Annual Report 2016
Year ended March 31, 2016

In Tune for Further GrowthIntroduction

Contents
page

8

9 To Our Stakeholders
10 Yamaha’s Highlights
12	Message from the
President24	‌Board of Directors,
Corporate Auditors,
and Executive Officers

Management
Strategy

page

2

Cover Story

page

26

GrowthFoundation

27	Research andDevelopment andIntellectual Property
30	Corporate Social
Responsibility (CSR)
34	Yamaha’s Approach to
Human Resources
36 Corporate Governance
45 Risk Factors

1

page

48

Forward-looking statements

49		Management’s Discussion
and Analysis
64		Consolidated
Financial Statements

Financial
Section100

101 Investor Information
102 Our History
104 Yamaha Product History
106 Our Businesspage

110 Main Networks

About Yamaha

113 Website Guide

112 Stock Information

The plans and strategies regarding
Yamaha’s future prospects presented inthis annual report have been drawn up
by the Company’s management based on
information available at the time of writing and, therefore, are subject to risks
and uncertainties. Accordingly, ouractual performance may differ significantly from our predictions depending
on changes in the operating and economic environments, demand trends,
the value of key currencies, such as the
U.S. dollar and the euro, technologicaladvancements, and developments in
intellectual property litigation.

2

Yamaha Corporation Annual Report 2016

For over 125 years since its foundation, Yamaha has beendeveloping its business centered on sound and music to provide a diverse range of products and services. With its origins
dating back to a request for Yamaha founder Torakusu Yamaha
to repair an imported reed organ and the subsequent successhe had in manufacturing organs on his own, Yamaha has
worked to respond to a wide range of needs related to music,
education, and culture. Not only have we provided productsin the realm of traditional musical instruments, such as acoustic instruments, that draw upon highly specialized technologies, we have also leveraged cutting-edge digital technology

to develop digital musical instruments, as well as created completely new musical instruments by melding these traditionaland digital technologies. In this way, we have adapted to thetimes to create products that not only meet but exceed customer expectations. Through efforts such as these, we havedeveloped a wide variety of businesses both in Japan andoverseas and established ourselves as the world’s one andonly comprehensive musical instruments manufacturer,
thereby achieving steady growth.
Meanwhile, to realize further growth going forward
it is becoming essential to not only promote research andPlease refer to the “Research and Development and Intellectual Property” section on page 27 for details on the Company’s R&D efforts,
and the “Yamaha’s Approach to Human Resources” section on page 34 for details on the Company’s human resources-related efforts. 

The Source of Yamaha’s Growth3development (R&D) that leverages the technologies,
know-how, and sensitivities the Company has cultivated over its long history but also secure diverse
human resources, such as personnel who are active
on a global scale as well as engineers who work ina variety of specialty fields. At Yamaha, we view R&D
and human resources as the sources of our growth.
Accordingly, we will continue to establish appropriate
R&D systems and carry out human resource cultivation as we aim for sustainable growth going forward.

Ratio of Overseas Sales

Trends in R&D Expenses
Millions of yen

30,00022,819 22,149 22,561

66.7 %

25,439 24,793

20,00010,0000

12/3 13/3 14/3 15/3 16/3

4

Yamaha Corporation Annual Report 2016

Yamaha made solid accomplishments under YamahaManagement Plan 2016 (YMP2016), which ended in March
2016, such as realizing significant profit growth. Drawing onthese accomplishments, as well as the issues that became
apparent under the plan, we commenced our new mediumterm management plan, NEXT STAGE 12, on April 2016 withthe aspiration for further growth. The basic strategy of theplan is to “consolidate competitive superiority throughadding new value and differentiation” and we will work toenhance our lineup of attractive products to further strengthen
our connection with customers. At the same time, we will
make efforts to consistently provide solutions for new value.
In addition, we have adopted the management objective of
realizing an operating income ratio of 12% by fiscal 2019, thefinal year of the plan, and will engage in various initiatives tomeet this objective.

For specific details on our new medium-term management plan, please see the “Message from the President” section on page 12.

New Value Creation and
Differentiation

5

Management Objective: Operating Income Ratio

12%

%

15

9.3
10

6.3
5

0

2.5

13/3

7.0

YMP2016
14/3

15/3

NEXT STAGE 12
16/3

19/3

6

Yamaha Corporation Annual Report 2016

Keeping in mind our corporate slogan of“Sharing Passion &Performance,” we have held repeated discussions from a
medium- to long-term perspective on what kind of company
we should aspire to be, including what we should aim for in
the future and how we should grow. As a result of these­discussions we adopted the following medium- to long-term
management vision with the hope of becoming a company thatoffers products and services that truly satisfy our customers.
Medium- to Long-Term Management Vision: Becoming an
Indispensable, Brilliantly Individual Company—Boosting Brand
Power to Become a Highly Profitable Enterprise

Please refer to the “Our History” section on page 102. 

The Road to Becoming
an Indispensable, Brilliantly
Individual Company

7

The new medium-term management plan, NEXT STAGE 12,
determines important strategies that we will engage in overthe following three years to realize this medium- to longterm management vision.
Going forward, Yamaha will create new value and offer
products that exceed customer expectations by leveraging thesources of its growth—i.e., R&D and human resources—andby continuing to take on innovative challenges with a highlevel of passion. In doing so, we will promote business­activities that constantly focus on creating excitement forour customers.

Become an indispensable,brilliantly individual company
Boosting brand power to become a highly profitable enterprise(operating income ratio of 20%)

New Medium-Term Management Plan

Increase Brand Power and Show Stronger Profitability as a Result

12

Operating Income Ratio of% (Target for FY2019.3)
Overcome yen appreciation trend and enhance profitability

8

Yamaha Corporation Annual Report 2016

Management Strategy
9		To Our Stakeholders

10		Yamaha’s Highlights

12 

		Message from the President

24 

Board of Directors, Corporate Auditors,
and Executive Officers

Management Strategy

Growth Foundation

Financial Section

To Our Stakeholders
My name is Takuya Nakata, and I am the President and Representative
Director of Yamaha.
Yamaha commenced its new medium-term management planNEXT STAGE 12 in April 2016. Under the previous plan, YamahaManagement Plan 2016 (YMP2016), the Company reached its numerical targets for net sales, operating income, and operating income ratioin fiscal 2015—the second year of the plan—which was one year aheadof schedule. In the plan’s final year, the Company continued to achievesolid results, realizing all of its numerical targets, including the target
for return on equity (ROE). At the same time, Yamaha was able to identify issues for the future. With NEXT STAGE 12, Yamaha will work toaddress these issues and achieve further growth.
At the same time as announcing NEXT STAGE 12, we adopted
the medium- to long-term management vision of “Becoming an
Indispensable, Brilliantly Individual Company—Boosting Brand Powerto Become a Highly Profitable Enterprise.” To realize this vision andfurther enhance corporate value, we will steadily engage in initiatives
in the first year of the plan, fiscal 2017, based on strategies formulated
to produce solid results.
Further, for the Company to improve brand and corporate value
over the medium to long term and realize sustainable growth, theentire Yamaha Group must make unified efforts under the corporate
philosophy to continue to create attractive products and services thatexceed the expectations and imagination of customers. To this end,
we have renewed our efforts to obtain a thorough understanding ofcustomer perspectives and revised the Yamaha Philosophy, which acts
as a cornerstone for the Group’s principles. In addition to the Corporate
Slogan, Corporate Philosophy, and the Yamaha Way, we added twoconcepts to the Yamaha Philosophy: Yamaha Quality, which exemplifies our insistence on quality in products and services, and Customer
Experience, which demonstrates our unique ability to stimulate theemotions and senses of customers through our products and services.
By continuing to offer products and services developed based on the
newly revised Yamaha Philosophy, I truly believe we can accentuate
our unique qualities and further enhance the Yamaha brand.
Leveraging the technologies, know-how, and sensitivities wehave cultivated over our long history, our global and diverse humanresources will continue to create attractive new products and services.
We ask that all our stakeholders continue to look forward with anticipation to the future of Yamaha.

Takuya Nakata
President and Representative Director

About Yamaha

910Yamaha Corporation Annual Report 2016

Yamaha’s Highlights

Yamaha Market Share by Musical Instrument(based on amounts for the year ended March 31, 2016, Yamaha estimates)

Global Market Size for Musical Instruments

Approx.

Yamaha Market Share for Musical Instruments¥860 billion

String andpercussion instruments(excluding guitars)

25 %Pianos

Guitars

Digital musicalinstruments

Wind instruments

Key Financial Figures
Year ended March 31, 2016

Net Sales

ROE¥435.5 billion

10.1 %+0.8 %+2.0 points

Operating Income

Free Cash Flow

¥40.7 billion¥43.0 billion+34.9 %

Segment Sales Composition
Others

5.6%
Electronic
devices

3.0%Musicalinstruments+114.6 %64.0%
Audio equipment

Net Income¥32.6 billion+30.9 %

27.4%

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Yamaha’s Business Domains
Enriched Lives

Comfortable SocietyMusical Instruments

Audio Equipment

Industrial Machinery/
Components
and Others

Technology that Crosses
Over Sound and People
Yamaha’s core competencies

Sales Proportion by Region
Japan

North America

33.3 %

20.3 %

Asia, Oceania,
and other areas

Europe27.5 %

18.9 %

11

12

Yamaha Corporation Annual Report 2016

Message from the President

Takuya Nakata
President and Representative Director

In Tune forFurther Growth

Meanwhile, in the global market, while we expectedsales growth in China and emerging countries, ouroverall performance in these countries was below
expectations due largely to stagnant economic conditions in South American countries as well as in Russia.
On the other hand, solid sales achieved in Europe andNorth America—markets in which we anticipatedstable growth—were able to offset unfavorable sales inemerging countries, with the strong performance of ourbusiness in the United States, in particular, contributing
significantly to this. As a result, we recorded robust
global sales overall.
Under these conditions, net sales in fiscal 2016
were up 0.8%, to ¥435.5 billion, despite decreased
revenue from music schools caused by the transfer ofmanagement to the Yamaha Music Foundation. In addition, we realized significant year-on-year increases inoperating income and net income, with operating
income climbing 34.9%, to ¥40.7 billion, and net
income attributable to owners of parent rising 30.9%,
Net Sales

Operating Income /Operating Income Ratio

Billions of yen

Billions of yen

500

50

410.3

432.2 435.5

400

The Company benefited from favorable exchange rates,
and we were able to reach the quantitative targets laid out
in YMP2016. However, I believe that the solid results we

8

30.1

26.0

30

200

20

4

100

10

2

14/3

15/3

16/3

ROE

0

14/3

6

15/3

16/3

Net Income per Share

%

Yen

15

200

168.9012

achieved in the plan were the culmination of the initiatives we steadily promoted thus far, and not solely due

7.0

300

0

Overview

9.2
9

10.1

150

118.268.1

128.75100

to these favorable exchange rates.
6

Looking back on the final year of YMP2016, our sales
growth in the Japanese market was on a par with theprevious year, much as we had anticipated.

10

40.7
40

6.3

Reflection on the Previous Medium-Term
Management Plan, YMP2016

%

9.3

50

3

0

14/3

15/3

16/3

0

14/3

15/3

16/3

0

Management Strategy

Growth Foundation

to ¥32.6 billion. These increases were attributableprimarily to an improved profit margin in the musicalinstruments business, which resulted from an improved
product model mix, reinforced efforts toward priceadjustments, and comprehensive initiatives to lower
manufacturing and other costs. Further, the recovery in
AV products, which performed poorly in the previous
fiscal year due to a delayed response to such market
changes as the expansion of network audio products,
and the continued healthy sales of PA equipment,
which are always anticipated to be a driving force for
growth, also contributed to these increases. Although
we had already reached YMP2016’s numerical targets
for net sales, operating income, and operating income
ratio by fiscal 2015—a year ahead of schedule—thanks
to the positive effects of structural reforms and favorable exchange rates, we continued to make earnest
efforts Companywide in the final year of the plan,
resulting in our favorable performance for fiscal 2016.

 ccomplishments of Key Business Strategies andAIssues Still RemainingU nder YMP2016, we made efforts in four key businessstrategies. While targets laid out in the “expanding sales
in the electronics business domain” and “strengthening
cost-competitiveness” strategies were accomplished,issues still remain in the strategies of “accelerating
growth in China and emerging countries” and “developing new businesses.”

The first strategy that we made significant accomplishments in was “expanding sales in the electronics
business domain.” In this domain, we took various
initiatives in the three fields of digital keyboard instruments, professional audio equipment, and informationand communications technology (ICT) devices. The¥151.7 billion we recorded in sales greatly surpassed
our target of ¥134.6 billion. The main factor behind thissolid performance was the fact that the high fundamental performance of our keyboards and sound generators, especially our digital pianos, received significant
praise around the world, allowing us to realize sales
growth on a global scale. For professional audio equipment, which will play a major role in our future growth,
we advanced the introduction of new digital mixers,
primarily into the European market. The positive

Financial Section

About Yamaha

feedback we received for these digital mixers should
tie into further sales growth. Turning to the consumer
audio market, we faced extremely difficult conditionsin the previous fiscal year due to the fact that we wereunable to fully respond to changes in consumer
demand, including the expansion of network audio
products. However, we have been launching­network-based products since fall 2015 and I believe
we will begin to see positive results during the three
years of the new medium-term management plan.
The next strategy in which we had success was“strengthening cost-competitiveness.” Even before theinitiatives we implemented in YMP2016, we madeefforts to strengthen cost-competitiveness, including
structural reforms, during the three years of YamahaManagement Plan 125 (YMP125), which began in
fiscal 2011. I believe we have seen solid results fromthese efforts and the efforts made under YMP2016.
Specifically, we took initiatives to reduce fixed costs
through structural reforms and improve the operating
ratio at our manufacturing bases through multi-item
production, in addition to working to bring down procurement costs. As a result, we reduced costs by ¥16.8
billion during the three-year period covered by YMP2016,
which exceeded our target of ¥15.0 billion.
While we made strides in the aforementioned
strategies, there are also strategies where issues still
remain. One of those strategies is “accelerating growthin China and emerging countries.” In regard to musicalinstrument sales in China, I consider the sales growth
we saw in musical instruments besides pianos, such as
digital musical instruments, wind instruments, and guitars, to be an accomplishment made under this strategy.
Despite the success we had in China, the impact of
economic stagnation in South American countries andin Russia, as well as a delay in business investments,
resulted in overall sales of ¥108.2 billion, which wasjust slightly lower than our target of ¥110.2 billion. The“developing new businesses” strategy presented us withthe future challenge of accelerating the pace of synergy
generation with U.S.-based Revolabs, Inc., and Line 6,
Inc., which were included in the Company’s scope of
consolidation in April 2014. In addition, while weestablished a business incubation system in-house, itwill take time for this system to produce positive results.

13

14

Yamaha Corporation Annual Report 2016

Message from the President

The New Medium-Term Management Plan,
NEXT STAGE 12

Awareness of the Business Environment
While uncertainty remains in the global macroeconomic
environment, gradual economic growth is expected overthe medium term.

When we look at the global macroeconomic environment, I believe we are seeing a gradual recovery occurring over the medium term. In particular, while SouthAmerican countries and Russia are currently facing difficult economic conditions, the upcoming three years
should set these economies on a course for recovery.
Meanwhile, the spread of Internet of Things (IoT),
one of the social phenomena that will likely have amajor impact on the Company’s business, is accelerating the pace of coordination between people, goods,
and things, and I believe that IoT will offer new value
and excitement going forward. With the opportunities
that IoT present us, I believe it is time to start examining ways to incorporate network technology into ourmusical instruments and audio equipment. In fact, thepossession of network technology, in addition to theacoustic and digital technologies we have maintained
over the years, will likely be the key to future growth.

organization to a function-specific one. Under
YMP2016, our business performance continued to besupported by the positive impact of exchange rates,
thereby allowing us to increase our profits.
As we move forward, we will boost profitability byaiming to further improve the strength of the Yamaha
brand. Guided by this ambition, we adopted“Becoming an Indispensable, Brilliantly IndividualCompany—Boosting Brand Power to Become a Highly
Profitable Enterprise” as our medium- to long-term
management vision, and, as a future target, we intend
to grow into a highly profitable company with an operating income ratio of over 20%. While working towardrealizing this vision, we aim to reinforce our brandpower under NEXT STAGE 12 and improve our profit

Net Sales and Operating Income Targets
Net Sales
Billions of yen

FY2016.3 435.5
Impact of exchange rates–20.5

Transfer of Japan
music school business–4.0

Musical instruments
business
Audio equipment businessWe have adopted“Becoming an Indispensable, Brilliantly
Individual Company” as our medium- to long-term management vision and are implementing the new medium-+24.0

By business domain

Industrial Machinery/
Components and Others+6.5

FY2019.3 465.0+24.0

Mature markets
ChinaOutline of NEXT STAGE 12+23.5

By region(musical instruments
and audio equipment)

+10.0
+13.5

Emerging countries*Exchange rate assumptions
	Fiscal 2016: ¥120 per US$1; ¥133 per €1
Fiscal 2019: ¥115 per US$1; ¥125 per €1term management plan, NEXT STAGE 12, to act as a
steppingstone toward achieving this vision.

Operating Income
Billions of yen

If we reflect on past medium-term management plans,
YMP125 (fiscal 2010–fiscal 2013) initially aimed forsignificant growth. However, with the occurrence of
the Lehman collapse during the first year of the plan’s
implementation, we had no choice but to shift the direction of the plan to focus on restructuring our business.
We positioned the three-year period of the following
plan, YMP2016 (fiscal 2013–fiscal 2016), as the timeto achieve results from the restructuring initiatives weengaged in under YMP125. Accordingly, we shifted theCompanywide organization from a business-specific

FY2016.3 40.7
Impact of exchange rates
Strategic investment
Improved gross margins
Cost reductions
Profit from increasein actual sales
FY2019.3 55.0

*Exchange rate assumptions
	Fiscal 2016: ¥121 per US$1; ¥134 per €1
Fiscal 2019: ¥115 per US$1; ¥125 per €1

–5.0
–5.0
+7.0
+8.0
+9.3

Management Strategy

Growth Foundation

ratio as a result. Accordingly, our basic strategy is to“consolidate competitive superiority through adding
new value and differentiation.” Under YMP2016,
we were able to recover profitability, realizing an
operating income ratio that exceeded 9%. With NEXT
STAGE 12, we are targeting an operating income ratio

Positioning of
the New Medium-Term Management Plan,
NEXT STAGE 12

Financial Section

About Yamahaof 12% and will work to improve the ratio average 1%
each year over the next three years. We will also aim to
maintain ROE at the 10% level and EPS at the ¥200
level. The number “12” is included in the title of the
new plan to ensure that all employees are aware of
our aim to increase the operating income ratio.

Become an indispensable,brilliantly individual company

New Medium-Term Management Plan
2016~20192013~20162010~2013

YMP125
Rebuild business platform
through restructuring

YMP2016
Sharply increase profits throughbusiness restructuring, cost
reduction, improved gross margins
in musical instruments business, etc.
Operating Income Ratio

Increase Brand Power andShow Stronger Profitability as a Result
Operating Income Ratio

12%(Target for FY2019.3)

Overcome yen appreciation trend
and enhance profitability

9.3% (FY2016.3)

Operating Income Ratio

2.5% (FY2013.3)

Basic Strategy and Management Targets
Our basic strategy is to “consolidate competitive superiority through adding new value and differentiation.”

Under NEXT STAGE 12, our basic strategy is to “consolidate competitive superiority through adding new value
and differentiation.” To succeed in this strategy, we willfurther strengthen the connection we have with ourcustomers and enhance the attractive quality of our
products. At the same time, we will work to constantly
provide solutions for new value. Further, we have put into
place three specific targets to help us reach the greatertarget of an operating income ratio of 12%. These targets
are to further raise profitability of the musical instruments business, expand the audio equipment businessto rival the musical instruments business in the future,and establish a platform for the industrial machineryand components business to act as the third key business domain following musical instruments and audio
equipment. Due to the fact that musical instruments
are a business to consumer (BtoC) business, and audio
equipment is both a BtoC and business to business(BtoB) business, the primary reason behind positioning
the industrial machinery and components business as
our third key domain is that we believe it is necessary
to expand our BtoB business in order to establish
a more balanced customer portfolio.

Basic Strategy
Consolidate competitive superiority throughadding new value and differentiation
Further deepening our connection with customers, Raise attractive
quality, and Always offer solutions with new value added

Management Objective (over 3 years)
Operating Income Ratio of

12% (FY2019.3)• F urther raise profitability of musical instruments business(aim for operating income ratio at the 15% level)• E xpand audio equipment business to rival musical instruments
business in the future (actual sales growth of 20%)• E stablish platform for industrial machinery and components
business as third key business domain following musicalinstruments and audio equipment

15

16

Yamaha Corporation Annual Report 2016

Message from the President

Four Key Strategies

in spring 2018—and provide additional opportunities
for further enhancing the efficiency of our development activities, in addition to encouraging exchanges
between engineers and collaboration both internallyand externally. At the same time, to accelerate the paceof our efforts to fuse technologies, we will work toensure that the center maintains the necessary environment to facilitate various kinds of high-level research
related to sound.

We have adopted four key strategies in NEXT STAGE 12
in order to realize the management targets that we haveestablished.

1.	Develop Products with Distinct Individuality
	We will develop products with new, original value
through the fusion of technologies.

I believe that the strength of the Company lies in its
extensive and highly specialized technological capabilities that can create a diverse array of products. We
possess unique technologies that span a wide range offields, from materials to networks and communications.
By fusing these diverse technologies together, we areoffering our customers products with new, originalvalue that cannot be imitated by competitors. One
example of this fusion is our hybrid instruments thatmeld traditional acoustic instruments, which create natural sounds, with digital instruments, which utilize
innovative sound generation and signal processing
technologies.
Further, we are currently constructing a new R&D
building, Building No. 21, on the grounds of our headquarters to complement existing buildings, No. 18 and
No. 20. These three buildings will function together as
the “Yamaha Innovation Center.” The center will bring
together a large number of engineers—primarily at
Building No. 21, which is scheduled to be completed

2. Enhance Customer Interaction
	We will implement various policies geared toward
consumers as well as our BtoB customers and corporate clients.

At Yamaha, we have yet to truly emphasize the idea ofstrengthening and expanding our relationship with customers. Until now, I believe our basic way of thinking
was that if we make quality products that leverage ourcultivated technologies and know-how then those
products will sell. In order to become an enterprisethat is valued by society as well as realize sustainablegrowth, I believe it is necessary for us to change ourbasic way of thinking. This is due to the fact that, nomatter how superior our products are, if we do notproperly convey that point to our customers then they
will not be interested. Accordingly, it is important for
us to reinforce the idea that not only do we need todeliver high-quality products to customers but that we

Develop Products with Distinctive Individuality
Add original value to excellent basic functions and develop products others cannot imitate
Fusion of Technology
Joy

BeautyConfidence

Discovery

Evaluation technology
Mechatronics technologies
to express minute movements

to scientifically assess human sensitivities
and sound recognition

High-quality, easy-to-operate

network technologies

Sensing technologies

Signal processing technologies

to accurately track motion

for rich sound processing

Materials/analysis technologies
to bring out the best qualities in raw materials

Technology that Crosses
Over Sound and People

Sound generator technologies
enabling diverse expression
othersManagement Strategy

Growth Foundation

Financial Section

17

About Yamaha

of our sales networks. For our BtoB customers and­corporate clients, we will work to fully understand thespecial characteristics of their business and enhancethe value we offer them as a solutions provider. We will
also expand our customer base by upgrading our product appeal as well as our ability to provide support. To
increase the number of accounts we have with audio
contractors, we will reinforce our personnel systems
and locations for customer support.

also have to properly convey that quality to them. Thiskind of reflection on our basic way of thinking led to
the formation of this strategy.
Regarding consumers, we aim to develop marketing activities that cater to diverse regions and needs aswell as expand our sales network. Specifically, we will
acquire new sales channels in mature countries andincrease our contract dealers by 10% over the next
three years in emerging countries through the expansion

Forge Stronger, Broader Ties with Customers
Consumers

Corporate Clients and B2B Customers

Respond to market expansion and diverse needs

Develop value we provide to customers asa solutions vendor• Expand sales channel
Increase the worldwide number of contract dealers by 10%
Mature markets: Secure channels through other industries
Emerging countries: Expand from urban to regional areas• Promote music popularization activity to suit local needs• Strengthen personnel and service bases to improve support
to customers
Get Closer toCustomers

Join activities with public and corporate sectors
ASEAN region: Promote music education in public elementary schools
Latin America: Support local youth orchestra• Expand products and services to meet customer needs
Offer new solutions in tune with social changes
	Better reflect customer needs in product development throughsupport activities
	Develop and provide new product offerings in the industrial
machinery and components business3. Continually Reduce Costs

production bases and work to reorganize production
processes to realize a comprehensive production
system where manufacturing and assembly are carriedout at the same location. In addition, we will introduce
new production methods that boost efficiency. In theseways, we will focus our efforts on reducing costs.

	We are moving forward with efforts to reduce costsby ¥8 billion (net) over the three-year period.

Over the three-year period of NEXT STAGE 12, we
expect to reduce costs by ¥8 billion (net) through thecontinuation of cost-reduction efforts we made under
YMP2016. We will engage in various initiatives to bring
down costs, including the shift from structural reforms
in Japan to a sharp focus on our overseas reforms
including the reorganization of our production bases.
For example, we are already combining functions atseveral of our 10 overseas productions bases so thatthey can produce a variety of products, including musical instruments, AV products, and PA equipment, rather
than being limited to one production item. This has
allowed us to use fixed costs effectively, flexibly formulate plans regarding changes in production, and reinforce our ability to respond to risk. Going forward,
we will promote these types of initiatives at other

Increase number of accounts to audio contractors by 50%
	Increase worldwide number of technical and other staff supporting
audio contractors by about 80

Continually Reduce Costs
Billions of yen

41.0

Costs in FY2019.3
estimated at current
cost rates
Increase in labor costs
at overseas plants
Reorganization of
production processes
Reduction inpurchasing costs
More efficient
production
Improve productivity of
indirect operations

33.0

FY2019.3
target costs+6.0
Absorb ¥6 billion cost
increase and pursue
further manufacturing
cost reductions

–2.5
–3.0

–5.5

–3.0
¥8 billion cost
reduction (net)¥14 billion cost
reduction (gross)18

Yamaha Corporation Annual Report 2016

Message from the President

4 Strengthen Global Business Platforms
	We will strengthen our human resources development
as well as infrastructure.

Overseas sales already account for two-thirds, or 67%,
of Yamaha’s entire sales, and the Company has 51 overseas locations in 32 countries. In this setting, I believe
we must work to reinforce our marketing activities andreduce costs on a global basis. As well, to move forwardwith enhancing our operating foundation I also feel aneed to leverage human resources who are globally

active. To this end, we will manage key Group talentaround the world under consistent standards and promote personnel deployment that puts the most qualified
person in the position where they can be best utilized.
In addition, we will establish roughly 200 key positions
at Group companies and promote human resources
development in accordance with each succession plan.
Also, we will promote initiatives to optimize our IT,
logistics, finance, and administrative functions on a
global scale, including establishing regional IT control
functions in Europe, the United States, and Japan (Asia),
and creating a 24-hour surveillance and service system.

Develop Human Resources to Support Global Business Operations and Reinforce Infrastructure
Facilitate international careers

Proportion of total sales
made overseas• Establish global core positions (approx. 200) to implement global grading system• Promote cross-border personnel assignment• Select candidates for core positions of the next generation and promote development program

67%

Optimize IT, logistics, finance, and administrative functions on a global scale• Establish regional IT headquarters in three regions: Europe, U.S., and Japan (Asia)- Establish 24-hour surveillance and service system using resources in the three regions• Build efficient logistics system- Aim for logistics cost reductions through optimizing distribution network, improving efficiency of packing and lading,centralizing procurement distribution, and promoting application of preferential tariffs• Prepare for introduction of International Financial Reporting Standards (IFRS) * Consider introduction of IFRS in fiscal 2020
- Aim for improvement in possibilities for international comparability of financial information and uniformity in Groupfinancial information• Strengthen global support systems of HQ corporate staff- Improve management level of regional offices in all countries

Major Business Strategies

Net SalesWe will engage in a wide range of initiatives in the musi-

Billions of yen

cal instruments, audio equipment, and industrial machinery and components businesses, which we position as
strategic business domains.

1.	Musical Instruments
	Looking at the market for musical instruments from ashort-term perspective, we are not likely to see significant sales growth. As such, more than valuing sales, ourgoal is to establish a highly profitable business with anoperating income ratio of 15% level. To realize thisgoal, we will leverage our global sales system and thescale of our development as a comprehensive musicalinstruments manufacturer to promote region-specificinitiatives.

Overseas business bases

51

in 32 countries*(* As of April 2016)

FY2016.3 277.5
Impact of exchange rates
Transfer of Japan music
school business, etc.

–13.5
–6.0

Digital musical instruments+13.0

Pianos+4.5

Wind and educational instruments/
string and percussion instruments(excluding guitars)+4.0

Guitars/accessories+4.0

FY2019.3 283.5* As of fiscal 2017, the soundproof room business which was previously reported
as part of the musical instruments segment was included in the audio equipment
segment. Accordingly, figures for fiscal 2016 have been adjusted to reflect thesesegment composition changes.

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Region-Specific Initiatives

Operating Income
Billions of yen

China
FY2016.3 31.5

Impact of exchange rates

Operatingincome ratio

11 %Strategic investments–1.5

Revision of selling prices
and product mix

+6.0
+5.5

Cost reductions
Increase due to risein actual sales–3.5

Operatingincome ratio

15 % level+3.0

FY2019.3 41.0

Reinforcing Brand Appeal
Leveraging the world’s largest development scale in themusical instruments industry, we will strengthen our
technologies and bolster the competitiveness of our
products. We will enhance the essence of acoustic
instruments by using our extremely unique evaluation
technology for assessing human sensitivities—a corecompetence of the Company—thereby reaching newheights in sound, expressiveness, and playing comfort.
Moreover, we will further evolve the expressive capabilities of our digital instruments by using our expertisein acoustic instruments to create new technology andsubsequently fusing that technology with mechatronics
and audio technologies. In this way, we will develop
musical instruments that are on a level that our competitors are unable to match. In addition, we willcontinue to offer new excitement by combing smart
devices and networks with our digital instruments,
which in turn will innovate the value that only these
instruments can provide.
We will also work to strengthen our ability to offer
brand new ideas for musical instruments through thefusion of acoustic and digital technologies. These ideas
will allow us to provide value unheard of before. For
example, regardless of the time or place, we can makeit possible to experience a genuine acoustic performance, even under a restricted environment. Or, we
can draw on our new TransAcoustic™ technology for
pianos, which recreates sound by vibrating the piano’ssoundboard, to realize an acoustic piano performanceusing digital sounds. In these ways, we will be able
to achieve an overwhelming level of productdifferentiation.

In China, we aim to increase our share in the piano
market. Following the increase in China’s GDP per
capita, the piano market is shifting to higher price ranges.
Accordingly we are increasing our share in the Chinese
market. To steadily capture demand for high-value-added
piano models going forward, we will work to improve ourbrand recognition and continuously promote the expansion of our sales networks into provincial cities. In addition, we will take initiatives to grow in the digital piano
market, where demand is increasing on a global scale.
Emerging Countries
Under YMP2016, we
made efforts to expand
Yamaha Music Schools
in emerging countries.
However, we were
Joint display of Yamaha guitar and motorunable to achieve thecycle in Malaysia
results we expected. In
the new medium-term
management plan,
while we intend to continue efforts to expand
the Yamaha brandthrough our music
Yamaha concert at 30th Anniversary of
Yamaha Motor in Taiwan
schools and increase
opportunities for people to enjoy music, we will notnecessarily insist on using methods we have cultivatedin Japan. Rather, we will develop educational programs
that suit local needs and promote activities to popularize musical activities. Specifically, in the ASEAN region
we plan to implement a variety of initiatives such as
developing music and extracurricular lessons, cooperating with local schools and public interest corporations
to provide musical instruments and dispatch teachers toour existing schools, and offering new programs at theseschools. In fact, we have already begun the ­process of
implementing these initiatives and are receiving highpraise. Further, we aim to have a total of 100,000 s­ tudents
participate in our Music Time Program, which we carryout in collaboration with music classes at elementary
schools, over the next three years.
In addition, we will work together with Yamaha
Motor Co., Ltd., to improve brand recognition in countries such as India, Taiwan, Vietnam, and Malaysia, and

19

20

Yamaha Corporation Annual Report 2016

Message from the President

have already started conducting collaborative initiatives
in India. In these initiatives, we dispatch musicians to safe
riding programs and mobile stores in regions throughout the country to demonstrate our musical instruments. While providing information on motorcycles toadults at these locations, we offer opportunities forchildren to enjoy music through these initiatives.
Mature Countries
The guitar market is the largest
musical instrument market in theworld. The reality of the situationis that Yamaha’s stake in thismarket is relatively small compared to the market’s overall size.
Giving consideration to the factthat consumers often select a
Mike Sternguitar based on its brand, we will
work to expand our share in theguitar market by taking initiatives
ahead of other companies to further establish our brand name. For
the first time in 25 years, welaunched a new series of electricguitars in January 2016 entitled
REVSTAR™, focusing particularly
on design and surface finishing.
David Bilger
Going forward, we will develop
similar products with distinct individuality that arehighly differentiated from those of other companies.
Not restricting ourselves only to guitars, we will
focus on improving our brand power by strengthening
our relationships with musicians. As further establishinga foundation for the Yamaha brand in mature countries,
from where Western musical culture originates, will inturn lead to an increase in the number of Yamaha fansaround the world, including emerging countries, wewill make wholehearted efforts to do so.

Professional Audio Equipment
We will accelerate sales growth for professional
audio equipment by expanding applications of thisequipment for various venues. Until now, we havefocused on developing PA equipment, which is used
for live concerts, as well as certain products related to
installed sound. However, around the world, PA equipment is being used in small-scale commercial spaces,such as cafeterias and retail stores. As such, we began
introducing products into this market in the later end of
YMP2016 and have been receiving an extremely positive response from consumers. In light of this, we plan
to branch out from professional audio equipment
domains in which we have been making efforts andpromote initiatives that respond to new markets byincorporating communications technology into our
products. The market for background music (BGM) at
retail stores, where providing a high-value-added atmosphere through sound quality and services is becoming
increasingly important, is a specific business domainthat we are aiming to enter into further going forward.
In addition, the market size for audio equipment forcorporate conference rooms is nearing ¥400 billion.
Net Sales
Billions of yen

FY2016.3 120.8

Professional
audio equipment

+17.2

20 %

AV products+7.0

FY2019.3 138.0

Operating Income
Billions of yen

FY2016.3 8.7
Impact of exchange rates

Operatingincome ratio

7%

Going forward, we are anticipating significant sales
growth in professional audio equipment. Accordingly,
we will expand our business domain and work toaccelerate the pace for overall growth in audio equipment sales by combining technological innovations
with enhanced customer support.

–1.5
–3.5

Strategic investments

2.	Audio Equipment–7.0

Actualsales growth

Impact of exchange rates+2.5

Cost reductions
Increase due torise in actual sales+5.8

FY2019.3 12.0

Operatingincome ratio

9%* As of fiscal 2017, the soundproof room business which was previously reported
as part of the musical instruments segment was included in the audio equipment
segment. Accordingly, figures for fiscal 2016 have been adjusted to reflect thesesegment composition changes.

Management Strategy

Growth Foundation

In this market, we will be able to demonstrate ourstrengths by fusing audio equipment with communications technology. As this domain is expected to expand
significantly around the world, including emerging
countries, we believe it to be a major business

Financial Section

About Yamaha

opportunity. Also, while custom installation of audio
equipment in residential spaces has yet to catch on in
Japan, it is becoming a major market in countries suchas the United States. Accordingly, we aim to increase
sales in this market by expanding our product lineup.

