Instructions for YAMAHA models including: 10-1 Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka, 430-8650 Japan
a “Compliance Code of Conduct” and related rules and manuals as well as the conduct of thoroughgoing compliance education and training.
(TRANSLATION ONLY) YAMAHA CORPORATION 10-1 Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka 430-8650, Japan (Security code: 7951) June 8, 2020 Notice of the 196th Ordinary General Shareholders’ Meeting
YAMAHA CORPORATION 10-1 Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka 430-8650, Japan
(TRANSLATION ONLY)
(Security code: 7951) June 8, 2020
Notice of the 196th Ordinary General Shareholders' Meeting
Dear Shareholders:
We hereby inform you of the 196th Ordinary General Shareholders' Meeting, to be held at the time and place set forth below.
To avoid the risk of COVID-19 infection, we would like to ask our shareholders to consider not attending the meeting if possible, and to exercise your voting rights by mailing the enclosed Exercise of Voting Rights form or via the Internet.
Please review the Reference Documents for the General Shareholders' Meeting provided and exercise your voting rights by 5:00 p.m. (JST), Monday, June 22, 2020.
[Voting by mail] Please indicate your votes of approval or disapproval for proposals on the enclosed Exercise of Voting Rights form and return the form to us by the above deadline.
[Voting via the Internet] Please enter your votes of approval or disapproval for proposals after reading the section "Concerning Procedures for Exercise of Voting Rights Via the Internet."
Very truly yours,
Takuya Nakata Director President and Representative Executive Officer
(TRANSLATION ONLY)
The 196th Ordinary General Shareholders' Meeting
1. Date and time: Tuesday, June 23, 2020 at 10:00 a.m.
2. Location:
First floor of Building No. 18
YAMAHA CORPORATION 10-1 Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka, Japan (Please refer to map in Japanese original)
3. Agenda of the meeting
Matters to be reported: 1. The Business Report, the Consolidated Financial Statements, and the Audit Reports of the
Consolidated Financial Statements by the Independent Accounting Auditor and the Audit Committee, for the 196th Fiscal Year (from April 1, 2019 through March 31, 2020). 2. The Non-consolidated Financial Statements for the 196th Fiscal Year (from April 1, 2019 through March 31, 2020)
Matters to be resolved: Proposal 1 Appropriation of Surplus Proposal 2 Election of Seven Directors
4. Predetermined terms of the convening (1) If you do not indicate your vote of approval or disapproval for any proposal on the Exercise of
Voting Rights form, you will be deemed to have approved that proposal.
(2) Handling of voting several times 1) When voting rights are exercised more than once via the Internet, the vote that arrives the latest will be deemed the valid one. 2) When a shareholder exercises voting rights via the Internet and by the Exercise of Voting Rights form, the vote via the Internet will be deemed the valid one.
(3) When a shareholder exercises voting rights by proxy at the meeting, the shareholder may appoint one shareholder with voting rights to act as his or her proxy. If you wish to exercise your voting rights by proxy at the meeting, please submit to the Company your Exercise of Voting Rights form together with a document evidencing the Proxy's power of representation for the meeting.
5. Other matters in relation to this Notice
From among the documents to be provided with this Notice, the "Notes to the Consolidated Financial Statements," "Notes to the Non-Consolidated Financial Statements," "Consolidated Statements of Changes in Shareholders' Equity," and "Non-Consolidated Statements of Changes in Shareholders' Equity" are not included in the documents attached to this Notice. These documents are disclosed on our Internet website (https://www.yamaha.com/en/) in accordance with laws and ordinances and the provisions of Article 18 of the Articles of Incorporation.
Notes: 1. For those attending, please present the enclosed Exercise of Voting Rights form at the reception desk on arrival at the meeting. If the Reference Documents for the General Shareholders' Meeting and the Attached Documents are amended, the amended items will be announced on our Internet website (https://www.yamaha.com/en/).
2. This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
(TRANSLATION ONLY)
Reference Documents for the General Shareholders' Meeting
Proposals and Reference Information
Proposal 1 Appropriation of Surplus
Bearing in mind the objective of increasing ROE (Profit ratio for the period to the share attributable to owners of the parent), and based on the level of the medium-term consolidated profits, the Company makes strategic investments in R&D, sales, and capital while actively providing returns to shareholders.
Additionally, while we try to provide dividends on a stable and consistent basis, it is also our mandate to promote capital efficiency by making sound decisions in distributing returns while ensuring appropriate internal reserves for investment in future growth.
Considering the policy above and the financial standing etc. of the Company, we will propose the appropriation of surplus as follows.
Matters relating to year-end dividend
(1)Type of assets for dividends Cash
(2) Allotment of assets for dividends to shareholders and the total amount of dividends
Year-end dividend:
33 yen per share of common stock of the Company
Total amount of dividends:
5,802,058,053 yen
As a result, the annual dividend, combined with the interim dividend of 33 yen per
share, amounts to 66 yen.
(3) Effective date of distribution of surplus June 24, 2020
Proposal 2
Election of Seven Directors
(TRANSLATION ONLY)
All of the eight Directors will complete their respective terms of office at the conclusion of this meeting. Accordingly, we shall propose the election of seven Directors.
The table below lists the nominees for those positions.
List of candidates
No.
Name
Current position and charge
Takuya 1 Nakata
(Mr.)
Satoshi 2 Yamahata
(Mr.)
Director Nominating Committee Member Compensation Committee Member Candidate for Reappointment President and Representative Executive Officer Executive General Manager of Brand Development Unit Director Managing Executive Officer Executive General Manager of Candidate for Reappointment Corporate Management Unit Executive General Manager of Human Resources and General Administration Unit
Attendance at Board of Directors
meetings during fiscal 2019
100% (12 out of 12
meetings)
100% (12 out of 12
meetings)
Yoshimi 3 Nakajima
(Ms.)
Candidate for Reappointment
Outside Director
Outside Director
Audit Committee Member
Independent Outside Director
100% (12 out of 12
meetings)
4 Taku Fukui (Mr.)
Candidate for Reappointment
Outside Director
Outside Director
Audit Committee Member
Independent Outside Director
100% (12 out of 12
meetings)
Yoshihiro 5 Hidaka
(Mr.)
Candidate for Reappointment Outside Director
Outside Director
Nominating Committee Member
Independent Outside Director Compensation Committee Member
91.7% (11 out of 12
meetings)
Mikio 6 Fujitsuka
(Mr.)
Candidate for Reappointment
Outside Director
Outside Director
Audit Committee Member
Independent Outside Director
100% (10 out of 10
meetings)
Paul Candland Candidate for Reappointment Outside Director
7 (Mr.)
Outside Director
Nominating Committee Member
Independent Outside Director Compensation Committee Member
100% (10 out of 10
meetings)
(TRANSLATION ONLY)
No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
April
1981: Entered the Company
October 2005: General Manager of Pro Audio &
Digital Musical Instruments Division
June
2006: Operating Officer
June
2009: Director and Operating Officer
April
2010 President and Director of Yamaha
Corporation of America
June
2010: Senior Operating Officer of the
Company
June
2013: President and Representative Director 75,500
March 2014: Director of Yamaha Motor Co., Ltd.
(Outside Director)
(current position)
Takuya Nakata June
(June 8, 1958)
1
June
Candidate for
Reappointment
2015: President of Yamaha Music Foundation (current position)
2017: Director, President and Representative Executive Officer of the Company (current position)
- Term of office as a director: Eight (8) years (at the conclusion of this Ordinary General Shareholders' Meeting)
- Attendance at Board of Directors meetings: 12 out of 12 meetings (100%)
- Reasons for nomination as director:
Having served in positions such as General Manager of our Pro Audio & Digital Musical
Instruments Division, President and Director of Yamaha Corporation of America, Mr. Takuya Nakata has a wealth of experience and achievements alongside broad insight in business. He has led the Group as President and Representative Director since June 2013, and as Director, President and Representative Executive Officer since June 2017 after our transition to a Company with Three Committees (Nominating, Audit, and Compensation). Additionally, he has been a leader in Corporate Governance reform via initiatives such as the transition to a Company with Three Committees (Nominating, Audit, and Compensation), and has worked to strengthen the oversight function of the Board of Directors. He has been nominated as a director on expectations that he will help further strengthen the oversight function of the Board of Directors through these achievements and insights, etc.
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No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
January 1988: Entered the Company
August 2009: General Manager of Accounting and
Finance Division
June
2013: Operating Officer
June
2013: General Manager of Corporate
Planning Division
April
2015: Executive General Manager of
Operations Unit
June
2015: Director and Senior Operating Officer 28,400
May
2016: Executive General Manager of
Corporate Management Unit
Satoshi Yamahata June
(current position) 2017: Director, Managing Executive Officer
(December 3, 1960)
(current position)
2
April
2020: Executive General Manager of Human
Candidate for
Resources and General Administration
Reappointment
Unit (current position)
- Term of office as a director: Five (5) years (at the conclusion of this Ordinary General Shareholders' Meeting)
- Attendance at Board of Directors meetings: 12 out of 12 meetings (100%)
- Reasons for nomination as director: In addition to work experience at an overseas subsidiary, Mr. Satoshi Yamahata has served as General Manager of the Accounting and Finance Division, General Manager of the Corporate Planning Division, Executive General Manager of the Operations Unit, and Executive General Manager of the Corporate Management Unit, and has a wealth of experience and achievements alongside broad insight. He has promoted Corporate Governance reform as Director and Senior Executive Manager since June 2015 and as Director and Managing Executive Officer since June 2017, and has
worked to strengthen the oversight function of the Board of Directors.
He has been nominated as a director on expectations that he will help further strengthen the
oversight function of the Board of Directors through these achievements and insights, etc.
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No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
April
1980: Entered The Yasuda Trust and
Banking Co., Ltd. (currently Mizuho
Trust & Banking Co., Ltd.)
February 1982: Entered AVON Product CO.LTD.,
Tokyo Japan
May
1997: Vice President of Consumer Banking
Headquarters of Citi Bank N.A.
June
2000: Senior General Manager of Societe
Generale Securities Japan Limited
April
2002: Vice President and Head of Global
Travelers Cheques and Prepaid
Services of American Express
International, Inc., Japan
August 2011: Country Manager, Singapore
0
Yoshimi Nakajima April
(President) 2014: Concurrently serving as President and
(December 16, 1956)
Representative Director of American
Candidate for June Reappointment
Express Japan Co., Ltd. 2017: Outside Director of the Company
(current position)
3
June
Candidate for
2017: Outside Director of AEON Financial Service Co., Ltd.
Outside Director June
(current position) 2018: Outside Director of Japan Freight
Candidate for Independent Outside Director
Railway Company (current position) September 2018: Outside Director of ULVAC, Inc. (current position)
- Term of office as a director:
Three (3) years (at the conclusion of this Ordinary General Shareholders' Meeting)
- Attendance at Board of Directors meetings:
12 out of 12 meetings (100%)
- Reasons for nomination as director:
Having been involved in management as the person responsible for the Asian region and Japanese arm of a global financial institution, Ms. Yoshimi Nakajima has a wealth of experience and achievements alongside broad insight as a corporate manager. Since assuming the position of Outside Director of the Company in June 2017, she has provided highly effective supervision while supporting the determination of major corporate actions and quick and decisive execution on decision-making, based on her wealth of achievements and insights, etc., as a corporate manager. She has been nominated as a director on expectations that she will help further strengthen the oversight function of the Board of Directors through these achievements and insights, etc. - About independence The Company files documentation with the Tokyo Stock Exchange to establish that Ms. Yoshimi Nakajima is an independent director under the provisions set forth by the Tokyo Stock Exchange.
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No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
April
1987: Registered as an attorney
Entered Kashiwagi Sogo Law Offices
April
2004: Professor of Keio University Law
School
(current position)
June
2005: Outside Audit & Supervisory Board
Member of Shin-Etsu Chemical Co.,
0
Ltd.
Taku Fukui
(current position)
(August 24, 1961) January 2009: Managing Partner of Kashiwagi Sogo
Law Offices
Candidate for
(current position)
Reappointment June
2017: Outside Director of the Company
(current position)
4
- Term of office as a director:
Candidate for
Three (3) years (at the conclusion of this Ordinary General Shareholders' Meeting)
Outside Director - Attendance at Board of Directors meetings:
12 out of 12 meetings (100%)
- Reasons for nomination as director:
Candidate for Independent
With a mastery of corporate law and corporate governance in Japan and overseas as an attorney, Mr. Taku Fukui has a high degree of expertise, wealth of experience and achievements alongside broad insight.
Outside Director
Since assuming the position of Outside Director of the Company in June 2017, he has provided highly effective supervision while supporting the determination of major corporate
actions and quick and decisive execution on decision-making, based on his high degree of
expertise, wealth of achievements and insights, etc.
He has been nominated as a director on expectations that he will help further strengthen the
oversight function of the Board of Directors through these achievements and insights, etc.
- About independence
There are no transaction relationships between the Company and Kashiwagi Sogo Law
Offices, where Mr. Taku Fukui serves as Managing Partner.
The Company files documentation with the Tokyo Stock Exchange to establish that Mr.
Taku Fukui is an independent director under the provisions set forth by the Tokyo Stock
Exchange.
(TRANSLATION ONLY)
No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
April
1987: Entered Yamaha Motor Co., Ltd.
July
2010: Vice President of Yamaha Motor
Corporation, U.S.A.
January 2013: Executive General Manager of 3rd Business Unit, MC Business
Operations of Yamaha Motor Co., Ltd.
