Annual Report 1993

The Report highlights achievements made in 1993, including the undertaking of legal studies covering institutional and legal aspects for international cooperation for development of the Lower Mekong River Basin.

times the amount of information per unit area.
• Continuous operation has been achieved in liquid nitrogen at 77°K with a wavelength of 447 nanometers (one nanometer= one-billionth of a meter), and pulsed operation with a wavelength of 498 nanometers has been attained at room temperature.
Sony will continue developing the basic technologies for blue semiconductor lasers-striving to realize continuous operation at room temperature or higher temperatures than now possible-that are needed for practical applications.

16-Megabit SRAM Chip
In February 1993, Sony announced the development of a 16-megabit static random access memory (SRAM) chip with the world's highest access speed. Although the structure of SRAM chips is more complicated than that of dynamic RAM (DRAM) chips, SRAM chips have such advantages as higher access speed, lower power consumption, and no need for refreshing.
This 16-megabit SRAM chip, which enables a nine-nanosecond access time (one nanosecond= one-billionth of a second), will meet future requirements for higher-speed memories, such as main memories of supercomputers and cache memories of workstations and personal computers.

Pt:RM Disk Technology
Pre-Embossed Rigid Magnetic (PERM) disk technology, developed by using Sony's accumulated technology for mastering and stamping CDs and MDs, enables higher-density recording on hard disks. This technology, using grooves in the disk to provide higher data capacity, will enable the production of smaller hard disks. (The surface of conventional disks is flat.) The grooves eliminate the cross talk that emanates from adjacent tracks while enabling magnetic heads to trace the tracks accurately by reading the minute servo marks. A prototype 2.5-inch disk drive has been developed with a data capacity of 200 megabytes (total of both sides), approximately double that of conventional hard disks. In the future, it is expected that a 2.5-inch disk drive with a 1.5-gigabyte (one gigabyte~ one thousand megabytes) data capacity will be developed.
Instead of polystyrene foam cushion, Sony has begun using pulp mold cushion incorporating recycled paper; pictured above is an example of camcorder and Walkman packaging. Also, Sony is now using only cardboard cartons. 6 --•oday, we face several serious environmental problems of worldwide significance-depletion of the ozone layer, global warming, and destruction of the world's rain forests. Recognizing that the preservation of the global environment is one of the most vital issues facing us today, Sony has implemented various measures, such as reducing the use of ozone-depleting substances (ODSs) and enhancing its product recycling and employee education programs.
• In March 1993, Sony's Global Environmental Policy was drawn up to provide a framework for making every aspect of Sony's operations more environmentally sound. In Japan, pursuant to this policy, Sony has developed its Environmental Action Plan, which sets out such steps as devising guidelines for product assessment and promoting environmental research programs.
• Sony has been making concerted efforts to phase out the use of ODSs since 1989.
Thanks to these efforts, Sony has eliminated the use of controlled chlorofluorocarbons (CFCs), 1,1, 1-trichloroethane, and carbon tetrachloride in its production processes at all its manufacturing plants worldwide.
• In October 1992, Sony initiated a program for collecting used nickel-cadmium rechargeable batteries through its approximately 2,500 retail outlets in Japan. This program is contributing to the recycling of rare materials.
• In the United States, Sony actively pursues environmental excellence in its electronics and entertainment operations, conducting annual audits of all manufacturing, warehouse, and service facilities to ensure compliance with environmental standards. Further, in its electronics activities, Sony participates in the Environmental Protection Agency's 33/50 program, which is aimed at reducing the use of 17 toxic and hazardous chemicals from 1988 levels-33% by 1992 and 50% by 1995.
Sony Music Entertainment Inc. (SMEI) is contributing to environmental preservation activities by supporting such organizations as the Nature Conservancy and the Rainforest Foundation . Also, Sony Pictures Entertainment (SPE) is using state-of-the-art environmental techniques in the renovation of its world headquarters in Culver City, California , and promoting the recycling of videotapes and the reduction and recycling of wood used in the construction of sets for motion pictures and television programs.
• In Europe, Sony is the first Japanese company to participate in a collaborative R&D project under the EC's Environment Program. The newly established Environment Technology Group at the Stuttgart Technology Center is responsible for the project, which focuses on improving the recycling of consumer products.
• Sony also holds seminars worldwide for its group companies to encourage stronger environmental awareness among their employees.

