摩托罗拉公司1971年年报

"The Motorola Executive Institute is an ideal that has worked'

campus

Foi o" e t c "Ler not a

-»

(dollar amounts in thousands except per

Sales and Other Revenues

Income Before Federal and Foreign Taxes

% to Sales

Federal and Foreign Income Taxes

Earnings

Per Share of Capital Stock

Non-Recurring Charge Net of Taxes

Capital Expenditures

Depreciation

Working Capital

Current Ratio

Shareholders' Equity

Weighted Average Shares Outstanding

Book Value Per Share

Yearend Employment (Approx.)

Annual Meeting The annual meeting will be held on Monday, May 1,1972. A notice of the meeting, together with a form of proxy and a proxy statement, will be

mailed to shareholders on or about March

30, 1972, at which time proxies will be solicited by management.

Covers (Front Cover) The ascending path to this modern classroom complex symbolizes the careers of many executive students

who have and will attend the Motorola Executive Institute. (Back) The Arizona desert provides a serene setting for the institute campus which is comprised of a

administration building (right), student quarters (center), classroom complex (upper left), and student union and dining hall (lower left).

data) 1971 1970

^ 926,593 ^ ^ ^ 4 1 9

62,055 51,813*

6.70% 6.51 %

30,305 26,150*

31,750 25,663*

2.37 1.93*

— 1,422

31,977 41,724

27,239 24,508

247,579 222,117

2.22 2.39

375,897 344,085

13,410,794 13,324,759

27.88 25.79

49,000** 37,000**

Transfer Agents Harris Trust and Savings Bank, 111 W. Monroe St., Chicago, Illinois 60690

First National City Bank, 111 Wal

New York, New York 10015

ontents 1 Financial highlights 2 Letter to shareholders

4 Organization for growth

7 Communications Division 10 Semiconductor Products Division

13 Consumer Products Division

16 Government Electronics Division

Excludes non-recurring charge from discontinuance of color TV picture tube operation. Yearend 1970 adjusted to include employes of Motorola Israel Ltd. Yearend 1971 also includes employes of Autovox S.p.A. Both are majority owned subsidiaries.

Registrars Continental Illinois Nati Bank and Trust Company of Chicago, 2 S. LaSalle St., Chicago, Illinois 60

Irving Trust Company, 1 Wall St., New

York, New York 10015

18 Automotive Products Division 20 Directors and Officers

21 Financial statements

28 Ten year financial summary (Inside back cover) Major facilities and product lines

Record sales were attained in 1971,

increasing 16 per cent to $926,592,871.

Earnings increased 24 per cent to $31,749,944 or $2.37 per share compared to $1.93 in 1970, before a 1970 extra-

ordinary expense of $1,422,465 (11 cents

per share). The 1971 earnings include 7

cents per share realized as a gain from

the translation of certain foreign balance

to current exchange rates.

These results were generally consistent

with our expectations of a slowly improv-

ing economy during 1971 as noted in last

year's report. Once again, our diversifica

tion in electronics was a benefit.

Semiconductor division sales were

approximately the same as in 1970, while earnings were somewhat lower, reflecting

reduced international volume, price

erosion and certain product mix problems.

The communications division achieved

record sales, up 10 per cent, while its

earnings growth moderated primarily due

to unusually large expenditures for new product development, investments in additional marketing and sales capability, and startup costs at the Fort Lauderdale

facility.

The consumer division turned in an

excellent performance by substantially

increasing sales and returning to a signif

cant profit position. Record color televis unit sales, distributor to dealer, increas

70 per cent over 1970, compared with a

domestic industry increase of 28 per cent.

The automotive division achieved record

sales and considerably increased earnings

and margins over 1970. These results

were due, in part, to an increase in car

sales and to consumer preference for more sophisticated car radios. The government division continued its com-

mendable performance with record earnings on moderately increased sales, despite reduced government spending. New order bookings in 1971 for advanced technology equipment and systems place

the division in an excellent position goi

into 1972.

Financial Matters

The strong financial position of the

company is exemplified by a current ratio

of $2.22 of current assets to $1 of curre

liabilities. Long-term debt is at 15 per

of long-term debt plus equity.

Assuming continued government limita-

tions on direct foreign investment for at

least the next two years, plans call for

overseas growth continuing to be financed

primarily with Eurodollars. In early Marc

1972, a Motorola subsidiary sold $25 million of 8 per cent guaranteed Euro-

dollar debentures, due in 1987, callable

beginning in 1977.

Capital expenditures totaled $32 million

in 1971 and are expected to approximate

$40 million in 1972 to provide for contin

ued growth, both foreign and domestic.

Research and Development Expenditures for research, product engineering and development programs

were $65 million, about the same as 1970.

An increase is planned in 1972.

Organization and Management

Appropriately, the theme of this annual

report is MANAGEMENT.

As first announced in March 1969, Elmer

H. Wavering will retire as vice chairman

and chief operating officer at the time o the May 1972 shareholders' meeting, after

completing 41 years of service with the

company and upon reaching his 65th

year. He will remain a member of the board of directors. As also announced in

1969, William J. Weisz, now president and assistant chief operating officer, will

become chief operating officer upon Mr. Wavering's retirement. The quality, depth and organization of management are key elements in the growth of an enterprise. After 43 years,

Motorola has reached an annual sales

level approaching one billion dollars. Hal

of this sales increase occurred over the past seven years. As this growth tran-

spired, many changes in organization took

place matching the talents of available

executives with the ever-increasing size

and complexity of the total managerial

task. We have continued to place decisionmaking authority at the lowest practical level, while keeping each executive's

span of responsibility within manageable

proportions. Our strong emphasis on

management development has enabled us

to make these past organizational changes

which in turn further contributed to the

development of our people.

As Motorola nears its first billion dollar

milestone, and as we see the opportunity

to reach additional similar milestones wit

increasing frequency, we have devoted,

over the past year, much thought and

attention to fashioning a new management structure which properly postures the corporation to seize upon the opportunitie and challenges which the future holds.

The result is a comprehensive organization

change announced in February 1972.

This change, which is detailed in the or-

ganization section of this report, is aime

at achieving the following objectives:

Place strong leadership in the most

influential positions and make the best

possible use of individual talents.

Elevate more key officers to senior

positions so as to effectively reduce

the span of control of the Chairman/

President's office.

Permit more time at the top for corporate strategy, long-range planning,

Elmer H. Wavering, vice chairman and chief operating officer; Walter B. Scott, vice presRobert W. Galvin, chairman and chief ident and director of manufacturing and executive officer; and Homer L. Marrs, facilities; Vincent J. Rauner, manager of vice president and general manager patent department; and Allen H. Center, of equipment divisions vice president of public relations

William J. Weisz, president and assistant chief operating officer; and J. Paul Jones, vice president and director of corporate staff

people evaluation, and management development. Establish a new ventures activity to lea Motorola's new business explorations.

Provide broad experience for more executives to train for later top assignments.

