Sony 2005 Annual Report Download - page 103

100 Sony Corporation
A summary of the exercise rights of the detachable warrants as of March 31, 2005 is as follows:
Exercise price
Issued on Exercisable during YenDollars Number of shares per warrant Status of exercise
August 23, 1999 September 1, 2000 ¥07,167 $067 279 shares of common 2,000 warrants outstanding
through August 22, 2005 stock of Sony Corporation
October 19, 2000 November 1, 2001
12,457 116 100 shares of common 9,600 warrants outstanding
through October 18, 2006 stock of Sony Corporation
December 21, 2001 January 6, 2003
6,039 56 100 shares of common 11,534 warrants outstanding
through December 20, 2007 stock of Sony Corporation
December 21, 2001 June 20, 2002
3,300 31 75 shares of subsidiary 600 warrants outstanding
through June 20, 2007 tracking stock
Aggregate amounts of annual maturities of long-term debt
during the next five years are as follows:
Yen in Dollars in
millions millions
Year ending March 31:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . ¥166,870 $1,560
2007 . . . . . . . . . . . . . . . . . . . . . . . . . 178,117 1,665
2008 . . . . . . . . . . . . . . . . . . . . . . . . . 32,059 300
2009 . . . . . . . . . . . . . . . . . . . . . . . . . 282,430 2,640
2010 . . . . . . . . . . . . . . . . . . . . . . . . . 2,909 27
At March 31, 2005, Sony had unused committed lines of
credit amounting to ¥863,956 million ($8,074 million) and can
generally borrow up to 90 days from the banks with whom Sony
has committed line contracts. Furthermore, Sony has Commer-
cial Paper Programs, the size of which was ¥1,251,450 million
($11,696 million). There was no commercial paper outstanding at
March 31, 2005. Under those programs, Sony can issue com-
mercial paper for the period generally not in excess of 270 days
up to the size of the programs. In addition, Sony has Medium
Term Notes programs, the size of which was ¥536,750 million
($5,016 million). At March 31, 2005, the total outstanding bal-
ance of Medium Term Notes was ¥58,755 million ($550 million).
13. Deposits from customers in the banking
business
All deposits from customers in the banking business are interest
bearing deposits and are owned by a Japanese bank subsidiary
which was established as an Online Internet bank for individuals.
At March 31, 2004 and 2005, the balance of time deposits
issued in amounts of ¥10 million ($93 thousand) or more were
¥55,164 million and ¥67,387 million ($630 million), respectively.
At March 31, 2005, aggregate amounts of annual maturities
of time deposits with a remaining term of more than one year
include ¥25,697 million ($240 million) and ¥23,910 million ($223
million) for the years ending March 31, 2007 and 2008, respec-
tively. There are no deposits having a maturity date after March
31, 2008.
14. Financial instruments
(1) Derivative instruments and hedging activities:
Sony has certain financial instruments including financial assets
and liabilities incurred in the normal course of business. Such
financial instruments are exposed to market risk arising from the
changes of foreign currency exchange rates and interest rates.
In applying a consistent risk management strategy for the
purpose of reducing such risk, Sony uses derivative financial
instruments, which include foreign exchange forward contracts,
foreign currency option contracts, and interest rate and currency
swap agreements. Foreign exchange forward contracts and
foreign currency option contracts are utilized primarily to limit the
exposure affected by changes in foreign currency exchange rates
on cash flows generated by anticipated intercompany transac-
tions and intercompany accounts receivable and payable denomi-
nated in foreign currencies. Interest rate and currency swap
agreements are utilized primarily to lower funding costs, to diver-
sify sources of funding and to limit Sony’s exposure associated
with underlying debt instruments and available-for-sale debt
securities resulting from adverse fluctuations in interest rates,
foreign currency exchange rates and changes in the fair value.
These instruments are executed with creditworthy financial
institutions, and virtually all foreign currency contracts are
denominated in U.S. dollars, euros and other currencies of
major countries. Although Sony may be exposed to losses in
the event of nonperformance by counterparties or unfavorable
interest and currency rate movements, it does not anticipate
significant losses due to the nature of Sony’s counterparties or
the hedging arrangements. These derivatives generally mature
or expire within 5 months after the balance sheet date. Sony
does not use these derivative financial instruments for trading or
speculative purposes except for certain derivatives utilized for
portfolio investments such as interest rate swap agreements and
interest rate future contracts in the Financial Services segment.
These derivative transactions utilized for portfolio investments in
the Financial Services segment are executed within a certain
limit in accordance with an internal risk management policy.
Derivative financial instruments held by Sony are classified and
accounted for as described below pursuant to FAS No. 133.
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