. Sales in the U.S. market reflected an 11 percent increase; the European market, a 46 percent increase; and the Asian market (except for the Japanese market}, a 19 percent increase. Sony paid cash dividends amounting to 4. 9 cents per Depositary Share for the six months of operations ended October 31, 1972 to holders of Sony Depositary Shares of record as of that date. Thus, total cash dividends of 9. 8 cents were paid for each Depositary Share in fiscal 1972. In addition, Sony made a free distribution to shareholders of record as of October 31, 1972, of one additional share for each four shares held. In January 1972, the company introduced a new color video projection system, which projects video and TV pictures on a specially designed, large-size display screen of more than 50 diagonal inches. It is likely that it will be introduced into the market at a price much lower than those of many previous types of video projection systems. Sony believes that this system will open a new field of home entertainment and also will find many applications in educational and commercial fields. This color video projection system will be introduced into the Japanese and U.S. markets during the spring of 1973. In April 1972, Sony announced that it had succeeded in developing a revolutionary new TRINITRON color picture tube which has a deflection angle of 114 degrees. It is the first color tube in the world having this wide an angle which improves the picture quality by bringing the electron gun closer to the phosphor screen. In this newly developed tube, the unique features of the TRINITRON system, such as sharpness, color brightness and high reliability, are utilized to the fullest. This tube also makes possible a markedly thinner color TV set. In April 1972, Sony commenced the sale in Japan of 17-inch color TV sets incorporating this tube. Color TV sets utilizing this tube will be introduced into the U.S. and European markets in the middle of 1973. The Sony "U-Matic" color videocassette system, which has been introduced into the Japanese, U.S. and Canadian markets, continues to enjoy leadership in these countries. The current large backlog of orders for this equipment reflects its sharply expanding markets and its adoption by many internationally known companies for use in communication, education and business. This system will be introduced into the European market in 1973. In order to meet the ever-increasing demand for the Sony "U-Matic" color videocassette system, the company has taken measures to expand its production capacity. Sales of TV sets increased 38 percent over the previous fiscal year and accounted for 42 percent of net sales. Sales of the company's TRINITRON color TV sets increased 48 percent above the previous fiscal year and accounted for 38 percent of net sales. The company further strengthened its position in the color TV industry through the introduction into the market of new color TV sets during this fiscal year. 15-inch sets were introduced into the U.S. market, 17-inch sets into the English market and 17-inch sets with the 114-degree wide-angle deflection tube into the Japanese market. Sales of these models have been excellent. The company's 12-inch TRINITRON color TV sets were introduced for the first time into West Germany and Belgium during this fiscal year and were excellently received. TRINITRON color TV sets have now been introduced into all the European countries which broadcast color TV programs. The San Diego plant commenced the assembly of 17-inch TRINITRON color TV sets in August, 1972, and the production lines are operating smoothly at the rate of 6,000 sets per month. This will be increased to over 10,000 sets per month by the middle of this year. Sales of tape recorders and radios increased 8 percent above the previous fiscal year and accounted for 28 percent of net sales. To meet the diversified demands of customers, Sony has developed several new models during this fiscal year ranging from easy-to-operate small models to professional models. Because of Sony's experienced and advanced engineering, Sony's portable cassette tape recorderI radio combination units and high quality stereo tape recorders have been especially well received. One of the unique models which has been well received is a portable unit combining a complete cassette recorder and FM/ AM tuner with Sony's unique matrix sound stereo system, in which rich stereo sound, cassette recorder and tuner functions, instant record­ ing capacity and eminent porta­ Sony "U-Matic" color videocassette system bility are encased in one cabinet. Sales of video tape recorders, including the Sony "U-Matic" color videocassette system and audio equipment, increased 45 percent above the previous fiscal year and accounted for 16 percent of net sales. Sales of the Sony "U-Matic'' color videocassette system showed a marked increase in a sharply expanding market because of such features as high reliability and ease of operation. Primarily because of portable video tape recorders, sales of video tape recorders other than the Sony "U-Matic" color videocassette system have also increased. In the vigorously expanding high fidelity market, Sony's audio equipment including a 4-channel stereo system enjoyed a good year. Complete stereo music systems and components, which are specially engineered and carefully designed for exceptionally accurate reproduction of the original sound, have enjoyed excellent reception. Sales of other products increased 17 percent over the previous fiscal year and accounted for 14 percent of net sales. Sales of videocassette tapes and audio cassette tapes showed a marked increase. Due to its usefulness and remarkable versatility the cassette type business machine for dictating and transcribing continued to sell very well. To strengthen Sony's line of high performance business machines, the company added new models to its small-size electronic SOBAX calculators during this fiscal year. These new models include a unit which is equipped with a unique electronic discharge printing system providing high speed and high readability. In order to finance the strengthening of the company's sales organization and to expand its manufacturing facilities, Sony issued 5,050,000 shares of Common Stock through a public offering in Japan on June 1, 1972 for which the company received 20,200 million yen, less expenses. The company's facilities for manufacturing and development were further enlarged. In September 1972, a new building (72,000 square feet of floor space) for the company's Technical Development Laboratory for acoustics' research and development activities was completed. In August 1972, the company's wholly-owned subsidiary, Sony Corporation of Inazawa, constructed a new facility (157,000 square feet of manufacturing floor space) for the production of the TRINITRON color picture tube, and another wholly-owned subsidiary of the company, Sony Corporation of Ichinomiya, completed a new facility (196,000 square feet of manufacturing floor space) in order to increase the company's capacity to assemble TRINITRON color TV sets in January 1973. In December 1972, the company incorporated a new wholly-owned subsidiary, Sony Corporation of Kohda, for the production of the Sony "U-Matic" color videocassette system in Japan. A facility with approximately 230,000 square feet of manufacturing floor space is now under construction and its operation is scheduled to commence sometime during the summer of 1973. The company also incorporated other subsidiaries for the production of audio equipment and other products in Japan. Outside of Japan, two wholly-owned subsidiaries of the company were newly incorporated: Sony Continental in Belgium to promote sales activities in Europe and Sony do Brasil Ltda. to manufacture and sell the company's products in Brazil.