Strengthen a corporate staff whose

purpose is to conceive, stimulate, and

challenge all the corporation's activiti

Rotate top executives between line and

staff positions, thereby broadening thei experience and understanding.

Create new opportunities for increased

delegation of responsibilities in a

chain-reaction of promotions.

In these changes we see a practical

resolution of our organizational needs for

the immediate future. We also recognize

that other progressive changes are inevitable in the years to come. The new pattern has been composed not only with

today in mind, but with a look to those

later years as well.

Dr. Daniel E. Noble will not stand for reelection as a director at the 1972 shareholders' meeting, but will continue as chairman of the Motorola science advisory board. In recognition of his outstanding contributions to the company, we will propose that he be named

Director Emeritus.

In May 1971, vice president J. Paul Jones, then general manager of the government electronics division and now director of corporate staff, was elected to the board

of directors.

In June 1971, Donald R. Jones, then director of finance of the communications division, was elected treasurer of the

corporation.

Also in mid-'71, in order to give Motorola burgeoning multinational activities, which serve the increasing needs of the markets

of the world, additional and intensified senior corporate overview and direction, a corporate office of multinational oper tions was established. Levy Katzir, unti then managing director of Motorola Israe Ltd., was named director.

On January 1, 1972, Jack Germain and Joseph F. Miller, Jr. were elected vice

presidents of the corporation. Their

communications division responsibilities

are detailed elsewhere in this report.

On February 22, 1972, Kenneth M. Piper,

65, retired as vice president of human

relations, after 22 years of commendable

and deeply appreciated service. He will

continue with the company as assistant t

the chairman, handling special projects.

He was succeeded by Benjamin W. Borne, a man with considerable experience in

industrial relations.

Outlook Our current estimates are for increased

sales and increased earnings for 1972 in

all of our divisions. While there remain

uncertainty regarding the international

economy, we do expect the domestic economy to continue the improvement which began in late 1971.

We acknowledge our sincere appreciation for the many and important contributions of our associates.

For the Board of Directors

Chairman of the Board

Vice Chairman of the Board

President

March 20, 1972

New Ventures In order to focus a senior management responsibility on Motorola's new business explorations, a new ventures activity has been established, reporting

directly to the Chairman/President's offic

and headed by vice president Stephen L.

Levy, formerly general manager of the

semiconductor products division. The following businesses, units and depart-

ments now are, or will be, under his

cognizance:

New ventures laboratories and market-

ing offices in Chicago and Phoenix.

The American Regitel Corp., producers

of point-of-sale credit systems and

alpha-numeric printers, based in San Carlos, California, with which company Motorola has a contract to acquire a

majority interest subject to fulfillmen

of certain conditions.

An acquisitions office.

The education and training products unit, which markets electronic video recording (EVR) TELEPLAYER equipment and a variety of cassette program material to the business-industry and institutional markets. ••

The institutional electronics unit, whi

supplies special television and related communications equipment and services to the hotel-motel industries. A portion of this business serving the hospital market has been integrated into the communications division.

Certain additional information processing hardware and software businesses which are being explored.

Corporate Staff In recent years, Motorola has moved steadily in the direction of making effective use of a broadly skilled corporate staff. Corporate offices of

manufacturing and marketing were established in 1967 and 1969, respectively. The establishment of the senior executive position of director of corporate staff moves this concept forward with increased vigor, and also provides another senior position to help oversee the affairs of the entire company.

Vice president J. Paul Jones, formerly general manager of the government electronics division, has been designated as director of corporate staff, and directl reports to the Chairman/President's office. Offices of engineering, manufacturing, marketing, planning, and public relations will comprise the corporate staff which will serve and support as well as challenge and monitor all activities of the company.

Finance, human relations, and multinational operations staff groups continue to report directlytothe Chairman/President's office because of the overriding and pervasive importance of finance, because of Motorola's non-union status and personal emphasis on people affairs, and because of the major effort underway as Motorola moves to a multinational posture.

Divisions Vice president Homer L. Marrs, formerly general manager of the communications division, has been designated general manager, equipment divisions. The general managers of the communications, consumer products, automotive products, and government electronics divisions report to Mr. Marrs. Grouping of the four equipment divisions, while leaving the semiconductor products division as a single entity, recognizes the essential difference in technology and processing, that the one serves each of the other four, and that our outside semiconductor customers rightfully expect a clear separation of the semiconductor products division from the equipment divisions, which are competitors of some of our semiconductor customers.

Stephen L. Levy, vice pres for new vent

John T. Hickey (standing), vice president for finance and secretary; Lewis D. Spencer vice president and general attorney; John A Hubeny, vice president and controller; Earl R. Gomersall, corporate director of informa tion systems; and Donald R. Jones, treasure

Dr. William J. Bakrow (right), presi of Motorola Executive Institute; Jam D. Burge, manager of executive resources; and Dr. Paul C. Baker, director of human resources

Carl P. Nierzwicki, director of app systems unit; R. James Harring, director of planning; and Levy Katz corporate director of multinational operations

Also reporting to Mr. Marrs is the applied systems unit, which offers systems, primarily utilizing the products or skills the equipment divisions, to the environmental control, security, and surveillance and urban/transportation markets.

To fill the vacancy created by Mr. Marrs' assignment, vice president John F. Mitchell, formerly assistant general manager of the communications division has been named general manager. Vice president Carl E. Lindholm was moved from director of product operations to assistant general manager. Ralph W. Eisner, vice president and assistant general manager of the government electronics division, replaces J. Pau Jones as general manager. Robert Solem, director of communications operations, becomes assistant general manager.

Thomas J. Connors, formerly corporate staff vice president for marketing and, earlier, director of marketing for the semiconductor products division, has replaced Mr. Levy as general manager of the division and reports to the Chairman/ President's office.

Operating Committee Under the chairmanship of William J. Weisz, president, an operating committee has been formed to augment communications, coordination, and planning across the corporation. The initially designated members of this committee are: Thomas J. Connors, vice president and general manager of semiconductor products division; John T. Hickey, vice president for finance and secretary; J. Paul Jones, vice president and director of corporate staff; Stephen L Levy, vice president for new ventures; and Homer L. Marrs, vice president and general manager of equipment divisions.

Other division managers and/or key corporate staff members will be called upon to serve on this committee from time to time. ' •

Motorola Executive Institute Delegation of responsibility to increasingly greater numbers of executives is only possible because of Motorola's success, over the years, in developing the managerial talents of its people. Elsewhere in this report is indicated the age and years of Motorola experience of the company's officers. In discussing organization, growth, and the future, it seems appropriate to comment on a proven concept of management development which augurs well for the future of the corporation and its depth of executive talent.

