Designing the New Sound
Annual Report 2014
Year ended March 31, 2014

With a vision of tomorrow, Yamaha enriches
the human spirit through the powerof sound and music.
The history of Yamaha began in 1887, when Torakusu Yamaha, the founder, repaired a broken reed organ.
Since then, over its 125-year history, Yamaha has continued to create ‘kando’* and enrich culture with technology
and passion born of sound and music, together with people all over the world.
Yamaha produces high-quality products by blending traditional craftsmanship with advanced digital technology.
The quality of sound produced by a Yamaha musical instrument reflects the long years of accumulated
technical expertise and the skilled craftsmanship of the Company.
The goal of Yamaha is to inspire people with the joy of music performed onmusical instruments that capture the heart and soul of both the player and audience.
* ‘Kando’ (is a Japanese word that) signifies an inspired state of mind.

Contents
08 To Our Stakeholders

Toward a Quantum Leap in Growth Phase

10 Key Figures
12 Yamaha at a Glance
16 Yamaha Group Medium-Term Management Plan
20 Interview with the President
26 Board of Directors, Corporate Auditors and Executive Officers
28 Corporate Governance
33 Risk Factors
36 Corporate Social Responsibility
38 R&D and Intellectual Property
40 Main Networks
42 Investor Information
44 Management’s Discussion and Analysis
60 Consolidated Financial Statements
97 History of the Yamaha Group98 Yamaha Product History
Forward-looking statements
The plans and strategies regarding Yamaha’s future prospects presented in this annual report have been drawn up by the Company’s
management based on information available at the current time and, therefore, are subject to risks and uncertainties. Accordingly, our actual
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, technological advancements and developments in intellectual property litigation.

Annual Report 2014

1

2

Yamaha Corporation

The Art of CraftsmanshipOur 125-year pursuit of perfection drives
our insatiable technological quest.
We attain new innovative heights by using the know-how
developed and passed down by our sound engineering experts
to move us into higher states of ‘kando.’

Annual Report 20143

Reaching Out toMusic Lovers of the WorldIn a world of constant change and ever-shifting human values,
the sound professionals at Yamaha remain consistent in their mission
to refine technology to deliver tantalizing sound and musicthat delight music lovers all over the world.

4

Yamaha Corporation

Annual Report 2014

5

6

Yamaha Corporation

Designing a Sound Future
To remain a trusted and admired brand loved by people all over the world,
Yamaha will design its own future, reaching new heights of growthand bringing new technologies, new sounds, and new states of‘kando’ that never fail to delight customers.

Annual Report 20147

To Our Stakeholders

8

Yamaha Corporation

Toward a Quantum
Leap in Growth Phase
My name is Takuya Nakata, and I am President and Representative Director of Yamaha.
Yamaha Corporation has started “Yamaha Management Plan 2016 (YMP2016),” its mediumterm management plan that covers the three-year period beginning from April 1, 2013. In the fiscal year ended March 31, 2014, the first year of the plan, Yamaha achieved year-on-year increases
in sales and earnings by implementing a wide range of measures. These included expanding andupgrading product development and sales channels, the ongoing business structural reforms,
and reducing costs.
To achieve the targets outlined in YMP2016, we must be in tune with changing customer
values and bring products to market that take advantage of Yamaha’s strengths. We must
reinforce and expand our domestic and overseas product sales channels. And, we must reduce
costs in all processes. It is extraordinarily important that we fully achieve these three steps. We
must be clearly aware of what is needed to achieve this plan, and all Yamaha employees in sales,development, and manufacturing, as well as administrative staff must adopt a new approach sothat Yamaha becomes a company that steadfastly carries out what it has pledged. By utilizing ourstrengths and accumulated know-how developed over the years in business domains centeredon sound and music, I want us to boldly produce new values while taking on new challenges with
out-of-the-box thinking.
The basic focus of Yamaha is to deliver a variety of ‘kando’ states to customers. We believethat products and services produced from the customer’s point of view bring exciting ‘kando’states to customers. To achieve our YMP2016 targets in fiscal 2015, the second year of the plan,we will take on new challenges one at a time and attain additional growth in our core business ofsound and music based on our corporate objective of CREATING ‘KANDO’ TOGETHER. Please lookforward with anticipation to the new Yamaha.

Takuya Nakata
President and Representative Director

Annual Report 20149

Key Figures
Year ended March 31, 2014

Change from the previous
fiscal year

¥410.3 billion+11.8 %

Operating Income¥26.0 billion

182.1 %Net Income¥22.9 billion

455.5 %Net Sales

9.2 %

ROE

+7.3 points¥10.3 billion

Free Cash Flow—Sales by Business Segment

Others 5.8%
Electronic Devices 4.6%

Audio Equipment 25.7%
Musical Instruments 63.9%

10

Yamaha Corporation■ Financial institutions■ Foreign investors

49.1%
26.4%

Sales by Region

Europe18.3%

North America

16.2%

Japan

40.9%

Asia, Oceania and Other Areas

24.6%

Reporting Segment Change

2014

2013
Along with the corporate organizational
reform, the AV/IT segment was renamed
audio equipment segment as of
fiscal 2014, and the professional audio
equipment business that was previously
reported as part of the musicalinstruments segment was included in
the audio equipment segment.

Musical Instruments

Musical Instruments

Yamaha Musical Instruments
Hardware Products

Yamaha Musical Instruments
Hardware Products

Professional Audio Equipment

Music Schools, etc.

Music Schools, etc.

Audio Equipment

AV/IT

Audio Products

Audio Products

Professional Audio Equipment

ICT Devices

ICT Devices

Electronic Devices

Electronic Devices

OthersOthersAnnual Report 201411

Yamaha at a GlanceMusical Instruments

Sales¥262.3 billion

Segment Sales
Proportion

Sales by Product Category
18.3%■ Pianos
29.3%■ Digital musical instruments
13.5%■ Wind instruments■ String and percussion instruments 8.2%
30.7%
■ Music schools, etc.

63.9%

Operating Income¥19.7 billion
Sales by Region

41.0%

17.3%
9.7%
Europe12

Yamaha Corporation

China

Japan

16.5%

15.5%

Asia, Oceania andOther Areas

North America

Business Strengths◆ Wealth of core technical expertise based on traditional craftsmanship in acoustics and advanced digitaltechnology◆ 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◆ A variety of activities through the operation of music
schools to increase the music-playing population

Major Products & Services◆ Pianos◆ Digital musical instruments (digital pianos,Electone™, portable keyboards, synthesizers,etc.)◆ Wind instruments (trumpets, flutes, saxophones, etc.)◆ 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 tuning13

Audio Equipment

Sales¥105.5 billion
Operating Income

Segment Sales
Proportion

25.7%¥5.9 billion
Business Strengths◆ Front surround sound technology for Digital Sound
Projector™
◆ High-quality sound technology in AV components
and HiFi audio products◆ Provision of system solutions using digital network
technology for professional audio equipment◆ Router solutions business◆ Signal processing technology for high sound quality
and wide coverage of microphone speakers for Web
conferencing

Major Products & Services◆ Audio products (AV receivers, speaker systems,
front surround speakers, desktop audio
systems, etc.)◆ PA equipment (mixers, power amplifiers, etc.)◆ Commercial online karaoke equipment◆ Routers◆ Conferencing systems

14

Electronic Devices

Sales¥18.8 billion
Operating Income

Segment Sales
Proportion

4.6%¥0.8 billion
Business Strengths

OthersSales¥23.7 billion
Operating Loss

Segment Sales
Proportion

5.8%-¥0.4 billion
Major Products & Services◆ Accumulated experience and know-how in generating high-quality sound◆ Golf products◆ Wealth of expertise in the development of devices for
digital musical instruments◆ Factory automation (FA) equipment◆ High-quality digital signal processing (DSP)
technologies◆ Automobile interior wood components◆ Resort facilities (Tsumagoi™, KatsuragiKitanomaru™, Katsuragi Golf Club™)◆ Software technologies for middleware and content
development tools

Major Products & Services◆ S emiconductors

Annual Report 201415

Yamaha Group Medium-Term Management Plan

Yamaha Management Plan 2016
Yamaha Corporation has formulated its new management plan “Yamaha Management Plan 2016 (YMP2016)” thatcovers the three-year period beginning in April 2013 to follow its Yamaha Management Plan 125 (YMP125), which wascompleted at the end of March 2013. YMP2016 sets forth Yamaha’s basic management policies, key strategies, and its
numerical targets.
Yamaha has positioned the three years under YMP2016 as the first stage of the “quantum leap” phase of its development. During this stage, Yamaha endeavors to secure growth in its existing businesses while actively investing to achieve
growth through new business in the next stage.
Under the new management plan, by the fiscal year ending March 2016, Yamaha will aim to reach consolidated
net sales of ¥430 billion (which will represent real growth over the three-year period of 14%), operating income of ¥30
billion (which will imply an operating income ratio of 7%), and a return on equity (ROE) of 10%. Over the period of
YMP2016, Yamaha plans to make investments for growth of ¥33 billion.

Management Policies
Attain continual growth

Expand sales with a focus on emerging markets and electronics business

Strengthen profitability

Steadily build on results of structural reform

Enhance specialization and professionalism to create new added value
Generate results from function-specific organizational units, foster specialist personnel

Growthin newbusinesses

Positioning◆ The new Medium-Term Management Plan will achieve steady growth inexisting businesses as the first stage of the “quantum leap” phase.
◆ The Company will invest aggressively in new business development witha view to achieving future targets of ¥500 billion in net sales and ¥50 billion
in operating income.

Growth inexisting
businesses

YMP2016
YMP125

Medium-Term Management PlanFirst stage:
Achieve growth in existing businesses and invest aggressively in new business development
Build a foundation
for growth

16

Yamaha Corporation

Quantum leap phase

Next stage

Numerical Targets(Billions of yen)

13/3

16/3
TargetschangeNet Sales

366.9

430.0

+63.1

Operating income ratio

9.2

2.5%

30.0

ROE

1.9%

10%

Actual growth rate over three years

Operating Income

+14%
7%

11/3-13/3(over three years)changeFree Cash Flows

9.9

50.0

+40.1

R&D Expenses

67.4

68.5

+1.1

+20.8

Capital Expenditures

35.6

46.0

+10.4

+8.1

(Depreciation)(36.4)(41.0)

+4.6

−

33.0

−

Special Allocation for
Growth Investment

Exchange Rate (Yen)
US$
EUR
US$
EUR

Net Sales
Operating Income

83
107
82
103

14/3-16/3(over three years)(Billions of yen)

85
115
85
115

Targets by Segment
Net Sales

Operating Income (Loss)(Billions of yen)

235.5

13/3*

15.0 23.8
366.9

92.6

14/3

262.3

105.5

16/3 Target

268.5

114.0

-2.0
6.4

13/3*

18.8 23.7
410.3
21.5 26.0
430.0

14/3

16/3 Target(Billions of yen)

0.3
4.6
9.2

-0.4

19.7

5.9

18.5

8.5

0.8
26.0
1.0
2.0 30.0■ Musical instruments ■ Audio equipment ■ Electronic devices ■ Others[Segment Realignment]
As a result of certain organizational realignments, effective from the first quarter of fiscal 2014, some segments are realigned as follows:
1. AV/IT segment will now be renamed audio equipment segment.
2. PA equipment business, which was previously reported as part of the musical instruments segment will now be reported as part of the audio equipment segment.
* Fiscal 2013 figures have been adjusted to reflect segment composition changes effective from fiscal 2014.

Operating Income Analysis

Growth Investment and Return to Shareholders(Billions of yen)

Actively invest in growth while continuing stable dividends
General overview of three-year cash flow distribution
Shareholder Return
Target payout ratio of
30% or more

Cost Improvement
Increase in Actual Income(Semiconductors/Others)
Impact ofCurrency
Fluctuations
6.4
9.2

13/3

1.3
14.8

2.0

7.0

Investment for Growthin New Businesses-10.7

Cash Flow fromOperating Activities

Effect of Structural
ActualReforms
Increasein SG&A

Increase in Actual Income(Musical Instruments/
Audio Equipment)¥33 billion¥95 billion
30.0

Investment in Current
Business Domain¥46 billion

16/3
TargetAnnual Report 201417

Four Key Strategies

1

Accelerate Growth in Emerging Countries
Launch models for China and emerging countries◆ Three-Year Target
Achieve actual growth of +34% in China and other emerging countries

Expand sales mainly of multifunction digital pianos designed
exclusively for China◆ Priority Measures
1. Focus management resources on key areas and expand sales
network
2. Increase music-playing population through music popularization activities
Net Sales(Billions of yen)

13/3

55.0

25.8

Actual growth rate

14/3

+99%

Develop moderately priced entry model with tones suited to
58.6
37.0
13/3
local tastes for emerging countries
Actual growth rate

+100%

63.8

16/3 Target

80.8

75.4

110.2

34.8

■ Other emerging countries ■ China

2

+4%

−4%

72.2
14/3
Contains 22 local tones including
Indian, Arabic, African,
73.8 Chinese,
16/3 Target
Celtic and Scottish tones

95.7

31.9

6.5

41.5

New commercial audio equipment launch◆ Three-Year Target
Achieve actual growth of +28% for digital keyboard instruments, professional audio equipment, and ICT devices◆ Priority Measures

QL5

Digital keyboard instruments
1. Expand market share through product differentiation

QL1

All-in-one mixer withcondensed elements, thecore of our top-of-the-line
CL Series

2. Further respond to various market demand
PA equipment
1. Enhance development capabilities to maintain solid growth
2. Enter new fields to expand business scale
ICT devices
1. Transform router business into network device solution
business

Intuitive, user-friendly androbust mixing consolewith superior soundquality and design

Full-scale entry into the commercial installed sound market

2. Expand Web conferencing USB microphone and speakerbusiness into audio communication device business

58.6
Actual growth rate

14/3

72.2

16/3 Target

73.8

6.5

37.0
+4%

−4%
41.5

(Billions of yen)

102.1
+19%
7.8 121.5

50.2■ Digital keyboard instruments ■ PA equipment ■ ICT devices

18

Yamaha Corporation

7.8 121.5

50.2■ Digital keyboard instruments ■ PA equipment ■ ICT devices

Expand Sales in Electronics Business Domain

13/3(Billions of yen)

102.1
+19%

10.6 134.6

Accommodates all types of facilities,
from hotels and convention centers
to small and medium-sized commercial spaces.
InterContinental Hotel(Switzerland)

10.6 134.6

Yamaha Group Medium-Term Management Plan

3

Strengthen Cost Competitiveness◆ Three-Year Target
Further strengthen productivities to exceed sharp rise inlabor costs in China and Indonesian factories◆ Priority Measures

Cost reduction plans progressed as scheduled, achieving first-year
actual cost reduction of ¥5.4 billion, representing over one-third of
the three-year cost reduction target of ¥15 billion(Billions of yen)

1st year cost reduction(effect of structural reform in Japan etc.)

1. Increase local procurement and strategically provide
components manufactured in overseas factories toJapanese production+3.9

2. Reduce personnel expenses through manufacturing
automation

4

-5.4

1st year cost
increase(overseas laborcost, etc.)

Initial projectionof costs in 16/3

2nd and 3rd year
projected cost increase¥5.4 billion
cost reduction +4.1

-9.6

2nd and 3rd year
projected cost
reduction

Projected costs
in 16/3 at 14/3

Target costs
in 16/3

M&A Development◆ Three-Year Target◆ Priority Measures

Develop new businesses to accelerate growth in
the quantum leap phase

1. Invest in M&A and capital tie-ups
2. Invest in venture firms
3. Pursue new business projects in-house

Acquired Line 6, Inc. (a U.S. musical instruments and audio equipment manufacturer), andRevolabs, Inc. (a U.S. provider of wireless audio solutions)Line 6, Inc.

Revolabs, Inc.

Location:
Calabasas, California, U.S.A.
Date established:
1996
Representative:
Paul Foeckler (President and CEO)
Number of employees: 220
Lines of business: 	Development, manufacture, and sale of guitars
and guitar peripherals, PA equipment, and wirelesssystems
Sales:
US$69.0 million (fiscal 2012)

Location:
Sudbury, Massachusetts, U.S.A.
Date established:
2005
Representative:
Jean-Pierre Carney (President and CEO)
Number of employees: 70
Lines of business: 	Development, manufacture, and sale of wirelessconference phones and wireless microphonesystems
Sales: 	US$25.5 million (fiscal 2013)

Yamaha has acquired Line 6, Inc. (Headquarters: California, U.S.A.), a company
engaged in the development, manufacture, and sale of modeling guitar processing products, professional audio (PA) equipment, wireless microphones,
and other products, and made it a wholly owned subsidiary. Through thisacquisition, the Yamaha Group will expand its portfolio of modeling guitar processing products and PA equipment product lines to accelerate growth in themusical instruments and audio equipment domains. Yamaha will create newvalue for customers by combining Line 6’s product planning and development
capabilities based on modeling and wireless technologies and Yamaha’s own
accumulated technological capabilities in the acoustic and digital domains, aswell as by utilizing the global knowledge of markets and customers amassedby the two companies.

Yamaha has acquired Revolabs, Inc. (Headquarters: Massachusetts, U.S.A.), a
company engaged in the development, manufacture, and sale of products
such as wireless microphone systems for corporate conference rooms andwireless conference phones, and made it a wholly owned subsidiary. By making Revolabs, a company with world-class technology, a wholly owned subsidiary, Yamaha seeks further growth for its corporate audio equipment businessin both voice communication devices and professional audio equipment.

Annual Report 201419

Interview with the President

Takuya Nakata
President and Representative Director

With the first year of the Yamaha Management Plan 2016 (YMP2016) completed, we now
have a clear view of the road we must take to achieve our goals. Takuya Nakata, President
and Representative Director, discusses the goals that need to be achieved over the next two
years and the challenges to stable growth that lie even further ahead.

20

Yamaha Corporation

Q

Could you describe Yamaha’s performance in fiscal 2014?

A

Consolidated net sales in fiscal 2014 were ¥410 billion, an
increase of 11.8% year on year. Operating income increased a
substantial 182.1% to ¥26 billion, and net income came to ¥23
billion. These figures, in each case, surpassed those of the previous fiscal year for the second consecutive year.
Key factors behind this increase were the steady recovery
of mature markets, as well as steady progress made in reducing
fixed and other costs through successful business structuralreforms. In the first year of the medium-term management

Q

How do you assess Yamaha’s performance after the first year of YMP2016?

A

Sales profit was achieved according to plan, supported by the
positive effects of foreign currency translations. We steadily
carried out the measures of the first year of the medium-term
management plan, the pillars of which include the expansion
and upgrading of sales channels, cost reductions, and investments for growth.
In August 2013, we eliminated the divisional system inthe musical instrument and audio equipment segments, established manufacturing and development groups, and realigned
into a functional organization that includes the existing sales
and marketing group. We tore down the walls of individual
cultures in each business division that were the by-productof a vertical organization and in their place we created anplan, even with favorable foreign currency translation effects
and last-minute demand from the consumption tax increase inJapan, we were able to take a decisive first step to achieving ourtargets.
Of course, there still remain challenges to the attainmentof steady growth, a target of our plan, but we have madeexplicit those challenges that we need to be aware of in orderto achieve our plan and have more clearly defined the directionthat we must take in the remaining two years of YMP2016.

environment where the various technologies and production
facilities owned by Yamaha are utilized across the Company. The
challenge facing us from this point forward is how to turn thewealth of potential arising from the interaction of differing internal cultures in varied business domains such as development,
manufacturing, and marketing into advantages for Yamaha.
Another major accomplishment was the return to profitability of the electronic devices business. Contributing factors
were the reduction of fixed costs through business structuralreforms and the rebound in sales. We will continue to focus on
new product development that takes advantage of strengths
unique to Yamaha while closely monitoring changes in the
global semiconductor business.

Numerical Targets
Net Sales

Operating Income

ROE(Billions of yen)(Billions of yen)

(%)

600

40

12

450
366.9

410.3

430.0

30

300

20

150

10

0

30.0
26.0

14/3

16/3
Target

10

9

6
9.2

3

0

13/3

9.2

1.9

0

13/3

14/3

16/3
Target

13/3

14/3

16/3
TargetAnnual Report 2014

21

Q
A

How will you speed up growth in China and other emerging countries,+50%
one of the keyRussia
strategies
of YMP2016?
The numerical targets of YMP2016 for fiscal 2016 are consolidated net sales of ¥430,000 million, operating income of ¥30,000
million, and ROE of 10%. In fiscal 2015, we will continue to workto accelerate growth in China and other emerging countries,
which is a priority business strategy for achieving those targets.
Our goalIndia
is to achieve
30% or more in real terms over
+84% growth ofVietnam +63%
the three years leading up to 2016.
Our basic strategy is the same as in the first year, andthat is to Indonesia
have stronger+50%product development tailored to eachmarket and to reinforce sales channels and sales staff. Further,
we will continue to aggressively expand Yamaha Music Schools
and conduct school music educational activities in China andotherEast/Africa/CIS
emerging countries
Middle+98% with the goal of increasing the size ofthe market.
In China, despite the relative slowdown in the market’s

overall growth, continued growth of acoustic piano demand is
expected. Moreover, we are beginning to see higher growth fordigital pianos, so we will also focus on this market.
In emerging markets, we will continue to take a sales
strategy that is appropriate for Indonesia, India, Brazil, andRussia and swiftly implement it. To accelerate sales growth,
Yamaha has established footholds in Vietnam by setting up a
local sales subsidiary, and in South Africa with the establishment of a representative office.
Emerging countries are changing moment to moment,
Brazil +58%
and therefore our challenge is to take the optimal approachafter assessing the local business customs of each country.
We constantly pursue the most effective measures by turning
the PDCA cycle and examining whether the local subsidiary isproperly implementing Yamaha’s business strategy.

Sales by Region(Billions of yen)

165.8

13/3

167.9

14/3
Japan

Music China 201322

Yamaha Corporation

178.1

16/3
Target

55.2

66.6

62.6

60.6

13/3

14/3

16/3
Target13/3

North America

Asian Beat Band Competition
Grand Final in Indonesia

74.9

69.2

14/3

16/3
TargetEuropeYamaha Music Square in India

85.4

13/3

100.9

14/3

120.1

16/3
TargetAsia, Oceania andOther Areas

Yamaha Piano Fair in Moscow

Q

What is Yamaha’s sales growth strategy in the electronics business domain?

A

Another one of our priority business strategies is to expand
sales in the electronics business domain. Our goal is to achievesales growth of about 30% for the duration of YMP2016 in thethree fields of digital keyboard instruments, professional audio
equipment, and information and communications technology(ICT) devices. In the area of digital keyboard instruments, which
includes digital pianos, we have been working to develop
appealing products that precisely meet market needs.
Professional audio equipment is a domain in which recent
organizational realignment efforts are likely to pay off, so we willcontinue to aggressively develop and launch new products. To

compete with new market entrants who launch products in thelower price segments, we will speed up product developmentwith the focus on planning high value-added products thattake advantage of Yamaha’s technology and know-how, and its
strength in the field of sound. We will deliver the high productreliability and strong product support capabilities required byprofessional audio equipment and swiftly launch products thatmeet market needs.
Even though sales are still relatively small, ICT devices are
steadily paying off as the product domain expands.

A demonstration of DisklavierTM
player piano connected with
HiFi audio products at the 2014
International Consumer Electronics Show (CES) in the U.S. tohighlight Yamaha’s unparalleledexpertise in sound and music.

Annual Report 201423

Q

How successful has new business development and M&A in particular been?

A

In YMP2016, with the goal of promoting business growththrough M&A and capital alliances as a priority business strategy,
we established a special investment framework for new businessdevelopment. An investment ceiling of ¥30,000 million wasestablished for investment in M&A and capital alliances, and aceiling of ¥3,000 million for investment in venture companies.
In line with this policy, we turned Line 6, Inc. (Headquarters:
California, U.S.A.) and Revolabs, Inc. (Headquarters: Massachusetts,
U.S.A.) into wholly owned subsidiaries in fiscal 2014.
Line 6 has an excellent reputation for guitar peripherals,
such as amplifiers loaded with the best digital technology, PA
equipment, and other products. With overlapping productdevelopment capabilities based on strengths Yamaha hasdeveloped in both acoustic and digital technologies, along withthe modeling and wireless technologies of Line 6, the YamahaGroup is set for even greater growth in the musical instrument
and audio equipment domains.
In addition, Revolabs possesses extremely high andunparalleled technological capabilities in the area of wirelessmicrophones and conferencing systems. In our view, the market
will expand significantly by merging audio equipment with
networking technology. We therefore believe that Revolabs
possesses major technological advantages in this domain.
The importance of technology in audio equipment is
growing year by year. By combining our products, technologies,
and sales channels we will not merely add, but multiply, ourstrengths, and considering the high potential for generating
new values in our business, we expect to make new future
investments.

Line 6, Inc. President and CEO Paul
Foeckler (left) shakes hands with
Yamaha Corporation President andRepresentative Director Takuya
Nakata (right).

24

Yamaha Corporation

Q
A

What efforts are you making to reach the medium-term management plan’scost-cutting target?
In YMP2016, we pursue production efficiency improvements
and cost reductions with the goal of lowering costs by ¥15,000
million over a three-year period.
Let me cite three areas of cost reduction. The first is
production efficiency improvement, the second is procurement
cost reduction, and the third is fixed cost reduction. Our major
success in the first year was in the first area, where we improved
production efficiency by sharing our best practices throughorganizational realignment. In the second area, as part of ourshift to overseas production, we set up a system that reduced

Piano manufacturing in Japan (Kakegawa)Q
A

procurement costs by raising the rate of local procurement
and producing parts locally. In the third area, we successfully
reduced fixed costs through the integration of our domestic
production facilities.
At the Indonesian plant, efforts to raise the rate of local
procurement and locally integrate production have paid off andrecently our production capabilities have greatly improved. We
will further reduce procurement costs through our procurement
department in Shenzhen, China that was incorporated in
October 2013 and thereby strengthening our purchasing.