March 2014: Executive Officer
January 2015: Executive General Manager of 2nd Business Unit, MC Business Operations
January
2016: Executive General Manager of 1st Business Unit, MC Business Operations, and General Manager of
1,500
Southeast & East Asia Sales Division,
1st Business Unit, MC Business
Operations
January 2017: Executive General Manager of Corporate Planning & Finance Center
March 2017: Senior Executive Officer and Director
Yoshihiro Hidaka (July 24, 1963)
January June
2018: President, Chief Executive Officer and Representative Director (current position)
2018: Outside Director of the Company (current position)
Candidate for
- Term of office as a director:
Reappointment
Two (2) years (at the conclusion of this Ordinary General Shareholders' Meeting) - Attendance at Board of Directors meetings:
5
Candidate for
11 out of 12 meetings (91.7%) - Reasons for nomination as director:
Having been involved in management at one of the largest global transportation equipment
Outside Director
manufacturers in Japan, Mr. Yoshihiro Hidaka has a wealth of experience and achievements
alongside broad insight as a corporate manager. Additionally, as President and Representative
Candidate for
Director of Yamaha Motor Co., Ltd., a company that shares a common brand with the Company, he is a person with one of the deepest understandings of the Yamaha brand.
Independent Outside Director
Since assuming the position of Outside Director of the Company in June 2018, he has provided highly effective supervision while supporting the determination of major corporate actions and quick and decisive execution on decision-making, based on his wealth of
achievements and insights, etc., as a corporate manager.
He has been nominated as a director on expectations that he will help further strengthen the
oversight function of the Board of Directors through these achievements and insights, etc.,
and improve the Yamaha brand value.
- About independence
As the Company and Yamaha Motor Co., Ltd., where Mr. Yoshihiro Hidaka serves as
President and Representative Director, share the Yamaha brand, the two companies are in a
relationship such that enhancements to the brand value via the Company's sustainable growth
also provides a positive effect on said company's corporate value, while damage to the brand
due to violations of laws and regulations or deficient governance, etc., by the Company will
have a negative effect on said company's corporate value. Mr. Yoshihiro Hidaka is a person
with one of the deepest understandings of the Yamaha brand, which is the source of the
Company's brand corporate value, and he shares an interest with ordinary shareholders
regarding improvement of the Company's brand value. Furthermore, not only there are no
significant transaction relationships* between the Company and Yamaha Motor Co., Ltd., but
as the Company is no longer a major shareholder of said company since 2017, there are no
concerns that Mr. Yoshihiro Hidaka will have conflicts of interest with ordinary shareholders,
and the Company believes that he can fulfill his duty for supervision, etc., of management
from an independent standpoint in order to maximize profits for shareholders of the Company.
The Company filed documentation with the Tokyo Stock Exchange to register him as an
independent director under the provisions set forth by the Tokyo Stock Exchange.
* The amount of transactions between the Company and Yamaha Motor Co., Ltd. is less
than 0.1% of consolidated net sales of both companies.
(TRANSLATION ONLY)
No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
April
1977: Entered Komatsu Ltd.
June
2001: General Manager of Corporate
Controlling Department
April
2005: Executive Officer
April
2008: President of Global Retail Finance
Business Division
February 2009: General Manager of Corporate
Planning Division and President of
Global Retail Finance Business
Division
Mikio Fujitsuka (March 13, 1955)
April April June
2010: Senior Executive Officer
0
2011: CFO
2011: Director and Senior Executive Officer
April
2013: Director and Senior Executive Officer
Candidate for April
2016: Executive Vice President and
Reappointment
Representative Director
6
June
Candidate for
Outside Director June
2019: Outside Director of the Company (current position)
2019: Outside Corporate Auditor of Mitsui Chemicals, Inc.
Candidate for Independent Outside Director
(current position)
- Term of office as a director: One (1) year (at the conclusion of this Ordinary General Shareholders' Meeting)
- Attendance at Board of Directors meetings: 10 out of 10 meetings (100%)
- Reasons for nomination as director:
Having been involved in management as CFO at one of the largest global construction
machinery manufacturers in Japan, Mr. Mikio Fujitsuka has a wealth of experience and
achievements alongside broad insight as a corporate manager, as well as adequate
knowledge of finance and accounting. Since assuming the position of Outside Director of the Company in June 2019, he has provided highly effective supervision while supporting the determination of major corporate actions and quick and decisive execution on decision-making, based on his wealth of achievements and insights, etc., as a corporate manager. He has been nominated as a director on expectations that he will help further strengthen the oversight function of the Board of Directors through these achievements and insights, etc. - About independence The Company filed documentation with the Tokyo Stock Exchange to register him as an independent director under the provisions set forth by the Tokyo Stock Exchange.
(TRANSLATION ONLY)
No.
Name (Date of Birth)
Brief personal history; position; charge; and important concurrent duties
Number of the Company shares
held
June
1985: Entered Owens Corning
April
1987: Entered PepsiCo, Inc.
November 1994: President of Okinawa Pepsi-Cola
April
1998: Representative, Japan Branch of
PepsiCo International Ltd.
November 1998: Representative Director and General
Manager of The Disney Store Japan,
Inc.
April
2002: Japan Managing Director, Walt Disney
Television International of The Walt
Disney Company (Japan) Ltd.
100
June
2007: Representative Director and President
July
2014: President of The Walt Disney
Company Asia
Paul Candland September 2018: Managing Director of PMC Partners
(December 4, 1958)
Co., Ltd.
Candidate for June
(current position) 2019: Outside Director of the Company
Reappointment
(current position)
7
Candidate for
September 2019: CEO of Age of Learning, Inc. (current position)
Outside Director
- Term of office as a director: One (1) year (at the conclusion of this Ordinary General Shareholders' Meeting)
- Attendance at Board of Directors meetings:
Candidate for Independent
10 out of 10 meetings (100%) - Reasons for nomination as director:
Having been involved in management as the person responsible for the Asian region and
Outside Director
Japanese arm of a global entertainment company, Mr. Paul Candland has a wealth of experience and achievements alongside broad insight as a manager. Since assuming the position of Outside Director of the Company in June 2019, he has provided highly effective supervision while supporting the determination of major corporate actions and quick and decisive execution on decision-making, based on his wealth of achievements and insights, etc., as a corporate manager. He has been nominated as a director on expectations that he will help further strengthen the oversight function of the Board of Directors through these achievements and insights, etc. - About independence There are no transaction relationships between the Company and PMC Partners Co., Ltd. or Age of Learning, Inc., where Mr. Paul Candland serves as representative, and neither party
is classified as a major shareholder of the other.
Furthermore, there are no significant transaction relationships* between the Company and
The Walt Disney Company (Japan) Ltd., where Mr. Paul Candland served until December
2017, and neither party is classified as a major shareholder of the other.
The Company filed documentation with the Tokyo Stock Exchange to register him as an independent director under the provisions set forth by the Tokyo Stock Exchange. * The amount of transactions between the Company and The Walt Disney Company and The Walt Disney Company (Japan) Ltd. is less than 0.1% of consolidated net sales of any of the companies.
(TRANSLATION ONLY)
Summary of the liability limitation agreement Ms. Yoshimi Nakajima, Mr. Taku Fukui, Mr. Yoshihiro Hidaka, Mr. Mikio Fujitsuka, and Mr. Paul Candland have entered into agreements with the Company to limit the liability for damage stipulated in Article 423, Paragraph 1 of the Companies Act. The maximum amount of liability under the agreements is the minimum amount stipulated in laws and regulations. If their re-elections are approved, we will renew the liability limitation agreements under the same conditions.
Special interests between the candidates for director and the Company Of the candidates for director, the nominees for directors who have special interests in the Company are as follows. 1) Takuya Nakata doubles as President of Yamaha Music Foundation, with which the Company
conducts transactions for contracting operations, etc. 2) Yoshihiro Hidaka doubles as President and Representative Director of Yamaha Motor Co., Ltd.,
with which the Company conducts transactions for the lease of real estate, etc. The amount of transactions between the Company and Yamaha Motor Co., Ltd. is less than 0.1% of consolidated net sales of both companies. 3) Paul Candland doubles as CEO of Age of Learning, Inc., which conducts a business of a similar nature to the language education business of the Group.
Standards and qualities of independence of the independent outside directors 1. Persons for whom any of the following apply may not serve as independent outside directors of
the Company. If after the appointment of an independent outside director any of the following are found to apply, the appointment shall be nullified. 1) Persons who do not meet the requirements and qualifications of an outside director as
stipulated in the Companies Act. 2) Persons or executives with whom the Group is a significant business partner, or persons or
executives which are significant business partners for our Group. Here, "significant business partner" means, in any one of the most recent three years, any company for which the amount the Company receives from the group of business partners exceeds 2% of the Company's consolidated net sales, or the amount to be paid to the Company that exceeds 2% of those companies' consolidated net sales or any of the top five banks with which we transact business. 3) Principal shareholders in the Company or executives of the Company, or directors or corporate auditors of companies in which the Company is a principal shareholder. Here, "principal shareholder" means any entity holding more than 10% of the outstanding shares or other form of equity investment. 4) Persons who are directors or corporate auditors of companies in a mutual secondment relationship with the Group. 5) Consultants, accounting specialists or legal specialists who receive large sums of money or
(TRANSLATION ONLY)
other assets other than executive remuneration from the Company. (If the entities receiving said assets are corporations, unions or other groups, then persons associated with these organizations.) Here, "large sums of money or other assets" means the amount of more than 10 million yen that is to be paid by the Company in any one of the most recent three fiscal years. (In cases of non-monetary compensation, this refers to the market value at the time of payment.) 6) Close relatives of anyone for whom (a) through (c) below apply (relations within the second degree). (a) Persons for whom 2) through 4) apply. (b) Executives of the Company or any of its subsidiaries. (c) Persons for whom (b) above applied at the time of the most recent General Shareholders' Meeting when persons were appointed as directors. 2. Even persons for whom 2) through 6) above apply may be appointed as independent outside directors, or not have their appointment nullified, if it can be clearly determined there exists no possibility of conflict with the interests of ordinary shareholders, and those reasons are clearly stated.
Composition of the Board of Directors The makeup of the Board of Directors is diverse and comprises persons with expertise and experience who have the necessary insight, high ethical values, sense of fairness, and integrity. The Board of Directors shall have the number of people that allows the Board of Directors to perform its functions effectively and efficiently. Furthermore, in order to perform the oversight function with a high level of transparency and objectivity, an appropriate proportion of the Board of Directors shall be independent outside directors.
Nomination and appointment standards of directors and other positions Regarding the selection of candidates for director, the Nominating Committee selects candidates based on basic personal qualities and capabilities, competency, experience and record of achievements that are required of internal directors and outside directors as defined by their respective roles, and then decides on the content of selection proposals to be submitted to the General Shareholders' Meeting.
Regarding the selection of members and the chairs of the Nominating Committee, Audit Committee, and Compensation Committee, the Nominating Committee select candidates based on personal qualities and capabilities as defined by the roles of the committee. The Nominating Committee then decides on the content of selection proposals to be submitted to the Board of Directors. Note that for the selection of candidates for members and the chair of the Audit Committee, the Nominating Committee gathers opinions from the Audit Committee in advance.
For Executive Officers, the Nominating Committees selects candidates based on basic personal qualities and capabilities, competency, experience, and record of achievements that are required of
(TRANSLATION ONLY)
Executive Officers as defined by their respective roles, and then decides on the content of selection proposals to be submitted to the Board of Directors.
Expertise held by the Company's candidates for director
Candidate for director
Corporate management
Legal and risk
management
Finance and accounting
IT and digital
Takuya
X
X
Nakata
Satoshi Yamahata
X
X
Yoshimi
Outside
X
X
Nakajima
Taku Fukui Outside
X
Yoshihiro Outside
X
X
Hidaka
Mikio
Outside
X
X
X
Fujitsuka
Paul
Outside
X
Candland
Manufacturing, technology, and R&D
Marketing and sales
Global experience
X
X
X
X
X
X
X
X
X
X
X
(Attached Documents)
(TRANSLATION ONLY)
Business Report
(From April 1, 2019 to March 31, 2020)
1. Current Conditions of the Yamaha Group
(1) Business Developments and Results
General Business Conditions
The business environment in the fiscal year ended March 31, 2020 was characterized by an overall slowing in global economic growth caused by factors that included the spread of protectionism, which was particularly evident in the US-China trade friction. While the U.S. economy remained firm, China's economy weakened under the trade friction and Europe's economic growth continued to slow. Japan's economy expanded moderately fueled by rush demand ahead of the hike in the consumption tax, but the pace of growth later slowed due in part to a strong typhoon that directly hit Eastern Japan. In addition to these conditions, the rapid spread of the COVID-19 that began near the end of 2019 had a huge impact on the entire global economy.
Amid these economic conditions, the Yamaha Group entered the first year of its Medium-term Management Plan "Make Waves 1.0," and the Group's activities focused on advancing the plan's four key strategies to "develop closer ties with customers," "create new value," "enhance productivity," and "contribute to society through our businesses."
To "develop closer ties with customers," we took our first steps toward transforming our shops and music schools in Japan and overseas from bases for sales and lessons into "brand value communication bases" where our customers can experience the Yamaha value. We are also developing our e-commerce operations. The musical instruments business introduced new products aimed at meeting various needs, including the PSR-I500 portable keyboard, which was designed to blend with the rich musical culture in India. The audio equipment business broadened its business domain by offering new products including wireless headphones and earphones to attract a wider range of customers.
To "create new value," we created new value by combining technology and sensibility in a way that only Yamaha can, in products like the YC61 stage keyboard that delivers organ tones using Virtual Circuitry Modeling technology and the YVC-330 unified communication speaker phone enabling remote conferencing even in noisy open locations. We are seeking to create new value by encouraging the "insatiable power of expression." These efforts led to the Yamaha flute played by Matvey Demin to win First Prize in the Woodwinds Category at the International Tchaikovsky Competition. Our efforts using AI technology also advanced and attracted much media attention.
To "enhance productivity," measures such as bringing the India factory up to full operation and launching the production of piano frames at Suzhou factory in China have progressed as well as various cost reduction measures through integrating IoT into Indonesia factories to convert them to a smart factory and accelerating global bulk purchasing. Progress was also made as planned in revisions of our product price to reasonable price.
