MESSAGE FROM THE PRESIDENT

Yamaha is accelerating initiatives in response to social change to accomplish its management vision of "Becoming an Indispensable, Brilliantly Individual Company."

I would like to begin by expressing my condolences for anyone who has lost loved ones to the global COVID-19 pandemic and by extending heartfelt thoughts and prayers to everyone who has been otherwise impacted by this catastrophe.

Operating Environment amid the COVID-19 Pandemic in Fiscal 2021

Management

Yamaha has been unable to escape the heavy impacts of the COVID-19 pandemic, which has continued since 2020. This catastrophe has had a myriad of impacts, both positive and negative, on our products and business activities. For exam- ple, the supply shortages seen in the second half of the fiscal year adversely impacted sales growth, creating a situation in which accomplishing the financial targets set forth by the Make Waves 1.0 medium-term management plan for fiscal 2022-its final year-is now unrealistic. Regardless, I am confident that the path we have taken during this crisis has been the right one. In fact, it could be said that we have been brought closer to the future we envisioned as a result of the pandemic. This realization reaffirms the need to further accelerate the initiatives we have put forth.

  • A positive thing to come out of the pandemic was the creation of opportunities for increased focus on the role of music as people were forced to remain at home and suffer from various constraints. This situation led to strong demand for such Yamaha offerings as digital musical instruments, such as digital pianos and portable keyboards, as well as for guitars and acoustic pianos. By capitalizing on this demand, we were

able to help soothe and fulfill people in the midst of this trying reality. As for negative impacts, the area in which we were most affected was our supply chain. Yamaha had decentralized its production and procurement venues as a

precaution based on our experience with the Great East Japan Earthquake. However, we had not anticipated a situation in which a pandemic would simultaneously affect countries across the globe, forcing us to stop all of our factories. As a result, we were unable to furnish a sufficient supply for meeting the growing demand, and this is a shortcoming that we must reflect on. Another factor we had not accounted for was how, unlike earthquakes and other natural disasters, which have large immediate damages but see gradual recoveries thereafter, the COVID-19 pandemic is a disaster that persists, with no clear end currently in sight. The takeaway from this is that we must focus on increasing our resilience going forward, as opposed to merely pursuing cost reductions and efficiency improvements. Increasing resilience will entail a multifaceted approach toward reforming supply chains, including applying more varied inventory policies and installing additional flexibility into production systems. Yamaha felt the impacts of the pandemic more acutely than other companies because the Company deals in such a wide range of instruments. There was thus a need for us to swiftly implement remote work systems and undertake digital trans- formation, which prompted us to adopt development, produc- tion, and sales methodologies that are innovative within the industry a step ahead of our peers.

Strategy

Progress in Second Year of Make Waves 1.0 Medium-Term Management Plan

Takuya Nakata

Director, President and Representative Executive Officer

Yamaha is currently in the process of advancing its medium- term management plan that covers the three years spanning from fiscal 2020 to fiscal 2022. Looking back at past plans, the theme of YMP125 (April 2010-March 2013) was "rebuild business platforms," the theme of YMP2016 (April 2013- March 2016) was "increase profitability," and the theme of NEXT STAGE 12 (April 2016-March 2019) was "increase brand power," which aimed at taking the Company to a new growth stage. These plans were followed by Make Waves 1.0, the current medium-term management plan. Launched in

April 2019 with the goal of furthering us toward the accomplishment of our management vision of "Becoming an Indispensable, Brilliantly Individual Company," this plan positions its period as the stage in which we should develop closer ties with customers and society and boost value creation capabilities.

  • As this plan has completed its second year, I would like to take this opportunity to discuss the progress of this plan in relation to Yamaha's principal businesses and the plan's four key strategies.

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YDS-150digital saxophone
Yamaha Ginza Building's hands-onexperience space-keybetween people
Yamaha brand audio system installed in ZEEKR001 vehicle produced by Zhejiang Geely Holding Group Co., Ltd.