Piano manufacturing in China (Hangzhou)

What is your financial strategy and approach to returning profits toshareholders going forward?
The Yamaha Group continues to build a solid foundation with anequity ratio of 61.9% at fiscal 2014 year-end. We will firmly adhere
to financial policies that balance investments and dividend
payments on the basis of maintaining financial stability andsoundness. On the other hand, we want to flexibly and expeditiously take on growth investments for the next growth phase.
With regard to returning profits to shareholders, Yamaha has
set a goal of 30% or more for its consolidated dividend payout
ratio based on continuous and stable dividend payment. In fiscal
2014, Yamaha paid an annual dividend of ¥27.0 per share. In
fiscal 2015, we plan to pay an annual dividend of ¥27.0 per share.

Dividends per Share
(Yen)

30

27.0

27.0

14/3

15/3
(plan)

20

10

10.0

10.0

10.0

11/3

12/3

13/3

0

Annual Report 201425

Board of Directors, Corporate Auditors and Executive Officers(As of June 24, 2014)(Left to right) Haruo Kitamura, Masato Oike, Takuya Nakata, Yoshikatsu Ota, Motoki Takahashi, Masao Kondo, Hiroyuki Yanagi

Board of Directors

26

Takuya Nakata

Motoki Takahashi

Masao Kondo

Masato Oike

President and Representative Director

Director

Director

Director

1981 Joined Nippon Gakki Co., Ltd.*2005 General Manager of Pro Audio& Digital Musical Instruments
Division
2006 Executive Officer
2009 Director and Executive Officer
2010 Senior Executive Officer of
Yamaha Corporation andPresident of Yamaha Corporationof America
2013 Deputy Senior General Manager
of Musical Instruments & Audio
Products Sales & MarketingGroup of Yamaha Corporation
	President and Representative
Director (to the present)

1974 Joined Nippon Gakki Co., Ltd.*
1999 President of Yamaha EuropeGmbH
2001 Executive Officer of Yamaha
Corporation
2006 General Manager of Corporate
Planning Division2007 Director and Executive Officer
2009 Director and Managing Executive
Officer (to the present)2012 Senior General Manager of Musical Instruments & Audio Products
Sales & Marketing Group

1978 Joined Nippon Gakki Co., Ltd.*
2007 General Manager of AV Products
Division
2008 Executive Officer
2009 Director and Executive Officer
2010 Senior Executive Officer andSenior General Manager of Soundand IT Business Group2013 Senior General Manager ofMusical Instruments & Audio
Products Production Group (tothe present)2014 Director and Senior Executive
Officer (to the present)

1982 Joined Nippon Gakki Co., Ltd.*
2006 President of Yamaha Music
Holding Europe GmbH2008 President of Yamaha Music
Europe GmbH2009 Executive Officer
2011 Senior Executive Officer
2013 Senior General Manager of Musical Instruments & Audio Products
Sales & Marketing Group (to thepresent)
2014 Director and Senior Executive
Officer (to the present)

Yamaha Corporation

Corporate Auditors

Executive Officers

Haruo Kitamura

Fumio Umeda

Managing Executive Officer

Outside Director (Certified Public Accountant)

Full-Time Corporate Auditor

1983 Joined Arthur Andersen
1987 Registered as a Certified Public Accountant
2002 Established Kitamura Certified Public Accounting Office (to the present)
2004 Outside Corporate Auditor of Rohm Co., Ltd.
(to the present )2005 Outside Director of MonotaRo Co., Ltd. (to thepresent)
2006 Supervisory Director, MID REIT, Inc. (to thepresent)
2009 Outside Corporate Auditor of Yamaha
Corporation2010 Outside Director of Yamaha Corporation (tothe present)

1974 Joined Nippon Gakki Co., Ltd.*
2003 G eneral Manager of Accounting and Finance
Division
2009 G eneral Manager of Corporate Auditors’ Office2011 F ull-Time Corporate Auditor (to the present)

Hiroyuki Yanagi
Outside Director(President, Chief Executive Officer and Representative Director of Yamaha Motor Co., Ltd.)
1978 Joined Yamaha Motor Co., Ltd.
2007 Executive Officer of Yamaha Motor Co., Ltd.
2009 Senior Executive Officer of Yamaha MotorCo., Ltd.
2010 President, Chief Executive Officer andRepresentative Director of Yamaha Motor Co.,
Ltd. (to the present)
2011 Outside Director of Yamaha Corporation (tothe present)

Yoshikatsu Ota
Outside Director(Special Advisor of Konica Minolta, Inc.)
1964 Joined Minolta Camera Co., Ltd.
1991 Director of Minolta Camera Co., Ltd.
1995 Managing Director of Minolta Co., Ltd.
1999 President and Representative Director of
Minolta Co., Ltd.
2003 Director, Vice President and Representative
Executive Officer of Konica Minolta Holdings,
Inc.
2006 Director, President and Chief Executive Officer,
Representative Executive Officer of Konica
Minolta Holdings, Inc.
2009 Director and Chairman of the Board of
Konica Minolta Holdings, Inc. (currently Konica
Minolta, Inc.)
2012 Outside Director of Yamaha Corporation (tothe present)2014 Special Advisor of Konica Minolta, Inc. (to thepresent)

Masahito Hosoi
Full-Time Corporate Auditor
1978 J oined Nippon Gakki Co., Ltd.*2005 G eneral Manager of Human Resources Division2009 E xecutive Officer
2011 G eneral Manager of Staff Business Reform
Division2013 S enior Executive Officer and Senior General
Manager of Corporate Administration Group
2014 F ull-Time Corporate Auditor (to the present)

Takashi Miyazawa

Motoki Takahashi

Senior Executive Officer

Masao Kondo

Senior General Manager of Musical Instruments &Audio Products Production Group

Masato Oike
Senior General Manager of Musical Instruments &Audio Products Sales & Marketing Group

Yutaka Hasegawa
Senior General Manager of Musical Instruments &Audio Products Development Group
Executive Officer

Akira Iizuka

General Manager of Research & Development
Division

Hirofumi Osawa
General Manager of Audio Products Sales &Marketing Division

Outside Corporate Auditor(Certified Public Accountant)

Hiroshi Sasaki

1973 J oined Arthur Young & Co.
1977 R egistered as a Certified Public Accountant
1993 J oined Showa Ota & Co. (currently Ernst &Young ShinNihon LLC)
2006 G eneral Manager of International Division,
ShinNihon & Co. (currently Ernst & Young
ShinNihon LLC)
2010 R etired from Ernst & Young ShinNihon LLC
2011 O utside Corporate Auditor of Yamaha
Corporation (to the present)

Kazunori Kobayashi

President of Yamaha Music Europe GmbH
General Manager of Business Development Division

Satoshi Yamahata
General Manager of Corporate Planning Division

Shigeki Fujii

Senior General Manager of IMC Business Group

Seiichi Yamaguchi
General Manager of Business Planning Division

Hitoshi Fukutome
Hirohiko Ikeda

President of Yamaha Corporation of America

Outside Corporate Auditor (Attorney)

Teruhiko Tsurumi

1987 A dmitted to the Japan Federation of Bar
Associations, joined Oh-Ebashi Law Offices(currently Oh-Ebashi LPC & Partners)
1991 W orked for Weil, Gotshal & Manges LLP (U.S.A.)
1992 A dmitted to the New York State Bar Association (U.S.A.)
1993 P artner in Oh-Ebashi Law Offices (currently
Oh-Ebashi LPC & Partners) (to the present)
2011 O utside Corporate Auditor of Yamaha
Corporation (to the present)

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

Shinobu Kawase
General Manager of Acoustic Musical Instruments
Production Division

Kimiyasu Ito
General Manager of Acoustic Musical Instruments
Development Division* Currently Yamaha Corporation

Annual Report 201427

Corporate GovernanceYamaha is taking steps to enhance the oversight functions of the Board of Directors while promoting an executive
officer system in order to strengthen business execution functions. Yamaha has also introduced 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 tostrengthen it.
The Company’s corporate objective is “CREATING ‘KANDO’*TOGETHER — continuing to create ‘kando’ and enrich culture withtechnology and passion born of sound and music, together with people all over the world.” Based on this objective, Yamaha will improve
management efficiency and become globally competitive and highly
profitable. At the same time, the Company will increase its corporate
and brand value by fulfilling its social responsibilities in areas such ascompliance, environment, safety and social contributions.
To achieve this goal, Yamaha will take steps to create a transparent and high-quality management that is also efficient by improving
its organizational structure and system, implementing all necessary
measures, and disclosing information in an appropriate manner.
* ‘Kando’ (is a Japanese word that) signifies an inspired state of mind.

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 below) centered on the oversightand supervision of management’s execution of duties by the Boardof Directors, and audits by the Board of Auditors. Further, Yamaha
has enhanced its governance functions by introducing an executive

officer system, setting up a Corporate Directors Personnel Committee,
Risk Management Committee, and corporate committees, convening
twice a month (in principle) Managing Council meetings, and establishing an internal control system. In conjunction with consistentaudits conducted by the Company’s system of full-time auditors, thesehelp raise the effectiveness of governance through fair and equitable
audits by highly independent outside corporate auditors.
Board of Directors
As of June 24, 2014, Yamaha had seven directors, including threeoutside directors. In principle, the Board of Directors convenes once
monthly, and is responsible for the Group’s management functions,such as strategy planning, monitoring the business execution of eachdivision, and providing guidance. Outside Directors are elected toenhance the supervisory function of the Board of Directors from an
objective standpoint, for increasing transparency of the management,
and gain good advice by utilizing their management experience invarious industries and advanced expertise.
In order to clarify directors’ management responsibilities, directors are appointed for a term of one year.
Representative Director
As of June 24, 2014, Yamaha had one representative director who
acts as President and Representative Director. The President andRepresentative Director is the chief officer in charge of business execution and represents the Company.

Corporate Governance Structure (As of June 24, 2014)
General Shareholders’ Meeting
Appointment/dismissal

Corporate Directors
Personnel Committee

Requestfor advice

Board of Directors

Appointment/dismissal

Audit

7 persons

Reports

Risk Management Committee
Managing Council
Corporate Committees

Reports

Request for advice

Representative Director
1 personAppointment/dismissal

Accounting Audit

Audit
Instruction

Internal Auditing Division
Reports

Executive Officers
15 persons
Individual Business Divisions, Administrative Divisions, Group Companies

28

Yamaha Corporation

Accounting Auditors

Consent to appointment
Judgments of appropriatenessof accounting audit

Corporate
Auditors’ OfficeAppointment/
dismissal/supervision

Reports

Reports

Board of Auditors
4 persons(Incl. 2 Full-time Auditors)(Incl. 2 Outside Auditors)(Incl. 3 Outside Directors)

Appointment/dismissal

Internal audit

Reorganization of System and Structure to Strengthen Corporate Governance2001 ➢ Adopted an executive officer system to separate management decision-making/supervision and execution functions
2003 ➢ Reduced the number of full-time directors from nine to eight, appointed an outside director, increased the number of outside corporate auditorsfrom one to two, and established a Corporate Auditors’ Office2005 ➢ Clearly defined directors’ management responsibilities and reduced the term of directors from two years to one year to create a system that canswiftly respond to changing business environments
2010 ➢ Decreased the number of full-time directors from eight to three, increased the number of outside directors from one to two, and registered one
outside director as an independent officer as stipulated by Japan’s financial instruments exchange
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

Auditors and the Board of Auditors
As of June 24, 2014, Yamaha had four auditors, including two outside
corporate auditors. In principle, the Board of Auditors convenes once
monthly. Based on audit plans, auditors periodically perform comprehensive audits of all business divisions, administrative divisions andGroup companies, and participate in Board of Directors’ meetings andother important meetings such as the Managing Council.
The reasonableness of accounting audits is determined basedon periodic progress reports from the accounting auditors of theiraudits of the Company’s financial statements.
In Yamaha, people with knowledge of finance and accounting
assume full-time auditor positions. To ensure good judgment withrespect to the reasonableness of business and accounting audits, oneof the full-time auditors is an expert in finance and accounting. To
ensure objectively fair and equitable audits, outside corporate auditors
are appointed and include specialists (CPAs and attorneys) who holdpositions independent from that of the Company.
Yamaha has also established a Corporate Auditors’ Office (withtwo staff members as of June 24, 2014) 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. The Committee deliberates
on director personnel issues and reports its findings to the Board of
Directors. The Committee, in which more than half of its members areoutside directors, ensures transparency and fairness.
Risk Management Committee
Yamaha established the Risk Management Committee as an advisory
body to the President and Representative Director. The Committee discusses risk management-related matters from a Companywide perspective and reports its findings to the President and Representative Director.
Managing Council and Corporate Committees
Managing Council meetings are held, in principle, twice a month forthe purpose of discussing and forming a consensus about management issues when they arise. Attending the Managing Council are thePresident and Representative Director, managing executive officer,
senior executive officers, and full-time auditors. To encourage deeper

discussion about important management strategic issues, corporate
committees have been set up to address each issue.
Executive Officers
Yamaha has adopted an executive officer system, with the purposeof strengthening consolidated Group management and businessexecution functions. As of June 24, 2014, the executive officer systemcomprised 15 executive officers, including one managing executive
officer and three senior executive officers. The managing executive
officer supports the president, who is the chief officer in charge ofbusiness execution. The senior executive officers, in principle, presideover the business and administrative groups as heads of those groupsin accordance with the importance of these responsibilities. These
officers are responsible for the business performance of the groups
they preside over and manage and direct in such a way that the groupfunctions 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 (nine staff members
as of June 24, 2014) under the direct control of the President andRepresentative Director. Its role is to closely examine and evaluate
management and operations systems, as well as operational execution, for all management activities undertaken by the Company fromthe standpoint of legality and reasonableness.
The Internal Auditing Division provides the President andRepresentative Director, divisions subject to audit, and supervisory divisions with information based on the evaluation along with suggestions
and proposals for rationalization and improvement. In parallel, Yamaha
strives to boost audit efficiency by encouraging close contact and coordination among the corporate auditors and the accounting auditors.
Principal Internal Audit Activities in Fiscal 2014
1. Performed visiting audits of divisions and Group companies (Japan and overseas; paper audits were also performed)
2. E valuated the status of Company-level internal controls, audited Company
regulations, its operation compliance, and updates thereof
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 and provided advice for improvement ofmonitoring quality
5. Performed follow-up audits to confirm that corrective action had been taken

Annual Report 201429

Support System for Outside Directors and Outside Corporate Auditors
The meeting to discuss and confirm management issues is held, inprinciple, monthly for the purpose of sharing important management
proposals between all directors and auditors and gaining a better
understanding about management’s execution of its duties.
A Division Meeting has been set up for reporting by the generalmanagers on business activities. When necessary, outside directors areindividually provided with explanations about proposals and reports
to be submitted to the Board of Directors.
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 otherFiscal 2014 Outside Directors and Outside Corporate Auditors
Outside Directors
Name

Haruo Kitamura

Independent
Officer✓

Reasons for Appointment

Views on their Independence

Board of Directors
Meetings Attended

A director with excellent character andinsight
A CPA with expertise in finance andaccounting

Has many years of experience as a CPA, but is under noadvisory agreement with Yamaha. Of independent socialand economic standing, he is not in a position that can besignificantly influenced by, or conversely, can significantly
influence the Yamaha management team, and is therefore
unlikely to pose a conflict of interest with Yamaha’s generalshareholders.

14 of 14

Although he is the president and CEO of a company inwhich Yamaha is a major shareholder, since Yamaha is notin a position that can exert significant influence over the
management team of the company, he is unlikely to pose aconflict of interest with Yamaha’s general shareholders.

12 of 14

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.

13 of 14

Views on their Independence

Board of Directors
and Board of Auditors
Meetings Attended

He can be counted on to strengthen
Yamaha’s governance functions andprovide objective advice

Hiroyuki Yanagi—

A director with excellent character andinsight
Has management experience in otherindustries
He can be counted on to advise anddirect Yamaha management for the
purpose of raising brand value

Yoshikatsu Ota✓

A director with excellent character andinsight
Has management experience in otherindustries
He can be counted on to strengthen
Yamaha’s governance functions andprovide objective advice

Outside Corporate Auditors
Name

Takashi Miyazawa

Hirohiko Ikeda

Independent
Officer

Reasons for Appointment✓

An auditor with excellent character andinsight
A CPA with expertise in corporate
accounting
He can be counted on to provide equitable and fair audits from an objective
point of view✓

An auditor with excellent character andinsight
An attorney with expertise in laws andregulations
He can be counted on to provide equitable and fair audits from an objective
point of view

Although previously affiliated with Yamaha’s accounting
auditor Ernst & Young ShinNihon LLC, he did not participate
in Yamaha’s accounting audits and has not been nor is he
now in a position that can influence accounting audit workat Ernst & Young ShinNihon LLC. Moreover, Ernst & Young
ShinNihon LLC is unlikely to influence his accounting work
as an outside corporate auditor. Of independent socialand economic standing, he is not in a position that can besignificantly influenced by, or conversely, can significantly
influence the Yamaha management team, and is therefore
unlikely to pose a conflict of interest with Yamaha’s generalshareholders.
Though he has worked for many years as an attorney, heis of independent social and economic standing, and is
not in a position that can be significantly influenced by, orconversely, can significantly influence the Yamaha management team, and is therefore unlikely to pose a conflict ofinterest with Yamaha’s general shareholders.

Board of Directors
Meetings 14 of 14
Board of Auditors
Meetings 14 of 14

Board of Directors
Meetings 13 of 14
Board of Auditors
Meetings 13 of 14* 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.

30

Yamaha Corporation

materials to them prior to the meeting and provide explanations asnecessary to enable them to perform a complete preliminary studyof 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 research and data collection.
Registration of Independent Officers
Yamaha has registered outside directors Haruo Kitamura andYoshikatsu Ota, and outside corporate auditors Takashi Miyazawa andHirohiko Ikeda as independent officers under the provisions of theTokyo Stock Exchange.

Policy on Determining Remuneration for Directors andCorporate Auditors
Yamaha sets the policy that determines remuneration for directors
at a meeting of the Corporate Directors Personnel Committee, inwhich more than half of its members are outside directors. The policy
on determining remuneration for corporate auditors is decided at a
meeting of the Board of Auditors.
Remuneration for Directors
Remuneration for directors, though based on a compensation
framework predetermined at the General Shareholders’ Meeting, is
to be decided in accordance with the following standards, taking into
account compensation levels primarily at other listed companies andrelevant employment standards.
(i) Remuneration for directors other than outside directors is determinedby reflecting consolidated results and each director’s individual

performance into the annual base salary, which is based on job responsibilities. Specifically, depending on consolidated results and individual
performance, the annual base salary may be raised or lowered by up
to 20%.
(ii) 
In addition to the compensation framework predetermined at
the General Shareholders’ Meeting, bonuses are paid to directors(excluding outside directors) depending on the level of consolidated net income based on the annual base salary and are paid
after obtaining approval at the Ordinary General Shareholders’Meeting. The amounts of the bonuses paid to directors are decided
at the Board of Directors Meeting.
(iii) Remuneration for outside directors is not linked to business performance. However, 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, though based on a compensation framework predetermined at the General Shareholders’ Meeting,is not linked to business performance. However, amounts are determined through consultation with the corporate auditors, taking into
account such factors as whether said remuneration is in balance withthat of directors and the scale of Yamaha Corporation’s business.
Other
At the 182nd Ordinary General Shareholders’ Meeting held on June27, 2006, a resolution was approved abolishing payment of retirement
allowances to executive officers. Yamaha does not maintain a stock
option system.

Remuneration for Directors and Corporate Auditors in Fiscal 2014
(Millions of yen)Compensation by TypeClassification
Directors(Excluding outside directors)
Corporate Auditors(Excluding outside corporate
auditors)
Outside Directors andOutside Corporate Auditors

Total Compensation Basic Compensation

Stock Options

Bonuses

Retirement Benefits

Number of Directors
and Corporate
Auditors

222

169

—

53

—

4

60

60

—

—

—

2

32

32

—

—

—

5

Depending on consolidated results and individual performance, the annual base salary for directors other than outside directors rose or was lowered by up to 20%. Directors’ bonuses are
entirely performance-based.

Accounting Auditors
Yamaha has appointed Ernst & Young ShinNihon LLC as its accounting
auditor. Shinji Tamiya and Hidetake Kayama, CPAs of said accounting
auditor firm, have performed Yamaha’s accounting audit. Ernst &Young ShinNihon have voluntarily adopted a rotating system for its
managing partners and have taken measures to ensure that the number of continuous years of service do not exceed a fixed period of time.
In addition, 10 CPAs, and 16 staff assist with the audits.

Annual Report 201431

Corporate Governance

Remuneration for CPAs in Fiscal 2014 and 2013
(Millions of yen)Classification

Filing company

Fiscal 2014
Compensation based on
auditing services
69

Fiscal 2013

Compensation based on
non-auditing services—

Compensation based on
auditing services
71

Compensation based on
non-auditing services—

Consolidated affiliates

27

17

7

27

Total

96

17

78

27

Notes:
Other important remuneration
Fiscal 2014: Yamaha Corporation of America, a consolidated subsidiary of Yamaha Corporation, and 13 other companies paid ¥100 million in compensation based on auditing services and ¥27
million based on non-auditing services to Ernst & Young, which is affiliated with the same CPA network as Yamaha Corporation.
Fiscal 2013: Yamaha Corporation of America, a consolidated subsidiary of Yamaha Corporation, and 13 other companies paid ¥83 million in compensation based on auditing services and ¥18
million based on non-auditing services to Ernst & Young, which is affiliated with the same CPA network as Yamaha Corporation.

Basic Concept of the Internal Control System
Yamaha has established an internal control system pursuant to Japan’sCompanies 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 sametime, the Company works to improve the internal control system toraise business efficiency, increase the dependability of Yamaha’s
accounting and financial data, and strengthen compliance, asset
soundness, and risk management capabilities.
Further, Yamaha established the Group Management Charterto clarify Group management policies. Also, divisions with jurisdiction
over subsidiaries are responsible for providing proper guidance andassistance with management in Group companies under their jurisdiction based on Group company management rules and regulations.
Subsidiaries shall confer and consult in advance with said divisions,while administrative divisions of Yamaha Corporation shall support
this process.
Yamaha has developed and put into operation internal controls
for financial reporting based on implementation standards for internal
control reporting systems (Financial Instruments and Exchange Law).
We will maintain and more firmly establish this internal control system
to ensure the reliability of our financial reporting.

Compliance Framework
Not only does the Yamaha Group observe laws and regulations, itseeks strict compliance management that addresses social norms andcorporate ethics. The Working Group for Compliance was established
as a subordinate body to the Risk Management Committee, an advisory body to the president, to promote and strengthen compliancein cooperation with the staff and departments in charge of laws andregulations.
In 2003, Yamaha established the Compliance Code of Conduct,
which is disseminated to all Group officers and employees (including
part-time and contract employees) through worksite briefings. Since
then, we have localized the Code by creating overseas and regionalversions based on the laws, regulations, and social norms of the countries in which our Group companies are based, and have had themtranslated into local languages. In 2011, we revised the Compliance
Code of Conduct, carried out routine employee training in the revised

32

Yamaha Corporation

Code and rigorously disseminated it throughout the Group.
Further, Yamaha conducts routine compliance surveys withthe 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 Compliance Help
Line that connects to the Working Group for Compliance executive
office and an outside attorney. The Compliance Help Line accepts
inquiries not only from employees, but also from interested parties
including business partners. In fiscal 2014, the Help Line received
a total of 35 inquiries and reports including from overseas Group
company employees. Since its inception, it has resolved problems by
responding to 517 inquiries and reports over an 11-year period.

Business Continuity Plan (BCP)The Risk Management Committee and its subsidiary body, the Working
Group for BCP and Disaster Prevention Management have put thenecessary systems and countermeasures in place to respond 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 of operations in the event ofan earthquake in Japan’s Tokai region where Yamaha headquarters
are located or other major natural disaster that could cause damage
to its buildings or facilities. In January 2012, Yamaha establishedvarious guidelines including the BCP/Disaster Basic Countermeasures,
Earthquake Countermeasures, and Fire Countermeasures, which
update and supersede the BCP Guidelines.

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

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 indemand may have a negative effect on the Group’s business results
and the development of its business.

❑2

Price Competition

The Yamaha Group confronts severe competition in each of its business segments. For example, in the musical instruments segment, theCompany is a comprehensive manufacturer of musical instruments
and sells high-quality, high-performance instruments covering a broad
price spectrum. However, the Company confronts competitors in eachmusical instruments segment, and competition in the lower pricesegments has become more intense, especially in recent years.
Also, in the audio equipment segment, the Yamaha Group is
subject to competition from low-priced products. Changes in logistics
and distribution and new technology trends could expose this business to even greater price competition, which could have an impact
on the Group’s current strong position.

❑4

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 riskboth qualitatively and quantitatively and makes careful, consideredjudgments, depending on circumstances, the Group may be unable torecover a portion or the full amount of its investments, or may decideto withdraw from a business, thereby resulting in additional losses.
In such cases, the value of assets invested in such businesses may besubject to impairment.

❑5

New Technology Development

The Yamaha Group will focus its management resources on the corebusiness domains of sound and music. The Group will firmly establish
itself as the world’s leading comprehensive musical instruments
manufacturer. The audio equipment segment has been expanded,with a focus on the AV products category and PA equipment. The
electronic devices segment has also been expanded, mainly in thearea of LSIs for sound, music, graphics, and sensors, a core operationin the semiconductor business.
Differentiating the Group’s technologies in the fields of sound,music, and networks is essential for the Group’s further development
and growth. In developing these technologies, if the Group does notcontinue to correctly forecast future market needs and adequately
meet them, the added value of its products in the musical instruments
segment will decline, which may lead to price competition. 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 and electronic
devices businesses.

Business Alliances

In recent years, partnership strategies, including alliances, joint ventures and investments in other companies, have increased in importance for the Group. In some cases, the anticipated effects of suchalliances and investments may not materialize because of conflicts ofinterest, or changes in the business strategies of the partner, or otherreasons.