Essentially, the role of the institute is t provide an upper-middle to top level manager the breadth of vision necessary for a key management role. Also, the four-week intensive program of residence, in groups of 16, on the institute campus at Oracle, Arizona, serves as a period of self-renewal which generates an awareness of the complexities of today's business environment and stimulates a desire in the executive to continue this broadening experience long after he has matriculated. Also significant is a written evaluation of each participant, which is a forecast of his promotability as well as an analysis of basic managerial attributes. This is done through a peer evaluation where each participant comprehensively rates all other participants in his group, combined with the professional evaluation by the staff psychologist and the results of specificall prepared tests. The curriculum focuses on the manager and his relations with the corporation, management groups, the free enterprise system, and the technological, social, and political environment of business.

Since the first session in June 1967, some 373 Motorola executives have graduated.

In 1971, sales volume was up by more than 10 per cent over last year. New order input ran 20 per cent ahead of last year and order backlog at yearend was the highest ever. Earnings advanced at a lesser rate primarily due to unusually large expenditures for new product development, expanding marketing and sales capability, and startup costs at the Fort Lauderdale facility.

The division introduced a number of new products and system concepts in 1971, and an additional number will be announced in early 1972. The major share of these products and systems will have broad market and dollar impact on the division's performance as it continues to maintain a strong leadership position in the personal and mobile communications industry. A new command and control concept helps conserve radio spectrum by utilizing advanced digital signaling techniques and computerized information handling systems. The dispatcher can automatically locate, identify and determine the status of each mobile radio without voice contact. These systems eliminate many other manual tasks of the dispatcher and mobile operators, resulting in reduced response time and maximum utilization of manpower and facilities. The division's new pleasure boat unit, the TRITON two-way FM radio-telephone, represents Motorola's entry into the pleasure boat market for the first time. This radio offers the same rugged reliability required in commercial applications Initial orders exceeded expectations, and shipments of the TRITON radio are scheduled to begin in the first quarter of 1972. The radios will be sold through a dealer organization as the division broadens its distributional base. A highway emergency radio system, MOTORCALL, was introduced which will

offer aid to the stranded motorist. When in need of assistance, the motorist opens the door of a call box located along the highway, picks up the handset and is in immediate contact with a radio dispatcher

The new PAGEBOY II radio pager, utilizing monolithic integrated circuits, is small and lightweight measuring only 4.8 cubic inches and weighing 3.9 ounces. This pocket-size pager is available with these optional features: memory call, group cal sub-audible paging, high-volume paging, and tone only, voice only or both.

Among the other product introductions

during 1971 was the MICOR Systems 90

radio accessory group, which allows the

radio user to select, and add on to, his

two-way radio system simply, without

paying costly custom design charges.

Complementing the portable two-way

product line was the introduction of the

HANDI-COM portable series, combining low cost with high reliability.

Increased emphasis on public safety,

transportation, and security in the indus

and general business markets, created

new demands for paging equipment,

CCTV systems, mobile and portable two-

way radios, and remote control systems.

New Motorola communications systems were installed in every state during the year. New York and Chicago contracted for extensive systems to expand and update their police communications systems. San Diego Transit Corporation in California and the Grand Trunk Railroa in Detroit contracted for large transport tion communications systems.

During the Southern California earthquake

in February, 1971, Motorola's HEAR (Hospital Emergency Administrative Radio) system provided reliable communications in the San Fernando Valley. By using the HEAR system, police, fire and medical officials were in constant com-

munications throughout the crucial period The system was invaluable for coordinating the rescue and removal of victims, finding beds for the injured and requisitioning supplies from other hospitals in the area.

By yearend, the 240,000 square foot plant in Fort Lauderdale approached full operation. The 110,000 square foot administration building, currently under construction, is scheduled for completion in the second quarter of 1972.

The Federal Communications Commission is studying the possibility of modifying

certain restrictions on the 470-512 MHz

UHF TV frequencies made available to the

land mobile services. FCC Docket 18262,

which allocated frequencies to wireline

telephone companies in the 900 MHz

band, has been the subject of technical

and marketing studies during the last

quarter of 1971.

To insure continuation of the division's growth, a reorganization of management

was implemented. Worldwide marketing

and distribution resources were consoli-

dated under one executive. A major

organization was established to pursue

development of large systems opportuni-

ties. To provide maximum flexibility in t development and manufacture of mobile, portable and base station products, these product operations and the international subsidiaries and joint ventures were consolidated under one manager. Sales in European markets more than tripled over 1970, providing a firmer bas for expansion in 1972. Other overseas operations also continued to broaden, highlighted by the establishment of a

distribution capability in Australia.

With the high order backlog and increased order input in 1971 and new market and product introductions, the division expec increased sales and earnings in 1972, both domestically and internationally.

Carl E. Lindholm (right), vice president Martin Cooper (right), vice president and and assistant general manager; and director of systems operations; and Charles Claude G. Davis, group operations H. Willyard, group operations manager for manager for portable products . . . systems products . . . discussing inspecting PAGEBOY II assembly command and control system

DEUTSCHES ROTES KREUZ 3

Jack Germain, vice president and (Bottom) H. E. James Finke (right), (Center) Robert N. Swift (right), vice director of product operations; and divisional managing director of Europe president and director of marketing; Arnold Brenner, group product man- .. . checking communications for Red and Joseph F. Miller, Jr., vice president ager for mobile products . . . examining Cross vehicle in Weisbaden, and general manager of domestic solid state MICOR unit Germany distribution

Semiconductor industry sales in the U. S. improved with each quarter of 1971, indicating that the domestic industry is beginning a resurgence. However, since the year began with a relatively low sales level, total domestic sales for the indust were still down by approximately three per cent from the previous year.

In the world market, semiconductor industry sales were down about four per cent for the year. In Europe, industry sal were estimated to be down approximately ten per cent, while in the Asia/Pacific ar they were up by only about two per cent, reflecting the continuation of general business softness in those two areas.

The year proved to be better for Motorola'

semiconductor products division than for

most of the industry. Sales were approxi-

mately the same as in 1970, enabling the

division to capture the largest share of

the total market in its 16-year history.

Earnings were lower than in the previous

year, due to reduced international volume, price erosion and certain product mix problems.

During 1971, some of the major markets

served by the semiconductor industry

showed signs of recovery while others did

not. The computer market and the military/

aerospace market remained relatively

stable. The commercial/industrial market

registered a slight growth for the year,

while the consumer market grew by over

20 per cent. This recovery pattern is creating a change in the "mix" of semiconductors currently being shipped, with low-cost, high-volume plastic encapsulated devices becoming more predominant.

Several organizational changes were made during the year to improve the division's ability to manage its worldwide organization, and to prepare senior managers for increased responsibilities. The operations managers of bipolar integrated circuits and discrete products

exchanged positions so that each would gain managerial backgrounds in both major areas of the business. The MOS (metal oxide semiconductor) integrated circuits operation became a separate function permitting particular emphasis on this rapidly growing segment of the market. In addition, staff directors of manufacturing, quality control, and marketing and engineering were named to afford the division greater control and to provide better measurement and reporting systems.

