Sony MPK-THC - page 32

Isahaya City in Nagasaki Prefecture, in Japan, is the home to Sony’s strategic semiconductor

production base. Since 2000, Nagasaki Fab* has produced state-of-the-art semiconductors and

continues to be an industry-leading manufacturing facility. Nagasaki Fab produces the key

components that give the Sony Group its solid competitive edge.

*The official name of the facility is “Sony Computer Entertainment Fab.“ Following the integration of the semiconductor production businesses

of the Sony Group, the name will be changed to “Sony Semiconductor Kyushu Corporation Nagasaki Technology Center” on July 1, 2004.

The strategic base for next generation key

components that give the Sony Group its

solid competitive edge

The inside story from Sony’s Nagasaki Fab

Contents

Main Page Page To Our Shareholders Management Message Efficiency and High Added Value Strategy Products Topics Continuing to be one of the worlds leading consumer brands Nobuyuki Idei, Chairman Page Page Operational restructur- ing aimed at realizing outstanding efficiency and high added value Page Page A stellar performer at the Montreux Jazz Festival Page Making the television experience more realistic and user friendly Enjoy a realistic television picture anytime, anywhere Television powered by Wega Engine technology Studio Application, a function that combines Sonys expertise in many fields A stylish remote control thats easy to use File 01: Flat panel television WEGA Automatic recording of your favorite programs and many other amazing features I want to copy something onto a DVD as quickly as possible Setting up a program recording has never been easier Compatibility with various disc formats for stress-free recording I want to record programs without worrying about how much space is left on the HDD PSXA world of entertainment in one box The remote control should be simple and fun to use [DESR-7100] I want a design that goes with my living room dcor I want to connect my PSX to lots of other equipment Chapter two of the VAIO story: Television picture quality on your PC I want to see LCD television- quality images on my PC I only want to see the keyboard and mouse when theyre needed Can a PC double as both a video deck and DVD recorder? It would be great if I could do everything with a remote control The new Cybershot: Fun to carry around and take photos I want a compact camera thats slender, yet durable I want to share my pictures with friends and family immediately after taking them I dont want to miss another great shot I want to enjoy taking photos using a camera equipped with a Carl Zeiss lens Capture it on DVD and watch it on a DVD player There is no danger of mistakenly recording over other material http://www.sony.net/Products/handycam/ DVD editing is easy It has never been easier to dub content and send it to family and friends The future of key components Sonys goal is to be a manufacturer of the worlds preeminent semiconductors Interview with Ken Kutaragi, Executive Deputy President, Corporate Executive Officer Image sensors Display components Memory Stick Lithium-ion batteries Optical disc components and digital tuners Blu-ray Disc Page Sony stands for captivating products Eikou Sumura Sony first caught my eye when I was a young child Good instructors should listen to themselves Like a memopad, my IC recorder is always by my side R research & development Sonys R&D strategy Sonys DNA: Freedom and open-mindedness Strategic fields for the next three years R&D activities for the fiscal year ended March 31, 2004 Long-term research fields 514.5 Page Page The art of manufacturingAdding value and driving Sonys growth How Sony makes its products Speeding up the manufacturing revolution Sony Craftsmanship A new information system that integrates sales, manufacturing and distribution Page Page Page Page Alejandro M. Lopez Sonys technology: Transcending ages and generations My son the Airboard expert Cineza The artists assistant An antique cabinet is my Sony treasure chest Alejandro M. Lopez Sony, a brand that I can trust I choose Sony for many reasons The Lance Lee Method for recording athletics A quality image Lance Lee At a Glance: Operating Performance Highlights Information and Communications Semiconductors Components Other MusicGame http://www.sony.net/games/ http://www.sony.net/music/ At a Glance: Operating Performance Highlights OtherFinancial ServicesPictures Sales and Operating Loss http://www.sony.net/movies/ Sales and Operating Income Financial Services Revenue and Operating Income Convergence A Key to Sonys Entertainment Game Other Constant Transformation Broadband will accelerate the convergence of electronics and entertainment Home Electronics The proliferation of broadband networks with television as the hub Page Control the pocket, control the future: Sonys core concept in mobile consumer electronics Mobile Electronics Hi-MD format Game Building on the PlayStation platform to create a new world of computer entertainment Proposing new modes of play EyeToy: Play Entertainment A music store for the digital age MUSIC BUSINESS PICTURES BUSINESS The Chaku-Uta mobile phone ringtone download service Taking the music library to mobile phone users Sony Pictures Imageworks moves forward with IMAGEMOTION Financial Services Sony Finance International, Inc. Sony Life Sony Assurance Sony Bank Integrated Circuit (IC) Card Business Other Sonys Advertising Around the World Corporate Governance Functions of the Company with Committees system Page New Members of the Board and Corporate Executive Officers Consolidated Financial Information OPERATING RESULTS OVERVIEW RESTRUCTURING Operating and Financial Review and Prospects SALES COST OF SALES AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES OPERATING PERFORMANCE OPERATING INCOME OTHER INCOME AND EXPENSES INCOME BEFORE INCOME TAXES INCOME TAXES RESULTS OF AFFILIATED COMPANIES ACCOUNTED FOR UNDER THE EQUITY METHOD MINORITY INTEREST IN INCOME (LOSS) OF CONSOLIDATED SUBSIDIARIES NET INCOME OPERATING PERFORMANCE BY BUSINESS SEGMENT Page Page Page Page Page FOREIGN EXCHANGE FLUCTUATIONS AND RISK HEDGING ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY ASSETS LIABILITIES INCREASE IN ASSETS AND LIABILITIES AS A RESULT OF CONSOLIDATION OF VARIABLE INTEREST ENTITIES STOCKHOLDERS EQUITY CONDENSED BALANCE SHEETS SEPARATING OUT THE FINANCIAL SERVICES SEGMENT (UNAUDITED) INVESTMENTS Page CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENT LIABILITIES OFF-BALANCE SHEET ARRANGEMENTS CASH FLOWS CONDENSED STATEMENTS OF CASH FLOWS SEPARATING OUT THE FINANCIAL SERVICES SEGMENT (UNAUDITED) LIQUIDITY AND CAPITAL RESOURCES CAPITAL RESOURCES LIQUIDITY MANAGEMENT AND COMMITMENT LINES RATINGS CASH MANAGEMENT THE USE OF EVA METHODOLOGY RESEARCH AND DEVELOPMENT NUMBERS OF EMPLOYEES REWARDING SHAREHOLDERS TREND INFORMATION ISSUES FACING SONY AND MANAGEMENTS RESPONSE TO THOSE ISSUES Page FORECAST OF CONSOLIDATED RESULTS CRITICAL ACCOUNTING POLICIES Page Page RECENTLY ADOPTED ACCOUNTING STANDARDS RECENT PRONOUNCEMENTS Five-Year Summary of Selected Financial Data Page Quarterly Financial and Stock Information Segment Information Page Page Page Consolidated Balance Sheets Page Consolidated Statements of Income Page Consolidated Statements of Cash Flows Page Consolidated Statements of Changes in Stockholders Equity Page Page Stock Information Stock Price Range and Trading Volume on the Tokyo Stock Exchange 100 0 20,000 Stock Acquisition Rights and Bond Information Straight Bonds Bonds with Warrants Stock Acquisition Rights (SARs) Convertible Bonds Investor Information