❑6❑3

Business Investment

Dependence on Materials and Parts Business Customers

The semiconductors, automobile interior wood components, andmaterials and parts that the Group manufactures and sells are affectedby 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, this may have anegative impact on future orders. Moreover, customers may ask Group
companies to compensate them for quality problems or other defects.

❑7International Business and Overseas Expansion

The Yamaha Group has established a global presence, with manufacturing and marketing bases in various parts of the world. Of theGroup’s 62 consolidated subsidiaries, 38 are foreign corporations, ofwhich 16 are manufacturing companies, with principal bases of operation in China, Indonesia, and Malaysia. Overseas sales comprise 59.1%of the Group’s net sales.
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

Annual Report 201433

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 inregulations(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 Materials Prices, Raw Materials Supplies, andLogistics Costs
To manufacture its products, the Group uses raw materials, including
lumber, metals such as copper, and plastics, for parts. Increases in theprices 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 todecreasing sales through these channels.

❑ 10

Recruitment and Training of Personnel

The average age of the Company’s employees is relatively high, witha significant number in the upper age brackets and many approaching the set retirement age. Therefore, an important challenge for theCompany is to address the changing composition of the workforce
by passing on musical instrument manufacturing know-how andrecruiting and training a new generation of employees. If the Company
is unable to respond sufficiently to changes in the composition of its
workforce, this could interfere with its business activities and future
growth.

34

Yamaha Corporation❑ 11 Protection and Use of Intellectual Property
The Group possesses intellectual property rights, including patents
based on its proprietary technologies, and accumulated businessknow-how. Some of this intellectual property cannot be fully protected, or can only be partially protected because of legal 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 in the market that are
similar to, or copies of those of Group companies, thus interfering withGroup sales. In addition, third parties may claim that Group products
infringe on their own intellectual property rights. As a result, sales ofGroup products that employ said intellectual property may be delayedor 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 inhigher manufacturing costs, which could affect price-competitiveness.
Moreover, if the Group is unable to obtain a license, it may have tosuspend 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 free of defects.
The Group is insured against product liability claims, but there is no
guarantee that this insurance will be sufficient to cover any potential
payments for damages. If product liability issues arise, insurance rates
are likely to increase. In that case, the cost to recall, exchange, repair,or change the design of a product could increase significantly, or theGroup’s business reputation could be tarnished, which could cause
sales to decline, and adversely affect the Group’s performance andfinancial 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 tothe laws and regulations of the countries in which they operate. Theselaws 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, andenvironmental 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 for some unexpected reason, it is unable tocomply with these laws and regulations, the Group’s activities could
be restricted and costs could increase as a result.

❑ 14

Environmental Regulations

With the environmental protection regulations that govern businessactivities becoming increasingly stringent, companies are being
asked to implement voluntary environmental programs as one of
their corporate social responsibilities. The Yamaha Group has 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 cancompletely prevent restricted substances released due to accidents orother causes from exceeding environmental standards, or reduce therelease of said substances. Moreover, in cases where soil pollution has
occurred on land formerly occupied by industrial 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 inthe soil on land already sold to third parties may spread, resulting in
pollution of the air or underground water, and may incur cleaning andremediation costs.

❑ 15

Information Leakage

The Group retains a wide range of important management– and business–related information as well as personal information on numerous
customers. To manage this information properly, the Group has
prepared policies and rules and put into place systems for maintaining
its security. However, in the event that this information accidentallyleaks outside the Group, this could have a major impact on the Group’sbusiness activities or lower public confidence in the Group.

❑ 16

Fluctuations in Foreign Currency Exchange Rates

As Yamaha Group’s business activities, including manufacturing andsales, are global in scale, the transactions of Group companies thatare denominated in foreign currencies are subject to fluctuating
currency 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 be able to achieve its initialbusiness plan targets due to exchange rate fluctuations. The euro-yen
exchange rate has an especially strong impact on profit and loss: a ¥1change will result in a ¥0.4 billion change in profitability.

❑ 17

Earthquakes and Other Natural Disasters

In the event of earthquakes and other natural disasters, the production
plants of the Yamaha Group may be damaged. Notably, the Company’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 unexpectednatural disasters may arise. In the event of a natural disaster, theYamaha Group’s facilities may suffer damage, and the Group may
be required to suspend or postpone operation, which could incur
substantial restoration costs. In addition, disaster conditions at raw
materials and parts suppliers could affect manufacturing.

❑ 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 event thatthe functioning of the Group’s data network systems is disrupted due
to computer virus infections, cyber attacks, and other threats, this
could adversely affect the Group’s performance and financial 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: ¥15.8 billion; consolidated balance
sheet value: ¥84.2 billion, as of March 31, 2014). Since available-forsale securities with market value are valued at the market price at thesettlement date based on the mark-to-market valuation method, therecorded balance sheet value of these securities may fluctuate depending on the price of the securities at the settlement date. This may, inturn, have an impact on the Company’s net assets. Further, when themarket 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, 2014, the market value of the Group’s land, revaluedin accordance with the Law Concerning Revaluation of Land, was¥8.4 billion below the book value of said land after revaluation. In theevent of the sale or disposal of said land, this unrealized loss may berecognized.
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 from the actual results.
As a result, retirement benefit obligations and expenses could increase.
Particularly, in the event that expected returns on managed
assets cannot be realized because of declining stock prices and otherfactors, unrecognized actuarial losses could arise, and retirement benefit expenses could increase.

Annual Report 201435

Corporate Social Responsibility (CSR)
In all its interactions with stakeholders, the Yamaha Group seeks through its business activities to help create ‘kando.’*Through activities grounded in the fields of sound and music, we will continue to create ‘kando’ and enrich culture
along with people around the world.

Yamaha’s Corporate Philosophy
Corporate Objective“CREATING ‘KANDO’TOGETHER”
Yamaha will continue to create ‘kando’ and enrichculture with technology and passion born of soundand music, together with people all over the world.

Management Philosophy
Customer-Oriented andQuality-Conscious Management

Transparent and Sound
Management

Yamaha fully satisfies its customers by offering
quality products and services that incorporate
new and traditional technologies as well as refinedcreativity and artistry.

Yamaha delivers proper returns to shareholders
by ensuring a solid business performance andachieves lasting development through transparent
and sound management.

Valuing People
Yamaha strives to be an organization where each
person’s individuality and creativity are respected
and all can demonstrate their full potential throughtheir work.

Harmony with Society
Yamaha is a good corporate citizen that contributes
to the development of society, culture, and theeconomy by observing laws, demonstrating highethical standards, and endeavoring to protect theenvironment.

The Yamaha Group’s approach with respect to customers, shareholders, the people who work with Yamaha, and society is clearly
expressed in the corporate philosophy shared by the entire Yamaha Group. The most valued concept for the Group is “CREATING‘KANDO’ TOGETHER,” a slogan that embodies the corporate objective that commands the highest position in the hierarchy thatframes the Group’s corporate philosophy. In consistently striving to enhance satisfaction among its diverse stakeholders and realize
sustainable growth by effectively utilizing management resources, the Yamaha Group is staunchly committed to maximizing its
corporate value.

Yamaha Corporation Group CSR Policy

Our aim is “CREATING ‘KANDO’ TOGETHER”
The objective of the Yamaha Corporation Group is to continue to create ‘kando’ and enrich culture with technology and passion born of sound andmusic, together with people all over the world.
Based on this corporate objective, Yamaha conducts its CSR activities according to the following guidelines to further strengthen the bondsof trust with its stakeholders through its corporate activities and contribute to the sustainable development of society.
1. Yamaha provides support to people who want to perform music and people who want to enjoy it by contributing to the popularization and development ofmusic and musical culture.
2. Yamaha works to maintain a healthy global environment by understanding the significance of protecting the natural environment, maintaining biodiversity,and reducing the burden on the environment, as well as promoting the proper use of wood resources, and cooperating with forest protection activities.
3. As a “corporate citizen” that is a member of society, Yamaha contributes to creating a better society by actively participating in many kinds of activities thatfurther the development of the community and culture.
4. Yamaha complies with laws and high ethical standards, works to create an environment in which its personnel can draw fully on their sensitivities and creativity,
and aims to build a corporate culture that will enable it to offer better products and services.
5. For its shareholders, who support its corporate activities financially, Yamaha aims for a high degree of transparency by disclosing management informationand engaging in active and sustained communication. For its business partners, Yamaha conducts transactions fairly and transparently, endeavors to deepen
mutual understanding, and works to build strong relationships of trust.
* ‘Kando’ (is a Japanese word that) signifies an inspired state of mind.

36

Yamaha Corporation

The Yamaha Group’s Approach to CSR
The Yamaha Group’s corporate management seeks to realize the corporate objective of “CREATING ‘KANDO’ TOGETHER” through businessactivities grounded in the fields of sound and music. With an emphasison corporate social responsibility (CSR) as one of our basic management policies, we are making steady, ongoing efforts in quality,
customer satisfaction, procurement, environmental issues, and public
relations in order to fulfill our role as a corporate citizen. The Group
as a whole will continue to raise awareness of its social responsibility
and contributions, and work to address various social issues basedon the following themes laid out in its management philosophy:
customer-oriented and quality-conscious management, transparent
and sound management, valuing people, and harmony with society.
In 2011, Yamaha signed the Global Compact that comprises thebasic principles of CSR, as advocated by the United Nations. Based on
the 10 principles of the Global Compact in addition to the Yamaha

Corporation Group CSR Policy established in 2010, we will further
promote CSR activities across the entire Group.
A special feature of CSR as practiced by the Yamaha Group is
its contribution through its business activities to the development ofmusic culture around the world. We seek to leverage our strengths
to provide products and services that deliver satisfaction to everyone
who enjoys music, and thereby contribute to the development of
humanity’s musical heritage and to the enrichment of life.
Yamaha also considers it crucial to address issues facing the local
communities that form the basis for its global business, as well as global
environmental issues such as global warming and preservation of biodiversity. We promote cultural and educational development in local
communities, develop and manufacture products that make efficientuse of resources and reduce the environmental burden, and because
we are a company that manufactures products from wood, we actively
support reforestation. Going forward, we will focus on activities thatallow us to address social issues as only the Yamaha Group can.

9th year of collaboration in Indonesianreforestation activities at Yamaha Forest

Fund raising for a U.S. children’s hospitalthrough Yamaha Cares’ participation incharity marathon

Creating music learning opportunities forchildren by providing recorder education
for musical instructors under our Sopro
Novo music program in Brazil

Provided music lessons at Chinese migrant
workers’ primary schools after donatingthese musical instruments

Yamaha Symphonic Band participates in
Charity Concert for Reconstruction after theGreat East Japan Earthquake

Promoting universal design for digital musicalinstruments with visibility feature that uses
color combinations that are easy to distinguishfor people with poor color vision

Saving resources and lowering CO2
emissions by using returnable racks forshipping grand piano frames

Performing environmental audits ofIndonesian factories

Yamaha’s inclusion in SRI indices

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/

Annual Report 201437

R&D and Intellectual Property
Based on its corporate objective of CREATING ‘KANDO’ TOGETHER and corporate philosophy of a quality-conscious
approach, Yamaha conducts its business activities driven by both products and services centered on sound and music.
To support this objective, Yamaha has identified technologies it has amassed in the fields of sound and music as coretechnologies and is conducting research and development with the aim of further advancing and extending thesetechnologies. Yamaha is also sharpening its competitive edge by linking R&D with its design and intellectual property
strategies.

Research and Development
Yamaha carried out organizational reform in August 2013. In themusical instruments and audio equipment businesses, the acoustic,
electronic devices, and R&D divisions were dissolved, and a functionalorganization including production, development, and sales divisions
was established.
The reform takes the product development functions that had
resided in each business division and the R&D functions for improving
the Company’s foundational elemental technology and creating new
businesses that had resided in the R&D division and integrates theminto the development division. The purpose of the reform is to promote closer cooperation between those functions and revitalize theorganization through their interaction. Moreover, the new businessdevelopment functions that had resided in the R&D division weretransferred to the newly established business development division,
which reports directly to the president. This move will enable Yamaha

to actively use internal and external resources and speed up theCompany’s growth strategy.
Yamaha’s R&D domain encompasses acoustics, materials, electronic devices, sound generators, voice and acoustic signal processing,music information processing, operating systems, communications
and networks; that is, from the inlet to the outlet of sound, as well as its
multipurpose uses.
In fiscal 2014, Yamaha selected sound, music, networks, anddevices as areas that it needs to further strengthen. The Company
has therefore focused on R&D to accelerate growth in the domains of
acoustic environments and space, the acquisition of voice recognition,
synthesis and song recognition, synthesis technologies, as well as thedevelopment of elemental technologies for next-generation musicalinstruments and audio equipment including those that are wirelessand network-related.

R&D Achievements✺  Twisted Flare Port™

✺  Music Information Processing Technology

Twisted Flare Port is an aerodynamic sound control technologythat reduces air turbulence noise, a challenge in subwoofer bass
reproduction. Utilizing aerodynamic sound analysis and flow
visualization measurement technology, Yamaha has identified thenoise generating mechanism and developed a method to reduce
it. The Twisted Flare Port’s flared and gently twisted shape enables
a clear and rich low-frequency reproduction with less noise than
before by reducing air turbulence on both ends of the port.
This technology is being newly adopted for use in audio subwoofers and will also be incorporated in HiFi speakers, PA systems,
electronic keyboards, and other products. VORART TM, the technology that reduces air turbulence — the basis of this system — will be
deployed in acoustic products including woodwind instruments.

Yamaha is pursuing R&D in the field of music information processing. The results of this R&D include the following technologies:
Automated song composition technology (used in the automatedsong composition software as a service VOCALODUCERTM) thatgenerates a melody line by simply specifying a template according
to a musical theme. This is accomplished by creating an algorithmof song composition know-how along with templates for rhythm
patterns, pitch changes, and chord progressions. Music searchtechnology (used in the Hiichao Kensaku™ application for iPhone*and iPod Touch*) that finds music including similar sounding
melodies by compiling the world’s musical compositions into a
database and developing and employing a melody verification
function. Chord progression analysis technology (used in the
Mobile Music Sequencer V3.0 application for iPad* and iPhone*)that identifies chord progressions by analyzing music performance data. Yamaha is taking these technologies based on music
information processing R&D and actively incorporating them in its
music software products.

Air turbulence on bothends of the port creates
noise

38

Yamaha Corporation

Air turbulence
is produced.

Turbulence isdiffused, air flow
becomes smooth.

Conventional Port

Twisted Flare Port* iPhone, iPad and iPod Touch are trademarks of Apple Inc. registered in the UnitedStates and other countries.

Intellectual Property
Since its founding, Yamaha has sought to acquire its own patents
and other intellectual property rights while respecting the intellectual
property rights held by third parties. More recently, the Company hastaken steps to integrate its business, R&D and intellectual property
strategies by implementing a number of measures designed to maximize the contribution of intellectual property to business earnings.

Patents
In order to differentiate itself from competitors, gain business advantages, ensure greater flexibility, and enable licensing to third parties,
Yamaha has formulated patent strategies tailored to operations in
specific business segments. These strategies include identifying target
technical fields for patent acquisition, such as core technologies, newbusinesses and new technologies, and building a strong patent portfolio by concentrating on its core competencies.
From the standpoint of asset optimization, Yamaha annuallyassesses its full portfolio of patents held within and outside of Japan,
evaluating patent rights in terms of present application and future
potential, ultimately retaining only those deemed most advantageous.
As of March 31, 2014, the Yamaha Group owned a total of
approximately 5,800 patents and utility models in Japan. Outside ofJapan, the Group held roughly 5,200 patents, mainly in the UnitedStates, Europe and China. Yamaha is working to increase the numberof patents held in China in particular.

Designs
Yamaha views design as a critical element in setting its products apartin the market, and 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 against counterfeit products. The
Yamaha Group held some 855 design rights in Japan and overseas asof March 31, 2014.

Copyrights
In addition to industrial property rights, such as patents, designs andtrademarks, the Yamaha Group generates numerous copyrighted
works, mostly in the fields of sound and music. Music-related copyrights are of particular importance to Yamaha in terms of intellectual
property. The Company takes steps to ensure their proper management and use, including legal action when necessary.

BrandsYamaha has taken various initiatives to maintain and enhance thevalue of its brand. In 1986, the Company established regulations for
Yamaha brand management, and also set up a Companywide brandmanagement committee to maintain and improve brand value by
ensuring appropriate use. In order to protect the Yamaha brand, theCompany acquires trademarks in numerous product domains in every
country.

Anti-Counterfeiting Measures
In recent years, the number of cases of unauthorized third parties
manufacturing and selling products under the Yamaha brand andproducing counterfeit Yamaha designs has been increasing. Using
government agencies and legal means, Yamaha has vigorously combated counterfeiting with growing success. Going forward, Yamahaplans to adopt a more aggressive legal approach, including litigation
against infringers, to preserve its brand value and business and toretain consumer trust in the Yamaha brand.

Intellectual Property Management Systems
Corporate staff are assigned to the Intellectual Property Division to
oversee the integrated management of all intellectual property heldby the Yamaha Group. In addition, specialists responsible for intellectual property are assigned to each business and R&D division to ensure
the Company’s intellectual property strategy is integrated with its
business and R&D strategies. These specialists work in close communication with the Intellectual Property Division to promote Yamaha’s
intellectual property strategy from both Companywide and businessdomain perspectives.

Achievement in Protection of Intellectual
Property Rights
VOCALOIDTMVOCALOID is a singing voice synthesizer technology and its software
application that can produce music vocals by simply entering lyrics
and a melody into a computer. New technology created during thedevelopment of VOCALOID-related technology as well as productnames are fully protected by intellectual property rights. At present,
Yamaha has applied for nearly 190 patents and 80 trademarks related
to this technology in Japan and abroad. Among these, Japan patent
number 4153220 “Singing voice synthesis technology with naturaland distinctive sound” received in 2013 the President’s Award of theJapan Patent Attorneys Association at a National Commendation forInvention of the Japan Institute of Invention and Innovation. Yamaha
also received the Invention Implementation Achievement Award for
its implementation of the awarded invention.

Patents Owned by Yamaha (As of March 31, 2014)
Japan
U.S.
China
Other areas
0

2,000

4,000

6,000
(Number of patents)■ Musical instruments ■ Audio equipment■ Electronic devices ■ Others

Annual Report 201439

Main Networks(As of July 1, 2014)

Overseas Network
Company nameLocation

Company name■2 Yamaha Commercial Audio Systems, Inc.
■
3 Yamaha Music InterActive, Inc.
●
4 YMH Digital Music Publishing, LLC*●
5 Line 6, Inc.
●
6 Revolabs, Inc.
●
7 Yamaha Artist Services, Inc.
■
8 Yamaha Canada Music Ltd.
■
9 Yamaha de México, S.A. de C.V.
■
10 Yamaha Music Latin America, S.A.
■
11 Branch in Venezuela■
12 Branch in Argentina■
13 Yamaha Musical do Brasil Ltda.
■
14 Yamaha Music Europe GmbH■
15 Branch in France■
16 Branch in Italy■
17 Branch in Ibérica
■18 Branch in the U.K.
■
19 Branch in Scandinavia■
20 Branch in Switzerland■
21 Branch in Austria■
22 Branch in Benelux■
23 Branch in Poland■
24 Branch in Turkey■
25 Steinberg Media Technologies GmbH●
26 Nexo S.A.
●

California, U.S.A.
California, U.S.A.
California, U.S.A.
California, U.S.A.
California, U.S.A.
Massachusetts, U.S.A.
New York, U.S.A.
Toronto, Canada
Mexico City, Mexico
Panama City, Panama
Caracas, Venezuela
Buenos Aires, Argentina
São Paulo, Brazil
Rellingen, Germany
Croissy-Beaubourg, France
Milan, Italy
Madrid, Spain
Milton Keynes, U.K.
Gothenburg, Sweden
Zurich, Switzerland
Vienna, Austria
Vianen, Netherlands
Warsaw, Poland
Istanbul, Turkey
Hamburg, Germany
Plailly, France

Wiener Neustadt, Austria●
28
YamahaMusic&
Electronics
TaiwanCo.,
Ltd.
Taipei, Taiwan■
29 Yamaha Music & Electronics (China) Co., Ltd.
Shanghai, China■
30 Yamaha Music Technical (Shanghai) Co., Ltd.
Shanghai, China■
31 Yamaha Trading (Shanghai) Co., Ltd.
Shanghai, China■
32 Yamaha Electronics (Suzhou) Co., Ltd.
Suzhou, China●
33 Xiaoshan Yamaha Musical Instruments Co., Ltd. Hangzhou, China●
34 Hangzhou Yamaha Musical Instruments Co., Ltd. Hangzhou, China●
35 Tianjin Yamaha Electronic Musical Instruments, Inc. Tianjin, China●
36 Shenzhen Yamaha Music & Electronics Trading Co., Ltd. Shenzhen, China■
37 Yamaha Music Korea Ltd.
Seoul, South Korea■
38 Yamaha Music (Asia) Private Limited
Singapore■
39 Yamaha Music (Malaysia) Sdn. Bhd.
Petaling Jaya, Malaysia■
40 Yamaha Electronics Manufacturing (M) Sdn Bhd Chemor, Malaysia●
41 PT. Yamaha Indonesia
East Jakarta, Indonesia●
42 PT. Yamaha Music Manufacturing Indonesia
East Jakarta, Indonesia●
43 PT. Yamaha Musik Indonesia (Distributor)
Central Jakarta, Indonesia■
44 PT. Yamaha Music Manufacturing Asia
Bekasi, Indonesia●
45
PT.
YamahaMusicalProducts
Indonesia
Pasuruan, Indonesia●
46 PT. Yamaha Electronics Manufacturing Indonesia Pasuruan, Indonesia●
47 Siam Music Yamaha Co., Ltd.*2
Bangkok, Thailand■
48 Yamaha Music Vietnam Company Limited*2
Ho Chi Minh City, Vietnam■
49 Yamaha Music India Pvt. Ltd.
Gurgaon, India■
50 Yamaha Music Gulf FZE
Dubai, U.A.E.
■
51 Yamaha Music (Russia) LLC.
Moscow, Russia■
52 Yamaha Music Australia Pty. Ltd.
Melbourne, Australia■

1 Yamaha Corporation of America

1

Location

27 L. Bösendorfer Klavierfabrik GmbH

Domestic Network
Company nameLocation

1 Kitami Mokuzai Co., Ltd.
Mombetsu-gun, Hokkaido, Japan●
2 Sakuraba Mokuzai Co., Ltd.
Kitaakita, Akita, Japan●
3 Yamaha Music Japan Co., Ltd.
Minato, Tokyo, Japan■
4
YamahaMusic
Retailing
Co.,
Ltd.
Minato, Tokyo, Japan■
5 Yamaha Sound Systems Inc.
Chuo, Tokyo, Japan●
6 Yamaha Music Entertainment Holdings, Inc. Shibuya, Tokyo, Japan●
7 Yamaha Music Communications Co., Ltd.
Shibuya, Tokyo, Japan●
8
YamahaMusic
Artist,Inc.
Shibuya, Tokyo, Japan●
9 Yamaha Music Publishing, Inc.
Shibuya, Tokyo, Japan●
10 Yamaha Music and Visuals, Inc.
Shibuya, Tokyo, Japan●
11 Yamaha Music Media Corporation
Toshima, Tokyo, Japan●
12 Epicurus Corporation
Toshima, Tokyo, Japan●
13 Matsukiya Co., Ltd.
Fukui, Japan■

Company nameLocation

14 Yamaha Piano Service Co., Ltd.
Kakegawa, Shizuoka, Japan■
15 Yamaha Piano Manufacturing Japan Co., Ltd. Kakegawa, Shizuoka, Japan●
16 Yamaha Resort Inc.
Kakegawa, Shizuoka, Japan■
17
YamahaMusicalProducts
Japan
Co.,
Ltd.
Iwata, Shizuoka, Japan●
18 Yamaha Music Electronics Japan Co., Ltd.
Iwata, Shizuoka, Japan●
19 Yamaha Hi-Tech Design Corporation
Iwata, Shizuoka, Japan●
20 Yamaha Business Support Corporation
Hamamatsu, Shizuoka, Japan■
21
Yamaha
Ai
Works
Co.,
Ltd.*
Hamamatsu,
Shizuoka, Japan■
22 Yamaha Fine Technologies Co., Ltd.
Hamamatsu, Shizuoka, Japan●
23 Yamaha Travel Service Co., Ltd.
Hamamatsu, Shizuoka, Japan■
24 Jeugia Corporation*
Kyoto, Japan■
25 Nishimuragakki Co., Ltd.
Miyazaki, Japan■
26 Yamaha Kagoshima Semiconductor Inc.
Aira-gun, Kagoshima, Japan
●
2

1

27

*1 Equity-method affiliates*2 Non-consolidated subsidiaries and affiliates

40

Yamaha Corporation

■ Sales companies, etc.
● Manufacturing/production companies, etc.
● Music entertainment business companies• Retail shops (Yamaha Music Retailing Co., Ltd.)