The division's worldwide production complex continued to expand in 1971, preparing for orderly future growth. In June, a 40,000 square foot plant in Guada-

lajara, Mexico was officially dedicated

and is currently fully staffed, equipped

and operational. In addition, construction

of a Motorola-owned plant in East

Kilbride, Scotland began. This 67,000

square foot plant will replace the leased,

13,000 square foot facility currently in us

Continuing the pattern established in the formative years of the division, new manufacturing processes, methods and

equipment were put into operation.

Automation was applied to many areas

for the first time. For example, a new, ful

computerized epitaxial growth system was

put on-stream at the divisiorr'-s Phoenix

plant. This system will both improve yields

and lower costs in this basic but very

important step in silicon wafer production.

In the discrete device area, two new laser scribers were added. These scribers separate individual chips from silicon wafers. An automatic laser was also added during the year for use in the manufacture of hybrid devices which require a trimming, or adjustment of various components. The laser trims these components with an accuracy and in a manner formerly unattainable.

Other areas where automation played an

John R. Welty, vice president and assistant general manager; and Gino Ori, operations manager for rectifier products . . inspecting automotive rectifie

important role were in power transistor production and wafer processing.

Three product groups received primary emphasis during 1971: MOS integrated circuits; MECL (emitter coupled logic) integrated circuits; and optoelectronic devices.

An entire series of MOS devices was introduced from random access memories (RAM's) to the first standard CMOS (complementary MOS) integrated circuits for use in watch circuits and portable equipment. In the fourth quarter alone, 1 new MOS products were introduced. The MECL 10,000 series of integrated circuits for high-speed computer applications was introduced and is expected to become the industry standard for this logic family.

Continuing breakthroughs in material processing and production have resulted in a broad line of standard optical devic During 1971, major emphasis was placed on developing the division's production capability. To date, about 50 standard optoelectronic components and numeric readout devices have been made available in quantity.

The outlook is for continuing industry recovery during 1972. Trends indicate the industry dollar sales will increase by 6 8 per cent. Motorola again expects to exceed the industry growth rate, further strengthening the division's position in the semiconductor industry.

John C. Haenichen, vice president and director of operations for metal oxid semiconductors . . . explaining MOS circuits on silicon wafer

(Bottom) Robert R. Heikes (right), divisional managing director of Europe; and Russo Albert, technician . . . applications laboratory in Geneva, Switzerland

12

(Center) Christian J. Goodman (right), vice president and sta director of marketing; and Rod O'Connor, director of marketing for U.S. and Canada . . . discussing semiconductors for consumer products

Patrick D. Lynch, vice president and director of operations for bipolar integrated circuits; and Max H. Bloemhard, technical specialist for linear programming .. . examining IC in automated testing area

Richard P. Abraham, director of operations for discrete products; and Richa L. Diddams, senior product development engineer. .. checking laser trimmer

Ernest H. Shrenzel (right), man aging director of Asia/Pacific area; and Kazuo Suzuki, manager of applications engineering of Motorola Semiconductors Japan Ltd., a marketing subsidiary

The consumer products division performed excellently in 1971. Running at a rate of improvement over 1970 far above that of the total industry, the division established a Motorola record for color television unit sales, distributor to deal with an increase of 70 per cent over the previous year. This compared with the domestic industry increasing 28 per cent. Motorola's previous record year for color TV unit sales was 1966. Thus, the division substantially increased its color televis share-of-market.

This large increase in color TV sales, plus the results of an extensive cost reduction program initiated in 1970, enabled the division to show a significant profit for the year. Additionally, a major improvement in asset turnover was accomplished by better management of inventories and receivables.

Motorola's color TV sales started the year briskly, due to the Quasar marketing strategy and retailer and consumer acceptance of Insta-Matic color TV tuning control. A highly demonstrable consumer benefit, Insta-Matic features one button which automatically balances color hue, intensity, brightness, contrast and also activates automatic fine tuning.

Additional promotional support was provided for Quasar color TV during the industry's usual midyear slump in color TV sales. This continuity of advertising made an important contribution to Motorola's rise in the marketplace. The consumer benefits of the Quasar system, including Insta-Matic tuning control, reliability of solid state componentry and easy-to-service plug-in mini-circuits, are recognized by dealers and consumers in growing numbers.

Demand for Motorola television required an expansion in product output which, for Quasar color television, meant doubling the 1970 rate. Production lines were

installed in Quincy to supplement Franklin Park. "Feeder" facilities in Pontiac, Illi and Chicago increased subassembly production to support stepped up final assembly operations. A color TV assembly plant was opened near Toronto, Ontario, Canada to support increased sales in the Canadian market.

Black and white TV sales were hampered in the first half by product shortages in certain popular screen sizes. However, during the second half, sales of this product were substantial and pushed results for the year ahead of 1970. The new Taiwan assembly plant, opened in January, was able to deliver increasing quantities of small screen monochrome models in the second half to supplement production at Quincy, Illinois.

The division introduced its first 4-channe sound products for the home in 1971 and was pleased with buying response to these initial entries in an exciting and promising sector of the audio market.

Substantial progress was made in strengthening the wholesale distributor and retail account structure. This contributed importantly to the division's successful year. New approaches to distribution were initiated in several markets where weakness in sales performance became apparent.

The division will no longer market portabl and table radios, portable phonographs and portable tape players, once current factory inventories are depleted. Changes in merchandising patterns over the past several years have made it increasingly difficult to achieve a profit on these products, which have represented only a small percentage of the division's dollar sales. Motorola's main thrust will thereby be in the higher technology areas of television and sophisticated audio products which are more important to our distributors and their dealers.

Edward P. Reavey, Jr. (center), vice ident and general manager; Charles W Kepler, assistant to general manager planning and control; and Lee J. Gua director of business management

14

The Motorola Consumer Service and Satisfaction program lengthened its reach and was cited on a number of occasions for its efforts to better serve the buying public. Color TV product guarantees are stated in simple terms and labeled on the product for ready reference.

A group of college students was given summer employment as aides to certain Motorola distributors in contacting consumers to verify satisfaction with the product. These activities reflect the division's total dedication to a continual sear for better ways to serve the consumer.

To capitalize on the gains of 1971 and to provide for future growth in sales and profit, the division management staff was restructured atyearend.

The new alignment reduced the number of functions reporting directly to the division manager's office. New positions of assistant to the general manager for planning and controls and director of business management were established. Also, other major managers acquired additional skills and services needed to provide more efficient and effective performance. Key planning centers were established within each of the major departments. All executive promotions in the realignment were made from within the ranks and opened the ddbr to further personal development of many people.

For 1972, the division estimates that domestic industry color TV distributor unit sales will rise about five per cent over th prior year to some 6.5 million sets. The division's goal is for sales to increase at rate greater than industry, with another important gain in earnings and share of market.