MESSAGE FROM THE PRESIDENT

MESSAGE FROM THE PRESIDENT

Performance in Business Segments

Musical Instruments Business

Disparity between Performance by Instrument Type

In the musical instruments business, we saw robust demand for digital pianos, portable keyboards, and guitars, but we were limited in our ability to cater to this demand due to supply shortages. Conversely, demand for wind instruments was low due to halts to brass and wind instrument band activities and school closures. As wind instruments are played using one's breath, there is concern that wind instrument performances could result in the spread of COVID-19 infections via airborne droplets. Accordingly, performance related to these instruments will likely continue slumping over the foreseeable future. Overall, the musical instruments business recorded reductions in revenue and profit due to the challenges presented by the COVID-19 pandemic. However, we did make progress in steps to overcome these challenges including price optimization and cost reductions. Meanwhile, we sought to create new value through the development of unique and distinctively Yamaha products that merge digital and acoustic technologies as well as the associated sensibilities. Examples of these products include the YDS-150 digital saxophone, which incorporates

with the development of technologies aimed at delivering new value by synchronizing sound and music across the physical limitations of distance through the union of PA and ICT equipment technologies. These efforts have led to successes in the forms of the SYNCROOM online remote ensemble performance service and the Remote Cheerer powered by SoundUD remote cheering system. These offerings have garnered attention as services matched to the social needs emerging amid the current restrictions on movement of people. Both are at a stage in which we can begin to pursue commercialization. We expect that, even in the new normal that will emerge after the pandemic has subsided, people will retain their desire to connect with others even when physically separated. Accordingly, Yamaha believes that these products will be able to continue contributing to society on into the future.

Industrial Machinery and Components Business Start of Production of Automotive Audio Systems The industrial machin-

ery and components business achieved higher profit due to

Basic Medium-Term Strategy

Develop closer ties with customers and society, and boost value creation capabilities

Yamaha value creation

Social value creation

Key strategy 1

Key strategy 2

Key strategy 3

Key strategy 4

Contribute to society through

Develop closer ties with customers

Create new value

Enhance productivity

our businesses

Management

Reflect society's values in our own

Profitability

=

Customer value

×

Productivity

Strategy

values over the medium to long term

cutting-edge digital technologies, and the THR30IIA Wireless amplifier for guitars, which delivers authentic audio from its compact body through wireless connections.

Audio Equipment Business

Growth Creating High Expectations for ICT Equipment Even amid Adversity

The COVID-19 pandemic affected different areas of operations to varying degrees in the audio equipment business, but overall this business posted decreases in revenue and profit. Performance of sound bars and other household AV products was strong due to their ability to accommodate demand related to people increasingly staying at home. However, we were affected by supply shortages in this area. Meanwhile, sales were stagnant for professional audio (PA) equipment due to the trend toward refraining from holding music events, while ICT equipment enjoyed impressive growth as a result of the normalization of teleworking and remote meetings. Yamaha has continued to move forward

SYNCROOM online remote ensemble performance service

favorable performance for automobile interior wood components and factory automation (FA) equipment. In addition, we commenced mass pro-

duction of automotive audio systems in November 2020 following the decision by multiple Chinese automobile manufacturers to use these systems in their products. We were able to receive these orders due to our focus on the growth market of automotive audio systems for the purpose of expanding our business-to-business (BtoB) operations in the area of audio, which it should go without saying is an area of expertise for Yamaha. The orders will entail more than the supply of speakers to be installed in vehicles; we will also provide equipment such as amps as well as a variety of solutions related to in-vehicle audio. Furthermore, the launch of vehicles, cutting-edge electric vehicles (EVs) nonetheless, that bear the Yamaha logo on their audio systems is anticipated to help heighten our brand image.