Various Venues
Live performances/concerts

Background music in retail stores

Corporate conference rooms

Residential spaces (custom installation)

Market scale after three years

Market scale after three years

Market scale after three years

Market scale after three years¥550 billion
Market growth in three years+8%¥50 billion
Market growth in three years+12%

Established Yamaha strengths

Moreover, we will meld our signal processing
technology, which we have long cultivated throughour experience with live concerts, with network technology in an effort to realize audio system innovation.
Specifically, we will actively apply our PA equipmentin the new venues mentioned earlier while working to
improve the usability of our audio systems. Also, as a
total solution we intend to offer our customers to create
enhanced audio systems that integrate audio input (i.e.,
microphones) and audio output (i.e., speakers) into one
complete system by working together and developing
alliances with other companies.
In conjunction with expanding the areas in which
our PA equipment are used, we will increase oursystem engineering and sales staff, primarily in Europe,
the United States, Japan, and the ASEAN region. At thesame time, we plan to increase the number of audio
contractors who partner with the Company by 50%
with the aim of enhancing customer support. Until
now, IT and PA equipment contractors have operated
separately from each other. However, as mutual operations with these contractors are likely to increase going
forward, we will actively provide them with support inhopes that they develop good relationships with us.

¥400 billion
Market growth in three years¥100 billion
Market growth in three years

+12%

+9%

Domains for further expansion

Additionally, I believe that the communications
and wireless technology of our subsidiary Revolabs willcontribute greatly to the kind of product development
for professional audio equipment we are looking topursue going forward.
Consumer Audio Products
In the second year of YMP2016, sales of consumer
audio products declined sharply, resulting in a poor
business performance. However, this decline does notmean that the audio market is shrinking overall. There
have been major changes in the demand structure ofcustomers as well as in the way they listen to music.
Accordingly, manufacturers who have accurately
assessed these changes have been increasing theirshare in the market, while many other manufacturers,
not just Yamaha, have been unable to realize a proper
response. In the final year of YMP2016, we launched
the strategic product MusicCast™, which realizes anenvironment where all users can easily enjoy a variety
of sound sources in every room of their home, as a new
product that responds to the changing needs of themarket. Accordingly, we will reinforce the MusicCast
brand and focus our efforts on activities to market it,
thereby increasing the product’s sales.

21

22

Yamaha Corporation Annual Report 2016

Message from the President

3. Industrial Machinery and Components
	Shifting from a semiconductor manufacturer to a provider of solutions, we aim to develop the industrial
machinery and components business so that it can act
as our third key business domain.

NEXT STAGE 12 positions industrial machinery andcomponents as a business that we can develop to alevel where it will act as our third key business domain.
As such, we aim to establish a solid foundation for thebusiness during the three-year period of the plan.
When it comes to expanding this business, we areaware of the importance of leveraging the diverse technologies that we have established over the years. We
aim to shift to becoming a solutions provider that offersa total package of products, including not only semiconductors but also the microphones and speakers
that are incorporated in the systems, as well as signal
processing technology. By making this shift, we will
help shorten the time it takes for our clients to commercialize their products. To go into detail, we will begin
by developing products geared toward the market for
onboard devices and then work to expand our customer base. By their very nature, automobiles make fora rather poor sound environment. As such, we intend
to offer automobile and other manufacturers a packageof products—including semiconductors—that provide
solutions to counter this. At the same time, we areworking to develop thermoelectric solutions that help
resolve issues related to exhaust gas and fuel consumption. In this way, we will promote initiatives to realize
an environmentally friendly motorized society going
forward.
In addition, we are moving forward with the development of products for the home healthcare market.
Leveraging the sensor technologies that we employ in
our musical instruments, we will provide new products
and solutions that contribute to a healthy daily life forthe consumer. Further, we plan to introduce new products in the industrial equipment market. We will work
to launch flexible printed circuit (FPC) detection devices
that offer enhanced detection capabilities as well as
detection systems that use hydrogen to measure leaks.
At the same time, we will make efforts to enhance ourcustomer support systems in China and Taiwan.

In regard to the onboard devices market, we will
focus our efforts on Japan, North America, and Europe.
Giving consideration to electronics manufacturing services (EMS), the markets of China and Southeast Asian
countries will be our target for industrial machinery.
Accordingly, we will establish customer support
systems not only in Japan but also in Southeast Asia
and North America. As the industrial machinery andcomponents business does not deal with products for
consumers, it will take time before we begin to see
results from these efforts. Nonetheless, we aim torealize profitability in this business in the last yearof NEXT STAGE 12.
Net Sales
Billions of yen

FY2016.3

24.4

Expand product lineups
and customer base

Sales growth

FY2019.3

+7.5

20 %

Home appliancesand others

–1.9

30.0

Operating Income
Billions of yen

FY2016.3

0.2

Operatingincome ratio

Improvement in cost andproduct mix +0.2

+1.1

Increase due to rise in sales
FY2019.3

1%

1.5
Operatingincome ratio

5%

Initiatives in ESG
We view the environment, society, and governance (ESG)related initiatives as an important strategy of NEXT STAGE 12.
As such, we will promote multifaceted efforts toward ESG.

Under NEXT STAGE 12, we are promoting a wide
range of efforts geared toward ESG. We have been promoting initiatives within our business activities that
focused on the needs of society from the perspective of
ESG. By once again adopting ESG as a major theme ofour medium-term management plan, we are able toconvey to our stakeholders that we are continuing topromote business activities that give consideration toManagement Strategy

Growth Foundation

Financial Section

ESG. I believe that management that does not consider
ESG is a type of management that will no longer beneeded by society in the future. With that belief, wewill steadily implement the ESG-related initiatives laidout in NEXT STAGE 12.

Returning Profits to Shareholders
After allocating generated cash to investments, we will
work to provide returns to shareholders in a flexible
manner.

During the three-year period of NEXT STAGE 12,
we plan to generate ¥150 billion in cash flows fromoperating activities.
As for the breakdown of growth investments, we
intend to make a capital investment of ¥40 billion to
support our existing business. In addition, we also plan
on a strategic investment of ¥50 billion. With the aimof creating new value, the strategic investment will be
put toward reorganizing our manufacturing bases, constructing the Yamaha Innovation Center, and conducting M&As and capital tie-ups. After allocating thesefunds to investments, we aim for a consolidated payout
ratio of 30% or more. While we adopt a continuousand stable dividend as the base of our shareholder
return policy, we also give consideration to maintaining
a balance between an appropriate amount of internal
reserves for future growth investments. As such, we
intend to carry out shareholder returns in a flexible
manner with the purpose of improving capital efficiency going forward.

Dividends per Share / Dividend Payout Ratio
Yen%

60

100

52
44
36

40

47.0

27

50

22.8

20

28.0

26.1

10

0

13/3

21.4
14/3

15/3

16/3

17/3
Plan

0

About Yamaha

In Closing

With YMP2016, we maximized the results made inbusiness restructuring efforts under the previous management plan, YMP125. We also aggressively promoted
initiatives to reduce costs and improve gross profit frommusical instruments, our mainstay business. Throughthese means, we were able to significantly increase
profits. With NEXT STAGE 12, we will continue to buildon the accomplishments of YMP2016 while implementing new initiatives that firmly address the issues wehave yet to resolve.
To realize our medium- to long-term management
vision of “Becoming an Indispensable, Brilliantly
Individual Company,” we aim to further improve ourbrand strength and become a highly profitable enterprise under NEXT STAGE 12. I would like to ask our
stakeholders for their continued support and to lookforward with anticipation for the future of Yamaha.

Takuya Nakata
President and Representative Director

23

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Yamaha Corporation Annual Report 2016

Board of Directors, Corporate Auditors, and Executive Officers(As of June 22, 2016)

Board of Directors

Takuya Nakata

Masato Oike

Satoshi Yamahata

President and Representative Director

Director

Director

1981 Joined Nippon Gakki Co., Ltd.*1982 Joined Nippon Gakki Co., Ltd.*

1988 Joined Yamaha Corporation2005 General Manager of Pro Audio & Digital MusicalInstruments Division

2006 P resident of Yamaha Music Holding Europe GmbH2009 G eneral Manager of Accounting and Finance
Division

2006 Executive Officer

2009 E xecutive Officer

2009 Director and Executive Officer

2011 S enior Executive Officer

2010 Senior Executive Officer of Yamaha Corporation
President of Yamaha Corporation of America

2013 E xecutive General Manager of Musical Instruments& Audio Products Sales & Marketing Unit
(to the present)2013 Deputy Executive General Manager of MusicalInstruments & Audio Products Sales & Marketing
Unit of Yamaha Corporation
	President and Representative Director(to the present)2008 P resident of Yamaha Music Europe GmbH2014 D irector and Senior Executive Officer

2013 E xecutive Officer and General Manager ofCorporate Planning Division2015 D irector, Senior Executive Officer andExecutive General Manager of Operations Unit
(to the present)2016 E xecutive General Manager of Corporate
Management Unit (to the present)2016 D irector and Managing Executive Officer(to the present)

Hiroyuki Yanagi

Shigeru Nosaka

Masatoshi Ito

Outside Director (President, Chief Executive Officer
and Representative Director of Yamaha Motor Co., Ltd.)

Outside Director (Director, Executive Vice
President & CFO of Oracle Corporation Japan)

Outside Director (Representative Director andChairman of the Board of Ajinomoto Co., Inc.)

1978 ‌Joined Yamaha Motor Co., Ltd.

1976 Joined‌
Marubeni Corporation

1971 Joined‌
Ajinomoto Co., Ltd.

2007 ‌Executive Officer of Yamaha Motor Co., Ltd.

1989 Joined‌Apple Computer KK2009 ‌Senior Executive Officer of Yamaha Motor Co., Ltd.

1996 Senior‌Executive Officer of Japan
Communications Inc.

1999 Member‌of the Board and General Manager ofFood Products Business Unit of Ajinomoto Co., Inc.

2010 ‌President, Chief Executive Officer andRepresentative Director of Yamaha Motor Co., Ltd.
(to the present)
2011 ‌Outside Director of Yamaha Corporation(to the present)

2002 Director‌and Managing Executive Officer ofOracle Corporation Japan
2005 ‌Retired
2007 Senior‌Managing Executive Officer ofOracle Corporation Japan
2008 Director‌and Senior Managing Executive Officerof Oracle Corporation Japan
2011 Director‌and Executive Vice President ofOracle Corporation Japan (to the present)2015 Outside‌Director of Yamaha Corporation(to the present)

2003 Member‌of the Board of Ajinomoto Co., Ltd. andPresident of Ajinomoto Frozen Foods Co., Inc.
2006 Representative‌
Director and Corporate Senior Vice
President, and President of Food ProductsCompany of Ajinomoto Co., Inc.
2009 Representative‌
Director, President and Chief
Executive Officer of Ajinomoto Co., Inc.
2015 Representative‌
Director and Chairman of the Boardof Ajinomoto Co., Inc. (to the present)2016 Outside‌Director of Yamaha Corporation(to the present)

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Corporate Auditors

Executive Officers

Masahito Hosoi

Managing Executive Officers

Executive Officers

Masato Oike

Hirofumi Osawa

Full-Time Corporate Auditor
1978 Joined‌
Nippon Gakki Co., Ltd.*2005 General‌Manager of Human Resources Division2009 Executive‌Officer
2011 General‌Manager of Staff Business
Reform Division2013 Senior‌Executive Officer and Senior General
Manager of Corporate Administration Group

Executive General Manager of Musical Instruments &Audio Products Sales & Marketing Unit

Shinobu Kawase

Executive General Manager of Musical Instruments &Audio Products Production Unit

Senior Executive Officers
Full-Time Corporate Auditor
1982 Joined‌
Nippon Gakki Co., Ltd.*
2002 Director‌and President of Yamaha Electronique
Alsace S.A.

Yutaka Hasegawa

Executive General Manager of Musical Instruments &Audio Products Development Unit

Satoshi Yamahata

Executive General Manager of Corporate Management
Unit and Operations Unit2011 General‌Manager of Human Resources Division2012 General‌Manager of Human Resources andGeneral Affairs Division2014 General‌Manager of Internal Audit Control
Division2015 Full-Time‌
Corporate Auditor (to the present)

Hirohiko Ikeda
Outside Corporate Auditor (Attorney)1987 ‌Admitted to the Japan Federation of Bar Associations
Joined Oh-Ebashi Law Offices (currently Oh-Ebashi
LPC & Partners)
1991 ‌Worked for Weil, Gotshal & Manges LLP (U.S.A.)
1992 ‌Admitted to the New York State Bar Association(U.S.A.)

Kazunori Kobayashi

President of Yamaha Music Japan Co., Ltd.

Hitoshi Fukutome

2014 Full-Time‌
Corporate Auditor (to the present)

Takashi Dairokuno

General Manager of Commercial Audio Business
Division, Musical Instruments & Audio Products Sales &Marketing Unit

Shigeki Fujii

Executive General Manager of IMC Business Unit

Akira Iizuka

Executive General Manager of Technology Unit

Seiichi Yamaguchi

Executive General Manager of Service Business Unit

President of Yamaha Corporation of America

Teruhiko Tsurumi

President of Yamaha Music & Electronics (China)
Co., Ltd.

Kimiyasu Ito

General Manager of Musical Instruments Development
Division, Musical Instruments & Audio Products
Development Unit

Masato Takai

Executive General Manager of Human Resources andGeneral Administration Unit

Shinichi Takenaga

General Manager of Corporate Planning Division,
Corporate Management Unit

Masato Oshiki

General Manager of Consumer Products Sales Division,
Musical Instruments & Audio Products Sales &Marketing Unit

Thomas Schöpe

President of Yamaha Music Europe GmbH

1993 ‌Partner in Oh-Ebashi Law Offices (currently
Oh-Ebashi LPC & Partners) (to the present)
2011 ‌Outside Corporate Auditor of Yamaha Corporation(to the present)

Junya Hakoda
Outside Corporate Auditor(Certified Public Accountant)
1974 Joined‌
Mitsubishi Rayon Co., Ltd.
1980 Joined‌Pricewaterhouse CPA Office
1983 Joined‌
Aoyama Audit Corporation
1984 Registered‌
as a Certified Public Accountant
2006 Representative‌of Arata Audit Corporation2012 Representative‌of Junya Hakoda & Co.
(to the present)2015 ‌Outside Corporate Auditor of Yamaha Corporation(to the present)* Currently Yamaha Corporation

25

26

Yamaha Corporation Annual Report 2016

Growth Foundation
27

Research and Development and Intellectual Property

30

Corporate Social Responsibility (CSR)

34 		Yamaha’s Approach to Human Resources

36 
–
45

		Corporate Governance		Risk Factors

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Research and Development and Intellectual Property
Yamaha has adopted the corporate slogan of “Sharing Passion & Performance” and a corporate philosophy of “withour unique expertise and sensibilities, gained from our devotion to sound and music, we are committed to creating
excitement and cultural inspiration together with people around the world.” In addition, Yamaha has established a
medium- to long-term management vision of becoming an indispensable, brilliantly individual company.
Guided by this slogan, philosophy, and vision, Yamaha has designated the technologies it has amassed in the fields
of sound and music as core technologies in order to promote its business activities, and is conducting R&D activities
with the aim of further advancing and extending these technologies. In addition, Yamaha is further sharpening its competitive edge by linking together its R&D strategies and intellectual property strategies.

Research and Development
Yamaha’s R&D domain ranges from the inlet to the outlet of soundas well as the multipurpose uses of sound, encompassing acoustics, sound generators, voice and acoustic signal processing, music
information processing, materials, analysis, electronic devices,
operating systems, communications, and networks.
In fiscal 2016, Yamaha identified sound, music, networks,
and devices as focus areas. In particular, Yamaha endeavored toenhance its scientific understanding of what constitutes “goodsound” and advanced R&D initiatives to actually apply “goodsound” to its musical instruments and audio equipment design
processes. In addition, Yamaha took initiatives to upgrade its various technologies, such as physical modeling, musical analysis,
and singing voice synthesis, as well as to advance the development of high-quality sound transmission technology for the network generation and technology related to wireless connectivity.
Yamaha’s R&D structure consists of two sections. The first section is the Research and Development Division, which is locatedwithin the Technology Unit. This section oversees the R&D
functions for enhancing the Company’s foundational elemental
technologies and creating new businesses. The other sectionis the Technology Development Division, which handles the
product development functions of each business division as
well as subsidiaries.
Technologies Accumulated through R&D
Guided by the expertise passed on from generation to generation
and a sensitivity toward sound creation, Yamaha has accumulated
a vast array of original technologies over its long history of manufacturing acoustic instruments. In the field of digital instruments
and audio equipment, Yamaha has developed groundbreaking
electronics technology. In recent years, Yamaha has expanded thescope of its technologies through the addition of new companies
to the Group. By drawing on the strengths of these technologies
and fusing them together, Yamaha has continued to provide newvalue that only it can create as well as new ways to enjoy and utilize sound and music.

keyboard actions, sound generation and effects, as well as acoustics, the Company actively pursues good sound and superior
performance.

YVN500S Artida™ violin with A.R.E.™
technology

Analysis of the vibrations of guitar
surface• Acoustic Resonance Enhancement (A.R.E.™)• 	Research on instrument structure; research and analysis
on the vibrations and sounds that occur within acoustic
instruments• Development of sound generators

DX7 Synthesizer

SY77 Synthesizer

VL1 Synthesizer

FM sound generator:
A method for modulating
the frequency of waveformand creating tone

 WM sound generator:A
A method for creating
tone by recorded soundof an instrument

 hysical model soundP
generator: A methodthat virtually creates aninstrument’s structure
to make sound(2) Technologies in the Audio Equipment Domain	In the audio equipment domain, Yamaha draws on the strengthsof cutting-edge software and electronics technologies, centeredprimarily on digital signal processing and network technologies,
using its expertiseand know-how related
to sound. Yamaha
offers high-valueadded products suchas AV products andPA equipment as well
as network devices.

(1) Technologies in the Musical Instruments Domain	In the musical instruments domain, Yamaha processes woodand metal materials in order to provide its customers with evenmore fulfilling sound and music. In addition, through the continued research of technologies related to the mechanisms of•	Fluid sound control technology, Twisted Flare Port™
•	Virtual surround technology, Air Surround Xtreme™
•	Virtual Circuitry Modeling technology, VCM

27

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Yamaha Corporation Annual Report 2016

Research and Development and Intellectual Property(3) Technological Fusion and Creating More Value	Not only does Yamaha evolve the technologies it has cultivatedover many years, the Company promotes the fusion of its technologies to offer new hybrid instruments as well as to innovate

its existing products. At the same time, the Company is creating
entirely new products in new businesses, thereby providing
customers with both surprise and excitement.

• TransAcoustic™ Piano•	Brass instrument silencing system, SILENT Brass™
• MusicCast™
• VOCALOID™
• Omotenashi Guide™
VOCALOID™

Omotenashi Guide™

R&D Achievements
Motion Control Synthesis Engine
The Motion Control Synthesis Engine is a comprehensive tone generation system that combines two types of sound generators and three
types of controllers, giving it the power to realize a dynamic and overwhelmingly expressive musical performance in a manner more fluid
than conventional synthesizers. The engine combines the excellent
sound reproduction of the Advanced Wave Memory™ 2 (AWM2)
sound generator with the dynamic tonal expression of the newly developed FM-X frequency modulation sound generator. The engine alsocomes equipped with Motion Control, which continually shifts complex sound across a diverse control source.
Motion Control is a function that adds rhythmical and multidimensional motion to sounds created through two kinds of sound generation
and allows the user to control these motions in real-time. In doing so,
Motion Control realizes completely new expressions in sound.
Motion Control drastically changes sounds in line with the musician’s performance and synchronizes these changes with the rhythm,

thereby delivering a sound richin expression. In addition,
Motion Control is able toreflect the passion of the musician in the instrument throughthe color and motion of lightthat is emitted in response tochanges in sound. This allows for an emotionally rich performance,
almost as if the musician and the instrument were having a conversation. In these ways, the function generates truly high-dimensionalsound.
The Motion Control Synthesis Engine was first applied to Yamaha’s
flagship synthesizer model, the MONTAGE™, which was launched in2016. Going forward, Yamaha will further expand this technology,
making it a key feature of its synthesizers.

NS-5000 Speaker
The NS-5000 is Yamaha’s flagship speaker that brings together the latest
speaker and analysis technologies. The speaker unit, which uses newly
developed diaphragms, and the cabinet, which incorporates the latest
R&D accomplishments, realize unlimited quietness and a clear sound,allowing for music to be clearly reproduced as is. The newly developed diaphragms of the tweeter, mid-range, and woofer use ZYLON®—
the world’s strongest fiber with an ideal elastic modulus and a speedof sound that rivals beryllium. This allows the NS-5000 to reproduce
extremely pleasant sounds with a high level of sophistication by realizing uniform tone quality across all frequency bands. Moreover, in order
to control the unnecessary sound that is emitted from the back of thetweeter and mid-range units, the NS-5000 is equipped with a resonance suppression (R.S.) chamber, which has a flat frequency responsethat negates tube resonance without using a large amount of acoustic
absorbent materials. In these ways, the NS-5000 is able to achieve
reproduction of even higher resolution.

As for the cabinet box sound,which is background noise that
occurs when vibration is present,
the NS-5000 controls even microscopic box sounds through theuse of the latest finite element
method (FEM) analysis that leverages the strengths of laser scanmeasurements. By installing the
newly developed Acoustic Absorber (patent pending), the NS-5000
also reclaims the original and natural sound of music that was lost
through the use of the large amount of acoustic absorbing materials
necessary to prevent standing waves within the cabinet.
Going forward, Yamaha plans on expanding its product lineup of
speakers that utilize these technologies.
* ZYLON® is a registered trademark of Toyobo Co., Ltd. in Japan

YHLD-100 Hydrogen Leak Detector
The YHLD-100 is a high-speed, highly sensitive hydrogen leak detector.
The detector uses hydrogen as the tracer gas to inspect the air tightnessof containers and piping and, as such, is expected to achieve lower gas
costs compared to helium—the mainstream gas currently used in leakdetection—and significantly reduce inspection operational expenses.
Through the world’s first installation of MEMS* hydrogen sensors,which were independently developed using the Yamaha Group’s
cutting-edge micromachinery technologies, the YHLD-100 realizes
a dynamic range that extends from low hydrogen concentrations (0.5ppm) to high hydrogen concentrations (13,000 ppm = 1.3%) as
well as a high-speed responsetime of one second or less (within
1,000 ppm).
* MEMS (Micro Electro Mechanical Systems): MEMS are small devices such as mechanical components, sensors, actuators, and electronic circuits that are combined into one
silicon circuit board.

Management Strategy

Growth Foundation

Financial Section

29

About YamahaIntellectual Property
The foundation that supports Yamaha’s extensive business development is the technology and know-how that it has accumulated
within the Group over many years of R&D activities. To support
this technology and know-how and to accelerate the further accumulation of intellectual property rights, Yamaha has actively invested
resources in its R&D activities. Moreover, with a primary goal of
maintaining and improving the competitive edge of the technologies it possesses, Yamaha is expanding its activities to acquire,
maintain, and utilize other related intellectual property rights.
Since its founding, Yamaha has sought to acquire its various
patents and other intellectual property rights while simultaneously
respecting the intellectual property rights held by third parties.
More recently, the Company has taken steps to integrate its business, R&D, and intellectual property strategies by implementing a
number of measures designed to maximize the contribution of its
intellectual property on its business earnings.
Patents
To differentiate itself from its competitors, gain a business advantage, ensure greater flexibility, and enable licensing to third parties, Yamaha has formulated patent strategies tailored to its
operations in specific business segments. These strategies include
establishing target technical fields for patent acquisition, such ascore technologies, new businesses, and new technologies, andbuilding a strong patent portfolio by identifying and focusing on
its core competencies. From the standpoint of asset optimization,
Yamaha annually assesses its full portfolio of patents held within
and outside of Japan, evaluating patent rights in terms of present
application and future potential, and ultimately retaining only
those rights deemed most advantageous. As of March 31, 2016,
the Yamaha Group owned a total of approximately 5,200 patents
and utility models in Japan. Outside of Japan, the Group also helda total of roughly 4,900 patents, mainly in the United States,
Europe, and China. Going forward, Yamaha is working to increase
the number of patents held in China in particular.

value by ensuring the effective use of the Yamaha brand. In orderto protect the Yamaha brand, the Company acquires trademarks
in numerous product domains in each country where it operates.
Anti-Counterfeiting Measures
In recent years, the number of cases of unauthorized third parties
manufacturing and selling products under the Yamaha brand or
reproducing counterfeit Yamaha product designs has been increasing. Using government agencies and various legal means, Yamaha
has vigorously combated cases of counterfeiting with growing
success. Going forward, Yamaha plans to adopt a more aggressive
legal approach, including litigation against infringers, to preserve
the Yamaha brand value and the value of its businesses as well as
to maintain consumer trust in the Yamaha brand.
Intellectual Property Management Systems
As part of the corporate body, the Intellectual Property Division
oversees the integrated management of all intellectual property
held by the Yamaha Group. In addition, members of theIntellectual Property Division are assigned to each business andR&D division, where they ensure that the Company’s intellectual
property strategy is integrated within its business and R&D strategies. The Intellectual Property Division also works in close communication with each business division to promote Yamaha’s
intellectual property strategy from both Companywide and business domain perspectives.
Patents Owned by Yamaha (As of March 31, 2016)
0

1,000

2,000

3,000

4,000

Number of patents

5,000

6,000

Japan
United States
China
Other Areas

Designs
Yamaha views design as a critical element in setting its productsapart from other offerings in the market, and consequently makes
every effort to properly safeguard and utilize these assets. In recent
years, Yamaha has taken bolder steps to acquire design rights in
China to protect itself against counterfeit products. As of March
31, 2016, the Yamaha Group held a total of approximately 980
design rights in Japan and overseas.
Copyrights
In addition to industrial property rights, such as patents, designs,
and trademarks, the Yamaha Group produces numerous copyrightprotected works, primarily in the fields of sound and music.
Music-related copyrights are of particular importance to Yamahain terms of its overall intellectual property policy. The Company
takes steps to ensure their proper management and use, including
undertaking legal action when necessary.
BrandsYamaha has taken numerous initiatives to maintain and enhancethe value of the Yamaha brand. In 1986, the Company establishedregulations for brand management, and also set up a Companywide
brand management committee to maintain and improve brandYamaha’s Intellectual Property
Receives High Appraisal GloballyThomson Reuters Selects Yamaha
for Top 100 Global Innovators

2015 THOMSON REUTERSTOP 100
GLOBAL INNOVATORS

Yamaha received a Thomson Reuters 2015 Top 100 Global Innovators
Award from Thomson Reuters Corporation, a global business data provider based in New York City. This award analyzes intellectual property
trends based on the intellectual property data of Thomson Reuters and isgiven every year to the top 100 companies with particularly impressive
results. 2015 marked the fifth year this award has taken place.
Award recipients are selected based on four criteria derived fromdata on patent volume, patent registration rates, portfolios in major markets, and impact of patents based on how often they are subsequently
cited. This is the third time for Yamaha to be selected, after being
selected for the first time in 2011 and again in 2014. Yamaha received
high praise for its successful patent registration rate, the global scope of
its intellectual property protection initiatives, and the impact of its patents. In addition, Yamaha’s score for the global scope of its intellectual
property protection initiatives rose substantially over the previous year,
which factored in greatly to the Company receiving this award.

30

Yamaha Corporation Annual Report 2016

Corporate Social Responsibility (CSR)
In all its interactions with stakeholders, the Yamaha Group seeks through its business activities to exceed customer
expectations and create excitement. Through activities grounded in the fields of sound and music, we will continue
to share passion and performance and enrich culture along with people around the world.

Basic Approach to CSR
The mission of the Yamaha Group is to continue pursuing its
corporate philosophy of “with our unique expertise and sensibilities,
gained from our devotion to sound and music, we are committed
to creating excitement and cultural inspiration together withpeople around the world.” To put this philosophy into practice,
Yamaha works to establish and maintain bonds of trust with its
stakeholders while also contributing to the creation of a sustainable society through its business activities.

Policy and Framework for CSR Promotion
The Yamaha Group continues to engage in a variety of CSR issues
by offering products and services and engaging in business processes
and corporate activities in regional societies. The Group uses thesocial responsibility international guideline ISO 26000 to identify
and organize the CSR issues it involves itself in. By taking into
account the importance of these issues to the Group and theirimpact on stakeholders, we decide which issues to prioritize aswell as the details of our efforts toward these issues. In 2015, a
council made up of our top management established strategic CSR
themes in which the Group should strengthen its initiatives. Basedon these themes, we revised our CSR Policy in June 2016.

Management Strategy

Growth Foundation

Financial Section

Strategic CSR Themes
Human Rights and Labor Practices• Systematic initiatives for the respect of human rights (evaluating
the influence of our business activities on human rights, etc.)• Promotion of diversity and human resources development(promotion of the active role of female workers, cultivation of
global human resources, etc.)

About Yamaha

Based on this philosophy, Yamaha conducts its CSR activities
according to the following guidelines, seeking to contribute to
the sustainable development of society and to further strengthen
the bond of trust with its stakeholders through sound, transparent
management methods, and corporate activities that balance socialand environmental concerns.

The Environment

1. By creating new values through products and services focusedon social and environmental issues, Yamaha contributes to thesustainable development of society.

• Lowering of greenhouse gas emissions (emission managementthat expands the scope of emissions throughout the entire supply
chain, etc.)• Sustainable procurement of timber (stringent verification of
traceability and lawfulness, expanded use of certified timber, etc.)

2. Through business development and social contributions basedin each region of the globe, Yamaha contributes to the promotion and popularization of music, and to the development ofcommunities.

Fair Operating Practices• Socially responsible procurement (by confirming adherence tothe Yamaha Supplier CSR Code of Conduct and making requests
for improvements when necessary, etc.)
Consumer Issues• Development of products and services with a focus on social
issues (universal design, environmentally-friendly products,
application of sound technologies, etc.)

3. By understanding the significance of protecting the natural environment and maintaining biodiversity, and by promoting the
reduction of environmental burden through measures suchas sustainable procurement of timber and lowering greenhousegas emissions, Yamaha works to maintain a healthy global
environment.
4. Yamaha observes laws, ordinances, and social norms, andmoreover, conducts business in a fair and impartial manner
throughout the entire value chain, including activities suchas socially responsible procurement carried out in cooperation
with business partners.

Community Involvement and Development• Development of regional community-based business and social
contribution activities (resolution of regional issues throughmusic, contribution to the development of regional communities, etc.)
Yamaha Corporation Group CSR Policy
Our aim is “Sharing Passion & Performance”
The Corporate Philosophy of the Yamaha Corporation Group is,“With our unique expertise and sensibilities, gained from our
devotion to sound and music, we are committed to creating
excitement and cultural inspiration together with people aroundthe world.”

5. Yamaha endeavors to prevent abuses of human rights,
responding appropriately to the effect of its business activities
as well as to any attendant risks to human rights, with the goalof achieving a society that safeguards the dignity of all.
6. Yamaha works to create an atmosphere that holds in high regard
the employee diversity that is a source of the new values createdwithin the Company, and which allows each person to fully
demonstrate their sensibilities and creativity through training
and use, without regard to race, nationality, gender, or age.
Formulated in February 2010 and revised in June 2016

CSR Education
In promoting initiatives based on our CSR Policy, the YamahaGroup believes it is important to deepen employee understandingof CSR and raise awareness for environmental and social issues.
The Yamaha Group engages in educational and awareness-raising

activities by sending CSR information via its website and Intranet,
as well as training and seminars for all employees, from managers
to new recruits, with the aim of promoting CSR throughout each
aspect of its business operations.

Fiscal 2016 Results
Item

TargetContent

Number of participants

In-house seminar

Management team and department
managers, general employees

A seminar by experts from outside the Company,
Lecture on the creation of products and services thattake into account social issues

250

Basic CSR training

New recruits, etc.

Introduction to CSR, Explanation of Yamaha Group CSR
Policy and measures, etc.

52

31

32

Yamaha Corporation Annual Report 2016

Corporate Social Responsibility (CSR)

Highlights
External Evaluation
Socially responsible investment (SRI) is an investing activity thatvalues companies from not only a financial perspective but also
from social and environmental viewpoints as well. SRI is usedby investors to determine what companies to invest in based onwhether or not a company is fulfilling their social responsibilities.
Yamaha is listed on such major international SRI indexes as theFTSE4Good Global Index, MSCI Global Sustainability Indexes,
and Morningstar Social Responsibility Index (MS-SRI).

Participation in the United Nations Global Compact
Yamaha endorses the United Nations Global Compact, a voluntarycode of conduct that encourages businesses worldwide to adopt
sustainable and socially responsible policies. Yamaha signed theCompact in June 2011 and has beenpromoting initiatives in adherence with theCompact’s 10 principles in the four areas ofhuman rights, labor, environment, and anticorruption. At the same time, the Company
has been actively cooperating with Global
Compact Network Japan (GCNJ) in such
ways as managing subcommittees.

TopicsYamaha Eco-Products Program
Guided by its Environmental Policy, the Yamaha Group is working
to create environmentally-friendly products in order to contributeto the creation of a sustainable society. To support this effort,
Yamaha established the Yamaha Eco-Products Program in 2015,
which certifies environmentally-friendly products that meet standards established by the Company.
The Yamaha Eco-Label is attached to
products that meet the Company’s standards.
By providing customers with easy-to-­understand information on the environment,
the program aims to assist customers inselecting which products to purchase.
For more details on the program, please visit:
http://www.yamaha.com/about_yamaha/csr/
guideline_eco_products
Music Time Program
Elementary school music education throughout the world is facing
a wide range of issues. With a shortage of music facilities andinstructors, music education is not being implemented sufficiently.
The reality is that there are many children who are not fortunate
enough to have the opportunity to learn a musical instrument.

Yamaha believes that enhanced music education during childhood
expands the possibilities for children to grow and, therefore, that itis necessary to increase the opportunities children are exposed tomusical instruments at school. With that belief, Yamaha has established the Music Time Program, which carries out music lessons at
schools. In addition to lessons, the Music Time Program provides
public elementary schools with a complete package of instruments,
teaching materials, and musical guidance and know-how. Currently,
Yamaha is running the program in Malaysia and Indonesia. In doing
so, Yamaha is promoting activities that create opportunities forchildren around the world to play musical instruments throughsolutions unique to the Company.

Smart Education System Project
Smart Education System (SES) is a new learning system created by
Yamaha that focuses on sound and music. Recently, the utilizationof ICT* devices in the school learning environment is becoming
essential, reflected by such facts as the Japanese Ministry of
Education, Culture, Sports, Science and Technology (MEXT)’s aim
of making a tablet available to each child at schools in Japan by
2020. Guided by the concept of using music and ICT devices
to learn, Yamaha continues its R&D activities while repeatedly
conducting demonstration experiments at schools in order todevelop music classes that are even more effective and fun. For
example, Yamaha is carrying out classes where students receive
a lecture from a guitar teacher via relay broadcasting, and, after
the lecture, students try their hand at playing guitar while viewing
digital educational materials that combine videos of finger motion
and guitar sounds. In addition, Yamaha is implementing classes
where students use iVOCALOID™, an iOS** application thatallows users to compose songs by intuitively combining sounds,
to create their own class song. In these ways, Yamaha is providing
schools with one-of-a-kind content using ICT devices.
*	ICT (Information and communications technology) devices: Network devices andaudio communication devices**	IOS is a trademark or registered trademark of Cisco in the U.S. and other countries
and is used under its license.

Management Strategy

Growth Foundation

Financial Section

Donation of Musical Instruments to Schools for the Children of
Migrant Workers

33

About Yamaha

In fiscal 2016, YMEC donated five pianos, 150 portable
keyboards, five AV products, and PA equipment to five elementaryand other schools in Hangzhou City. At the donation ceremony,music teachers held a mini concert with portable keyboards,
which was greatly enjoyed by those in attendance.
Under a policy to continue these kinds of CSR activities,
YMEC plans to make donations to schools for the children of
migrant workers in approximately 10 cities, with the aim ofreinforcing relationships with local distributors and extending its
contribution to local communities.

On the occasion of its 10-year anniversary, Yamaha Music &Electronics (China) Co., Ltd. (YMEC) began donating instruments
to schools for the children of migrant workers all over China infiscal 2012—together with four manufacturing subsidiaries in the
country—as a five-year project to show gratitude toward local
areas for the development of its business in China.
YMEC has continued this activity under the belief that the
donation of musical instruments, AV products, and other materials
for music classes at schools can offer more children the opportunity
to experience music as well as convey to them the wonders ofmusic, thereby fostering a rich sensitivity.
Since beginning this activity, YMEC has carried out donationsin Shanghai (March 2013), Beijing (September 2013), Tianjin(October 2013), Hangzhou (December 2013), Suzhou (May2014), and Guangzhou (October 2014).