Herbert D. DeBorde, vice president for operations; and H. Warren Gieffers, director of manufacturing . . . inspecting Quasar "works in a drawer "

(Bottom) Richard A. Kraft, director of (Center) Robert C. Warren, director of product development; James E. Stewart, marketing; and R. Douglass Cooper, director of international operations; and president of R. Cooper, Jr. Inc., a disHerbert J. Zeller, director of industrial tributor .. . explaining Quasar features design . . . discussing monochrome TV

15

The government electronics division continued its commendable performance with sales increasing slightly, despite

decreased spending by its two major

customers, Department of Defense (DOD)

and National Aeronautics and Space

Administration (NASA). Earnings also

increased in 1971 over 1970 and set a new high, breaking the record level set just last year. While yearend dollar back was somewhat lower than at the end of 1970, new order bookings for advanced technology equipment and systems during 1971 have placed the division in a stron position going into the new year, and dollar backlog has substantially increase in early 1972.

International operations continued to

increase their contribution to sales and

earnings during 1971. New order bookings

and sales to international customers were

up approximately 23 per cent.

Two important new contracts were won, complementing equipment being developed under DOD's triservice Integrated

Target Control System (ITCS) contract

received in 1970. This work, being done

by the radar operations, includes an

augmentation subsystem for the Air Force

high altitude supersonic target HAST

drone and a vector miss-distance indicato

subsystem for a variety of target drones.

These two contracts, along with developments under the ITCS program, place the division in an advantageous position in

the growing remotely piloted vehicle electronics market.

The communications operations won a

significant contract from the Navy for fle

broadcast receivers. These receivers will

notably increase the Navy's ability to

communicate with its fleets throughout

the world's oceans via communications satellites. Though still in the developmen stage, this project should lead to worthwhile production. In space communications, the division continued to receive many contract awards for subsystems on unmanned space satellites, including the radio frequency transmitter receiver, the X-band and the flight data subsystems of the

Mariner/Venus/Mercury spacecraft, and

the radio relay subsystem of the Viking

Orbiter, the spacecraft which will go into

orbit around Mars in 1975. Motorola was

also selected for two other subsystems for the Viking Orbiter program but negotiations were not complete at yearend.

The tactical electronics operation con-

tinued its excellent work in the highly

classified countermeasures area, deliver-

ing flight test hardware ahead of schedule

The outstanding performance of this

equipment during Air Force flight tests

has resulted in a preproduction contract

and in Air Force investigation of the

application of the same kind of advanced countermeasures technique to tactical aircraft. In the fuzing area, the division received several new development contracts to apply state-of-the-art techniques to a variety of ordnance devices from free-fall bombs to artillery shells to small caliber projectiles. The division continued its strategy of pursuing state-of-the-art development contracts in a diversity of selected technical areas, thereby building a solid foundation for the future.

Ralph W. Eisner, vice president and Philip C. Wright (right), director of opgeneral manager; and Harry H. Mottek, erations support; and Wayne A. Stoltz, director of international operations . . . group leader of transponder test examining range positioning system section . . . inspecting automated contransponder trol and landing system test equipment

(Center) Arnold R. Sabel (right), director of tactical electronics operations; and James R. McEown, Robert J. Solem (right), assistant general program manager. . . testing ordnance device manager; and Kenneth W. Porter, deputy (Bottom) Alfred S. Hume (right), director of manager of communications engineering radar operations; and David M. Barrow, mandepartment. . . checking Mariner space- ager of integration and test, ITCS program . . . borne communications equipment test discussing drone command and control station

17

Sales of the automotive products division, excluding the 52 per cent interest recentl acquired in Autovox S.p.A. in Rome, Italy,

rose more than 25 per cent to a new

record. Dollar earnings and margins

increased considerably over 1970. These

results reflect, in part, an upswing in ca

sales and a consumer preference for more

sophisticated car radios.

Car radio continues to be the division's major product line. Major original equipment contracts received include 100 per cent of the 1972 car radio requirements for American Motors and the phasing-in of Motorola as the sole outside supplier to Chrysler for the 1972 model year. This wil represent approximately a threefold increase in sales to Chrysler as compared to the 1971 model year. The division

continues to provide selected models of

car radios to Ford, and for Volkswagen,

Volvo, and Renault cars sold in the U. S.

The trend towards AM/FM and AM/FM stereo is a significant shift in car radio product mix. FM stereo radios contain about 21/2 times the circuitry of conventional AM radios, thus increasing sales dollars. Currently over 15 per cent of

18

domestic autos produced contain factory installed FM radios. Original equipment tape player sales increased during 1971 and Motorola will be sole supplier during 1972 for Chrysler, Ford, and American Motors. The division also provides tape players for Volkswagen and Volvo cars in the U. S. During 1972, the division will supply a complete entertainment center for Chrysler which will include AM, FM, FM stereo, and stereo 8-track tape player in one compact package.

Sale of private label tape decks to other equipment manufacturers increased for both 8-track and 4-channel applications.

Motorola-branded aftermarket entertainment product sales showed a substantial upsurge in 1971. Car radio sales increased dramatically. Stereo 8 tape player sales

increased at a lesser rate. During the fir

quarter, the division began shipping

4-channel automotive tape players to

distributors. Sales are expected to

increase as the market further develops

during 1972.

Solid state ignition sales declined due to reduced volume to Outboard Marine Corporation. The division continues to supply 100 per cent of the requirements for Chrysler Outboard Corporation's 2-, 3-, and 4-cylinder engines. Development programs are in progress with major original equipment customers for future ignition systems for automotive, industria and snowmobile applications.

Alternator charging system sales set an

all time record, with over 250 original

equipment customers. The largest single contract is for 100 per cent of American Motors alternator charging system requirements through the 1973 model year. A new electronic concept in brushless alternator systems was marketed during 1971. Initial applications are for high

mileage, heavy duty equipment such as trucks and industrial machinery. International operations continue to grow. Sales of car radios and tape players produced at the division's subsidiary in England are increasing steadily. Besides the aftermarket, Motorola supplied entertainment products to Chrysler and Volkswagen in the United Kingdom in 1971. In October, the division introduced 4-channel sound during the British Motor Show. The reaction was excellent.

Alps-Motorola, an unconsolidated joint venture company in Japan, achieved record sales and profits. This company manufactures tape players and tape components for worldwide distribution. Currently, about 50 per cent of sales are to original equipment manufacturers in Japan.

In September, the division acquired 52

per cent of the capital shares of Autovox

S.p.A., an Italian car radio, tape player,

and television set manufacturer. Autovox,

with a well-known and respected product

line in Europe, provides Motorola a major

new capability for competing in the Common Market. Car radio and tape player sales increased in Canada. During the third quarter, the three millionth car radio was produced in Canada since production began in 1966 at Midland, Ontario. A high percentage of these units are imported into the U. S. under the United States-Canadian Automotive Products Agreement.

Increased international activity is planne

in the major free world markets through

subsidiaries, joint ventures, and licensee

arrangements. The automotive industry is predicting increased sales in 1972. The outlook for most of the division's markets, domestically and internationally, is favorable. Consequently, the division expects further gains in 1972.