Initiatives Based on Four Key Strategies

Develop Closer Ties with Customers

Enhancement of Brand Value through Both Physical and Digital Approaches

Even during the COVID-19 pandemic, we continued efforts to expand and strengthen points of contact with customers through both physical and digital approaches. In Japan, our directly operated musical instrument stores in Ginza and Nagoya were renovated and reopened as experience-oriented brand shops. Many visitors to these stores have posted comments describing the enjoyment the stores offered on social media, indicating that we have been successful in communicating our desired message. Efforts in China included the use

of new marketing practices, such as live commerce, an approach toward face-to-face sales that takes advantage of the internet. These marketing frameworks are also being exported to Japan and other regions. In

addition, let me say that we have made strides in penetrating the Chinese market, as indicated by sales growth at physical venues surpassing the targets of our medium-term management plan. Elsewhere, we set up a proprietary e-commerce website India, which has gotten off to a strong start and is currently enjoying rising access numbers.

  • Our progress in developing customer data platforms (CDPs) varies by country, but we were still successful in accumulat- ing a certain degree of data, and we have begun using this data for certain applications. Accordingly, we believe we are at a stage in which we can commence more full-fledged utilization of customer data. We also implemented internal measures aimed at creating the foundations for growing lifetime value from customers. Examples of these measures including setting up the Yamaha Marketing University program and arranging skill-enhancing lectures for business divisions.
  • It is common for customers to be awakened to the quality of Yamaha's musical instruments after actually taking them in hand and playing them. For this reason, physical sales venues will definitely continue to be important going forward. This is also the reason why we have been enhancing our stores and increasing store numbers even amid the pandemic. We also believe that a balanced hybrid marketing approach combining

online and offline measures will be crucial in the new normal that will emerge after the pandemic has subsided. Meanwhile, there can be no doubt that we will see a rise in purchases made completely through e-commerce, with the buyer never

actually taking an instrument in hand before the purchase. For many customers making such purchases, the reliability of the Yamaha brand will certainly be a source of reassurance. Fortunately, the Yamaha brand has grown into a significant source of strength for us today. I also recognize that we must continue to refine this brand going forward. Ongoing effort will be imperative for this purpose, and we therefore intend to advance our current strategies in a continuous and accelerated manner.

Create New Value

Combination of Yamaha's Distinctive Technologies

and Sensibilities

Yamaha's successes in creating new value in fiscal 2021 included the aforementioned digital saxophone as well as the Charlie™ communication robot, which communicates via singing. In addition, the ADECIA comprehensive remote conferencing solution is an example of a product that responds to the new needs arising in response to the COVID- 19 pandemic. This solution is making large contributions to flexible workstyles and comfortable communication in preparation for the new normal to be seen after the pandemic. Meanwhile, SYNCROOM and Remote Cheerer powered by SoundUD received incredibly positive responses from users in the verification test phase. These offerings help address contemporary social issues, namely the need to connect with people while avoiding physical contact. If we can just clear the quality hurdles, primarily by improving the precision of their technologies and fixing any defects, I am confident that these solutions will become commercially viable. Another area in which we anticipate future growth is Yamaha brand automotive audio systems. In this area, we will supply ­solutions related to automotive audio and to engineering designed to ensure faithful recreations of the tones of instruments by speakers, amp, and signal processing equipment. We thereby hope to deliver inspiring experiences that allow users to enjoy the pinnacles of music quality in their vehicles.

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MESSAGE FROM THE PRESIDENT

MESSAGE FROM THE PRESIDENT

Yamaha has accumulated significant insight through its ongoing involvement in basic research from the material level. We are thus poised to combine our diverse technologies and sensibilities to create new value for the digital society in the post-COVID-19 era and to improve lifetime value for custom- ers. Going forward, we will continue proactive R&D investments aimed at creating new value by combining the strengths of our technologies and sensibilities.