Environmental Performance Data
GHG (Greenhouse Gas) Emissions

Water Usage Amounts

t-CO2

m3

300,000

4,000,000

196,607200,000

163,533

177,583 177,698

3,000,000

2,585,044 2,677,923

2,977,801

2,792,816

2,404,675

156,165
2,000,000

100,000
1,000,000

0

12/3

13/3

14/3

15/3

16/3

0

12/3

13/3

14/3

15/3

16/3

* The environmental performance data includes figures of Yamaha headquarters, all the production sites, and resort facilities covering more than 90% of the group site.

Human Resources Data
Number of Directors

Number of Employees

840,000

7
6

6

6

6

28,191 27,886

27,71427,737 28,338

0

12/3

14/3

15/3

Domestic

Overseas

30,0005

4

20,0002

10,0000

12/3Standing directors

13/3

14/3

15/3

16/3

Outside directors

2012/3
Percentage of female employees
Percentage of female employees in management positions
Average years of continuous employment (years)
Percentage of persons with disabilities employed

22.2%
4.1%
20.8
2.18%

13/3

16/3

Temporary employees, etc.

2013/3
21.6%
4.4%
20.1
2.08%

2014/3
20.0%
4.7%
20.6
2.15%

2015/3
17.2%
4.8%
20.3
2.38%

* Figures in this table are for Yamaha Corporation only

For more in-depth reporting on Yamaha’s CSR activities, please visit “Corporate Social Responsibility” on Yamaha’s website:
http://www.yamaha.com/about_yamaha/csr/

2016/3
17.8%
4.8%
19.8
2.31%

34

Yamaha Corporation Annual Report 2016

Yamaha’s Approach to Human Resources
Yamaha considers human resources to be its most importantmanagement resource in supporting corporate growth. As such,
the Company believes that, regardless of age, gender, or nationality, leveraging a diverse group of employees with various lifestyles, including those with time constraints due to raising children
or caregiving, will help reinforce the Company’s competitivenessand lead to further growth and development. In addition toensuring fairness in the Company’s hiring processes, Yamaha
makes efforts so that all employees are able to demonstrate theirabilities and express themselves freely, regardless of race, age, orgender. At the same time, the Company has established personnel
development programs to help employees grow as professionals.
In these ways, Yamaha is working to create a pleasant work environment supported by active dialogue with its employees.
Yamaha conducts its business at 51 locations throughout
32 countries, with overseas sales accounting for 67% of theCompany’s overall sales. As a key policy, Yamaha makes focused
efforts to employ global human resources and strengthen its development of these human resources so that they may be active on a

global scale. Further, the Company is actively promoting initiatives
to assign local talent to key positions at overseas subsidiaries.
As of March 31, 2016, the Yamaha Group had 20,348
employees worldwide (in addition to 7,990 temporary employees).

Number of Employees by Region (As of March 31, 2016)
0

2,000

4,000

6,000

8,000

10,00012,000

Japan
North America
EuropeChina
Other

Number of employees

Number of temporary employees (yearly average)

Yamaha’s Human Resources Development
Yamaha has in place a human resources development system that
focuses equally on employee education and training and careerdevelopment to create a mutually beneficial relationship between
the employee and the Company. With the underlying goal ofdeveloping human resources that are active on a global scale,
Yamaha implements training and education programs tailored toa specific objective in one of the following categories: Stratified
Training, Strategic Personnel Development, Position-SpecificTraining, and Self-Development Education.
In Stratified Training, Yamaha carries out training programsin accordance with the respective career turning points of each
employee. These programs work to raise the overall level ofhuman resources by enhancing the skills of individual employees.
In Strategic Personnel Development, Yamaha offers programs
designed to cultivate the next generation of core employees throughthe Yamaha Global Institute and the Yamaha Management Institute,which aim to develop global human resources who will act as the
backbone of the Company in the future, as well as the Senior
Specialist Institute (SSI), which conducts manufacturing management training for personnel at all Group production plants in Asia.
At production sites in Japan, the Company has set up the Yamaha
Advanced Skill School as well as the Technology Training Center.
For Position-Specific Training, Yamaha implements courses
for craftsmanship skill development and quality management,international education programs, and core technology training
programs (signal processing, sound and vibration, and materials
engineering).
In Self-Development Education, Yamaha provides support for
employees’ self-directed studies, including through the Yamaha
Business School, a correspondence education program.

Conditions of Training Programs Implemented in Fiscal 2016
Frequency

Annual number ofparticipants

Training hours per
employee

2–4 times a year400

15–30 hours a year

Yamaha Global Institute3 times a year

17

15 days a year

51

Yamaha Management Institute9 times a year18

27 days a year

90

Stratified Training

Total number oflecture attendees

2,000(most recent 5 years)

SSI (Senior Specialist Institute)
Group Production Plant Management Development program (SKIP)

Once a year*6

80 days a year

26

Manufacturing management training

Once in 2 years

6

40 days38

Global manufacturing management training

Once in 2 years

6

24 days a year

14
500

From–To Program

—

20

—

Yamaha Advanced Skill School

4 days a month16

370 hours

700

Technology Training Center2 days a month30

180 hours

1,500

Overseas / Language training—2

6 months

29

Yamaha Business School (correspondence education program)

—

250

—

* The last program was held in 2012.

Management Strategy

Growth Foundation

Going forward, the Yamaha Group will further strengthen its
programs for providing employees with highly specialized jobspecific training and education so that they may carry out the
Yamaha values of being Customer-Oriented and QualityConscious, which Yamaha places the most importance onin promoting its business activities, at an even higher level.
Global Human Resources Development
In light of globalization and the diversification of value systems
and lifestyles, Yamaha aims for self-sustaining business activities
that are deeply rooted in the local communities of each region in

Financial Section

About Yamaha

which it operates. Under this aim, the Company promotes theutilization of its human resources on a global scale. Yamaha will
establish 200 key positions at each Group company and work tobetter understand the core talent of each region. At the same time,
the Company will promote consistent evaluations based onGroupwide standards that go beyond country or organization as
well as the cross-border deployment of human resources. Also,
as an important strategic theme, the Company will engage ininitiatives to promptly identify and develop candidates forthe key positions of the next generation.

Human Resources Development for CraftsmanshipWith the aim of optimizing its production structure, Yamaha isworking to better clarify the functions and roles of each Group
production plant. At the same time, the Company is making efforts
to develop human resources capable of craftsmanship that ensuresthat every product made at Yamaha Group production plants
around the world maintains the concept of “Made in Yamaha,”
the Company’s approach to guaranteeing the consistent qualityof its products.
Yamaha positions its Group production plants in Japan as
locations for manufacturing high-value-added products. As such,
the Company is focusing its efforts on developing technologies
that are competitive in the global market as well as steadily passing
on key manufacturing techniques to employees of the younger
generation. Yamaha positions China and Indonesia as key locations for the manufacture of products in affordable price ranges,
such as pianos, wind instruments, string and percussion instruments, and digital musical instruments. The Company dispatchesa large number of engineers and instructors from Japan to provide
support and guidance in order to further improve quality andproductivity at these overseas locations.
As for the initiatives the Company is taking to develop humanresources who will be responsible for these support activities,
Yamaha is implementing manufacturing management training,which trains management personnel at Group production plants;
the Yamaha Advanced Skill School and the Technology Training
Center; which develops human resources who will act as the
backbone of domestic Group production plants in the next generation; and the From–To Program, which passes on core techniques
for manufacturing musical instruments to the younger generationof employees. In addition, Yamaha aims for the effective management of Group production plants from a global perspective. To thisend, the Company is commencing local talent development
programs and manufacturing management training at overseas
manufacturing subsidiaries.
SSI (Senior Specialist Institute)
Since the 1990s, the Yamaha Group has been raising its
percentage of overseas manufacturing. Currently, the Company’s
overseas manufacturing subsidiaries operate at 10 locations
located throughout China, Indonesia, and Malaysia. Given thesecircumstances, the Company recognizes the importance to trainsupervisors for these overseas Group production plants in orderto ensure their effective management. Accordingly, Yamaha hascommenced SKIP programs
to develop core employees atthese locations. While initialtraining involved developing
managerial personnel, theCompany has expanded its
efforts to also include programs
to develop local talent at theselocations. To date, 54 employees Grobal Production Plant Management
Development program (SKIP)
from Japan, Indonesia, andChina have participated in these programs.
With this global manufacturing management training,
Yamaha takes participants away from their regular duties for 30days per year during a 10-month period and, through practical
onsite training, aims to have them obtain the necessary skills andknowledge to act as management personnel at manufacturing
companies.
From–To Program
Due to the fact that acoustic
musical instrument manufacturing uses a large amount of
natural materials, techniciansneed to make adjustments byhand and through sensitivity
based on techniques underpinned by their individual
From–To Program
experience. These sensitive
adjustments are an importantfactor in determining the instrument’s quality. Yamaha regards
the transfer of these manufacturing techniques as an importantmanagement issue. As such, the Company identified its core technologies and techniques and introduces them in the From–To
Program, which started in 1999.
The From–To Program groups expert technicians with theirsuccessors to work together for nearly one year. During this time,these veteran technicians demonstrate to their successors the specifictechniques and skills used in the manufacturing process. While theFrom–To Program represents a form of on-the-job training (OJT),
the Company conducts strict progress management and evaluation
to ensure that the necessary techniques are being steadily transferred. Over 500 employees have participated in the program
since its introduction.

35

36

Yamaha Corporation Annual Report 2016

Corporate Governance
While making efforts to bolster the supervisory functions of the Board of Directors, Yamaha is promoting an executive
officer system in order to strengthen business execution functions. Yamaha has selected highly independent outside
directors and outside corporate auditors to increase the effectiveness of its governance.

Fundamental Concept of Corporate GovernanceYamaha positions the enhancement of corporate governance as
an important management issue and is taking proactive steps toimprove it.
Adopting the Yamaha Philosophy and its Promise to Stakeholders,which applies to shareholders and all other related parties, Yamaha
is working to secure global competitiveness and a high level ofprofitability based on effective management. At the same time,
the Company is making efforts to realize sustainable growth andimprove corporate value over the medium to long term by fulfilling its social responsibilities in such areas as compliance, theenvironment, safety, and social contributions.
Assessing the true nature of each regulation in Japan’s Corporate
Governance Code, Yamaha created a Corporate Governance Policy
Book in November 2015 through a decision by the Board of Directors
in order to help strengthen the Company’s corporate governance.
In this policy book, Yamaha explains its basic policies for corporate
governance, based on which the Company has established institutional designs for management—in addition to an organizational
structure and systems—and implemented a wide variety of­governance-related measures. Yamaha also realizes transparent andhigh-quality management through the appropriate disclosure of
information.

• Customer Experience*1: Joy, Beauty, Confidence, Discovery• Yamaha Quality*2: Excellence, Authenticity, Innovation• Yamaha Way*3: Embrace Your Will, Stand on Integrity, Take
Proactive Actions, Go Beyond the Limits, Stick to the Goals

Basic Policies for Corporate Governance• From a shareholder’s perspective, ensure the rights and equal
treatment of shareholders• Taking into consideration our relationships with all stakeholders,
proactively fulfill the Company’s social responsibilities• Ensure that information is disclosed appropriately and thatmanagement is transparent• By separating the oversight and executive functions andstrengthening the oversight function, ensure that the Board of
Directors is highly effective and is able to execute decisions witha sense of urgency• Proactively engage in dialogue with shareholders• Valuing People

Yamaha Philosophy• Corporate Slogan: Sharing Passion & Performance• Corporate Philosophy: With our unique expertise and sensibilities, gained from our devotion to sound and music, we are committed to creating excitement and cultural inspiration together
with people around the world.

*1 Customer Experience exemplifies the meaning of “Sharing Passion & Performance”
from the customer’s viewpoint. When customers experience, use, or own Yamaha
products and services they should experience a profound response that will stimulate
both their emotions and senses.
*2 Yamaha Quality is a set of criteria that supports Yamaha’s insistence on quality inproducts and services and the Company’s dedication to excellence in manufacturing.
These criteria assist in making the Corporate Philosophy a reality.
*3 The Yamaha Way explains the mindset that all employees of the Yamaha Group should
adopt, and the manner in which they should act on a daily basis, in order to put the
Corporate Philosophy into practice.

Promises to Stakeholders• Customer-Oriented and Quality-Conscious Management
Yamaha fully satisfies its customers by offering quality products
and services that incorporate new and traditional technologies
as well as refined creativity and artistry.
• Transparent and Sound Management
Yamaha delivers proper returns to shareholders by ensuring a solid
business performance and achieves lasting development throughtransparent and sound management.
Yamaha strives to be an organization where each person’s individuality and creativity are respected and all can demonstrate theirfull potential through their work.
• Harmony with Society
Yamaha is a good corporate citizen that contributes to the development of society, culture, and the economy by observing laws,
demonstrating high ethical standards, and endeavoring to protect
the environment.
Moreover, the organizational structure and systems that
Yamaha has established for corporate governance conforms to
Japan’s Corporate Governance Code. Items of our organizational
structure and systems that are not based on the Code are explainedand disclosed in sections of our Corporate Governance Report.
https://www.yamaha.com/en/ir/governance/

Basic Corporate Governance System
Yamaha is a company with a board of auditors as defined underJapanese law. With the General Shareholders’ Meeting as its highest decision-making body, Yamaha has built a corporate governancesystem (outlined in the diagram to the right) centered on oversightfunctions of business execution by the Board of Directors andauditing functions by the Board of Auditors.

Management Strategy

Growth Foundation

Financial Section

In addition, Yamaha has also established a Corporate Directors
Personnel Committee, which is an advisory body of the Board of
the Directors; the Managing Council, which is an advisory body ofthe president and representative director; the Risk Management
Committee; and corporate committees. Furthermore, the Company
is reinforcing its governance functions by setting up an internal
audit system. A structure to manage Group companies has also
been created within the Company. To enhance the governancefunction of the entire Group, auditors from Group companies­conduct audits on the Company and vice versa. Furthermore, theCompany ensures appropriate decision-making processes in accordance with the Group Management Charter, which establishes thebasic management policies that should be shared Groupwide.
Board of Directors
As of June 22, 2016, there were six members on the Board of
Directors (including three outside directors and two independent
directors). As a general rule, the Board meets once a month. Basedon its fiduciary responsibilities, the Board of Directors promotes
the Group’s sustainable growth and corporate value improvement
over the medium to long term. The Board exercises its supervisory
functions toward general management in such ways as establishingbasic management policies, making decisions on important businessexecution, overseeing plans for the president and other directors’
successors with the help of the Corporate Directors Personnel
Committee, nominating and appointing candidates for directors,
determining director remuneration, approving transactions withrelated parties, creating internal control systems, and overseeing
operating conditions. The Board also gives consideration to therelationship the Company has with all of its stakeholders, fully
obeying all related rules and regulations and comprehending theCompany’s articles of incorporation. By carrying out a sufficientamount of information gathering, the Board actively exchanges
opinions and holds constructive debate at the Board of
Directors’ meetings.
Independent outside directors act as a supervisory function on
management and conflicts of interest as well as offer advice based37

About Yamaha

on an independent and objective opinion. These directors also
ensure that the opinions of stakeholders are properly reflectedin the Board of Directors’ actions.
In order to clarify directors’ management responsibilities,
directors are appointed for a term of one year.
Moreover, Yamaha analyzes and evaluates the Board of
Directors’ effectiveness through self-assessment by directors,
including outside directors, and evaluations by auditors. The
results are shared throughout the Board and used as a reference
to help enhance the Board’s effectiveness.
Yamaha carried out evaluations, including evaluations byoutside specialists, in fiscal 2016 using the following processes.
• Implementation of survey geared toward the directors andauditors regarding the “roles and responsibilities of the Board of
Directors,” “structure of the Board of Directors,” “roles and qualities of directors,” and “management of the Board of Directors”• Evaluations, including evaluations by outside specialists, andanalyses based on survey answers and individual interviews• Evaluation of the effectiveness of the Board of Directors basedon the results of these analyses as well as discussion andmaterialization of improvements for applicable issues
Through these processes, Yamaha assessed the Board Directors
to be effective and functioning appropriately from the following
perspectives.
• The Board of Directors is made up of directors and auditors,
including multiple independent outside directors, with a diverse
range of perspectives and experience.
• The Board of Directors conducts highly effective oversight ofmanagerial ranks from an independent and objective standpoint.
• The Board of Directors holds sincere and constructive debate on
important management issues.
Meanwhile, constructive opinions were presented to further
enhance the oversight functions of the Board. Based on the resultsof these evaluations, Yamaha will work to further improve theeffectiveness of the Board of Directors by continually making
improvements.

Corporate Governance Structure (As of June 23, 2016)
General Shareholders’ Meeting
Appointment/dismissal
Requestfor advice

Corporate Directors
Personnel Committee
Four directors(Incl. 3 Outside Directors)

Appointment/dismissal

Board of Directors

Audit

6 persons
Reports

Appointment/dismissal/
supervision

4 persons

Risk Management Committee
Corporate Committees

Request for advice
Reports

Accounting Auditor
Determination of
measures for appointment

Corporate
Auditors’ Office

Reports

Representative Director

Judgments of appropriateness of accounting audit

Accounting
audit

Audit

Appointment/dismissal

Managing Council

Reports

Board of Auditors(Incl. 2 Full-Time Auditors)(Incl. 2 Outside Auditors)(Incl. 3 Outside Directors)

Appointment/dismissal

Instruction

1 person

Executive Officers

Internal Auditing Division
Reports

Internal audit

16 persons

Individual Business Divisions, Administrative Divisions
Group Companies in Japan

Overseas Group Companies

38

Yamaha Corporation Annual Report 2016

Corporate GovernanceReorganization of Systems and Structure to Strengthen Corporate Governance2001 ‌Adopted an executive officer system to separate management
decision-making/supervision and execution functions

2009 ‌Increased the number of outside corporate auditors fromtwo to three

2003 ‌Reduced the number of full-time directors from nine to eight,
appointed an outside director, increased the number of outside
corporate auditors from one to two, and established
the Corporate Auditors’ Office2010 ‌Decreased the number of full-time directors from eightto three, increased the number of outside directors from one totwo, and registered one outside director as an independent officer as stipulated by Japan’s Financial Instruments and ExchangeAct

2005 ‌Clearly defined directors’ management responsibilities andreduced the term of directors from two years to one year to­create a system that can swiftly respond to changing businessenvironments

2011 ‌Reorganized Internal Auditing Division to centralize
audit functions and to promote comprehensive audits
2012 ‌Increased the number of outside directors from two to three

2006 ‌Adopted a group manager system that concedes businessexecution authority to full-time directors so they can swiftly
respond to management issues

2014 Increased the number of full-time directors from three to four

Representative Director
As of June 22, 2016, Yamaha had one representative director who
acts as president and representative director. The president andrepresentative director is the chief officer in charge of businessexecution and represents the Company.

The committee oversees planning related to successors of the president and other directors, decides on candidates to be nominatedto the Board of Directors and other positions, holds debate on
decisions regarding remuneration for directors and executive officers, and reports the results of committee discussions to the Boardof the Directors.
In fiscal 2016, the committee met a total of three times,
making examinations related to director remuneration for fiscal
2016 as well as the promotion, appointment, and resignation of
directors, auditors, and executive officers, and the employmentof outside personnel.

Auditors and the Board of Auditors
As of June 22, 2016, Yamaha had four auditors, including two
outside corporate auditors who are also independent officers.
In principle, the Board of Auditors convenes once monthly. The
Company’s auditors audit the execution of duties by directors andexecutive officers as an independent institution based on theirfiduciary responsibilities. In this way, the auditors are responsible
for ensuring the sound, sustainable growth of the Company and
the Group as well as establishing a high-quality corporate governance structure that can earn the trust of society.
The Board of Auditors creates auditing reports and makes
decisions on a wide variety of items, including the appointment
and dismissal of full-time corporate auditors, auditing policies,
methods to investigate the status of operations and assets, andother items related to the execution of auditing duties. The Board
also decides on proposals to elect accounting auditors, which aresubmitted at the General Shareholders’ Meetings, and works togain consensus on proposals to elect other auditors.
In order to accurately evaluate the reasonableness of businessand accounting audits, one of the full-time auditors appointed
possesses a great deal of expertise in finance and accounting.
Outside corporate auditors are appointed to ensure objectively fairand equitable audits and include specialists (one attorney andone CPA) who hold positions independent from that of the Company.
Yamaha has also established the Corporate Auditors’ Office (withone staff member as of June 22, 2016) that is dedicated to supporting auditors, so as to ensure an environment conducive to performing effective audits.
Corporate Directors Personnel Committee
Yamaha established the Corporate Directors Personnel Committee
as an advisory body to the Board of Directors and determined thatthe president and representative director shall be the committee
chairman. Yamaha has also determined that over half of the committee’s members shall be outside directors in order to ensuretransparency and fairness in the committee’s business procedures.

2015 ‌Reduced the number of full-time directors from four to three

Corporate Directors Personnel Committee
Committee chairman

President andrepresentative director

Takuya Nakata

Committee members

Outside director

Hiroyuki Yanagi

Outside director

Shigeru Nosaka

Outside director

Masatoshi Ito

Risk Management Committee
Yamaha established the Risk Management Committee as anadvisory body to the president and representative director anddetermined that the representative director shall be the committee
chairman. The committee discusses risk management-related matters from a Companywide perspective including business continuity
planning (BCP), disaster countermeasures, internal controls, compliance, export, and information security and reports its findings
to the president and representative director.
Managing Council and Corporate Committees
Yamaha established the Managing Council as an advisory
body that holds debate on important management issues from a
Companywide perspective and reports its findings to the president
and representative director. Managing Council meetings are held,
in principle, twice a month. Attending the Managing Council
are the president and representative director, managing executive
officers, senior executive officers, and full-time corporate auditors.
To encourage deeper discussion about important management
strategic issues, corporate committees have been set up to addresseach issue.

Management Strategy

Growth Foundation

Executive Officers
Yamaha has adopted an executive officer system with the purposeof strengthening consolidated Group management and businessexecution functions. As of June 22, 2016, the executive officer
system comprised 16 executive officers, including two managing
executive officers and five senior executive officers. The managing
executive officer supports the president, who is the chief officer incharge of business execution. The managing executive officer or
senior executive officers, in principle, preside over the businessand administrative groups as heads of those groups in accordancewith the importance of these responsibilities. These officers are
responsible for the business performance of the groups they preside over and manage and direct in a way that allows each groupto function to its maximum potential. Moreover, executive officers
are assigned to divisions that are responsible for key management
issues in each group.
Internal Audits
Yamaha established the Internal Auditing Division (14 staff members as of June 22, 2016) under the direct control of the president
and representative director. Its role is to closely examine and evaluate management and operations systems, as well as operational
execution, for all management activities undertaken by theCompany from the standpoint of legality, reasonableness, effectiveness, and efficiency. The Internal Auditing Division provides
the president and representative director, divisions subject to audit,
and supervisory divisions with information based on the evaluation along with suggestions and proposals for rationalization andimprovement. At the same time, Yamaha strives to boost audit efficiency by encouraging close contact and coordination among thecorporate auditors and the accounting auditors.

Financial Section

About Yamaha

Principal Internal Audit Activities in Fiscal 2016
1. Performed visiting audits of divisions and Group companies(Japan and overseas; paper audits were also performed)
2. Confirmed the status of Company-level internal controls andaudited Company regulations
3. Presided over audits of subsidiaries by their auditors
4. Audited the status and content of monitoring conducted by
the administrative divisions of Yamaha Corporation andprovided advice for improvement of monitoring quality
5. Performed follow-up audits to confirm that corrective action
had been taken upport System for Outside Directors andS
Outside Corporate Auditors
A meeting to examine management issues is held monthly, in principle, for the purpose of sharing important management proposals
between all directors and corporate auditors and discussing withthe executive officers in responsible positions.
Yamaha also creates opportunities at the time of appointment
to explain to outside directors and auditors the Yamaha Philosophy,
corporate governance systems, internal regulations, and the progress of the medium-term management plan, thereby promoting
their understanding of the current situation and enhancing theirrecognition of management issues. When necessary, outside
directors are individually provided with explanations about proposals and reports to be submitted to the Board of Directors.

Fiscal 2016 Outside Directors and Outside Corporate Auditors
Outside Directors
Name

Hiroyuki Yanagi

Yoshikatsu Ota

Shigeru Nosaka

Independent
officer

Reasons for appointment

Views on their independence

Board of Directors’
meetings attendedNo∙ Has excellent character and insight∙ Has management experience as therepresentative director of Yamaha
Motor Co., Ltd.
∙ Can be counted on to strengthen Yamaha’s
governance functions, improve brandvalue, and provide appropriate advice
from an objective standpoint

Although he has not been made an independent director
due to the fact that he also serves as the representative
director of Yamaha Motor, of which the Company is amajor shareholder, he has been appointed as an outside
director for the reasons listed.

11 of 13Yes

∙ Has excellent character and insight∙ Has management experience inother industries∙ Can be counted on to strengthen
Yamaha’s governance functions andprovide appropriate advice from an
objective standpoint

Although he has many years of corporate management
experience, he and the companies that he has managed
at have not been major business partners. Of independentsocial and economic standing, he is not in a position thatcan be significantly influenced by, or conversely, cansignificantly influence the Yamaha management team,and is therefore unlikely to pose a conflict of interest
with Yamaha’s general shareholders.

12 of 13Yes

∙ Has excellent character and insight∙ Has management experience in otherindustries∙ Can be counted on to strengthen
Yamaha’s governance functions andprovide appropriate advice from an
objective standpoint

Although he has many years of corporate management
experience, he and the companies that he has managed
at have not been major business partners. Of independentsocial and economic standing, he is not in a position thatcan be significantly influenced by, or conversely, cansignificantly influence the Yamaha management team,and is therefore unlikely to pose a conflict of interest
with Yamaha’s general shareholders.

9 of 1039

40

Yamaha Corporation Annual Report 2016

Corporate GovernanceOutside Corporate Auditors
Name

Hirohiko Ikeda

Junya Hakoda

Independent
officer

Yes

Yes

Board of Directors’
and Board ofAuditors’ meetings
attendedReasons for appointment

Views on their independence∙ Has excellent character and insight∙ Has expertise in laws and regulations∙ Can be counted on to provide
equitable and fair audits froman objective standpoint

Although he has worked for many years as an attorney,
he is of independent social and economic standing, andis not in a position that can be significantly influenced
by, or conversely, can significantly influence the Yamaha
management team, and is therefore unlikely to pose aconflict of interest with Yamaha’s general shareholders.

Board of Directors’
meetings∙H as excellent character and insight∙ Is a CPA with expertise in corporate
accounting∙C an be counted on to provide
equitable and fair audits froman objective standpoint

Although he has worked for many years as an accountant,
he is of independent social and economic standing, andis not in a position that can be significantly influenced
by, or conversely, can significantly influence the Yamaha
management team, and is therefore unlikely to pose aconflict of interest with Yamaha’s general shareholders.

Board of Directors’
meetings

12 of 13
Board of Auditors’
meetings

15 of 15

10 of 10
Board of Auditors’
meetings

11 of 11

* To gain valuable human resources from outside the Company, Yamaha has concluded agreements with outside directors and outside corporate auditors that limit liability under Article
423, Paragraph 1 of the Companies Act. The liability limit based on said agreements is the minimum amount established by law.

With respect to agenda items at meetings of the Board of
Directors and the Board of Auditors to be attended by outside
corporate auditors, full-time staff members send documents
and other materials to them prior to the meeting and provide
explanations as necessary to enable them to perform a complete
preliminary study of the agenda. With regard to other material
matters, the Company strives at all times to maintain an effective
auditing environment, including by providing information, supplying documentation, listening to opinions, and supporting researchand data collection.
Registration of Independent Officers
Yamaha has registered outside directors Shigeru Nosaka andMasatoshi Ito and outside corporate auditors Hirohiko Ikeda andJunya Hakoda as independent officers under the provisions of theTokyo Stock Exchange (TSE).
In addition to provisions pertaining to officer independence
in Japan’s Companies Act and the TSE, Yamaha has established thefollowing in-house standards for evaluating officer independence.
1. If any of the following items are applicable to the individual,
the Company, in principle, will not appoint him or her as anindependent officer. Furthermore, if any of the following items
become applicable after an individual has been appointed as
an independent officer, he or she will be removed from theposition.
A. Any individual who does not meet the qualification requirements for an outside director or auditor as stipulated in the
Companies Act
B. Any individual who is a member of a party that places theGroup as a primary business partner or does business withsuch a party, or any individual who is a member of a party theGroup places as a primary business partner or does businesswith such a party
		 “Primary business partner” refers to a party from which, in
any of the past three business years, Yamaha has received compensation that exceeds 2% of the Company’s consolidated net

sales, or any party to which Yamaha has paid compensation thatexceeds that 2% of that party’s consolidated net sales. “Primarybusiness partner” also includes the top five banks that Yamaha
does business with.
C. Any individual who is a primary shareholder of the Company
or who does business with a primary shareholder of the Company,
as well as any director or auditor of a company of which Yamaha
is a primary shareholder
		 “Primary shareholder” refers to an individual or entity thatpossesses shares or interests that total over 10% of the total
shares issued by the Company.
D. Any individual who has been dispatched within the Group
as a director or auditor
E. Any consultant or accounting or legal expert that receives
large monetary amounts or other assets from the Company,
excluding director remuneration (in the event that a corporation, union, or another kind of organization is receiving theasset, this refers to individuals that are affiliated with suchan organization)
		 “Large monetary amounts or other assets” refers to cases
where the Company has made payments of over ¥10 million
in any of the past three business years (in the case that theCompany provided non-financial compensation, the fair market
valuation at the time the compensation was provided is used).
F. Any near relative (within the second degree) of an individual
to which the following is applicable
1. Any individual described in B through D
2. An individual who does business with the Company or its
subsidiaries
3. An individual who was appointed as a director or auditor towhich (2) was applicable to at the time that the most recent
General Shareholders’ Meeting concluded

Management Strategy

Growth Foundation

Financial Section

2. Even in the event that B, C, or D apply to an individual, if it
becomes clear that there is no substantial risk of the individual
creating a conflict of interest with the general shareholders,

41

About Yamahathat individual may be appointed as an independent director,
or avoid being removed as an independent director, usingthat reason.

Policy on Determining Remuneration for Directors and Corporate Auditors
Director remuneration consists of a fixed compensation that is set
within a limit predetermined at the General Shareholders’ Meeting,a performance-based compensation, and a director bonus thatreflects short-term performance. Director remuneration also consists of a share acquisition-based compensation to enhance the
incentive for directors to improve corporate value over the medium
to long term. The policy for director remuneration is determined by
the Board of Directors after deliberations by the Corporate Directors
Personnel Committee. Remuneration for corporate auditors is also
set within a limit decided on at the General Shareholders’ Meetingand is determined through deliberations among corporate auditors.

In addition, as of July 2015, directors will acquire 12.5% of
fixed compensation in the form of the Company’s shares throughthe Company’s Director Shareholding Association and maintainpossession of those shares throughout their term of service. This
will further enhance the performance incentive for directors overthe medium to long term.
Remuneration for outside directors is limited to only a fixedcompensation and amounts are determined taking into accountsuch factors as whether said remuneration is in balance with thatof other directors and the scale of Yamaha Corporation’s business.
Remuneration for Corporate Auditors
Remuneration for corporate auditors is limited to a fixed compensation and is based on a compensation framework. Amounts are
determined through consultation with the corporate auditors,
taking into account such factors as whether said remuneration
is in balance with that of directors and the scale of Yamaha
Corporation’s business.

Remuneration for Directors
Remuneration for directors other than outside directors comprises(1) a fixed compensation, (2) a performance-based compensation,and (3) a director bonus.
The performance-based compensation is assessed based on
the rate of year-on-year growth in return on sales (ROS), return on
equity (ROE), and consolidated net sales, as well as the year-onyear improvement rate of consolidated operating income, andranges from 0 to 50% of fixed compensation depending on individual performance. The director bonus is paid within a compensation framework predetermined at the General Shareholders’Meeting. With an upper limit of 0.5% of consolidated net incomeof fiscal 2015, the bonuses are calculated in correlation with
net income of fiscal 2016.

Other
At the 182nd Ordinary General Shareholders’ Meeting, held on
June 27, 2006, a resolution was approved abolishing payment of
retirement allowances to directors. Yamaha does not maintaina stock option system.

Remuneration for Directors and Corporate Auditors in Fiscal 2016
Total compensation(Millions of yen)Classification

Compensation by Type (Millions of yen)
Fixedcompensation

Performance-based
compensation

BonusesNumber of
directors andcorporate auditors

Directors(Excluding outside directors)

256

125

47

82

5

Corporate Auditors(Excluding outside corporate auditors)

60

60

—

—

3

Outside Directors andOutside Corporate Auditors

32

32

—

—

7

Remuneration by Director for Fiscal 2016
Name

Takuya Nakata

Compensation by Type (Millions of yen)

Total
compensation(Millions of yen)

Director category

Company category

Fixedcompensation

Performance-based
compensation

Bonuses

145

President andRepresentative Director

Submitting Company

68

28

48

* Only directors whose total consolidated remuneration is ¥100 million or more are listed.

42

Yamaha Corporation Annual Report 2016

Corporate GovernanceAccounting Auditor
Yamaha has appointed Ernst & Young ShinNihon LLC as its
accounting auditor. Takahiro Takiguchi and Hidetake Kayama,
CPAs of said accounting auditor firm, have performed Yamaha’s
accounting audit. Ernst & Young ShinNihon has voluntarily

adopted a rotating system for its managing partners and has taken
measures to ensure that the number of continuous years of service
does not exceed a fixed period of time. In addition, 14 CPAs and
16 staff assist with the audits.

Remuneration for Accounting Auditor in Fiscal 2015 and 2016
Classification

Fiscal 2015

Fiscal 2016

Compensation based on audit
certificate services(Millions of yen)Compensation based on
non-auditing services(Millions of yen)Compensation based on audit
certificate services(Millions of yen)Compensation based on
non-auditing services(Millions of yen)

64
22
86

—
25
25

66
22
88

—
21
21

Filing company
Consolidated affiliates
Total

Notes: Other important remuneration
Fiscal 2016: Yamaha Corporation of America, a consolidated subsidiary of Yamaha Corporation, and 17 other companies paid ¥135 million in compensation based on audit certificate
services and ¥7 million based on non-auditing services to Ernst & Young, which is affiliated with the same auditing accounting auditor network as Yamaha Corporation.
Fiscal 2015: Yamaha Corporation of America, a consolidated subsidiary of Yamaha Corporation, and 15 other companies paid ¥125 million in compensation based on audit certificate
services and ¥9 million based on non-auditing services to Ernst & Young, which is affiliated with the same auditing accounting auditor network as Yamaha Corporation.

So-Called Policy Cross-Holdings
Yamaha’s principle policy on the ownership of shares is to
only possess shares in cases where it is reasonable to do so forthe purpose of contributing to sustainable growth and mediumto long-term improvement in corporate value. Such cases refer topossessing shares to continue stable relationships with importantbusiness partners and financial institutions, which in turn will
enhance brand value, support sustainable growth, and ensure
a solid financial foundation.
Yamaha shares its brand with Yamaha Motor Co., Ltd. and has
established a Joint Brand Committee, the Yamaha Brand Charter,and the Joint Brand Regulations between the two companies, carrying out a variety of collaborative initiatives. At the same time,through the mutual possession of shares and dispatch of directors,
both companies can appropriately monitor each other’s initiatives
geared toward sustainable growth. Yamaha believes that byworking to maintain and improve the Yamaha brand value throughthis mutual monitoring and collaborative relationship with Yamaha
Motor, it can contribute to improving the Company’s corporate
value over the medium to long term.
Also, the Board of Directors regularly and continuously
verifies the reasonableness of each policy shareholding.
When voting on policy cross-holdings, the pros and cons ofeach proposal are comprehensively evaluated from the perspectiveof how the policy cross-holding will work to improve the mediumto long-term corporate value of the company concerned, rather or
not the policy cross-holding conforms to Yamaha’s principle policyon the ownership of shares, and how the policy shareholding willlead to improvement in the Company’s corporate value over the
medium to long term.