To "contribute to society through our businesses," we continued effort to popularize musical instrument education not only in Indonesia but also in India, Vietnam, and other countries, and in the first year of the Make Waves 1.0 plan the cumulative total number of students increased to 390,000 for a solid start toward our three-year target of 1 million students. We are also making progress in using certified timber for our wooden products as planned, toward our three year target of 50%.
(TRANSLATION ONLY) In the fiscal year ended March 31, 2020, revenue declined by ¥20,145 million (-4.6%) year on year to ¥414,227 million due to the combined impacts of ¥13.7 billion from the COVID-19 pandemic, a ¥13.1 billion negative impact in the foreign exchange, and sluggish market conditions for the industrial machinery and components business. Core operating profit* declined by ¥6,393million (-12.1%) year on year to ¥46,352million, also owing to the impacts of the COVID-19 pandemic, a ¥6.5 billion negative impact in the foreign exchange, and the struggling industrial machinery and components business. Profit attributable to owners of the parent decreased by ¥5,715 million (-14.2%) year on year to ¥34,621 million due to, in addition to a decrease in core operating profit, a ¥1.4 billion of loss from suspension of operations caused by COVID-19 pandemic along with the recognition of ¥3.3 billion impairment loss on fixed assets.
*Core operating profit corresponds to operating income under Japanese GAAP and is calculated by subtracting selling, general and administrative expenses from gross profit.
The Group has applied the International Financial Reporting Standards (IFRS) from the fiscal year under review. Financial figures through the previous fiscal year are displayed under IFRS, reclassified from the figures initially announced under Japanese GAAP.
(TRANSLATION ONLY)
Musical Instruments Business
The musical instruments business recorded higher overall full-year sales in all regions other than Japan despite impacts in the fourth quarter from the COVID-19 pandemic in all regions. Against a background of retail store closures, the acoustic piano sales in China maintained the same level as the previous year, and sales declined year on year in Japan and North America. The guitar sales rose year on year in all regions and the digital musical instrument sales grew in all regions, excluding Japan, both of which have a high ratio of e-commerce sales. The wind instrument sales declined largely due to reduced demand from wind instrument ensembles in Japan.
The musical instruments business posted a revenue decline of ¥10,100 million (-3.6%) year on year to ¥269,371 million, largely due to a ¥9.1 billion negative impact in the foreign exchange from the previous fiscal year. Core operating profit declined by ¥3,064 million (-7.5%) to ¥37,750million, including a ¥4.8 billion negative impact in the foreign exchange.
Audio Equipment Business
The professional audio equipment sales grew in global, especially the audio equipment installations in Japan progressed as planned, on the other hand, its sales declined in North America and China from the COVID-19 pandemic. The audio products sales rose in Japan but fell year on year in other regions.
The audio equipment business recorded a revenue decline of ¥5,751 million (-4.8%) year on year to ¥114,392 million, primarily owing to a ¥3.8 billion negative impact in the foreign exchange from the previous fiscal year. Core operating profit declined by ¥1,043 million (-10.9%) to ¥8,571 million, including a ¥1.7 billion negative impact in the foreign exchange.
Industrial Machinery/Components and Other Businesses
In these business category, sales grew for the electronic devices year on year but fell for the FA equipment in the adverse business conditions.
These business revenue declined ¥4,294 million (-12.4%) year on year to ¥30,462 million. Core operating profit decreased ¥2,284 million (-98.7%) to ¥30 million.
(3) Capital Expenditure
Segments
Investment (million yen)
Musical Instruments Business
Audio Equipment Business Industrial Machinery/Components and Other Businesses
Total
14,995 4,324 1,226 20,545
percentage change from previous quarter (%(
Composition Ratio (%)
25.3
73.0
52.6
21.0
6.6
6.0
28.8
100.0
(4) Fund Raising
Not applicable
The Group has applied the International Financial Reporting Standards (IFRS) from the 196th fiscal year. Financial figures through the 195th fiscal year are displayed under IFRS, reclassified from the figures announced under Japanese GAAP. The graph on this page shows the figures for the 195th fiscal year and the 196th fiscal year which can be compared under the IFRS standard.
(TRANSLATION ONLY)
(4) Issues to Be Addressed
The Group is working on its Medium-Term Management Plan, Make Waves 1.0, which targets the three-year period starting from April 2019. 1) Environment As the industrial structure changes rapidly due to the acceleration of digitalization, we are now able to form closer ties with our customers. Additionally, with remarkably enhanced levels of convenience realized through AI and IoT, we find ourselves entering into 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. For the Yamaha Group, we consider these types of changes an opportunity, with our strength in combining technologies and sensibilities. 2) Value Creation Story to Realize Vision
3) Positioning of the Medium-Term Management Plan and the Basic Strategy Taking into account the achievements we have made thus far, we have positioned the three years of the Medium-Term Management Plan as a period in which we will aim to develop closer ties with customers and society, and boost value creation capabilities, and we have adopted that aim as the basic strategy of the plan.
(TRANSLATION ONLY)
4) Management Objectives (Fiscal year ending March 2022)
(Policy) Boost profitability while also building stronger business platforms for growth
Financial targets
Core operating profit ratio: 13.8%
ROE: 11.5%
EPS (Earnings per share): 270 yen
(Assumed exchange rate: 1 U.S. dollar = 110 yen / 1 euro = 125 yen)
Non-financial targets
Corporate
Music popularization for learning musical
brand value*: instruments in emerging markets:
+30%
1 million people (cumulative total)
Certified timber use: 50% of total use
*Brand value added with Yamaha and Yamaha Motor Company: US$1.2 billion (Best Japan Brands 2019 issued
by Interbrand)
Investment and
(Policy) Well-balanced allocation to investment in growth and returns to shareholders
shareholder returns Total return ratio: 50% (cumulative total for 3 years)
5) Four Key Strategies To promote our basic strategy of "develop closer ties with customers and society, and boost value creation capabilities," we established four key strategies. By steadily executing these key strategies, we will realize Yamaha value creation and social value creation. We will create customer value by developing closer ties with customers and offering them new value. We will also increase our profitability by enhancing productivity. Furthermore, we strive to contribute to society through our business activities, which we believe will lead to improvement in corporate value over the medium to long term.
1. Develop Closer Ties with Customers Develop Broader, Deeper, Longer Ties with Customers To develop broader, deeper, and longer ties with our customers, we will promote our brand through our new brand promise and develop digital and physical customer interfaces with a focus on digital marketing. We will also take steps to contribute to lifetime value enhancement. Additionally, in emerging countries centered on China and ASEAN, we will engage with middle-income earners and accelerate growth. For the audio equipment business and the industrial machinery and components business, we will achieve growth by expanding our business domains in growth markets.
(TRANSLATION ONLY)
Brand Promise In January 2019, we established the brand promise of Make Waves, and have been communicating this promise on a global basis. With the medium-term management plan, we will promote the value of the Yamaha brand through our brand promise and develop customer interfaces with a focus on digital marketing. In these ways, we will move forward with efforts aimed at improving our brand value.
2. Create New Value Create New Value by Combining Technology and Sensibility We will create new value by leveraging our unique strength of combining technologies and sensibilities. Based on the changes occurring around the world and the feedback we have received from customers, we will provide unique products and services to our customers by making full use of our technologies for the scientific evaluation of assessing human sensibilities as well as our analysis and simulation technologies. We will also offer such products and services by melding the technologies we possess, including our acoustic and digital technologies.
(TRANSLATION ONLY)
3. Enhance Productivity Boosting Profitability by Improving Productivity We will work to optimize pricing by enhancing added value and strengthening efforts to showcase our product value. At the same time, we will strive to continuously reduce production costs. In addition, we will perform a zero-based analysis of expenditures and promote a shift toward strategic spending aimed at improving customer value. In these ways, we will reinforce profitability going forward.
4. Contribute to Society through Our Businesses Contributing to the Sustainable Development of Music Culture and Society We will contribute to the global music scene through the provision of diverse musical instruments. We will work to spread musical instrument education in emerging countries. In this manner, we will not only contribute to the sustainability of music culture but also work to resolve social issues through our products and services. Also, we will realize a peaceful coexistence with the natural environment through such efforts as promoting the sustainable procurement of timber and developing environmentally friendly products.
Culture Contribute to sustainability of music
culture Contribute to global music scene by
supplying a diverse of musical
instruments Spread the joy of music through music
schools Promote musical instrument education
in school music lessons in emerging
markets Support education in schools for
children of migrant workers in China by
donating musical instruments
Society Resolve social issues through products and services Support the healthy development of youth through music
popularization activities (in Latin America) Continue to revitalize communities through the Oto-Machi
project, which aims to create communities filled with music
(in Japan) Enhance diversity and fulfilment of the people we work with Create an environment where diverse personnel can make
full use of their individuality and creativity Promote human rights due diligence across entire supply
chain Worklife balance support including telecommuting and
in-house childcare facility (in Japan)
Environment Coexist with the natural environment Utilize sustainable timber Develop environmentally friendly
products Reduce greenhouse gas emissions
(TRANSLATION ONLY)
6) Strategies by Business Musical instruments business The Company will expand sales, primarily in emerging markets, and boost profitability by enhancing added value. We will create demand by promoting a high-end strategy, expanding sales of mid-range and high-end products, while at the same time focusing on enhancing lifetime value and activities to popularize music.
Audio equipment business In the B2B business, we will utilize our strength in digital mixers as we focus on further strengthening our offering of comprehensive solutions, while also strengthening our direct marketing to upstream clients such as facility owners. In the AV products B2C business, the Company will promote a shift to a portfolio adapted to changes in customers' lifestyles.
Industrial machinery and components business We will use technologies that combine sound, voice, and noise control to solve various in-vehicle sound issues, and thus establish our position in the market.
7) Investments and Shareholder Returns
We will pursue well-balanced allocation of created cash to investment in growth and returns to shareholders
[Investments]
[Shareholder returns]
Regular investment: 40.0 billion yen Strategic investment: 50.0 billion yen (additional investment in new production bases, R&D bases, M&A, etc.) While we try to provide dividends on a stable and consistent basis, it is also our mandate to promote capital efficiency by making sound decisions in distributing returns while ensuring appropriate internal reserves for investment in future growth. We set a target for a total return ratio of 50% over a three-year period.
Response to the Spread of COVID-19
The Yamaha Group places the highest priority on the safety and health of our customers, business partners, employees, and their families. We are and will continue to make every effort to minimize the impact on our businesses while fully respecting the requests and guidance of the national and local governments.
(TRANSLATION ONLY)
(5) Operating Performance and Status of Assets for the Group
Millions of yen, except profit per share (net income per share)
Items
Japanese GAAP
International Financial Reporting Standards (IFRS)
(Items in parentheses 193rd Fiscal Year 194th Fiscal Year 195th Fiscal Year 195th Fiscal Year 196th Fiscal Year
show items under Japanese GAAP)
(April 1, 2016 (April 1, 2017 (April 1, 2018 (April 1, 2018 (April 1, 2019
March 31, 2017) March 31, 2018) March 31, 2019) March 31, 2019) March 31, 2020)
Revenue (net sales)
408,248
432,967
437,416
434,373
414,227
Core operating profit (operating income)
44,302
48,833
56,030
52,745
46,352
Profit for the period attributable to owners of the parent (net income attributable to owners of parent)
46,719
54,378
43,753
40,337
34,621
Basic profit per share (net income per share) (yen)
249.17
291.81
240.94
222.12
194.71
Total assets (total assets)
522,362
552,309
514,762
515,924
474,034
Total equity (net assets)
367,437
388,345
382,771
359,007
326,450
(Note) The Group has applied the International Financial Reporting Standards (IFRS) from the 196th fiscal year. Financial figures through the 195th fiscal year in accordance with the International Financial Reporting Standards (IFRS) are displayed under IFRS, reclassified from the figures announced under Japanese GAAP. "Partial Amendments to Accounting Standards for Tax-Effect Accounting" have been applied, and the method of presentation has been revised in Japanese GAAP for the 195th fiscal year. Amount of total assets for the 194th fiscal year has been restated retroactively applying the amended accounting standards.
(TRANSLATION ONLY)
(6) Principal Subsidiaries
Name
Yamaha Corporation of America
Yamaha Music Europe GmbH
Capital
50,000
thousand U.S. dollars
70,000
thousand euros
Percentage of ownership (%)
Main business lines
100.0
Import and sales of musical instruments and audio equipment
100.0
Import and sales of musical instruments and audio equipment
Yamaha Music & Electronics 782,023
(China) Co., Ltd.
thousand CNY
100.0
Investment management for subsidiaries in China, sales of musical instruments and audio equipment
Yamaha Electronics Manufacturing (M) Sdn. Bhd.
31,000
thousand
Malaysian ringgit
100.0
Manufacturing of audio equipment
Xiaoshan Yamaha Musical Instruments Co., Ltd.
274,888
thousand CNY
100.0*
Manufacturing of musical instruments
PT. Yamaha Music Manufacturing Asia
Yamaha Electronics (Suzhou) Co., Ltd.
82,450
million Indonesian rupiahs
328,754
thousand CNY
100.0 100.0*
Manufacturing of musical instruments and audio equipment
Manufacturing of musical instruments and audio equipment
PT. Yamaha Musical Products Asia
Hangzhou Yamaha Musical Instruments Co., Ltd.
568,540
million Indonesian rupiahs
396,121
thousand CNY
100.0* 100.0*
Manufacturing of musical instruments Manufacturing of musical instruments
Yamaha Music India Pvt. Ltd.
3,700
million rupees
100.0*
Import and sales of musical instruments and audio equipment, manufacturing of musical instruments
Yamaha Music Japan Co., Ltd.
100
million yen
100.0
Sales of musical instruments and audio equipment
Yamaha Music Retailing Co., Ltd.