Enhance Productivity

Pursuit of Increased Profitability Capitalizing on High Levels of Value

We are targeting a net cost reduction of ¥5.5 billion over the three-year period of the medium-term management plan. We made smooth progress in fiscal 2020, the first year of the plan, with cost reductions totaling ¥2.0 billion. In fiscal 2021, however, we prioritized the maintenance of production functions in response to supply shortages, and cost reduction efforts did not proceed as planned as a result. Nonetheless, the fact that we did not experience a significant rise in costs, despite this situation, should be seen as a positive develop- ment. In this manner, rather than rigidly adhering to a policy of cost reduction going forward, we intend to emphasize the resilience of our supply chain. As one facet of these efforts, we are working to cut fixed costs by tightening our belts while remaining cognizant of the need to incur levels of cost that are appropriate for each application. Our initiatives amid the COVID-19 pandemic will no doubt prove to be beneficial after the end of the pandemic. We therefore expect that profitability improvements will accelerate over the medium to long term.

  In regard to price optimization, we are past the phase of

uniformly raising selling prices to more appropriate levels.

Now, we are in a phase in which we need to supply products

that offer new forms of value and to receive levels of com-

project. Quite the contrary, the services we offer through this project remained in strong demand, and the total number of participants thus climbed past 710,000 in fiscal 2021, the second year of our medium-term management plan, putting us well within sight of the plan's three-year target of one million participants. This result exceeded our expectations, all the more impressive given the pandemic, highlighting the strong desire people feel for music.

Class held as part of the School Project (program for promoting instrumental music education in emerging countries)

  • In January 2021, we established the Sustainability Committee as a body through which management can directly monitor Companywide sustainability initiatives. In

addition, we set up five theme-specific working groups under this committee-the Working Group for Climate Change, Working Group for Resource Circulation, Working Group for Procurement, Working Group for Human Rights, D&I, and Working Group for Cultural Contributions. These organizations are tasked with discussions based on our sustainability priorities (materiality) for the purpose of fostering Groupwide

Strategy Management

  Sustainability is not a pursuit to be limited to certain groups

measures, it is important for management and all other

of people. The Sustainability Committee and the working

employees to pool their wisdom to ensure we can move

groups are, at the end of the day, merely forums for discuss-

forward in this area.

ing and formulating measures. In actually advancing those

Never-Ending Pursuit of New Pinnacles for Corporate Governance

pensation matched to said value. The THR30IIA Wireless

amplifier for guitars mentioned earlier is one example of such

a product. This product costs roughly three to five times more

than preceding products with similar applications. However, it

has been incredibly popular among customers regardless of

this price tag. Increases in costs, such as those for parts, are

of course one factor behind the higher price tag. More signifi-

cant, however, is that these products provide new value

based on unprecedented concepts, and that customers have

recognized this value. We will continue to build upon this

approach going forward with the aim of making Yamaha an

even more profitable company.

Contribute to Society through Our Businesses Establishment of the Sustainability Committee

Based on the belief that the creation of social value will in turn generate corporate value, Yamaha seeks to contribute to the resolution of social issues and to the accomplishment of the SDGs through its business. With this focus, fiscal 2021 became a year in which we were once again reminded of the power of music. For example, we have been advancing the School Project for some time now, and we had worried that the limits on face-to-face interaction imposed in response to the COVID-19 pandemic would impede the progress of this

sustainability awareness. Our sustainability priorities are revised periodically. In these revisions, we seek to identify issues that better account for the unique characteristics of Yamaha so that these issues can be a central focus of future business activities. Moreover, our intent is not to attach the concept of social and environmental contributions to our existing management practices. Rather, we look to place such contributions at the heart of our management in order to transform internal thinking. One area of these contributions is the fight against climate change. Issues in this area have the potential to seriously impact the scarce timber used in our products. For this reason, our initiatives for combating climate change go beyond the expected efforts to pursue carbon neutrality by preserving forecasts and supporting forestry cycles; we are also developing materials that can be used in place of scarce timber. These efforts require us to call upon Yamaha's exceptional technological prowess. Yamaha stands out among other musical instrument manufacturers from around the world in that it has a particularly strong obligation to help address social issues through the use of tech- nology. Looking ahead, it can be expected that a sustainability perspective will be more important than ever in realizing our management vision of "Becoming an Indispensable, Brilliantly Individual Company."