Basic Concept of the Internal Control System
Yamaha has established an internal control system pursuant
to Japan’s Companies Act and the Enforcement Regulations of
the Companies Act. Yamaha seeks to achieve optimal corporate
governance in order to raise corporate value and the Yamaha
brand image. At the same time, the Company works to improve
its internal control system to raise business efficiency, increase
the dependability of Yamaha’s accounting and financial data, andstrengthen compliance, asset soundness, and risk management
capabilities.
Furthermore, Yamaha requires subsidiaries to establish internal
controls that confirm with the Group’s internal control policy,
which was determined by the Company, based on the GroupManagement Charter, which stipulates Group management policies.
In regard to decisions on certain important items, other than management information, that impact Group management, subsidiaries
are required to receive consent from the Company in advance,and must also report the results of decisions on certain items.
Yamaha has developed and put into operation internal controls for financial reporting based on implementation standards
for internal control reporting systems (the Financial Instruments
and Exchange Act). We will maintain and more firmly establish
this internal control system to ensure the reliability of our
financial reporting.

Management Strategy

Growth Foundation

Financial Section

43

About Yamaha

Compliance Framework
Not only does the Yamaha Group observe laws and regulations,
it seeks strict compliance management that addresses social
norms and corporate ethics. The Working Group for Compliance
was established as a subordinate body to the Risk Management
Committee, an advisory body to the president and representative
director, to promote and strengthen compliance in cooperation
with the staff and departments in charge of laws and regulations.
In 2003, Yamaha established the Compliance Code of
Conduct, a compilation of items to be strictly observed that isdisseminated to all Group officers and employees (including
part-time and contract employees) through worksite briefings.
We also implement training sessions on a regular basis to ensure
the thorough enforcement of the Code. Since its establishment,
we have localized the Code by creating overseas and regionalversions based on the laws, regulations, and social norms of thecountries in which our Group companies are based, and haveintroduced translated versions of the code at 32 companies. In
2006 and 2011, we revised the Code to respond to changes in theoperating environment.
Furthermore, Yamaha conducts routine compliance surveys
with the goal of raising Group employee awareness and gaining
a better understanding of potential risks.
As a system for handling compliance-related inquiries andreports from employees, Yamaha has established a ComplianceHelp Line that connects to the Working Group for Complianceexecutive office and an outside attorney. The Compliance Help
Line accepts inquiries not only from employees but also frominterested parties including business partners. In fiscal 2016, thehelp line received a total of 25 inquiries and reports includingfrom overseas Group company employees. Since its inception,it has resolved problems by responding to 573 inquiries andreports over a 13-year period.

General Shareholders’ Meetings
Yamaha has positioned the General Shareholders’ Meeting as thehighest decision-making body of the Company. At these meetings,
decisions are made on important matters and reports are given
on audit results such as consolidated financial statements. As
a general rule, invitations are sent out at least three weeks prior
to the date the meeting is to be held. In addition, Yamaha avoids
holding the meeting on dates that conflict with the meetings ofother companies in an effort to have as many shareholders
participate as possible.
In regard to exercising voting rights, Yamaha implements electronic voting via the Internet, in addition to conventional voting

methods via mail, in order to allow those shareholders who could
not participate in the meeting the chance to vote. The Company
also uses an electronic voting platform geared toward institutional
investors to allow those with substantial voting rights to vote. At
the General Shareholders’ Meeting, business reports are madeusing video to deepen the understanding of the shareholders inattendance. After the meeting concludes, the Company carries out
events such as a mini concert that introduces its products. In addition, items that are reported and items that are voted on are
uploaded to the Company’s website after the meeting finishes.
https://www.yamaha.com/en/ir/shareholder_info/

Items Voted On at the Fiscal 2016 General Shareholders’ Meeting
The number of votes for and against items proposed at the 192nd General Shareholders’ Meeting, held on June 22, 2016, the number of
abstained votes, the necessary conditions for proposed items to be approved, and the results of each proposal are as follows.

Proposal

Number of
votes forNumber of
votes against

Number ofabstained votes

Approval
percentage

ResultProposal 1: Appropriation of Surplus

1,564,574

1,066

146

98.5

Approved

Takuya Nakata

1,557,044

9,183

146

98.0

Approved

Masato Oike

1,558,115

6,453

1,806

98.1

Approved

Satoshi Yamahata

1,558,088

6,480

1,806

98.1

Approved

Hiroyuki Yanagi

1,367,492

198,734

146

86.1

Approved

Shigeru Nosaka

1,561,286

4,942

146

98.3

Approved

Masatoshi Ito

1,565,011

1,217

146

98.5

Approved

Proposal 2: Election of Six Directors* The necessary conditions for each proposal to be approved are as follows.
(1) Proposal 1 requires a majority of votes in favor from the shareholders in attendance.
(2) P roposal 2 requires that a minimum of one-third of the shareholders with voting rights be in attendance as well as a majority of votes in favor from the shareholders in attendance.
** Reason why a part of votes from shareholders who attended the General Shareholders’ Meeting were not included in the vote count	The requirements for passage of the resolutions have been met as a result of aggregating the number of voting rights indicating approval or rejection exercised in advance on or before
the day prior to the day of this General Shareholders’ Meeting and the voting rights of certain shareholders who attended the meeting and whose intention to approve or reject the
propositions have been confirmed, and the resolutions were thereby enacted lawfully under the Companies Act. Accordingly, the results of the exercise of voting rights by shareholders who attended the meeting but whose intention to approve or reject the proposition or to abstain from the votes cannot be confirmed are not included in the vote count.

44

Yamaha Corporation Annual Report 2016

Corporate Governance

Investor Relations (IR)The Company’s disclosure policy is listed on its website and statesthat the Company aims for the fair and prompt disclosure of accurate information. Guided by this policy, the Company endeavors toactively disclose information to institutional and private investors
without discrepancy in a timely manner. At the same time, Yamaha
is carrying out activities to enhance investors’ understanding of
the Company.
In addition to holding financial results briefings for securities
analysts and institutional investors, Yamaha holds explanatory
meetings on its management policies and individual businesses
and offers educational tours of its factories and facilities asneeded. For overseas investors, the Company uploads English
translations of presentation documents and Q&A sessions fromevents held in Japan on its website. In addition, the president andrepresentative director, as well as directors, visit investors overseas
several times a year to explain the Company’s management plans
and conditions of its business. In this way, the Company endeavors

to promote mutual understanding through direct dialogue withinvestors.
Yamaha holds briefings for private investors in cities acrossJapan to encourage more people to become loyal fans and shareholders of the Company.
The IR manager in charge shares the opinions of shareholders
and investors, which are gathered through these kinds of initiatives
in communication, with the relevant internal departments. The
president and representative director, as well as other responsible
directors and executive officers, report the results of their efforts
to the Board of Directors in an appropriate manner and receive
management-related feedback. This feedback is used to help makefuture improvements.
Also, the Company sets a quiet period every quarter from thequarter settling day to the day that financial results are announced
in which it avoids dialogue on financial information.

Major IR Activities in Fiscal 2016
Activities

Frequency

Content

Financial results briefings

4

Briefings on the results of the quarter

Business briefings

1

Briefings on the musical instruments and audio equipment businessOne-on-one meetings

250

IR interviews

For overseas investors

Overseas roadshows3

Visits by the president and representative director and other
responsible officers (North America, Europe, Asia)

For private investors

Explanatory meetings forprivate investors

3

Tokyo, Nagoya, Gifu

For analysts and institutional investors

Business Continuity Plan (BCP)The Risk Management Committee and its subsidiary body, theWorking Group for BCP and Disaster Prevention Management,
have put the necessary systems and countermeasures in place torespond to a wide range of risks.
In fiscal 2009, Yamaha formulated the BCP Guidelines—its
basic Companywide policy for its business continuity plan—
which is designed to enable the immediate resumption ofoperations in the event of an earthquake in Japan’s Tokai region,
where Yamaha’s headquarters are located, or another major natural
disaster that could cause damage to Yamaha’s buildings or facilities. In January 2012, Yamaha established various guidelines
including BCP/Disaster Basic Countermeasures, Earthquake
Countermeasures, and Fire Countermeasures, which update
and supersede the BCP Guidelines.

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Risk Factors
Among the matters covered in this annual report, items that may have a material impact on the decisions of investors
include those listed and described below. In addition, information related to future events as described in the text isbased on judgments made by the Yamaha Group at the end of the fiscal year under review.

1 Economic Conditions

4 Business Investment

The Yamaha Group has a global business presence and therefore is
subject to the influence of economic conditions in Japan and othercountries. Recessions in world markets and accompanying
declines in demand may have a negative effect on the Group’sbusiness results and the development of its business.

The Group makes business investments including capital investments to promote business growth. However, when making
investment decisions, even though the Group monitors investment
return and risk both qualitatively and quantitatively and makes
careful, considered judgments, depending on circumstances,
the Group may be unable to recover a portion or the full amountof its investments, or may decide to withdraw from a business,thereby resulting in additional losses. In such cases, the value of
assets invested in such businesses may be subject to impairment.

2 Price Competition
The Yamaha Group confronts severe competition in each of its
business segments. For example, in the musical instruments segment, the Company is a comprehensive manufacturer of musicalinstruments and sells high-quality, high-performance instruments
covering a broad price spectrum. However, the Company confrontscompetitors in each musical instruments segment, and competitionin the lower price segments has become more intense, especiallyin recent years.
Also, in the audio equipment segment, the Yamaha Groupis subject to competition from low-priced products. Changes inlogistics and distribution and new technology trends could expose
this business to even greater price competition, which could havean impact on the Group’s current strong position.

5 Business Alliances
In recent years, partnership strategies, including alliances, joint
ventures, and investments in other companies, have increased inimportance for the Group. In some cases, the anticipated effectsof such alliances and investments may not materialize because of
conflicts of interest, or changes in the business strategies of thepartner, or other reasons.

6 D ependence on Customers in Materials andParts Business

3 New Technology Development
The Yamaha Group will focus its management resources on thecore business domains of sound and music. The Group will firmly
establish itself as the world’s leading comprehensive musicalinstruments manufacturer. The audio equipment segment has been
expanded, with a focus on the AV products category and PA
equipment. The electronic devices and others segments have also
been expanded, mainly in the areas of onboard devices, amusement equipment, and industrial parts and machinery.
Differentiating the Group’s technologies in the fields of sound,music, networks, and devices is essential for the Group’s further
development and growth. In developing these technologies, if theGroup does not continue to correctly forecast future market needs
and adequately meet them, the added value of its products in themusical instruments segment will decline, which may lead to pricecompetition. As a result, the Group may be unable to stimulate
new demand for its products and may find it difficult to sustain
the audio equipment, electronic devices, and others businesses.

The semiconductors, automobile interior wood components,and materials and parts that the Group manufactures and sells
are affected by the business performance of the manufacturers
who buy them.
When the bonds of trust between such customers and Group
companies are impaired by delivery, quality, or other issues, thismay have a negative impact on future orders. Moreover, customers
may ask Group companies to compensate them for quality problems or other defects.

7 International Business and Overseas Expansion
The Yamaha Group has established a global presence, with production and sales bases in various parts of the world. Of the Group’s
67 consolidated subsidiaries, 45 are foreign corporations, of which
23 are manufacturing and production companies, with principal
bases of operation in China, Indonesia, and Malaysia. Overseas
sales comprise 66.7% of the Group’s net sales.

45

46

Yamaha Corporation Annual Report 2016

Risk Factors
Various risks, including those listed below, are inherent to the
expansion of business overseas. If such risks materialize, including
adverse effects caused by an over-concentration of manufacturing
facilities in a particular region, the Group may not be able to provide
stable supplies of its products. Such risks include:(a) ‌Political and economic turmoil, terrorism, and war(b) Introduction‌of adverse policies or imposition of, or changes
in regulations(c) Unexpected‌changes in laws or regulations(d) Difficulty‌in recruiting personnel(e) Sharp‌rises in personnel expenses and commodity prices(f) Difficulty‌in procuring raw materials and parts as well as
issues related to the level of technology(g) Interruption‌of distribution due to harbor strikes, etc.
(h) Imposition‌of taxes under transfer pricing regulations(i) Labor disputes including strikes

8 Raw Material Prices, Raw Material Supplies, andLogistics Costs

To manufacture its products, the Group uses raw materials, including
lumber, metals such as copper, and plastics, for parts. Increases in
the prices of these materials raise manufacturing costs. In addition,
specific suppliers supply the Group with different raw materials.
Supply conditions for those materials could have an impact on
the Group’s manufacturing activities.
In addition, when logistics costs increase due to sharply rising
crude oil prices, the ratio of manufacturing costs and cost of sales
to net sales may increase.

9 Declining Birthrates
In the Yamaha Group’s core business of musical instruments,
schools constitute an important sales channel, in addition to
the Group’s music schools and English language schools, whose
students are primarily children. Declining birthrates, particularly
in Japan, could lead to decreasing sales through these channels.

10 Recruitment and Training of Personnel
The average age of the Company’s employees is relatively high,with a significant number in the upper age brackets and many
approaching the set retirement age. Therefore, an important challenge for the Company is to address the changing composition of
the workforce by passing on musical instrument manufacturingknow-how and recruiting and training a new generation of
employees. If the Company is unable to respond sufficiently tochanges in the composition of its workforce, this could interferewith its business activities and future growth.

11 Protection and Use of Intellectual Property
The Group possesses intellectual property rights, including
patents based on its proprietary technologies, and accumulated
business know-how. Some of this intellectual property cannot
be fully protected, or can only be partially protected because oflegal constraints in certain regions. Therefore, the Group may not
be able to effectively prevent third parties from using its intellectual property. As a result, some products of other companies
may appear on the market that are similar to, or copies of,those of Group companies, thus interfering with Group sales.
In addition, third parties may claim that Group products infringeon their own intellectual property rights. As a result, sales ofGroup products that employ said intellectual property may bedelayed or suspended.
In some cases, the Group licenses the intellectual propertyof third parties to produce key components for its products. Any
increases in royalties paid for such intellectual property may
result in higher manufacturing costs, which could affect pricecompetitiveness. Moreover, if the Group is unable to obtain a license,
it may have to suspend manufacturing of the relevant product.

12 Defects in Products and Services
The Yamaha Group controls the quality of its products based on
corporate quality assurance and product quality rules and regulations. However, there is no guarantee that all products will be freeof defects. The Group is insured against product liability claims,
but there is no guarantee that this insurance will be sufficient tocover any potential payments for damages. If product liability
issues arise, insurance rates are likely to increase. In that case, thecost to recall, exchange, repair, or change the design of a productcould increase significantly, or the Group’s business reputation
could be tarnished, which could cause sales to decline, andadversely affect the Group’s performance and financial position.
Also, although the Group is very careful about safety and sanitation at the retail shops, music schools, recreation, and other facilities that it operates, in the event of an accident, the stores, schools,
or facilities may have to temporarily suspend operation, which
could damage the Group’s reputation and lead to declining sales.

13 Legal Regulations
The Group’s business operations throughout the world are subject
to the laws and regulations of the countries and regions in which
they operate. These laws and regulations include those pertaining
to foreign investment, restrictions on exports and imports that may
affect national security, commerce, anti-trust issues, consumer protection, tax systems, and environmental protection. In addition,
the Group has an obligation to securely manage the personal
information of its customers. The Yamaha Group takes every measure to ensure that it complies with legal regulations, but, if forsome unexpected reason, it is unable to comply with these laws
and regulations, the Group’s activities could be restricted andcosts could increase as a result.

Management Strategy

Growth Foundation

Financial Section

About Yamaha

14 Environmental Regulations

17 Earthquakes and Other Natural Disasters

With the environmental protection regulations that govern business activities becoming increasingly stringent, companies arebeing asked to implement voluntary environmental programs as
one of their corporate social responsibilities. The Yamaha Grouphas implemented measures that exceed existing environmental
standards for products, packaging materials, energy conservation,and industrial waste treatment. However, there is no guarantee that
the Group can completely prevent restricted substances released
due to accidents or other causes from exceeding environmental
standards, or reduce the release of said substances. Moreover, in cases
where soil pollution has occurred on land formerly occupied byindustrial plants, substantial soil remediation costs may be incurred
when the land is sold in the future, or the land may be impossible
to sell. Restricted substances in the soil on land already sold tothird parties may spread, resulting in pollution of the air or underground water, and may incur cleaning and remediation costs.

In the event of earthquakes and other natural disasters, the production plants of the Yamaha Group may be damaged. Notably, theCompany’s Head Office, domestic plants, and major subsidiaries
are concentrated in Shizuoka Prefecture, located in the Tokai
region of Japan, an area in which a major earthquake has been
predicted for years. Moreover, the Group’s overseas manufacturing
plants are concentrated in China, Indonesia, and Malaysia, countries where the outbreak of unexpected natural disasters may arise.
In the event of a natural disaster, the Yamaha Group’s facilities may
suffer damage, and the Group may be required to suspend or postpone operations, which could incur substantial restoration costs.
In addition, disaster conditions at raw material and parts suppliers
could affect manufacturing.

15 Information Leakage
The Group retains a wide range of important managementand business-related information as well as personal information
on customers. To manage this information properly, the Grouphas prepared policies and rules and put into place systems formaintaining its security. However, in the event that this information accidentally leaks outside the Group, this could have a major
impact on the Group’s business activities or lower public confidence in the Group.

16 Fluctuations in Foreign Currency Exchange Rates
As the Yamaha Group’s business activities, including manufacturing and sales, are global in scale, the transactions of Group­companies that are denominated in foreign currencies are subject
to fluctuating exchange rates. The Group uses forward currency
hedge transactions to minimize the impact of foreign exchange rate
fluctuations in the short term. However, the Group may not beable to achieve its initial business plan targets due to exchange
rate fluctuations. The euro-yen exchange rate has an especiallystrong impact on profit and loss: a ¥1 change will result in a ¥0.4
billion change in profitability.

18 Data Network Systems
The use of data network systems and its importance have been
increasing in the Yamaha Group’s business activities. In the eventthat the functioning of the Group’s data network systems is disrupted due to computer virus infections, cyber attacks, and otherthreats, this could adversely affect the Group’s performance andfinancial position.

19 Items Related to Changes in Financial Position
a. Valuation of Investment Securities
The companies of the Yamaha Group hold available-for-sale securities
with market value (acquisition cost: ¥15.9 billion; consolidatedbalance sheet value: ¥93.6 billion, as of March 31, 2016). Since
available-for-sale securities with market value are valued at themarket price at the settlement date based on the mark-to-market
valuation method, the recorded balance sheet value of these securities may fluctuate depending on the price of the securities at thesettlement date. This may, in turn, have an impact on the Company’s
net assets. Further, when the market value of these securities falls
markedly relative to their acquisition cost, the value of said securities may be subject to impairment.

b. Unrealized Losses on Land Valuation
As of March 31, 2016, the market value of the Group’s land, revalued in accordance with the Law Concerning Revaluation of Land,was ¥7.3 billion below the book value of said land after revaluation.
In the event of the sale or disposal of said land, this unrealized
loss may be recognized.

c. Retirement Benefit Obligations and Expenses
The Yamaha Group’s retirement benefit obligations and expenses
are calculated based on its retirement benefit system, an estimateddiscount rate, and an expected rate of return on pension plan
assets. In some cases, the retirement benefit system may change
and the estimate of said obligations and expenses may differ fromthe actual results. As a result, retirement benefit obligations andexpenses could increase.

47

48

Yamaha Corporation Annual Report 2016

Financial Section
49

Management’s Discussion and Analysis

50

Eleven-Year Summary

58

Electronic Devices

52

Overview

59

Others52 		

Analysis of Management Performance

59 		

56 	

Review of Operations

60 	

56 

Musical Instruments

Key Business Indicators

Analysis of Financial Position

62 

Forecast for Fiscal 2017

58 

Audio Equipment

64

Consolidated Financial Statements

64

Consolidated Balance Sheet

70

Consolidated Statement of Cash Flows

66

Consolidated Statement of Operations

71

Notes to Consolidated Financial Statements

67 		


Consolidated Statement of Comprehensive Income

68 	

Consolidated Statement of Changes in Net Assets

99 		

Independent Auditor’s ReportManagement Strategy

Growth Foundation

Financial Section

About YamahaManagement’s Discussion and Analysis
Fiscal 2016 Summary• Year-on-year increases in both sales and earnings for the fourth consecutive year• Substantial sales in the musical instruments segment despite lower revenue from music schools due tothe impact of change in the schools’ management Significant increase in earnings as a result of an improved product model mix andlower manufacturing costs• Increased sales and earnings in the audio equipment segment due to a recovery in AV products andthe continued growth of PA equipment• Return to profitability in the electronic devices segment brought about by reduced fixed costs throughfabless manufacturing
Fiscal 2015
Consolidated Statement of Operations Summary

Consolidated Balance Sheet Summary

Millions of yen

Millions of yen

Total assets

Operating income¥530,034 million

432,177

Net sales

80,97630,135
247,632

Net income

100,306

24,929113,158
348,752
169,243

Fiscal 2016
Consolidated Statement of Operations Summary

Consolidated Balance Sheet Summary

Millions of yen

Millions of yen

Total assets
Net sales

435,477

Cost of sales–262,406

Selling, general andadministrative expenses

40,663

Other income+914

Current income taxes

Net income attributable tonon-controlling interests

Net income
attributable toowners of parent

75,459–132,407

Operating income

Deferred income taxes¥469,745 million
255,135

90,396104,280

303,889–9,541+656–59

110,329

32,633Current assets
Property plant and equipment
Investments and other assets
Current liabilities
Noncurrent liabilities
Net assets

49

50

Yamaha Corporation Annual Report 2016

Eleven-Year Summary
Yamaha Corporation and consolidated subsidiaries
Years ended March 31

2006

2007

2008

2009

2010

For the year:
Net sales¥534,084¥550,361¥548,754¥459,284¥414,811

Cost of sales

341,816352,382

343,686

290,381

268,380

Gross profit

192,267

197,980

205,066

168,902

146,431

Selling, general and administrative expenses

168,132

170,295

172,220

155,057

139,602

Operating income

24,13527,68532,845

13,845

6,828

35,842

33,101

62,510(12,159)(201)

Income (loss) before income taxes andminority interests
Net income (loss)*

28,123

27,86639,558(20,615)(4,921)

Capital expenditures

22,88225,152

24,394

22,581

14,480Depreciation expenses

18,944

19,956

20,28917,912

14,139R&D expenses

24,05524,22024,86523,21821,736

2

Cash flow from operating activities

25,51039,73237,225(2,235)39,870Cash flow from investing activities(18,104)(22,427)

41,999(25,999)(12,711)

7,406

17,30579,225(28,234)

27,159

Free cash flow
At year-end:
Total assets¥519,977¥559,031¥540,347¥408,974¥402,152

Total current assets

209,381

231,033

275,754

202,097

193,260

Total current liabilities

117,047

136,656

120,174

90,05075,182

Interest-bearing liabilities

28,47425,551

21,03619,19215,017

Net assets*3

316,005351,398

343,028

251,841

254,591

Net income (loss)¥ 136.04¥ 135.19¥ 191.76¥ (103.73)¥

3

Net assets*

1,532.62

1,680.91

1,646.44

1,262.42

1,276.35

Dividends*4

20.00

22.50

50.00

42.50

27.50

Per share:(24.95)Key indicators:
Operating income ratio

4.5

5.0

6.0

3.0

1.6

ROE (Return on equity)*3

9.5

8.4

11.5

(7.0)

(2.0)

ROA (Return on assets)

5.5

5.2

7.2

(4.3)

(1.2)

Equity ratio*3

60.8

62.0

62.9

60.9

62.6

Debt to equity ratio (Times)

0.09

0.07

0.06

0.08

0.06

Interest coverage (Times)

36.89

47.83

34.56

26.74

16.88

Current ratio

178.9

169.1

229.5

224.4

257.1

Dividend payout ratio

14.7

16.6

26.1

—

—

*1.	U.S. dollar amounts are translated from yen at the rate of ¥112.68 = U.S.$1.00, the approximate rate prevailing on March 31, 2016.
*2.	Net income (loss) for fiscal 2016 is presented as net income attributable to owners of parent on the consolidated financial statements.
*3.	Net assets, ROE (return on equity), and equity ratio were classified as shareholders’ equity, ROE (return on shareholders’ equity), and shareholders’ equity ratio, respectively,
until the year ended March 31, 2006.
*4.	The dividends per share from the years ended March 2008 to March 2010 include a ¥20 special dividend.

Management Strategy

Growth Foundation

Financial Section

51

About Yamaha

Millions of yen%

Millions of
U.S. dollars*1

2015/2016

2016

2011

2012

2013

2014

2015

2016

¥373,866¥356,616¥366,941¥410,304¥432,177¥435,477+0.8$3,864.72

237,313

231,659

238,261

262,310

270,357

262,406–2.9

2,328.77

136,553

124,957

128,680

147,994

161,820

173,070+7.0

1,535.94

123,387

116,846

119,465

121,999

131,684

132,407+0.5

1,175.07

13,165

8,110

9,215

25,99430,13540,663+34.9

360.87

6,802

6,971

7,795

25,81828,526

41,578+45.8

368.99289.61

5,078(29,381)

4,122

22,89824,92932,633+30.9

10,43911,337

13,844

10,79913,846

11,220

–19.0

99.57

12,814

11,973

11,61312,75912,597

12,681+0.7

112.54

22,416

22,81922,14922,561

25,43924,793–2.5

220.0322,646

10,8807,755

33,21331,72942,399+33.6

376.28(9,740)(9,004)(12,617)(22,950)(11,700)

591–105.1

5.25

12,906

1,875(4,862)

10,26320,02942,991+114.6381.53¥390,852¥366,610¥390,610¥438,932¥530,034¥469,745–11.4$4,168.84

194,717

188,952

197,902214,487

247,632

255,135+3.0

2,264.24

74,836

72,82971,55073,14580,97675,459–6.8

669.68

11,838

11,295

10,013

8,755

11,868

8,510

–28.3

75.52

245,002

206,832

229,636

274,843

348,752

303,889–12.9

2,696.92

Yen¥

U.S. dollars*1

25.90¥ (151.73)

¥

21.79

¥ 118.26¥ 128.75¥ 168.90$ 1.501,250.06

1,052.01

1,171.67

1,403.12

1,787.42

1,601.55

14.21

10.00

10.00

10.00

27.00

36.00

44.00

0.39

3.5

2.3

2.5

6.3

7.0

9.3

2.1

(13.2)

1.9

9.2

8.1

10.1

%

1.3

(7.8)

1.1

5.5

5.1

6.5

61.9

55.6

58.1

61.9

65.3

64.2

0.05

0.05

0.04

0.03

0.03

0.03

40.38

31.84

40.64

130.19130.51129.41

260.2

259.4

276.6

293.2

305.8

338.1

38.6

—

47.0

22.8

28.0

26.1

52

Yamaha Corporation Annual Report 2016

Overview
Economic Environment
During fiscal 2016, ended March 31, 2016, the U.S. economy
continued on a course of gradual recovery as consumer spending
increased due to improved employment and income, althoughconcerns of an economic slowdown are beginning to appear. In
Europe, there was a gradual economic recovery due to a reboundin consumer spending that accompanied a decrease in the unemployment rate, and solid retail sales during the Christmas shopping
season. The economic slowdown in China worsened as consumption was sluggish following poor business performance in the
manufacturing industry. In other emerging countries, while conditions varied from country to country, there was a strong sense of
economic stagnation due to such factors as the decline in resource
prices, including crude oil, the falling value of their currencies
against the U.S. dollar, and the economic slowdown in China. In
Japan, despite signs of an economic recovery due to changes inmonetary policy, a strong sense of uncertainty about the future of
the economy emerged due to falling stock prices beginning fromthe start of 2016 and appreciation of the yen.
Performance Review
With regard to sales in fiscal 2016, in the musical instruments
segment, sales of pianos in Japan and other markets failed to reachlast year’s levels and sales in North America were poor. On theother hand, sales in China were solid, resulting in an overall sales
level that was on par with the previous fiscal year. For digitalmusical instruments, while sales of Electone™ electronic organs
decreased year on year as the positive impact of releasing new
products in the previous year faded, digital pianos achieved­double-digit growth in sales thanks to favorable sales in all­markets. As a result, digital musical instruments, including portable
keyboards, recorded solid sales overall. Sales of wind instruments
rose due to favorable sales in all markets, especially North America
and Europe, and double-digit guitar sales helped drive increases insales of string and percussion instruments. As for results by market
for the musical instruments business, sales were strong in Europe
and China, with firm sales in North America as well.

In the audio equipment segment, while sales of audio products
were poor in the beginning of the fiscal year following the sluggish
conditions in the market for AV receivers—Yamaha’s mainstay
product—sales for the entire fiscal year rose due to such factors as
the introduction of new network audio products.
In the professional audio equipment business, sales for new
digital mixers, in addition to sales of analog mixers and speakers
through musical instrument sales routes, were favorable, achieving
double-digit growth in all markets except for North America,
where sales were poor due to a delay in establishing a sales structure.
In the electronic devices segment, while sales of large-scale
integrated (LSI) for amusement equipment rose, sales of audio
devices such as digital amplifiers fell, resulting in a year-on-yearsales decrease overall.
As for the others segment, strong sales of factory automation(FA) equipment, in addition to favorable sales in golf products andthe resort business, offset a decline in sales of automobile interior
wood components. As a result, overall sales were on par with theprevious fiscal year.
Turning to profit and loss, the musical instruments segment
saw a significant increase in profits due to the positive effects fromcontinuous reductions in manufacturing costs as well as sales
increases in highly profitable products, primarily digital musicalinstruments. In addition, profits rose in nearly every product category
for the audio equipment segment, including audio products, professional audio equipment, and information and communications
technology (ICT) devices. While profits in the others segment fellslightly, the electronic devices segment realized a return to profitability as reductions in fixed costs due to the effects of restructuring efforts substantially improved the profit and loss situation.
As a result of the abovementioned factors, net sales in fiscal
2016 increased 0.8%, to ¥435,477 million, and operating income
was up 34.9%, to ¥40,663 million. Ordinary income rose 31.0%,
to ¥40,907 million, and net income attributable to owners ofparent increased 30.9%, to ¥32,633 million.

Analysis of Management Performance
Net Sales¥435,477 million+0.8%

Net Sales
Net sales in fiscal 2016 climbed ¥3,299 million, or 0.8%, to¥435,477 million. While sales in the audio equipment segment
were up, the actual sales increase in the musical instruments segment could not offset the impact of a ¥12,400 million decrease insales caused by the transfer of music school management to the
Yamaha Music Foundation. Sales in the electronic devices andothers segments decreased, albeit only slightly.

Sales by Region
In Japan, sales in fiscal 2016 declined ¥15,340 million, or 9.6%,
to ¥145,033 million. This decline was primarily attributable to theimpact of the transfer of music school management to the YamahaMusic Foundation. In the musical instruments business, although
piano sales fell and sales of Electone™, which were strong in
the previous fiscal year, decreased significantly, product sales
remained at about the same level as last year as digital pianos,
portable keyboards, wind instruments, and guitars all posted favorable sales. However, overall sales for the musical instruments business fell sharply due to such factors as the substantial impact of
the sales decline that accompanied the change in the managementof the Company’s music schools as well as the decline in sales ofthe music software business.

Management Strategy

Growth Foundation

In audio equipment, sales conditions were favorable thanks
to the recovery in AV products from last year’s sluggish results aswell as solid sales of professional audio equipment. Furthermore,installation sales of commercial audio equipment rose significantly
due to the special demand that accompanied the frequency
modifications in wireless microphones.
In the electronic devices business, sales were down due to the
sharp fall in sales for audio devices, despite rising sales of audio
and graphics LSI for amusement equipment. As for the others business, while sales of automobile interior wood components were
down year on year, sales in FA equipment, golf products, andresort businesses were up.
Turning to outside Japan, sales climbed ¥18,640 million, or
6.9%, to ¥290,443 million. On a local currency basis, sales in
Europe and China were extremely strong, and sales in North
America and other markets surpassed those of the previous fiscal
year. The ratio of overseas sales to net sales edged up 3.8 points,from 62.9% to 66.7%.
By region, sales in North America were up ¥8,487 million, or
10.6%, to ¥88,234 million. In the musical instruments business,
nearly every product aside from pianos recorded strong sales. As

Sales by Segment
Millions of yen

450,000

435,477

300,000

150,000

0Musical instruments
Audio equipment
Electronic devices
Others

12/3* 13/3* 14/3 15/3 16/3

* F igures for fiscal 2012 and 2013 have been adjusted to reflect segment compositionchanges effective from fiscal 2014.

Financial Section

53

About Yamaha

for audio equipment, sales of AV products showed signs of recovery as sales of Yamaha products by mass merchandisers increased,
while sales of professional audio equipment fell due to a delay inestablishing a sales structure. As a result, overall sales were up
year on year in North America.
In Europe, sales increased ¥1,927 million, or 2.4%, to¥82,205 million. In the musical instruments business, sales of
pianos remained at the same level as the previous fiscal year,
while sales of digital musical instruments rose due to solid sales ofdigital pianos. In addition, wind instruments recorded firm sales,
and healthy sales of guitars led to higher sales of string and percussion instruments. Sales of both AV products and professional audio
equipment rose in the audio equipment business as the introduction of new products into the market progressed smoothly. As aresult, sales in Europe increased overall.
Sales in Asia, Oceania, and other areas rose ¥8,225 million, or
7.4%, to ¥120,003 million. In the musical instruments business in
China, sales of pianos, which post the largest sales volumes compared to any other musical instrument, rose significantly, and salesof digital musical instruments, wind instruments, and guitars were
solid. In the audio equipment business, AV products and professional audio equipment both recorded double-digit sales growth,
resulting in healthy overall sales amid a worsening economic
slowdown. Overall, sales in China saw double-digit growth. In
other areas, while conditions vary by country and region, salesof musical instruments maintained similar levels as the previous
fiscal year, and the audio equipment business saw firm sales of AV
products and professional audio equipment, which resulted in an
increase in overall sales.
Cost of Sales and Selling, General and Administrative Expenses
Cost of sales decreased ¥7,950 million, or 2.9%, to ¥262,406
million. The cost of sales ratio improved 2.3 percentage points,
to 60.3%.
Gross profit was up ¥11,250 million, or 7.0%, to ¥173,070
million. The gross profit ratio improved 2.3 percentage points,
to 39.7%.
Selling, general and administrative (SG&A) expenses rose¥722 million, or 0.5%, to ¥132,407 million. The ratio of SG&A
expenses to net sales declined 0.1 percentage point, to 30.4%.

Sales by Region
Millions of yen

500,000

Major Items Included in Selling,
General and Administrative Expenses

435,477

Millions of yen

400,000

300,000

200,000

Japan
North America
EuropeAsia, Oceania, and other areas

100,0000

12/3 13/3 14/3 15/3 16/3

Sales commissions
Transport expenses
Advertising expenses and sales
promotion expenses
Allowance for doubtful accounts
Provision for product warranties
Retirement benefit expenses
Provision for directors’ bonuses
Salaries and benefits
Rent
Depreciation and amortization

%

2015

2016

Change¥ 1,516
12,813¥ 1,396
13,407–7.9+4.6

18,671
214
606
3,063
77
54,116
3,910
2,461

19,183
69
974
2,921
—
54,806
4,017
2,440

+2.7
-67.8
+60.7
–4.6
—
+1.3
+2.7
–0.9

54

Yamaha Corporation Annual Report 2016

Operating Income¥40,663 million+34.9%

Operating income in fiscal 2016 increased ¥10,527 million, or
34.9%, to ¥40,663 million.
By segment, operating income in the musical instruments
segment rose ¥6,466 million, or 25.8%, from ¥25,064 million to¥31,530 million, reflecting the fact that a higher sales composition
ratio of highly profitable products and improvement in manufacturing costs offset a decline in sales in musical instruments businesses.
In the audio equipment segment, operating income increased¥2,559 million, or 41.7%, from ¥6,133 million to ¥8,693 million.
This increase was attributable to a recovery in sales from the introduction of new AV products and an increase in sales in professional
audio equipment. Operating income in the electronic devices segment improved ¥1,553 million from the previous year’s operating
loss of ¥1,446 million due to the positive impact of lower fixed
costs that accompanied structural forms. As a result, the segment
recorded operating income of ¥107 million. In the others segment,
operating income decreased ¥51 million, or 13.5%, from ¥384
million to ¥332 million, as profits from FA equipment andautomobile interior wood components declined.
The primary reasons behind the significant increase in yearon-year earnings were such factors as higher profits due toincreased sales and production (¥9.3 billion), improved manufacturing costs (¥4.4 billion), and a recovery in the profit and loss
situation in the electronic devices segment due to businessrestructuring (¥1.9 billion). These positive factors outweighed suchnegative factors as the increase in manufacturing costs due torising labor costs at overseas productions bases (¥1.8 billion), thenegative impact of foreign currency translations (¥1.7 billion), andan increase in SG&A expenses (¥1.5 billion).
Non-Operating Income and Expenses
In fiscal 2016, non-operating income rose ¥189 million, or 4.0%,
from ¥4,687 million to ¥4,876 million. Of this amount, dividend
income was up ¥186 million, or 8.5%, from ¥2,191 million to¥2,377 million, reflecting a higher dividend from Yamaha MotorCo., Ltd. In addition, the Company recorded ¥693 million in atariff refund at a U.S.-based sales subsidiary.