14 25
22
19
20

18

15 26

6

51

23
21 27

17

8

24
16

32
50

35

1 2 3 4 537

29 30 31

28

49

7

33 34

9

36
47

48

39 40

38

10

11

41 42 43 44
45 46

13
12

52

1

2

17 18 19
3 4 5 6 7 8 9 10 11 121324

14 15 16

Yamaha Corporation (headquarters)

20 21 22 23

26 25

Annual Report 201441

Investor Information(As of March 31, 2014)◆ Head Office10-1, Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka
430-8650, Japan◆ Date of Establishment
October 12, 1897
◆ Stated Capital¥28,534 million◆ Number of Employees (Consolidated)
19,851 (Excludes average number of temporary employees: 7,863)◆ Number of Consolidated Subsidiaries
62◆ Account Settlement Date
March 31

◆ Public Notices
Shall be issued electronically at
http://jp.yamaha.com/ (only in Japanese), except when
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’ MeetingJune◆ Accounting Auditors
Ernst & Young ShinNihon LLC◆ Number of Shareholders
24,788◆ Shareholder Composition (Number of shares)◆ Dividends
Year-end: To the shareholders of record on March 31
Interim: To the shareholders of record on September 30■ Financial institutions■ Foreign investors■ Individuals■ Japanese corporations■ Securities companies◆ Number of Shares of Common Stock
Authorized: 700,000,000
Issued:197,255,025◆ Stock Exchange Listing
Tokyo
First Section, Code No. 7951

◆ Main Shareholders◆ Administrator of Shareholders’ Registry
The Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
3-15-33, Sakae, Naka-ku, Nagoya, Aichi 460-8685, Japan◆ Depositary for American Depositary Receipt
Deutsche Bank Trust Company Americas
DR Exchange: OTC
Ticker Symbol: YAMCY
Ratio: 1 share of common stock = 1 ADR

U.S. Securities Code: 984627109

47.6%■ Financial institutions
29.0%■ Foreign investors
The Master Trust Bank of12.0%
Japan, Ltd. (trust a/c)
■ Individuals
Japan
Trustee
Services
Bank,
6.3%Ltd. (trust a/c)
■ Japanese corporations
companies
YamahaMotor Co., Ltd. 5.1%
■ Securities

Mizuho Bank, Ltd.
The Shizuoka Bank, Ltd.
Mitsui Sumitomo Insurance Co., Ltd.
Sumitomo Life Insurance Company
Nippon Life Insurance Company
State Street Bank and Trust Company 505223
BNP Paribas Securities (Japan) Limited

IR Contact

Dividends per Share / Dividend Payout Ratio
(%)

50

50

40

40

30

27.0 30
22.8

20
10
0

10/3 11/3 12/3 13/3 14/3

42

Yamaha Corporation

20

Shareholding ratio
(%)

8.04
6.72
5.33
4.42
4.31
4.14
3.77
2.97
2.06
1.80

Note: The shareholding ratio is calculated by excluding treasury stock amounting to
3,628,117 shares from total outstanding shares.

Type: Level 1 with sponsor bank

(Yen)

47.6%
29.0%
12.0%
6.3%
5.1%

Corporate Planning Division
TEL: +81 3 5488 6602
http://www.yamaha.com/

Number of Shareholders / Foreign Investors(%)

30,00025,00040
24,78830■ Regular dividends■ Special dividends
Dividend payout ratio

20,000■ Number of shareholders

29.0

15,00020

10,000
10

10

5,000

0

0

0

10/3 11/3 12/3 13/3 14/3

Foreign investors

Common Stock Price Range and Trading Volume
Common stock price range

TOPIX

(Yen)
3,000

(Points)
3,000

2,000

2,000

1,000

1,000

0

Trading volume(Thousand shares)
60,00040,00020,000
0

4
2009

7

10

1
2010

4

7

10

1
2011

4

7

10

1
2012

4

10/3

Fiscal year ended

10

11/3

1,207
1,282
865
252

Share price at the end of fiscal year (Yen)
Share price — high (Yen)
Share price — low (Yen)
Trading volume (Million shares)

7

943
1,295
805
280

1
2013

4

12/3

858
1,034
663
291

7

10

1
2014

13/3

14/3

1,329
1,705
873
340

934
1,035
654
281

Fiscal year ended

10/3

11/3

12/3

13/3

14/3

Dividend yield (%)
Price to earnings ratio (Times)
Price to book value ratio (Times)
Number of shares issued (Thousand shares)
Market capitalization at the end of fiscal year (Millions of yen)
Percentage of shares owned by foreign investors (%)

2.28
—
0.95
197,255
238,086
23.4

1.06
36.4
0.75
197,255
186,011
25.9

1.17
—
0.82
197,255
169,244
22.9

1.07
43.9
0.80
197,255
184,236
26.4

2.03
11.2
0.95
197,255
262,152
29.0

A special dividend of ¥20 is included in the dividends per share for the year ended March 31, 2010.

Dividend Yield

Price to Earnings Ratio

Price to Book Value Ratio(%)(Times)(Times)

5.0

50

2.0

4.0

40

3.0

30

2.0

2.03

1.5

1.0
11.2

1.0

10

0

0

10/3 11/3 12/3 13/3 14/3

0.95

20
0.5

0

10/3 11/3 12/3 13/3 14/3

10/3 11/3 12/3 13/3 14/3

Annual Report 201443

Management’s Discussion and Analysis
Contents

46 Eleven-Year Summary
48 Overview
48 Analysis of Management Performance
52 Review of Operations
52 Musical Instruments
54 Audio Equipment
54 Electronic Devices
55 Others
55 Key Business Indicators

56 Analysis of Financial Position
59 Forecast for Fiscal 2014

Consolidated Financial Statements
Contents

44

Yamaha Corporation

60 Consolidated Balance Sheet
62 Consolidated Statement of Operations
63 Consolidated Statement of Comprehensive Income
64 Consolidated Statement of Changes in Net Assets
66 Consolidated Statement of Cash Flows
67 Notes to Consolidated Financial Statements
96 Independent Auditor’s ReportFiscal 2014 Summary◆  In fiscal 2014, sales increased and earnings rose substantially◆  Fourth quarter earnings were strong due to last-minute demand prior to the consumption tax rateincrease in Japan◆  Electronic devices business returned to profitability due to higher sales and structural reform effects

Consolidated Statement of Operations Summary

Consolidated Balance Sheet Summary(Millions of yen)

(Millions of yen)

Fiscal 2013

Fiscal 2013

Total assets

390,610

366,941

Net sales
Operating income
Net income

71,550

9,215
4,122

197,90289,422

110,325

229,636

82,382

Fiscal 2014

Fiscal 2014

Total assets
410,304

Net sales

438,932

73,145

262,310
Cost of sales

214,487

90,94425,994

109,984

274,843

Other expenses

175

114,461

Current income taxes

5,778

Selling, general andadministrative expenses
Operating income

Deferredincome taxes
Minority interests
in incomeNet income

121,999(3,088)229
22,898■ Current assets■ Property, plant and equipment■ Investments and other assets■ Current liabilities■ Noncurrent liabilities■ Net assets

Annual Report 201445

Eleven-Year Summary

Yamaha Corporation and consolidated subsidiaries
Years ended March 31

2004

2005

2006

2007

For the year:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Income (loss) before income taxes and minority interests
Net income (loss)
Capital expenditures
Depreciation expenses
R&D expenses
Cash flows from operating activities
Cash flows from investing activities
Free cash flow

¥539,506
337,813201,693
156,637
45,05647,45643,541
21,16017,52222,50358,349(18,775)
39,574¥534,079
335,483
198,595
162,899
35,69533,516
19,69722,702
18,95822,95339,588(12,896)
26,692¥534,084
341,816
192,267
168,132
24,13535,842
28,123
22,882
18,94424,05525,510(18,104)
7,406¥550,361
352,382
197,980
170,295
27,685
33,101
27,86625,152
19,95624,22039,732(22,427)
17,305

At year-end:
Total assets
Total current assets
Total current liabilities
Interest-bearing liabilities
Net assets*2¥508,731
201,704
123,596
48,871
259,731¥505,577
225,581
145,820
46,598275,200¥519,977
209,381
117,047
28,474
316,005¥559,031
231,033
136,656
25,551
351,398

Per share:
Net income (loss)
Net assets*2
Dividends*3¥  210.63
1,259.28
15.00¥   95.06
1,334.51
20.00¥  136.04
1,532.62
20.00¥  135.19
1,680.91
22.50

8.4
18.4
8.5
51.1
0.19
36.51
163.2
7.1

6.7
7.4
3.9
54.4
0.17
44.62
154.7
21.0

4.5
9.5
5.5
60.8
0.09
36.89
178.9
14.7

5.0
8.4
5.2
62.0
0.07
47.83
169.1
16.6

Key indicators:
Operating income to net sales
ROE (Return on equity)*2
ROA (Return on assets)
Equity ratio*2
D/E ratio (Times)
Interest coverage (Times)
Current ratio
Dividend payout ratio*1. U.S. dollar amounts are translated from yen at the rate of ¥102.92 = U.S.$1.00, the approximate rate prevailing on March 31, 2014.
*2. 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.
*3. The dividends per share from the years ended March 2008 to March 2010 include a ¥20 special dividend.

46

Yamaha Corporation

Millions of yen%

Thousands of
U.S. dollars*1

2013/2014

2014

2008

2009

2010

2011

2012

2013

2014

¥548,754
343,686
205,066
172,220
32,84562,51039,55824,394
20,28924,86537,22541,99979,225¥459,284
290,381
168,902
155,057
13,845(12,159)(20,615)
22,581
17,912
23,218(2,235)(25,999)(28,234)¥414,811
268,380
146,431
139,6026,828(201)(4,921)
14,48014,13921,73639,870(12,711)
27,159¥373,866
237,313
136,553
123,387
13,165
6,802
5,078
10,43912,814
22,416
22,646(9,740)12,906¥356,616
231,659
124,957
116,846
8,110
6,971(29,381)
11,337
11,973
22,81910,880(9,004)
1,875¥366,941
238,261
128,680
119,465
9,215
7,795
4,122
13,844
11,61322,1497,755(12,617)(4,862)¥410,304
262,310
147,994
121,999
25,99425,81822,898
10,79912,75922,561
33,213(22,950)
10,263

+11.8
+10.1
+15.0
+2.1
+182.1+231.2+455.5
-22.0
+9.9
+1.9
+328.3——$3,986,630
2,548,679
1,437,952
1,185,377
252,565
250,855
222,483
104,926
123,970219,209322,707(222,989)
99,718¥540,347
275,754
120,174
21,036
343,028¥408,974
202,097
90,05019,192
251,841¥402,152
193,260
75,18215,017
254,591¥390,852
194,71774,836
11,838245,002¥366,610
188,952
72,82911,295
206,832¥390,610
197,90271,55010,013229,636¥438,932
214,487
73,145
8,755
274,843

+12.4
+8.4
+2.2
-12.6
+19.7

$4,264,788
2,084,017
710,698
85,0662,670,453

Yen¥  191.76
1,646.44
50.00¥ (103.73)
1,262.42
42.50¥   (24.95)
1,276.35
27.50¥   25.90
1,250.06
10.00¥ (151.73)
1,052.01
10.00¥   21.29
1,171.67
10.00

6.0
11.5
7.2
62.9
0.06
34.56
229.5
26.1

3.0
(7.0)
(4.3)
60.9
0.08
26.74
224.4
—

1.6
(2.0)
(1.2)
62.6
0.06
16.88
257.1
—

3.5
2.1
1.3
61.9
0.05
40.38
260.2
38.6

2.3
(13.2)
(7.8)
55.6
0.05
31.84
259.4
—

2.5
1.9
1.1
58.1
0.04
40.64
276.6
47.0

¥ 118.26
1,403.12
27.00

U.S. dollars*1$ 1.15
13.63
0.26

%

6.3
9.2
5.5
61.9
0.03
130.19293.2
22.8

Annual Report 201447

Overview
Economic Environment
In fiscal 2014, ended March 31, 2014, the United States continued toshow signs of a modest economic recovery. The European market
was mostly weak as the mature markets of Central Europe remainedsluggish, despite an economic upswing in Southern Europe. In China,
the economy was largely sluggish on a slower economic growth rate
than in the past. In emerging markets, the economy also slowed down
due in part to the effects of the relaxation of U.S. economic stimulus
measures, even though the effects were different in each country. In
Japan, aided by the depreciation of the yen triggered by the economic
stimulus policies enacted after the new prime minister assumed officein 2012, recovery is virtually assured, especially in export-related companies. Although the second half of the fourth quarter saw last-minutedemand prior to the consumption tax rate increase, with a temporary
economic slowdown expected after the tax increase, future economic
prospects should be closely watched.

Performance Review and Japan’s Business Structural Reforms
Sales in fiscal 2014 got off to a tough start with mediocre musicalinstrument sales in every market in the first half, especially the firstquarter. Not only in developed markets, but also in China, which had
been growing at a fast pace, and in emerging markets, business performance was down year on year on a local currency basis.
Subsequently, from the second quarter, the markets of North
America and China turned toward recovery, but our performance inEurope and other markets fell below that of fiscal 2013 in real terms,
excluding currency exchange effects.
By business, in the musical instruments segment, string instrument sales were down year on year in real terms due to the productionsuspension at the guitar manufacturing plant in Indonesia caused by an
employee strike that affected product supply. However, this was offset
by increased sales of digital musical instruments including digital pianos, as well as higher sales of pianos and wind instruments. As a resultof these factors, musical instrument sales were generally fair. In audio

equipment, sales decreased in real terms due to intense competition
in audio products. The PA equipment business, for which high growth
had been anticipated, was unable to deliver expected results as adverse
conditions persisted throughout the fiscal year. This was mainly due
to slower economic growth in China and emerging markets, lower
public-sector demand, intense competition, and delays in productdevelopment. Sales of electronic devices were up on brisk demand for
geomagnetic sensors and LSIs for amusement equipment, primarily inthe first half. Sales of other businesses were mostly unchanged from theprevious fiscal year, as golf product revenue increased, but automobileinterior wood components revenue decreased.
Operating income in the musical instruments business rose
substantially year on year, from ¥6,451 million to ¥19,728 million. This
was attributable to foreign currency effects, real revenue growth,and business structural reforms such as the reduction of fixed costs.
Audio equipment profits were up, despite harsh conditions in overseas
sales. Electronic devices, which recorded an operating loss in fiscal
2013, saw a significant profit increase and returned to profitability
thanks to higher sales, business structural reforms implemented at the
production subsidiary in the previous fiscal year, consigned production to overseas suppliers, and the focusing of business resourceson competitive products. Structural reforms taken in our Japanesebusiness beginning from the previous fiscal year yielded ¥2,300 million in restructuring effects year on year including restructuring ofadministrative divisions. Foreign currency effects of ¥13,700 million,
manufacturing costs improvement of ¥2,700 million, and a decrease in
SG&A expenses of ¥1,000 million, along with other factors contributed
to substantially higher earnings.
As a result, net sales in fiscal 2014 increased 11.8% year on year, to¥410,304 million, due to higher revenue in all segments excluding theothers segment. Operating income jumped 182.1%, to ¥25,994 million,
and net income surged 455.5%, to ¥22,898 million. Depreciation of the
yen also had a positive effect on full-year earnings.

Analysis of Management Performance
Net Sales

Sales by Region¥410,304 million +11.8%

Fiscal 2014 sales in Japan increased ¥2,113 million, or 1.3%, to ¥167,903
million. In the musical instruments business, sales for pianos, digitalmusical instruments including digital pianos, and wind instruments
were firm. As a result, sales for the full fiscal year remained largely
the same year on year. Audio equipment sales were also unchanged
from the previous fiscal year thanks to firm demand for routers andconferencing systems, despite lower sales for audio products, professional audio equipment, and commercial online karaoke equipment.
Although sales of golf products, automobile interior wood components and factory automation equipment were weak, sales in the

Net sales in fiscal 2014 climbed ¥43,363 million, or 11.8%, to ¥410,304
million. This was attributable to various factors including a sales
increase of about ¥42,700 million caused by foreign currency effects
and higher sales of electronic devices.

48

Yamaha Corporation

Management’s Discussion and Analysis

resort business were flat year on year. Other businesses were sluggish
overall. In the electronic devices business, solid demand for geomagnetic sensors for smartphones and tablet PCs, as well as audio codecs
and audio and graphic LSIs for amusement equipment resulted inhigher sales in the region overall.
Outside of Japan, sales climbed ¥41,249 million, or 20.5%, to¥242,400 million. On a local currency basis, even though sales in North
America and emerging markets surpassed those of the previous year,
in Europe and China, they were largely unchanged. Nevertheless, sales
were up in each region due to substantial foreign currency effects. The
ratio of overseas sales to net sales was 4.3 percentage points higher
than in fiscal 2013, rising from 54.8% to 59.1%.
By region, sales in North America rose ¥11,479 million, or
20.8%, year on year, to ¥66,635 million. Sales of musical instruments,
excluding string and percussion instruments, increased in real terms.
However, audio equipment sales declined overall in real terms owing
to lower audio products sales from intense competition and sluggish
commercial audio equipment sales in PA equipment. If we exclude theapproximately ¥11,000 million increase from foreign currency translation effects, sales increased roughly ¥400 million, or 0.8%, in real terms.
In Europe, sales climbed ¥14,251 million, or 23.5%, to ¥74,863 million. Under adverse economic conditions, digital musical instrument

Sales by Segment(Millions of yen)

600,000

410,304

400,000■ Musical instruments■ Audio equipment■ Electronic devices■ Others■ Lifestyle-related products*2

200,0000

10/3 11/3 12/3 13/3*1 14/3
*1 Fiscal 2013 figures have been adjusted to reflect segment composition changes effectivefrom fiscal 2014.
*2 Following the handover of the lifestyle-related products business on March 31, 2010, thissegment has been excluded from consolidation from the year ended March 31, 2011.

sales increased with the release of a new flagship portable keyboard,but piano, wind instrument, string and percussion instrument sales
declined. With the positive effect of the almost ¥15,400 million inforeign currency translation, sales decreased nearly ¥1,100 million, or
1.9%, in real terms.
Sales in Asia, Oceania and other areas increased ¥15,518 million, or 18.2%, to ¥100,901 million. In China, piano sales remained
unchanged year on year in real terms due primarily to slower economic
growth, more intense competition, and increased market inventories.
However, sales of digital musical instruments and string and percussion instruments were brisk and enjoyed double-digit growth in realterms. The audio equipment market, facing generally adverse conditions, experienced declining year-on-year sales, in real terms. In otherregions, harsh conditions continued, with piano sales falling below
those of the previous year. If we exclude the approximately ¥15,200
million increase from foreign currency translation effects, in the region
as a whole, sales increased roughly ¥300 million, or 0.3%, in real terms.

Cost of Sales and Selling, General and Administrative Expenses
Cost of sales in fiscal 2014 climbed ¥24,049 million, or 10.1%, to¥262,310 million, mainly due to foreign currency effects and thereallocation of a part of selling, general and administrative expenses(SG&A) to cost of sales after reviewing the manufacturing functions of
the Company and its consolidated subsidiaries in fiscal 2014. The costof sales ratio improved one percentage point year on year to 63.9%.
Gross profit increased ¥19,313 million, or 15.0%, to ¥147,994 million. The gross profit ratio improved one percentage point, to 36.1%.
SG&A expenses increased ¥2,534 million, or 2.1%, to ¥121,999
million due to foreign currency effects and other factors, despite adecrease caused by the aforementioned reallocation. Of this amount,
advertising expenses and sales promotion expenses increased ¥2,144
million, or 13.7%, from ¥15,680 million to ¥17,825 million. Personnel
expenses also increased ¥166 million, or 0.3%, from ¥49,817 million to¥49,984 million. The ratio of SG&A expenses to net sales declined 2.9
percentage points, to 29.7%.

Major Items Included in
Selling, General and Administrative Expenses
Millions of yen

Sales by Region

13/3

%

14/3

Change(Millions of yen)

Sales commissions¥ 1,239 ¥ 1,388+12.0

600,000

Transport expenses

11,263

12,292+9.1

Advertising expenses and sales promotion
expenses

15,68017,825+13.7

Allowance for doubtful accounts

(15)

(199)

—

Provision for product warranties

426

570

+33.8

Retirement benefit expenses

4,270

3,545

–17.0

Provision for directors’ bonuses

21

53+152.4

Salaries and benefits

49,81749,984

+0.3

Rent

3,682

3,435

–6.7

Depreciation and amortization

3,156

2,712

–14.1

400,000

410,304■ Japan■ North America■ Europe■ Asia, Oceania, and other areas

200,0000

10/3 11/3 12/3 13/3 14/3

Annual Report 201449

Operating Income¥25,994 million

Extraordinary Income and Losses+182.1%

Operating income in fiscal 2014 increased ¥16,779 million, or 182.1%,
year on year, to ¥25,994 million. The primary factors behind theincrease in earnings were substantially higher profit in the mainstay
musical instruments segment, as well as return to profitability in theelectronic devices segment from the effects of structural reforms anda higher gross profit margin due to sales increases and changes tothe product mix. Earnings increased significantly year on year as thenegative factors of manufacturing cost increases (about ¥2,700 million)
caused by rising labor costs at overseas production bases and the suspension of production at the guitar manufacturing plant in Indonesia(roughly ¥800 million) were more than offset by such positive factors
as foreign currency translation effects (approximately ¥13,700 million),
structural reforms in Japanese sales and marketing and the semiconductor business (about ¥2,300 million), and a decrease in real SG&A
expenses (nearly ¥1,000 million).

Income before Income Taxes and Minority Interests

Non-Operating Income and Expenses
In fiscal 2014, non-operating income increased ¥1,198 million, or 51.9%,
year on year, from ¥2,309 million, to ¥3,507 million. Of this amount,interest and dividend income increased ¥769 million, or 57.5%, to ¥2,108
million, compared with ¥1,339 million in the previous fiscal year. Other
non-operating income increased ¥428 million, or 44.2%, year on year,
from ¥970 million to ¥1,398 million. Of this amount, patent royalty revenue of ¥353 million was recorded in fiscal 2014.
Non-operating expenses increased ¥411 million, or 14.0%, from¥2,943 million to ¥3,355 million. Of this amount, interest expenses
decreased ¥43 million, or 16.7%, from ¥259 million to ¥216 million. Sales
discounts due to early payment increased from ¥1,980 million to ¥2,404
million, an increase of ¥424 million, or 21.4%. Other non-operating
expenses rose from ¥703 million to ¥734 million, an increase of ¥30 million, or 4.3%. Of these, foreign exchange losses increased ¥69 million, or
120.0%, from ¥57 million to ¥126 million.

Operating Income

Extraordinary income in fiscal 2014 decreased ¥1,377 million, or 46.6%,
year on year, from ¥2,955 million to ¥1,578 million. Of this amount, gainon sales of investment securities decreased ¥98 million, or 9.1%, from
¥1,089 million to ¥990 million. Gain on sales of property, plant andequipment declined ¥1,270 million, or 68.4%, to ¥587 million, comparedwith ¥1,857 million in the previous fiscal year when idle assets such as
land formerly occupied by industrial plants were sold off.
Extraordinary loss was down ¥1,834 million, or 49.0%, to ¥1,906
million, compared with ¥3,740 million in the same period of theprevious fiscal year. Of this amount, in fiscal 2013, ¥3,059 million inpersonnel costs and an impairment loss on assets in connection
with the consolidation of sales bases in Japan, and personnel costsin the semiconductor business was recorded as business structuralreform expenses. In fiscal 2014, ¥869 million in personnel costs and an
impairment loss on assets in connection with the consolidation andconcentration of stores and music schools in Japan was recorded. In
addition, a ¥525 million loss caused by the suspension of production at
the Indonesian guitar manufacturing plant was recorded.

Income before income taxes and minority interests in fiscal 2014 cameto ¥25,818 million, an increase of ¥18,022 million, or 231.2%, from ¥7,795
million in the previous fiscal year. The ratio of income before income
taxes and minority interests to net sales increased from 2.1% to 6.3%.

Current Income Taxes and Deferred Income Taxes
Current income taxes and deferred income taxes in fiscal 2014
decreased ¥765 million year on year, to ¥2,690 million, compared with
¥3,455 million in the previous fiscal year. In light of recent performancetrends, as a result of conducting a careful review of the collectability ofdeferred tax assets, we recorded additional deferred tax assets in fiscal
2014. Accordingly, we recorded deferred income taxes of ¥3,088 million.

Operating Income Analysis(Billions of yen)

(Millions of yen)

30,00025,99420,00013/3
Increase in labor costat overseas factories
Impact of guitar production–0.8

Actual increase in sales+0.6

Actual decrease in SG&A
Impact of currency fluctuations

10,000Effect of structural reform
0

10/3 11/3 12/3 13/3 14/3

50

Yamaha Corporation

9.2
–2.7

+1.0
+13.7
+2.3

Improvement in manufacturing cost

+2.7

14/3

26.0

Management’s Discussion and Analysis

Minority Interests in Income
In fiscal 2014, minority interests in income increased ¥12 million, or
5.6%, year on year, from ¥217 million to ¥229 million.

Net Income¥22,898 million+455.5%

As a result of the foregoing, the Company recorded net income infiscal 2014 of ¥22,898 million, an improvement of ¥18,776 million, or
455.5%, from the ¥4,122 million in the previous fiscal year. Net income
per share was ¥118.26 compared with ¥21.29 in fiscal 2013.

Net Income (Loss) / ROE(Millions of yen)(%)

40,00020

20,00022,8989.2 100

0-20,000-10■ Net income (loss)
ROE

-20

-40,000

10/3 11/3 12/3 13/3 14/3

Fluctuation in Foreign Exchange Rates and Risk Hedging
Yamaha conducts business on a global scale with a focus on musicalinstruments and audio equipment. As such, the Company’s businessstructure is relatively vulnerable to the effects of fluctuations in foreign
currency exchange rates. The Company’s consolidated financial
statements are affected by foreign currency translation effects stemming from risks associated with currency translation and transactions
denominated in those currencies, including the U.S. dollar, the euro,
the Canadian dollar, the Australian dollar, and the Chinese yuan. Of
these risks, currency translation risks are incurred when consolidated
subsidiaries translate their financial statements for a specified periodor 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, transactionrelated risks are subject to risk hedges.
Specifically, U.S. dollar-related currency fluctuation risks arehedged by marrying risk associated with dollar receipts from export
sales with risk associated with dollar payments for imported products.
The Company hedges the value of risks associated with the euro
and the Canadian and Australian dollars by projecting related export

revenues and purchasing relevant three-month currency forwards.
Sales at overseas consolidated subsidiaries are calculated using
the average exchange rates recorded during the year. On this basis, infiscal 2014, the yen depreciated ¥17 against the U.S. dollar comparedwith the previous fiscal year, to ¥100 per U.S.$1. The year-on-year effectof this change was an increase of approximately ¥14,400 million insales. The yen depreciated by ¥27 against the euro year on year, for an
average exchange rate of ¥134 to €1, resulting in an increase of roughly¥15,400 million in sales. Overall, the net effect on sales of foreignexchange rate movements, including the upward effect of approximately ¥13,000 million in fluctuations of the yen against such othercurrencies as the Canadian and Australian dollars, was an increase ofaround ¥42,800 million compared with fiscal 2013.
In terms of operating income, for the U.S. dollar, benefits fromthe 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, thetranslation of operating income figures by overseas subsidiaries caused
income to increase by approximately ¥1,800 million. The average
settlement rate against the euro was ¥129 to €1, a depreciation of¥26, resulting in an approximately ¥9,700 million increase in operating
income. The net effect on operating income of exchange rate movements was an increase of roughly ¥13,700 million compared with theprevious fiscal year.