Since the transition to the Company with Three Committees (Nominating, Audit, and Compensation) structure described in the Companies Act of Japan in 2017, Yamaha has continued to strengthen oversight with a Board of Directors membered by a majority of outside directors. We welcomed a new outside director after receiving approval at the General Shareholders' Meeting held in June 2021, meaning that membership of the Board of Directors currently stands at two inside ­directors and six outside directors, making for the same composition as we had in June 2020. In addition, we call upon the ­services of external experts when conducting the annual evaluation of the Board of Directors' effectiveness. The Board commits to pursuing improvements with regard to any issues identified, and these improvements are positioned as a ­priority in the following year in order to drive steady, year-by- year progress.

  • In 2020, we established the new position of audit officer. Audit Committee members have had a positive opinion of these new officers, and their benefits are already appearing. Our Audit Committee is comprised exclusively of outside directors designated as independent directors in order to improve its objectivity and strengthen its oversight function. This arrangement and the resulting lack of full-time mem- bers of the Audit Committee, however, has created issues with members facing difficulty in collecting information. The

position of audit officer was created to rectify these issues.

Audit officers differ from executive officers and operating officers and have the same authority of the corporate auditors of the past. Among other duties, these officers are tasked with supporting members of the Audit Committee. Furthermore, we have expanded the staff of the Internal Auditing Division by appointing more appropriately skilled human resources based on recommendations from members of the Audit Committee stating that this division needed to be made stronger.

  • We also recognize that the cultivation of successors for management positions is a crucial element of corporate gov- ernance. The Nominating Committee is developing frame- works for identifying and evaluating individuals with the potential to become such successors. In addition, frame- works are being created for ensuring objectivity by contract- ing third-party institutions to perform 360° evaluations of these individuals, allowing for the amassed evaluation data to be shared within the Company. Our human resource base is structured in levels, starting with the president and spreading out to executive officers and so forth. We are now at a stage in which outside directors are evaluating junior employees. In addition, the Board of Directors has implemented a program for fostering future management candidates and arranges forums for discussion and engagement with these candi- dates. In selecting candidates for the position of president, we consider qualities that are commonly sought for such

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MESSAGE FROM THE PRESIDENT

MESSAGE FROM THE PRESIDENT

positions, like strong leadership skills and a global mindset. At the same time, we place emphasis on finding candidates who understand the essence of Yamaha.

  • As for risk management, we prepare risk maps that catego- rize risks and quantify the degree to which we are currently prepared to mitigate these risks, based on which we prioritize the risks to be addressed. These risks maps are revised on an annual basis. The fiscal 2021 revision included raising the rating of procurement risks. Up until now, we have faced no particu- lar obstacles to procuring parts. Accordingly, procurement risks were rated to be small in terms of both impact and frequency. However, the COVID-19 pandemic made the importance of supply chain resilience painfully clear, prompting us to raise the impact rating for procurement risks to large.
  • Another important priority is compliance. I have frequently communicated our stance of staunch opposition toward harassment and all other compliance violations, and we have sought to foster a corporate culture of compliance starting with reforms to the mindsets of individual employees. At the same time, we have developed rigorous systems for ensur- ing compliance. In Japan, we have been steadily moving forward with initiatives including online awareness-raising programs and the expansion of external consultation venues. Globally, we have completed the installation of compliance helplines, and will devote steadfast effort to improvements by means such as spreading awareness regarding helplines, developing manuals, and implementing ongoing employee education programs.