Operating Income

Extraordinary Income and Loss
Extraordinary income in fiscal 2016 climbed ¥8,811 million, from¥168 million to ¥8,979 million, reflecting the sale of old stores,
residential facilities, and idle land.
Extraordinary loss was up ¥5,435 million, from ¥2,874 million
to ¥8,309 million. Of this amount, an impairment loss of ¥882
million on fixed assets was recorded in connection with the
expected disposal of property and other assets. The Company also
posted ¥6,759 million in amortization of goodwill. This represented the immediate amortization of goodwill that accompanied
an impairment loss on the shares of consolidated subsidiaries.
Specifically, the Company recorded ¥4,457 million in goodwill
related to Line 6, Inc., a U.S. subsidiary of the Company and its
subsidiaries, and ¥2,302 million in a portion of goodwill related
to Revolabs, Inc., which is also a U.S. subsidiary of the Company
and its subsidiaries.
Income before Income Taxes
In fiscal 2016, income before income taxes rose ¥13,052 million,or 45.8%, from ¥28,526 million to ¥41,578 million. The ratio ofincome before income taxes to net sales improved 2.9 points,from 6.6% to 9.5%.
Current Income Taxes and Deferred Income Taxes
Current income taxes in fiscal 2016 increased ¥2,224 million, or
30.4%, from ¥7,317 million to ¥9,541 million, reflecting higher
income before income taxes.
Deferred income taxes decreased ¥3,240 million, from ¥3,896
million to ¥656 million, reflecting the recording of a deferred tax
liability following the disposal of reduction entry for the gain on
sales of fixed assets that occurred during the period under review.
Net Income Attributable to Non-Controlling Interests
In fiscal 2016, net income attributable to non-controlling interests
decreased ¥117 million, or 66.4%, from ¥176 million to ¥59 million.

Operating Income Analysis

Millions of yen

45,000Non-operating expenses were up ¥1,040 million, or 29.0%,
from ¥3,591 million to ¥4,632 million. Of this amount, sales
discounts increased ¥268 million, or 10.1%, from ¥2,641 million
to ¥2,909 million, and foreign exchange loss rose ¥514 million,
from ¥84 million to ¥598 million.

Billions of yen

40,663
15/3

30.1
–1.7

Impact of exchange rates

30,000–1.8

Increase in labor costs at overseas plants–1.5

Increase in SG&A expenses
Increase in profitability of electronic devices

15,000

Increase in sales and production
Improvement in manufacturing costs

0

12/3 13/3 14/3 15/3 16/3

16/3

+1.9
+9.3
+4.4
40.7

Management Strategy

Growth Foundation

Net Income Attributable to Owners of Parent¥32,633 million+30.9%As a result of the aforementioned factors, net income attributableto owners of parent climbed ¥7,704 million, or 30.9%, from
¥24,929 million to ¥32,633 million. Net income per share was¥168.90, compared to ¥128.75 in the previous fiscal year.
Net Income (Loss) Attributable to Owners of
Parent / ROE
Millions of yen%

32,63340,00020,000

30

15

10.1
0

0

–20,000–15–40,000

12/3 13/3 14/3 15/3 16/3–30

 et income (loss)N
attributable to ownersof parent
ROE (right)*N et income (loss) attributable to owners of parent was presented as net income on the
consolidated financial statements in fiscal 2012, 2013, 2014, and 2015.

Fluctuations in Foreign Currency Exchange Rates and Risk Hedging
Yamaha conducts business on a global scale with a focus on musical instruments. As such, the Company’s business structure is vulnerable to the effects of fluctuations in foreign currency exchange
rates. The Company’s consolidated financial statements are influenced by foreign currency exchange rate effects stemming fromrisks associated with currency exchange rates and transactions
denominated in those currencies, including the U.S. dollar, theeuro, the Canadian dollar, the Australian dollar, and the Chinese
yuan. Of these risks, currency exchange rate risks are incurred

Dividends per Share

Financial Section

About Yamaha

when overseas consolidated subsidiaries translate their financial
statements for a specified period or on a specified date into
Japanese yen. Transaction-related risks are incurred when earnings
and expenses and/or assets and liabilities are denominated in different currencies. For this reason, transaction-related risks are
subject to risk hedges.
Specifically, U.S. dollar-related currency fluctuation risks arehedged by marrying risk associated with dollar receipts fromexport sales with risk associated with dollar payments for imported
products. The Company hedges the value of risks associated withthe euro and the Canadian and Australian dollars by projecting
related export revenues and purchasing relevant three-monthcurrency forward contracts.
Sales at overseas consolidated subsidiaries are calculatedusing the average exchange rates recorded during the year. On
this basis, in fiscal 2016 the yen depreciated ¥10 against the U.S.
dollar, for an average exchange rate of ¥120 to US$1. The year-onyear effect of this change was an increase of approximately ¥9,100
million in sales. Furthermore, the yen appreciated ¥6 against theeuro, for an average exchange rate of ¥133 to €1, resulting in adecrease of roughly ¥4,000 million in sales. Overall, the net effecton sales of foreign exchange rate movements, including the downward effect of approximately ¥800 million in fluctuations of the
yen against such other currencies as the Canadian and Australian
dollars, was an increase of approximately ¥4,400 million.
In terms of operating income, for the U.S. dollar, benefits
from the aforementioned marriage of risks related to the currency
enabled the Company to largely hedge the effects of currency
exchange rates stemming from fluctuations in settlement rates.
However, the U.S. dollar translation of operating income figures ofoverseas consolidated subsidiaries to Japanese yen caused income
to decrease roughly ¥100 million. The average settlement rate
against the euro was ¥134 to €1, an appreciation of ¥7, resulting
in a decrease of approximately ¥2,800 million in operating
income. The net effect on operating income of exchange rate
movements, including other currencies, was a decrease of roughly¥1,700 million compared with the previous fiscal year.

Dividends per Share¥44
In fiscal 2016, a regular dividend of ¥44 per share (a 26.1%
payout ratio) was paid. This was an increase of ¥8 year on year,
and due largely to sales and income increases.

Yen

50

44

40

30

20

10

0

12/3 13/3 14/3 15/3 16/3

55

56

Yamaha Corporation Annual Report 2016

Review of Operations

Musical Instruments
Operating Income

Sales¥278,872 million

Fiscal 2016 Performance Overview
Sales in fiscal 2016 fell ¥2,794 million, or 1.0%, to ¥278,872 million. Operating income was up ¥6,466 million, or 25.8%, from
¥25,064 million to ¥31,530 million.
Review by Major Products
Sales of pianos in Japan for the entire fiscal year under review
were slightly below the previous fiscal year’s level. Sales in North
America were poor as store inventories were high following strong
sales at the end of the previous fiscal year. Piano sales in China
were solid against a backdrop of stable demand from the increased
use of pianos for educational purposes, and bids for orders frommusic colleges and other institutions increased. Overall pianosales maintained similar levels as the previous fiscal year.
As for digital music instruments, the diminishing impact of
new product releases in the electronic organ Electone™ series, forwhich the Company carried out a model change during the previous fiscal year for the first time in 10 years, resulted in a decline insales. However, in addition to the healthy sales in portable keyboards, digital pianos achieved double-digit sales growth as sales
increased in every region due to model changes for mainstay
products. As a result, overall sales for digital instruments werefavorable. North America helped drive sales of wind instruments,
which also saw favorable sales in Japan. In addition, the speed of
popularization for wind instruments in China accelerated, resulting in solid sales overall. For string and percussion instruments,

Sales¥31,530 million–1.0%+25.8%

guitar sales were strong in Europe, China, and Japan, and otherstring instruments, as well as percussion instruments, recorded
double-digit sales growth, resulting in solid sales overall. Revenue
from Yamaha’s music and English language schools fell sharply
as management of the music schools was transferred to YamahaMusic Foundation from the second quarter of the year underreview. While sales of school course materials increased after
being negatively affected by the reactionary downturn following
the demand rush that accompanied the consumption tax rateincrease in the previous fiscal year, sales in the Company’s music
software business declined.

Sales by Product Category%

Music schools, etc.
22.5%

String and percussion
instruments
11.7%

Pianos
18.5%

Digitalmusical instruments
32.0%Wind instruments
15.3%

Operating Income

Millions of yen

300,000

278,872

Millions of yen

40,00031,53030,000200,000
20,000100,000
10,0000

12/3* 13/3* 14/3 15/3 16/3

0

12/3* 13/3* 14/3 15/3 16/3

* ‌As of fiscal 2014, the AV/IT segment changed
its name to the audio equipment segment and
the PA equipment business, which was previously reported as part of the musical instruments segment, was included in the audio
equipment segment. Accordingly, figures forfiscal 2012 and 2013 have been adjusted toreflect these segment composition changes.

Management Strategy

Growth Foundation

Financial Section

57

About Yamaha

Review by Region
Percentage of Sales by Region

Market Trends and Fiscal 2016 PerformanceJapan•	Overall demand for musical instruments in Japan has been declining
steadily. An example of this trend is the drastic contraction of themarket for acoustic pianos over the past three decades. The highpiano ownership rate and low birthrate are both responsible forthis trend.
•	While signs of a gradual recovery were seen, the outlook for theJapanese economy was uncertain due to the impact of yen appreciation on exchange rates and falling stock prices. Amid these circumstances, sales of digital musical instruments, wind instruments, andguitars were healthy, resulting in product sales levels that were on
par with those of the previous fiscal year.

31.9

%

Sales by Region
120

89.0
80

40

0

North America

20.2

%

Europe

18.2

%

China

12.6

%

•	The U.S. musical instruments market, showing no bias toward any
particular instrument category, is clearly oriented toward hobbies
and entertainment, where a wide range of musical instruments
are used. Favorable business conditions continued amid higher
consumer spending.
•	By product category, while piano sales fell below the previous
fiscal year’s level, digital pianos and wind instruments recorded
double-digit sales growth.

17.1

%

12/3* 13/3* 14/3 15/3 16/3

75

56.4
50

25

0

12/3* 13/3* 14/3 15/3 16/3

•	In Europe, musical tastes and musical instrument use vary by country.
Market conditions showed signs of gradual recovery thanks to arebound in consumer spending amid growing concerns from theimpact of the terrorist attacks in France and Belgium as well as the
refugee crisis.
•	By country and region, in addition to the strong economic performance in Germany—a core European market—Spain, Italy, France,and other countries in southern Europe continued to enjoy a moderate economic recovery. By product, although piano sales remained atabout the same level as the previous fiscal year, sales of digital pianos,
wind instruments, and string and percussion instruments, primarily
guitars, were strong, resulting in favorable sales overall.

60

50.7

0

12/3* 13/3* 14/3 15/3 16/3

•	China’s musical instruments market is distinctive, with acoustic pianosales accounting for more than half of the market. However, withsales for digital musical instruments, wind instruments, and guitars
showing high growth rates, the demand structure of the market will
become increasingly similar to that of developed countries.
•	Despite the worsening economic slowdown, sales of the Company’s
musical instruments were favorable. The percentage of participationin and acquisition of bids for pianos increased, backed by a strong
demand for pianos in music education for children. In addition, digital pianos, wind instruments, and guitars achieved double-digit sales
growth, resulting in an overall sales increase year on year.

40

35.2

40

20

30

20

10

0

Other Areas

Billions of yen•	Influenced by various factors, such as the decline in resource prices,
including crude oil, and the depreciation of local currencies, tougheconomic conditions continue to prevail in key emerging countries.
However, while conditions vary by country, a trend of gradual economic recovery has been seen.
•	By product, sales of digital musical instruments and wind instruments
rose year on year. However, overall sales were held to roughly thesame level as the previous fiscal year as the momentum of recovery
in sales lacked strength.

* ‌As of fiscal 2014, the AV/IT segment changed its name to the audio equipment segment and the PA equipment business,
which was previously reported as part of the musical instruments segment, was included in the audio equipment segment.
Accordingly, figures for fiscal 2012 and 2013 have been adjusted to reflect these segment composition changes.

12/3* 13/3* 14/3 15/3 16/3

60

47.6
40

20

0

12/3* 13/3* 14/3 15/3 16/3

Yamaha musical instruments hardware products
Music schools, etc.

58

Yamaha Corporation Annual Report 2016

Audio Equipment
Sales

Operating Income¥119,378 million

Fiscal 2016 Performance Overview
Sales in fiscal 2016 rose ¥6,538 million, or 5.8%, to ¥119,378 million.
For AV products, the Company made proactive efforts torelease new products in response to last year’s market contraction
for existing product domains, such as AV receivers, as well aschanges in consumer preferences, such as the increased demand
for network devices. As a result, sales levels recovered compared to the previous fiscal year.
As for professional audio equipment, sales grew primarily
from the introduction of flagship model digital mixers and digitalSales+41.7%

mixers in affordable price ranges. Leveraging musical instrument
sales routes, sales of analog mixers, amplifiers, and speakers
increased as well. In Europe, both AV products and professional
audio equipment sales were strong. While sales of commercial
online karaoke equipment fell following revisions made in the
supply method to customers, ICT devices such as routers andconference systems achieved higher year-on-year sales.
Operating income rose ¥2,559 million, or 41.7%, from
¥6,133 million to ¥8,693 million.

Operating Income

Millions of yen

119,378

Millions of yen

120,000

9,000

80,000

6,000

8,693

* ‌As of fiscal 2014, the AV/IT segment changed its
name to the audio equipment segment and thePA equipment business, which was previously
reported as part of the musical instruments segment, was included in the audio equipment segment. Accordingly, figures for fiscal 2012 and 2013
have been adjusted to reflect these segment composition changes.

3,000

40,0000¥8,693 million

+5.8%

0

12/3* 13/3* 14/3 15/3 16/3

12/3* 13/3* 14/3 15/3 16/3

Electronic Devices
Operating Income

Sales¥13,068 million
Fiscal 2016 Performance Overview
Sales in fiscal 2016 were down ¥366
million, or 2.7%, to ¥13,068 million.
Despite sales increases in LSI for
amusement equipment and geomagnetic
sensors (electronic compasses) for smartphones, sales for audio devices such as
audio codecs decreased, resulting in a
year-on-year decline in overall sales.
Operating income stood at ¥107 million, an improvement of ¥1,553 million
from the operating loss of ¥1,446 million
recorded in the previous fiscal year due
to the positive impact of lower fixed costs
that accompanied structural reforms.

¥107 million

–2.7%

Sales

Operating Income (Loss)

Millions of yen

Millions of yen

20,000

—

1,000

107
15,00013,0680

10,000–1,0005,000–2,0000

12/3 13/3 14/3 15/3 16/3

–3,00012/3 13/3 14/3 15/3 16/3

Management Strategy

Growth Foundation

Financial Section

59

About Yamaha

Others
Sales

Operating Income¥24,156 million¥332 million–0.3%

Sales in fiscal 2016 decreased ¥78­million, or 0.3%, to ¥24,156 million.
For golf products, the positive effectsof launching new products in Japan
offset a decrease in sales overseas, resulting in a year-on-year increase in overallsales. Sales in the resort business alsorose slightly year on year. While sales
in FA equipment were firm thanks tohealthy sales of precision machines,
sales declined sharply for automobileinterior wood components due to theimpact of the new vehicle plans ofcustomers. As a result, overall sales
were more or less on par with theprevious fiscal year.
Operating income decreased ¥51
million, or 13.5%, from ¥384 million
to ¥332 million.

–13.5%

Sales

Operating Income (Loss)

Millions of yen

Millions of yen

30,000500

332

24,156250
20,0000
10,000–250

012/3 13/3 14/3 15/3 16/3

–500

12/3 13/3 14/3 15/3 16/3

Key Business Indicators
Millions of
U.S. dollars

Millions of yen

SalesMusical Instruments
Audio Equipment
Electronic Devices
OthersOperating income (loss)
Musical Instruments
Audio Equipment
Electronic Devices
OthersCapital expenditures
Musical Instruments
Audio Equipment
Electronic Devices
OthersDepreciation expenses
Musical Instruments
Audio Equipment
Electronic Devices
OthersR&D expenses
Musical Instruments
Audio Equipment
Electronic Devices
Others2012/3*

2013/3*

2014/3

2015/3

2016/3

2016/3¥230,356
87,89816,23322,128¥235,507
92,571
15,03823,823¥262,310
105,485
18,82823,679¥281,667
112,839
13,43524,235¥278,872
119,378
13,06824,156$2,474.90
1,059.44
115.97214.38

¥

5,337
5,248
(2,913)
437

¥

6,451
4,553
(2,044)254¥ 19,728
5,866
770
(370)

¥ 25,064
6,133(1,446)384¥ 31,530
8,693
107
332

$ 279.82
77.15
0.95
2.95

¥

7,982
1,328
736
1,290

¥

8,928
2,467
1,381
1,068

¥

6,621
2,788
216
1,172

¥

9,534
2,840
639
832

¥

6,700
3,102
617
801

$

59.46
27.53
5.48
7.11

¥

8,737
1,576
976
684

¥

8,597
1,592
669
754

¥

8,519
2,647
761
830

¥

8,238
2,857
706
795

¥

8,390
3,075
464
750

$

74.46
27.29
4.12
6.66

¥

9,242
8,360
3,979
1,237

¥

8,088
9,219
3,374
1,466

¥

8,078
10,011
3,094
1,376

¥

9,580
11,025
3,429
1,403

¥

9,291
11,461
2,162
1,879

$

82.45
101.71
19.19
16.68

U.S. dollar amounts are translated from yen at the rate of ¥112.68 = U.S.$1.00, the approximate rate prevailing on March 31, 2016.
For more-detailed information, please refer to Financial Data 2016.
* ‌As of fiscal 2014, the AV/IT segment changed its name to the audio equipment segment and the PA equipment business, which was previously reported as part of the musical instruments segment, was included in the audio equipment segment. Accordingly, figures for fiscal 2012 and 2013 have been adjusted to reflect these segment composition changes.

60

Yamaha Corporation Annual Report 2016

Analysis of Financial Position
Financing Policy
The Yamaha Group obtains working capital to fund its businessactivities and finances its business expansion primarily from cashon hand, operating cash flows, and bank loans.
Yamaha’s basic financing policy is to procure stable, low-costfunding while preserving an appropriate amount of liquidity.
In fiscal 2016, the Company maintained a sufficient level ofliquidity on hand, with cash and deposits totaling ¥88,166 million.
Group finance is carried out to promote efficient fundutilization for the entire Group.
Furthermore, the Company commissions long-term preferreddebt rating assessments from credit rating agencies each year tofacilitate smooth fund procurement in capital markets. The latest
published ratings are shown below.
Credit Ratings
Long-term
preferred debt rating*Rating agency

Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

A (stable)
A+ (stable)

Cash and deposits were up ¥8,865 million, or 11.2%, to¥88,166 million. Notes and accounts receivable–trade decreased¥12,637 million, or 20.5%, to ¥49,026 million, resulting from afall in accounts receivable–trade that accompanied the change inmusic school management. Inventories rose ¥4,083 million, or
4.7%, to ¥91,866 million. Deferred tax assets climbed ¥855 million, or 10.8%, to ¥8,802 million. Other current assets increased¥6,228 million, or 50.7%, to ¥18,521 million, following theincrease in payments made to trust account for purchase of treasury stock. The ratio of total current assets to total current liabilities
at fiscal year-end was 338%, compared with 306% from a year
earlier, indicating the Company continued to sustain a high levelof liquidity during fiscal 2016.
Total Property, Plant and Equipment
Total property, plant and equipment as of March 31, 2016, stoodat ¥104,280 million, a fall of ¥8,878 million, or 7.8%. Constructionin progress was ¥1,544 million, a decrease of ¥2,594 million, or
62.7%, reflecting the completion of construction of the Yamaha
Osaka Building.

* As of March 31, 2016

Total Assets¥469,745 million–11.4%

Total assets as of March 31, 2016, amounted to ¥469,745 million,a decrease of ¥60,289 million, or 11.4%, from the previous fiscal
year-end figure of ¥530,034 million. Of this amount, total current
assets totaled ¥255,135 million, a rise of ¥7,503 million, or 3.0%,
from ¥247,632 million at the end of the previous fiscal year.
Noncurrent assets came to ¥214,610 million, down ¥67,792
million, or 24.0%, from the previous year-end figure of¥282,402 million.
Total Assets / ROA
Millions of yen%

600,000

18

469,745

300,000

Total Liabilities¥165,856 million–8.5%

Total liabilities as of March 31, 2016, came to ¥165,856 million, adecrease of ¥15,426 million, or 8.5%, from the previous year-end
figure of ¥181,282 million. Total current liabilities amounted to¥75,459 million, a fall of ¥5,516 million, or 6.8%, from ¥80,976
million at the end of the previous fiscal year. Total noncurrent liabilities totaled ¥90,396 million, a decrease of ¥9,909 million, or
9.9%, from the previous fiscal year-end figure of ¥100,306 million.

9

6.5
0

Total Investments and Other Assets
Total investments and other assets as of March 31, 2016,
amounted to ¥110,329 million, a year-on-year decrease of¥58,913 million, or 34.8%.
Investment securities decreased ¥47,925 million, or 33.1%, to¥96,911 million. This decrease was due primarily to a fall in themarket value of securities held by the Company. Deferred tax
assets were up ¥102 million, or 5.1%, to ¥2,123 million. Goodwill
declined ¥9,723 million, or 79.8%, to ¥2,456 million, reflecting
an immediate amortization of goodwill related to two of theCompany’s U.S. subsidiaries.

0

12/3 13/3 14/3 15/3 16/3

–9

Total assets
ROA (right)

Total Current Assets
Total current assets totaled ¥255,135 million, up ¥7,503 million,
or 3.0%. This rise was attributable to increases in cash and deposits
as well as inventories.

Total Current Liabilities
Total current liabilities stood at ¥75,459 million, down ¥5,516
million, or 6.8%. While accounts payable–other and accrued
expenses and income taxes payable increased, notes and accounts
payable–trade and short-term loans payable decreased.
Specifically, notes and accounts payable–trade decreased ¥3,841
million, or 16.6%, to ¥19,353 million. Short-term loans payable
declined ¥3,338 million, or 28.4%, to ¥8,409 million. On theother hand, accounts payable–other and accrued expenses rose
¥2,320 million, or 6.6%, to ¥37,222 million, and income taxes
payable climbed ¥150 million, or 7.0%, to ¥2,307 million.

Management Strategy

Growth Foundation

Total Noncurrent Liabilities
Total noncurrent liabilities as of March 31, 2016, decreased¥9,909 million, or 9.9%, to ¥90,396 million. While net defined
benefit liabilities were up, deferred tax liabilities and deferred tax
liabilities for land revaluation decreased. Specifically, deferred
tax liabilities fell ¥14,672 million, or 37.2%, to ¥24,750 million,
due mainly to a fall in the market value of securities held by theCompany and revisions to the effective tax rate. In addition,deferred tax liabilities for land revaluation decreased ¥1,254 million, or 11.3%, to ¥9,878 million, following the sale of land ofold stores and revisions to the effective tax rate. Meanwhile, net
defined benefit liabilities increased ¥6,311 million, or 19.9%, to¥38,024 million, due to a declining discount rate that accompanied a return on pension plan assets and a decrease in interest
rates on long-term government bonds.

Financial Section

made at the Board of Directors’ meeting held on February 4, 2016,
to acquire treasury stock. In addition, the negative balance of foreign currency translation adjustments expanded ¥10,406 million.
Remeasurements of defined benefit plans increased ¥9,708 million, to ¥11,320 million, due to the declining discount rate that
accompanied a return on pension plan assets and a decrease ininterest rates on long-term government bonds. Revaluation reserve
for land fell ¥1,341 million, or 7.4%, to ¥16,743 million, reflecting the sale of land of old stores. Non-controlling interests
decreased ¥321 million, or 12.1%, to ¥2,344 million. The equity
ratio fell 1.1 points, from 65.3% to 64.2%, and return on equity(ROE) rose 2.0 points, from 8.1% to 10.1%.
Total Net Assets / Equity Ratio
Millions of yenInterest-Bearing Liabilities /Debt to Equity Ratio
Millions of yenTimes

12,000

0.06

8,510
8,000

0.04

0.03
4,000

0

0.02

12/3 13/3 14/3 15/3 16/3

0Interest-bearing liabilities
Debt to equity ratio (right)

Total Net Assets¥303,889 million–12.9%

Total net assets as of March 31, 2016, amounted to ¥303,889
million, down ¥44,862 million, or 12.9%, from the previous fiscal
year-end figure of ¥348,752 million. While retained earnings
increased due to a rise in net income attributable to owners ofparent, there was a lower unrealized holding gain on securities, anacquisition of treasury stock, changes in foreign currency translation adjustments, and a decrease in remeasurements of defined
benefit plans, and a decline in land revaluations, resulting in the
decline in net assets.
Specifically, retained earnings increased ¥26,613 million, or
14.3%, to ¥213,050 million, reflecting net income attributable toowners of parent of ¥32,633 million and dividend payments of¥7,841 million. Unrealized holding gain on securities decreased¥32,150 million, or 36.9%, to ¥55,038 million, due to a fall in themarket value of securities held by the Company. Treasury stockrose ¥17,234 million, to ¥20,945 million, following a decision

%

64.2

450,000

Net Interest-Bearing Liabilities
As of March 31, 2016, short- and long-term loans payable, whichconstitute interest-bearing liabilities, totaled ¥8,510 million. Cashand deposits were ¥88,166 million, resulting in net cash anddeposits, less short- and long-term loans payable, of ¥79,655 million,
an increase of ¥12,223 million compared with ¥67,431 million at
the previous fiscal year-end.

About Yamaha

75.0

303,889
300,000

50.0

150,000

25.0

0

0

12/3 13/3 14/3 15/3 16/3

Total net assets
Equity ratio (right)

Cash FlowsNet cash provided by operating activities in fiscal 2016 was¥42,399 million, compared to net cash of ¥31,729 million provided
in the previous fiscal year. This constituted a ¥10,670 million
increase in cash provided.
Net cash provided by investing activities was ¥591 million, in
contrast to net cash of ¥11,700 million used in the previous fiscal
year. This increase was due to ¥12,811 million in proceeds fromsales of property, plant and equipment.
Net cash used in financing activities was ¥30,349 million,
compared to ¥5,909 million used in the previous fiscal year. This
increase, which represents a ¥24,439 million increase in cashused year on year, was attributable to an increase in outflow dueto the acquisition of treasury stock, the use of cash to repay
short-term loans, and the increase in dividend payments.
As a result of the above factors, the fiscal 2016 year-end
balance of cash and cash equivalents increased ¥8,858 million,to ¥85,018 million.
Free Cash FlowMillions of yen

45,00042,991

30,00015,0000–15,000

12/3 13/3 14/3 15/3 16/3

61

62

Yamaha Corporation Annual Report 2016

Capital Expenditures / Depreciation and Amortization
Capital expenditures in fiscal 2016 came to ¥11,220 million, adecrease of ¥2,625 million, or 19.0%, from ¥13,846 million in theprevious fiscal year. Capital expenditures in the musical instruments
segment totaled ¥6,700 million, down ¥2,834 million, or 29.7%,
from ¥9,534 million. In the audio equipment segment, capital
expenditures increased ¥261 million, or 9.2%, from ¥2,840 million to ¥3,102 million. Moreover, in the electronic devices segment, capital expenditures declined ¥21 million, or 3.4%, from¥639 million to ¥617 million. Capital expenditures in the others
segment decreased ¥31 million, or 3.7%, from ¥832 million to¥801 million.
Depreciation and amortization amounted to ¥12,681 million, an increase of ¥84 million, or 0.7%, from ¥12,597 million
in fiscal 2015.
R&D Expenses
R&D expenses in fiscal 2016 were down ¥646 million, or 2.5%,
from ¥25,439 million to ¥24,793 million. The ratio of R&D expenses
to net sales fell 0.2 percentage point, from 5.9% to 5.7%.

Most of the Company’s R&D spending was directed at productdevelopment, primarily in digital musical instruments, professional
audio equipment, communications equipment, and semiconductor businesses. Specifically, the spending supported elemental
technology research and product development for hybrid productsthat meld acoustic and digital technologies, development efforts toraise the competitiveness of digital musical instruments, and thedevelopment of new commercial audio equipment to respond to
the expansion of digital networks. Spending also supported productdevelopment aimed at expanding the category of AV products andnew product development, including online karaoke equipment
and routers. In the semiconductor business, spending was used todevelop high-value-added analog and hybrid semiconductors andto advance the development of geomagnetic sensors (electronic
compasses) for smartphones, and new amusement equipment.
R&D budgets also funded programs to research and develop
basic sound- and music-related technologies (sound sources, voicesynthesis, architectural acoustics, etc.). Such new devices as
speakers, sensors, and interfaces were also researched, in addition
to acoustic materials.

Capital Expenditures /Depreciation and Amortization

R&D Expenses /R&D Expenses to Net Sales

Millions of yen

Millions of yen%

30,00012

11,22015,00012,681

10,00020,0005,000

10,00024,7938

5.7

0Capital expenditures
Depreciation and amortization

12/3 13/3 14/3 15/3 16/3

04

12/3 13/3 14/3 15/3 16/3

0

R&D expenses
R&D expenses to net sales (right)

Forecast for Fiscal 2017
Net Sales

Net Income Attributable to Owners of Parent¥420,000 million–3.6%¥45,500 million+39.4%

Operating Income¥42,000 million+3.3%

Performance forecast
Fiscal 2017 represents the first year of the new medium-term
management plan, NEXT STAGE 12.
Steady economic recovery is expected to continue in North
America. In Europe, although economic uncertainty remains, signsof recovery have emerged and a solid performance is anticipated.
With expected stagnation in the rate of economic growth, thefuture of the Chinese economy is becoming increasingly moreopaque. Despite this, the Company is expecting stable performance due to steady growth in piano sales and the genuine rise

Management Strategy

Growth Foundationin popularity of other musical instruments, although the rate of
growth will most likely be more gradual compared to the previous
fiscal year. Other emerging countries appear to need more time
to fully recover, although the situation differs depending on theregion, but they are expected to show steady growth overall.
By business segment, in the musical instruments segment theCompany will aggressively widen its business through continuing
efforts to expand and upgrade its sales networks in China andother emerging countries. Particularly in China, the Company will
respond flexibly to the changing market, which is beginning toshow steady sales growth for various products, including digitalmusical instruments, wind instruments, and guitars. Also, in suchdeveloped markets as North America we aim to expand sales bytaking a flexible approach to market changes while maximizing
the impact of new product launches. We will also bolster efforts tocreate synergies with Line 6, Inc., a manufacturer of guitar peripherals, and its subsidiaries. Overall, in the musical instruments segment the Company expects decreased sales, despite substantive
sales increases, as a significant decline in revenues is expected
due to the impact of exchange rates, which has been worsening
since the previous fiscal year. Income is expected to increase.
In the audio equipment segment, we aim to achieve sales
growth for AV products by steadily promoting the network-based
products that were launched in the previous fiscal year. In professional audio equipment, we expect to record higher sales by
expanding our product lineup for digital mixers and making ourfull-scale entry into the commercial installed sound market. In themarkets of the United States and ASEAN regions, we will streamline our sales structures, which in turn will lead to a steadyincrease in the rate of growth.
In the commercial router business, we will take advantage of
our excellent reputation in the market and expand our productdomain for switches, access points, and other products. In doing
so, we plan to increase sales of ICT devices as a whole byintegrating microphone speakers for Web conferencing into
the audio communication device business. Moreover, we havebrought Revolabs, Inc., a manufacturer of conference microphones with advanced technology in the area of digital wirelesscommunications, under our corporate umbrella. This move will
help us expand sales by effectively sharing product lines andleveraging sales channels while pursuing synergistic effects in
product development.
In the others segment, for golf products, with adverse conditions
continuing in Japan we will work to expand sales by launching
new products. In parallel with these efforts, we will endeavor to
expand further into overseas markets, such as South Korea, which
we have continuously focused on, and China. In the automobileinterior wood components business, with the aim of enhancing
our manufacturing capabilities by reducing lead time, we will
work to deliver a stable supply to customers. In the electronic
devices business, amid estimations for sales to be on par with theprevious fiscal year, we will improve our model mix and promote
cost reductions. Through proposals for modules that fuse the various
technologies the Company possesses, we will contribute to the profit
growth of client companies. For FA equipment, the Company willcontinue to set its sights on higher sales through the expansion of
its customer base and initiatives to reinforce customer support byincreasing the number of development staff. In the resort business,
we expect to increase revenue by further strengthening measures
to attract customers during the winter season. Overall, sales are

Financial Section

About Yamaha

expected to increase year on year in the others segment.
In addition, the electronic devices segment will be abolishedin fiscal 2017. The results of the electronic devices business will be
combined with the industrial machinery and components businessand listed in the others segment.
Exchange rate assumptions for fiscal 2017 are: ¥110 per
US$1, ¥125 per €1, ¥83 per AUS$1, ¥85 per CAN$1, and ¥17 per
CNY¥1. In fiscal 2017, we forecast a decrease in sales and anincrease in operating income compared with fiscal 2016.
Capital Expenditures Forecast
In fiscal 2017, capital expenditures are expected to increase compared to fiscal 2016. In addition to regular investment in molds forthe production of new products, investment for facility upgrade
and refurbishment, investment related to sales and marketing,R&D investment, and expenses related to plant rationalization,
the Company plans to make investments to develop new facilities
in the area surrounding its headquarters as well as to establish
additional overseas production facilities.
Depreciation and amortization expenses are expected to beon par with the previous fiscal year as these expenses will notincrease to the extent of capital expenditures following theGroupwide integration of a straight-line depreciation method.
Profit Distribution Policy
With due consideration given to raising ROE, Yamaha adheres to abasic policy of actively providing returns to its shareholders while
carrying out growth investments in areas such as R&D, sales, andcapital expenditures, based on prospective levels of medium-term
consolidated earnings. For shareholder returns, the Company
adopts a policy of providing a continuous and stable dividend.
However, giving consideration to the balance between returns
and an appropriate amount of retained earnings for future growthinvestments, the Company will provide returns in a flexible andappropriate manner with the aim of improving capital efficiency.
In addition, the Company has set a goal for a consolidated payout
ratio of 30% or more.
In fiscal 2017, Yamaha plans to pay a total dividend of ¥52.0
per share, including an interim dividend payment of ¥26.0 per
share. Furthermore, as part of our shareholder return policy, theCompany has purchased treasury stocks totaling ¥20,000 million
between the period starting from February 5, 2016, to April 8,
2016, based on a resolution passed at the Board of Directors’
meeting held on February 4, 2016.