Restoration work on a statue of Leonardo da Vinci in Milan is being sponsored by Sony lta/ia.
ony is involved in a wide range of philanthropic work, supporting the areas of social welfare, education, culture and the arts, international cooperation and exchange, environmental protection, and community programs. • Sony's concern for preserving the rich cultural heritage of Europe is demonstrated in the activities of Sony ltalia S.p.A., which sponsors the restoration work of several

GLOSSARY
• bipolar integrated circuit (bipolar IC) An IC that uses both positive and negative charges. Bipol?r ICs operate faster and have better frequency in linear applica-. tions than MOS ICs and are widely used 'for analog signal processing in audio components, TVs, VTRs, and other electronic equipment.
• charge-coupled device (CCD)' A CCD image sensor can convert light energy into electrical signals as well as store and transfer those signals. ceo image sensors apply these capabilities as the "electronic eyes" in video cameras and other equipment. Three-CCD camera systems have an independe~t ceo image sensor to capture the three colors-red, green, and blue-separated by a prism . from light entering the lens. This allows for superior resolution and more faithful color reproduction.
• ~igital VTR A VTR that digitally records and reproduces video/audio signals. Appreciating the virtual absence of loss in picture and sound quality after editing or repeated dubbing, such users as broadcasting stations and production houses ha~e been actively introducing digital VTRs. There are two main types of digital VTRs: component and composite. The component video format adopted !n D-1 VTRs processes luminance and color signals separately, enabling high picture quality recording and playback without cross-coloring or other unwanted effects. D-1 VTRs are therefore · suited to the creation of commercials and other soft\A{are in which high picture quality is desired. Digital Betacam, which Sony recently developed, also employs the digital component recording format. The composite video format .adopted ' in D-2 VTRs process~s luminance and color signals together: As broadcast programs are mainly transmitted through the composite system, D-2 digita1 1 VTRs are suitable for program e~iiting and transmission ahd are well accepted by broadcasti-ng stations and pro~uction houses. · • high-density metal particle alignment technology A new videotape technology that, through a high-density alignment of ultrafine magnetic particles, affords significant improvements in output characteristics as well as improved picture and sound quality.
• magneto-optical (MO) disc A large-v9lume recording medium that uses laser beams and magnetism 'to read, record, and erase data. MDs ar~ a type of MO disc; in co~parison ; COs and CO-ROMs are read-only optical discs.
• metal-oxide-semiconductor integrated circuit (MOS IC) An IC with a three-layered structure comprising m~tal, an oxide membrane, and a semiconductor. MOS. ICs afford greater levels of integration and lower power consumption compared with bipolar ICs and are commonly used as the signal processors and logic elements in digital audiovisual equipment arid computers.

