Yamaha Medium-Term Management Plan April 2019 – March 2022 Review of the Previous Medium-Term Management Plan Key strategies progressed largely as planned, and medium-term targets have been achieved. Note: projected figures are as of date of announcement of new medium-term plan (April 12, 2019) Progress on Key Strategies Financial Results NEXT STAGE 12 • Launched many unique products by Sales Develop (billion yen) merging technologies Operating income products with (billion yen) distinctive • Won numerous design awards globally Operating (Good Design Grand Award, etc.) income ratio individuality (%) 12.5% 12% 10.9% 11.3% • Expanded account numbers (as planned) 9.3% Enhance (10% increase in contract dealers, 50% increase in FY2016.3 FY2017.3 FY2018.3 FY2019.3 FY2019.3 audio contractors) results results results projection medium-term customer target interaction • Promoted music popularization for learning musical instruments in emerging markets (to 260,000 people Sales 435.5 408.2 433.0 440.0 465.0 in cumulative total, 160% above target) Operating income 40.7 44.3 48.8 55.0 55.0 Operating • Progress in reducing costs did not fully compensate % % % % % Continually income ratio 9.3 10.9 11.3 12.5 12 for rising procurement prices, and net cost savings reduce costs amounted to ¥5.3 billion (vs. target of ¥8.0 billion) ROE 10.1% 14.0% 14.5% 10.3% 10% level EPS ¥169 ¥249 ¥292 ¥220 ¥200 level Earnings per Share Exchange US$ 120 Strengthen 108 111 111 115 • Global human resource management, establishment rates EUR 133 119 130 128 125 global of three global IT headquarters, and introduction of business IFRS (in April 2019) platforms Total Shareholder Return 168% over 3 years 2 Copyright 2019 Yamaha Corporation All rights reserved Value Creation Story to Realize Vision Management Vision （Our future image Becoming an Indispensable, Brilliantly Individual Company in the medium-to-long term） Boost brand power to become a highly profitable enterprise [Core operating income ratio of 20%] Enhance corporate value and realize vision by creating social value Business Activities Value Provided Social Value Creation Musical instruments Contribute to rich musical culture Contribute to spiritually rich lives and pleasant societies • Supply products to 161 countries and • Contribute to global music scene Management Vision region in a wide range of categories and advancement of musical culture through sound and music and price brackets as a • Lower the threshold to playing Spiritually rich lives Becoming an comprehensive manufacturer of musical instruments and expand the musical instruments Indispensable, number of players Lives enriched by music Music popularization Diverse forms of expression and self-actualization Brilliantly Individual • Operate music schools for children Spread the joy of music • Create opportunities for children Interpersonal connections and adults in 44 countries to come into contact with music Company • Promote music popularization for Development of global music culture learning musical instruments in • Spread the joy of music in emerging markets countries and regions devoid of Pleasant societies music lessons Audio equipment Convenient, safe and secure lives • Supply diverse products and Contribute to pleasant societies services to customers ranging • Help to enrich cultures and societies Customers from commercial users to by creating sound in a variety of consumers settings • Secure sustainable forest resources Finance Industrial machinery Brand Technology and components (IMC) • Use core technologies to provide People solutions in automotive and industrial equipment sectors Customers Finance Brand Technology People 3 Copyright 2019 Yamaha Corporation All rights reserved Outlook for Business Environment The world is undergoing major changes at a rapid pace due to accelerated digitization and diversification of values Combining technology and sensibility presents opportunities for Yamaha Rising awareness Transformations caused by Greater diversity in of sustainability accelerated digital technologies lifestyles and sense of value • Greater requirements for corporate social • The industrial structure and the world in • AI and IoT technologies are taking responsibility general are undergoing major change due to automation and convenience to new levels • Broad awareness that social contribution advances in digital technologies • As well as material wealth, people are seeking links to corporate value creation in the • Closer, more direct customer interaction greater spiritual satisfaction and authenticity medium to long term Regional • Although mature economies remain steady, uncertainties are increasing Musical instruments: gradual expansion driven by growing middle class macro- • The pace of growth is slowing in