63

64

Yamaha Corporation Annual Report 2016

Consolidated Balance Sheet
Yamaha Corporation and its consolidated subsidiaries

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

2015

2016

AssetsCurrent assets:
Cash and deposits (Notes 20 and 22)
Notes and accounts receivable — trade (Note 22)
Inventories (Note 9)
Deferred tax assets (Note 26)
Other
Allowance for doubtful accounts
Total current assets¥ 88,166
49,02691,866
8,802
18,521(1,247)
255,135¥ 79,300
61,66387,782
7,947
12,293(1,354)
247,632$  782,446
435,091
815,282
78,115
164,368(11,067)
2,264,244

Property, plant and equipment, net of accumulated
depreciation (Notes 5, 14 and 29):
Buildings and structures, net
Machinery, vehicles, tools, furniture and fixtures, net
Land (Note 8)
Leased assets, net
Construction in progress
Total property, plant and equipment, net of accumulated depreciation

33,72822,612
46,061
333
1,544
104,280

35,754
23,681
49,207375
4,139
113,158

299,326
200,674
408,777
2,955
13,703
925,453

Investments and other assets:
Investment securities (Notes 6, 22 and 23)
Long-term loans receivable
Net defined benefit assets (Note 25)
Deferred tax assets (Note 26)
Lease and guarantee deposits
Goodwill
Other
Allowance for doubtful accounts
Total investments and other assets
Total assets

96,911
122
6
2,123
4,330
2,456
4,483
(104)
110,329¥469,745

144,836
135
74
2,020
4,673
12,1795,473(151)
169,243¥530,034

860,055
1,083
53
18,841
38,427
21,79639,785(923)
979,136$4,168,841

As of March 31, 2016

See Notes to Consolidated Financial Statements.

Management Strategy

Growth Foundation

Financial Section

Thousands of
U.S. dollars (Note 4)

Millions of yen
As of March 31, 2016

Liabilities
Current liabilities:
Notes and accounts payable — trade (Note 22)
Short-term loans payable (Notes 22 and 29)
Current portion of long-term loans payable (Notes 22 and 29)
Accounts payable — other and accrued expenses (Note 22)
Income taxes payable
Deferred tax liabilities (Note 26)
Provision for product warranties
Provision for directors’ bonuses
Provision for business restructuring expenses
Other
Total current liabilities
Noncurrent liabilities:
Long-term loans payable (Notes 22 and 29)
Deferred tax liabilities (Note 26)
Deferred tax liabilities for land revaluation (Note 8)
Net defined benefit liabilities (Note 25)
Long-term deposits received (Note 22)
Other
Total noncurrent liabilities

65

About Yamaha

2016

2015

2016

¥ 19,353
8,409
30
37,222
2,307
2
2,526
—
—
5,607
75,459¥ 23,194
11,74828
34,902
2,156
31
2,511
77
1,190
5,135
80,976$  171,752
74,627266
330,334
20,47418
22,417——49,760669,675

71
24,7509,878
38,024
15,041
2,631
90,39692
39,422
11,13331,71215,152
2,792
100,306

630
219,649
87,664
337,451
133,484
23,349802,236

28,534—40,054
213,050(20,945)
260,694—
28,53440,054
186,436(3,711)
251,314253,230—
355,467
1,890,753(185,880)
2,313,578

55,038(97)
16,743(19,513)(11,320)40,8502,344
303,889¥469,745

87,188215
18,085(9,106)(1,611)
94,771
2,666
348,752¥530,034

488,445(861)
148,589(173,172)(100,461)
362,531
20,802
2,696,920$4,168,841

Contingent liabilities (Note 7)
Net Assets
Shareholders’ equity:
Capital stock:		 Authorized		 — 700,000,000 shares;
		 Issued 2016 — 197,255,025 shares		2015 — 197,255,025 shares
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities
Unrealized gain (loss) from hedging instruments
Revaluation reserve for land (Note 8)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
See Notes to Consolidated Financial Statements.

66

Yamaha Corporation Annual Report 2016

Consolidated Statement of Operations
Yamaha Corporation and its consolidated subsidiaries
Year ended March 31, 2016

Net sales
Cost of sales (Notes 9, 10 and 12)Gross profit
Selling, general and administrative expenses (Notes 11 and 12)
Operating income
Other income (expenses):
Interest and dividend income
Patent royalty revenue
Tariff refund
Interest expenses
Sales discounts
Gain (loss) on sales or disposal of property, plant andequipment, net (Note 13)
Gain on sales of investment securities
Loss on impairment of fixed assets (Note 14)
Amortization of goodwill (Notes 3 and 15)
Business structural reform expenses (Note 16)
Other, net (Note 17)

Income before income taxes
Income taxes (Note 26):
Current
Deferred

Net income for the period
Net income attributable to non-controlling interests
Net income attributable to owners of parent
See Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016¥435,477
262,406
173,070
132,407
40,663

2015¥432,177
270,357
161,820
131,684
30,135

2016$3,864,723
2,328,772
1,535,942
1,175,071
360,871

3,077
—
693
(338)
(2,909)

2,884
623
—
(253)
(2,641)

27,307—
6,150(3,000)(25,816)

8,296
3
(882)
(6,759)
—
(265)
914

(47)
1
(861)
—
(1,786)471(1,609)73,62427(7,827)(59,984)—(2,352)
8,111

41,57828,526368,992

9,541
(656)
8,885

7,317
(3,896)
3,420

84,673(5,822)78,852

32,69359¥ 32,633

25,105176¥ 24,929

290,140524$  289,608

Management Strategy

Growth Foundation

Financial Section

67

About Yamaha

Consolidated Statement of Comprehensive Income
Yamaha Corporation and its consolidated subsidiaries
Year ended March 31, 2016

Net income for the period
Other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliates accounted forusing equity method
Total other comprehensive income (Note 18)
Comprehensive income(Composition)
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
See Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016¥ 32,693

2015¥25,1052016$ 290,140(32,118)(313)
450(10,858)(9,708)41,621316
1,165
11,721
2,159(285,037)(2,778)3,994(96,361)(86,155)(31)(52,580)¥(19,887)26
57,012¥82,118(275)(466,631)$(176,491)¥(19,694)¥ (192)¥81,440¥ 677$(174,778)$ (1,704)

68

Yamaha Corporation Annual Report 2016

Consolidated Statement of Changes in Net Assets
Millions of yen
Shareholders’ equity

Accumulated other comprehensive income

Year ended March 31, 2016

Capital stock(Note 19)

CapitalsurplusRetainedearnings(Note 19)

Treasury stock(Note 19)

Total
shareholders’equity(Note 19)

Balance as of April 1, 2014

¥28,534¥40,054¥168,338 ¥ (3,705)¥233,222

Yamaha Corporation andits consolidated subsidiaries

Unrealized
holding gain
(loss) on
securities

Unrealized
gain (loss)
from hedging
instruments

Revaluation
reservefor landForeigncurrencytranslation
adjustments¥ 45,540¥(101)¥17,139¥(20,347)

Total
accumulated
Remeasurements
otherof definedcomprehensive Non-controlling
benefit plansincomeinterests¥ (3,771)¥ 38,459¥3,161Total
net assets¥274,843

Changes of items during
the period:
Dividends from surplus(Note 19)

(6,389)(6,389)(6,389)Net income attributableto owners of parent

24,92924,92924,929Change in the scope of
consolidation

(661)

(661)

(661)

Reversal of revaluation
reserve for land

219

219

219

(5)

(5)

Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items
during the period

(5)

—

—

Balance as of April 1, 2015

¥28,534¥40,054

41,64818,097316

945

11,241

2,159

56,312(495)

55,816(5)

18,092

41,648316

945

11,241

2,159

56,312(495)

73,908¥186,436 ¥ (3,711)¥251,314¥ 87,188¥ 215¥18,085¥ (9,106)¥ (1,611)¥ 94,771¥2,666¥348,752Changes of items during
the period:
Dividends from surplus(Note 19)

(7,841)(7,841)(7,841)

Net income attributableto owners of parent

32,63332,63332,633

Change in the scope of
consolidation

29

29

29

Reversal of revaluation
reserve for land

1,791

Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items
during the periodBalance as ofMarch 31, 2016(17,234)——¥28,534¥40,054

26,613

1,791

1,791

(17,234)(17,234)(32,150)(313)(1,341)(10,406)(9,708)(53,920)(321)(54,242)(17,234)

9,379(32,150)(313)(1,341)(10,406)(9,708)(53,920)(321)(44,862)¥213,050 ¥(20,945)¥260,694¥ 55,038¥ (97)¥16,743¥(19,513)¥(11,320)¥ 40,850¥2,344¥303,889

Management Strategy

Growth Foundation

Financial Section

69

About Yamaha

Thousands of U.S. dollars (Note 4)
Shareholders’ equity
Yamaha Corporation andits consolidated subsidiaries
Year ended March 31, 2016

Capital stock(Note 19)

Balance as of April 1, 2015

$253,230

Accumulated other comprehensive income
Total
shareholders’equity(Note 19)

Unrealized
holding gain
(loss) on
securities

Unrealized
gain (loss)
from hedging
instruments$355,467 $1,654,562 $ (32,934) $2,230,334$ 773,766$ 1,908

Retainedearnings(Note 19)

CapitalsurplusTreasury stock(Note 19)

Revaluation
reservefor landForeigncurrencytranslation
adjustments

Total
accumulated
Remeasurements
otherof definedcomprehensive Non-controlling
benefit plansincomeinterests$160,499 $ (80,813) $ (14,297) $ 841,063

Total
net assets$23,660 $3,095,066

Changes of items during
the period:
Dividends from surplus(Note 19)

(69,586)(69,586)(69,586)

Net income attributableto owners of parent

289,608

289,608

289,608

Change in the scope of
consolidation

257

257

257

Reversal of revaluation
reserve for land

15,895Purchase of treasury stockNet changes of items otherthan shareholders’ equity
Total changes of items
during the period—Balance as ofMarch 31, 2016
$253,230(152,946)

15,895

15,895(152,946)(152,946)(285,321)(2,778)(11,901)(92,350)(86,155)(478,523)(2,849) (481,381)

83,236(285,321)(2,778)(11,901)(92,350)(86,155)(478,523)(2,849) (398,136)$355,467 $1,890,753 $(185,880) $2,313,578$ 488,445$ (861) $148,589 $(173,172) $(100,461) $ 362,531$20,802 $2,696,920—

See Notes to Consolidated Financial Statements.

236,182 (152,946)

70

Yamaha Corporation Annual Report 2016

Consolidated Statement of Cash Flows
Yamaha Corporation and its consolidated subsidiaries
Year ended March 31, 2016

Operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts(Gain) on liquidation of subsidiaries
Loss on valuation of investment securities(Gain) on sales of investment securities(Gain) on liquidation of investment securities(Decrease) in net defined benefit liabilities
Interest and dividend income
Interest expenses
Foreign exchange (gains) losses
Equity in losses of affiliates
Loss on sales of stocks of subsidiaries and affiliates
Loss (gain) on sales or disposal of property, plant and equipment, net
Business structural reform expenses(Increase) decrease in notes and accounts receivable — trade(Increase) in inventories(Decrease) in notes and accounts payable — trade
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Payment of business structural reform expenses
Income taxes paid
Net cash provided by operating activities
Investing activities:
Net decrease (increase) in time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investment securities
Proceeds from sales and redemption of investment securities
Proceeds from liquidation of investment securities
Other, net
Net cash provided by (used in) investing activities
Financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from deposits received from membership
Repayments for deposits received from membership
Purchase of treasury stock
Payments made to trust account for purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Increase in cash and cash equivalents due to newly
consolidated subsidiaries
Decrease in cash and cash equivalents resulting from exclusion ofsubsidiaries from consolidation
Cash and cash equivalents at end of period (Note 20)
See Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars (Note 4)

Millions of yen

2016

2015

2016

¥ 41,578
12,681
882
9,553
(91)
—
0
(3)
(13)
(3,172)(3,077)338
286
6—(8,296)—
9,947(8,523)(1,921)273
50,4493,137(332)(1,543)(9,311)
42,399¥ 28,526
12,597
861
2,913
192
(6)
—
(1)
—
(2,889)(2,884)
253
(465)
20
17
47
1,786
(473)
(267)
(1,185)(1,496)37,547
2,859
(256)
(340)
(8,080)31,729$ 368,992
112,540
7,827
84,780
(808)
—
0
(27)
(115)
(28,151)(27,307)
3,000
2,538
53
—
(73,624)—
88,277(75,639)(17,048)
2,423
447,719
27,840(2,946)(13,694)(82,632)
376,278(300)(11,432)
12,811
(250)
41
27
(305)
591

290
(12,530)
809
(219)
90
—
(139)
(11,700)(2,662)(101,455)
113,694(2,219)364
240(2,707)
5,245(2,188)
93
(111)
150
(261)
(17,234)(2,793)(7,841)(129)(31)(30,349)(3,782)
8,859
76,159

1,925
18
(63)
157
(343)
(5)
—
(6,389)(1,173)(34)(5,909)3,573
17,69257,524(19,418)
825
(985)
1,331
(2,316)(152,946)(24,787)(69,586)(1,145)(275)(269,338)(33,564)
78,621
675,887

858

950

7,614

(858)
¥ 85,018(8)¥ 76,159(7,614)$ 754,508

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Notes to Consolidated Financial Statements

1

Summary of Significant Accounting Policies (a) Basis of presentation
Yamaha Corporation (the Company) and its domestic subsidiaries
maintain their accounting records and prepare their financial
statements in accordance with accounting principles generally
accepted in Japan, and its overseas subsidiaries maintain theirbooks of account in conformity with those of their respective
countries of domicile. However, in accordance with “Practical
Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (Practical
Issues Task Force (PITF) No.18), the accompanying consolidated
financial statements have been prepared by using the accountsof overseas consolidated subsidiaries prepared in accordancewith either International Financial Reporting Standards (IFRS)
or accounting principles generally accepted in the United States
as adjusted for certain items. The Company and all consolidated
subsidiaries are referred to herein as the “Yamaha Group.”
The consolidated financial statements are prepared on thebasis of accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards,
and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments
and Exchange Law of Japan. Certain reclassifications have been
made to present the accompanying consolidated financial statements
in a format that is familiar to readers outside Japan. As permitted,
amounts of less than one million yen have been omitted. As a result,
the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily agree withthe sums of the individual amounts.
(b) Basis of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the parent company and all subsidiaries over which
it exerts substantial control either through majority ownership ofvoting stock and/or by other means. As of March 31, 2016, thenumbers of consolidated subsidiaries and subsidiaries and affiliates accounted for by the equity method were 67 and 2 (69 and2 in 2015). From the fiscal year ended March 31, 2016, theCompany has included one overseas subsidiary in the scope of
consolidation. The Company has also excluded two domestic subsidiaries and one overseas subsidiary from the scope of consolidation. The Company has included Yamaha Music Vietnam Company
Ltd. in the scope of consolidation, as its operations have become
increasingly more important to the Company. The Company has
excluded Yamaha Music and Visuals, Inc. from the scope of consolidation, due to absorption of the company by Yamaha MusicMedia Corporation. Due to the fact that the importance of Yamaha
Kagoshima Semiconductor Inc. has decreased following a business
transfer, the company has been excluded from the scope of consolidation. Yamaha Commercial Audio Systems Inc. has also been
excluded from the scope of consolidation, due to absorption of thecompany by Yamaha Corporation of America.
Investments in affiliates (other than subsidiaries as defined
above) whose decision-making and control over their operations
are significantly affected in various ways by the Yamaha Group areaccounted for by the equity method. Investments in two affiliates
were accounted for by the equity method for the year ended
March 31, 2016 (two in 2015). Investments in unconsolidated
affiliates not accounted for by the equity method are carried at cost.
Ten overseas subsidiaries have a financial closing date asof December 31, which differs from the financial closing dateof the Company; however, financial statements as of March 31
are prepared and reported by these overseas subsidiaries forconsolidation purposes.
(c) Securities
Securities owned by the Yamaha Group have been classified into
two categories, held-to-maturity and available-for-sale, in accordance with the accounting standards for financial instruments.
Under these standards, held-to-maturity debt securities are either
amortized or accumulated to face value by the straight-line method.
Marketable securities classified as available-for-sale securities arecarried at fair value with any changes in unrealized holding gainor loss, net of the applicable income taxes, included directly in net
assets. Nonmarketable securities classified as available-for-salesecurities are carried at cost. If the market value of marketablesecurities classified as available-for-sale securities declines significantly, such securities are written down to their respective fairvalue, thus establishing a new cost basis. The amount of each writedown is charged to income as a loss on valuation of investment
securities unless the fair value is deemed recoverable. The Company
has established a policy for the recognition of loss on valuation of
investment securities if the market value at the year-end has declined
more than 30% and a recovery to fair value is not anticipated. Costof securities sold is determined by the weighted-average method.
(d) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are stated principally at the cost method (a method of reducing book value when the profitability of the inventories declines),
cost being determined by the periodic average method. Inventoriesof the Company’s overseas consolidated subsidiaries are statedprincipally at the lower of cost or market, cost being determinedby the moving average method.
(e) Depreciation
Depreciation of property, plant and equipment (excluding leased
assets) is calculated principally by the declining-balance method,
except for certain consolidated subsidiaries applying the straightline method, at rates based on the estimated useful lives of therespective assets.
Estimated useful lives:
Buildings: 31 – 50 years (accompanying facilities: 15 years)
Structures: 10 – 30 years
Machinery and equipment: 4 – 9 years
Tools, furniture and fixtures: 5 – 6 years (molds: 2 years)
Depreciation of leased assets under finance leases, other thanthose for which the ownership transfers to the lessee, is calculatedby the straight-line method over the lease period with the residual
value at zero.

71

72

Yamaha Corporation Annual Report 2016(f) Allowance for doubtful accounts
To properly evaluate accounts receivable, the allowance for doubtful accounts is provided at an amount sufficient to cover possible
losses on the collection of receivables. The amount of the provision
is based on the historical experience with write-offs for normal
receivables and individual estimation of the collectability of receivables due from specific companies in financial difficulties.
(g) Provision for product warranties
Provision for product warranties is provided to cover the costof customers’ claims relating to after-sales service and repairs.
The amount of this provision is based on a percentage of the amountor volume of sales after considering the historical experience withrepairs of products under warranty or individual estimation.
(h) Retirement benefits
In calculating retirement benefit obligations, the benefit formula is
primarily used as the method for allocating projected retirement
benefits to periods of service up to March 31, 2016.
Prior service cost is amortized as incurred by the straight-line
method over a period (10 years) that is shorter than the averageremaining years of service of the employees participating in
the plans.
Actuarial gain or loss is amortized in the following year inwhich the gain or loss is recognized, primarily by the straight-line
method, over a period (10 years) that is shorter than the averageremaining years of service of the employees participating in
the plans.
(i) Construction contracts
For the construction work in progress, if the outcome of the construction activity during the course of the construction is deemedcertain, the percentage of completion method is applied.
When the above condition is not met, the completed-contract
method is applied.
The method for estimating the amount recognized by thepercentage of completion method is based on the ratio of costs
incurred to the estimated total cost.
(j) Criteria for presentation of finance leases (as lessor)
Finance lease transactions where the Company or a consolidated
subsidiary is the lessor of the leased assets, in which ownership is
not transferred to the lessee, are recorded as lease investment assets
which are included in the item “Other” account under “Current
assets.” Sales and cost of sales related to these finance lease transactions are recognized at the time the lease fees are received.
(k) Foreign currency translation
Monetary assets and liabilities of the Company and its domestic
consolidated subsidiaries denominated in foreign currencies aretranslated at the exchange rates in effect at each balance sheet
date. The resulting exchange gain or loss is recognized as otherincome or expense. Assets and liabilities of overseas consolidated
subsidiaries are translated at the exchange rates in effect at eachbalance sheet date. The components of net assets excluding translation adjustment and non-controlling interests are translated attheir historical exchange rates. Revenue and expense accounts aretranslated at the average rates of exchange in effect during theyear. Differences arising from translation are presented as translation
adjustments and non-controlling interests in the accompanying
consolidated balance sheet.
(l) Derivative financial instruments
The Company has entered into various derivative transactions
in order to manage certain risk arising from adverse fluctuations
in foreign currency exchange rates. Derivative financial instruments
are carried at fair value with changes in unrealized gain or loss
charged or credited to operations, except for those which meet thecriteria for deferral hedge accounting under which unrealized gainor loss is deferred as a component of net assets.
(Hedge accounting)To manage the fluctuation of foreign exchange risk in normal
export and import transactions, the Company and its consolidated
subsidiaries arrange their forward foreign exchange contracts andcurrency options, within amounts necessary, in accordance withinternal rules of each company.
Hedging instruments are forward foreign exchange contracts
and purchased foreign currency put options. Hedged items consistof forecast transactions, and recognized receivables and payables
denominated in foreign currencies.
Forecast transactions denominated in foreign currencies
designated as hedged items are accounted for by the benchmark
method.
Where hedge effectiveness is not reassessed given that the
anticipated cash flows have been fixed by hedging activities andthe risk of changes in cash flows is completely avoided, forward
foreign exchange contracts related to receivables and payables
denominated in foreign currencies are accounted for by the allocation method whereby translation differences are allocated into
the hedged items. See Note 22.
(m) Amortization method and amortization period for goodwill
Amortization of goodwill is carried out separately for eachgoodwill item over a reasonable amount of years using thestraight-line method.
(n) Cash and cash equivalents
Cash on hand and in banks, and short-term investments witha maturity of three months or less when purchased which caneasily be converted to cash and are subject to little risk of change
in value.
(o) Income taxes
Deferred income taxes are recognized by the asset and liability
method. Under this method, deferred tax assets and liabilities are
determined based on the differences between financial reporting
and the tax bases of the assets and liabilities and are measured
using the enacted tax rates and laws which will be in effect when
the differences are expected to reverse.
The Company and certain of its domestic subsidiaries haveadopted the consolidated taxation system.
(p) Consumption tax
National and local consumption taxes are excluded from transaction amounts. Non-deductible national and local consumption
taxes on assets are treated as expenses.

Management Strategy

2Growth Foundation

About Yamaha

Changes in Accounting Principles 

The “Revised Accounting Standard for Business Combinations”(Accounting Standards Board of Japan Statement No.21,
September 13, 2013, hereinafter referred to as the “Business
Combinations Accounting Standards”), the “Revised AccountingStandard for Consolidated Financial Statements” (ASBJ Statement
No.22, September 13, 2013, hereinafter referred to as the“Consolidated Financial Statements Accounting Standard”), andthe “Revised Accounting Standard for Business Divestitures”(ASBJ Statement No.7, September 13, 2013, hereinafter referred toas the “Business Divestitures Accounting Standard”) were applied
from the beginning of this fiscal year. As a result, for subsidiaries inwhich the parent company retains control, differences arising fromchanges in holdings of equity are now recorded in capital surplus,
and costs associated with the acquisition of shares are now
recorded as expenses in the consolidated financial statements forthe year in which they are incurred. In addition, for businesscombinations occurring on and after the beginning of the current
fiscal year, any changes to the allocation of the acquisition costarising from finalization of the provisional accounting must now
be reflected in the consolidated financial statements for the year inwhich the business combination occurred. Additionally, theCompany has changed the method of presenting consolidated net
income, and ‘minority interests’ has been changed to‘non-controlling interests.’

3

Financial Section

The consolidated financial statements for the previous fiscal
year have been restated in order to reflect these changes.
The application of the newly adopted accounting standards
noted at the outset of this section has been implemented from thestart of the fiscal year, in accordance with the transitional provisions in Article 58-2(4) of the Accounting Standard for Business
Combinations, Article 44-5(4) of the Accounting Standard forConsolidated Financial Statements, and Article 57-4(4) of the
Accounting Standard for Business Divestitures.
In the consolidated statement of cash flows from the fiscal
year under review, the following changes were made in themethod of classification. Cash flows related to purchases or salesof shares of subsidiaries, not resulting in a change in the scope of
consolidation, are classified under “Cash flows from financing
activities.” Cash flows related to expenses arising from purchasesof shares of subsidiaries, resulting in a change in the scope of
consolidation, or cash flows related to expenses for purchases
or sales of shares of subsidiaries, not resulting in a change of thescope of consolidation, are classified under “Cash flows fromoperating activities.”
Please note there was no material impact on the consolidated
financial statements and per share information for the year ended
March 31, 2016 as a result of these changes.

Additional Information 

Extraordinary losses due to impairment loss on stock ofconsolidated subsidiary and immediate amortization of goodwill
The Company reported extraordinary losses in the year ended
March 31, 2016 because of an impairment loss on stock of a consolidated subsidiary held by the Company (in the non-consolidated
closing) and the immediate amortization of goodwill (in the
consolidated closing).
(1) Impairment loss on stock of consolidated subsidiary(in the non-consolidated financial statements)
The Company recognized ¥8,493 million ($75,373 thousand) ofextraordinary losses as loss on valuation of stocks of subsidiaries
and affiliates, namely, Line 6, Inc., which became a wholly owned
subsidiary in January 2014, and its subsidiaries. The losses wererecognized because the companies’ financial results and expected
performance, which were initially estimated based on the companies’ product planning and development capabilities, diverged
from their initial plans.
In addition, the Company recognized loss on provision of support for subsidiaries as extraordinary losses, in the amount of ¥420
million ($3,727 thousand).

The Company also recognized ¥3,603 million ($31,976 thousand) of extraordinary losses on valuation of stocks of subsidiaries
and affiliates, namely, Revolabs, Inc., which became a wholly
owned subsidiary in March 2014, and its subsidiaries. The losses
were recognized because the companies’ financial results
diverged from their initial plans.
Please note that the extraordinary losses recognized in the
non-consolidated closing have been eliminated in consolidation;
therefore, the impact of these extraordinary losses in the consolidated
financial statements is equal to those shown in (2).
(2) Immediate amortization of goodwill(in the consolidated financial statements)
Accompanying the impairment loss in the non-consolidated
financial statements noted previously, in its consolidated financial
statements the Company recognized extraordinary losses on theimmediate amortization of goodwill in the amounts of ¥4,457 million ($39,554 thousand) related to Line 6, Inc., and its subsidiaries,and ¥2,302 million ($20,430 thousand) related to Revolabs, Inc.,and its subsidiaries.

73

74

Yamaha Corporation Annual Report 2016

4

U.S. Dollar Amounts 

Solely for the convenience of the reader, the accompanying consolidated financial statements for the year ended March 31, 2016 havebeen presented in U.S. dollars by translating all yen amounts at ¥112.68 = U.S.$1.00, the exchange rate prevailing on March 31, 2016.
This translation should not be construed as a representation that yen have been, could have been, or could in the future be converted into
U.S. dollars at the above or any other rate.

5

Accumulated Depreciation 

Accumulated depreciation of property, plant and equipment at March 31, 2016 and 2015 amounted to ¥189,438 million ($1,681,203
thousand) and ¥229,671 million, respectively.

6

Investment Securities 

Investment securities at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Investment securities in unconsolidated subsidiaries and affiliates
Investments in capital in unconsolidated subsidiaries and affiliates

7

2016¥1,00932

2015¥1,055636

2016$8,955284

Contingent Liabilities Contingent liabilities at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Export bills discounted with banks
Guarantees of indebtedness of Hamamatsu CATV*

2016
¥27
—

2015
¥ 68
112

2016
$240
—

* The amount guaranteed substantially by the Company is ¥9 million at March 31, 2015.

8Land Revaluation 

For the year ended March 31, 2016, the Company has carried over the revaluation of their landholdings at the date of revaluation inaccordance with the “Law Concerning the Revaluation of Land” (Law No.34 published on March 31, 1998). The date of revaluation was
March 31, 2002.
For the years ended March 31, 2016 and 2015, the Company determined the value of its land based on the respective value registered in the land tax list or the supplementary land tax list as specified in No.10 or No.11 of Article 341 of the Local Tax Law governed
by Item 3 of Article 2 of the Enforcement Order for the “Law Concerning the Revaluation of Land” (Cabinet Order No.119 published on
March 31, 1998).
The excess of the revalued carrying amount of such land over its market value at March 31, 2016 and 2015 is summarized as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Excess of revalued carrying amount of land over market value

2016¥(7,331)2015¥(8,323)2016$(65,060)

Management Strategy

9Growth Foundation

Financial Section

75

About Yamaha

Inventories Inventories at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

2016
¥63,232
12,82515,808¥91,866

2015¥58,477
13,30316,002¥87,7822016$561,164
113,818
140,291$815,282

Write-downs of inventories for the years ended March 31, 2016 and 2015 were recognized in the following account:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Cost of sales

2016¥(1,080)

2015
¥132

2016
$(9,585)* Figure shown in parentheses is a profit item.

10

Provision for Loss on Construction Contracts Provision for loss on construction contracts was included in the following account for the years ended March 31, 2016 and 2015:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Cost of sales

11

2016
¥165

2015
¥8

2016
$1,464

Selling, General and Administrative Expenses 

Principal items of selling, general and administrative expenses for the years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Sales commissions
Transport expenses
Advertising expenses and sales promotion expenses
Allowance for doubtful accounts
Provision for product warranties
Retirement benefit expenses
Provision for directors’ bonuses
Salaries and benefits
Rent
Depreciation and amortization2016¥ 1,396
13,407
19,183
69
974
2,921
—
54,806
4,017
2,440

2015
¥ 1,516
12,813
18,671
214
606
3,063
77
54,116
3,910
2,461

2016
$ 12,389
118,983
170,243612
8,644
25,923—486,386
35,65021,654

76

Yamaha Corporation Annual Report 201612

R&D Expenses 

R&D expenses, included in selling, general and administrative expenses and cost of sales for the years ended March 31, 2016 and 2015,
amounted to ¥24,793 million ($220,030 thousand) and ¥25,439 million, respectively.

13

Sales or Disposal of Property, Plant and Equipment For the year ended March 31, 2016
Gain on sales of property, plant and equipment totaled ¥7,931 million ($70,385 thousand), resulted principally from sales of the land andbuilding of the former Shinsaibashi building, as well as the land of the former Kyushu building. Loss on disposal of property, plant andequipment principally resulted from disposal of land, machinery and equipment, and buildings and structures.
For the year ended March 31, 2015
Gain on sales of property, plant and equipment principally resulted from sales of land, machinery, and equipment. Loss on disposal ofproperty, plant and equipment principally resulted from disposal of buildings and structures, machinery, and equipment.

14

Loss on Impairment of Fixed Assets 

The following table summarizes loss on impairment of fixed assets for the years ended March 31, 2016 and 2015.

Group of fixed assets

Location

Impaired assets

Idle assets, etc.

Hamamatsu City, Shizuoka,
and elsewhere

Buildings and structures
Machinery, vehicles, tools,
furniture and fixtures
Land
Total

Millions of yen

Thousands of
U.S. dollars (Note 4)

2016
¥ 85

2016
$  754

0
796
¥882

0
7,064
$7,827

Millions of yen
Group of fixed assets

Location

Impaired assets

Assets of the musicalinstruments businessFukuoka City, Fukuoka,
and elsewhere

Buildings and structures
Machinery, vehicles, tools,
furniture and fixtures
Total
Buildings and structures
Machinery, vehicles, tools,
furniture and fixtures
Land
Leasehold right
Total
Buildings and structures
Machinery, vehicles, tools,
furniture and fixtures
Land
Leasehold right
Total

Idle assets, etc.

Total

Hamamatsu City, Shizuoka,
and elsewhere

2015
¥111
14
¥126
¥360
15
328
30
¥735
¥471
30
328
30
¥861

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Method of grouping assets
Within its segment classification, the Yamaha Group forms the smallest asset units that generate cash flows independently of the cash flows
from other assets.
Background on recognition of impairment losses
Impairment losses were recognized on idle assets that will not be used in the future, assets that are expected to become idle assets, andassets that the Company expects to dispose of.
Regarding the assets of the musical instruments business, impairment losses are recognized for those asset groups where the total
undiscounted future cash flows were less than the book value among those assets that are continuing to run losses on operations or are
expected to run losses.
Method for computing recoverable amounts
The recoverable value of idle assets, etc., was calculated using estimates of the net sale value; the price indicators were the expected salevalue, the appraised value, the assessed value for tax purposes of noncurrent assets, and other sources.
The recoverable value of assets in the musical instruments business was calculated using estimates of the value of the assets in use,
and future cash flows from these assets were discounted to the present using a discount rate of 6.4%.

15

Amortization of Goodwill 

For the year ended March 31, 2016
An immediate amortization of goodwill was recognized based on Item 32 of the “Practical Guideline Related to Capital Consolidation
Procedures in Consolidated Financial Statements” (Final Revision on November 28, 2014, the Accounting Practice Committee Report
No.7 issued by the Japanese Institute of Certified Public Accountants).
See note 3.
For the year ended March 31, 2015
None

16

Business Structural Reform Expenses 

For the year ended March 31, 2016
None
For the year ended March 31, 2015
Business structural reform expenses comprise losses in connection with the transfer of the business of a semiconductor manufacturingsubsidiary and personnel costs incurred in Europe on guitar peripheral equipment that were related to consolidation and concentrationof sales outlets.

77

78

Yamaha Corporation Annual Report 201617

Other Income (Expenses) The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Foreign exchange losses
Gain on liquidation of subsidiaries and affiliates
Loss on valuation of investment securities
Loss on sales of stock of subsidiaries and affiliates
OthersOther, net

18

2016
¥(598)
13(0)—
320¥(265)

2015¥ (84)
6
—
(17)
566
¥471

2016
$(5,307)
115
(0)
—
2,840
$(2,352)

Information on Consolidated Statement of Comprehensive Income Reclassification adjustments and tax effects related to each component of other comprehensive income for the years ended March 31,
2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Other comprehensive income
Unrealized holding gain (loss) on securities
Amount arising during the year
Tax effectTotal
Unrealized gain (loss) from hedging instruments
Amount arising during the year
Tax effect
Total
Revaluation reserve for landTax effectForeign currency translation adjustments
Amount arising during the year
Remeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments for gains and losses recognized in theStatement of Operations
Amount before tax effect adjustment
Tax effect
Total
Share of other comprehensive income (loss) of affiliates accounted forusing equity method
Amount arising during the year
Total

2016

2015

2016

¥(48,053)
15,934(32,118)¥ 57,433(15,811)
41,621$(426,455)
141,409(285,037)

(457)
144
(313)

472
(155)
316

(4,056)
1,278(2,778)

450

1,165

3,994

(10,858)

11,721(96,361)(10,428)

1,205(92,545)741(9,686)(22)(9,708)

852
2,057
102
2,159

6,576
(85,960)(195)(86,155)(31)¥(52,580)

26¥ 57,012(275)$(466,631)

Management Strategy

19

Growth Foundation

Financial Section

79

About Yamaha

Information on Consolidated Statement of Changes in Net Assets 

The following tables present information related to the accompanying consolidated statement of changes in net assets for the years ended
March 31, 2016 and 2015:(a) Common stock2016
197,255,025——
197,255,025

Number of shares

Beginning of the year
Increase
Decrease
End of the year2015
197,255,025——
197,255,025(b) Treasury stock2016
3,631,425
5,340,508*1—
8,971,933

Number of shares

Beginning of the year
Increase
Decrease
End of the year
*1. Increase owing to purchase of treasury stock based on the resolution of the Board of Directors:
Increase owing to purchase of outstanding fractional shares of less than one trading unit:*2. Increase owing to purchase of outstanding fractional shares of less than one trading unit:

2015
3,628,117
3,308*2—
3,631,425

5,336,200 shares
4,308 shares
3,308 shares(c) Subscription rights to shares
None(d) Cash dividends(1) Amount of dividend payments

2016

Date of approval

Type of shares

Jun. 23, 2015
 (Annual General Meeting Commonof Shareholders)
stock
Oct. 30, 2015
Common(Board of Directors)
stock

Total dividends(Millions of yen)

Total dividends(Thousands of
U.S. dollars)(Note 4)

Dividends per share(Yen)

Dividends
per share(U.S. dollars)(Note 4)

Record date

Effective date

¥4,356$38,658¥22.50$0.20

Mar. 31, 2015

Jun. 24, 2015

¥3,485$30,928¥18.00$0.16

Sept. 30, 2015

Dec. 8, 2015

Notes: D ividends per share of ¥22.50 ($0.20) approved on June 23, 2015 consisted of regular dividends of ¥22.50 ($0.20).
Dividends per share of ¥18.00 ($0.16) approved on October 30, 2015 consisted of regular dividends of ¥18.00 ($0.16).

2015
Date of approval

Type of shares

Jun. 24, 2014
 (Annual General Meeting Commonof Shareholders)
stock
Oct. 31, 2014
Common(Board of Directors)
stock

Total dividends(Millions of yen)

Dividends per share(Yen)

Record date

Effective date

¥3,775¥19.50Mar. 31, 2014

Jun. 25, 2014

¥2,613¥13.50

Sept. 30, 2014

Dec. 9, 2014

Notes: D ividends per share of ¥19.50 approved on June 24, 2014 consisted of regular dividends of ¥19.50.
Dividends per share of ¥13.50 approved on October 31, 2014 consisted of regular dividends of ¥13.50.

