Sony 2001 Annual Report Download - page 122

Sony Corporation Annual Report 2001
120
Dollars in millions
Pre-tax Tax Net-of-tax
amount expense amount
For the year ended March 31, 2001:
Unrealized gains on securities—
Unrealized holding gains arising during the period . . . . . . . . . . . . . . $ (50) $ (10) $ (60)
Less: Reclassification adjustment for gains included in net income . . . (129) 50 (79)
Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . (637) 268 (369)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . 1,353 (71) 1,282
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 537 $237 $ 774
The Extraordinary General Meeting of Shareholders held on January 25, 2001 approved the amendment of the
Articles of Incorporation which authorizes the issuance of shares of subsidiary tracking stock, a new class of stock,
which is intended to be linked to the economic value of Sony Communication Network Corporation, a wholly-owned
Japanese subsidiary engaged in internet related services.
Subsequently, Sony Corporation resolved at the meeting of its Board of Directors held on May 15, 2001 to
issue 3,072,000 shares of the subsidiary tracking stock to general public in Japan. The subsidiary tracking stock is
currently scheduled to be issued in June 2001.
16. Stock-based compensation plans
The number of shares and the exercise prices in the following information have been adjusted for all periods to
reflect the two-for-one stock split that became effective on May 19, 2000.
Sony has three types of stock-based compensation plans as incentive plans for directors and selected employees.
(1) Warrant plan:
Upon issuance of unsecured bonds with detachable warrants which are described in Note 12, Sony Corporation
has purchased all of the detachable warrants and distributed them to the directors and selected employees of
Sony Corporation. By exercising a warrant, directors and selected employees can purchase the common stock of
Sony Corporation, the number of which is designated by each plan. The warrants generally vest ratably over a
period of three years, and are generally exercisable up to six years from the date of grant.
(2) Convertible Bond plan:
In April 2000, Sony adopted a new equity-based compensation plan for selected executives of Sony’s United
States of America subsidiaries using U.S. dollar-denominated non-interest bearing convertible bonds which
have characteristics similar to that of an option plan. Each convertible bond can be converted into 100 shares of
the common stock of Sony Corporation at an exercise price based on the prevailing market rate shortly before
the date of grant. The convertible bonds vest ratably over a three-year period and are exercisable up to ten
years from the date of grant. As the convertible bonds were issued in exchange for a non-interest bearing
employee loan, no accounting recognition was given to either the convertible bonds or the employee loans in Sony’s
consolidated balance sheet as a right of offset exists between the convertible bonds and the employee loans.