Oscar P. Kusisto, vice president and gen eral manager; and C. J. Gentry, director marketing for branded automotive sound products . . . discussing Quadraline 4-channel automotive tape player

Warren L. Knauer (center), director of automotive and industrial product operations; and Lawrence H. Jones, general sales manager; and James R. Cherry, product manager of same operations . .. observing brushless alternator test

James A. Torrence (right), vice president and assistant general manager; and A. C. Boss, director of OEM sales and marketing . . . examining Chrysler entertainment center

Fred P. Hill, vice president and dire of entertainment products and international operations; Robert A. Wolf, product manager of entertainment products; Ruediger Schmidt (seated), international engineer.. . evaluating car radio produced in England

BOARD OF DIRECTORS OFFICERS (Note: Age and years of Motorola service, respectively, appear after e

ROBERT W. GALVIN ROBERT W. GALVIN (49-31) CHRISTIAN J. GOODMAN, JR. (51-10) Chairman of the Board and Vice President and Staff Director J. PAUL JONES Chief Executive Officer of Marketing

ELMER H. WAVERING (64-41) JACK C. HAENICHEN (36-13) OSCAR P. KUSISTO Vice Chairman and Chief Vice President and Director of Operating Officer Operations, Metal Oxide STEPHEN L. LEVY Semiconductors WILLIAM J. WEISZ (45-24) HOMER L MARRS President and Assistant Chief PATRICK D. LYNCH (38-12) Operating Officer Vice President and Director of Operations, Bipolar Integrated Cir ARTHUR C. NIELSEN, JR. OPERATING COMMITTEE CONSUMER PRODUCTS DIVISION DANIEL E. NOBLE THOMAS J. CONNORS (42-8) Vice President and General Manager, EDWARD P. REAVEY, JR. (48-5) Semiconductor Products Division Vice President and General Manager Chairman, Science Advisory Board J. PAUL JONES (48-20) HERBERT D. DEBORDE (52-5) ARTHUR L. REESE Vice President and Director of Vice President, Operations Corporate Staff ELMER H: SCHULZ GOVERNMENT JOHN T. HICKEY (46-24) ELECTRONICS DIVISION Vice President for Finance WALTER B. SCOTT and Secretary RALPH W. ELSNER (51-23) EDWIN P. VANDERWICKEN Vice President and General Manager Chairman, Finance and Audit STEPHEN L. LEVY (50-8) Committees Vice President, New Ventures AUTOMOTIVE PRODUCTS DIVISION ELMER H. WAVERING HOMER L. MARRS (55-34) OSCAR P. KUSISTO (58-23) Vice President and General Manager, Vice President and General Manager WILLIAM J. WEISZ Equipment Divisions JAMES A. TORRENCE (41-19) KENNETH V. ZWIENER Vice President and Assistant COMMUNICATIONS DIVISION General Manager JOHN F. MITCHELL (44-19) Vice President and General Manager FRED P. HILL (51-33) Vice President and Director of CARL E. LINDHOLM (43-5) Entertainment Products and Vice President and Assistant International Operations General Manager CORPORATE MARTIN COOPER (43-18) Vice President and Director of BENJAMIN W. BORNE (47-0) Systems Operations Vice President, Human Relations (Starting February 22, 1972) JACK GERMAIN (45-22) Vice President and Director of ALLEN H. CENTER (59-18) Product Operations Vice President, Public Relations

JOSEPH F. MILLER, JR. (47-20) DONALD R. JONES (42-21) Vice President and General Manager, Treasurer Domestic Distribution JOHN A. HUBENY (61-37) ROBERT N. SWIFT (48-20) Vice President and Vice President and Controller Director of Marketing KENNETH M. PIPER (65-22) Vice President, Human Relations SEMICONDUCTOR (Until February 22, 1972) PRODUCTS DIVISION THOMAS J. CONNORS (42-8) WALTER B. SCOTT (56-26) Vice President and General Manager Vice President and Director of Manufacturing and Facilities JOHN R. WELTY (49-14) Vice President and Assistant LEWIS D. SPENCER (55-21) General Manager Vice President and General Attorn

as of December 31, Motorola, Inc. and Subsidiaries

ASSETS * ^ ^ ^ ^ ^ ^ ^ ^ H 1971 1970

Current Assets

Cash $ 19,068,167 $ 21,223,399

Short-term investments, at cost (approximating market) 4,230,099 6,070,269

Accounts receivable 209,393,410 173,200,309

Allowance for doubtful accounts (5,945,000) (5,070,000)

Costs recoverable under United States government contracts, less progress billings 6,983,099 5,695,960

Inventories, at the lower of cost (first-in, first-out) or market 180,314,678 146,263,834

Future income tax benefits (note 2) 19,821,796 18,647,412

Other current assets 17,087,294 15,498,680

TOTAL CURRENT ASSETS 450,953,543 381,529,863

Plant and Equipment, at Cost

Land 12,750,055 10,684,954

Buildings 146,477,996 136,481,392

Machinery and equipment 150,191,541 136,357,239

Accumulated depreciation (note 3) (125,200,701) (108,993,570)

NET PLANT AND EQUIPMENT 184,218,891 174,530,015 Sundry assets, net 11,568,579 13,492,239

$646,741,013 $569,552,117

See accompanying notes to consolidated financial statements

21

as of December 31, Motorola, Inc. and Subsidiaries

LIABILITIES AND SHAREHOLDERS' EQUITY 1971 1970

Current Liabilities

Notes payable

Domestic $ 24,950,000 $ 1,000,000

Foreign 18,851,995 8,642,273

Current maturities of long-term debt (note 4) 3,272,629 23,860,360

Accounts payable 67,327,911 55,746,278

Accrued compensation 17,709,983 14,401,348

Federal and foreign income taxes (note 1) 10,882,920 9,107,289

Other (including withheld) taxes 12,022,580 10,520,406

Contribution to employees' profit sharing funds (note 7) 8,577,119 6,497,968

Product and service warranties 9,754,951 6,701,451

Accrued expenses and other 30,024,472 22,935,504

TOTAL CURRENT LIABILITIES 203,374,560 159,412,877

Long-Term Debt (notes 4 and 9) 63,779,811 65,347,505

Minority Interest in Subsidiaries (note 1) 3,689,389 706,469

Shareholders' Equity

Capital stock, $3.00 par value (notes 4 and 5) Authorized: 20,000,000 shares Outstanding: 1971, 13,480,798 shares; 1970, 13,342,666 shares 40,442,394 40,027,998