100
million yen
100.0* Sales of musical instruments
Yamaha Music Manufacturing Japan Corporation
100
million yen
100.0
Manufacturing of musical instruments and audio equipment
Notes: 1. Percentages with * include the Company's indirect ownership. 2. The Company has 57 consolidated subsidiaries, including the 13 principal subsidiaries listed above.
(7) Main Businesses
Segments Musical Instruments Business
Major products
Pianos, digital musical instruments, wind instruments, strings, percussion instruments, music schools, English-language schools, and music software
(TRANSLATION ONLY)
Audio Equipment Business
Industrial Machinery/Components and Other Businesses
Audio products, professional audio equipment, information and telecommunication equipment, and soundproof rooms
Electronic devices, automobile interior wood components, factory automation (FA) equipment, golf products, accommodations, and management of sports facilities
(8) Main Bases and Facilities for the Group
The Company Subsidiaries
Headquarters Sales offices
Japan
Overseas
10-1 Nakazawa-cho, Naka-ku, Hamamatsu, Shizuoka
Tokyo Office (Minato-ku, Tokyo), Osaka Office (Naniwa-ku, Osaka)
Yamaha Music Japan Co., Ltd. (Minato-ku, Tokyo) Yamaha Music Retailing Co., Ltd. (Minato-ku, Tokyo) Yamaha Music Entertainment Holdings, Inc. (Shibuya-ku, Tokyo) Yamaha Fine Technologies Co., Ltd. (Minami-ku, Hamamatsu) Yamaha Music Manufacturing Japan Corporation (Iwata-shi, Shizuoka)
Yamaha Corporation of America (U.S.A.) Yamaha Canada Music Ltd. (Canada) Yamaha Music Europe GmbH (Germany) PT. Yamaha Music Manufacturing Asia (Indonesia) PT. Yamaha Indonesia (Indonesia) PT. Yamaha Musical Products Asia (Indonesia) Yamaha Music & Electronics (China) Co., Ltd. (China) Tianjin Yamaha Electronic Musical Instruments, Inc. (China) Hangzhou Yamaha Musical Instruments Co., Ltd. (China) Xiaoshan Yamaha Musical Instruments Co., Ltd. (China) Yamaha Electronics (Suzhou) Co., Ltd. (China) Yamaha Electronics Manufacturing (M) Sdn. Bhd. (Malaysia) Yamaha Music India Pvt. Ltd. (India)
(9) Employees
Segments
Number of employees
Musical Instruments Business
14,746
Audio Equipment Business
4,393
Industrial Machinery/Components and Other Businesses
1,064
Total
20,203
Note: The number of employees refers to workers employed full time.
(10) Principal Lenders
Not applicable
Annual change -62 -121 +11 -172
(TRANSLATION ONLY)
2. The Company's Stocks
(1) Maximum Number of Shares Authorized to be Issued:
700,000,000
(2) Number of Shares Outstanding: 191,555,025 (including 15,735,084 shares of treasury shares)
(3) Number of Shareholders:
18,290
(4) Principal Shareholders
Shareholders
Number of shares held (Thousand shares)
Shareholding ratio
The Master Trust Bank of Japan, Ltd. (trust a/c)
28,414
16.16%
Japan Trustee Services Bank, Ltd. (trust a/c)
12,078
6.87%
Yamaha Motor Co., Ltd.
10,326
5.87%
The Shizuoka Bank, Ltd.
7,525
4.28%
Sumitomo Life Insurance Company
7,300
4.15%
Mitsui Sumitomo Insurance Co., Ltd.
6,963
3.96%
Nippon Life Insurance Company
5,002
2.85%
Mizuho Bank, Ltd.
4,958
2.82%
Japan Trustee Service Bank, Ltd. (trust a/c No. 7)
3,629
2.06%
JPMorgan Chase Bank 385151
2,782
1.58%
Note: The Company holds 15,735,084 shares of treasury shares which have been excluded from the above Major Shareholders. The shareholding ratio is calculated by excluding treasury shares from total outstanding shares.
Breakdown of Shareholders
Individuals Financial institutions Japanese corporations Foreign investors Securities companies
Number of shareholders (Persons) 17,345 59 182 666 38
Note: The figure for individuals includes treasury shares.
Number of shares held (Thousand shares) 28,317 99,290 11,929 48,958 3,059
3. The Company's Subscription Rights to Shares
Not applicable
4. Directors
(TRANSLATION ONLY)
(1) Names and Other Information regarding Directors
Name
Position
Responsibilities
Important concurrent duties
Takuya Nakata
Director
Nominating Committee Member Outside Director of Yamaha Motor Co.,
Compensation Committee
Ltd.
Member
President of Yamaha Music Foundation
Satoshi Yamahata
Director
Masatoshi Ito
Outside Director
Yoshimi Nakajima
Outside Director
Taku Fukui
Outside Director
Yoshihiro Hidaka
Outside Director
Nominating Committee Member Compensation Committee Member
Chairman of the Board of Ajinomoto Co., Inc., Outside Director of Japan Airlines Co., Ltd., Outside Director of NEC Corporation
Outside Director of AEON Financial
Audit Committee Member
Service Co., Ltd., Outside Director of Japan Freight Railway Company, Outside
Director of ULVAC, Inc.
Attorney (Kashiwagi Sogo Law Offices),
Audit Committee Member
Outside Audit & Supervisory Board Member of Shin-Etsu Chemical Co., Ltd.,
Professor of Keio University Law School
Nominating Committee Member President, Chief Executive Officer and
Compensation Committee
Representative Director of Yamaha Motor
Member
Co., Ltd.
Mikio Fujitsuka
Outside Director
Audit Committee Member
Outside Corporate Auditor of Mitsui Chemicals, Inc.
Paul Candland
Outside Director
Nominating Committee Member Compensation Committee Member
Managing Director of PMC Partners Co., Ltd., CEO of Age of Learning, Inc.
Notes: 1. Directors Masatoshi Ito, Yoshimi Nakajima, Taku Fukui, Yoshihiro Hidaka, Mikio Fujitsuka, and Paul
Candland are Outside Directors.
2. The Company files documentation with the Tokyo Stock Exchange to establish that Outside Directors
Masatoshi Ito, Yoshimi Nakajima, Taku Fukui, Yoshihiro Hidaka, Mikio Fujitsuka, and Paul Candland
are independent directors under the provisions set forth by the Tokyo Stock Exchange.
3. Audit Committee Member Mikio Fujitsuka has experience serving as CFO at one of the largest global
construction machinery manufacturers in Japan, as well as considerable knowledge of finance and
accounting.
4. Relationships between the Company and the organizations at which Outside Directors hold important
concurrent duties are as follows.
1) The Company holds 9.9% of shares of Yamaha Motor Co., Ltd., where Director Yoshihiro
Hidaka holds a concurrent duty.
2) Age of Learning, Inc., where Director Paul Candland holds a concurrent duty, operates a
business of a similar nature to the language education business of the Group.
3) There are no special relationships between the Company and the companies where Directors
Masatoshi Ito, Yoshimi Nakajima, Taku Fukui, and Mikio Fujitsuka hold concurrent duties.
5. Changes in the important concurrent duties of Outside Directors during fiscal 2019 are as follows.
1) Director Mikio Fujitsuka retired from the position of Director of Komatsu Ltd. on June 18, 2019,
and assumed the position of Outside Corporate Auditor of Mitsui Chemicals, Inc. on June 25,
2019.
2) Director Paul Candland assumed the position of CEO of Age of Learning, Inc. on September 1,
2019.
6. Changes of Directors during fiscal 2019 are as follows.
1) Directors Mikio Fujitsuka and Paul Candland were newly elected and assumed their position as
Director at the 195th Ordinary General Shareholders' Meeting held on June 24, 2019.
2) Directors Masahito Hosoi, Shigeru Nosaka, and Junya Hakoda retired because they completed
their respective terms of office at the conclusion of the 195th Ordinary General Shareholders'
Meeting held on June 24, 2019.
(TRANSLATION ONLY)
Summary of the Liability Limitation Agreement
Directors Masatoshi Ito, Yoshimi Nakajima, Taku Fukui, Yoshihiro Hidaka, Mikio Fujitsuka, and Paul Candland have entered into agreements with the Company to limit the liability for damage stipulated in Article 423, Paragraph 1 of the Companies Act. The maximum amount of liability under the agreements is the minimum amount stipulated in laws and regulations.
(TRANSLATION ONLY)
(2) Matters Relating to Outside Directors
Principal activities during fiscal 2019
Name
Position
Masatoshi Ito
Director
Yoshimi Nakajima Director
Taku Fukui
Director
Yoshihiro Hidaka
Director
Mikio Fujitsuka
Director
Paul Candland
Director
Principal activities during fiscal 2019
He attended all 12 meetings of the Board of Directors, all 3 meetings of the Nominating Committee, and all 3 meetings of the Compensation Committee held during fiscal 2019, and made appropriate comments as necessary on proposals and other matters of deliberation based on his wealth of experience and broad insight as a corporate manager. She attended all 12 meetings of the Board of Directors and 13 of the 14 meetings of the Audit Committee held during fiscal 2019, and made appropriate comments as necessary on proposals and other matters of deliberation based on her wealth of experience and broad insight as a corporate manager. He attended all 12 meetings of the Board of Directors and all 14 meetings of the Audit Committee held during fiscal 2019, and made appropriate comments as necessary on proposals and other matters of deliberation based on his specialist perspective and broad insight as an attorney. He attended 11 of the 12 meetings of the Board of Directors, all 3 meetings of the Nominating Committee, and all 3 meetings of the Compensation Committee held during fiscal 2019, and made appropriate comments as necessary on proposals and other matters of deliberation based on his wealth of experience and broad insight as a corporate manager. He attended all 10 meetings of the Board of Directors and all 11 meetings of the Audit Committee held following his assumption of office as Director, and made appropriate comments as necessary on proposals and other matters of deliberation based on his wealth of experience and broad insight as a corporate manager. He attended all 10 meetings of the Board of Directors, all 3 meetings of the Nominating Committee, and all 2 meetings of the Compensation Committee held following his assumption of office as Director, and made appropriate comments as necessary on proposals and other matters of deliberation based on his wealth of experience and broad insight as a corporate manager.
(TRANSLATION ONLY)
(3) Names and Other Information regarding the Executive Officers
Name Takuya Nakata Shinobu Kawase
Position
President and Representative Executive Officer
Managing Executive Officer
Responsibilities and important concurrent duties
Executive General Manager of Brand Development Unit
Executive General Manager of Musical Instruments & Audio Products Production Unit
Satoshi Yamahata
Managing Executive Officer
Executive General Manager of Corporate Management Unit Executive General Manager of Operations Unit
Shigeki Fujii
Executive Officer
Executive General Manager of IMC Business Unit Executive General Manager of Technology Unit
Akira Iizuka
Executive Officer
Executive General Manager of Audio Products Business Unit
Seiichi Yamaguchi
Executive Officer
Executive General Manager of Musical Instruments & Audio Products Sales Unit
Takashi Dairokuno Executive Officer In charge of internal audits
Teruhiko Tsurumi
Executive Officer
Executive General Manager of Musical Instruments Business Unit
Note: Changes in responsibilities of Executive Officers after April 1, 2020 are as follows. 1) Mr. Akira Iizuka and Mr. Takashi Dairokuno retired from the position of Executive Officer on March 31, 2020. 2) Mr. Shinobu Kawase assumed the position of Executive General Manager of Musical Instruments & Audio Products Production Unit and Executive General Manager of Audio Products Business Unit on April 1, 2020. 3) Mr. Satoshi Yamahata assumed the position of Executive General Manager of Corporate Management Unit and Executive General Manager of Human Resources and General Administration Unit on April 1, 2020.
(TRANSLATION ONLY)
(4) Names and Other Information regarding the Operating Officers
Name
Position
Responsibilities and important concurrent duties
Kimiyasu Ito Masato Takai
Operating Officer Operating Officer
Deputy Executive General Manager of Musical Instruments Business Unit
Executive General Manager of Human Resources and General Administration Unit
Shinichi Takenaga
Operating Officer
President and Director of PT. Yamaha Musik Indonesia (Distributor)
Masato Oshiki
Operating Officer President of Yamaha Music Japan Co., Ltd.
Takashi Haga
Operating Officer President of Yamaha Music India Pvt. Ltd.
Koichi Morita
Operating Officer
Senior General Manager of Research and Development Division, Technology Unit
Thomas Sumner
Operating Officer President of Yamaha Corporation of America
Naoya Tetsumura
Operating Officer
Senior General Manager of Manufacturing Process Division, Musical Instruments & Audio Products Production Unit
Taro Tokuhiro
Operating Officer
Senior General Manager of Corporate Planning Division of Corporate Management Unit Senior General Manager of Information Systems Division, Operations Unit
Hiroko Ohmura
Operating Officer
Senior General Manager of Marketing Division, Brand Development Unit
Note: Changes in responsibilities of Operating Officers after April 1, 2020 are as follows. 1) Mr. Kimiyasu Ito, Mr. Masato Takai, Mr. Takashi Haga, and Mr. Koichi Morita retired from the position of Operating Officer on March 31, 2020. 2) Mr. Shinichi Takenaga assumed the position of Deputy Executive General Manager of Audio Products Business Unit on April 1, 2020. 3) Mr. Naoya Tetsumura assumed the position of Deputy Executive General Manager of Musical Instruments & Audio Products Production Unit on April 1, 2020. 4) Mr. Taro Tokuhiro assumed the position of Executive General Manager of Operations Unit on April 1, 2020. 5) Ms. Hiroko Ohmura assumed the position of Deputy Executive General Manager of Brand Development Unit on April 1, 2020. 6) Mr. Yutaka Matsuki assumed the position of Operating Officer (Senior General Manager of Piano Division, Musical Instruments Business Unit) on April 1, 2020.