30
• multiple sub-nyquist sampling encoding (MUSt) decoder A MUSE decoder, used ·to decompress Hi-Vision images, is necessar;y to receive Hi-Vision broadcasts. (Hi-Vision is Japan's HDTV standard.) Hi-Vision video signals normally require a 20MHz transmission bandwidth-five times that of conventional TVs. The MUSE system was develope-d to compress this bandwidth to 8MHz, or that necessary for one satellite broadcast channel.
• non-tracking technology With ordinary magnetic recording media, playback was possible only if the playback head faithfully traced the tracks on which the signal was recorded, thus .limiting the level of the precision possible in recording. With the non-tracking technology developed by Sony, small portions of data are filed in memory allowing for faithful data reproduction even · if the playback head does not trace the tracks perfectly, thereby enabling more precise recording of data. Furthermore, non-tracking technology simplifies tape-loading and other mechanisms, affording tape recorders and players higher sound quality while significantly reducing the body size and power consumption of such equipment.
• Super· Bit ·Mapping process Current CD signal processing has been standardized .at 16 bits; therefore, master tapes recorde-d at 20 bits must be' converted to 16 bits when producing COs. The Super Bit Mapping process moves the error (quantization noise) arising during the conversion from the midrange of audio frequency, at which the human ear is very sensitive, to the less sensitive highfrequency range. With the noise thus shaped psychoacoustically, high-quality sound approaching that of the original 20-bit signal is realized without changing the current CD standard.
• Trinitron A cathode ray tube (CRT·) wi,th sophisticated functions develop~d by Sony. Through an array of features, including . a one-gun, three-beam system and a cylindrical screen sur-fa<i:e, the Trinitron projects sharp, high-quality color pictures. The ability to faithfully recreate colors and produce virtually distortion-free images has afforded new applications for the Trinitron system outside the home, for example, in broadcasting and industrial fields. In · addition, a Super Trinitron CRT with a flatter screen and a HD Trinitron for Hi-Visionuse with even higher resolution and picture quality have been .developed and commercialized.
• "video Ni8" Hi-Band format 8mm video. The format shifts the white peak . frequency from the 5.4MHz used previously to 7. 7MHz, offerfng.
higher picture quality through over 400 lines of horizontal resolution.  ············•·········· 6.4% 2 4 1 2 0 6 1 6 5 · 1 4 2 under review, while th. ose for the Entertainment segment were solid, advancing 6.6% from the previous year. Operating income fell a sharp 37.1% in Electronics and was down 8.5% in Entertainment. By geographic · area, sales and operating revenue ed.ged down in Japan, but operating income posted ·. a .15.2% gain. Operating income as a percentage of total sales was held to 2.3% in Japan due to the weakened profitability of exports arising from a stronger yen, a stagnant audiovisual equipment market, and the burden of R&D expenditures.
In the United States, although sales an.d operating revenue , were strong, operating income declined 20.1 %. Operating ' . income as a percentage of total sales fell to 3.2%, reflecting a relatively heavy burden of qepreciation and amortization . expenses arising from fixed assets approximately triple those of Sony's European operations. As for ·Europe, both sales and operating revenue and operating income dropped due to the economic slump and other factors, and operating income as · a percentage of total sales declined to 5.9%. Gains in sales and operating revenue were attained in Other Areas, . primarily Asia, but operating income decreased 32.6%, and operating income as a percentage of total sales was 3.4%. I I ($345 mi,llion) for the expansion of semicond' uctor facilities.

• · future Outlook
Sony's business environment is expected to remain challenging, due to prolonged recessionary conditions in Japan and Europe, the mntinued slump in the Japanese audiovisual equipm-ent market, i'ntensifYing price competition, and the ' . volatility in foreign exchange rates. Amid these c;onditions, · Sony will, in its Electronics ffusiness, work tb develop and introduce such high-quality and high-value-added products as the MD system and HDTV-related prodLi_ cts. In the Entertainment Business, Sony wiiJ ·strive to continue enhanCing its music and pictures operations.
In the fiscal year ending March 31, 1994, Sony intends to .
f~rther reduce its capital investments in view of the fact 1 that· its majm investment plans have bee_ n coll)pleted. Sony believes R&D activities are critical to the long-term growth of its electronics business and ' expects R&D expenditures will be sust~ined at approximately~the. same level· as in the year under review.
. NET CASH PROVIDED BY OPERATING ACTIVITIES (Billion ¥)

Net income per Depositary
Share is computed based <;>n the average number of common shares outstanding during each period after consideration of the dilutive effect of common stock equivalents which include . warrants and certain convertible bonds. Net income per Depositary Share is ap[5ropriately adjusted for the free distribution of common stock. 3. During the first quarter ended June 30, 1992, it became apparent that certain undistributed earnings from the Compi:]ny's foreign subsidiaries on which income taxes had been accrued would not be remitted. As a result, the Company reversed accrued taxes on April 1 1 1992, of '¥9,696 million ($83,586 thousand), corresponding to a portion of undistributed earnings which is considered permanently reinvested, as q credit to income taxes for the first quarter ended June 30, 1992. 4. In Japan, no •accounting en~ry is required for a free distribution of common stock of 33,908,621 shares made on November 20, 1991. Had the distribution been accounted for in the manner adopted by companies in the United States, '¥201,078 million ($1, 733,431 thousand) would have been transferred from refained 'earnings to the appropriate capital accounts. 5. On November 22, 1991, Sony Music Entertainment (Japan) Inc., a consolidated subsidiary, issued shares of common stock in a public offering to third parties at a price which was in e~cess of the Company's average per share carrying value. The issuance was regarded as a sale of a part of the Company's interest in the subsidiary and resulted in a '¥61 ,544 million gain on subsidiary sale of stock. No taxes were provided for on the gain as the Company has no present intention of disposing of its remaining investment.   Less-Accumulated depreciation -Other assets (Notes 3 and 8): Goodwill. •. Other.
i The accompanying notes are an integral part ofthese statements. Gain on subsidiary sale of stock (Note 1S)