Dividends¥27.0
In fiscal 2014, a regular dividend of ¥27.0 was paid due to the earnings
increase.

Dividends per Share
(Yen)

50
40
30

27.0

20

■ Regular dividends■ Special dividends

100

10/3 11/3 12/3 13/3 14/3

Annual Report 201451

Review of Operations

Musical Instruments
Sales

Operating Income¥262,310 million¥19,728 million+11.4%

Fiscal 2014 Performance Overview
Sales in fiscal 2014 climbed ¥26,803 million, or 11.4%, to ¥262,310
million. Excluding increases resulting from foreign currency effects(approximately ¥27,600 million), sales decreased in real terms byroughly ¥800 million, or 0.4%, year on year.
Operating income jumped ¥13,277 million, or 205.8%, year on
year, from ¥6,451 million to ¥19,728 million.

+205.8%

Sales of string and percussion instruments declined due to mainstay guitar supply delays in each market caused by the suspension of
production due to a strike at our guitar manufacturing subsidiary inIndonesia.
Revenue from music and English language schools was down on
decreased student enrollment. Sales of music school course materials
were up but sales were down in the music entertainment business as awhole.

Review of Major Products
Piano sales in Japan surpassed those of the previous fiscal year andwere also strong in North America. In China, where growth weakened
on the back of a deteriorating market, sales were slow as a result of
more intense competition. In Europe and in other markets, adverse
conditions remained. However, piano sales, as a whole, surpassed theprevious fiscal year’s, in real terms, excluding foreign currency effects.
Digital musical instrument sales were generally firm due to thefollowing: 1) double-digit growth of digital pianos in Japan, China andother markets, in real terms, excluding foreign currency translation
effects, and higher sales in North America and Europe; and 2) strong
sales of a new flagship portable keyboard in Europe and other regions.
Wind instrument sales exceeded those of the previous fiscal year
as last-minute demand prior to the consumption tax increase in Japangenerated sales including for mid-range to high-end instruments.
North American sales were also strong.

Fiscal 2014 Sales by Product Category■ Pianos■ Digital musical instruments■ Wind instruments■ String and percussion instruments■ Music schools, etc.

Sales

Operating Income(Millions of yen)

(Millions of yen)

400,000

30,000300,000

262,310

19,72820,000200,000
10,000100,00000

10/3 11/3 12/3 13/3* 14/3

10/3 11/3 12/3 13/3* 14/3

* F iscal 2013 figures have been adjusted to reflect segment composition changes effective from fiscal 2014.

52

Yamaha Corporation

18.3%
29.3%
13.5%
8.2%
30.7%

Management’s Discussion and Analysis

Review by Region
Percentage of Sales by Region

Market Trends and Fiscal 2014 Performance

Sales by Region (Billions of yen)(Billions of yen)

Japan

41.0%

◆D
 emand for musical instruments in Japan has been declining steadily. An example of thistrend is the drastic reduction in the market for acoustic pianos over the past three decades.
The high piano ownership rate and low birthrate are both responsible for this trend.
◆ Even though the Japanese economy showed signs of recovery, the musical instruments
market was stagnant overall since sales in this market do not directly correlate to economic recovery. With the last-minute demand prior to the consumption tax increase
appearing for pianos, digital musical instruments, wind instruments, and music school
course materials in the fourth quarter, full fiscal 2014 sales were flat year on year.

150
107.6
100

50

0

North America

15.5%◆ 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 ofmusical instruments are used. Due to the impact of a record-breaking cold wave in thesecond half, economic recovery in the U.S. was stagnant until February. Nevertheless,full fiscal 2014 performance was up year on year.
◆ By product category, hybrid piano and digital piano sales were firm and wind instrument and guitar sales were strong.

80
60
40

17.3%

China

9.7%

Other Areas

16.5%◆ In Europe, musical tastes and musical instrument use vary by country. The market grewincreasingly uncertain as a whole due to the economic slowdown triggered by thedebt crisis in southern Europe in the summer of 2011, the effects of which are just now
appearing in Germany.
◆ By country and region, Spain, Italy, France and other southern European countries inparticular showed gradual signs of recovery, despite continuing difficult conditions inGermany, a core market. By product category, aside from brisk sales in the new portable
keyboard products and other digital musical instruments, sales decreased year on year,
in real terms.
◆C hina’s musical instruments market is distinctive, with acoustic piano sales accounting
for more than half of its market. However, recent trends of sales for digital musical instruments, and string and percussion instruments, though small in scale, have also begun tosee high growth rates.
◆ With slower economic growth and higher sales channel inventory due to more intensecompetition with Chinese manufacturers for pianos, the growth rate was stagnant.
However, in real terms, sales increased in the market as a whole thanks to digital piano,
portable keyboard, and other product growth.

◆ Influenced by the United States’ cutback of its economic easing policy and economic
slowdown in China, the growth rate of musical instrument markets in key emerging
countries has largely slowed.
◆ By product category, digital musical instruments, of which digital pianos grew in double
digits, and wind instruments all sustained higher year-on-year growth in real terms,
but sales of pianos and string and percussion instruments declined. For the region as awhole, sales decreased in real terms.

40.8

20
0

Europe10/3 11/3 12/3 13/3* 14/3

■ Yamaha musical instruments hardware produc(Billionsof yen)schools, etc.
■ Music

10/3 11/3 12/3 13/3* 14/3

■ Yamaha musical instruments(Billions of yen)
■ Music schools, etc.
80
60
45.5
40
20
0

10/3 11/3 12/3 13/3* 14/3

■ Yamaha musical instruments(Billions of yen)
■ Music schools, etc.
40
30

25.3

20
10
0

10/3 11/3 12/3 13/3* 14/3

■ Yamaha musical instruments(Billions of yen)
■ Music schools, etc.
50

43.2

40
30
20
10
0

10/3 11/3 12/3 13/3* 14/3

■ Yamaha musical instruments
Music schools,
etc. products
Yamaha musical■instruments
hardwareMusic schools, etc.

Annual Report 201453

Audio Equipment
Sales¥105,485 million

Operating Income+14.0%

Fiscal 2014 Performance Overview
Sales in fiscal 2014 climbed ¥12,914 million, or 14.0%,
to ¥105,485 million. Excluding increases resulting fromforeign currency effects (approximately ¥14,000 million),sales decreased in real terms by roughly ¥1,000 million,
or 1.2%, year on year.
Despite weak sales due to intensifying competition in TV peripheral and desktop audio products, salesof audio products increased year on year on the yen’s
depreciation. In PA equipment, while sales of commercial
audio equipment were slack from intensified competition for digital mixers, sales of speakers with built-in
amplifiers increased in Europe and North America,and sales of music composition interface devices andsoftware were also strong. Commercial online karaokeequipment saw revenue decrease, despite higher-thanexpected sales. Router shipments were down due tomarket inventory adjustments at the beginning of the
fiscal year, but subsequently sales increased on risingcommercial demand in Japan.

¥5,866 million+28.8%

Operating income jumped ¥1,313 million, or 28.8%,
year on year, from ¥4,553 million to ¥5,866 million.

Sales

Operating Income(Millions of yen)

(Millions of yen)

120,000

5,866

6,000

105,485

90,0004,000
60,0002,000
30,00000

10/3 11/3 12/3 13/3* 14/3

10/3 11/3 12/3 13/3* 14/3

* Fiscal 2013 figures have been adjusted to reflect segment composition changes effective from fiscal 2014.

Electronic Devices
Sales¥18,828 million

Operating Income+25.2%¥770 million—

Fiscal 2014 Performance Overview
Sales in fiscal 2014 climbed ¥3,790 million, or 25.2%,
to ¥18,828 million. Sales of geomagnetic sensors for
smartphones and tablet PCs, as well as audio codecs andaudio and graphics LSIs used in amusement equipment
increased year on year.
The electronic devices segment recovered froman operating loss of ¥2,044 million in fiscal 2013 andreturned to profitability in fiscal 2014 with operating
income ¥770 million, an improvement of ¥2,814 million.
The turnaround was attributable to higher sales, the business structural reforms and other factors.

Sales

Operating Income (Loss)(Millions of yen)

(Millions of yen)

4,000

30,00020,00018,82810,000-2,000-4,00010/3 11/3 12/3 13/3 14/3

Yamaha Corporation

770
0

0

54

2,000

10/3 11/3 12/3 13/3 14/3

Management’s Discussion and Analysis

OthersSales¥23,679 million

Operating Loss

¥370 million–0.6%

Fiscal 2014 Performance Overview
Sales in fiscal 2014 decreased ¥144 million, or 0.6%, to¥23,679 million.
Golf product revenue was up overall thanks to
the market recovery in South Korea and new productlaunches. Sales of automobile interior wood components
decreased due to lower demand caused by the absenceof car model changes in the previous fiscal year, eventhough sales to European luxury automobile makers
increased. Sales in the factory automation (FA) businesswere sluggish. This was because, despite sales growth
for leak testers, parts manufacturers, to which we deliver
our precision machines, completed their round ofinvestments on their business. In the resorts business,sales were largely unchanged, even though our plan for
attracting winter customers did not meet expectations.

—Operating income declined ¥624 million, from¥254 million to an operating loss of ¥370 million.

Sales

Operating Income (Loss)(Millions of yen)

(Millions of yen)

40,000

2,000
1,500

30,00023,6791,000

20,000500
10,000

–370

0

0

-500

10/3 11/3 12/3 13/3 14/3

10/3 11/3 12/3 13/3 14/3

Key Business Indicators
Years ended March 31

Sales
Musical 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
OthersMillions of yen

Millions of
U.S. dollars

2010

2011

2012

2013*

2014

2014

¥276,252
54,40919,74527,461¥271,124
57,023
20,61025,108¥265,089
53,165
16,23322,128¥235,507
92,571
15,03823,823¥262,310
105,485
18,82823,679$2,548.68
1,024.92
182.94230.07¥  5,117
1,405
(606)
546

¥  8,616
2,547
510
1,490

¥  7,713
2,872(2,913)437¥  6,451
4,553(2,044)254¥ 19,728
5,866
770
(370)

$  191.68
57.00
7.48
(3.60)¥ 11,663
1,348
659
284

¥  8,008
1,044
921
464

¥  8,251
1,059
736
1,290

¥  8,928
2,467
1,381
1,068

¥  6,621
2,788
216
1,172

$   64.33
27.09
2.10
11.39

¥  9,511
1,436
981
1,323

¥  9,678
1,361
900
873

¥  9,065
1,248
976
684

¥  8,597
1,592
669
754

¥  8,519
2,647
761
830

$   82.77
25.72
7.39
8.06

¥  9,910
5,605
3,630
1,661

¥ 11,557
5,752
3,931
1,174

¥ 12,704
4,898
3,979
1,237

¥ 8,088
9,219
3,374
1,466

¥  8,078
10,0113,094
1,376$   78.49
97.27
30.06
13.37

For more detailed information, please refer to Financial Data 2014.

* Fiscal 2013 figures have been adjusted to reflect segment composition changes effective from fiscal 2014.
Annual Report 201455

Analysis of Financial Position
Financing Policy

Current Assets

The Yamaha Group obtains working capital to fund its business activities and finances its business expansion primarily from cash-on-hand,operating cash flows and bank loans.
Yamaha’s basic financing policy is to procure stable, low-costfunding while preserving sufficient liquidity.
The Company tries to ensure that liquidity on hand is equivalent
to approximately one month of consolidated net sales, a figure covered by the ¥60,558 million in cash and deposits recorded as of March
31, 2014.
To promote efficient fund utilization for the entire Group, Groupfinance is carried out.
Furthermore, the Company commissions long-term preferreddebt rating assessments from credit rating agencies each year tofacilitate smooth fund procurement from capital markets. The latest
published ratings are shown below.

Current assets as of March 31, 2014 totaled ¥214,487 million, up ¥16,584
million, or 8.4%, from the end of the previous fiscal year.
This was attributable to increases in cash and deposits, notes andaccounts receivable–trade, inventories and deferred tax assets. Cashand deposits increased ¥9,112 million, or 17.7%, year on year, to ¥60,558
million. Notes and accounts receivable–trade (after deduction ofallowance for doubtful accounts) increased ¥5,729 million, or 11.2%, to¥56,710 million. Inventories increased ¥676 million, or 0.8%, to ¥82,690
million. This figure included an increase of roughly ¥5,000 million
due to currency translation effects. Excluding this factor, inventories
decreased by about ¥4,300 million, or 5.3%, in real terms. Deferred tax
assets increased ¥2,536 million, or 113.2%, to ¥4,778 million. Other current assets declined ¥1,220 million, or 11.1%, to ¥9,749 million. The ratioof current assets to current liabilities at fiscal 2014 year-end was 293%,
compared with 277% from a year earlier, sustaining liquidity at a highlevel during fiscal 2014.

Credit Ratings
Long-term preferreddebt rating

Rating agency

Rating and Investment Information, Inc. (R&I)

A (stable)

Japan Credit Rating Agency, Ltd. (JCR)

A+ (stable)

Property, Plant and Equipment
Property, plant and equipment as of March 31, 2014 were ¥109,984
million, down ¥341 million, or 0.3%, year on year. Construction inprogress was ¥1,768 million, down ¥336 million.

* As of March 31, 2014

Investments and Other Assets
Total Assets¥438,932 million +12.4%
Total assets as of March 31, 2014 amounted to ¥438,932 million, an
increase of ¥48,322 million, or 12.4%, from the previous fiscal yearend figure of ¥390,610 million. Of this amount, current assets totaled¥214,487 million, up ¥16,584 million, or 8.4%, from the previous
fiscal year-end figure of ¥197,902 million. Noncurrent assets came to¥224,445 million, an increase of ¥31,737 million, or 16.5%, from theprevious fiscal year-end figure of ¥192,707 million.

(%)

15

600,000
438,932
400,000

10

200,000

5.5 5

0

0

-200,000-5-10-400,000

10/3 11/3 12/3 13/3 14/3

56

Yamaha Corporation

Total Liabilities¥164,089 million+1.9%

Total liabilities as of March 31, 2014 came to ¥164,089 million, an
increase of ¥3,115 million, or 1.9%, from the previous year-end figure of¥160,973 million. Current liabilities came to ¥73,145 million, an increaseof ¥1,594 million, or 2.2%, from the previous fiscal year-end figure of¥71,550 million. Noncurrent liabilities increased ¥1,521 million, or 1.7%,
to ¥90,944 million from ¥89,422 million.

Total Assets / ROA(Millions of yen)

Investments and other assets as of March 31, 2014 amounted to¥114,461 million, a year-on-year increase of ¥32,078 million, or 38.9%.
Investment securities amounted to ¥103,170 million, up ¥31,602
million, or 44.2%. This was mainly due to increases in value of availablefor-sale securities. Deferred tax assets increased ¥227 million, or 17.6%,
to ¥1,517 million. Intangible assets as of March 31, 2014 increased ¥82
million, or 2.6% year on year, to ¥3,307 million.

■ Total assets
ROA

Management’s Discussion and Analysis

Current Liabilities

Net Interest-Bearing Liabilities

Current liabilities as of March 31, 2014 came to ¥73,145 million, up¥1,594 million, or 2.2%, year on year. This was due to increases in notes
and accounts payable–trade, accounts payable–other and accrued
expenses, and income taxes payable, which outweighed decreases inshort-term loans payable and the current portion of long-term loans
payable. Notes and accounts payable–trade were ¥21,595 million, an
increase of ¥1,255 million, or 6.2%, from the previous fiscal year-end
figure. Accounts payable–other and accrued expenses amounted to¥31,805 million, up ¥495 million, or 1.6%, year on year. Income taxes
payable rose ¥1,203 million, or 76.1%, to ¥2,786 million. Short-term loans
payable declined ¥769 million, or 8.2%, to ¥8,590 million, and the current
portion of long-term loans payable decreased ¥453 million, or 93.3%, to¥32 million.

As of March 31, 2014, long- and short-term loans payable, which areinterest-bearing liabilities, totaled ¥8,756 million. Cash and deposits
were ¥60,558 million, resulting in net cash and deposits, less long- andshort-term loans payable, of ¥51,801 million, a ¥1,036 million increase
compared with ¥41,431 million at the previous fiscal year-end.

Noncurrent Liabilities
Noncurrent liabilities as of March 31, 2014 increased ¥1,521 million,
or 1.7% year on year, to ¥90,944 million. This was due to decreases inlong-term loans payable, deferred tax liabilities for land revaluation,
long-term deposits received, and net defined benefit liabilities, whichwere outweighed by an increase in deferred tax liabilities. Long-termloans payable amounted to ¥133 million, down ¥32 million, or 19.8%.
Deferred tax liabilities for land revaluation decreased ¥23 million, or
0.2%, to ¥12,415 million. Deferred tax liabilities increased ¥5,567 million, or 30.1%, to ¥24,059 million.
Due to the early adoption of the revised Accounting Standard
for Retirement Benefits, the accounting item “Provision for retirement
benefits” was changed to “Net defined benefit liabilities.” Further, due
to a decrease of ¥7,062 million in the beginning of fiscal year balance
resulting from a change in the method for calculating retirement
benefit obligations and to an increase of ¥3,871 million in the fiscal
year-end balance from the recording of unrecognized liabilities, net
defined benefit liabilities decreased ¥4,698 million, or 11.4%, to ¥36,450
million. Long-term deposits received decreased ¥106 million, or 0.7%,
to ¥15,339 million following the repayment of deposits received fromresort memberships.

Net Assets¥274,843 million +19.7%
Total assets as of March 31, 2014 amounted to ¥274,843 million, an
increase of ¥45,206 million, or 19.7%, from the previous fiscal year-end
figure of ¥229,636 million. This was the result of an increase in retained
earnings due to the recording of net income in fiscal 2014, a higher
valuation difference on available-for-sale securities, and changes inforeign currency translation adjustments. The loss recorded under foreign currency translation adjustments was reduced by ¥10,096 million
year on year. Retained earnings increased ¥27,864 million, or 19.8%, to¥168,338 million, reflecting net income of ¥22,898 million, effects fromthe early adoption of the revised Accounting Standard for Retirement
Benefits of ¥7,062 million, dividend payments of ¥2,420 million, andother factors. Valuation difference on available-for-sale securities
increased ¥10,730 million, or 30.8%, to ¥45,540 million, reflecting a risein the value of securities held. Revaluation reserve for land decreased¥44 million, or 0.3%, to ¥17,139 million.
Minority interests increased ¥396 million, or 14.4%, year on year,to ¥3,161 million.
The equity ratio was 61.9% as of March 31, 2014, a 3.8 percentage point increase, from 58.1% at the previous fiscal year-end.
Return on equity (ROE) was 9.2%, a 7.3 percentage point increase,from 1.9%.

Interest-Bearing Liabilities / Debt to Equity Ratio

Net Assets / Equity Ratio(Millions of yen)(Times)(Millions of yen)(%)

30,0000.10

400,00080
61.9

300,000

60
274,843

200,000

40

8,755

100,000

20

0

0

20,0000.05
10,0000.03

010/3 11/3 12/3 13/3 14/3

■ Interest-bearing liabilities
Debt to equity ratio■ Net assets
Equity ratio

0

10/3 11/3 12/3 13/3 14/3

Annual Report 201457

Cash FlowsNet cash provided by operating activities in fiscal 2014 was ¥33,213
million, in contrast to net cash of ¥7,755 million provided in the previous fiscal year. This represented a ¥25,458 million increase in cash
provided.
Net cash used in investing activities was ¥22,950 million, in
contrast to net cash of ¥12,617 million used in the previous fiscal year.
This represented a ¥10,332 million increase in cash used, reflecting
increased purchases of investment securities.
Net cash used in financing activities was ¥4,745 million, in
contrast to net cash of ¥5,536 million used in the previous fiscal year.
This represented a ¥791 million decrease in cash used, reflecting thedecrease in repayment of loans.
As a result, the fiscal 2014 year-end balance of cash and cash
equivalents amounted to ¥57,524 million, representing a year-on-yearincrease of ¥8,060 million.

Capital expenditures in the musical instruments segment decreased¥2,306 million, or 25.8%, year on year, from ¥8,927 million to ¥6,621
million. In the audio equipment segment, capital expenditures wereup ¥321 million, or 13.0%, from ¥2,467 million to ¥2,788 million. In theelectronic devices segment, capital expenditures were down ¥1,165
million, or 84.3%, year on year, from ¥1,381 million to ¥216 million.
Capital expenditures increased in the others segment, rising ¥104 million, or 9.8%, from ¥1,068 million to ¥1,172 million.
Depreciation and amortization amounted to ¥12,759 million, an
increase of ¥1,146 million, or 9.9%, from ¥11,613 million in fiscal 2013.

R&D Expenses

Capital expenditures in fiscal 2014 came to ¥10,799 million, a decreaseof ¥3,045 million, or 22.0%, from ¥13,844 in the previous fiscal year.

R&D expenses in fiscal 2014 increased ¥412 million, or 1.9%, from
¥22,149 million to ¥22,561 million. The ratio of R&D expenses to net
sales was 0.5 percentage points lower than in fiscal 2013, falling from
6.0%, to 5.5%.
Most of this spending was directed at product development
primarily in digital musical instruments, professional audio equipment, communications equipment and semiconductor businesses.
Specifically, the spending supported elemental technology researchand product development for hybrid pianos that blend acoustic anddigital technologies, development efforts to make digital musicalinstruments more competitive, development of new commercial audio
equipment for the professional audio equipment market leveraging
digital network technology, and development of products to expand
the audio equipment category, and new products such as commercial
online karaoke equipment and routers. In semiconductors, spending
was used for development of high value-added analog and hybrid
semiconductors and development of geomagnetic sensors for mobile
phones, new amusement equipment and smartphones.
R&D budgets also funded programs to research and develop
basic sound- and music-related technologies (sound sources, voicesynthesis, architectural acoustics, etc.), and acoustic materials. New
devices such as speakers and sensors, as well as interfaces were also
researched.

Capital Expenditures / Depreciation and Amortization

R&D Expenses(Millions of yen)

(Millions of yen)

30,00030,00020,00020,000Free Cash Flow
(Millions of yen)

60,00030,00010,2630-30,0000

10/3 11/3 12/3 13/3 14/3

Capital Expenditures/Depreciation and Amortization

22,561

10,79910,00012,7590amortization

10,0000

10/3 11/3 12/3 13/3 14/3

58

■ Capital expenditures■ Depreciation andYamaha Corporation

10/3 11/3 12/3 13/3 14/3

Management’s Discussion and Analysis

Forecast for Fiscal 2015
Performance Forecast
Net Sales¥430,000 million+4.8%

Operating Income¥29,000 million+11.6%Net Income¥21,000 million–8.3%

In fiscal 2015, world affairs were in a state of rising tensions caused bysituation in the Ukraine among other factors.
Nevertheless, we knew that the outlook for North America wassteady economic recovery, despite our concerns over the economic
effects of fiscal austerity. In Europe, signs of recovery from the previous year have emerged and solid performance is expected. Despite aslowdown in the first quarter of the previous fiscal year, China is
gradually showing signs of recovery and is expected to remain
relatively stable. Other emerging markets appear to need more time tofully recover, though the situation differs depending on the region, butwill show steady growth overall. In addition to the future outlook forthis market, the yen is expected to remain at current levels, so productexports should be mostly positive, even with the risk of sharply risingmaterials and parts procurement costs.
By business segment, in the musical instruments segment, we
will continue to upgrade our sales network in China and other emerging markets and aggressively expand business. Above all, in China,
we will respond flexibly to the changing market, which is beginningto show sales growth for various products including digital musicalinstruments and wind instruments. Also, in developed markets suchas North America, we will expand sales by taking a flexible approachto market changes while maximizing the impact of new productlaunches. We will also create synergies with Line 6, Inc., a manufacturerof guitar peripherals that was made a wholly owned subsidiary in fiscal
2014. Through these efforts, we expect to increase sales and earnings
year on year in the entire musical instruments segment.
The audio equipment business will seek growth by launchingproducts that meet existing demand trends for audio products. In
professional audio equipment, having missed an opportunity toincrease expected sales from new product launches in fiscal 2014 due
to product development delays, we have set our sights on increasing
sales by improving our development capabilities, speeding up operations, expanding our product lineup and fully entering the commercial
installed sound market. In the commercial router business, we willtake advantage of our excellent reputation in the market and expand

our product domain for switches, access points, and other products.
We also plan to increase sales of Information and Communication
Technology (ICT) devices as a whole by bringing microphone speakers
for Web conferencing into the audio communication device business.
In the audio equipment segment, we have brought Revolabs,
Inc., a manufacturer of conference microphones with high technology
in the area of digital wireless communications, under our corporate
umbrella. This move will help us expand sales by effectively sharing
product lines and leveraging sales channels while pursuing synergistic
effects in product development.
In the electronic devices segment, we will maintain and improve
our earning capacity, which enabled a return to profitability in fiscal
2014, and aggressively propose to customers products with promising growth potential such as LSIs for amusement equipment andgeomagnetic sensors.
In the others segment, with the Japanese market for golf products remaining adverse, we will work to expand sales by releasing new
products. In parallel with this effort, we will develop overseas markets
including South Korea, a market of continued focus, and China, amarket with high growth potential. In the automobile interior woodcomponents business, with the aim of raising our manufacturing capabilities by reducing lead time, we will work to achieve a stable supply
to customers. In the resort business, we expect to increase revenue bycontinuing to take stronger measures to attract customers during thewinter season. In the others segment as a whole, sales are expected toincrease.
As a result of the foregoing, exchange rate assumptions for fiscal
2015 are: JP¥100 per US$1, JP¥135 per €1, JP¥90 per AU$1, JP¥95 per
CA$1, and JP¥15.9 per CN¥1. In fiscal 2015, we forecast increases inboth sales and operating income over fiscal 2014.