(5) Names and Other Information regarding Audit Officers (Assumed office on April 1, 2020)
Name
Position
Responsibilities and important concurrent duties
Hirofumi Mukaino Audit Officer
Senior General Manager of Internal Auditing Division
Yasushi Nishiyama Audit Officer
Senior General Manager of Audit Committee's Office
Note: In order to strengthen audit functions, on April 1, 2020, the Company newly established the position of Audit Officer to take responsibility for auditing functions in the Yamaha Group as a member of the management team at equivalent position as Operating Officers.
(TRANSLATION ONLY)
(6) Total Compensation for Directors and Executive Officers
Millions of yen
Classification
Total compensation
Compensation by type
Fixed compensation
Performancelinked bonuses
Compensation in the form of
restricted stock
Number of people (Persons)
Directors
68
68
9
Outside Directors
60
60
8
Executive Officers
579
279
141
158
8
Notes: 1. The above numbers include three Directors who retired at the conclusion of the 195th Ordinary
General Shareholders' Meeting held on June 24, 2019.
2. The total compensation and number of Executive Officers concurrently serving as Directors are
described in the section for Executive Officers.
Policy for Determination of Compensation for Directors and Summary Thereof
Individual amounts and policy regarding the compensation of Directors and Executive Officers have been determined in the Compensation Committee, which is comprised of three Outside Directors and one internal Director.
Compensation for Directors (excluding Outside Directors and Audit Committee Members) and Executive Officers (excluding the Executive Officers in charge of the internal audit) will consist of (1) fixed compensation, (2) performance-linked bonuses, and (3) compensation in the form of restricted stock. The approximate breakdown of total compensation of (1), (2), and (3) will be 5:3:2. "(2) Performance-linked bonuses" will vary according to the Company's consolidated profit for the period and ROE in the previous fiscal year, and these bonuses will be calculated with consideration for the individual's record of performance. The evaluation of individual performance will be based on indicators of performance set by business and function in each area the individual is responsible for. "(3) The Restricted stock compensation plan" has been introduced with the intent of continuously improving the corporate value, and having the Directors and Executive Officers share a common interest with shareholders. Compensation based on Company performance has also been introduced to provide a motivation for reaching performance goals in the medium term, therefore the two thirds (2/3) of the total amount is linked to the Company performance. Conditions for performance will be measured with an indicator, which is contained in the Medium-Term Management Plan that gives equal weight to "core operating income ratio," "ROE," and "EPS." Transfer restrictions shall not be lifted till the retirement of Director or Executive Officer (the transfer restrictions are effective for thirty (30) years or till the retirement of Director or Executive Officer) for the purpose of aligning the interests of the corporate officers with those of the shareholders over a long period after the end of the Medium-Term Management Plan. In addition, in the event of serious cases of accounting fraud and/or major losses during the restricted period, a claw-back clause is included that will require the return of all or a portion of restricted shares transferred to officers on an accumulated basis to date, depending on the responsibility of the officers in charge.
Outside Directors and Directors who are members of the Audit Committee as well as the Executive Officer in charge of the internal audit will receive only the fixed compensation.
(TRANSLATION ONLY)
5. Independent Accounting Auditor
(1) Name of Independent Accounting Auditor
Ernst & Young ShinNihon LLC
(2) Compensation for the Independent Accounting Auditor
Classification
Amount paid (Million yen)
1) Compensation paid by the Company to the Independent Accounting Auditor during fiscal 2019
113
2) Total compensation payable by the Company and its subsidiaries to the
Independent Accounting Auditor
154
Notes: 1. The audit under the Companies Act and the audit under the Financial Instruments and Exchange Act are not classified differently in the audit contract between the Company and the Independent Accounting Auditor, nor would it be practical to do so. Therefore, the compensation stated under classification 1) above is the total amount for both audits.
2. The Audit Committee of the Company has given their consent with respect to Article 399, Paragraph 1 of the Companies Act for the compensation paid to the Independent Accounting Auditor, as a result of confirming the status of audit plans in previous fiscal years and the track record of the Independent Accounting Auditor, while also confirming trends in the time required for audits and audit compensation, and thereby considering the validity of the expected time required for the audit and amount of compensation for the relevant fiscal year.
3. Each of the following principal subsidiaries of the Company contracts another certified public accountant or audit corporation (including a person having an equivalent qualification in the foreign country concerned) for auditing: Yamaha Corporation of America, Yamaha Music Europe GmbH, PT. Yamaha Music & Electronics (China) Co., Ltd., Yamaha Electronics Manufacturing (M) Sdn. Bhd., Hangzhou Yamaha Musical Instruments Co., Ltd., Yamaha Music Manufacturing Asia, Yamaha Electronics (Suzhou) Co., Ltd., PT. Yamaha Musical Products Asia, Xiaoshan Yamaha Musical Instruments Co., Ltd., and Yamaha Music India Pvt. Ltd.
(3) Policy for Determining Whether to Dismiss or Not Reappoint Independent Accounting Auditor
The Company's Audit Committee will dismiss the Independent Accounting Auditor by mutual consent of all members of the committee in the event that one of the items in Article 340, Paragraph 1 of the Companies Act applies to the Independent Accounting Auditor. The Audit Committee determines the content of proposals regarding the dismissal or non-reappointment of the Independent Accounting Auditor submitted to the General Shareholders' Meeting in the event that it is deemed necessary to change the Independent Accounting Auditor, for reasons such as the Independent Accounting Auditor being impeded in performing its duties based on a comprehensive analysis of the Independent Accounting Auditor's qualifications, specializations, independence from the Company, and other evaluation criteria.
(TRANSLATION ONLY)
6. Systems for Ensuring the Appropriateness of Business Activities
Based on the Companies Act and Ordinances for the Implementation of the Companies Act, the Company has put
in place systems to secure the proper conduct of its business activities (hereinafter, Internal Control Systems). The
aims of these systems are conducting business efficiently, securing the reliability of reporting, securing strict
compliance with laws and regulations, preserving the value of Company assets, and strengthening risk
management.
(1) Systems to Ensure that the Execution of Duties of the Executive Officers, Operating Officers, Audit Officers and Employees Are Compliant with Laws and Regulations and the Articles of Incorporation
1) The Company has established the Yamaha Philosophy, with its structure of ideals and goals, and the Executive Officers, Operating Officers, Audit Officers and all Group employees share this philosophy and put it into action.
2) The Board of Directors makes decisions on important matters that are specified in laws and regulations, the Articles of Incorporation, and Regulations of the Board of Directors, including basic management policy. The Board of Directors delegates important decisions concerning matters of executing business to the Executive Officers, specifies what matters are to be reported in the Regulations of the Board of Directors, and requires reasonable procedures and decision making. The Executive Officers report the status of the conduct of their duties to the Board of Directors periodically, and the Board of Directors exercises oversight of the conduct of business by the Executive Officers.
3) The Audit Committee audits the conduct of duties of the Executive Officers and the Directors based on auditing standards and auditing plans.
4) The Company has established a committee to deal with compliance matters, including the preparation of a "Compliance Code of Conduct" and related rules and manuals as well as the conduct of thoroughgoing compliance education and training.
5) To increase the effectiveness of compliance, the Company has established an internal whistle-blower system applicable to the Group as a whole.
6) The Company has stated clearly its fundamental policy of excluding any relationships with antisocial individuals and groups. The Company, therefore, rejects unreasonable requests from such antisocial elements and has a clear and strictly enforced policy of eliminating any cover-ups of improper behavior, which may create fertile ground for such unreasonable requests.
(2) Systems related to the Retention and Management of Information pertaining the Execution of the Duties of the Executive Officers
The Executive Officers properly file for safekeeping and manage documents and other information related to the conduct of their duties in accordance with laws and regulations as well as internal regulations.
(3) Rules and Other Systems related to Management of the Risk of Loss
1) Regarding major business risks, the Risk Management Committee, which is an advisory body to the President and Representative Executive Officer, maintains a comprehensive grasp of risks, and prepares measures for risk management for the Group as a whole.
2) Depending on the nature of the risk, the Company designates an organizational unit to be in charge of its management, and this unit is responsible for the preparation of regulations and manuals as well as providing guidance and advice to the Group as a whole.
3) Through the auditing activities of the Internal Auditing Division, the Company takes appropriate measures by gathering information related to risks.
(TRANSLATION ONLY)
(4) Systems for Ensuring that the Executive Officers Perform Their Duties Efficiently
1) To increase the speed of business activities and efficiency of management, the Company prepares organizational regulations, authority regulations, and other regulations related to the conduct of business, and clarifies the authority and responsibility of Executive Officers, appropriate delegation of authority, the missions of Company divisions and subsidiaries, and the chain of command.
2) The Company has established the Management Council to act as an advisory committee to the President and Representative Executive Officer. This committee considers major decisions, etc., related to the conduct of business and reports to the President and Representative Executive Officer.
3) To set numerical targets and evaluate performance of the Group as a whole, the Company structures systems for making prompt management judgments and to make risk management possible.
(5) Systems for Ensuring the Appropriateness of Business Activities in the Group, Consisting of the Company and Its Subsidiaries
1) The Company has structured the Internal Control Systems for the Group as a whole, based on the "Group Management Charter," which sets forth basic Group management policies, and the "Group Internal Control Policies & Rules," which sets internal control policy for the Group.
2) The Company and its Subsidiaries have established regulations for the conduct of business that include "Regulations of the Board of Directors," "Regulations of the Management Council, and "Regulations for Authority" with the objectives of clarifying the authority of the Directors and the chain of command.
3) For the status of management and other decisions that are of some degree of importance and may have an effect on the management condition of the Group, Subsidiaries are required to receive approval from the Company in advance and report certain items to the Company.
4) The Company establishes risk management systems for the Group as a whole and conducts compliance training.
(6) Items Related to Appointment of Employees to Assist in the Audit Committee's Work
As a specialized organizational unit with responsibility for assisting the Audit Committee, the Company has established the Audit Committee's Office, which reports directly to the Audit Committee.
(7) Items Related to Ensuring the Independence of Employees Assisting the Audit Committee from the Executive Officers and Securing the Effectiveness of Instruction Given to These Employees
As a specialized organizational unit with responsibility for assisting the Audit Committee, the Company has established the Audit Committee's Office, which reports directly to the Audit Committee. To secure independence from the Executive Officers and other persons engaged in the conduct of business, personnel evaluations, changes in personnel assignments, and rewards/disciplinary punishments of the staff of the Audit Committee's Office will require the approval of the Audit Committee.
(8) System for Reporting to the Audit Committee
1) Audit Committee members may attend important meetings, including the Managing Council, etc., and express their opinions.
2) The Company has a system where under the direction of the Audit Committee, General Manager of the Audit Committee's Office attends important meetings, including the Managing Council, etc., and expresses his/her opinions.
3) The Company has a system where General Manager of the Audit Committee's Office accesses the written approvals and other important documents, and, as necessary, requests explanations and reports from the Executive Officers, Operating Officers, Audit Officers and Employees before reporting the content of the documents to the Audit Committee.
4) The following divisions/departments report periodically to the Group as a whole on items required by laws and regulations and the items requested by the Audit Committee. (a) Results of Internal Auditing Division fact-finding (b) Reports made by the Legal Division related to the status of compliance as well as reports on actual
35
(TRANSLATION ONLY)
operations, including information obtained through the internal whistleblowing system (c) Status of compliance in other staff divisions and the activities of the Internal Control Systems 5) Divisions and subsidiaries of the Company may report to the Audit Committee important matters that affect business operations and performance through the Executive Officers, Operating Officers, Audit Officers and Employees or report directly to the Audit Committee or General Manager of the Audit Committee's Office.
(9) Systems for Ensuring that Directors, Executive Officers, Operating Officers, Audit Officers and Employees in the Company and in Group Subsidiaries, who Give Whistle-blower Reports to the Audit Committee, Are not Treated Disadvantageously
The Company holds the identity of persons who have made whistle-blower reports to the Audit Committee in strictest confidence and has structured systems to prevent such persons from being treated disadvantageously.
(10) Matters Related to Policy for Handling of Expenses or Liabilities Incurred by Members of the Audit Committee in the Conduct of Their Duties
The Company bears the expenses related to the conduct of audits based on the audit plans of the Audit Committee. When duties other than those in the audit plan are necessary and expenses are incurred, these are paid when invoices are received from the Audit Committee.
(11) Other Systems for Ensuring that Audits by Audit Committee Are Performed Effectively
The President and Representative Executive Officer exchanges views periodically with the Audit Committee regarding the structure and the status of operation of the Internal Control Systems and is promoting the continuing improvement of these systems.
When audits are conducted by the Audit Committee, the Company secures opportunities for collaboration with the Internal Auditing Division and the Accounting Auditor. The Audit Committee is allowed also to give instructions regarding audits to the Internal Auditing Division as necessary. In cases where instructions given by the Audit Committee conflict with those given by the President and Representative Executive Officer, the instructions of the Audit Committee will take precedence. When the manager of the Internal Auditing Division is going to be reassigned, the opinions of the Audit Committee must be heard in advance.
Note that, when the Audit Committee deems it necessary, support for the audit function may be obtained from outside specialists.
Appointment / dismissal
General Shareholders' Meeting
(TRANSLATION ONLY)
Appointment / dismissal
Board of Directors 8 persons (including 6 Outside Directors)
Nominating Committee 4 persons
(including 3 Outside Directors)
Compensation Committee 4 persons
(including 3 Outside Directors)
Audit Committee 3 persons
(including 3 Outside Directors)
Audit Audit Committee's
Office Audit Officer
1 person
Report
· Decision of appointment proposal
· Judgments of accounting audit authenticity
Independent Accounting
Auditor
Appointment / dismissal / oversight
Report
Appointment / dismissal / oversight
Instruction
Report
Managing Council
Risk Management Committee
Corporate Committees
Request for
advice
President, Representative
Executive Officer
Report
1 person
Executive Officers
6 persons
Operating Officers 7 persons
Instruction
Report
Internal Auditing Division Audit Officer 1 person
Internal audit
Accounting audit
Individual Business Divisions, Administrative Divisions
Domestic Group Companies
Domestic Group Companies
As of April 1, 2020
(TRANSLATION ONLY)
7. Overview of the Implementation Status of the Systems for Ensuring the Appropriateness of Business Activities
(1) Status of Initiatives to Ensure the Execution of Duties by Executive Officers, Operating Officers, Audit Officers, and Employees and the Efficiency Thereof
The Company has established the Yamaha Philosophy, which is made up of the corporate philosophy and policies for realizing it, and the Executive Officers, Operating Officers, Audit Officers, and employees share this philosophy and put it into action. In addition, the Company has established the Corporate Governance Policies, and under the basic policies for corporate governance therein, have established institutional designs for management--in addition to an organizational structure and systems--while implementing a range of initiatives and appropriately disclosing information based on the "Systems for Ensuring the Appropriateness of Business Activities." In these ways, we are working to realize transparent, high-quality business management.