Rising Importance of Employee Engagement

In fiscal 2022, there are two matters I want to emphasize in light of this being the final year of the current medium-term management plan and to ensure the smooth start of the next medium-term management plan. The first is the aforementioned Companywide entrenchment of sustainability aware- ness. The second is the creation of an open corporate culture in which everyone respects one another.

  The COVID-19 pandemic provided an opportunity for us to

reexamine how people work. I do not feel that there is a need

for us to choose between remote work and office commut-

ing. Rather, I think that each individual should be able to

choose their ideal workstyle based on their rank and circum-

stances. In Japan, we formerly introduced a remote work

system in October 2020, and we intend to continue offering

Online discussion between President Nakata and employees

Strategy Management

workstyles that use both remote work and office commuting

even after the pandemic has subsided. Incorporating remote

work requires us to transition from the prior membership-

type systems to job-type systems. Moreover, we will need to

implement flexible measures based on the labor laws of each

country of operation, rather than uniformly applying the same

rules. I also expect that we will see changes to our evaluation

and compensation frameworks. Yamaha has continued to

implement gradual, yearly changes to its human resource

systems based on a contemporary view of work-life balance.

However, we have now entered into an era in which we are

pressed to develop completely new systems based on new

ways of looking at human resource management.

  Systems are, of course, important. However, what I want

to emphasize even more is employee engagement. In an

awareness survey submitted to all employees in 2020 indi-

cated, we received write-in comments to open-answer ques-

tions from an astounding 6,500 employees. I read each of

these comments, which opened my eyes on a lot of matters.

Most notably, I was reminded that communication is impor-

tant above all else. This communication must be facilitated in

a variety of directions, between the Company and employees,

between supervisors and their subordinates, and between

workplace colleagues. This recognition led me to engage in

more than 40 online discussions with employees working

around the world over the past year (as of June 30, 2021).

Managers of all levels followed my example and began arranging similar discussions with employees. Remote work reduces our opportunities to bump into someone else and strike up a conversation. However, if you are willing to put in the legwork, the current environment actually provides the opportunity to converse with an even wider range of people. I therefore hope to take advantage of the unique circumstances we face to invigorate internal communication.

  • We also advancing initiatives for raising diversity and inclu- sion awareness based on the belief that diversity will be the driving force behind the creation of new value for Yamaha.
    Online seminars are being arranged for this purpose, and we have established the Working Group for Gender Equality under the Human Resources Development Committee. This working group is meant to function as a forum for members of senior management and executive general manager-level individuals to discuss ways of empowering female employ- ees for the purpose of shaping initiatives for removing the various social obstacles placed before women. We have been seeing a gradual change in internal awareness as a result of these efforts. However, we understand that people's thinking is not something that can be changed overnight, and we are therefore committed to ongoing, Companywide action. Diversity and inclusion will also likely have a more prominent position in the next medium-term management plan.

In Closing

We have six months left in the Make Waves 1.0 medium-term management plan. We are making steady progress in initiatives based on the plan's four key strategies. However, as

I stated earlier, the accomplishment of the plan's financial targets is no longer realistic. Accordingly, fiscal 2022 will be positioned as a period for recovering to the state seen before the COVID-19 pandemic and for preparing for the next medium-term management plan. Regardless, I am convinced that the path we have walked these past few years has not been mistaken. I therefore do not feel that we need to change the course of our Companywide strategies. Quite the contrary, we should accelerate these strategies. The operating environment seen in the second half of fiscal 2021 made it apparent that the demand for Yamaha's business, although currently slumping, will return, making it different than the types of demand that cannot be expected to recover to pre- COVID-19 levels, like business-related transportation. I also see hope for the future in the relisting of the shares of another major musical instrument manufacturer on the stock exchange as this development represents increased interest for our industry from capital markets and demonstrates that the industry as a whole is regaining its vigor.

