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Sony Corporation Annual Report 2001
123
(3) SAR plan:
Sony grants stock appreciation rights (“SARs”) in Japan, Europe and the United States of America for se-
lected employees. Under the terms of these plans, employees on exercise receive cash equal to the amount that
the market price of Sony Corporation’s common stock exceeds the strike price of the SARs. The SARs generally
vest ratably over a period of three years, and are generally exercisable up to six to ten years from the date of
grant. Sony holds treasury stock for the SAR plan in Japan to minimize cash flow exposure associated with the
SARs. In addition, Sony uses various strategies to minimize the compensation expense associated with the SAR
plans in the United States of America and Europe.
The status of the SAR plans is summarized as follows:
Year ended March 31
1999 2000 2001
Weighted- Weighted-
average average
Number of exercise Number of exercise Number of Weighted-average
SARs price SARs price SARs exercise price
Yen Yen Yen Dollars
Outstanding at beginning
of year . . . . . . . . . . . . . . . 484,400 ¥6,106 2,190,750 ¥5,426 4,046,490 ¥5,443 $ 43.54
Granted . . . . . . . . . . . . . . . 1,725,850 5,234 2,306,610 5,896 154,700 9,801 78.41
Exercised . . . . . . . . . . . . . . ——(439,736) 5,308 (588,092) 5,198 41.58
Expired or forfeited . . . . . . (19,500) 5,275 (11,134) 5,502 (47,852) 5,869 46.95
Outstanding at end
of year . . . . . . . . . . . . . . . 2,190,750 ¥5,426 4,046,490 ¥5,443 3,565,246 ¥6,218 $ 49.74
Exercisable at end
of year . . . . . . . . . . . . . . . ——745,496 ¥5,711 1,397,216 ¥5,966 $ 47.73
A summary of SARs outstanding and exercisable at March 31, 2001 is as follows:
Outstanding Exercisable
Weighted-
average
Number of Weighted-average remaining Number of Weighted-average
Exercise price range SARs exercise price life SARs exercise price
Yen Yen Dollars Years Yen Dollars
¥3,732 –5,000 . . . . . . . 241,134 ¥4,599 $ 36.79 3.75 103,727 ¥4,596 $ 36.77
5,001 –10,000 . . . . . . . 3,268,662 6,217 49.74 3.87 1,289,564 6,049 48.39
10,001 –15,488 . . . . . . . 55,450 13,287 106.30 8.58 3,925 15,105 120.84
¥3,732 –15,488 . . . . . . . 3,565,246 ¥ 6,218 $ 49.74 3.94 1,397,216 ¥5,966 $ 47.73
In accordance with APB No. 25 and its related interpretations, the SARs compensation expense is measured
as the excess of the quoted market price of Sony Corporation’s common stock over the SARs strike price, which
is consistent with the accounting treatment prescribed for SAR plans in FAS No. 123. For the years ended March
31, 1999 and 2000, Sony recognized ¥886 million and ¥19,174 million of SARs compensation expense, respectively.
For the year ended March 31, 2001, Sony recognized a reduction in SARs compensation expense of ¥5,587
million ($45 million) due to the decline in Sony’s stock price during the year.