In line with the transition to a Company with Three Committees (Nominating, Audit, and Compensation) in June 2017, authorities related to important decisions pertaining to business execution have been largely delegated from the Board of Directors to Executive Officers. This has enabled business operations to be executed in a manner that is both efficient and speedy.
In the fiscal year under review, the Managing Council, an advisory body to the President and Representative Executive Officer, met twice per month to confirm progress on business issues while promoting the execution of business operations in line with the medium-term management plan.
Executive Officers provided reports regarding the status of their execution of duties to the Board of Directors on a regular basis and as necessary, and the Board of Directors thus oversaw the status of the execution of duties by Executive Officers.
Furthermore, in order to ensure the execution of duties by Executive Officers, Operating Officers, and Audit Officers and the efficiency thereof, the Company formulated Regulations for Executive Officers, Regulations for Operating Officers, and Regulations for Audit Officers, while also setting forth the Regulations of the Management Council in a clear manner.
(2) Status of Initiatives related to Management of the Risk of Loss
Regarding major business risks, the Company prepares measures for risk management for the Group as a whole, identifies, analyzes, and evaluates risks in a comprehensive manner, and monitors measures to address risks in the Risk Management Committee, which is an advisory body to the President and Representative Executive Officer.
In the fiscal year under review, the Risk Management Committee evaluated and analyzed the importance of risks surrounding the Group, the frequency of their occurrence, and the level of their control, specified important risks that should be addressed as a matter of priority, and designated departments responsible for dealing with risks, thereby enhancing the level of risk control.
In addition, specific specialist issues were deliberated at meetings of the five Working Groups under the Risk Management Committee, and these Working Groups are promoting activities aimed at reducing risk.
In regard to compliance, meetings of the Working Group for Compliance, which counts an external attorney among its members, has been held to formulate plans for activities and discuss responses to issues submitted to the internal reporting hotline, which covers the entire Yamaha Group. In the fiscal year under review, the Company augmented the domestic internal reporting hotline, as part of measures to enhance convenience for users, and worked to spread knowledge of the reporting hotline to Group employees in Japan and overseas. In addition, the Company also implemented various types of training in the form of educational programs based on the Codes of Conduct for Compliance, thereby developing employees' awareness of compliance.
(3) Status of Initiatives for Ensuring the Appropriateness of Business Activities in the Group, Consisting of the Company and Its Subsidiaries
To ensure the appropriateness of business activities in the Group as a whole, the Company has established the
(TRANSLATION ONLY) Group Management Charter, the Group Internal Control Policies & Rules, and various Group regulations and shares them as basic policies for the entire Group.
In the fiscal year under review, the Company developed Group Policies & Rules, formulating new regulations related to legal affairs, document management, and internal audits. In addition, international conferences were held with managers at subsidiaries in Japan and overseas participating together with persons responsible for legal affairs, information systems, logistics, etc., as part of efforts to share information on issues related to business operations and positive examples. Moreover, the Internal Auditing Division performed audits of the legality, reasonableness, effectiveness, and efficiency of the execution of business operations across the Group as a whole.
(4) Status of Initiatives for Ensuring Effectiveness of Audits by Audit Committee
In order to ensure, maintain, and enhance the effectiveness of audits by the Audit Committee, the Company has ensured a system is in place that enables the Audit Committee to obtain all important information from across the Group as a whole and receive explanations as necessary. The Company also established the Audit Committee's Office as a department to assist the Audit Committee with its duties and allocated two full-time employees to this department, in addition to appointing an Audit Officer, a position newly created on April 1, 2020, as Senior General Manager of Audit Committee's Office, and ensuring that this person attended important internal meetings and provided views thereat, thus working to ensure effectiveness.
In the fiscal year under review, the Audit Committee, which consists of three Outside Directors, received regular reports from departments related to risk management and internal controls, and confirmed the content thereof. The Audit Committee also held meetings to exchange views with the President and Representative Executive Officer, while also receiving reports from Executive Officers, Operating Officers, and other members of the management team, and confirming the status of the execution of business operations. In addition to the above, the Company is endeavoring to ensure effectiveness via means including having Corporate Auditors of subsidiaries in Japan gather and participate in liaison meetings to provide audit reports from each company, and providing opportunities for the Audit Committee to share information with the Independent Accounting Auditor and the Internal Auditing Division.
39
Consolidated Financial Statements
Consolidated Statement of Financial Position
(TRANSLATION ONLY)
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Profit for the period Other comprehensive income Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans Financial assets measured at fair value through other comprehensive income Share of other comprehensive income of associates accounted for using the equity
method Total items that will not be reclassified to profit or loss Items that may be subsequently reclassified to profit or loss Exchange differences on translation of foreign operations Cash flow hedges Total items that may be subsequently reclassified to profit or loss Total other comprehensive income Comprehensive income for the period
Comprehensive income for the period attributable to: Owners of parent Non-controlling interests
(Millions of yen) FY2020.3 (April 1, 2019 March 31, 2020)
34,703
7 (23,431)
1
(23,421)
(9,629) (35)
(9,664) (33,086)
1,616
1,597 19
Consolidated Statement of Cash Flows
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
(TRANSLATION ONLY)
(Millions of yen) FY2020.3 (April 1, 2019March 31, 2020)
57.162 (21,067) (36,422)
(2,816) (3,143) 95,815 92,671
Consolidated Statement of Changes in Equity
FY2020.3 (April 1, 2019March 31, 2020)
Balance at April 1, 2019 Profit for the period Other comprehensive income Total comprehensive income for the period Acquisition of treasury stock Dividends Share-based compensation Transfer to retained earnings Total transactions with owners Balance at March 31, 2020
(Millions of yen)
Equity attributable to owners of the parent
Other components of equity
Financial
Capital stock Capital surplus
Retained earnings
RemeasureTreasury stock ments of
defined benefit plans
assets measured at fair value through other comprehen-
sive
Exchange differences on translation of
foreign operations
income
28,534
21,568
293,547
(42,533)
57,610
(893)
34,621
7
(23,429)
(9,567)
34,621
7
(23,429)
(9,567)
28,534
(290) (290) 21,277
(11,274)
5 (11,269) 316,899
(23,078) 519
(22,559) (65,093)
(7)
2
(7)
2
34,183
(10,461)
Balance at April 1, 2019 Profit for the period Other comprehensive income Total comprehensive income for the period Acquisition of treasury stock Dividends Share-based compensation Transfer to retained earnings Total transactions with owners Balance at March 31, 2020
Equity attributable to owners of the parent Other components of equity
Cash flow hedges
Total
Total
(Millions of yen)
Non-controlling interests
Total equity
102
56,820
357,936
34,621
(35) (33,024) (33,024)
1,070 81 (61)
359,007 34,703 (33,086)
(35) (33,024)
1,597
19
1,616
(23,078)
(23,078)
(11,274)
(49) (11,324)
228
228
(5)
(5) (34,124)
(49) (34,173)
67
23,789
325,409
1,040
326,450
Notes to Consolidated Financial Statements
I. Notes regarding Basic Significant Items for the Preparation of Consolidated Financial Statements
1. Basis for Preparation
The consolidated financial statements of the Company and its subsidiaries (hereinafter the "Group") have been prepared in accordance with International Financial Reporting Standards (hereinafter "IFRS") from the fiscal year ended March 31, 2020, pursuant to the provisions under Article 120, Paragraph 1 of the Rules of Corporate Accounting. Pursuant to the provisions of the second sentence of the above Paragraph, certain disclosure items required under IFRS are omitted.
2. Scope of Consolidation
Number of consolidated subsidiaries: 57
Names of major consolidated subsidiaries:
Yamaha Corporation of America Yamaha Music & Electronics (China) Co., Ltd. Xiaoshan Yamaha Musical Instruments Co., Ltd. Yamaha Electronics (Suzhou) Co., Ltd. Hangzhou Yamaha Musical Instruments Co., Ltd. Yamaha Music Japan Co., Ltd. Yamaha Music Manufacturing Japan Corporation
Yamaha Music Europe GmbH Yamaha Electronics Manufacturing (M) Sdn. Bhd. PT. Yamaha Music Manufacturing Asia PT. Yamaha Musical Products Asia Yamaha Music India Pvt. Ltd. Yamaha Music Retailing Co., Ltd.
3. Application of Equity Method
Number of associates accounted for using equity method
Not applicable Two companies including JEUGIA Corporation which were accounted for using equity method in the fiscal year ended March 31, 2019, were excluded from the scope of application of equity method due to equity transfer and company liquidation.
4. Fiscal Years, etc. of Consolidated Subsidiaries
The fiscal year-end for 11 consolidated subsidiaries including Yamaha Music & Electronics (China) Co., Ltd. is December 31. In preparing consolidated financial statements, adjustments have been made such as preparing additional financial statements in accordance with the Company's accounting period.
5. Accounting Policies
(1) Accounting policy for measuring significant assets 1) Financial assets (a) Initial recognition and measurement Initial recognition of financial assets is on the date of the Group's transaction with the contract party. Financial assets at initial recognition, other than financial assets measured at fair value through profit or loss, are measured at an amount of fair value plus transaction costs directly attributable to the acquisition of the financial asset. Transaction costs of financial assets measured at fair value through profit or loss are recognized in profit or loss.
(b) Classification and subsequent measurement The Group, at initial recognition, classifies financial assets as (i) financial assets measured at amortized cost, (ii) financial assets measured at fair value through other comprehensive income, or (iii) financial assets measured at fair value through profit or loss.
(i) Financial assets measured at amortized cost
Among financial assets, debt instruments meeting the following criteria together are categorized as financial assets measured at amortized cost. They are held based on a business model whose objective is to hold financial assets in order to collect
contractual cash flows. The contractual terms of these instruments give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding. After initial recognition, financial assets measured at amortized cost are measured at amortized cost using the effective interest rate method. The amortized amount using the effective interest rate method and profit or loss, in cases where a financial asset is derecognized, is recognized at profit or loss.
(ii) Financial assets measured at fair value through other comprehensive income Among financial assets, debt instruments meeting the following criteria together are categorized as financial assets measured at fair value through other comprehensive income. They are held based on a business model whose objective is achieved by both collecting contractual cash flows and selling assets. The contractual terms of these instruments give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Equity instruments, such as shares of Yamaha Motor Co., Ltd. which are using a common brand with the Group and shares of companies related to other businesses, are categorized upon initial recognition as financial assets measured at fair value through other comprehensive income. The amount of change in the fair value of equity instruments measured at fair value through other comprehensive income after initial recognition is recognized as other comprehensive income. In the instance, financial assets are derecognized or the fair value decreases materially, the accumulated other comprehensive income is transferred to retained earnings. Dividends from such financial assets are recognized in profit or loss as finance income.
() Financial assets measured at fair value through profit or loss Financial assets other than the above are categorized as financial assets measured at fair value through profit or loss. The amount of change in the fair value of financial assets measured at fair value through profit or loss after initial recognition are recognized as profit or loss.
(c) Impairment of financial assets For the trade and other receivables, the Group recognizes an allowance for doubtful accounts equivalent to the expected credit loss over the full period. For trade and other receivables for which repayment is deemed as a serious or potentially serious problem, the impairment loss amount of such assets is assessed individually or in groups with assets of similar types of risk and accounted in the allowance for doubtful accounts. For trade and other receivables that do not fall into the above category, impairment loss is assessed primarily based on the historical actual default rate and accounted in the allowance for doubtful accounts. For trade and other receivables where the actual impairment loss was previously recognized and the impairment amount decreased due to a subsequent event, the previously recognized impairment amount is reversed and recognized in profit or loss. For trade and other receivables that have clearly become unrecoverable, the unrecoverable amount is directly reduced.
(d) Derecognition The Group derecognizes a financial asset when the contractual rights to cash flows from the financial asset expire or when such rights are transferred by the Group and all the risks and economic value of ownership of the financial asset are substantially transferred.
2) Hedge accounting and derivatives The Group uses, within the scope of actual demand, forward exchange contracts (comprehensive contract) and currency options to reduce potential foreign exchange risk from foreign-currency denominated receivables and payables incurred during import and export transactions. Derivative transactions are initially recognized at fair value upon execution of a contract and subsequently remeasured at fair value. With regard to derivative transactions, the Group financial management policies and rules and each company's management policies and rules based on those of the Group have been established and transactions and management are conducted in compliance with policies and rules. Derivative transactions that fulfill the criteria for hedge accounting are applied to cash flow hedge with the
effective portion of profit or loss arising from the hedge instrument recognized as other comprehensive income and the remaining ineffective portion recognized as profit or loss. The amount of a hedge instrument recorded as other comprehensive income is transferred to profit or loss at the time the transaction conducted as a hedged item affects profit or loss. Transactions to apply hedge accounting are assessed on an ongoing basis whether the derivative used for the hedge transactions at the inception of the hedge and during the hedge period is effectively offsetting the change in cash flows of the hedged item.