Deferred income · taxes
Changes in assets and liabilities net of effects from acquisitions: (Increase) decrease in notes and a'ccounts receivable .

Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued income and other taxes

Increase (decrease) in other current liabilities
Other.
Net cash provided by operating activities.
Cash flows from investing activiti~s:

Payments for purchases of fixed assets
Proceeds from sales of fixed assets Proceeds ~rom subsidiary sale of stock, net of related expenses (Note 15) Payments for investments and advances .
Proceeds from sales of investment securities and collections of advances .
Payments . for purchases of marketable securities The parent company and subsidiaries in Japan maintain their records a~d prepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign subsidiaries in conformitY with those of the muntries of their domicile.
Certain adjustments and reclassifications, including those relating to t.he tax effects of timing differences, .capitalization of stock purchase warrants, the appropriation for or reversal of special allowances, the accrual of certain ~xpenses and the accounting fqr foreign currency translation, have been incorporated in the accompanying consolidated financial stat~. ments to conform with accounting principles generally accepted in the United States of America. These adjustments were not recorded in 'the statutory books of account.
Significant accounting policies, aft~r reflecting adjustments for the above, are as follows:

Basis of consolidation and accounting' fo; investments in affiliated companies
The consolidated financial statements include the accour;1ts of the· parent company and those of its majority-owned subsidiary companies.
All significant intercompany transactions and accounts are eliminated.
Investments in 20% to 50% owned companies are stated at cost plus equity iri undistributed earnings; consolidated net income includes the company's equity in current earnings of such companies, after elimination of unrealized intercompany profits. . .
The excess of the cost over the underlying net equity of investments in subsidiaries and affiliated companies accounted for on an equity basis is · allocated to identifiable assets based on fair market value at the date of acquisition. The unassigned residual value of the excess of the cost over the underlying net equity is recognized as goodwill.
On occasion, a subsidiary or affiliated company accounted. for by the equity method may issue its shares to third parties as either apublic offering or upon conversion of convertible debt to common stock at amounts per share in excess of or less than the company's average per share carrying value. With· respect to such transactions, .
the resulting gains or losses arising from change in interest are recorded in income for the year t,he change in interest transaction ocwrs.

Translation of foreign currencies
Ail asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate year-end current rates and all income and expense accounts are translated at rates prevailing at the time of the transactions. , The resulting translatio-n adjustments are accumulated as a .component of stockholders' equity.
Foreign currency receivables and payables are translated at appropriate year-end current rates and the resulting translation gains or losses are taken into income ·currently.

Revenue recognition
Revenues from sales are recognized when products are shipped to customers.
Motion picture revenue is recognized beginning on the date of theatrical exhibition. Revenue from television licensing agreements is recognized when the motion pict1,1re or television series first becomes available for telecast. Revenue from home videocassette sales is generally recognized on the date of shipment.

Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, . ' generally with original maturities of three months or less, that are readily convertible to known arnounts of cash and are so near maturity that they present insignificant .risk of changes in value because of changes in interest rates~

Marketable securities and securities investments.
Marketable equity securities included in marketable securities (current) and those included in securities investments and other (noncurrent) are each stated at the lower of aggregate cost or market.
Other current and noncurrent marketable securities are stated at the low.er _ of cost or market. Other securities investments (noncurrent) are stated at cost or less.
The cost of marketable equity securities s9ld is based on the average cost of all the shares of each security held at the time of sale.