Capital Expenditures Forecast
In fiscal 2015, capital expenditures are expected to rise. Major items
contributing to the rise will be regular investment in molds for production of new products, investment for facility upgrade and refurbishment, investment related to sales and marketing, R&D investment, andplant rationalization-related expenses. Depreciation and amortization
expenses are expected to be in line with those of fiscal 2014.

Profit Distribution Policy (Dividend Forecast)
Yamaha’s basic policy is to distribute profits in line with consolidated
performance, while also making suitable investments and setting
aside an appropriate amount of retained earnings to strengthen the
Company’s business foundation through investments in R&D, sales
and capital expenditures, based on prospective levels of mediumterm consolidated earnings. Specifically, seeking to return profits toshareholders, Yamaha has set a goal of 30% or more for its consolidated dividend payout ratio based on continuous and stable dividend
payments. Under this policy, Yamaha plans to pay a total dividend of¥27.0 per share for fiscal 2015, including an interim dividend paymentof ¥13.5 per share.

Annual Report 201459

Consolidated Balance Sheet
Thousands of
U.S. dollars (Note 5)

Millions of yen

Yamaha Corporation and its consolidated subsidiaries

2014

2013

2014

Current assets:
Cash and deposits (Notes 21 and 23)
Notes and accounts receivable — trade (Notes 23 and 31)
Short-term investment securities (Notes 23, 24 and 30)
Inventories (Note 10)
Deferred tax assets (Note 27)
Other
Allowance for doubtful accounts
Total current assets¥ 60,558
57,890—82,6904,778
9,749(1,179)214,487¥ 51,445
52,069250
82,014
2,241
10,969(1,088)
197,902$  588,399
562,476—
803,440
46,424
94,724(11,455)
2,084,017

Property, plant and equipment,
net of accumulated depreciation (Notes 6, 14 and 30):
Buildings and structures, net
Machinery, equipment and vehicles, net
Land (Note 9)
Leased assets, net
Construction in progress
Total property, plant and equipment, net of accumulated depreciation

36,23822,06649,595315
1,768
109,984

36,845
21,40549,634336
2,104
110,325

352,099
214,400
481,879
3,061
17,1781,068,636

Investments and other assets:
Investment securities (Notes 7, 23, 24 and 30)
Long-term loans receivable
Net defined benefit assets (Notes 2 and 26)
Deferred tax assets (Note 27)
Lease and guarantee deposits
Goodwill
Other
Allowance for doubtful accounts
Total investments and other assets

103,170
156
4
1,517
4,730
279
4,735
(133)
114,461

71,568
365
—
1,290
5,019
356
4,374
(591)
82,382

1,002,429
1,516
39
14,74045,9582,711
46,007(1,292)
1,112,136

Total assets¥438,932¥390,610$4,264,788

At March 31, 2014

AssetsSee Notes to Consolidated Financial Statements.

60

Yamaha Corporation

Thousands of
U.S. dollars (Note 5)

Millions of yen

2014

2013

2014

Current liabilities:
Notes and accounts payable — trade (Notes 23 and 31)
Short-term loans payable (Notes 23 and 30)
Current portion of long-term loans payable (Note 30)
Accounts payable — other and accrued expenses (Note 23)
Income taxes payable
Advances received (Note 30)
Deferred tax liabilities (Note 27)
Provision for product warranties
Provision for directors’ bonuses
Other
Total current liabilities¥21,595
8,590
32
31,805
2,786
—
7
2,539
53
5,733
73,145¥ 20,339
9,360
486
31,309
1,582
14
625
2,596
21
5,213
71,550$209,823
83,463311
309,026
27,070—68
24,670515
55,703
710,698

Noncurrent liabilities:
Long-term loans payable (Notes 23 and 30)
Deferred tax liabilities (Note 27)
Deferred tax liabilities for land revaluation (Note 9)
Provision for retirement benefits (Note 26)
Net defined benefit liabilities (Notes 2 and 26)
Long-term deposits received (Note 23)
Other
Total noncurrent liabilities

133
24,05912,415—36,45015,3392,547
90,944165
18,491
12,43941,148—15,445
1,732
89,422

1,292
233,764
120,628—
354,159
149,038
24,747
883,638

28,534—40,054
168,338(3,705)233,222—
28,53440,054140,473(3,699)205,363

277,244—
389,176
1,635,620(35,999)
2,266,051

45,540(101)
17,139(20,347)(3,771)
38,4593,161
274,843¥438,932

34,810(41)
17,184(30,443)—
21,5082,764
229,636¥390,610

442,480(981)
166,527(197,697)(36,640)
373,679
30,7132,670,453$4,264,788

Liabilities

Contingent liabilities (Note 8)

Net Assets
Shareholders’ equity (Note 20):
Capital stock:
Authorized — 700,000,000 shares;
Issued 2014 — 197,255,025 shares2013 — 197,255,025 shares
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities
Unrealized loss from hedging instruments
Revaluation reserve for land (Note 9)
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

Annual Report 201461

Consolidated Statement of Operations

Yamaha Corporation and its consolidated subsidiaries
Year ended March 31, 2014

Net sales
Cost of sales (Notes 4, 10 and 12)Gross profit
Selling, general and administrative expenses (Notes 4, 11 and 12)
Operating income
Other income (expenses):
Interest and dividend income
Patent royalty revenue
Interest expenses
Sales discounts
Gain on sales or disposal of property,
plant and equipment, net (Note 13)
Gain on sales of investment securities
Loss on impairment of fixed assets (Note 14)
Business structural reform expenses (Note 15)
Loss on closure of operations (Note 16)
Other, net (Note 17)

Income before income taxes and minority interests
Income taxes (Note 27):
Current
DeferredIncome before minority interests
Minority interests in income
Net income
See Notes to Consolidated Financial Statements.

62

Yamaha Corporation

Thousands of
U.S. dollars (Note 5)

Millions of yen

2014¥410,304
262,310
147,994
121,999
25,9942013¥366,941
238,261
128,680
119,465
9,215

2014$3,986,630
2,548,679
1,437,952
1,185,377
252,565

2,108
353
(216)
(2,404)

1,339
—
(259)
(1,980)20,482
3,430(2,099)(23,358)

285
990
(192)
(869)
(525)
293
(175)

1,604
1,089
(293)
(3,059)—139(1,419)

2,769
9,619
(1,866)(8,443)(5,101)
2,847(1,700)25,818

7,795

250,855

5,778(3,088)2,690
23,128229¥ 22,898

3,635
(179)
3,455
4,339
217
¥  4,122

56,141(30,004)
26,137
224,718
2,225$  222,483

Consolidated Statement of Comprehensive Income

Yamaha Corporation and its consolidated subsidiaries
Year ended March 31, 2014

Income before minority interests
Other comprehensive income:Unrealized holding gain on securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliates accounted
for using equity method
Total other comprehensive income (Note 18)
Comprehensive income(Composition)
Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

Thousands of
U.S. dollars (Note 5)

Millions of yen

2014¥23,1282013¥ 4,3392014$224,718

10,711(59)
10,481
6,944

7,474
326
13,607—104,071(573)
101,836
67,470(5)
28,073¥51,201021,408¥25,747(49)
272,765$497,483¥50,717¥484¥25,091¥656$492,781$4,703

See Notes to Consolidated Financial Statements.

Annual Report 201463

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

Yamaha Corporation andits consolidated subsidiaries
Year ended March 31, 2014

Balance as of April 1, 2012
Cumulative effects of changes
in accounting policies
Balance at the beginning of the period
after adjustments
Changes of items during the period:
Dividends from surplus (Note 19)
Net income
Change in the scope of consolidation
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes of items other thanshareholders’ equity
Total changes of items during the period
Balance as of April 1, 2013
Cumulative effects of changes
in accounting policies
Balance at the beginning of the period
after adjustments
Changes of items during the period:
Dividends from surplus (Note 19)
Net income
Change in the scope of consolidation
Change in the scope of equity method
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes of items other thanshareholders’ equity
Total changes of items during the period
Balance as of March 31, 201464

Yamaha Corporation

Capitalstock(Note 19)

CapitalsurplusRetainedearnings(Notes 2
and 19)

Accumulated other comprehensive income

RemeasurTotal
ements of accumulated
Total
Unrealized
definedothershareholders’ Unrealized gain (loss)
Foreign
benefitcomprehensive
equityTreasury
holdingfromplansincome
Revaluation currency
stock(Notes 2(Notes 2(Notes 2
gain onhedging reserve for translation(Note 19)
and 19)and 19)securities instruments
adjustments and 19)
land¥28,534 ¥40,054 ¥138,152 ¥(3,690) ¥203,050 ¥27,337———

28,53440,054—¥(367)¥17,304 ¥(43,611) ¥   —¥   662

Minority
interests

Total
net assets¥3,118 ¥206,832

—

—

—

—

—

—

—

—

—

138,152(3,690) 203,050

27,337(367)

17,304(43,611)

—

662

3,118

206,832(1,936)
4,122
14
120

(1,936)
4,122
14
120
(9)

(9)

(1,936)
4,122
14
120
(9)

7,472
—
—
2,321
(9)
2,312
7,472
¥28,534 ¥40,054 ¥140,473 ¥(3,699) ¥205,363 ¥34,810

326
326¥ (41)(120) 13,167—(120) 13,167—¥17,184 ¥(30,443) ¥   —

—

—

7,062

—

7,062

—

—

—

28,53440,054

147,536(3,699)212,425

34,810(41)

17,184(5)(2,420)22,898
(203)
482
44
(5)

(2,420)22,898
(203)
482
44

10,730——20,802(5) 20,796 10,730¥28,534 ¥40,054 ¥168,338 ¥(3,705) ¥233,222 ¥45,540—

20,845
20,845¥21,508(353) 20,492(353) 22,804¥2,764 ¥229,636(10,716)(10,716)—(3,654)(30,443) (10,716)

10,792

2,764

225,982(2,420)22,898
(203)
482
44
(5)

(59)
(59)
¥(101)(44) 10,096
6,944(44) 10,096
6,944¥17,139 ¥(20,347) ¥ (3,771)

27,667
27,667¥38,459396
28,064396
48,860¥3,161 ¥274,843

Thousands of U.S. dollars (Note 5)
Shareholders’ equity

Capitalstock(Note 19)

CapitalsurplusRetainedearnings(Notes 2
and 19)

Accumulated other comprehensive income

RemeasurTotal
ements of accumulated
Total
Unrealized
definedothershareholders’ Unrealized gain (loss)
Foreign
benefitcomprehensive
equityTreasury
holdingfromplansincome
Revaluation currency
stock(Notes 2(Notes 2(Notes 2
gain onhedging reserve for translation(Note 19)
and 19)and 19)securities instruments
adjustments and 19)
land

Balance as of April 1, 2013
$277,244 $389,176 $1,364,876 $(35,941) $1,995,365 $338,224
Cumulative effects of changes
in accounting policies—— 68,616—
68,616—
Balance at the beginning of the period
after adjustments
277,244 389,176 1,433,502 (35,941) 2,063,982 338,224
Changes of items during the period:
Dividends from surplus (Note 19)(23,513)(23,513)
Net income
222,483
222,483
Change in the scope of consolidation(1,972)(1,972)
Change in the scope of equity method
4,683
4,683
Reversal of revaluation reserve for land
428
428
Purchase of treasury stock
(49)
(49)
Net changes of items other thanshareholders’ equity
104,256
Total changes of items during the period—— 202,118(49) 202,060 104,256
Balance as of March 31, 2014
$277,244 $389,176 $1,635,620 $(35,999) $2,266,051 $442,480$(398) $166,965 $(295,793) $    —
—

—

(398)

166,965—$208,978(104,120)(104,120)(295,793) (104,120)

104,858

Minority
interests

Total
net assets$26,856 $2,231,209—(35,503)

26,856 2,195,705(23,513)
222,483(1,972)
4,683
428
(49)

(573)
(428) 98,096
67,470(573)(428) 98,096
67,470$(981) $166,527 $(197,697) $(36,640)

268,820
268,820$373,679

3,848 272,678
3,848 474,738$30,713 $2,670,453

See Notes to Consolidated Financial Statements.

Annual Report 201465

Consolidated Statement of Cash Flows

Year ended March 31, 2014

Operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Decrease in allowance for doubtful accounts
Loss on valuation of investments in capital of subsidiaries and affiliates
Gain on liquidation of subsidiaries
Loss on valuation of investment securities
Gain on sales of investment securities
Decrease in provision for retirement benefits
Decrease in net defined benefit liabilities
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Equity in (earnings) losses of affiliates
Gain on sales or disposal of property, plant and equipment, net
Business structural reform expenses
Loss on closure of operations
Increase in notes and accounts receivable — trade
Decrease 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 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
Payments for purchase of stocks of subsidiaries and affiliates
Proceeds from sales of stocks of subsidiaries and affiliates
Payments for investments in capital of subsidiaries and affiliates
Proceeds from liquidation of subsidiaries and affiliates
Other, net
Net cash used in investing activities
Financing activities:
Net decrease in short-term loans payable
Repayment of long-term loans payable
Proceeds from deposits received from membership
Repayments for deposits received from membership
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) 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 of subsidiaries from consolidation
Cash and cash equivalents at end of period (Note 21)
See Notes to Consolidated Financial Statements.

66

Yamaha Corporation

Thousands of
U.S. dollars (Note 5)

Millions of yen

Yamaha Corporation and its consolidated subsidiaries

2014

2013

2014

¥25,818
12,759
192
95
(474)
—
—
16
(990)
—
(1,691)(2,108)
216
47
(20)
(285)
869
525
(2,372)
4,783(304)(1,311)35,764
2,125
(220)
(546)
(3,909)33,213¥ 7,795
11,613
293
105
(355)
102
(8)
32
(1,089)(771)—(1,339)259(181)
0(1,604)
3,059—(2,178)2,004(4,464)(630)
12,643
1,327(244)(1,940)(4,030)7,755$250,855
123,970
1,866
923(4,606)——155(9,619)—(16,430)(20,482)
2,099
457
(194)
(2,769)8,443
5,101(23,047)
46,473(2,954)(12,738)
347,493
20,647(2,138)(5,305)(37,981)322,707(649)(11,248)
1,177(15,632)
3,380
—
—
—
—
22
(22,950)(1,043)(13,115)
2,680
(150)
283
(675)
5
(601)
11
(11)
(12,617)(6,306)(109,289)
11,436(151,885)
32,841————
214(222,989)(1,627)
(486)
176
(290)
(5)
(2,420)(87)(4)(4,745)2,323
7,841
49,464231(12)¥57,524(2,336)
(998)
265
(337)
(9)
(1,936)(180)(3)(5,536)
3,825(6,573)55,919130(12)¥49,464(15,808)(4,722)
1,710(2,818)(49)(23,513)(845)(39)(46,104)
22,571
76,185
480,606
2,244(117)$558,920

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 acceptedin Japan, and its overseas subsidiaries maintain their books of accountin 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), theaccompanying consolidated financial statements have been preparedby using the accounts of overseas consolidated subsidiaries preparedin accordance with 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 notnecessarily agree with the sums of the individual amounts.

(b) Basis of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the parent company and all subsidiaries over which itexerts substantial control either through majority ownership of voting
stock and/or by other means. As of March 31, 2014, the numbers ofconsolidated subsidiaries and subsidiaries and affiliates accounted forby the equity method were 62 and 2 (72 and 1 in 2013). During the year
ended March 31, 2014, one overseas subsidiary was included in the scopeof consolidation. Further, 11 domestic subsidiaries were excluded fromthe scope of consolidation. Yamaha Music India Pvt. Ltd. was includedin the scope of consolidation due to its increased significance. Yamaha
Credit Corporation was excluded from the scope of consolidation due
to its decreased significance. Yamaha Electronics Marketing Corporation
and Yamaha Music Lease Corporation were excluded from the scope of
consolidation due to a merger with Yamaha Music Trading Corporation.
Additionally, Yamaha Music Trading Corporation changed its nameto Yamaha Music Japan Co., Ltd. Further, Yamaha Music Tokyo Co.,
Ltd., Yamaha Music Hokkaido Co., Ltd., Yamaha Music Tohoku Co., Ltd.,
Yamaha Music Kanto Co., Ltd., Yamaha Music Tokai Co., Ltd., YamahaMusic Chushikoku Co., Ltd., and Yamaha Music Kyushu Co., Ltd. were
excluded from the scope of consolidation due to a merger with YamahaMusic Osaka Co., Ltd. Additionally, Yamaha Music Osaka Co., Ltd. changed

its name to Yamaha Music Retailing Co., Ltd. Yamaha A&R, Inc. was
excluded from the scope of consolidation due to a merger with YamahaMusic Entertainment Holdings, Inc.
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 are accounted for by theequity method. Investments in two affiliates were accounted for by theequity method for the year ended March 31, 2014 (one in 2013). JEUGIA
Corporation was included in the scope of the equity method due toits increased significance. Investments in unconsolidated affiliates notaccounted for by the equity method are carried at cost.
Ten overseas subsidiaries have a financial closing date as ofDecember 31, which differs from the financial closing date of the Company;
however, financial statements as of March 31 are prepared and reported bythese overseas subsidiaries for consolidation purposes.

(c) Securities
Securities owned by the Yamaha Group have been classified into two
categories, held-to-maturity and available-for-sale, in accordance withthe 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 are carried at fair value withany changes in unrealized holding gain or loss, net of the applicable
income taxes, included directly in net assets. Nonmarketable securities
classified as available-for-sale securities are carried at cost. If the market
value of marketable securities classified as available-for-sale securities
declines significantly, such securities are written down to their respective fair value, thus establishing a new cost basis. The amount of eachwrite-down 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. Cost of
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. Inventories of theCompany’s overseas consolidated subsidiaries are stated principallyat the lower of cost or market, cost being determined by 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 straight-line method, at
rates based on the estimated useful lives of the respective assets.
Estimated useful lives:
Annual Report 201467

		
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 calculated by thestraight-line method over the lease period with the residual value at zero.

(f) Allowance for doubtful accounts
To properly evaluate accounts receivable, the allowance for doubtful
accounts is provided at an amount sufficient to cover possible losseson the collection of receivables. The amount of the provision is basedon the historical experience with write-offs for normal receivables
and individual estimation of the collectability of receivables due from
specific companies as in financial difficulties.

(g) Provision for product warranties
Provision for product warranties is provided to cover the cost of customers’ claims relating to after-sales service and repairs. The amountof this provision is based on a percentage of the amount or volume
of sales after considering the historical experience with repairs of
products under warranty or individual estimation.

(h) Provision for directors’ bonuses
Provision for directors’ bonuses is provided at the estimated amountfor the payment of bonuses to directors.

(i) 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, 2014.
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 in which
the gain or loss is recognized, primarily by the straight-line method,over a period (10 years) that is shorter than the average remaining
years of service of the employees participating in the plans.

(j) Construction contracts
For the construction work in progress, if the outcome of the construction activity during the course of the construction is deemed certain,
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 the percentage of completion method is based on the ratio of costs incurred
to the estimated total cost.

(k) Criteria for presentation of finance leases (as lessor)
Finance lease transactions where the Company or a consolidated

68

Yamaha Corporation

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 arerecognized at the time the lease fees are received.

(l) 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 other income or
expense. Assets and liabilities of the overseas consolidated subsidiaries
are translated at the exchange rates in effect at each balance sheet
date. The components of net assets excluding translation adjustment
and minority interests are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of
exchange in effect during the year. Differences arising from translation
are presented as translation adjustments and minority interests in theaccompanying consolidated balance sheet.

(m) Derivative financial instruments
The Company has entered into various derivative transactions in orderto manage certain risk arising from adverse fluctuations in foreign
currency exchange rates. Derivative financial instruments are carried atfair value with changes in unrealized gain or loss charged or credited
to operations, except for those which meet the criteria for deferral
hedge accounting under which unrealized gain or loss is deferred as acomponent 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 and currency options, within amounts necessary, in accordance with internal
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 and therisk of changes in cash flows is completely avoided, forward foreignexchange contracts related to receivables and payables denominatedin foreign currencies are accounted for by the allocation method
whereby translation differences are allocated into the hedged items.
See Note 23.

(n) Cash and cash equivalents
Cash on hand and in banks, and short-term investments with amaturity of three months or less when purchased which can easily beconverted 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 determinedbased on the differences between financial reporting and the tax basesof 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.

2 Changes in Accounting Principles
The Company began applying the “Accounting Standard for
Retirement Benefits” (ASBJ Statement No. 26, May 17, 2012, hereinafter referred to as “Retirement Benefits Accounting Standard”) and“Guidance on the Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25, May 17, 2012, hereinafter “Guidance on Retirement
Benefits”) from this fiscal year after these standards became applicablefor fiscal years beginning on April 1, 2013. Consequently, the Company
recorded the amount of retirement benefit obligations less pension
assets as net defined benefit liabilities, and recorded unrecognizedactuarial differences and unrecognized prior service costs in net
defined benefit liabilities. In addition, the Company changed themethod for calculating retirement benefit obligations and service costs
and changed from the straight-line method for attributing benefits toyears of service to the benefit formula basis, and it also changed thediscount rate.

With regard to the application of Retirement Benefits AccountingStandard, in accordance with the transitional treatment stipulated in
Section 37 of Retirement Benefits Accounting Standard, the Company
recorded the amount of retirement benefit obligations less pension
assets as net defined benefit liabilities at the beginning of the fiscal
year (April 1, 2013). The resulting financial impact was adjusted inremeasurements of defined benefit plans in accumulated other comprehensive income. In addition, the financial impact resulting fromchanges to the calculation method for retirement benefit obligations
and service costs was adjusted in retained earnings.
As a result, the Company reported net defined benefit liabilitiesof ¥45,051 million ($437,728 thousand), and accumulated other comprehensive income decreased by ¥10,716 million ($104,120 thousand)and retained earnings increased by ¥7,062 million ($68,616 thousand)at the beginning of the fiscal year (April 1, 2013). The effects of thesechanges on income (loss) and segment information in the consolidated financial statements were not material.

3 New Accounting Standards Not Yet Applied•A ccounting Standard for Business Combinations(ASBJ Statement No. 21, September 13, 2013)•A
 ccounting Standard for Consolidated Financial Statements(ASBJ Statement No. 22, September 13, 2013)•A
 ccounting Standard for Business Divestitures(ASBJ Statement No. 7, September 13, 2013)•A
 ccounting Standard for Earnings Per Share(ASBJ Statement No. 2, September 13, 2013)•G
 uidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures(ASBJ Guidance No. 10, September 13, 2013)•G
 uidance on Accounting Standard for Earnings Per Share(ASBJ Guidance No. 4, September 13, 2013)(a) Overview
The primary revisions to these accounting standards are: 1. accounting treatment for changes in ownership interests in subsidiaries if
ownership is retained in the additional acquisition of subsidiary stocks,
2. accounting treatment for acquisition-related costs, 3. change inpresentation of net income and change of the account name fromminority interests to non-controlling interests, and 4. provisional
accounting treatment.

(b) Scheduled effective date
These standards are scheduled to take effect from the beginning of
the year ending March 31, 2016. The provisional accounting treatment
is applied to business combinations that are carried out after the
beginning of the year ending March 31, 2016.

(c) Impact of application of revised accounting standards
The financial impact was still under review at the time of the preparation of the consolidated financial statements.

Annual Report 2014

69

4 Additional Information(a) Reclassification of certain cost of sales and selling, generaland administrative expenses
Along with the organizational reform, the manufacturing functionsof the Company and consolidated production subsidiaries were
improved. As a result, certain amounts that had been recorded as selling, general and administrative expenses were reclassified as cost of
sales from the year ended March 31, 2014.
Due to this change, the cost of sales increased by ¥5,698 million($55,363 thousand), and gross profit decreased by the same amountcompared to the previous method. In addition, selling, generaland administrative expenses decreased by ¥6,136 million ($59,619
thousand) and operating income increased by ¥437 million ($4,246
thousand) respectively.
The financial impact of change on business segments for the year
ended March 31, 2014 is disclosed in Note 28 Segment Information.

(b) Share acquisition of 100% ownership of U.S. musical instruments and audio equipment manufacturer Line 6, Inc.
On December 20, 2013, the Company reached an agreement with Line6, Inc. (Head office: Calabasas, California, hereinafter referred to as “Line6”), a company that engages in developing, producing, and selling
guitar peripheral equipment, PA equipment, wireless microphones,
etc., to make it a wholly own Line 6’s share. Legal procedures for theacquisition of Line 6 were completed on January 23, 2014.
Line 6 was established in 1996. The company started with thedevelopment and sale of the world’s first digital modeling guitar
amplifier, the “AxSys212,” followed by an expansion of its productlineup of guitar amplifiers. While expanding its lineup, Line 6 proposed
new value to guitarists through such products as the “POD,” an amplifier simulator for guitar recording, and the “Variax,” a modeling guitar,establishing its reputation in the market. Line 6 further expanded its
product lineups, including PA equipment, wireless systems for guitars,
and wireless microphones, and succeeded in building a brand supported not only by guitarists but also by a wide range of musicians.

Through this acquisition of Line 6, the Yamaha Group expands
its portfolio of guitar peripheral equipment and PA equipment in the
future to accelerate growth in the musical instruments and audio
equipment area. Also, the Company obtains opportunities to create
new value for customers by combining Line 6’s product planning anddevelopment capability based on modeling and wireless technology and Yamaha’s own accumulated technological capability in the
acoustic and digital areas, as well as by utilizing the global knowledgeof markets and customers amassed by the two companies.
The financial impact from this acquisition for the year ended
March 31, 2014 is not material.