Additional paid-in capital (notes 4 and 5) 95,349,326 87,643,617-

Retained earnings (notes 1 and 4) 240,105,533 216,413,651

TOTAL SHAREHOLDERS' EQUITY 375,897,253 344,085,266

$646,741,013 $569,552,117

22

Years Ended December 31 Motorola, Inc. and Subsidiaries 1971 1970

Working Capital Provided Net earnings before non-recurring charge $ 31,749,944 $ 25,662,905 Add expenses not requiring outlay of working capital: Depreciation (including $252,645 in non-recurring charge in 1970) (note 3) 27,239,303 24,760,998 Amortization of deferred debenture discount and expense 632,213 652,471 Working capital provided from operations, exclusive of non-recurring charge 59,621,460 51,076,374 — (1,422,465) Non-recurring charge Disposals of plant and equipment (and tooling, net) 722,096 9,932,022 Decrease (increase) in sundry assets (exclusive of amortization of deferred debenture discount and expense) 1,291,447 (580,775) Increase in long-term debt 4,913,940 1,243,905 Increase in minority interest in subsidiaries 2,982,920 706,469 Proceeds from issuance of capital stock 8,120,105 1,378,539 Total working capital provided 77,651,968 62,334,069

Working Capital Used Additions to plant and equipment (includes net balance of a subsidiary acquired as of August 31, 1971 — $5,672,781) 37,650,275 41,723,511 Reduction of long-term debt 6,481,634 26,202,490 Cash dividends 8,058,062 7,668,183 Total working capital used 52,189,971 75,594,184 Increase (decrease) in working capital $ 25,461,997 $(13,260,115)

Increase (Decrease) in Components of Working Capital Cash $ (2,155,232) $ 375,968 Short-term investments (1,840,170) (13,633,859) Accounts receivable 36,193,101 5,800,633 Allowance for doubtful accounts (875,000) (670,000) Cost recoverable under United States Government contracts, less progress billings 1,287,139 (1,608,877) Inventories 34,050,844 (7,840,413) Future income tax benefits 1,174,384 (19,285) Other current assets 1,588,614 3,679,784 Total current assets 69,423,680 (13,916,049) Notes payable 34,159,722 3,305,457 Current maturities of long-term debt (20,587,731) 22,448,410 Accounts payable 11,581,633 (6,435,475) Accrued compensation 3,308,635 (4,951,387) Federal and foreign income taxes 1,775,631 (5,711,750) Other (including withheld) taxes 1,502,174 2,374,083 Contribution to employees' profit sharing funds 2,079,151 (7,651,247) Product and service warranties 3,053,500 90,376 Accrued expenses and other 7,088,968 (4,124,401) Total current liabilities 43,961,683 (655,934) Increase (decrease) in working capital $ 25,461,997 $(13,260,115)

See accompanying notes to consolidated financial statements

23

Motorola, Inc. and Su

Balance at beginning of year

Share option plans (note 5)

Conversion of 41/2% convertible guaranteed debentures (principal amount $2,366,000) (note 4)

Balance at end of year

See accompanying notes to consolidated financial statements

accountants repor The Board of Directors and Shareholders of Motorola, Inc.:

We have examined the consolidated balance sheet of Motorola, Inc. and subsidiaries as of December 31, 1971 and 1970 and the related statements of earnings and retained earnings, additional paid-in capital, and the statement of changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the aforementioned financial statements present fairly the financial position of Motorola, Inc. and subsidiaries at

iaries 1971 1970

$ 87,643,617 86,336,418

6,016,897 1,307,199

1,688,812

$ 95,349,326 $ 87,643,617

December 31,1971 and 1970 and the results of their operations and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

PEAT, MARWICK, MITCHELL & CO.

Chicago, Illinois February 16, 1972, except for Note 9 as to which the date is March 15, 1972

24

Years Ended December 31 Motorola, Inc. and Subsidiaries 1971 1970

Sales and other revenues $926,592,871 $796,418,521

Manufacturing and other costs of sales 632,312,505 544,873,333

Selling, service and administrative expense (notes 6 and 7) 196,993,345 165,752,894

Depreciation of plant and equipment (note 3) 27,239,303 24,508,353

Interest and amortization of debenture discount and expense 7,713,483 9,499,231

Minority interest in net earnings of subsidiaries (note 1) 279,291 (28,195)

TOTAL COSTS AND OTHER EXPENSES 864,537,927 744,605,616

Income before federal and foreign income taxes and non-recurring charge 62,054,944 51,812,905

Federal and foreign income taxes, net of investment credit of $554,000 in 1971; $757,000 in 1970 (note 1) 30,305,000 26,150,000

Earnings from operations 31,749,944 25,662,905

Non-recurring charge from discontinuance of color TV picture tube manufacturing operation, including investment credit, $491,000, less federal income taxes, $872,000, and other credits 1,422,465

Net earnings 31,749,944 24,240,440

Retained earnings at beginning of year 216,413,651 219,842,193

Less: Share for share distribution—par value of 6,666,933 shares transferred to capital stock — (20,000,799)

Cash dividends declared (per share: 1971, $.60; 1970, $.575 adjusted for share distribution) (8,058,062) (7,668,183)

Retained earnings at end of year (notes 1 and 4) $240,105,533 $216,413,651

Earnings per weighted average share outstanding during the year: From operations $2.37 $1.93

Less non-recurring charge — (.11) Net earnings $2.37 $1.82

See accompanying notes to consolidated financial statements

25

consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated in con-

solidation. The financial statements of foreign subsidiaries were translated at appropriate rates of exchange resulting i net realized gains of $879,348 in 1971 (1970, $45,713) and

deferred gains of $272,466 as of December 31, 1971 (1970, $381,185) which were not realized. Operating accounts were

translated generally at exchange rates prevailing during the

year.

At December 31, 1971 and 1970 net assets of consolidated operations outside of the United States and Canada aggregated $49,900,000 and $40,800,000, respectively.

Export sales of domestic companies and sales and other

revenues of operations outside of the United States and

Canada were 13% of the consolidated amounts in both 1971 and 1970.

The undistributed earnings of foreign subsidiaries may be

subject to domestic income taxes (reduced by foreign tax paid credits, if any) if and when remitted to the parent com pany. The Company does not contemplate repatriating any of these undistributed earnings in the form of dividends, and accordingly no domestic income tax has been provided. .

The consolidated accounts include the 52% interest the

Company acquired in Autovox S.p.A. (an Italian corporation)

during 1971. The minority interest therein and other minorit

interest have been set forth as a separate item in the finan

statements; the 1970 amounts have been reclassified to

conform to the 1971 presentation.

ure income tax benefits should result from the deduction

from taxable income of reserves which have been provided

on the books of the companies but are not yet allowable as

deductions in determining income taxes currently payable.

preciation of plant and equipment is provided on the basis

of the estimated useful lives generally by the declining balance method for items acquired subsequent to December 31, 1953 and by the straight-line method for items acquired prior to that date.

as of December 31, Motorola, Inc. and Subsidiaries

Long-term debt at December 31 consisted of the following: 1971 1970 1 4 /2 % convertible guaranteed debentures due July 1,1983 (issued outside the United States and Canada) $27,634,000 $30,000,000

4 % % debentures due April 1, 1986 (less $500,000 debentures held by the company for sinking fund

payment) 27,000,000 27,500,000

Revolving credit notes (prevailing prime rate plus 1/4%) — 22,500,000 3 % % and 4 % % notes due in annual installments to 1976 3,000,000 4,000,000

Notes payable (foreign, generally at prevailing prime rates) due in

installments to 1981 9,418,440 5,207,865 67,052,440 89,207,865

Less current maturities, included in current liabilities 3,272,629 23,860,360

Net long-term debt $63,779,811 $65,347,505

The 41/2% convertible guaranteed debentures (issued by Motorola International Development Corporation) are convertible into capital stock of Motorola, Inc. at the rate of 12.6 shares for each $1,000 principal amount, subject to adjustment in certain events, and are guaranteed as to the payment

of principal and interest by Motorola, Inc. The debentures are

redeemable at various dates at redemption prices reducing

from 1041/2% to 100% of the principal amount thereof. In

1971, $2,366,000 in debentures were converted into 29,807

shares.