Inventories
Inventories i' n electronics and music entertainment are valued at cost, not in excess of ~arket, cost · being determined on the "average" basis except for the cost. of finished products carried by certain subsidiary companies which is determined on the-"first-in, first-out" basis.
Film costs include production, print, certain advertising costs and allocated overhead. Film costs are amortized in the proportion that revenue for a period relates to management'$· estimate of ultimate revenues. Unam,ortized film costs are compared with estimated net realizable value on an individual film basis and writedowns are recorded when indicated. Film costs for motion pictures and television programs that are expected to be amortized against revenues from primary markets are classified as current assets. Primary markets for motion pictures include theatrical,· home videocassette and pay television.
Primary mar~ets for television . programs include network and first-run syndication. All other 'film costs are classified as noncurrent.

Property, plant and equipment and depreciation
Property, plant at:~d equipment is stated at cost; Depreciation of .
property, plant and equipment is computed on the declin_ ing-balarice method for the parent company and Japanese subsidiaries and on the straight-line method for foreign subsidiary companies at rates based on estimated useful lives of the assets according to general class, type of construction and use. Significant renewals and additions are capitalized at cost. Maintenance and repairs and minor renewals and betterments are charg~d to income ·as incurred.

Intangibles and goodwill
Intangibles, which mainly consist of artist contracts and music catalogs, are beirig amortized on a straight-line basis principally over 16 years and 21 years, respectively.
-Goodwill recognized in acquisitions accounted for as purchases is being amortized on a straight-line basis principally over a 40-year period.

Net income per common share
Net income per common share is computed based on the average number of common stock outstanding during each period after considerati~n of the dilutive effect of c~mmon stock equivalents which include warrants and certain convertible bonds.
Net income per common share is apprqpriately adjusted for the free distribution of common stock.

Distribution of common stock
. .
On occasion, the company may r:nake a free distribution of com~on  film-released -in process . •.

· '
44 date of acquisition. The excess of th.e purchase price over the net assets acquired was allocated to identifiable assets based upon .· the estimated fa"ir value of the assets. The unassigned residual value of the excess of the purchase price over · the net assets acquired is recognized as goodwill.
The following unaudited consolidated pro forma information shows . the results of the company's consolidated operations for the yea~;> ended March 31, 1991 .and 1992 as though the purchase ?f 'RCA/Columbia had been made 'as of th~ begi!lning of those years. .,

Yen in millions
Year Conversions of convertible debt into common stock and additional paid-in capital were ¥34,897 million,.¥2,975 million. and ¥225 million ($1 ,939 thousand). for the years ended. March 31, 1991March 31, , 1992March 31, and 1993 In connection with the acquisiti~n consummate~ in· the year ended

II ·short-term borrowings and long-term debt
Short-term borrowings at M~rch 31, 1993 comprise the following: Loans, principally from banks, with interest ranging from 3.31-% to 15.35% per annum . Commercial paper with interest ranging from 3.10% to 3. 77% per annum .
Long-term debt ai March 31, 1993 comprises the following: Unsecured loans, · representing obligatio~s principally . to banks, due 1993 to 2010 with interest ranging from 2.0% to 14.00% per annum.
Secured loans, representing obligations principally to insurance companies and banks, due 1995 to 2002 with interest ranging from 7.5% to 10.13% Medium~term notes of consolidated subsi9iaries due 1993 to 2000 with interest ranging from 3 . .2% to 8.67% per annum Unsecured 6.0% convertible debentures due 1997, convertible currently at ¥3,200.2 ($12.49 calculated at ¥256.30 = $1) for one common share, redeemable before due date . . · Unsecured 6.875% bonds due 2000 . Unsecured 9 7 /s% senior subordinated notes of a consolidated subsidiary, due 1998· Unsecured 10.50% ·notes of a consolidated subsidiary, due 1994, redeemable before due date Unsecured fixed coupon notes linked to the Yen/U~S. dollar rate of a consolidated subsidiary, due 2001 . Unsecured Nikkei-linked coupon notes of .a consolidated subsidiary, due 1997, redee.mable before due date ' · Unsecured 7.0% notes linked to the Yen/Deutsche Mark currency rate of a consolidated subsidiary, due 1995, redeemable before due date.
. . . Unsecured 5.7% notes of a consolidated subsidiary, due 1997, redeemable before due· date. Unsecured 7 1 /2% bonds of ~ consolidated subsidiary, due 1996. Unsecured 6.0% notes of a consolidated subsidiary, due 1997, redeemable before due date. Unsecured floating rate notes of a consolidated subsidiary, due .1997, redeemable before due date : Unsecured floating rate notes of a consoli9ated s~bsidiary, due 1996, redeemable before due date. Secured 5.0% bonds of a consolidated subsidiary, · due 1996, redeemable before due date Secured 5.3% bonds of a consolidated subsidiary, due 1996, redeemable before due date Long-term capital lease obligations, 2.5% to 24.4%, due 1993 to 2008 ' .,..