3) Inventories Inventories are measured at the lower of acquisition cost and net realizable value. The acquisition cost of inventories is determined principally based on the weighted average method and includes the purchase cost, processing cost, and any other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
4) Impairment of non-financial assets Non-financial assets (excluding inventories, deferred tax assets, and assets associated with employee benefits) are assessed at the final date of each reporting period for indications of impairment and tested for impairment when indications are found. Impairment tests are conducted every period and each time indications of impairment are found for goodwill, intangible assets for which a useful life cannot be determined, and intangible assets which are unusable on the final date of the reporting period. Impairment loss is recognized if an impairment test finds the book value of the asset or a cash-generating unit exceeds the recoverable amount of an asset. For assets not tested individually at impairment test, assets are grouped together into the smallest cash-generating unit that generates cash inflows that are largely independent of the cash inflows of other assets or asset group. The recoverable amount of an asset or a cash-generating unit is the higher of its value in use and its fair value less the cost of disposal. In determining the value in use, estimated future cash flows arising from assets and cash-generating unit are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Recognition of impairment loss of cash-generating units including goodwill is conducted by first allocating to reduce the book value of the goodwill that was allocated to the cash-generating unit, then proportionately distributing the impairment based on the book value of each asset of the cash-generating unit. If an impairment loss recognized in a previous period shows indications of a reversal and the recoverable amount of an asset or cash-generating unit exceeds the book value, the impairment loss is reversed. The impairment loss is reversed up to the lower of the calculated recoverable amount or book value less the necessary depreciation and amortization in the instance impairment loss was not recognized previously. Impairment loss associated with goodwill is not reversed.
(2) Accounting policy for depreciation of significant assets 1) Property, plant and equipment Property, plant and equipment is measured using the cost model and stated at acquisition cost less accumulated depreciation and accumulated impairment losses. The acquisition cost of property, plant and equipment comprises any costs directly attributable to the acquisition of the item, the initial estimate for disassembly, removal, or other restoration costs and borrowing costs that should be capitalized. Depreciation costs on an item of property, plant and equipment, other than land and construction in progress, are accounted for using a straight-line method over its estimated useful life. The range of estimated useful lives by major asset item is as follows:
Buildings: 31 to 50 years (Equipment attached to the buildings is mainly 15 years) Structures: 10 to 30 years Machinery and equipment: 4 to 12 years Tools, furniture and fixtures: 5 to 6 years
Estimated useful life, residual value, and depreciation methods are reviewed at the end of each fiscal year and, if there is a change, adjustments will be applied from that point forward as changes in accounting estimate.
2) Right-of-use assets The Group leases a portion of its property, plant, and equipment. The acquisition cost of right-of-use assets is
set at the initial measurement of the present value of the lease fee during a non-cancelable period at the lease start date plus reasonably sure extension option period (hereafter "lease period"), and any lease prepayments prior to the lease start date, initial direct costs and the amount of the initial estimate for disassembly, removal, or other restoration costs and less any lease incentives received. Lease liabilities are set at the initial measurement of the present value of the lease fee during the lease period. In the instance of changes in the lease period or lease fee subsequent to the initial measurement, lease liabilities amounts are remeasured, and the acquisition cost of a right-of-use asset and the lease liability amounts are adjusted. Right-of-use assets are accounted using the cost model and stated at acquisition cost less accumulated depreciation and accumulated impairment loss amount. Lease liabilities are stated at the initial measurement amount and adjusted amount due to remeasurement less payments of lease fee and adjusted for interest. Depreciation cost of right-of-use assets is accounted for using the straight-line method over the lease period. Interest expenses associated with lease liabilities are classified separately from depreciation costs on right-of-use assets and included in finance expenses. However, items with short-term leases of lease periods of 12 months or less and underlying assets with low-value are not recognized as right-of-use assets or lease liabilities and lease fees are recognized as profit or loss either by applying the straight-line method or other established standards to the lease amount. The Group applies the exemption prescribed in IFRS 1 allowing a lease classified as an operating lease prior to the transition date to IFRS to report an equivalent amount to the lease liability on the date of the transition to IFRS.
3) Intangible assets Intangible assets are accounted using the cost model and stated as the amount of the acquisition cost less accumulated amortization and accumulated impairment loss.
(3) Accounting policy for significant provisions The Group has present legal and constructive obligation arising from past circumstances and this is likely to require the Group to forego resources with economic benefits to settle debts. If a reliable estimate for such debt can be determined, it is recognized as a provision. In instances where the time value of money becomes material, the provision amount is measured based on estimated future cash flows discounted to their present value using a discount rate reflecting the time value of money and risk specific to the liability.
(4) Employee benefits 1) Post-employment benefit The Group maintains defined-benefit pension plans and defined-contribution pension plans as post-employment benefit plans for employees. Defined benefit obligation is determined using the projected unit credit method based on the present value of the defined benefit obligation and related current and past service costs. The discount rate used to discount to the present value of defined benefit obligations is determined by referring to the market yields of high-quality corporate bonds matching the currency and the maturity date with the retirement benefit obligation. Assets or liabilities related to the defined benefit plans are calculated as the net sum of the present value of the defined benefit obligation and the fair value of plan assets for each plan. Differences arising in remeasurement of defined benefit plans are recognized in a lump sum in other comprehensive income in the period they are incurred and immediately transferred to retained earnings. Past service costs are recognized as profit or loss in the period they occur. Contributions to defined contribution pension plans are recognized as expenses at the time the relevant service are provided.
2) Short-term employee benefits Short-term employee benefits are not discounted and are recognized as an expense at the time service is provided. Bonuses and paid leave costs are recognized as a liability in the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(5) Revenue recognition Revenue is recognized through the following steps in accordance with IFRS 15 "Revenue from Contracts with Customers." Step 1. Identify the contract(s) with a customer. Step 2. Identify the performance obligations in the contract.
Step 3. Determine the transaction price. Step 4. Allocate the transaction price to each performance obligation. Step 5. Recognize revenue when/as a performance obligation is satisfied.
The Group's main business is the manufacture and sale of musical instruments, audio equipment, and other products. In principle, the customer takes possession of an item at the time of transfer and this is deemed as fulfilling the performance obligation. In most circumstances, revenue from an item is recognized at the time of transfer. Revenue is measured as the amount set at the time of contract with customers less any amount provided as a discount, rebate, or for a sales return.
(6) Income tax Income taxes comprise current and deferred tax and are recognized as profit or loss with the exception of items related to business combinations or recognized directly in equity or in other comprehensive income. Current tax is measured at the amount expected to be paid to or recovered from the tax authorities. The amount of current tax is determined based on the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. In the event of uncertainty concerning the tax position for treatment under income tax, if there is a high probability of the tax position to occur based on the tax laws, then a reasonable estimated amount is recognized as an asset or liability. Deferred tax is recognized on temporary difference between the reported book value of assets and liabilities at the end of reporting period and associated amounts for taxation purpose, losses carried forward and tax credit carried forward. A deferred tax asset is recognized for future deductible temporary differences, losses carried forward, and tax credit carried forward to the extent that taxable income is highly probable to occur for them to recover. A deferred tax liability is, in principle, recognized for all projected future taxable temporary differences. A deferred tax asset is reviewed each fiscal period and reduced to the extent that the tax benefit of the deferred tax assets is no longer expected to be realized. Deferred tax assets and liabilities are not recognized for the following temporary differences: Future taxable temporary differences arising from the initial recognition of goodwill; Temporary differences arising on the initial recognition of an asset or liability arising in a transaction other than a business combination and that affects neither accounting profit nor taxable income; Future taxable temporary differences associated with investments in subsidiaries and associated companies to the extent that the timing of the reversal of the temporary differences can be controlled and it is probable that they will not reverse in the foreseeable future; Future deductible temporary differences associated with investments in subsidiaries and associated companies to the extent it is not probable that sufficient taxable income will be available to use the benefits from the taxable temporary difference or that it is not probable that the taxable temporary difference will be eliminated in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied in the period when the asset is realized or liability is settled, based on statutory tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are netted when the entity has a legally enforceable right to offset current tax assets and liabilities, and the tax balances are associated to the same entity and same taxation authority. The Company and some of its subsidiaries have adopted the consolidated taxation system.
(7) Foreign currencies 1) Transaction denominated in foreign currencies The financial statements of each of the Group entities are prepared using each company's functional currency. Transactions conducted in currencies other than the functional currency are translated into the functional currency using the exchange rate on the transaction date or an exchange rate that approximates the exchange rate on that date. Foreign currency monetary items on the end of a reporting period are reconverted at the exchange rate on that date, and foreign currency non-monetary items measured at fair value are reconverted at exchange rate on the date of calculation of fair value; and both are converted to the functional currency. Any exchange differences arising from reconversion or settlement are recognized in profit or loss. However, exchange differences arising from financial instruments measured at fair value through other comprehensive income or cash flow hedges are recognized in other comprehensive income.
2) Foreign operations Assets and liabilities of the Group's foreign operations are translated using the exchange rates on the final date of a reporting period. Income and expense items are translated at the average exchange rates for the reporting
period, unless any significant change has occurred. Any exchange differences arising from these translations are recognized in other comprehensive income. If a foreign operation is disposed of, the accumulated amount of the exchange differences on translation related to the foreign operation is transferred to profit or loss at the time the foreign operation was disposed of. The Group has applied the IFRS 1 exemption provision allowing it to transfer cumulative exchange differences on translation of foreign operations at the date of transition to IFRS from other components of equity to retained earnings.
(8) Other significant items for the preparation of consolidated financial statements 1) Consumption taxes Transactions subject to national and/or local consumption tax are recorded at an amount exclusive of consumption taxes, and asset-related non-deductible national and/or local consumption tax was expensed in the fiscal year ended March 31, 2020.
2) Significant accounting estimates and judgments The Group utilizes estimates and assumptions concerning the application of accounting policies and measurement of assets, liabilities, revenues and expenditures in the preparation of the consolidated financial statements. The estimates and assumptions are based on the management best judgement in consideration of past performance and other various factors considered to be reasonable at the end of reporting period. However, by their nature, the presented amounts that are based on estimates and assumptions may differ from actual results.
The estimates and the underlying assumptions are reviewed on an ongoing basis, and the effects of revisions to the estimates are recognized in the period in which the estimate is revised and in future periods that are affected by the revision. Judgments, estimates, and assumptions that have significant effects on the amount recognized in the consolidated financial statements of the Group are as follows:
(a) Scope of subsidiaries Whether a subsidiary is eligible for inclusion in the consolidation is determined by whether the Group has control over the company.
(b) Impairment of non-financial assets The Group conducts impairment tests in accordance with "(1) Accounting policy for measuring significant assets 4) Impairment of non-financial assets" on property, plant and equipment, right-of-use assets, goodwill, and intangible assets. The impairment tests to calculate recoverable value include assumptions for future cash flow, discount rates, and other items. Management uses their best estimates and judgment to set the assumptions; however, the test results can be affected by changes in uncertain future economic conditions. When revisions are necessary, the changes can have a material effect on the consolidated financial statements.
(c) Recognition and measurement of allowance Allowances are measured based on best estimates of payments to settle future debts on the last day of the reporting period. The payment amounts expected to be used to settle debts in the future are calculated in consideration of all possible outcomes in the future. The estimates used to calculate such allowances can be affected by changes in uncertain future economic conditions and therefore contain the risk that the measured amounts for the allowances may require significant revision in the future.
(d) Measurement of retirement benefit obligation The defined benefit corporate pension plan recognizes the net amount of the defined benefit obligation and fair value of plan assets as assets and liabilities. The defined benefit obligation is calculated using actuarial calculation, which includes estimates for the discount rate, retirement rate, mortality rate, and rate of salary increase. These assumptions are determined based on a comprehensive judgment using available information, such as market trends in interest rate fluctuations. The assumptions for the actuarial calculation can be affected by the uncertain future economic environment and social changes and therefore contain the risk that the measured amounts for the retirement benefit obligation may require significant revision in the future.
(e) Recoverability of deferred tax assets Deferred tax assets are recognized based on the assumption that the company has a high probability of generating taxable income that can be applied to future deductible temporary differences. The judgment of
the possibility of generating taxable income is based on projections of when and how much income is expected in the business plan. Management uses their best estimates to set the estimates; however, uncertain future economic conditions can change to the extent that they affect the actual results.
The above includes judgments based on estimates and assumptions concerning the Group's future performance; however, at the end of the fiscal year, there is concern that the spread of COVID-19 will cause a significant slowdown in the global economy. The Group's future performance could be significantly affected if the impact of the pandemic on the global economy is longer than expected.The estimates and assumptions used in the preparation of the consolidated financial statements are based on the management's best estimates as of the end of the fiscal year. However, the future economic conditions are uncertain, and the Group performance may also be impacted by unanticipated developments in economic conditions other than those mentioned above. If such changes require management to revise its outlook, the impact on the consolidated financial statements could be substantial.
II. Additional Information
(Consolidated statement of income)
1. Loss from Suspension of Operations
During the fiscal year, the spread of COVID-19 and its serious worldwide impact have led the Group to temporarily close its directly managed shops and music schools, suspend factory operations, and cancel events.
Expenses incurred during the period of business suspensions and factory shutdowns and from event cancellations are recognized as loss from suspension of operations amounting to ¥1,386 million and recorded as "other expenses." 2. Impairment of Non-financial Assets
Impairment loss has been recognized in the fiscal year and recorded as "other expenses."
The breakdown of the impairment loss is as follows.
Impairment losses
Segment
Location
Type
Amount (Millions of yen)
Musical instruments Tokyo and other Property, plant and
regions
equipment
Buildings
732
Other
23
Right-of-use assets
2,575
Total
3,330
(1) Method of grouping assets The Group's assets are grouped based on the minimum cash-generating units that generate primarily independent cash inflows.
(2) Reason for recognition of impairment loss Due to the spread of COVID-19, directly managed shops and schools in Japan remained closed on and certain period after April. New student recruitment activities for music schools were also reduced, and this is expected to lead to a prolonged period of decreased profitability for the music schools. Due to the prospect of the deteriorating earnings, we have recognized an associated impairment loss as an asset group that is expected to be unable to recover its book value through future cash flow.