  • Yamaha is a company that provides musical instruments and audio equipment.These items may not be daily living necessities,

but I believe that they are human necessities. Even amid the upheaval caused by the pandemic, people sought our prod- ucts. This reaffirmed my belief that Yamaha's products are indeed necessities. If Yamaha can continue to supply products and services that enrich people's lives by fulling their most fundamental of needs, the need to feel as though one is living a life of human dignity, it will certainly be able to contribute to society while growing itself.

  • I look forward to increasing the range of opportunities I have to engage with shareholders, investors, and other stakeholders through online and other venues. I would also like to ask our stakeholders for their continued support going forward.

September 2021

Takuya Nakata

Director, President and Representative Executive Officer

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MAKE WAVES 1.0 MEDIUM-TERM MANAGEMENT PLAN

Review and Progress of the Medium-Term Management Plan

MAKE WAVES 1.0 MEDIUM-TERM MANAGEMENT PLAN

Approach to Formulating the Medium-Term Management Plan

Financial Results

J-GAAP

IFRS

Net sales*1 / Revenue (Billions of yen)

Operating income*1 / Core operating profit (Billions of yen)

Operating income ratio*1 / Core operating profit ratio (%)

12.8%

12.1%

2.5%

9.3%

2013/3

2016/3

2019/3

YMP125

YMP2016

NEXT STAGE 12

Final year

Final year

Final year

Net sales*1 /

366.9

435.5

437.4

434.4

Revenue (Billions of yen)

Operating income*1 /

9.2

40.7

56.0

52.7

Core operating profit (Billions of

yen)

Operating income ratio*1 /

2.5%

9.3%

12.8%

12.1%

Core operating profit ratio

ROE

1.9%

10.1%

11.4%

11.1%

EPS

¥21

¥169

¥241

¥222

13.8%

11.8%

2022/3

Make Waves 1.0

Final-Year Targets

(Initial Targets)

(Forecasts)*2

470.0 400.0

65.0 47.0

13.8% 11.8%

11.5% 10.0%

¥270 ¥233

Amid the rapid changes occurring in the operating environment, the environment within the Company's business domains, which center on sound and music, is undergoing particularly dramatic changes. In light of these changes, we formulated our Makes Waves 1.0 medium-term management plan by making use of the backcasting method. Under this method, we established a long-term outlook for the future and analyzed how the changes in the operating environment would impact our business. We then examined which domains would allow us to realize further development as a company as well as the future growth opportunities and risks that may arise.

Assumptions of Our Outlook for the Future Business Environment (Megatrends)

Analysis of Impacts on Operating Environment

(Examination of Development Domains, Growth Opportunities, and Risks)

Management

Environmental Changes That Majorly Impact Yamaha and Related Growth Factors and Strengths

As the industrial structure changes rapidly due to the acceleration of digitalization, we are now able to form closer ties with our customers.

Strategy

Additionally, with remarkably enhanced levels of convenience realized through AI and the IoT, we find ourselves entering an era where there

will be a greater demand for emotional satisfaction and authenticity. We are also seeing an even greater social awareness of sustainability.

These operating environment changes are indicative of wide-ranging growth areas in which Yamaha is primed to capitalize on the technolo-

gies and foundations it has developed thus far.

Transformations

Long-cultivated,cutting-edge digital technologies

caused by accelerated

Utilization of network technologies

digital technologies

Progression of direct digital marketing

*1 The Company employed J-GAAP standards until fiscal 2019 and IFRS beginning in fiscal 2020. *2 Forecasts were announced in May 2021.