Guarantee deposits received.
Less-Portion due within one year .

46
"' The e$tima. ted fair value of total long-term debt including the .current portion at March 31; 1993 was ¥983,278 million ($8,476,534 thousand). The fair value was estimat~d based on the discounted am!:!unts of future ·cash flows usi~g the company's current .incremental .
borrowing rates for similar liabilities.
On February 14, 1990, the company issued the 0.3% bonds of ¥100 billion, with detachable warrants. One warrant certificate. is attached to each ¥1 ,000,000 bond and entitles the holders to · · subscribe ¥1,000,000 ($8,621) for shares of common stock of. the company at ¥7,670 ($66.12) per share · (subject to adjustment in certain circumstances). At March 31, 1993, warrants of ¥100 billion (~862,069 thousand) issued in 1999 were outstanding and will expire on February 10, 1994.
Year ending March 31 ' ' 1994 1995 ' 1996 1997 1998 The oasic agreements with certain banks in Japan include provisions that collateral (including sums on deposit with such banks) or guarantors will be furnished upon the banks' request and that any m Pension and severance plans . The estimated fair values of the warrants at the time of issuances were credited to additional paid-in capital with a cprresponding charge to· bond discounts. These discounts, which a(e netted against the face amount o{ the bond, are being amortized over the lives of ., 39,986 344,707 89,285 769,698 175,530 l,513, 190 collateral furnished, pursuant to such agreements or otherwise, will be apppcable to all present or future indebtedness to such banks.  m Income taxes.
The comp. any is subject ·to a number ' of different income taxes ~hich, in the aggregate, in~icate an effective statutory rate in Japan of approximately 51% for the year ended March 31, 1991 and 52% for the years ended March 31, 1992 and1993. The ordinary relationship between income· tax expense and pretax accounting inconie is distorted by a number of items including various tax credits, certain expenses not allowable for income tax purposes, nondeductibility of losses of subsidiaries, different tax rates applicable to foreign· subsidiaries arid dividend income which ' is not taxable.
In the , year ended March 31, 1993, it became apparent that certain undistributed earnings of the company's foreign subsidiaries · on which i. ncome-ta' xes had been accrued would not be remitted.
Based on a declaration on May 22, 1991, a free share distribution of 33,908,621 sha' res was made on November 20, 1991. In Japan,· no accounting entry is required for such a free share distribution.
Had the distribution been accounted for in the manner adopted by companies in the United . States of America, ¥201 ,078 miUion ($1, 733,431 thousand) would have been transferred from retained .earnings to the appropriat~ capital accounts.