80

Yamaha Corporation Annual Report 2016

(2) Dividends whose effective date is in the year subsequent to that in which the record date falls

2016Type of shares

Source ofdividends

Total dividends(Millions of yen)

Total dividends(Thousands of
U.S. dollars)(Note 4)

Dividends per share(Yen)

Dividends
per share(U.S. dollars)(Note 4)

Jun. 22, 2016
 (Annual General Meeting Commonof Shareholders)stock

Retainedearnings¥4,895$43,442¥26.00$0.23

Date of approval

Record date

Effective dateMar. 31, 2016 Jun. 23, 2016

Note: Dividends per share of ¥26.00 ($0.23) approved on June 22, 2016 consisted of regular dividends of ¥26.00 ($0.23).

2015
Type of shares

Source ofdividends

Total dividends(Millions of yen)

Dividends per share(Yen)

Jun. 23, 2015
 (Annual General Meeting Commonof Shareholders)stock

Retainedearnings¥4,536¥22.50Date of approval

Record date

Effective dateMar. 31, 2015 Jun. 24, 2015

Note: Dividends per share of ¥22.50 approved on June 23, 2015 consisted of regular dividends of ¥22.50.

20

Supplementary Cash Flow Information 

The following table represents a reconciliation of “Cash and deposits” and “Cash and cash equivalents” at March 31, 2016 and 2015:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Cash and deposits
Time deposits with a maturity of more than three months
Cash and cash equivalents

21

2016
¥88,166(3,147)¥85,018

2015¥79,300(3,140)¥76,1592016$782,446(27,929)$754,508

Leases 

2016Lessees’ accounting
Operating Lease Transactions

Future minimum lease payments subsequent to March 31, 2016 on noncancellable leases are as follows:
Years ending March 31

20172018 and thereafter
Total

Millions of yen¥  8492,797¥3,646

Thousands of
U.S. dollars (Note 4)$ 7,535
24,823$32,357

Management Strategy

Growth Foundation

Financial Section

81

About Yamaha

Finance Lease Transactions in which Ownership is not transferred to the Lessee Commencing on or before March 31, 2008(a) Amounts related to leased assets corresponding to the acquisition cost, accumulated depreciation and net book value at the end of
the year
As of March 31, 2016

Buildings and structures
Other
Total

Acquisition costs

Millions of yen
Accumulated
depreciation

Net book value

¥799
—
¥799

¥406
—
¥406

¥392
—
¥392

Thousands of U.S. dollars (Note 4)
Accumulated
Acquisition costs
depreciation
Net book value$7,091—$7,091$3,603—$3,603$3,479—$3,479Amounts corresponding to the acquisition costs include interest expense since the balance of future minimum lease payments
accounts for only a small percentage of property, plant and equipment as of the balance sheet date.
(b) Amounts corresponding to the future minimum lease payments subsequent to March 31, 2016
Years ending March 31

20172018 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars (Note 4)

¥ 47
345
¥392

$  417
3,062$3,479Amounts corresponding to the future minimum lease payments include interest expense since the balance of future minimum lease
payments accounts for only a small percentage of property, plant and equipment as of the balance sheet date.
(c) Amounts corresponding to the lease payments and depreciation
Year ended March 31, 2016

Lease payments
Depreciation

Millions of yen

Thousands of
U.S. dollars (Note 4)

¥47
47

$417
417

(d) Method of calculating the amount of the depreciation of leased assets
Depreciation of leased assets is calculated by the straight-line method over the lease period with their residual value at zero.
Lessors’ accounting
Operating Lease Transactions

Future minimum lease amounts receivable subsequent to March 31, 2016 on noncancellable leases are as follows:
Years ending March 31

20172018 and thereafter
Total

Millions of yen¥  502586¥1,088

Thousands of
U.S. dollars (Note 4)$4,4555,201$9,656

82

Yamaha Corporation Annual Report 20162015
Lessees’ accounting
Operating Lease Transactions

Future minimum lease payments subsequent to March 31, 2015 on noncancellable leases are as follows:
Years ended / ending March 31

Millions of yen

20162017 and thereafter
Total¥  864
2,406¥3,271

Finance Lease Transactions in which Ownership is not transferred to the Lessee Commencing on or before March 31, 2008(a) Amounts related to leased assets corresponding to the acquisition cost, accumulated depreciation and net book value at the end of
the year
As of March 31, 2015

Buildings and structures
Other
Total

Acquisition costs

Millions of yen
Accumulated
depreciation

Net book value

¥799
—
¥799

¥358
—
¥358

¥440
—
¥440

Amounts corresponding to the acquisition costs include interest expense since the balance of future minimum lease payments
accounts for only a small percentage of property, plant and equipment as of the balance sheet date.
(b) Amounts corresponding to the future minimum lease payments subsequent to March 31, 2015
Years ended / ending March 31

20162017 and thereafter
Total

Millions of yen

¥ 47
392
¥440

Amounts corresponding to the future minimum lease payments include interest expense since the balance of future minimum lease
payments accounts for only a small percentage of property, plant and equipment as of the balance sheet date.
(c) Amounts corresponding to the lease payments and depreciation
Year ended March 31, 2015

Lease payments
Depreciation

Millions of yen¥9393(d) Method of calculating the amount of the depreciation of leased assets
Depreciation of leased assets is calculated by the straight-line method over the lease period with their residual value at zero.
Lessors’ accounting
Operating Lease Transactions

Future minimum lease amounts receivable subsequent to March 31, 2015 on noncancellable leases are as follows:
Years ended / ending March 31

20162017 and thereafter
Total

Millions of yen¥  581739¥1,320Management Strategy

22

Growth Foundation

Financial Section

About Yamaha

Financial Instruments (a) Overview(1) Policy for financial instruments

The Yamaha Group, in principle, limits its cash management todeposits for which principals are guaranteed and interest rates are
fixed. In addition, the Yamaha Group raises funds mainly throughbank borrowings. Further, Yamaha and its owned domestic subsidiaries practice group finance. The Yamaha Group uses derivatives
for the purpose of reducing risk, and limits derivative transactions
to actual exposure. The Yamaha Group does not enter into derivative transactions for speculative purposes.
(2) Types of financial instruments and related risk

Trade notes and accounts receivable are exposed to the credit riskof its customers. In addition, the Yamaha Group is exposed to­foreign currency exchange risk arising from receivables denominated in foreign currencies.
Short-term investment securities and investment securities are
exposed to market risk. Those securities are composed of mainly
the stock of Yamaha Motor Co., Ltd., a former affiliated company
which shares the Yamaha brand in common, and shares ofcommon stock of other companies with which it has business
relationships. Trade notes and accounts payable, other accounts
payable, and accrued expenses have payment due dates within
one year. In addition, trade accounts payable that are denominated in foreign currencies are exposed to foreign currency
exchange risk. Short-term loans payable are raised mainly in connection with business activities, and long-term loans payable aretaken out principally for the purpose of making capital investments. The repayment dates of long-term loans payable extend up
to three years and four months from March 31, 2016, and up to
four years and four months from March 31, 2015, respectively.
Long-term deposits received are membership deposits received
from customers in the Yamaha Group’s recreation business. The
Yamaha Group is exposed to liquidity risk from its trade notes andaccounts payable, other accounts payable, accrued expenses,
short-term loans payable, long-term loans payable, and long-term
deposits received.
Regarding derivatives, the Yamaha Group enters into foreignexchange forward contracts with netting arrangements and­currency options (foreign currency put options) to reduce foreign
currency exchange risk arising from the receivables and payables
denominated in foreign currencies in normal export and importtransactions.
Foreign exchange forward contracts are exposed to foreign
currency exchange risk. For currency options, since the YamahaGroup only uses purchased foreign currency put options, the riskof loss is limited to the option premium.
Derivative transactions are accounted for by hedge accounting. The method of hedge accounting, hedging instruments andhedged items, hedging policy, and the assessment of the effectiveness of hedging activities are described in Note 1(l) Derivative
financial instruments (Hedge accounting).

(b) Risk management for financial instruments
The Yamaha Group has established a Group financial risk management policy, and the Company and its consolidated subsidiaries
have prepared rules based on this policy for the following risk:(1) Credit risk (the risk that customers may default)

The Yamaha Group has prepared policy for managing its credit
exposure and trade receivables. In accordance with the rules,
the Yamaha Group monitors the credit exposure limits of eachcustomer and organizes all trade receivables by customer, andconfirms the outstanding balances by customers regularly. For
receivables that become past due, rules require taking steps tounderstand the causes and preparing a schedule for the recoveryof this exposure.
To minimize the credit risk of the counterparty in derivativetransactions, the Yamaha Group enters into transactions only withfinancial institutions that have a sound credit profile.
(2) Market risk (the risks arising from fluctuations in exchange rates,interest rates, and other indicators)

For trade receivables denominated in foreign currencies, theYamaha Group minimizes the foreign exchange risk arising fromthe receivable by entering into forward foreign exchange contracts
and arranging for currency options, after netting by the payables
denominated in foreign currencies, within the limits of actual
transactions. Also, the trade accounts payable denominated inforeign currencies are maintained within the amount of accounts
receivable denominated in foreign currencies at all times.
For short-term investment securities and investment securities,
the Yamaha Group periodically reviews the market value and thefinancial position of the issuer with which the Yamaha Group hasa business relationship.
In conducting derivative transactions, based on the policy
stated in (1) above, the Company and its consolidated subsidiaries
hold discussions, establish internal rules for the management ofderivatives, and then conduct and manage such transactions inaccordance with the rules.
Derivative transactions of the Company and its subsidiaries areconcentrated in each accounting and finance department of thesecompanies. Internal rules set forth the roles of each accounting
and finance department, reports to be submitted to top management,
communications to be sent to related departments, and maximum
upper limit on position.
Monthly reports including the outstanding balance of derivative transactions and quantitative information such as market
trends of foreign exchange rate are submitted to top management.

83

84

Yamaha Corporation Annual Report 2016(3) Liquidity risk (the risk that the Group may not be able to meet its(4) Supplementary explanation of the estimated fair value of financial

obligations on the scheduled dates)

instruments

The Yamaha Group manages liquidity risk based on the cash flowplans of the Company and its consolidated subsidiaries andthrough the practice of group finance at the Company and its
wholly owned subsidiaries in Japan.

The estimated fair value of financial instruments is their quoted
market price if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.
In addition, the notional amounts of derivatives in Note 24
are not indicative of the actual market risk involved in derivativetransactions.

(c) Estimated fair value of financial instruments
Carrying value on the consolidated balance sheet as of March 31, 2016 and 2015, and difference between carrying value and estimatedfair value, are shown in the following table. The following table does not include financial instruments for which it is extremely difficult
to determine the fair value. See Note (ii) below:
As of March 31, 2016

Carrying value*1

Millions of yen
Estimated fair value*1

Difference

Thousands of U.S. dollars (Note 4)
Carrying value*1 Estimated fair value*1
Difference

Cash and deposits
Notes and accounts
receivable — trade
Investment securities
Subsidiaries and affiliates securities
Available-for-sale securities
Notes and accounts payable — trade
Accounts payable —other and accrued expenses
Derivatives*2¥ 88,166¥ 88,166¥ —$ 782,446$ 782,446

49,02649,026—

435,091

435,091—714
93,690(19,353)

340
93,690(19,353)

(373)
—
—

6,337
831,470(171,752)

3,017
831,470(171,752)(3,310)——(37,222)(139)(37,222)
(139)

—
—

(330,334)(1,234)(330,334)(1,234)——As of March 31, 2015

Carrying value*1

Millions of yen
Estimated fair value*1

Difference

Cash and deposits
Notes and accounts
receivable — trade
Investment securities
Subsidiaries and affiliates securities
Available-for-sale securities
Notes and accounts payable — trade
Accounts payable —other and accrued expenses
Derivatives*2¥ 79,300¥ 79,300¥ —61,663

61,663—760
141,726(23,194)446
141,726(23,194)

(314)
—
—

(34,902)317(34,902)
317

—
—

$

—

*1. Figures shown in parentheses are liability items.
*2. The value of assets and liabilities arising from derivatives is shown at net value, with net liability position shown in parentheses.

Notes:(i) Methods for computing the estimated fair value of financial instruments, securities and derivative transactions

Cash and deposits and notes and accounts receivable — trade
Since these items are settled in a short period of time, the carrying value approximates fair value.
Investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either the quoted market priceor prices provided by the financial institutions making markets in these securities.
Information on securities classified by holding purpose is contained in Note 23.
Notes and accounts payable — trade and accounts payable — other and accrued expenses
Since these items are settled in a short period of time, the carrying value approximates fair value.
Derivative Transactions
See Note 24.

Management Strategy

Growth Foundation

Financial Section

85

About Yamaha(ii) Financial instruments for which it is extremely difficult to determine the fair value
Thousands of
U.S. dollars (Note 4)

Millions of yen

Carrying value
Unlisted stocks
Long-term deposits received

2016

2015

2016

¥ 2,507
15,041¥ 2,351
15,152$ 22,249
133,484

Because no quoted market price is available and estimating their future cash flows is deemed to be prohibitively expensive, the estimatedfair value of these financial instruments was extremely difficult to determine, and has not been disclosed.
(iii) The redemption schedule for receivables and securities with maturities as of March 31, 2016 and 2015

As of March 31, 2016

Cash and deposits
Notes and accounts
receivable — trade
Total

As of March 31, 2015

Cash and deposits
Notes and accounts
receivable — trade
Total

Withinone year

Millions of yen
Between one
Between fiveand five years and ten years

Over ten years

Thousands of U.S. dollars (Note 4)
Between one
Between fiveand five years and ten years Over ten years

Withinone year¥ 88,166

¥—

¥—

¥—

$  782,446

$—

$—

$—

49,026¥137,192

—
¥—

—
¥—

—
¥—

435,091$1,217,536

—
$—

—
$—

—
$—

Millions of yen
Between one
Between fiveand five years and ten years

Over ten years

Withinone year¥ 79,300

¥—

¥—

¥—

61,663¥140,963

—
¥—

—
¥—

—
¥—

(iv) The redemption schedule for long-term debt with maturities as of March 31, 2016 and 2015

As of March 31, 2016

Short-term loans payable
Long-term loans payable
Lease obligations
Other interest-bearing debt
Total

As of March 31, 2016

Short-term loans payable
Long-term loans payable
Lease obligations
Other interest-bearing debt
Total

As of March 31, 2015

Short-term loans payable
Long-term loans payable
Lease obligations
Other interest-bearing debt
Total

Within one year

Between one andtwo years¥8,40930
27—¥8,467

¥—
30
61
—
¥92

Within one year

Between one andtwo years$74,627266
240—$75,142

$ —
266
541
—
$816

Within one year

Between one andtwo years¥11,74828
64—¥11,840

¥—
27
56
—
¥83

Millions of yen
Between two andBetween three andthree years
four years

¥ —
30
71
—
¥102

Between four andfive years

¥—
10
62
—
¥72

¥—
—
35
—
¥35

Thousands of U.S. dollars (Note 4)
Between two andBetween three andthree years
four years

Between four andfive years

$ —
266
630
—
$905

$ —
89
550
—
$639

$ —
—
311
—
$311

Millions of yen
Between two andBetween three andthree years
four years

Between four andfive years

¥—
27
54
—
¥82

¥—
27
50
—
¥78

¥—
9
46
—
¥56

Over five years

¥—
—
97
—
¥97

Over five years

$ —
—
861
—
$861

Over five years

¥ —
—
124
—
¥124

86

Yamaha Corporation Annual Report 2016

23

Securities (a) Available-for-sale securities with fair market value
Millions of yen
As of March 31, 2016

Securities whose carrying value
exceeds their acquisition costs:
Stock
Other
Securities whose carrying value does
not exceed their acquisition costs:
Stock
Other
Total

Thousands of U.S. dollars (Note 4)
Unrealized
Carrying value
Acquisition costs
gain (loss)

Unrealized
gain (loss)

Carrying value

Acquisition costs¥90,859—
90,859¥12,873—
12,873¥77,985—
77,985$806,345—
806,345$114,244—
114,244$692,093—
692,093

2,831
—
2,831
¥93,690

3,036
—
3,036
¥15,910

(205)
—
(205)
¥77,780

25,124—25,124$831,470

26,944—26,944$141,196(1,819)—(1,819)$690,273

Millions of yen
As of March 31, 2015

Securities whose carrying value
exceeds their acquisition costs:
Stock
Other
Securities whose carrying value does
not exceed their acquisition costs:
Stock
Other
Total

Carrying value

Acquisition costs

Unrealized gain
(loss)¥141,725—
141,725¥15,910—
15,910¥125,815—
125,8150—0¥141,7260—0¥15,910(0)—(0)¥125,815(b) Available-for-sale securities sold during the years ended March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 4)

Millions of yen

Sales of available-for-sale securities
Gain on sales
Loss on sales

2016
¥3
3
—

2015
¥1
1
—

2016
$27
27
—

Management Strategy

24

Growth Foundation

Financial Section

About Yamaha

Derivatives and Hedging Activities 

As of March 31, 2016 and 2015, there were no derivative transactions outstanding for which hedge accounting has not been applied.
The notional amounts and the estimated fair value of the derivative instruments outstanding as of March 31, 2016 and 2015, for which
hedge accounting has been applied are summarized as follows:

As of March 31, 2016

Millions of yen
Notional amount
Total
Over one year

Hedged items

Foreign exchange forward contracts
accounted for by benchmark method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Foreign exchange forward contracts
accounted for allocation method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Total

Estimated fair value

Calculation of fair value

Prices provided byfinancial institution*2
¥

541
691
12,495

¥—
—
—

¥

563
716
12,588Market prices

217
257
2,362
¥16,566

—
—
—
¥—

¥

—*1

*1. The estimated fair value is included in the fair value of accounts receivable, since the foreign exchange forward contracts are accounted for as part of accounts receivable under
the allocation method in hedge accounting.
*2. The estimated fair value is the fair value of the notional amount, and the net value in payable of assets and liabilities arising from derivatives was ¥139 million.

As of March 31, 2016

Thousands of U.S. dollars (Note 4)
Notional amount
Total
Over one year
Estimated fair value

Hedged items

Foreign exchange forward contracts
accounted for by benchmark method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Foreign exchange forward contracts
accounted for allocation method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Total

Calculation of fair value

Prices provided byfinancial institution*2
$

4,801
6,132
110,889

$—
—
—

$

4,996
6,354
111,715
Market prices

1,926
2,281
20,962$147,018

—
—
—
$—

$

—*1

*1. The estimated fair value is included in the fair value of accounts receivable, since the foreign exchange forward contracts are accounted for as part of accounts receivable under
the allocation method in hedge accounting.
*2. The estimated fair value is the fair value of the notional amount, and the net value in payable of assets and liabilities arising from derivatives was $1,234 thousand.

As of March 31, 2015

Millions of yen
Notional amount
Total
Over one year

Hedged items

Foreign exchange forward contracts
accounted for by benchmark method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Foreign exchange forward contracts
accounted for allocation method:
Sell:
Accounts receivable
Australian dollars
Canadian dollars
Euros
Total

Estimated fair value

Calculation of fair value

Prices provided byfinancial institution*2
¥

873
1,159
11,239

¥—
—
—

¥

853
1,142
10,958Market prices

161
221
2,339
¥15,995

—
—
—
¥—

¥

—*1

*1. The estimated fair value is included in the fair value of accounts receivable, since the foreign exchange forward contracts are accounted for as part of accounts receivable under
the allocation method in hedge accounting.
*2. The estimated fair value is the fair value of the notional amount, and the net value in receivable of assets and liabilities arising from derivatives was ¥317 million.

87

88

Yamaha Corporation Annual Report 201625

Retirement Benefits (a) Outline of the Company’s retirement benefit system
To provide employee retirement benefits, the Company and its consolidated subsidiaries have funded and unfunded defined benefit
pension plans and defined contribution pension plans.
The defined benefit pension plan (funded and unfunded plans) pays a lump-sum or an annual pension based on the employeecompensation point system.
In certain cases, the Company pays employees who are retiring, etc., additional retirement benefits that are not considered tobe retirement benefit obligations as calculated under actuarial methods based on retirement benefit accounting principles.
Certain consolidated subsidiaries that have defined benefit pension plans calculate net defined benefit liabilities and retirement
benefit expenses using the simplified method.
(b) Defined benefit pension plans(1) Changes in the retirement benefit obligations for the years ended March 31, 2016 and 2015 (excluding plans that apply the simplified method)
Thousands of
U.S. dollars (Note 4)

Millions of yen

Retirement benefit obligations at the beginning of year
Service cost
Interest cost
Actuarial gain or loss
Retirement benefits paid
Other
Retirement benefit obligations at end of year

2016
¥116,528
4,446
1,188
7,656
(8,969)(299)¥120,551

2015¥116,180
4,306
1,487
3,820
(9,457)
190¥116,528

2016$1,034,150
39,457
10,54367,945(79,597)(2,654)$1,069,853(2) Changes in the plan assets for the years ended March 31, 2016 and 2015 (excluding plans that apply the simplified method)
Thousands of
U.S. dollars (Note 4)

Millions of yen

Plan assets at the beginning of year
Expected return on plan assets
Actuarial gain or loss
Contribution by the Yamaha Group
Retirement benefits paid
Other
Plan assets at end of year2016
¥86,450
1,712(2,825)
5,660(6,910)(93)¥83,9942015¥81,341
1,605
5,041
5,726
(7,390)125¥86,450

2016$767,217
15,193(25,071)
50,231(61,324)(825)$745,421(3) Changes in net defined benefit liabilities for plans that apply the simplified method for the years ended March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 4)

Millions of yen

Net defined benefit liabilities at the beginning of year
Retirement benefit expenses
Retirement benefits paid
Contribution to plan
Other
Net defined benefit liabilities at end of year2016
¥1,560
219
(233)
(28)
(56)
¥1,4612015¥1,607
206
(127)
(96)
(29)
¥1,5602016$13,845
1,944(2,068)(248)(497)$12,966

Management Strategy

Growth Foundation

Financial Section

89

About Yamaha(4) Reconciliation between the funded status of the plans (retirement benefit obligations and plan assets) and the amounts recognized in the
consolidated balance sheet (net defined benefit liabilities and net defined benefit assets) as of March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 4)

Millions of yen

Retirement benefit obligations of funded plans
Plan assets
Retirement benefit obligations of unfunded plans
Net assets and liabilities recorded in the consolidated balance sheet
Net defined benefit liabilities
Net defined benefit assets
Net assets and liabilities recorded in the consolidated balance sheet

2016¥102,797(84,657)
18,13919,87838,01738,024(6)¥ 38,017

2015¥ 99,925(87,982)
11,943
19,69531,63831,712(74)¥ 31,638

2016$ 912,291(751,305)
160,978
176,411337,389
337,451(53)$ 337,389

Note: Including plans that apply the simplified method.

(5) Components of retirement benefit expenses
Thousands of
U.S. dollars (Note 4)

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain or loss
Amortization of prior service cost
Retirement benefit expenses calculated by simplified method
Additional retirement benefit expenses temporarily paid
Other
Retirement benefit expenses for defined benefit pension plans

2016¥ 4,446
1,188(1,712)
1,154
(414)
219
—
2
¥ 4,8842015¥ 4,306
1,487(1,605)
1,287
(438)
206
1
3
¥ 5,250

2016$ 39,457
10,543(15,193)
10,241(3,674)1,944—
18$ 43,344

Note: In the year ended March 31, 2015, other than the amount described above, the Company posted an extraordinary loss (business structural reform expenses) of ¥343 million
on premium severance pay and other contribution items in connection with the transfer of the business of a semiconductor manufacturing subsidiary.

(6) Remeasurements of defined benefit plans

Components of remeasurements of defined benefit plans (before taxes)
Thousands of
U.S. dollars (Note 4)

Millions of yen

Prior service cost
Actuarial gain or loss
Total

2016
¥  (412)(9,274)¥(9,686)2015¥ (438)2,495¥2,0572016$ (3,656)(82,304)$(85,960)(7) Accumulated adjustments of defined benefit plans

Components of remeasurements of accumulated defined benefit plans (before taxes)
Thousands of
U.S. dollars (Note 4)

Millions of yen

Unrecognized prior service cost
Unrecognized actuarial gain or loss
Total

2016
¥ (439)11,940¥11,5002015¥ (852)
2,666¥1,8132016$ (3,896)
105,964$102,059

90

Yamaha Corporation Annual Report 2016(8) Items for plan assets(i) Components of plan assets

Ratio of primary components of total plan assets
Life insurance company general accounts
Stocks
Bonds
Cash and deposits
Other
Total

2016
58%
19%
19%
2%
2%
100%

2015
57%
21%
18%
2%
2%
100%

(ii) Determining expected long-term rate of return

In determining the long-term rate of return of plan assets, the Company considers the current and projected asset allocations,as well as the current and expected long-term investment returns from the various assets that constitute the plan assets.
(9) Items related to the basis of actuarial calculation

Items that form the primary basis for actuarial calculations as of March 31, 2016 and 2015

Discount rate
Expected long-term rate of return

2016
0.3%
2.0%

2015
0.9%
2.0%

(c) Defined contribution pension plans
Required contributions to defined contribution pension plans of consolidated subsidiaries totaled ¥723 million ($6,416 thousand) and¥634 million in the years ended March 31, 2016 and 2015, respectively.
In addition, aside from the above required contributions, the Company also posted ¥58 million ($515 thousand) and ¥67 million of
additional retirement benefit expenses in the years ended March 31, 2016 and 2015, respectively.

Management Strategy

26

Growth Foundation

Financial Section

91

About Yamaha

Income Taxes 

Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries comprised corporation tax, inhabitants’taxes, and enterprise tax which, in the aggregate, resulted in effective statutory tax rates of approximately 32.1% and 34.6% for the years
ended March 31, 2016 and 2015, respectively. Income taxes of the overseas consolidated subsidiaries are, in general, based on the tax
rates applicable in their respective countries of incorporation.
The major components of deferred tax assets and liabilities as of March 31, 2016 and 2015 are summarized as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Deferred tax assets:
Write-downs of inventories
Unrealized gain on inventories and property, plant and equipment
Allowance for doubtful accounts
Depreciation
Loss on impairment of fixed assets
Loss on valuation of investment securities
Accrued employees’ bonuses
Provision for product warranties
Net defined benefit liabilities
Tax loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for deferred gain on property, plant and equipment
Reserve for special account for acquisition of replacement property
Reserve for special depreciation
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

2016

2015

2016

¥ 1,727
2,041
306
7,372
6,780
2,006
2,383
546
11,1787,232
5,067
46,642(33,976)¥ 12,666¥ 2,252
1,242
308
8,065
7,933
2,172
2,304
572
9,657
10,005
5,328
49,844(38,883)¥ 10,960$ 15,327
18,113
2,716
65,42460,17017,803
21,148
4,846
99,20164,182
44,968413,933(301,526)$ 112,407

¥

¥

$

(750)
(2,204)(5)(22,855)(676)(26,493)¥(13,827)

(817)
—
(28)
(38,790)(810)(40,446)¥(29,485)(6,656)(19,560)(44)(202,831)(5,999)(235,117)$(122,710)

A reconciliation between the effective statutory tax rate and the effective tax rate for the years ended March 31, 2016 and 2015 is
as follows:
Effective statutory tax rate
Adjustments:
Differences in tax rates of overseas consolidated subsidiaries
Non-temporary differences not deductible for tax purposes
Per capita inhabitants’ taxes
Allowances for changes in valuation
Amortization of goodwill
Other
Effective tax rate after adjustments for tax-effect accounting

2016
32.1%

2015
34.6%

(2.7)
(0.5)
0.5
(15.9)
7.4
0.5
21.4%

(5.2)
(0.9)
0.7
(25.6)
3.5
4.9
12.0%

92

Yamaha Corporation Annual Report 2016

Accompanying the approval on March 29, 2016, of the “Actto Partially Revise the Income Tax Act and Others” (Act No.15
of 2016) and the “Act to Partially Revise the Local Tax Act andOthers”(Act No.13 of 2016) , the effective statutory tax rates applicable to the calculation of consolidated deferred tax assets and tax
liabilities (applicable only to such assets and liabilities that will
expire on and after April 1, 2016) that were used were 32.11% forrecoveries and payments that are expected from April 1, 2015 toMarch 31, 2016, and 31.33% for those expected on April 1,2016 and later. For recoveries and payments that are expectedfrom April 1, 2016 through March 31, 2018, the tax rate has been

27

changed to 30.21%, and then to 29.99% for recoveries and payments expected from April 1, 2018.
As a result of this change, the net value of the Group’sdeferred tax liabilities (after the deduction of the amount ofdeferred tax assets) decreased ¥1,170 million ($10,383 thousand),and income taxes–deferred, unrealized holding gain on securities,
and revaluation reserve for land increased ¥289 million ($2,565
thousand), ¥1,021 million ($9,061 thousand), and ¥441 million($3,914 thousand), respectively, while unrealized gain (loss) fromhedging instruments decreased ¥2 million ($18 thousand) as ofand for the year ended March 31, 2016.

Segment Information 

For the years ended March 31, 2016 and 2015(a) Summary of reporting segments
Business segments are composed of business units that provide
separate financial information, and are regularly reviewed by
the Board of Directors of the Company for the purpose of businessperformance evaluation and management resource allocation
decisions.
The Company’s business segments, based on its economic
features and similarity of products and services, comprise its threeprincipal reporting segments, which are musical instruments,
audio equipment, and electronic devices. Other businesses
have been grouped together in the “Others” segment.
The musical instruments business segment includes the manufacture and sales of pianos; digital musical instruments; wind, string,and percussion instruments; and other music-related activities.
The audio equipment business segment includes the manufactureand sales of audio products, professional audio equipment, information and telecommunications equipment and certain otherproducts. The electronic devices business segment includes the
manufacture and sales of semiconductor products. The “Others”
segment includes automobile interior wood components, factory
automation (FA) equipment, golf products, recreation, and certain
other lines of business.

(b) Method for calculating the sales, income (loss), assets,­liabilities, and other items for reporting segments
The accounting treatment for reporting segments is carried out
through principles and procedures that are the same as those used
for preparing the consolidated financial statements.
Figures for income in reporting segments are on an operating
income basis.
Intersegment sales and transfers are based on prevailingmarket prices.

Management Strategy

Growth Foundation

Financial Section

93

About Yamaha(c) Information by product and service
Millions of yen
As of March 31, 2016

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property, plant andequipment and intangible assets

Audioequipment

Electronic
devices¥278,872¥119,378

278,872¥ 31,530¥272,690¥¥¥

Adjustments andelimination

OthersTotal¥ 24,156
24,156¥332¥105,710¥435,477
544
436,021¥ 40,663¥469,745

¥ —
(544)
(544)
¥ —
¥ —

¥435,477

119,378¥ 8,693¥ 81,052¥13,068544
13,613¥ 107¥10,292

8,390
882

¥
¥

3,075
—

¥
¥

464
—

¥
¥

750
—

¥ 12,681
¥
882

¥ —
¥ —

¥ 12,681
¥
882

6,778

¥

3,145

¥

617

¥

801

¥ 11,341¥ —¥ 11,341

Adjustments andelimination

Consolidated

Musicalinstruments

Audio
equipment$2,474,902$1,059,443

2,474,902$ 279,819$2,420,039$$$

As of March 31, 2016

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property, plant andequipment and intangible assets

Musicalinstruments

Thousands of U.S. dollars (Note 4)
Electronic
devices
OthersTotal$214,377

1,059,443$ 77,148$ 719,311$115,974
4,828
120,811$950$ 91,338

74,4597,827$$

27,290—$$60,153$

27,911$

Consolidated

435,477¥ 40,663¥469,745$—(4,828)(4,828)$—$—$3,864,723

214,377$ 2,946$938,143$3,864,723
4,828
3,869,551$ 360,871$4,168,841

4,118
—

$
$

6,656
—

$ 112,540
$
7,827

$
$

—
—

$ 112,540
$
7,827

5,476

$

7,109

$ 100,648$—$ 100,648

3,864,723$ 360,871$4,168,841

Notes: 1. The item “Adjustments and elimination” for the year ended March 31, 2016 contains the following:
The sales adjustment item of ¥(544) million ($(4,828) thousand) comprises eliminations of transactions among the Company’s business segments.
2. “Segment income” for the year ended March 31, 2016 means the operating income of the segment as presented in the Consolidated Statement of Operations.
3. Among the assets of the Others segment, the amounts of investment securities related to Yamaha Motor Co., Ltd. (the market value reported on the accompanying consolidatedbalance sheet) were ¥79,827 million ($708,440 thousand).

Millions of yen
As of March 31, 2015

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Loss on impairment of fixed assets
Increase in property, plant andequipment and intangible assets

Musicalinstruments

Audio
equipment

Electronic
devices¥281,667¥112,839

281,667¥ 25,064¥277,916¥¥¥

Adjustments andelimination

Others

Total

Consolidated¥ 24,235
24,235¥384¥149,635¥432,177
526
432,704¥ 30,135¥530,034

¥ —
(526)
(526)
¥ —
¥ —

¥432,177

112,839¥ 6,133¥ 87,642¥13,435
526
13,962¥ (1,446)¥14,839

8,238
861

¥
¥

2,857
—

¥
¥

706
—

¥
¥

795
—

¥ 12,597
¥
861

¥ —
¥ —

¥ 12,597
¥
861

9,581

¥

2,880

¥

639

¥

832

¥ 13,932¥ —¥ 13,932

432,177¥ 30,135¥530,034

Notes: 1. The item “Adjustments and elimination” for the year ended March 31, 2015 contains the following:
The sales adjustment item of ¥(526) million comprises eliminations of transactions among the Company’s business segments.
2. “ Segment income (loss)” for the year ended March 31, 2015 means the operating income of the segment as presented in the Consolidated Statement of Operations.
3. Among the assets of the Others segment, the amounts of investment securities related to Yamaha Motor Co., Ltd. (the market value reported on the accompanying consolidatedbalance sheet) were ¥123,749 million.

94

Yamaha Corporation Annual Report 2016(d) Information by geographical segment(i) Sales information based on the geographical location of the customers

Year ended March 31, 2016

Net sales
Sales as a percentage ofconsolidated net sales

Year ended March 31, 2016

Net sales
Sales as a percentage ofconsolidated net sales

Japan

North America¥145,033¥88,234

33.3%

20.3%

Millions of yen
Overseas
Asia, Oceania,
Europeand other areas

Total

Consolidated¥82,205¥120,003¥290,443¥435,477

18.9%

27.5%

66.7%

100.0%

Thousands of U.S. dollars (Note 4)
Overseas
Asia, Oceania,
Europeand other areas

Japan

North America

Total

Consolidated$1,287,123$783,049$729,544$1,064,989$2,577,591$3,864,723

33.3%

20.3%

18.9%

27.5%

66.7%

100.0%

Notes: 1. S ales information is based on the geographical location of customers, and is classified by country or region.
2. M ain country and regional divisions other than Japan:(a) North America: U.S.A. and Canada(b) Europe: Germany, France, and U.K.
(c) Asia, Oceania, and other areas: People’s Republic of China, Republic of Korea, and Australia

Year ended March 31, 2015

Net sales
Sales as a percentage ofconsolidated net sales

Millions of yen
Overseas
Asia, Oceania,
Europeand other areas

Japan

North America

Total

Consolidated¥160,374¥79,747¥80,277¥111,778¥271,803¥432,177

37.1%

18.4%

18.6%

25.9%

62.9%

100.0%

Notes: 1. S ales information is based on the geographical location of customers, and is classified by country or region.
2. M ain country and regional divisions other than Japan:(a) North America: U.S.A. and Canada(b) Europe: Germany, France, and U.K.
(c) Asia, Oceania, and other areas: People’s Republic of China, Republic of Korea, and Australia

Management Strategy

Growth Foundation

Financial Section

95

About Yamaha(ii) Sales, income (loss) and property, plant and equipment information based on group locations

Year ended March 31, 2016

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income
Total assets
Property, plant and equipment

Year ended March 31, 2016

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income
Total assets
Property, plant and equipment

Japan

North America

EuropeMillions of yen
Asia, Oceania,
and other areas¥154,957
170,025
324,983¥ 20,396¥303,374¥ 75,155¥93,577
3,566
97,143¥ 2,161¥42,482¥ 1,608¥82,6852,332
85,017¥ 4,424¥39,890¥ 3,303¥104,256
101,290
205,547¥ 14,193¥112,469¥ 24,215

Japan

North America$1,375,195
1,508,919
2,884,123$ 181,008$2,692,350$ 666,977$830,467
31,647862,114$ 19,178$377,015$ 14,271

Total¥435,477
277,215712,692¥ 41,175¥498,217¥104,280

Adjustments

Consolidated¥—(277,215)(277,215)¥(512)¥ (28,472)¥—¥435,477—
435,477¥ 40,663¥469,745¥104,280

Adjustments

Consolidated—(2,460,197)(2,460,197)$(4,544)$ (252,680)$—$3,864,723—
3,864,723$ 360,871$4,168,841$ 925,453

Thousands of U.S. dollars (Note 4)
Asia, Oceania,
Europeand other areas
Total$733,804
20,696754,499$ 39,262$354,011$ 29,313$ 925,240
898,917
1,824,166$ 125,958$ 998,127$ 214,901$3,864,723
2,460,197
6,324,920$ 365,415$4,421,521$ 925,453$

Notes: 1. S ales information is based on Group locations where sales take place, and is classified by country or region.
2. M ain country and regional divisions other than Japan:
This classification is the same as “Sales information based on the geographical location of the customers.”
3. The item “Adjustments” contains the following:
The sales adjustment item of ¥(277,215) million ($(2,460,197) thousand) comprises eliminations of transactions among the Company’s business segments.
4. C
 onsolidated segment income corresponds to operating income presented in the consolidated statement of operations.