Consolidated retained earnings at December 31 exceeded

the amount restricted by loan agreements by $137,000,000 in

1971 and $123,000,000 in 1970 and consolidated working

capital exceeded the amount required by $172,579,000 in

1971 and $147,117,000 in 1970.

See note 9.

Under the Company's Employee Share Option Plans, shares of capital stock have been made available for option to employees of the Company and certain subsidiaries. Options

may be granted at not less than market value, are exercisable

one year from date of grant, and expire at the end of five

years. Data on share options are summarized as follows:

1971 1970 Options outstanding beginning of year $ 508,170 $ 564,090 Options granted 124,900 1,000 633,070 565,090 Less: Options exercised 108,325 38,760 Options terminated 9,900 18,160 118,225 56,920

Options outstanding end of year 514,845 508,170 Shares reserved for possible future

options 585,860 700,86 Total shares reserved 1,100,705 1,209,03

Aggregate option price of outstanding

options $32,819,842 $28,486,291

Aggregate option price of exercisable options $22,148,386 $28,422,384

Excess of the option price over the par value of shares issued $ 5,429,030 $ 1,307,199

Tax benefit resulting from premature disposal by grantees 587,867

The exercise of outstanding options and conversion of 41/2%

debentures would not result in a significant dilution of earnings per share.

An Executive Incentive Plan provides that the Company may

reserve up to 4% of its annual consolidated pre-tax earnings

(as defined) for the payment of cash incentive awards. Awards

are payable generally in equal annual installments over a period of five years and are generally subject to the recipients' continued employment. Reserves of $1,613,517 and $1,292,151 representing 4 % of defined earnings were provided in 1971 and 1970 respectively for such awards. Awards of $1,284,020 were made in 1971 ($1,970,820 in 1970) and

as of December 31 Motorola, Inc. and Subsidiaries

$2,835,725 was available for awards at December 31, 1971 ($2,506,228 in 1970).

The Company and certain subsidiaries have contributory profit

sharing plans in which all eligible employees participate. The

companies' contributions to the United States, Canadian, and

other foreign profit sharing funds, based upon percentages of pre-tax earnings, were $8,577,119 in 1971 and $6,497,968 in 1970.

The Company and certain subsidiaries have a voluntary, contributory pension plan. The Company's policy is to fund pension costs accrued, 1971, $2,577,978; 1970, $2,120,185. At December 31,1970, date of the latest actuarial determination,

vested benefits were fully funded. In the event that the amoun actually payable under the plan does not amount to 40% or

more of an officer's rate of salary at retirement, it is the i

tion of the Company (subject to certain qualifications and conditions) to make supplementary payments so that the total

payments will aggregate at least 40% (or 30% in the case of

payments to widows) of the officer's rate of salary at retirement. The Company is providing a reserve for the supple-

mentary payments on a current basis.

The companies are obligated under repurchase and other agreements principally in connection with the financing of

sales of products to consumers, and are defendants in suits and claims, which management believes will have no material

effect on the business of the companies.

In March, 1972, a subsidiary, formed forthe purpose of financing international operations, issued outside the United States

and Canada $25,000,000 of 8% guaranteed sinking fund

debentures due in 1987. The annual sinking fund require-

ments will commence on March 1, 1977.

Motorola, Inc. and Subsidiaries

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

Operating Income Before $ 25,258,547 27,126,526 38,926,724 57,838,678 60,012,843 34,571,147 57,376,196 71,842,573 51,812,905 62,054,944 Income Taxes

Net Inve Investment $ 54733 8 1 8 67,283,543 67,836,835 81,082,588 127,219,219 136,962,787 145,581,706 167,499,524 174,530,015 184,218,891 in inPriant « Equipment

'Earnings per share are based on weighted average shares outstanding during the respective years, adjusted for share distributions. The conversion of 41/2 % debentures and the exercise of outstanding stock options would not result in a significant dilution of earnings per share. Earnings per share shown above do not include 8(f of nonrecurring gain from sale of finance subsidiary in 1962 and 11 ij of non-recurring charge from discontinuance of color TV picture tube manufacturing operation in 1970.

28

MAJOR FACILITIES

Chicago, Franklin Park, Pontiac, and Schaumburg,

Phoenix, Scottsdale, Mes and Tempe, Arizona

Fort Lauderdale, Florida

Arcade, New York

Midland and Toronto, Can

Stotfold, England

Toulouse, France

Wiesbaden, Germany

Kowloon, Hong Kong Tel-Aviv, Israel Rome, Italy

Seoul, Korea

Guadalajara, Mexico City and Nogales, Mexico

Vega Baja, Puerto Rico

East Kilbride, Scotland

Geneva, Switzerland

Taipei, Taiwan

MAJOR PRODUCT LINES

Communications Division

Mobile and portable FM two-way radio communications systems

Radio paging systems

Communications control centers

Visual communications systems

Signaling and remote control systems

Car telephone systems

Microwave communications systems

Hospital products and communications systems Precision instruments Component products

Semiconductor Products Division

Digital integrated circuits (Bipolar, MOS and CMOS)

Linear integrated circuits

MSI/LSI integrated circuits

(Bipolar and MOS)

Silicon and germanium power and small signal transistors

Silicon rectifiers and annular trans

Field effect transistors

RF small signal and power transistor Thyristors, varactors, hybrid device

Zener and tuning diodes Functional circuits, optoelectronics

Consumer Products Division

Quasar color television Monochrome television

Console and component audio products Visual display monitors

Government Electronics Division

Aerospace communications systems

Tactical radio and microwave communications systems

Radar systems, data links, and display systems

Range positioning and navigation s

ASW tracking systems

Instrumentation products

Countermeasures systems

Missile guidance and drone systems Electronic ordnance devices

Automotive Products Division

Car radios

Tape players

Alternator charging systems

Electronic instrumentation

Solid state ignition systems

Corporate Marketing Units

Electronic video recording (EVR) p and program material

Institutional electronic managemen and entertainment systems Environmental, supervisory control security and urban communications systems

ill"'1 MOTOROLA