50
The Japanese Commerci~l Code provides that an amount equal to at least 1 Oo/o of cash dividends and other distributiOt'JS from retained earnings paid by the company and its .Japanese subsidiaries be , appropriafe9 as a legal reserve. No further approprfation is required when the legal reserve equals 25% of stated capital.
The appropriations of retained earnings for the year ended .March 31, 1993, which have been incorporated in th' e accompanying consolidated financial statements, will be proposed for approval .
at the general stoc~holders' meeting to be held in June 1993 and will be recorded in the statutory books of account, in accordance with the Japanese Commercial' Code, after stockholders' approval.
An analysis of the changes in the cumulative translation adjustment for the years ended March 31, 1991March 31, , 1992  ltd Currency exchange contracts and · interest rate swap agreemen~s The company enters into various f?reign exchange forward contracts, adverse fluctuation in foreign currency exchange and interest rates.
interest rate swap agreements 1 currency swap agreements and foreign The estimated fair values of such agreements, based on the discurrency options as a normal part of its risk management efforts.
. Such "off-balance sheet" activities comprise the following: Foreign exchange forward contracts, the majority of which will mature within one year, are used to·hedge the risk of changes in foreign currency ~xchange rates associated with certaih assets and liabilities d~noininated in fore,ign currency. Although the company may be_ exposed to losse. s in the e~ent of nonperformance by counterparties or interest and currency rate movements, it does not antk1pate significant l~sses d~e to the financial arrangements described above.
Certain subsidiaries in the music ~ntertainment industry entered , into lorig-term contracts with recording artists and companies for the production and/or distribution of prerecorded music and videos.
These contracts cover various pe-riods mainly through March 31, 1997 . . As of ·,March 31, 1993, these subsidiaries were committed to make payments under such long-term contracts of ¥27,775 million ($239,440 thousand). · The company and certain of its subsidiaries are defendants ·in several pending lawsuits. However, based upon the ' information currently available to · both the company a~d its legal counsel, maoagement of the company believes that damages from such lawsuits, if any, would not have a material effect on the company's · consolidated financial statements.
. I llil Business segment information We have audited the accompanying consolidated balance sheets of Sony Corporation and its consolidated subsidiaries as of March 31, 1992 and 1993, and the re.lated consolidated statements of income and retained earnings and of cash flows for each of the three years in the period ended March 31, 1993, expressed in yen. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are fr~e of material misstatement. An audit includ_ es examining, on a test basis, evidence supporting the amounts and disclosures in . the financial statements. An audit alsp includes assessing the accounting . principles used and significant estimates made by management, as well as evaluating the overall financial statement presentati?n. We believe that our audits provide a ·reasonable basis for our opinion. ' In our report dated May 21, 1992, we expressed a qualified opinion that the company's consolidated financial statements for ·the years ended March 31, 1991 and 1.992 did not disclose segment information concerning operations in different industries, and foreign operations · and export sales, which was required by accounting principles generally accepted in the United States of America. As described in Note 18 to the accompanying consolidated financial statements, the company has disclosed such segment information for the years ended March 31, · 1991 and 1992 in conformity with accounting principles generally accepted in the United. States of America. Accordingly, our opi~ion on the consolidated financial statements for the years ended March 31, 1991 and 1992, as presented herein, is different from that expressed in our previous report.
In our opinion the consolidated financial statements audited by us present fairly, in all material respects, the financial position of Sony Corporation and its consolidated subsidiaries at March 31, 1992 and 1993, and the results of their operations and their cash floiNs for each of the three · years in the period ended March 31, 1993, in conformity with accounting principles ?enerally accepted in the United States of America. (As of April 30, 1993)

Ill Sony Pictures Entertainment (Japan) Inc.
Distribution of motion pictures and television programs and duplication and sale of video software

E!l Sony PCL Inc.
Video and HDTV software planning and editing; video duplication; rental of a full range of display systems; film processing

B) Sony Chemicals Corporation
Manufacture and sale of videotapes, adhesives, and electronic components

E!J Sony Magnescale Inc.
Manufacture and sale of digital position readout systems, CNC systems, instrumentation recorders, and high-speed video duplicating systems lS) Sony Plaza Co., Ltd.
Manufacture, sale, and service of audio, video, data communications, and other products ID Sony Life Insurance Co., Ltd.

D Sony Austria GmbH
Sale and . service of Sony electronic products in Austria Sony DADC Austria AG (As ~f June 22, 1993) D Anif, Salzburg Manufacture of CDs, MDs, and laserdiscs ,

• General Meeting of Shareholders
The General M~eting of Shareholders will be held at the end of June in Tokyo.

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This annual report was ·printed entirely on recycled paper that meets U.S. Environmental Protection Agency guid~lines for recycled paper.