Year ended March 31, 2015

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment income (loss)
Total assets
Property, plant and equipment

Japan

North America

EuropeMillions of yen
Asia, Oceania,
and other areas¥171,882
155,004
326,887¥ 15,439¥350,928¥ 81,473¥85,517
1,385
86,903¥ (309)¥52,277¥ 1,508¥78,516
2,342
80,858¥ 3,581¥38,794¥ 3,433¥ 96,261
91,295
187,556¥ 11,997¥115,825¥ 26,745

Total¥432,177
250,027
682,205¥ 30,708¥557,825¥113,158

Notes: 1. S ales information is based on Group locations where sales take place, and is classified by country or region.
2. M ain country and regional divisions other than Japan:
This classification is the same as “Sales information based on the geographical location of the customers.”
3. The item “Adjustments” contains the following:
The sales adjustment item of ¥(250,027) million comprises eliminations of transactions among the Company’s business segments.
4. C
 onsolidated segment income corresponds to operating income presented in the consolidated statement of operations.

Adjustments

Consolidated¥¥432,177—
432,177¥ 30,135¥530,034¥113,158—(250,027)(250,027)¥(572)¥ (27,790)
¥
—

96

Yamaha Corporation Annual Report 2016(e) Information related to the amount of amortization of goodwill and the unamortized amount of goodwill by reporting segment
For the year ended March 31, 2016
Musical instruments

Amounts amortized in the year ended
Balance as of March 31, 2016

¥5,651¥  113
Musical instruments

Amounts amortized in the year ended
Balance as of March 31, 2016

Audio equipment¥3,901¥2,342Millions of yen
Electronic devices¥—¥—

Others¥—¥—Thousands of U.S. dollars (Note 4)
Audio equipment
Electronic devices
Others$50,151$ 1,003$34,620$20,785

Musical instruments

Audio equipment

$—
$—

$—
$—

Total

¥9,553¥2,456
Total$84,780$21,796

For the year ended March 31, 2015

Amounts amortized in the year ended
Balance as of March 31, 2015

¥1,452¥5,779(f) Information on gain on negative goodwill by reporting segment
None¥1,460¥6,400Millions of yen
Electronic devices¥—¥—

Others

¥—
¥—

Total

¥ 2,913¥12,179

Management Strategy

28

Growth Foundation

Financial Section

97

About Yamaha

Amounts per Share 
Yen

U.S. dollars (Note 4)

Years ended March 31

2016

2015

Net income per share:
Basic¥168.90¥128.75
Yen

As of March 31

Net assets per share2016¥1,601.55

2016
$1.50
U.S. dollars (Note 4)

2015¥1,787.42

2016$14.21

Basic net income per share is computed based on the net income and the weighted-average number of shares of common stock outstanding
during each year. Diluted net income per share for the years ended March 31, 2016 and 2015 has not been presented because there wereno potentially dilutive securities at March 31, 2016 and 2015.
Net assets per share are based on the number of shares of common stock outstanding at each balance sheet date.
The basic net income per share is calculated as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen
Years ended March 31

Basic net income per share:
Net income
Amounts not attributable to shareholders of common stock
Net income attributable to shareholders of common stock
Weighted-average number of shares outstanding (shares)

2016

2015

2016

¥32,633—
32,633
193,210,820¥24,929—
24,929193,625,357$289,608—
289,608—

98

Yamaha Corporation Annual Report 201629

Short-Term Loans Payable and Long-Term Debt 

Short-term and long-term loans payable, lease obligations, and guarantee deposits as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Short-term loans payable
Current portion of long-term loans payable
Current portion of lease obligations
Long-term loans payable
Lease obligations
Guarantee deposits
Total

2016
¥8,409
30
27
71
328
48
¥8,915

2015¥11,748
28
64
92
332
48
¥12,313

2016$74,627
266
240
630
2,911
426
$79,118

The annual weighted-average interest rates applicable to above short-term loans payable and long-term debt at March 31, 2016 wereas follows:
Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Guarantee deposits

2016
1.3%
1.9%
1.8%
1.2%

Note: The average interest rate shown above is the weighted average of the interest rates on loans calculated by using the balance of such obligations outstanding at the end of the year. For
lease obligations, no average interest rate is shown because the amounts in the consolidated balance sheet include the amounts corresponding to interest paid from total lease payments.

The assets pledged as collateral for long-term loans payable and certain other current liabilities at March 31, 2016 and 2015 wereas follows:
Thousands of
U.S. dollars (Note 4)

Millions of yen

Property, plant and equipment, net of accumulated depreciation

2016
¥—

2015
¥13

The above assets were pledged as collateral for “Long-term loans payable” of ¥14 million at March 31, 2015.

30

Related Party Transactions 

None

31
None

Subsequent Events 

2016
$—

Management Strategy

Growth Foundation

Independent Auditor’s Report

Financial Section

About Yamaha99100 Yamaha Corporation Annual Report 2016

About Yamaha
101

		Investor Information

102
–
104 
–
106
–
110
–
112
–
113

		Our History

		 Yamaha Product History		 Our Business		 Main Networks

		 Stock Information

		 Website Guide

Management Strategy

Growth Foundation

Investor Information

Financial Section

101

About Yamaha(As of March 31, 2016)

Head Office

Shareholder Composition

Number ofshareholders

Number of shares(Thousands of shares)

10-1, Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka
430-8650, Japan

Individuals

17,504

23,678Date of Establishment

Financial institutions

66

105,366

October 12, 1897

Japanese corporations

204

12,450Stated Capital

Foreign investors

499

49,662¥28,534 million

Securities companies

33

6,097

Number of Employees (Consolidated)

Note: The figure for individuals includes treasury stock.

20,348 (Excludes average number of temporary employees: 7,990)

Number of Consolidated Subsidiaries
67

Account Settlement Date
March 31

Dividends
Year-end: To the shareholders of record on March 31
Interim: To the shareholders of record on September 30

Number of Shares of Common Stock

Shareholder Composition (Number of shares)
Japanese corporations

Securities companies

6.3%

3.1%

Individuals

12.0%
Foreign investors

Financial institutions

25.2%

53.4%

Authorized: 700,000,000
Issued: 197,255,025 (includes treasury stock of 8,971,933)

Stock Exchange Listing
Tokyo
First Section, Code No. 7951

Main Shareholders

Shareholding ratio(%)

The Master Trust Bank of Japan, Ltd. (trust a/c)

10.65%The Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
3-15-33, Sakae, Naka-ku, Nagoya, Aichi 460-8685, Japan

Japan Trustee Services Bank, Ltd. (trust a/c)

8.80%

Yamaha Motor Co., Ltd.

5.48%

Mizuho Bank, Ltd.

4.54%

Depositary for American Depositary Receipt

The Shizuoka Bank, Ltd.

4.43%

Deutsche Bank Trust Company Americas
DR Exchange: OTC
Ticker Symbol: YAMCY
Ratio: 1 share of common stock = 1 ADR
U.S. Securities Code: 984627109
Type: Level 1 with sponsor bankMitsui Sumitomo Insurance Co., Ltd.

4.25%

Sumitomo Life Insurance Company

3.88%

Nippon Life Insurance Company

2.66%

State Street Bank and Trust Company 505223

1.84%

Trust & Custody Services Bank, Ltd. (securities investment trust a/c)

1.74%

Public Notices

Note: ‌The shareholding ratio is calculated by excluding treasury stock amounting to 8,971,933
shares from total outstanding shares.

Administrator of Shareholders’ Registry

Shall be issued electronically at
http://jp.yamaha.com/ (only in Japanese), except when an
accident or other unavoidable occurrence prevents this, inwhich case they shall be released in the Nihon Keizai Shimbun
business daily released in Tokyo.

Ordinary General Shareholders’ Meeting
June

Accounting Auditor
Ernst & Young ShinNihon LLC

Number of Shareholders
18,306

IR Contact	‌Corporate Planning Division
TEL: +81 3 5488 6602
https://www.yamaha.com/en/

102 Yamaha Corporation Annual Report 2016

Our History
The Yamaha Group is steadily expanding its business operations guided by its corporate philosophy which continues
to be upheld to this day. Drawing upon the accumulated unique Yamaha qualities that Yamaha has cultivated in its
more than 125-year history, Yamaha will continue to create products and services that contribute to the developmentof musical culture and the enrichment of society. In this way, Yamaha will continue on its path for growth.

Before the 1930s

1940 to 1980s

1887 •‌Company founder Torakusu Yamaha repairs

1949 •Lists on Tokyo Stock Exchange
1954 •Establishes Yamaha Music School and holds

elementary school’s reed organ and successfullybuilds his first reed organ

1889 •Establishes Yamaha Fukin Seizoujo(currently Yamaha Corporation)

1890 •Establishes organ factory at its headquarters
1897 •Establishes Nippon Gakki Co., Ltd.

pilot classes

		
POINT

		
POINT

(currently Yamaha Corporation)

1900 •Begins production of upright pianos
1939 •Creates Guiding Principles of Yamaha
		
POINT

1

2

•‌Produces its first audio product (HiFi player)

3•Begins production of motorcycles

1955 •Establishes Yamaha Motor Co., Ltd.
(splits off motorcycle division)

1958 •Begins production of sports equipment(fiber-reinforced plastics [FRP] archery products)•Establishes first overseas subsidiary,
Yamaha de México S.A. in Mexico
		
POINT

4

1959 •Begins production of electronic organs(Electone™)

1960 •Establishes subsidiary in United States,
Yamaha International Corporation(currently Yamaha Corporation of America)
1962 •Begins recreation business

POINT

1

Inheriting the spirit of Yamaha

The Guiding Principles of Yamaha set out the Company’s expectations forhow each employee should act. Today, the original spirit of Yamaha still
remains, embodied in the values upheld by its employees, such as kindness and sincerity, perseverance, continuous improvement, anda commitment to contribute to society.

POINT

2

Working to expand the population of music players

Yamaha decided its mission was not only to sell musical instruments
but also to bring the joy of playing music to as many people as possible.
Accordingly, Yamaha took initiatives to expand the populationof music players.

POINT

3

Developing businesses born from a passion for creating
sound

By drawing on accumulated technologies and sensitivities associated withthe playing of musical instruments, the Company developed the Yamaha
HiFi player. Its manufacture led to the production of various other products, including pre-main amplifiers and speakers.

Management Strategy

Growth Foundation

Financial Section

About Yamaha

1990 to 2016
1965 •Begins production of wind instruments
1966 •Establishes Yamaha Music Foundation(becomes general incorporated
foundation in 2011)1993 • B egins sales of SILENT Piano™
		
POINT

2002 •Establishes Yamaha Music & Electronics(China) Co., Ltd.

•Expands into Europe with founding of
Yamaha Europa GmbH in former West
Germany

1968 •Issues shares at market price (the firstsuch issuance in Japan)

1971 •Begins production of semiconductors
		
POINT

5

1980 •Establishes Yamaha Piano Technical
Academy, a piano tuner training school
1987 •Changes corporate name from Nippon

Gakki Co., Ltd. to Yamaha Corporation tomark 100th year in business•Establishes Yamaha Music Holding EuropeGmbH in Germany (currently Yamaha Music
Europe GmbH)

2003 •Establishes a Level 1 American Depositary
Receipt (ADR) program

2005 •Acquires German audio software house
Steinberg Media Technologies GmbH2007 •Establishes music entertainment businessholding company Yamaha MusicEntertainment Holdings, Inc.
2008 •Acquires Austrian piano manufacturer
L. Bösendorfer Klavierfabrik GmbH

•Opens Yamaha English language school

1989 •Establishes subsidiary in China, Tianjin
Yamaha Electronic Musical Instruments,
Inc., for manufacture and sale of digitalmusical instruments6•Acquires French loudspeaker manufacturer
NEXO S.A.

2010 •Completes integration of Japanese piano
factories into Kakegawa plant2012 •Completes integration of Japanese wind
instrument factories into Toyooka plant•Celebrates 125th year in business2014 •Acquires U.S. musical instrument and audio
equipment manufacturer Line 6, Inc.

•Acquires U.S. provider of wireless audio
solutions Revolabs, Inc.

POINT

4

Expanding overseas

Since the establishment of its first overseas subsidiary in Mexico, Yamaha
has expanded into the United States, Europe, and the rest of Asia. By pursuing business activities that are attuned to each location, Yamaha successfully made its way into new markets.

POINT

5

I mproving the sound quality of electronic
musical instruments

To improve the sound quality of its electronic musical instruments,
Yamaha decided to develop its own large-scale integrated (LSI) circuits
instead of relying on outsourced circuits from semiconductor manufacturers. In 1971, Yamaha completed the construction of its then cutting-edge
integrated circuit (IC) plant in Toyooka.

POINT

6

Melding acoustic and digital technologies

With the launch of its SILENT Piano in 1993, Yamaha developed numerous musical instruments in the SILENT™ series as well as its range ofhybrid pianos, skillfully melding the traditional technologies of acoustic
musical instrument creation with digital audio technology.

103

104 Yamaha Corporation Annual Report 2016

Yamaha Product History
1887

1900

1887 Organs

Pianos‌Wind instruments
and educationalmusical instruments

Woodworking
skillsWoodprocessing

1950

1900 Upright pianos
1902 Grand pianos

1947 Began manufacturing
piano frames

Artificial seasoning of wood

Metal molding

Acoustic technology

Coating/Chemical technology

Coating

1914 Harmonicas

1965 Trumpets
Brass processing

1967 Saxophones, etc.
1941 Acoustic guitars

String instruments‌Percussion
instruments

1960
1967 CF series concert grand pianos

1966 Electric guitars

Wood processing
Coating

1915 Xylophones

1966 Drums
Air-seal system
Sound synthesis
technology

1959 D-1 Electone electronic organ
Analog modelingElectronics technology‌Digital musicalinstruments

1969 VA-120 vocal amplifier system‌PA equipment
1922 High-quality handcranked phonographs

1954 HiFi players
HiFi audio

Coating

AV products

Wood processing

1967 NS speakerSpeaker technology

Divided diaphragmflat-panel speaker

Semiconductors
Integrated circuit technology

IT equipment‌Music entertainment
business and others

1921 Import and sales ofoverseas-mademusical instruments
and music scores

1961 Iron-aluminum alloy/coppertitanium alloy
1962 Iron-nickel alloy (permalloy) (~2007)

OthersPermalloy

1954 Began Yamaha Music School
activities

Music

Music schools

Schools, events

1965 Opened the first overseas YamahaMusic School in the U.S.
1967 First Light Music Contest held inJapan (~1971)
1969 First Composition Contest held
(Later renamed the Popular SongContest) (~1986)
Musical events‌Lifestyle-related
products

1903 Fine wooden furniture

1964 FRP bathtubs

Wood processing

FRP molding

Coating

Materials development

Sports equipment

1959 FRP archery products (~2002)

1961 FRP skis (~1997)

FRP (Fiber Reinforced Plastics) molding

FRP molding

1964 Toba Hotel International opened(Business transferred in 2007)
1967 Nemunosato opened (Business
transferred in 2007)

Resorts

Musical events and leisure

Wood processing

Yamaha Motor Co., Ltd.

1921 Wooden aircraft propellers
1931 Metallic aircraft propellers
Metal technology

Metal processing

1954 Motorcycle prototype developed(Later spun off from the Company
as Yamaha Motor Co., Ltd.)
Mechatronics technology

Engines

1960 FRP powerboats
FRP moldingManagement Strategy

Growth Foundation

1970

Financial Section

1980

1990

1982 Disklavier player piano

2000

1991 CFeS concert grand piano
1993 SILENT Piano

Player piano technology

105

About Yamaha

2010
2010 CFX concert grand piano

Silencing technology

1995 SILENT Disklavier player piano
1995 GranTouch hybrid piano
1973 Pianica

Hybrid piano technology

2014 TransAcoustic Piano

1990 Xeno brass instrument series
1995 SILENT BRASS system(pickup mute)2014 Biomass-derived recorder

Silencing technology

1983 Electric acoustic guitars

1997 SILENT Violin

2000 Braviol acoustic violin
2001 SILENT Guitar
2008 L36ARE and L26ARE acoustic guitars
Wood modification technology

1986 PMC1 electronic drums

1996 SILENT Session Drums

1974 CSY-1 synthesizer
1975 GX-1 Electone electronic organ

1980 Portable keyboards
1983 DX7 digital synthesizer

1993 VL series virtual
acoustic synthesizers

Polyphonic synthesis

FM synthesis

2011 THR guitar amplifier
VCM technology

2016 YEV series electric violin

2010 DTX900 series electronic drums
Textured cellular silicon drum pad1983 Clavinova digital piano
1987 WX7 wind MIDI controller
Physical modeling synthesis

1985 SPX90 digital multi-effects processor

1994 ProMix 01 digital mixing console
Digital mixers

Analog mixers

2000 AW4416 digital audio workstation
Audio workstations

2001 PM1D digital audio mixing system
2008 POCKETRAK CX pocket recorder

Digital effect1974 B-1 power
amplifier2001 MOTIF music production synthesizer
2002 EZ-EG EZ guitar (self-teaching guitar)2004 STAGEA Electone electronic organ
2006 H01 MODUS digital piano
2008 TENORI-ON digital musical instrument
2009 AvantGrand hybrid piano
2009 CP1 stage piano2015 reface mobile
mini keyboard
2016 Montage synthesizer
Motion Control synthesis engine

VACM synthesis

Digital technology

1974 PM-1000 mixing console

PCM synthesis

1982 CD-1 CD player
1986 DSP-1 digital sound field processor

1995 Theater sound system
Theater surround2004 YSP-1 Digital Sound Projector

2012 CL Series digital mixing consoleCentralogic
VCM technology

2014 Rivage digital mixing system
Hybrid microphone preamplifierSound beam control speaker2010 AVENTAGE AV receiver2010 Earphones
2011 Interior audio
2015 MusicCast wireless music system
2016 NS-5000 speaker

Power-FET

DSP

1974 NS-1000M speaker witha beryllium diaphragm1988 AST-1 speaker incorporated Yamaha
Active Servo Technology (YST)

2006 NX-A01 SR-Bass SpeakerSpeaker with a beryllium diaphragm

YST

SR-Bass

1975 Headphones
1972 Sound generator LSIs for theElectone electronic organ

1983 FM synthesizer LSIs
1983 Graphics controller LSIs

1999 Sound generator LSIs formobile phones

2002 LSIs for digital amplifiers

LSI for musical instruments

LSI for PC/video games

LSI for mobile phones

2005 Magnetic sensor

CINEMA DSP HD3

LSI for digital amplifiers
GMR technology

Information processing technology

1993 CD recorders (~2003)
1993 Online karaoke equipment

Computers

2006 Audio conference system
Audio conference

Online karaoke equipment

1983 MSX personal computers

Psychoacoustic technology

1995 Remote routers

Signal processing technology

2011 VSP-1 speech privacy system
Sound masking

2011 Thin light flexible speaker
Electrostatic speakers

Routers

2011 Smart L2 switches
2012 INFOSOUND acoustic data
communications technology
Acoustic communications technology

Online services
Architectural acoustics

1974 Computer-generated
architectural acoustic simulation

1986 S RS (Sound Room System)
music room for home use
1989 AVITECS soundproof room2000 Mobile phone ringtone distribution
service2000 Digital sheet music distribution service

Soundproof room

DTM

2003 V OCALOID singing synthesis software
Singing synthesis technology

2009 BODiBEAT interactive music player
1984 Industrial robots

1972 Sponsoredthe first Junior
Original Concert(JOC)

2013 Wireless LAN access points
2014 Unified communications
microphone & speaker system
2010 TCH Acoustic conditioning panel
Sound field control

2010 iVOCALOID(VOCALOID for
iPhone and iPad)

1991 Thin-film magnetic heads (~2000)

RobotsThin-film deposition

1989 A utomobile interior wood components

1997 Magnesium cases (~2010)

Automobile interior wood components

Magnesium molding

1986 Began Popular Music School
1987 B egan English language schools

2003 Musical instrument rental service

English language schools

2005 Opened Yamaha Music Schoolin China
2006 Started online music lessons service

Musical instrument rental service

1987 First Teens’ Music Festival (~2006)

Online lessons

Musical events

2007 First Music Revolution contest held
Musical events

1975 Unit furniture (~2005)
1976 System kitchens
1977 New artificial marble countertops

1982 System bathrooms

Titanium casting1982 Golf clubs
1986 Acuras series carbon composite
golf club

2002 inpres golf club2005 inpresX golf club

Carbon composite

1974 Tsumagoi opened
1976 Katsuragi Golf Club opened
1978 Katsuragi Kitanomaru opened
1979 Haimurubushi opened (Business
transferred in 2007)
Musical events and leisure1974 FRP pools
FRP molding

Lifestyle-related products business transferred in 2010Marble sinks

Artificial marble

1973 Tennis rackets (~1997)

2002 System kitchens with artificial
marble sinks

1991 Kiroro opened(Business transferred in 2007)2014 RMX golf club106 Yamaha Corporation Annual Report 2016

Our Business

Musical Instruments
Segment Sales Proportion

Business Strengths• ‌Wealth of core technical expertise based on traditional
craftsmanship in acoustics and advanced digitaltechnology

64.0%• ‌Development of high-quality products by forging close
relationships with artists• ‌Manufacturing of high-value-added musical instruments
utilizing cutting-edge electronics technology• ‌Global strategy built on Yamaha’s localized marketingand service activities in each country• ‌Variety of activities through the operation of music
schools to increase the music-playing population

Sales¥278.9 billion
Operating Income¥31.5 billion

Sales Proportion by Product Category

PianosMusic schools, etc.

22.5%

18.5%

Major Products & Services
PianosDigital musical instruments (digital pianos, Electone™,
portable keyboards, synthesizers, etc.)
Wind instruments (trumpets, flutes, saxophones, etc.)

Digital musicalinstruments

String instruments (guitars, violins, etc.)
Percussion instruments (drums, timpani, marimbas, etc.)
Educational musical instruments (recorders, Pianica™, etc.)
Soundproof rooms (AVITECS™)Music schools, English language schools
Music entertainment business
Piano tuning

32.0%

String and percussion
instruments

11.7%

Wind instruments

15.3%

Management Strategy

Growth Foundation

Financial Section

107

About Yamaha

Grand pianoMusic school

TrumpetDigital pianoPortable keyboard

Acoustic guitar
Saxophone
Acoustic drums

Electric violin

Sales Proportion by Region
Japan
Europe
China

18.2%

12.6%

Asia, Oceania, andother areas

17.1%

31.9%

North America

20.2%

108 Yamaha Corporation Annual Report 2016

Our Business

Audio Equipment
Segment Sales Proportion

Business Strengths• ‌High-quality sound technology in AV components and HiFi
audio products• ‌Audio network technology such as MusicCast™ in a wide
variety of home audio products

27.4%• ‌‌Provision of system solutions using digital network technology
for professional audio equipment• ‌‌Internet VPN and backup solutions for the enterprise by VPN
router and visualization solutions for small and medium-scale
LAN by the switch and AP• ‌Signal processing technology for high-quality sound and wide
coverage of microphone speakers for Web conferencing

Sales¥119.4 billion

Line-arrayspeaker
Integrated audio production system

Operating Income¥8.7 billion

AV receiver
USB conference
speakerphone

Major Products & Services
Audio products (AV receivers, speaker systems, front
surround speakers, desktop audio systems, etc.)

Commercial
installed soundspeakers

Network switch

PA equipment (mixers, power amplifiers, etc.)
Commercial online karaoke equipment
Enterprise network equipment (routers, switches,wireless LAN access points)
Telecommunications peripheral devices

Wirelessstreaming
speaker

Integrated
audio system

Digital soundprojector
Digital mixing console

Management Strategy

Growth Foundation

Financial Section

109

About Yamaha

Electronic Devices
Segment Sales Proportion

Sales¥13.1 billion

Graphic controller foramusement equipment

Electric compass

Operating Income

3.0%¥0.1 billion
Major Products & Services
Semiconductors

Woofer speaker for
laptop computer

Business Strengths• ‌Accumulated experience and know-how
in generating high-quality sound• ‌Wealth of expertise in the developmentof devices for digital musicalinstruments• ‌High-quality digital signal processing(DSP) technologies• ‌Software technologies for middlewareand content development tools

OthersSegment Sales Proportion

Sales

Golf product¥24.2 billion
Operating Income

5.6%¥0.3 billion
Major Products & Services
Automobile interior wood components

Golf products
Automobile interior wood components
Factory automation (FA) equipment
Resort facilities (Tsumagoi™,
Katsuragi Kitanomaru™,
Katsuragi Golf Club™)
FA equipment

Resort facility

110 Yamaha Corporation Annual Report 2016

Main Networks(As of July 1, 2016)

Overseas Network
Company nameLocation

Company nameLocation

1 Yamaha Corporation of America .......................................................... California, U.S.A.

26 Yamaha Music & Electronics Taiwan Co., Ltd. ...................................... Taipei, Taiwan

2 Yamaha Music InterActive, Inc. ............................................................... California, U.S.A.

27 Yamaha Music & Electronics (China) Co., Ltd. .................................... Shanghai, China

3 YMH Digital Music Publishing, LLC*1 .......................................... California, U.S.A.

28 Yamaha Music Technical (Shanghai) Co., Ltd. ..................................... Shanghai, China

4 Line 6, Inc. ........................................................................................................................................ California, U.S.A.

29 Yamaha Trading (Shanghai) Co., Ltd. .................................................................... Shanghai, China

5 Revolabs, Inc. ............................................................................................................................. Massachusetts, U.S.A.

30 Yamaha Electronics (Suzhou) Co., Ltd. ............................................................. Suzhou, China

6 Yamaha Artist Services, Inc.

New York, U.S.A.

31 Xiaoshan Yamaha Musical Instruments Co., Ltd. ........................... Hangzhou, China

7 Yamaha Canada Music Ltd. .............................................................................. Toronto, Canada

32 Hangzhou Yamaha Musical Instruments Co., Ltd. ...................... Hangzhou, China...........................................................................

8 Yamaha de México, S.A. de C.V. ............................................................. Mexico City, Mexico

33 Tianjin Yamaha Electronic Musical Instruments, Inc. ........... Tianjin, China

9 Yamaha Music Latin America, S.A. ..................................................... Panama City, Panama

34 Shenzhen Yamaha Music & Electronics Trading Co., Ltd.*2 .......... Shenzhen, China

10 Branch in Argentina ............................................................................................ Buenos Aires, Argentina

35 Yamaha Music Korea Ltd. ............................................................................................................ Seoul, South Korea

11 Yamaha Musical do Brasil Ltda. ............................................................... São Paulo, Brazil

36 Yamaha Music (Asia) Private Limited .................................................................... Singapore

12 Yamaha Music Europe GmbH .................................................................... Rellingen, Germany

37 Yamaha Music (Malaysia) Sdn. Bhd. ....................................................................... Petaling Jaya, Malaysia

13 Branch in France.........................................................................................................

Croissy-Beaubourg, France

14 Branch in Italy .................................................................................................................. Milan, Italy

38 Yamaha Electronics Manufacturing (M) Sdn. Bhd. ..................... Chemor, Malaysia
39 PT. Yamaha Indonesia ........................................................................................................................ East Jakarta, Indonesia

15 Branch in Ibérica ........................................................................................................ Madrid, Spain

40 PT. Yamaha Music Manufacturing Indonesia ........................................ East Jakarta, Indonesia

16 Branch in the U.K. ..................................................................................................... Milton Keynes, U.K.

41 PT. Yamaha Musik Indonesia (Distributor) ................................................ Central Jakarta, Indonesia

17 Branch in Scandinavia ...................................................................................... Gothenburg, Sweden

42 PT. Yamaha Music Manufacturing Asia ............................................................. Bekasi, Indonesia

18 Branch in Switzerland ....................................................................................... Thalwil, Switzerland

43 PT. Yamaha Musical Products Indonesia ....................................................... Pasuruan, Indonesia

19 Branch in Austria ........................................................................................................ Vienna, Austria

44 PT. Yamaha Electronics Manufacturing Indonesia ...................... Pasuruan, Indonesia

20 Branch in Benelux .................................................................................................... Vianen, Netherlands

45 Siam Music Yamaha Co., Ltd.*2 ......................................................................................... Bangkok, Thailand

21 Branch in Poland ........................................................................................................ Warsaw, Poland

46 Yamaha Music Vietnam Company Limited ............................................... Ho Chi Minh City, Vietnam

22 Branch in Turkey ......................................................................................................... Istanbul, Turkey

47 Yamaha Music India Pvt. Ltd. ............................................................................................... Gurgaon, India

23 Steinberg Media Technologies GmbH ..................................... Hamburg, Germany

48 Yamaha Music Gulf FZE .................................................................................................................. Dubai, U.A.E.

24 Nexo S.A. ............................................................................................................................................ Plailly, France

49 Yamaha Music (Russia) LLC. ................................................................................................... Moscow, Russia

25 L. Bösendorfer Klavierfabrik GmbH ............................................... Wiener Neustadt, Austria

50 Yamaha Music Australia Pty. Ltd. ................................................................................... Melbourne, Australia

Domestic Network
Company nameLocation

1 Kitami Mokuzai Co., Ltd. ...................................................................................... Mombetsu-gun, Hokkaido, Japan

Company nameLocation

13 Yamaha Piano Service Co., Ltd. ............................................................... Kakegawa, Shizuoka, Japan

2 Sakuraba Mokuzai Co., Ltd. ........................................................................... Kitaakita, Akita, Japan

14 Yamaha Piano Manufacturing Japan Co., Ltd. .............. Kakegawa, Shizuoka, Japan

3 Yamaha Music Japan Co., Ltd. .................................................................... Minato, Tokyo, Japan

15 Yamaha Resort Inc. .......................................................................................................... Kakegawa, Shizuoka, Japan

4 Yamaha Music Retailing Co., Ltd. ........................................................ Minato, Tokyo, Japan

16 Yamaha Musical Products Japan Co., Ltd. ........................... Iwata, Shizuoka, Japan

5 Yamaha Sound Systems Inc. .......................................................................... Chuo, Tokyo, Japan

17 Yamaha Hi-Tech Design Corporation .......................................... Iwata, Shizuoka, Japan

6 Yamaha Music Entertainment Holdings, Inc. ................ Shibuya, Tokyo, Japan

18 Yamaha Business Support Corporation .................................. Hamamatsu, Shizuoka, Japan

7 Yamaha Music Communications Co., Ltd. ......................... Shibuya, Tokyo, Japan

19 Yamaha Ai Works Co., Ltd.*2 ......................................................................... Hamamatsu, Shizuoka, Japan

8 Yamaha Music Artist, Inc. ................................................................................... Shibuya, Tokyo, Japan

20 Yamaha Fine Technologies Co., Ltd. ............................................... Hamamatsu, Shizuoka, Japan

9 Yamaha Music Publishing, Inc. ................................................................ Shibuya, Tokyo, Japan

21 Yamaha Travel Service Co., Ltd. .............................................................. Hamamatsu, Shizuoka, Japan

10 Epicurus Corporation ................................................................................................ Shibuya, Tokyo, Japan

22 Jeugia Corporation*1 ................................................................................................... Kyoto, Japan

11 Yamaha Music Media Corporation .................................................. Toshima, Tokyo, Japan
12 Matsukiya Co., Ltd. .......................................................................................................... Fukui, Japan*1. Equity-method affiliates*2. Non-consolidated subsidiaries and affiliates

Management Strategy

Growth Foundation

Financial Section

111

About Yamaha

Overseas Network

12 23
17

20

21
49

16

13 24
15

18

19 25

33

35
5

7

22

6

30

27 28 29

14

31 32
48

8

34

47

26

45
46

37 38

36
39 40 41 42

1

9
2

3

4

43 44

11
50

10

Sales companies, etc.
Manufacturing/production companies, etc.
Music entertainment business companies• Retail shops (Yamaha Music Retailing Co., Ltd.)

Domestic Network

1

2

16 17

3

4

5

6

7

8

9 10 1112
22
13 14 15

Yamaha Corporation (headquarters)

18 19 20 21

112 Yamaha Corporation Annual Report 2016

Stock Information(As of March 31, 2016)

Common Stock Price Range and Trading Volume
Yen

Common stock price range
TOPIX

2,500

2,000

1,500

1,000

500

0
Trading volume

Thousands of shares

40,00030,00020,00010,000
0

4
2011

7

10

1
2012

4

7

10

1
2013

4

7

10

1
2014

4

7

10

1
2015

4

7

10

1
2016

2012/3

2013/3

2014/3

2015/3

858

934

1,329

2,104

3,390

Share price — high (Yen)

1,034

1,035

1,705

2,355

3,575

Share price — low (Yen)

663

654

873

1,267

2,083

Trading volume (Million shares)

291

281

340

268

276

2012/3

2013/3

2014/3

2015/3

2016/3

1.17

1.07

2.03

1.71

1.30

Price to earnings ratio (Times)

—

43.9

11.2

16.3

20.1

Price to book value ratio (Times)

0.82

0.80

0.95

1.18

2.12

Number of shares issued (Thousand shares)

197,255

197,255

197,255

197,255

197,255

Market capitalization at the end of fiscal year (Millions of yen)

169,244

184,236

262,152

415,025

668,695

22.9

26.4

29.0

31.4

25.2

Fiscal year ended

Share price at the end of fiscal year (Yen)

Fiscal year ended

Dividend yield (%)

Percentage of shares owned by foreign investors (%)

Dividend Yield

Price to Earnings Ratio

Price to Book Value Ratio

%

Times

Times

3

60

2.4

2

40

1.6

1

0

1.30

12/3 13/3 14/3 15/3 16/3

2016/3

2.12

20.1
0.8

20

0

12/3 13/3 14/3 15/3 16/3

0

12/3 13/3 14/3 15/3 16/3

Management Strategy

Growth Foundation

Financial Section

About Yamaha

Website Guide
Find out more about the activities of Yamaha not included in this report on the Company website.

Corporate website
https://www.yamaha.com/en/

Investor Relations
https://www.yamaha.com/en/ir/

Corporate Social Responsibility (CSR)
http://www.yamaha.com/about_yamaha/csr/

Yamaha Design
https://www.yamaha.com/en/about/design/

I Play Yamaha
https://www.yamaha.com/en/ipy/

The “DESIGN” page offers a summary of Yamaha’s passion toward
design. The page features interviews with our designers and introduces our philosophy for and concept of design.

“I Play Yamaha” is a short video compilation created by artists
who play our instruments. We are proud to have many outstanding artists choose our instruments for their musical expression.
Please enjoy this compilation of great performances.

113

ゴ｜欧文｜標準形｜横組｜モノクロ｜ポジ｜

Corporate Planning Divisionhttps://www.yamaha.com/en/

Printed in Japan on FSC R -approved paper using vegetable oil ink and waterless printing processes.
2016/7 – CM162