(c) Share acquisition of 100% ownership of a U.S. provider ofwireless audio solutions, Revolabs, Inc.
On March 17, 2014, the Company reached an agreement with Revolabs,
Inc., (Head office: Sudbury, Massachusetts; hereinafter referred to as“Revolabs”) a company that engages in developing, manufacturing,and selling products, such as wireless microphone systems and wireless conference phones for corporate conference rooms to become
a wholly owned subsidiary. Legal procedures for the acquisition of
Revolabs were completed on March 26, 2014.
Established in 2005, Revolabs mainly supplies such equipment
as wireless microphone systems and wireless conference phones forconference rooms. Revolabs is highly regarded in the market for thoroughly reflecting the needs of its customers in its products throughthe use of industry-leading technical capabilities, such as the ability touse many channels at the same time, in addition to high sound quality.
As a result, Revolabs has grown rapidly.
Collaboration in the area of mutual sharing of the product lines,
technology, know-how, and sales networks of both companies will
enable the Yamaha Group to integrate high-quality solutions for thediversifying needs of the market in the future.
The financial impact from this acquisition for the year ended
March 31, 2014 is not material.

5 U.S. Dollar Amounts
Solely for the convenience of the reader, the accompanying consolidated financial statements for the year ended March 31, 2014 have been presented in U.S. dollars by translating all yen amounts at ¥102.92 = U.S.$1.00, the exchange rate prevailing on March 31, 2014. 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.

6 Accumulated Depreciation
Accumulated depreciation of property, plant and equipment at March 31, 2014 and 2013 amounted to ¥218,423 million ($2,122,260 thousand) and¥212,307 million respectively.

70

Yamaha Corporation

7 Investment Securities
Investment securities at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

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

2014

2013

2014

¥16,985616¥1,502
616$165,031
5,985

8 Contingent Liabilities
Contingent liabilities at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

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

2014

2013

2014

¥ 72
173

¥394
262

$  700
1,681* The amount guaranteed substantially by the Company is ¥14 million ($136 thousand) at March 31, 2014, and ¥21 million at March 31, 2013.

9 Land Revaluation
For the year ended March 31, 2014, the Company has carried over the revaluation of their landholdings at the date of revaluation in accordancewith 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, 2014 and 2013, the Company determined the value of its land based on the respective value registered in theland 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, 2014 and 2013 is summarized as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Excess of revalued carrying amount of land over market value

2014

2013

2014

¥(8,449)¥(8,044)$(82,093)•• Inventories
Inventories at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

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

2014

2013

2014

¥55,653
14,01313,023¥82,690¥54,647
14,09013,276¥82,014$540,740
136,154
126,535$803,440

Write-downs of inventories for the years ended March 31, 2014 and 2013 were recognized in the following account:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Cost of sales

2014

2013

2014

¥(132)¥(345)$(1,283)* Figures shown in parentheses are profit items.

Annual Report 201471

•• Selling, General and Administrative Expenses
Principal items of selling, general and administrative expenses for the years ended March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

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 amortization

2014

2013

2014

¥ 1,388
12,292
17,825
(199)
570
3,545
53
49,984
3,435
2,712¥ 1,239
11,263
15,680
(15)
426
4,270
21
49,817
3,682
3,156$ 13,486
119,433
173,193(1,934)
5,538
34,444515
485,659
33,37526,351•• R&D Expenses
R&D expenses, included in selling, general and administrative expenses and cost of sales for the years ended March 31, 2014 and 2013, amounted to¥22,561 million ($219,209 thousand) and ¥22,149 million, respectively.

•• Sales or Disposal of Property, Plant and Equipment
For the year ended March 31, 2014
Gains on sale of property, plant and equipment principally resulted from sales of land, buildings and structures. Loss on disposal of property, plantand equipment principally resulted from disposal of buildings and structures, machinery and equipment.

For the year ended March 31, 2013
Gains on sale of property, plant and equipment principally resulted from sales of land, machinery and equipment. Loss on disposal of property,
plant and equipment principally resulted from disposal of buildings and structures, machinery and equipment.

72

Yamaha Corporation

•• Loss on Impairment of Fixed Assets
The following table summarizes loss on impairment of fixed assets for the years ended March 31, 2014 and 2013.
Millions of yen

Group of fixed assets

Idle assets, etc.

Location

Fukuoka-shi, Fukuoka, etc.

Impaired assets

Buildings and structures
Machinery and equipment
Land
Total

Thousands of
U.S. dollars (Note 5)

2014

2014

¥197
19
115
¥332

$1,914185
1,117$3,226Of the total shown above, ¥139 million ($1,351 thousand) was reported as business structural reform expenses in connection with the consolidationand concentration of the music store and school businesses.

Millions of yen

Group of fixed assets

Idle assets, etc.

Location

Sapporo-shi, Hokkaido, etc.

Impaired assets

Buildings and structures
Machinery and equipment
Land
Total

2013

¥503
2
350
¥855

Of the total shown above, ¥562 million was reported as business structural reform expenses in connection with the consolidation and concentration of business locations.

Method of grouping assets
Within its segment classification, the Yamaha Group groups assets based on the smallest cash generating units.

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, and assets that
the Company expects to dispose of.

Method for computing recoverable amounts
The recoverable amount of idle assets, etc., is estimated at the net selling value, using estimates based on price indexes of real estate appraisers
and/or the assessed value for the tangible fixed assets tax.

•• Business Structural Reform Expenses
For the year ended March 31, 2014
These include expenses incurred in connection with personnel policies at retail sales subsidiaries following domestic business restructuring andimpairment losses on assets related to the consolidation and concentration of the music store and school businesses.

For the year ended March 31, 2013
Expenses consist of personnel-related costs in the domestic sales division and retail subsidiaries, in line with a change in management structure
for domestic sales activities, loss on impairment of fixed assets in connection with the consolidation and concentration of business locations, andpersonnel-related costs for Yamaha Kagoshima Semiconductor Inc. as part of a change in the management structure.

•• Loss on Closure of Operations
The loss is due to suspension of production at a guitar manufacturing plant operated by a subsidiary in Indonesia due to a labor strike.

Annual Report 201473

•• Other Income (Expenses)
The components of “Other, net” in “Other income (expenses)” for the years ended March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Foreign exchange losses
Gain on liquidation of subsidiaries
Loss on valuation of investment securities
Loss on valuation of investments in capital of subsidiaries and affiliates
OthersOther, net

2014

2013

2014

¥(126)
—
(16)
—
437
¥ 293

¥ (57)
8
(32)
(102)
323
¥139

$(1,224)
—
(155)
—
4,246
$   2,847•• 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, 2014 and2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Other comprehensive income
Unrealized holding gain on securities
Amount arising during the year
Reclassification adjustments for gains andlosses recognized in the income statement
Amount before tax effect adjustment
Tax effect
Total
Deferred gains and losses on hedges
Amount arising during the year
Tax effectTotal
Foreign currency translation adjustments
Amount arising during the year
Remeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments for gains andlosses recognized in the income statement
Amount before tax effect adjustment
Tax effect
Total
Share of other comprehensive income (loss) of affiliates accounted
for using equity method
Amount arising during the year
Total

74

Yamaha Corporation

2014

2013

2014

¥16,289¥11,533$158,269(0)
16,289(5,577)
10,711(885)
10,648(3,173)7,474(0)158,269(54,188)
104,071

(113)
53
(59)

326
—
326

(1,098)515(573)

10,481

13,607

101,836

5,257—

51,079

1,836
7,094
(149)
6,944

—
—
—
—

17,83968,927(1,448)67,470(5)¥28,073

0¥21,408(49)$272,765•• Information for 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, 2014 and 2013:(a) Common stock
2014

2013

197,255,025——
197,255,025

197,255,025——
197,255,025

Number of shares

Beginning of the year
Increase
Decrease
End of the year(b) Treasury stock
Number of shares

Beginning of the year
Increase
Decrease
End of the year

2014

2013

3,623,885
4,232*1—
3,628,117

3,612,338
11,547*2—
3,623,885*1. Increase owing to purchase of outstanding fractional shares of less than one trading unit: 4,232 shares*2. Increase owing to purchase of outstanding fractional shares of less than one trading unit: 11,547 shares(c) Subscription rights to shares
None(d) Cash dividends(1) Amount of dividend payments
2014

Date of approval

Type of shares

Jun. 26, 2013
(Annual General Meeting of
Shareholders)Common stock
Oct. 31, 2013
(Board of Directors)
Common stock

Total dividends(Millions of yen)

Total dividends(Thousands of
U.S. dollars)(Note 5)

Dividends
per share(Yen)

Dividends
per share(U.S. dollars)(Note 5)

Record date

Effective date¥  968$ 9,405

¥5.00

$0.05

Mar. 31, 2013

Jun. 27, 2013

¥1,452$14,108

¥7.50

$0.07

Sept. 30, 2013

Dec. 3, 2013

Note: Dividends per share of ¥5.00 ($0.05) approved on June 26, 2013 consisted of regular dividends of ¥5.00 ($0.05)
Dividends per share of ¥7.50 ($0.07) approved on October 31, 2013 consisted of regular dividends of ¥7.50 ($0.07)

2013
Date of approval

Type of shares

Jun. 27, 2012
(Annual General Meeting of
Shareholders)Common stock
Oct. 31, 2012
(Board of Directors)
Common stock

Total dividends (Millions of yen)

Dividends per share (Yen)Record date

Effective date

¥968

¥5.00

Mar. 31, 2012

Jun. 28, 2012

¥968

¥5.00

Sept. 30, 2012

Dec. 4, 2012

Note: Dividends per share of ¥5.00 approved on June 27, 2012 consisted of regular dividends of ¥5.00
Dividends per share of ¥5.00 approved on October 31, 2012 consisted of regular dividends of ¥5.00

Annual Report 201475

(2) Dividends whose effective date is in the year subsequent to that in which the record date falls
2014

Date of approval

Type of shares

Source ofdividends

Jun. 24, 2014
(Annual General Meeting of
Shareholders)Commonstock

Retainedearnings

Total dividends(Thousands ofTotal dividends
U.S. dollars)(Millions of yen)
(Note 5)

¥3,775$36,679

Dividends
per share(Yen)

Dividends
per share(U.S. dollars)(Note 5)¥19.50$0.19

Record date

Effective dateMar. 31, 2014 Jun. 25, 2014

Note: Dividends per share of ¥19.50 ($0.19) approved on June 24, 2014 consisted of regular dividends of ¥19.50 ($0.19)

2013
Date of approval

Type of shares

Source ofdividends

Jun. 26, 2013
(Annual General Meeting of
Shareholders)Commonstock

Retainedearnings

Total dividends(Millions of yen)

Dividends
per share
(Yen)

¥968

¥5.00

Record date

Effective dateMar. 31, 2013 Jun. 27, 2013

Note: Dividends per share of ¥5.00 approved on June 26, 2013 consisted of regular dividends of ¥5.00•• Legal Reserve and Additional Paid-in Capital
The Corporation Law of Japan (the Law) provides that amounts from capital surplus and retained earnings may be distributed to the shareholders at
any time by resolution of the shareholders or by the Board of Directors if certain provisions are met subject to the extent of the applicable sourcesof such distributions. The Law further provides that amounts equal to 10% of such distributions be transferred to additional paid-in capital included
in capital surplus or the legal reserve based on the applicable sources of such distributions until the sum of additional paid-in capital and the legal
reserve equals 25% of the capital stock account.

•• Supplementary Cash Flow Information
The following table represents a reconciliation of “Cash and deposits” and “Cash and cash equivalents” at March 31, 2014 and 2013:
Thousands of
U.S. dollars (Note 5)

Millions of yen

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

76

Yamaha Corporation

2014

2013

2014

¥60,558(3,033)¥57,524¥51,445(1,981)¥49,464$588,399(29,469)$558,920

•• Leases
2014

Lessees’ accounting
Operating Lease Transactions
Future minimum lease payments subsequent to March 31, 2014 on noncancellable leases are as follows:
Years ending March 31

Millions of yen

Thousands of
U.S. dollars (Note 5)20152016 and thereafter
Total¥  6371,179¥1,816$ 6,189
11,455$17,645

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 endof the year

As of March 31, 2014

Buildings and structures
Machinery and equipment
Other
Total

Acquisition
costs

Millions of yen
Accumulated
depreciation Net book value

¥799
—
7
¥806

¥311
—
7
¥319

¥487
—
0
¥487

Thousands of U.S. dollars (Note 5)
Acquisition
Accumulated
costs
depreciation Net book value$7,763—68$7,831$3,022—68$3,099$4,732—
0$4,732

Amounts corresponding to the acquisition costs include interest expense since the balance of future minimum lease payments accounts for only asmall 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, 2014
Years ending March 31

Millions of yen

Thousands of
U.S. dollars (Note 5)20152016 and thereafter
Total

¥ 47
440
¥487

$  4574,275$4,732

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, 2014

Lease payments
Depreciation

Millions of yen

Thousands of
U.S. dollars (Note 5)

¥59
59

$573
573

(d) Method of calculating the amount of the depreciation of leased assets
Depreciation of leased assets is calculated by 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, 2014 on noncancellable leases are as follows:
Years ending March 31

Millions of yen

Thousands of
U.S. dollars (Note 5)20152016 and thereafter
Total

¥487
440
¥927

$4,732
4,275$9,007

Annual Report 2014

77

2013

Lessees’ accounting
Operating Lease Transactions
Future minimum lease payments subsequent to March 31, 2013 on noncancellable leases are as follows:
Years ending March 31

Millions of yen

2014
2015 and thereafter
Total

¥ 637
1,376
¥2,013Finance 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 endof the year

As of March 31, 2013

Buildings and structures
Machinery and equipment
Other
Total

Acquisition
costs

¥943
4
7
¥955

Millions of yen
Accumulated
depreciation Net book value

¥398
4
6
¥408

¥544
0
1
¥546

Amounts corresponding to the acquisition costs include interest expense since the balance of future minimum lease payments accounts for only asmall 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, 2013
Years ending March 31

Millions of yen

2014
2015 and thereafter
Total

¥ 58
487
¥546

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, 2013

Lease payments
Depreciation

Millions of yen¥6464(d) Method of calculating the amount of the depreciation of leased assets
Depreciation of leased assets is calculated by 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, 2013 on noncancellable leases are as follows:

78

Years ending March 31

Millions of yen

2014
2015 and thereafter
Total

¥ 538
664
¥1,202

Yamaha Corporation

•• Financial Instruments(a) Overview(1) Policy for financial instruments
The Yamaha Group, in principle, limits its cash management to deposits for which principals are guaranteed and interest rates are fixed. In addition,
the Group raises funds mainly through bank borrowings. Further, Yamaha and its wholly owned domestic subsidiaries practice group finance.
The Group uses derivatives for the purpose of reducing risk, and limits derivative transactions to actual exposure. The 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 credit risk of its customers. In addition, the Group is exposed to foreign 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 of common 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, tradeaccounts 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 are taken out principally forthe purpose of making capital investments. The repayment dates of long-term loans payable extend up to five years and four months from March
31, 2014, and up to six years and four months from March 31, 2013, respectively. Long-term deposits received are membership deposits received
from customers in the Group’s recreation business. The Group is exposed to liquidity risk from its trade notes and accounts payable, other accounts
payable, accrued expenses, short-term loans payable, long-term loans payable and long-term deposits received.
Regarding derivatives, the Group enters into foreign exchange forward contracts with netting arrangements and currency options (foreign
currency put options) to reduce foreign currency exchange risk arising from the receivables and payables denominated in foreign currencies innormal export and import transactions.
Foreign exchange forward contracts are exposed to foreign currency exchange risk. For currency options, since the Group only uses purchased foreign currency put options, the risk of loss is limited to the option premium.
Derivative transactions are accounted for by hedge accounting. The method of hedge accounting, hedging instruments and hedged items,
hedging policy, and the assessment of the effectiveness of hedging activities are described in Note 1(m) Derivative financial instruments (Hedge
accounting).

(b) Risk management for financial instruments
The Group has established a Group financial risk management policy, and the Company and its consolidated subsidiaries have prepared rules basedon this policy for the following risk:(1) Credit risk (the risk that customers may default)
The Group has prepared policy for managing its credit exposure and trade receivables. In accordance with the rules, the Group monitors credit
exposure limits of each customer and organizes all trade receivables by customer, and confirms the outstanding balances by customers regularly.
For receivables that become past due, rules require taking steps to understand the causes and preparing a schedule for the recovery of this exposure.
To minimize the credit risk of the counterparty in derivative transactions, the Group enters into transactions only with financial institutions thathave 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, the Group minimizes the foreign exchange risk arising from the 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 in foreign 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 Group periodically reviews the market value and the financial position of
the issuer with which the Group has a 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 of derivatives, and then conduct and manage such transactions in accordance with the rules.

Annual Report 201479

Derivative transactions of the Company and its subsidiaries are concentrated in each accounting and finance department of these companies.
Internal rules set forth the roles of each accounting and finance department, reports to be submitted to top management, communications to besent 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 foreignexchange rate are submitted to top management.
(3) Liquidity risk (the risk that the Group may not be able to meet its obligations on the scheduled dates)
The Group manages liquidity risk based on the cash flow plans of the Company and its consolidated subsidiaries and through the practice of groupfinance at the Company and its wholly owned subsidiaries in Japan.
(4) Supplementary explanation of the estimated fair value of financial instruments
The estimated fair value of financial instruments is their quoted market price if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could resultin different fair value.
In addition, the notional amounts of derivatives in Note 25 are not indicative of the actual market risk involved in derivative transactions.

(c) Estimated fair value of financial instruments
Carrying value on the consolidated balance sheet as of March 31, 2014 and 2013, and difference between carrying value and estimated fair value,
are shown in the following table. The following table does not include financial instruments for which it is extremely difficult to determine the fairvalue. See Note (ii) below:

As of March 31, 2014

Cash and deposits
Notes and accounts receivable — trade
Short-term investment securities
Held-to-maturity securities
Investment securities
Held-to-maturity securities
Subsidiaries and affiliates securities
Available-for-sale securities
Notes and accounts payable — trade
Accounts payable — other and accrued expenses
Derivatives*2

As of March 31, 2013

Cash and deposits
Notes and accounts receivable — trade
Short-term investment securities
Held-to-maturity securities
Investment securities
Held-to-maturity securities
Subsidiaries and affiliates securities
Available-for-sale securities
Notes and accounts payable — trade
Accounts payable — other and accrued expenses
Derivatives*2

Thousands of U.S. dollars (Note 5)
Estimated
Carrying value*1
Difference
fair value*1

Carrying value*1

Millions of yen
Estimated
fair value*1

Difference¥60,558
57,890¥60,558
57,890¥ ——$588,399
562,476$588,399
562,476$    —
—

—

—

—

—

—

—

—
761
84,218(21,595)(31,805)
(154)

—
340
84,218(21,595)(31,805)
(154)

—
(420)
—
—
—
—

—
7,394
818,286(209,823)(309,026)(1,496)—
3,304
818,286(209,823)(309,026)(1,496)—(4,081)————

Carrying value*1

Millions of yen
Estimated
fair value*1

Difference¥51,445
52,069¥51,445
52,069

¥—
—

250

250

0

40
247
68,025(20,339)(31,309)
(41)

40
324
68,025(20,339)(31,309)
(41)

0
77
—
—
—
—

*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.

80

Yamaha Corporation

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.
Short-term investment securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either quoted market price or prices
provided by the financial institutions making markets in these securities.
Information on securities classified by holding purpose is contained in Note 24.
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.
Derivatives Transactions
See Note 25.
(ii) Financial instruments for which it is extremely difficult to determine the fair value
Thousands of
U.S. dollars (Note 5)

Millions of yen

Carrying value
Unlisted stocks
Long-term deposits received

2014

2013

2014

¥18,191
15,339¥ 3,256
15,445$176,749
149,038

Because no quoted market price is available and estimating their future cash flows is deemed to be prohibitively expensive, the estimated fair valueof 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, 2014 and 2013

As of March 31, 2014

Withinone year

Cash and deposits¥ 60,558
Notes and accounts receivable — trade
57,890
Short-term investment securities
and investment securities
Held-to-maturity securities
Government and municipal bonds—
Corporate bonds—
Others—Total¥118,449

As of March 31, 2013

Cash and deposits
Notes and accounts receivable — trade
Short-term investment securities
and investment securities
Held-to-maturity securities
Government and municipal bonds
Corporate bonds
Others
Total

Withinone year

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

Withinone yearThousands of U.S. dollars (Note 5)
Between one Between fiveand five years and ten years Over ten years

¥—
—

¥—
—

¥—
—

$  588,399
562,476

$—
—

$—
—

$—
—

—
—
—
¥—

—
—
—
¥—

—
—
—
¥—

—
—
—
$1,150,884

—
—
—
$—

—
—
—
$—

—
—
—
$—

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

Over ten years¥ 51,445
52,069

¥—
—

¥—
—

¥—
—

250
—
—
¥103,764

40
—
—
¥40

—
—
—
¥—

—
—
—
¥—

Annual Report 201481

(iv) The redemption schedule for long-term debt with maturities as of March 31, 2014 and 2013

As of March 31, 2014

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

As of March 31, 2014

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

As of March 31, 2013

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

Within one year

Between one
and two years¥8,59032
38—¥8,662

¥—
31
28
—
¥59

Within one year

Between one
and two years$83,463311
369—$84,162

$ —
301
272
—
$573

Millions of yen
Between two
Between three
and three years
and four years

¥—
30
23
—
¥53

¥—
30
21
—
¥51

Thousands of U.S. dollars (Note 5)
Between two
Between three
and three years
and four years

$ —
291
223
—
$515

$ —
291
204
—
$496

Millions of yen
Between two
Between three
and three years
and four years

Between fourand five years

Over five years

¥—
30
18
—
¥49

¥—
10
132
—
¥142

Between fourand five years

Over five years

$ —
291
175
—
$476

$   —
97
1,283
—
$1,380Between fourand five years

Over five years

¥—
30
16
—
¥47

¥ —
40
151
—
¥192

Within one year

Between one
and two years¥9,360486
26—¥9,873

¥—
32
30
—
¥63

¥—
31
22
—
¥54

Carrying value

Millions of yen
Estimated
fair value

Unrealized
gain

¥—
—
—
—

¥—
—
—
—

¥—
—
—
—

$—
—
—
—

$—
—
—
—

$—
—
—
—

—
—
—
—
¥—

—
—
—
—
¥—

—
—
—
—
¥—

—
—
—
—
$—

—
—
—
—
$—

—
—
—
—
$—

¥—
30
19
—
¥50

•• Securities(a) Held-to-maturity securities with fair market value
As of March 31, 2014

Securities whose estimated fair value
exceeds their carrying value:
Government and municipal bonds
Corporate bonds
Other
Securities whose estimated fair value
does not exceed their carrying value:
Government and municipal bonds
Corporate bonds
Other
Total

82

Yamaha Corporation

Thousands of U.S. dollars (Note 5)
Estimated
Unrealized
Carrying value
fair valuegainAs of March 31, 2013

Securities whose estimated fair value
exceeds their carrying value:
Government and municipal bonds
Corporate bonds
Other
Securities whose estimated fair value
does not exceed their carrying value:
Government and municipal bonds
Corporate bonds
Other
Total

Carrying value

Millions of yen
Estimated
fair value

Unrealized
gain

¥290
—
—
290

¥290
—
—
290

¥ 0
—
—
0

—
—
—
—
¥290

—
—
—
—
¥290

—
—
—
—
¥ 0

Carrying value

Millions of yen
Acquisition
costs

Unrealized
gain

Thousands of U.S. dollars (Note 5)
Acquisition
Unrealized
Carrying value
costs
gain

¥84,218—
84,218¥15,898—
15,898¥68,319—
68,319$818,286—
818,286$154,469—
154,469$663,807—
663,8070—0¥84,2180—0¥15,898(0)—(0)¥68,3190—0$818,2860—0$154,469(0)—(0)$663,807

Carrying value

Millions of yen
Acquisition
costs

Unrealized
gain¥68,016—
68,016¥15,898—
15,898¥52,117—
52,1178—
8¥68,02511—
11¥15,909(2)—(2)¥52,115(b) Available-for-sale securities with fair market value
As of March 31, 2014

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

As of March 31, 2013

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

(c) Available-for-sale securities sold during the years ended March 31, 2014 and 2013
Thousands of
U.S. dollars (Note 5)

Millions of yen

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

2014

2013

2014

¥1,251990—¥2,412
1,089—$12,155
9,619—

Annual Report 201483•• Derivatives and Hedging Activities
As of March 31, 2014 and 2013, 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, 2014 and 2013, for which hedge
accounting has been applied are summarized as follows:
Millions of yen
Notional amount
As of March 31, 2014

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

Hedged items

Total

Over one year

Estimated
fair value

Calculation of fair value

Prices provided byfinancial institution*2
Accounts receivable¥ 1,123
1,148
13,120¥———¥ 1,155
1,153
13,238Market prices

Accounts receivable
179
185
1,775
¥17,532

—
—
—
¥—

*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 of assets and liabilities arising from derivatives was ¥154 million.

Thousands of U.S. dollars (Note 5)
Notional amount
As of March 31, 2014

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

Hedged items

Total

Over one year

Estimated
fair value

Calculation of fair value

Prices provided byfinancial institution*2
Accounts receivable$ 10,911
11,154
127,478$———$ 11,222
11,203
128,624
Market prices

Accounts receivable
1,739
1,798
17,246$170,346

—
—
—
$—

*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. T he estimated fair value is the fair value of the notional amount, and the net value of assets and liabilities arising from derivatives was $1,496 thousand.

84

Yamaha Corporation

Millions of yen
Notional amount
As of March 31, 2013

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

Hedged items

Total

Over one year

Estimated
fair value

Calculation of fair value

Prices provided byfinancial institution*2
Accounts receivable¥ 1,682
1,276
10,154¥———¥ 1,721
1,291
10,142Market prices

Accounts receivable
104
167
1,490
¥14,874

—
—
—
¥—

*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 of assets and liabilities arising from derivatives was ¥41 million.