China Market in emerging markets (+6%) economic • The general trend in emerging markets is expansion, but there are outlook Audio equipment: expansion driven by technological innovation and disparities among countries and regions commercial equipment demand (+8%) environment Note: figures in parentheses indicate market growth over 3 years 4 Copyright 2019 Yamaha Corporation All rights reserved Positioning of New Medium-Term Management Plan Management Vision Become an Indispensable, Brilliantly Individual Company Boost brand power to become a highly profitable enterprise (Core operating income ratio: 20%) New Medium-Term Management Plan 2019 - 2022 Develop closer ties with Core operating customers and society, and boost income ratio*: 13.8 % value creation capabilities Based on IFRS standards Operating income ratio 12.5 % Japanese A/C standards Increase brand power 2016-2019 NEXT STAGE 12 Core operating income ratio* 11.9% IFRS standards 2013-2016 YMP2016 Increase profitability Operating income ratio 9.3% *Core operating income is equivalent to operating income under the Japanese Rebuild business platform Operating income ratio 2.5% accounting standards used prior to adoption of IFRS. However, sales discounts 2010-2013 YMP125 (amounting to ¥3 billion) are deducted from net sales (under Japanese accounting standards, they are classified as non-operating expenses). 5 Copyright 2019 Yamaha Corporation All rights reserved Basic Strategy and Management Objective Basic strategy In a world undergoing major changes at a rapid pace, Develop closer ties with customers and society, and boost value creation capabilities Financial targets Boost profitability while also building stronger business platform for growth (IFRS standards) Core operating income ratio: 13.8 % ROE: % Customers 11.5 Financial EPS: ¥270 evaluation Non-financial targets Finance Brand Technology Corporate brand value*: +30 % People Music popularization for learning musical instruments in emerging markets: 1 million people Evaluation of: (in cumulative total) -Growth capacity -ESG initiatives, etc. Certified timber use: 50 % of total use Corporate value: ¥1 trillion + Investment and shareholder return (market capitalization) Well-balanced allocation to investment in growth and returns to shareholders Total return ratio: *Brand value added with Yamaha and Yamaha Motor Company: $1.2 billion 50 % (Best Japan Brands 2019 issued by Interbrand) 6 Copyright 2019 Yamaha Corporation All rights reserved Path to Improving Core Operating Income Ratio Goals for each business Raise core operating income ratio to 14% level • Musical instruments: continue and aim for further increase to improve profitability Core operating ％ ％ income ratio: 14.1 16.5 （ FY2 0 1 9 . 3 ） （ FY2 0 2 2 . 3 ） Core operating Market • Audio equipment: drive growth income ratio: in business scale Leader 11.9% 13.8% (optimal pricing) （ FY2 0 1 9 . 3 ） （ FY2 0 2 2 . 3 ） Core operating 8.2％ 9.6％ income ratio: （ FY2 0 1 9 . 3 ） （ ） FY2 0 2 2 . 3 Overwhelming • Industrial machinery and market presence components (IMC): strengthen Sales Growth Unique Products Focused on and Services base with a view to leaping ahead Emerging Markets Yamaha strengths (Global share in fiscal 2018) Core operating ％ ％ income ratio: 7.4 7.9 （ FY2 0 1 9 . 3 ） （ FY2 0 2 2 . 3 ） Yamaha’s strengths 49% 54% True Yamaha spirit 37% 32% High marginal Technology x Pianos Digital Portable Wind income ratio pianos keyboards instruments sensibility Enhance Productivity 7 Copyright 2019 Yamaha Corporation All rights reserved Projected Growth Analysis (by business and by region) IFRS standards (billion yen) Net Sales Audio IMC and equipment others Emerging + 4.0 markets Musical (12％) + 10.0 instruments + 14.0 China Impact of Mature （15％） exchange + 13.0 (12％) FY2022.3 markets rates + 19.0 Net Sales + 10.0 (25％) - 4.0 FY2019.3 (7％) 470.0 (4％) (Rate of growth over 3 years) Net Sales (projection) By region 437.0 By business (musical instruments and audio equipment) Strategic Core Operating Income expenditure Impact of + 5.5 - 6.0 exchange +160Cost rates + 15.5 reductions FY2022.3 - 2.0 Core Operating FY2019.3 Increased sales and Core Operating improved gross Income Income (projection) margins 65.0 52.0 Medium-term exchange rate assumptions: US$1 = ¥110 EUR1 = ¥125 8 Copyright 2019 Yamaha Corporation All rights reserved Key Strategies Copyright 2019 Yamaha Corporation All rights reserved Four Key Strategies Basic Medium-Term Strategy Develop closer ties with customers and society, and boost value creation capabilities Yamaha value creation Social value creation 4. Contribute to 1. Develop closer ties 2. Create new value 3. Enhance productivity society through with customers our business Reflect society’s values in our own Profitability ＝ customer