Review of Prior Medium-Term Management Plans

Over the nine-year period encompassing the previous three medium- term management plans-YMP125 (April 2010-March 2013), YMP2016 (April 2013-March 2016), and NEXT STAGE 12 (April 2016- March 2019)-Yamaha undertook the selection and concentration of its diversified businesses to focus more on its core businesses centered on sound and music while also reinforcing the growth foundations of these core businesses. Net sales growth over this period was relatively flat as a result of the declines associated with the withdrawal from businesses as part of our concentration on core businesses combined with the impacts of substantial yen appreciation. Conversely, a massive increase was seen in operating income, which amounted to ¥13.8 billion, with an operating income ratio of 3.0%, in fiscal 2009, prior to the start of YMP125, but then climbed to ¥56.0 billion, with an operating income ratio of 12.8%, in fiscal 2019. This increase was achieved in conjunction with structural improvements to profitability. Particularly large contributions to the improvement of profitability came from our exiting unprofitable businesses through the process of concentrating on the musical instrument and audio equipment businesses, consolidating and reorganizing factories in core businesses, and moving toward fabless manufacturing in

Progress of Make Waves 1.0 Medium-Term Management Plan

In the first year of the Make Waves 1.0 medium-term management plan, sales and profit were down due to negative foreign exchange influences as well as the impacts of the COVID-19 pandemic felt in the fourth quarter. In fiscal 2021, the second year of the plan, sales and profit were once again down as the pandemic spread on a global scale, resulting in store closures, activity restrictions, and subsequently reduced demand during the first half of the fiscal year, and as we suffered from increasingly serious difficulties in procuring components in the second half of

semiconductor operations. Other major profitability improvement factors included our strengthening development, sales, and marketing foundations by transitioning from business-based organizations to function-based organizations as well as the resulting improvements in value levels achieved by integrating technologies, continuously reducing manufacturing costs, and optimizing processes. Furthermore, we established the Innovation Center and conducted strategic growth investments for constructing two new overseas factories under NEXT STAGE 12, the previous medium-term management plan.

  • The key strategies of NEXT STAGE 12 progressed more or less as intended, and we were able to achieve the targets of this plan. However, the plan also revealed business segment issues related to delays in addressing changes in demand for AV products in the audio equipment business and sluggish growth in sales of professional audio (PA) equipment. Market segment issues were also identified, namely struggling growth of sales in emerging markets, where we were facing unfavorable progress in developing operating founda-

tions. Meanwhile, asset efficiency issues were faced in terms of difficulty in identifying opportunities for strategic investment. We continue to address these issues under the current medium-term management plan.

the fiscal year due to ongoing restrictions on production activities in Indonesia and other countries as well as a fire at a semiconductor supplier. Even amid this adversity, the development of highly unique products moved forward as planned. In addition, we made steady progress in the measures of the medium-term management plan, including the reformation of customer data platforms (CDPs), next- generation supply chain management (SCM) systems, and processes as well as other digital transformation initiatives; the improvement of rates of certified timber use; and the transition to renewable energy for 100% of the electricity purchased at our Company headquarters.

Greater diversity in

Scientific insight on sensibilities

Provision of emotional satisfaction through the unique strength of combining

lifestyles and

technologies and sensibilities

senses of value

Progression of direct digital marketing

Heightened awareness

Utilization of advanced materials technologies

Initiatives toward sustainable timber procurement

of sustainability

Initiatives to help resolve social issues through sound and music

Directives of the Medium-Term Management Plan

In the era in which there is greater demand for emotional satisfaction and authenticity, the need for emotional value will unquestionably surpass the need for functional value. Our business domains center on sound and music, which offer significant value in the form of sensibilities and emotional impact. In these fields, these changes in needs will no doubt provide a positive boost to the Yamaha Group, which has assessed sound and musical instruments as a part of culture itself and has striven to refine its technologies and sensibilities.

  • It is therefore imperative that we fully leverage our strengths to capitalize on this growth opportunity by enhancing our ties with custom- ers and society as well as our connection to market growth and growth domains.

The world is undergoing major changes at a rapid pace due to accelerated digitalization

and diversification of value systems.

Combining technologies and sensibilities presents

growth opportunities for Yamaha

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Yamaha Group Annual Report 2021

Yamaha Group Annual Report 2021

29

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Yamaha Corporation published this content on 25 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2021 04:59:07 UTC.