•• Retirement Benefits
For the year ended March 31, 2014(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 plansand defined contribution pension plans.
The defined benefit pension plan (funded and unfunded plans) pays a lump-sum or an annual pension based on the employee compensation point system.
In certain cases, the Company pays employees who are retiring, etc., additional retirement benefits that are not considered to be 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 during the year ended March 31, 2014 (excluding plans that apply the simplified method)
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

Thousands of
U.S. dollars (Note 5)

2014

2014

¥119,593
4,393
1,420
(991)
(8,181)(54)¥116,180$1,162,000
42,684
13,797(9,629)(79,489)(525)$1,128,838

Annual Report 201485

(2) Changes in the plan assets during the year ended March 31, 2014 (excluding plans that apply the simplified method)
Millions of yen

Plan assets at the beginning of year
Expected return on plan assets
Actuarial gain or loss
Contribution by Yamaha Group
Retirement benefits paid
Other
Plan assets at end of year

Thousands of
U.S. dollars (Note 5)

2014

2014

¥76,228
1,507
4,225
5,798
(6,480)62¥81,341$740,653
14,642
41,051
56,335(62,962)602$790,332(3) Changes in net defined benefit liabilities for plans that apply the simplified method during the year ended March 31, 2014
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 year

Thousands of
U.S. dollars (Note 5)

2014

2014

¥1,685
206
(245)
(112)
73
¥1,607$16,372
2,002(2,380)(1,088)709$15,614(4) Reconciliation between the funded status of the plans (retirement benefit obligations and plan assets) and the amounts recognizedin the consolidated balance sheet (net defined benefit liabilities and net defined benefit assets) as of March 31, 2014
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

Thousands of
U.S. dollars (Note 5)

2014

2014

¥99,931(82,717)
17,214
19,23136,44536,450(4)¥36,445$970,958(803,702)
167,256
186,854354,110354,159(39)$354,110

Millions of yen

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

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
Retirement benefit expenses for defined benefit pension plans

86

Yamaha Corporation

2014

2014

¥4,393
1,420(1,507)
2,258
(434)
206
18
¥6,356$42,684
13,797(14,642)
21,939(4,217)
2,002
175$61,757

(6) Remeasurements of defined benefit plans
Components of remeasurements of defined benefit plans (before taxes)
Thousands of
U.S. dollars (Note 5)

Millions of yen

Prior service cost
Actuarial gain or loss
Total

2014

2014

¥     (435)7,529¥7,094$  (4,227)
73,154$68,927(7) Accumulated adjustments of defined benefit plans
Components of remeasurements of accumulated defined benefit plans (before taxes)
Thousands of
U.S. dollars (Note 5)

Millions of yen

Unrecognized prior service cost
Unrecognized actuarial gain or loss
Total

2014

2014

¥(1,290)
5,162¥ 3,871$(12,534)
50,155$ 37,612(8) Items for plan assets( i ) Components of plan assets
Ratio of primary components of total plan assets
2014Life insurance company general accounts
Stocks
Bonds
Cash and deposits
Other
Total

55%
23%
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, 2014
2014

Discount rate
Expected long-term rate of return

1.2%
2.0%

Annual Report 201487

(c) Defined contribution pension plans
Required contributions to defined contribution pension plans of consolidated subsidiaries amounted to ¥593 million ($5,762 thousand) in the year
ended March 31, 2014.
In addition, aside from the above required contributions, the Company also posted ¥305 million ($2,963 thousand) of business structuralreform expenses, which was included in ¥347 million ($3,372 thousand) of additional retirement benefit expenses.
For the year ended March 31, 2013
The Company and its domestic consolidated subsidiaries have defined benefit pension plans, such as welfare pension plans and lump-sum payment plans.
In certain cases, the Company pays employees who are retiring, etc., additional retirement benefits that are not considered to be retirement
benefit obligations as calculated under actuarial methods according to retirement benefit accounting principles.
Certain overseas consolidated subsidiaries have either defined benefit plans or defined contribution pension plans.
The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the accompanying consolidatedbalance sheet at March 31, 2013 for the Company’s and its consolidated subsidiaries’ defined benefit pension plans:Millions of yen

2013

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial gain or loss
Unrecognized prior service cost
Net retirement benefit obligation at transition
Prepaid pension expenses
Provision for retirement benefits¥(127,080)
75,846(51,234)
11,846(1,759)(41,148)—¥ (41,148)

The components of retirement benefit expenses for the year ended March 31, 2013 are outlined as follows:
Millions of yen

2013

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial gain or loss
Additional retirement benefit expenses
Total¥4,2142,557(1,469)
(316)
3,451
78
¥8,515

Note: In addition, aside from the above retirement benefit expenses, the Company posted an extraordinary loss (business structural reform expenses) of ¥2,440 million on premium
severance pay and other items.

The assumptions used in accounting for the above plans are summarized as follows:
2013

Discount rate
Expected rate of return on plan assets
Periodical allocation method of expected benefit payments
Amortization of prior service cost
Amortization of actuarial gain or loss
Years of amortization of net retirement benefit obligation at transition

88

Yamaha Corporation

2.0%
2.0%
Straight-line attribution method
10 years (straight-line method)
10 years (straight-line method)
Treated as lump-sum expense•• Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprised corporation tax, inhabitants’ taxes and enterprise tax
which, in the aggregate, resulted in a statutory tax rate of approximately 37.0% for the years ended March 31, 2014 and 2013, 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, 2014 and 2013 are summarized as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

2014

2013

2014

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
Provision for retirement benefits
Net defined benefit liabilities
Tax loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets¥  1,929
820
330
8,433
8,500
2,621
2,181
604
—
12,261
12,193
4,409
54,286(47,446)¥  6,840¥ 2,083
464
464
8,367
9,016
2,790
2,072
691
14,305—
15,321
3,949
59,526(55,852)¥ 3,673$  18,743
7,967
3,206
81,937
82,58825,466
21,191
5,869—
119,131
118,471
42,839527,458(460,999)$  66,459

Deferred tax liabilities:
Reserve for deferred gain on property, plant and equipment
Reserve for special depreciation
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities¥   (938)(42)(22,978)(652)(24,611)¥(17,771)¥ (1,040)(24)(17,400)(793)(19,258)¥(15,585)$  (9,114)(408)(223,261)(6,335)(239,127)$(172,668)

A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2014 and 2013 is as follows:
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
Other
Effective tax rate after adjustments for tax-effect accounting

2014

2013

37.0%

37.0%

(4.2)
(3.1)
0.7
(23.2)
3.2
10.4%(15.6)
0.4
1.6
7.7
13.2
44.3%

Under the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No.10 of 2014) enacted on March 31, 2014, the Special Reconstruction
Corporation Tax will not be imposed from the fiscal year beginning April 1, 2014. As a result, the effective tax rate used to calculate deferred tax
assets and deferred tax liabilities for this fiscal year has been changed from previous fiscal year’s rate of 36.99% to 34.61% for the temporary differences expected to be settled from the fiscal year beginning April 1, 2014.
The financial impact from this change for the year ended March 31, 2014 is not material.

Annual Report 201489

•• Segment Information
For the years ended March 31, 2014 and 2013(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 Directorsof the Company for the purpose of business performance evaluation and management resource allocation decisions.
The Company’s business segments, based on its economic features and similarity of products and services, comprise its three principal 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 manufacture and sales of audio products, professional audio equipment, information and telecommunication equipment and certain other products. The electronic devices businesssegment 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 business 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 prevailing market prices.

(c) Item Related to Reporting Segment Change
Along with the corporate organizational reform, the name of the AV/IT business was changed to “Audio equipment” business from this fiscal year.
In addition, the segment classification was reviewed, and professional audio equipment was moved from the “Musical instruments” business to the“Audio equipment” business.
Segment information of the previous fiscal year was restated using the classification method after the change.
As stated in additional information, along with the organizational reform, the manufacturing functions of divisions of the Company andconsolidated production subsidiaries were reviewed. As a result, a part of the amounts that had been recorded as selling, general and administrative expenses was recorded as the cost of sales from this fiscal year.
As a result of these changes, income of the “Musical instruments” segment for the fiscal year increased by ¥353 million ($3,430 thousand),and income of the “Audio equipment” segment increased by ¥71 million ($690 thousand) compared to the previous method. Also, income of the“Electronic devices” segment increased by ¥3 million ($29 thousand), and income of “Others” increased by ¥9 million ($87 thousand).

90

Yamaha Corporation

(d) Information by product and service
Millions of yen
Year ended March 31, 2014

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

Year ended March 31, 2014

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

Others

Total

Adjustments andelimination¥262,310¥105,485¥23,679
23,679¥   (370)¥93,847¥410,304
619
410,923¥ 25,994¥438,932

¥   —
(619)
(619)
¥   —
¥   —

¥410,304

105,485¥  5,866¥ 80,396¥18,828
619
19,448¥   770¥13,414262,310¥ 19,728¥251,273¥  8,519¥    332¥  2,647¥     —¥   761¥    —¥   830¥    —¥ 12,759¥    332

¥   —
¥   —

¥ 12,759¥    332¥  6,659¥  2,877¥   216¥ 1,172¥ 10,926¥   —¥ 10,926

Musicalinstruments

Audio
equipment

Thousands of U.S. dollars (Note 5)
Electronic
devices
Others
Total

Adjustments andelimination

Consolidated$2,548,679$1,024,922

2,548,679$  191,683$2,441,440

1,024,922$   56,996$  781,150$182,938
6,014
188,962$  7,482$130,334$   82,773$    3,226$   25,719$       —$   64,701$   27,954$230,072

Consolidated

410,304¥ 25,994¥438,932

230,072$  (3,595)$911,844$3,986,630
6,014
3,992,645$  252,565$4,264,788$    —(6,014)(6,014)$    —$    —$3,986,630
3,986,630$  252,565$4,264,788$  7,394$     —$  8,065$     —$  123,970$    3,226$    —$    —$  123,970$    3,226$  2,099$ 11,387$  106,160$    —$  106,160

Notes: 1. The item “Adjustments and elimination” for the year ended March 31, 2014 contains the following:
The sales adjustment item of ¥(619) million ($(6,014) thousand), which comprises eliminations of transactions among the Company’s business segments.
2. “Segment income (loss)” for the year ended March 31, 2014 means the operating income (loss) 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
Consolidated Balance Sheet) were ¥70,147 million ($681,568 thousand).
Millions of yen
Year ended March 31, 2013

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

Others

Total

Adjustments andelimination¥235,507¥92,571

235,507¥  6,451¥234,557

92,571¥ 4,553¥64,073¥15,038697
15,736¥ (2,044)¥13,638¥23,823

¥ —
(697)
(697)
¥ —
¥ —

¥366,941

23,823¥   254¥78,341¥366,941
697
367,638¥  9,215¥390,610¥  8,597¥    855¥ 1,592¥    —¥   669¥    —¥   754¥    —¥ 11,613¥    855¥ —¥ —¥ 11,613¥   855¥  9,006¥ 2,497¥ 1,381¥ 1,068¥ 13,954¥ —¥ 13,954

Consolidated

366,941¥  9,215¥390,610

Notes: 1. The item “Adjustments and elimination” for the year ended March 31, 2013 contains the following:
The sales adjustment item of ¥(697) million, which comprises eliminations of transactions among the Company’s business segments.
2. “Segment income (loss)” for the year ended March 31, 2013 means the operating income (loss) 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
Consolidated Balance Sheet) were ¥55,009 million.

Annual Report 201491

(e) Information by geographical segment(i) Sales information based on the geographical location of the customers
Millions of yen

Year ended March 31, 2014

Net sales
Sales as a percentage of consolidated net sales

Japan

North America¥167,903
40.9%¥66,635
16.2%

Overseas
Asia, Oceania
Europeand other areas¥74,863
18.3%¥100,901
24.6%

Total

Consolidated¥242,400
59.1%¥410,304
100.0%

Thousands of U.S. dollars (Note 5)

Year ended March 31, 2014

Net sales
Sales as a percentage of consolidated net sales

Japan

North America$1,631,393
40.9%$647,445
16.2%

Overseas
Asia, Oceania
Europeand other areas$727,390
18.3%$980,383
24.6%

Total

Consolidated$2,355,227
59.1%$3,986,630
100.0%

Notes: 1. Sales information is based on the geographical location of customers, and it is classified by country or region.
2. Main 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
Millions of yen

Year ended March 31, 2013

Net sales
Sales as a percentage of consolidated net sales

Japan

North America¥165,790
45.2%¥55,156
15.0%

Overseas
Asia, Oceania
Europeand other areas¥60,61116.5%¥85,383
23.3%

Total

Consolidated¥201,151
54.8%¥366,941
100.0%

Notes: 1. Sales information is based on the geographical location of customers, and it is classified by country or region.
2. Main 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(ii) Sales, income (loss) and property, plant and equipment information based on group locations

As of/ Year ended March 31, 2014

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

92

Yamaha Corporation

Japan

North America

EuropeMillions of yen
Asia, Oceania
and other areas¥179,527
143,874
323,401¥ 11,819¥289,570¥ 81,870¥65,890738
66,628¥ 2,190¥29,349¥ 1,099¥75,373
2,467
77,840¥ 2,325¥40,462¥ 3,799¥ 89,513
82,997
172,510¥ 11,608¥103,997¥ 23,215

Total

Adjustments

Consolidated¥410,304
230,077
640,382¥ 27,944¥463,379¥109,984¥    —(230,077)(230,077)¥ (1,950)¥(24,447)¥    —¥410,304—
410,304¥ 25,994¥438,932¥109,984

As of/ Year ended March 31, 2014

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

Japan

North America$1,744,335
1,397,921
3,142,256$  114,837$2,813,545$  795,472$640,206
7,171
647,377$ 21,279$285,163$ 10,678

Thousands of U.S. dollars (Note 5)
Asia, Oceania
Europeand other areas
Total$732,346
23,970756,316$ 22,590$393,140$ 36,912$  869,734
806,422
1,676,156$  112,787$1,010,464$  225,564$3,986,630
2,235,494
6,222,134$  271,512$4,502,322$1,068,636

Adjustments

Consolidated$         —(2,235,494)(2,235,494)$  (18,947)$ (237,534)$         —$3,986,630—
3,986,630$  252,565$4,264,788$1,068,636

Notes: 1. Sales information is based on Group locations where sales take place, and it is classified by country or region.
2. Main 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 ¥(230,077) million ($(2,235,494) thousand), which comprises eliminations of transactions among the Company’s business segments.
4. Consolidated segment income corresponds to operating income presented in the Consolidated Statement of Operations.

As of/ Year ended March 31, 2013

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¥177,939
117,423
295,363¥ (2,190)¥256,886¥ 84,978¥54,635
586
55,222¥ 1,735¥28,144¥ 1,087¥60,898
1,523
62,421¥ 2,062¥34,391¥ 3,438¥ 73,467
66,847140,314¥  8,016¥ 92,267¥ 20,819

Total

Adjustments

Consolidated¥366,941
186,381553,322¥  9,624¥411,690¥110,325¥     —
(186,381)(186,381)¥    (409)¥ (21,079)¥     —

¥366,941—
366,941¥  9,215¥390,610¥110,325

Notes: 1. Sales information is based on Group locations where sales take place, and it is classified by country or region.
2. Main 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 ¥(186,381) million, which comprises eliminations of transactions among the Company’s business segments.
4. Consolidated segment income (loss) corresponds to operating income presented in the Consolidated Statement of Operations.

(f) Information related to the amount of amortization of goodwill and the unamortized amount of goodwill by reporting segment
Since the amounts are not material, this information has been omitted.

(g) Information on gain on negative goodwill by reporting segment
None

Annual Report 201493•• Amounts per Share
U.S. dollars (Note 5)

Yen
Years ended March 31

Net income per share:
Basic

2014

2013

2014

¥118.26¥21.29$1.15
U.S. dollars (Note 5)

Yen
As of March 31

Net assets per share

2014

2013

2014

¥1,403.12¥1,171.67$13.63

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, 2014 and 2013 has not been presented because there were no potentiallydilutive securities at March 31, 2014 and 2013.
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 5)

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 (thousands of shares)

2014

2013

2014

¥ 22,898—
22,898
193,629¥  4,122—
4,122
193,635$222,483—
222,483—•• Short-Term Loans Payable and Long-Term Debt
Short-term and long-term loans payable, lease obligations, and guarantee deposits as of March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

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

94

Yamaha Corporation

2014

2013

2014

¥8,590
32
38
133
224
51
¥9,071¥ 9,360
486
26
165
241
52
¥10,333$83,463
311
369
1,292
2,176
496
$88,136

The annual weighted-average interest rates applicable to above short-term loans payable and long-term debt at March 31, 2014 were as follows:
2014

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Guarantee deposits

1.3%
2.5%
2.7%
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, 2014 and 2013 were as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Short-term investment securities
Property, plant and equipment, net of accumulated depreciation
Investment securities
Total

2014

2013

2014

¥—
15
—
¥15

¥250
16
40
¥306

$ —
146
—
$146

The above assets were pledged as collateral for “Long-term loans payable” of ¥17 million ($165 thousand) at March 31, 2014, and for “Advances
received” of ¥14 million and for “Long-term loans payable” of ¥20 million at March 31, 2013.

•• Notes Receivable and Payable Maturing on the Balance Sheet Date
Notes receivable and payable are settled on the date of clearance. As March 31, 2013 was bank holiday, notes receivable and payable maturingon that date could not be settled and were settled on the following business day and included in the ending balances of notes and accounts
receivable-trade, and notes and accounts payable-trade as follows:
Thousands of
U.S. dollars (Note 5)

Millions of yen

Notes and accounts receivable-trade
Notes and accounts payable-trade

2014

2013

¥—
—

¥258
6

2014

$—
—

•• Related Party Transactions
None•• Subsequent Events
None

Annual Report 2014

95

96

Yamaha Corporation

History of the Yamaha Group

Founder,Torakusu Yamaha

1887

Torakusu Yamaha builds his first reed organ

1897

Establishes Nippon Gakki Co., Ltd. (currently Yamaha Corporation) with capital of ¥100,000

1900

Begins production of upright pianos

1949

Listed on Tokyo Stock Exchange

1954	Establishes Yamaha Music School and holds pilot classes
Produces its first HiFi player (audio product)
1955	Establishes Yamaha Motor Co., Ltd. (Splits off the motorcycle division)
1958

Begins production of sports equipment
Establishes first overseas subsidiary in Mexico

1960	Establishes Yamaha International Corporation (currently Yamaha
Corporation of America)
1962

Begins recreation business

1965

Begins production of wind instruments

1968	Issues shares at market price for the first time in Japan1971

Begins production of semiconductors

1987

Changes company name to Yamaha Corporation

2002	Establishes Yamaha Music & Electronics (China) Co., Ltd.
Establishes Yamaha Music Holding Europe GmbH(currently Yamaha Music Europe GmbH)2005	Acquires Steinberg Media Technologies GmbH2007	Establishes music entertainment business holding company
2008	Acquires L. Bösendorfer Klavierfabrik GmbH	Acquires NEXO S.A.
2010	Transfers shares of the lifestyle-related products subsidiary	Completes integration of Japanese piano factories to Kakegawa
2012	Completes integration of Japanese wind instrument factories to Toyooka
	Celebrates 125th anniversary of foundation2014	Establishes three domestic musical instrument and audio equipment production subsidiaries
after the split-off and merger
Acquires Line 6, Inc. and Revolabs, Inc.

Annual Report 201497

Yamaha Product History
1887
1887 Organs
Woodworking skills◆

Pianos◆Wind instruments
and educationalmusical instruments◆

String instruments◆

Percussion instruments

1900

Wood processing

1900 Upright pianos
1902 Grand pianos
Artificial seasoning of wood1947 Began manufacturing
piano frames
Metal molding

1960
1967 CF series concert grand pianos

Acoustic technology
Coating/Chemical technology

Coating

1965 Trumpets
Brass processing
1967 Saxophones, etc.
1966 Electric guitars

1914 Harmonicas
1941 Acoustic guitars
Wood processing
Coating

1966 Drums
Air-seal system

1915 Xylophones
Sound synthesis
technology

◆

1950

1959 D-1 Electone electronic organ
Analog modelingElectronics technology

Digital musicalinstruments

1969 VA-120 vocal amplifier system❖ PA equipment◆

AV products

1954 HiFi players
HiFi audio

1922 High-quality hand-cranked
phonographs
Coating
Wood processing

Speaker technology◆

1967 NS speaker
Divided diaphragmflat-panel speaker

Semiconductors
Integrated circuit technology◆

IT equipment◆

Music entertainment
business and others◆

Others1921 Import and sales ofoverseas-made musicalinstruments and musicscores1954 Began Yamaha Music
School activities
Music Music schools◆

Schools, events◆

Lifestyle-related
products◆

Sports equipment

◆

◆

98

1903 Fine wooden furniture
Wood processing
Coating

Materials development
1959 FRP archery products (~2002)
FRP (Fiber Reinforced Plastics)
molding

Yamaha Corporation

1961 FRP skis (~1997)
FRP molding
1964 Toba Hotel International opened(Business transferred in 2007)
1967 Nemunosato opened(Business transferred in 2007)
Musical events and leisure

Resorts

Yamaha Motor Co., Ltd.

1961 Iron-aluminum alloy/
copper-titanium alloy
1962 Iron-nickel alloy (permalloy) (~2007)
Permalloys
1965 Opened the first overseas
Yamaha Music School in the U.S.
1967 First Light Music Contest heldin Japan (~1971)
1969 First Composition Contest held
(Later renamed the PopularSong Contest) (~1986)
Musical events
1964 FRP bathtubs
FRP molding

Wood processing
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

1970

1980

1990

1982 Disklavier player piano
Player piano technology

1991 CFIIIS concert grand piano
1993 SILENT Piano
Silencing technology
1995 SILENT Disklavier player piano
1995 GranTouch hybrid pianoHybrid piano technology

2000

2010
2010 CFX concert grand piano

1990 Xeno brass instrument series
1995 SILENT BRASS system (pickup mute)
Silencing technology

1973 Pianica

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

1983 Electric acoustic guitars

1997 SILENT Violin

1986 PMC1 electronic drum

1996 SILENT Session Drum1980 Portable keyboards
1983 DX7 digital synthesizer
FM synthesis
1983 Clavinova digital piano
1987 WX7 wind MIDI controller

1993 VL series virtual
acoustic synthesizers
Physical modeling synthesis

Digital technology
1974 PM-1000 mixing console
Analog mixers

1985 SPX90 digital multi effects processor

1974 NS-1000M speaker witha beryllium diaphragm
Speaker with a beryllium diaphragm1975 Headphones
1972 Sound generator LSIs for
the Electone electronic organ
LSI for musical instruments

Information processing technology
Signal processing technology

Architectural acoustics
1974 Computer-generated
architectural acoustic simulation

1972 Sponsored the first Junior
Original Concert (JOC)

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

1973 Tennis rackets (~1997)

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

2010 DTX900 series electronic drum
Textured cellular silicon drum pad2012 CL Series Digital mixing consoleCentralogic
VCM technology

2000 AW4416 digital audio workstation
Audio workstations

1995 Theater sound system
Theater surround2001 PM1D digital audio mixing system
2008 POCKETRAK CX pocket recorder2004 YSP-1 Digital Sound Projector
Sound beam control speaker2010 AVENTAGE AV receiver
CINEMA DSP HD3

2006 SR-Bass Speaker NX-A01
SR-Bass

2010 Earphones

1988 AST-1 speaker incorporated Yamaha
Active Servo Technology (YST)
YST
1983 FM synthesizer LSIs
1983 Graphics controller LSIs
LSI for PC/video games

1999 Sound generator LSIs for mobile phones
LSI for mobile phones

Computers
1983 MSX personal computers

1993 CD recorders (~2003)
1993 Online karaoke equipment
Online karaoke equipment
1995 Remote routers
Routers

1986 SRS (Sound Room System)
music room for home use
1989 Avitecs soundproof room
Soundproof room

1984 Industrial robots
1991 Thin-film magnetic heads (~2000)
Thin film deposition
Robots1989 Automobile interior wood components 1997 Magnesium cases (~2010)
Magnesium molding
Automobile interior wood components
1986 Began Popular Music School
1987 Began English language schools
English language schools
1987 First Teens’ Music Festival (~2006)
Musical events

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

PCM synthesis
2001 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 piano
VACM synthesis

2011 THR guitar amplifier
VCM technology

1994 ProMix 01 digital mixing console
Digital mixers

Digital effect1974 B-1 power amplifier
Power-FET

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

2002 LSIs for digital amplifiers
LSI for digital amplifiers
2005 Magnetic sensor
GMR technology
2006 IP conferencing systems
Teleconference

2011 VSP-1 speech privacy system
Sound masking
2011 Thin light flexible speaker
Psychoacoustic technology
Electrostatic speakers
2011 Smart L2 switches
2012 INFOSOUND acoustic data communication technology
Acoustic communication technology
2013 Wireless LAN access points
Online services
2000 Mobile phone ringtone distribution service 2010 Acoustic conditioning panel
Sound field control
2000 Digital sheet music distribution service
DTM
2003 VOCALOID singing synthesis software
Singing synthesis technology
2009 BODiBEAT interactive music playerMusical instrument rental service
2003 Musical instrument rental service
2005 Opened Yamaha Music School in China
2006 Started music lessons online service
Online lessons
2007 First Music Revolution contest held
Musical events
2002 System kitchens with artificial marble sinks
Marble sinks

1982 System bathrooms

Lifestyle-related products business
transferred in 2010

Titanium casting1982 Golf clubs
2002 inpres golf clubs
1986 Acuras series carbon composite golf club
Carbon composite
1991 Kiroro opened (Business transferred in 2007)

1994 PAS electrically power-assisted bicycle

2002 Electric commuter motorcycle

Annual Report 201499

Corporate Planning Division
http://www.yamaha.com/

Printed in Japan on FSC-approved paper using vegetable oil inks
and waterless printing processes.

2014/7 – CM142