(3) Calculation of the recoverable amount
The recoverable amount is estimated based on value in use and is calculated by discounting future cash flow by
4.5%.III. Notes to Consolidated Statement of Financial Position
1. Allowance for Doubtful Accounts Directly Deducted from Assets
Trade and other receivables Financial assets
(Millions of yen) 1,760 132
2. Accumulated Depreciation of Property, Plant and Equipment
(Millions of yen) 187,457
IV. Notes to Consolidated Statement of Changes in Equity
1. Number of Shares Outstanding
Class of share
Common stock (shares)
At the beginning of the fiscal year ended March 31,
2020
191,555,025
Increase
Decrease
At the end of the fiscal year ended March 31, 2020
191,555,025
2. Dividends
(1) Dividends paid
Resolution
Class of share
Annual Shareholders' Meeting held on June
24, 2019 Board of Directors'
Meeting held on November 1, 2019
Common stock
Common stock
Total dividends (Millions of
yen)
5,389
5,885
Dividend per share
(yen)
30.00
33.00
Record date
March 31, 2019 September 30,
2019
Effective date
June 25, 2019 December 5,
2019
(2) Dividends with a record date in the fiscal year ended March 31, 2020 and effective date in the next fiscal year
Resolution
Class of share
Source
Total dividends (Millions of
yen)
Dividend per share
(yen)
Record date Effective date
Annual
Shareholders' Common Retained Meeting held on stock earnings
5,802
33.00 March 31, 2020 June 24, 2020
June 23, 2020
V. Notes to Financial Instruments
1. Conditions of Financial Instruments
(1) Policy on capital management The Group, in principle, limits its cash management to deposits for which principles are guaranteed and interest rates are fixed. In addition, the Group raises funds mainly through bank borrowings. Further, the Company and its domestic subsidiaries practice group finance. The Group uses derivatives for the purpose of reducing risks mentioned below and limits derivative transactions to actual exposure. The Group does not enter into derivative transactions for speculative purposes.
(2) Financial risk management The Group is exposed to various financial risks including credit risk, liquidity risk, and market risk in the course of business activities. To mitigate such risks, the Group has established a risk management system; that is, the Group has set up a Group financial management policy, and the Company and its consolidated subsidiaries have prepared rules based on this policy.
1) Credit risk The Group is exposed to credit risk that the Group may suffer a financial loss if a counterparty of holding financial assets could not perform contractual obligations. As to trade receivables from domestic and overseas customers, the Group is exposed to a risk that those receivables may become uncollectible due to deterioration in credit standing or bankruptcy of customers or
other reasons. Establishing rules for managing its credit exposure and trade receivables, the Group evaluates and manages a credit limit by customer, keeps records of receivables and confirms outstanding balances on a regular basis. For receivables that become past due, the Group monitors the cause of delinquency and evaluates when they become collectible. Regarding excess funds, the Group, in principle, limits the investments to deposits for which principles are guaranteed and interest rates are fixed, by emphasizing safety and security. Derivative transactions are executed based on the Group's policy and rules. Limiting derivative transactions to actual exposure, the Group does not enter into derivative transactions for speculative purposes. In addition, in order to mitigate counterparty credit risk, the Group only enters into derivative transactions with financial institutions with high-credit ratings. The maximum credit risk exposures for financial assets are shown as the book value in the consolidated financial statements.
2) Liquidity risk Liquidity risk is a risk that the Group may not perform obligations to repay financial liabilities on their due date. The Group establishes a cash management plan based on the annual management plan, prepares and updates a cash flow budget to control cash flows, and monitors the budget and actual cash flows on a continuous basis. In addition, the Company and its domestic subsidiaries manage the liquidity risk by practicing group finance.
3) Market risk (a) Foreign exchange risk Receivables and payables denominated in foreign currencies are exposed to foreign currency fluctuation risk. In order to mitigate a risk arising from foreign currency fluctuation in connection with regular export and import transactions, the Group uses foreign exchange forward contracts and currency option contracts to hedge actual exposures of net position of trade receivables and payables denominated in foreign currencies.
(b) Price variation risk of equity instruments The Company holds equity instruments including stocks of companies with business relationships, and therefore, is exposed to a risk of fluctuation of their prices. The Company continuously monitors the status of changes in fair value of these equity instruments. The Group does not hold equity instruments for short-term trading purposes and does not actively trade them.
2. Fair Values of Financial Instruments
The book values and fair values of financial assets and financial liabilities at the end of the fiscal year ended March 31, 2020 are as follows:
Classification Financial assets
Financial assets measured at amortized cost Cash and cash equivalents Trade and other receivables Other financial assets
Financial assets measured at fair value through profit or loss Debt instruments Derivative assets
Financial assets measured at fair value through other comprehensive income Equity instruments Total
Financial liabilities Financial liabilities measured at
amortized cost Trade and other payables Borrowings Other financial liabilities Financial liabilities measured at fair value through profit or loss Derivative liabilities
Total
Book value
92,671 58,067 16,945
497 128
63,185 231,496
52,982 10,830 11,189
75,003
(Millions of yen) Fair value
92,671 58,067 16,945
497 128
63,185 231,496
52,982 10,830 11,189
75,003
3. Details of Financial Instruments by Fair Value Level
(1) Fair value hierarchy The fair value hierarchy is as follows: Level 1: Fair value measured by using unadjusted quoted prices in active markets Level 2: Fair value measured by using inputs other than Level 1 inputs that are observable either directly or indirectly Level 3: Fair value measured by valuation techniques including inputs not based on observable market data
(2) Fair value measurement Fair value measurement of major financial instruments are as follows:
1) Cash and cash equivalents, financial assets and liabilities (excluding borrowings and lease liabilities) measured at amortized cost Cash and cash equivalents, short-term investments, receivables and payables (excluding borrowings and lease liabilities) measured at amortized cost are settled in a short period of time or are financial instruments which are payable on demand. Since their fair value approximates book value, their book value is used as fair value.
2) Equity instruments and debt instruments measured at fair value through profit or loss Listed stocks are measured at market price as at the end of each reporting period, and classified as Level 1. Unlisted stocks, investments in associates and debt instruments measured at fair value through profit or loss are measured by using financial statements of portfolio companies and applying appropriate valuation techniques such as valuation based on market values of similar companies, and are classified as Level 3.
3) Borrowings Short-term borrowings are settled in a short period of time and their fair value approximates their book value. Thus, the book value is used as fair value.
Fair value of long-term borrowings is calculated by discounting future cash flows by interest rates assumed for new similar borrowings, and classified as Level 2.
4) Derivative transactions Fair value of derivative transactions is measured at prices obtained from counterparty financial institutions, and classified as Level 2.
(3) Financial instruments measured at fair value
The breakdown of financial instruments measured at fair value is as follows:
(Millions of yen)
Classification
Level 1
Level 2
Level 3
Total
Financial assets
Financial assets measured at
fair value through profit or
loss
Debt instruments
497
497
Derivative assets
128
128
Financial assets measured at
fair value through other
comprehensive income
Equity instruments
57,690
5,494
63,185
Total
57,690
128
5,991
63,811
Financial liabilities
Financial liabilities measured
at fair value through profit or
loss
Derivative liabilities
Total
The breakdown of financial instruments measured at fair value on a recurring basis and classified as Level 3 is as
follows:
(Millions of yen)
Balance at beginning of period
5,790
Gain or loss (Note 1)
432
Other comprehensive income (Note 2)
217
Purchase
0
Sale and redemption
(449)
Balance at end of period
5,991
Notes: 1. Gain or loss relates to financial assets measured at fair value through profit or loss and is included
in "Finance income" and "Finance expenses" in the consolidated statement of income.
2. Other comprehensive income relates to financial assets measured at fair value through other
comprehensive income and included in financial assets measured at fair value through other
comprehensive income in the consolidated statement of comprehensive income.
The corresponding financial instruments are mainly unlisted stocks, investments in associates and debt instruments measured at fair value through profit or loss. They are measured by using financial statements of portfolio companies and applying appropriate valuation techniques such as valuation based on market values of similar companies.
VI. Notes to Per Share Information
Equity per share attributable to owners of the parent ¥1,850.81
Basic profit per share
¥194.71
Non-consolidated Financial Statements
Non-consolidated Balance Sheets
ASSETS Current assets: Cash and deposits Notes receivable - trade Electronically recorded monetary claims operating Accounts receivable - trade Merchandise and finished goods Work in process Raw materials Short-term loans receivable Other Allowance for doubtful accounts Total current assets Non-current assets: Property, plant and equipment: Buildings and structures Machinery and equipment Vehicles Tools, furniture and fixtures Land Leased assets Construction in progress Total property, plant and equipment Intangible assets: Software Other Total intangible assets Investments and other assets: Investment securities Stocks of subsidiaries and affiliates Investment in capital of subsidiaries and affiliates Long-term loans receivable Lease and guarantee deposits Prepaid pension cost Other Allowance for doubtful accounts Total investments and other assets Total non-current assets
Total assets
FY2019.3 (as of March 31, 2019)
54,722 253
1,153 16,430 12,191
2,031 1,237 4,504 13,005 (361) 105,168
26,295 1,057 61 3,006
40,601 2
3,144 74,169
0 0
92,400 65,546 20,563
2 1,034
132 (131) 179,548 253,719 358,887
(Millions of yen) FY2020.3 (as of March 31, 2020)
50,833 419
1,166 17,491 9,725 1,678 1,247 5,869 6,874
(434) 94,870
26,314 967 52
2,891 43,700
2 3,072 77,001
83 0 83
59,075 65,522 20,563
2 1,014 1,588
91 (88) 147,768 224,853 319,723
LIABILITIES Current liabilities: Accounts payable - trade Short-term loans payable Lease obligations Accounts payable - other Accrued expenses Income taxes payable Accrued expenses Advances received Deposits received Provision for product warranties Provision for loss of subsidiaries Total current liabilities Non-current liabilities: Lease obligations Long-term accounts payable - other Deferred tax liabilities Deferred tax liabilities for land revaluation Provision for product warranties Provision for retirement benefits Long-term deposits received Other Total non-current liabilities
Total liabilities NET ASSETS
Shareholders' equity: Capital stock Capital surplus
Legal capital surplus Other capital surplus Total capital surplus Retained earnings Legal retained earnings Other retained earnings
Reserve for tax purpose reduction entry General reserve Retained earnings brought forward Total other retained earnings Total retained earnings Treasury stock Total shareholders' equity Valuation and translation adjustments: Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Total valuation and translation adjustments Total net assets Total liabilities and net assets Note: Figures of less than ¥1 million have been omitted.
FY2019.3 (as of March 31, 2019)
8,925 13,447
0 4,823 15,388
15,388
815 512
20 442 44,376
2 2,840 10,087 9,544
15,118 8,997
47 46,637 91,013
28,534
3,054 19,152 22,206
4,159
6,712 70,710 102,847 180,269 184,429 (42,533) 192,636
54,771 85
20,379 75,237 267,873 358,887
(Millions of yen)
FY2020.3 (as of March 31, 2020)
8,365 16,398
0 3,987 13,751 2,319 13,751
618 302 16 131 45,891
1 1,409
894 9,536 1,140 14,704 8,980
466 37,133 83,025
28,534
3,054 19,319 22,374
4,159
6,478 70,710 117,878 195,067 199,226 (65,093) 185,042
31,225 67
20,362 51,655 236,698 319,723
Non-consolidated Statements of Income
Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Non-operating income Interest income Dividend income Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary income . Extraordinary income Gain on sales of non-current assets Gain on exchange of non-current assets Gain on sales of investment securities Reversal of provision for loss of subsidiaries Total extraordinary income . Extraordinary losses Loss on retirement of non-current assets Provision of allowance for doubtful accounts Loss from suspension of operations Loss on valuation of shares of subsidiaries and associates Impairment loss Total extraordinary losses Income before income taxes Income taxes - current Income taxes - deferred Total income taxes Net income Note: Figures of less than ¥1 million have been omitted.
FY2019.3 (April 1, 2018 March 31, 2019)
232,416 178,968 53,448 33,930 19,518
118 17,510 1,250 18,879
2 181 183 38,214
40 2,034
821 200 3,097
350 94 688 192 1,325 39,985 5,051 2,115 7,167 32,817
(Millions of yen) FY2020.3 (April 1, 2019 March 31, 2020)
231,795 180,335 51,460 33,072 18,387
93 12,751
889 13,735
2 740 742 31,380
133 310 443
32 58 174 265 31,558 5,042 461 5,503 26,055
Non-consolidated Statements of Changes in Equity
(April 1, 2019March 31, 2020)
Capital stock
(Millions of yen) Shareholders' equity
Capital surplus
Legal capital Other capital Total capital
surplus
surplus
surplus
Balance at April 1, 2019 Changes of items during period Dividends of surplus Net income Reversal of revaluation reserve for land Reserve for tax purpose reduction entry Acquisition of treasury stock Disposal of treasury stock Net changes of items other than shareholders'
equity
Total changes of items during period
Balance at March 31, 2020
28,534
28,534
3,054
19,152
22,206
3,054
167
167 19,319
167
167 22,374
Balance at April 1, 2019 Changes of items during period Dividends of surplus Net income Reversal of revaluation reserve for land Reserve for tax purpose reduction entry Purchase of treasury stock Disposal of treasury stock Net changes of items other than shareholders'
equity
Total changes of items during period
Balance at March 31, 2020
Legal retained earnings
4,159
Shareholders' equity
Retained earnings
Other retained earnings
Reserve for
tax purpose reduction entry
General reserve
Retained earnings brought forward
Total retained earnings
6,712
70,710
102,847
184,429
(233)
(11,274) 26,055
17 233
(11,274) 26,055
17
4,159
(233) 6,478
70,710
15,031 117,878
14,797 199,226
Treasury stock
Total shareholders' equity
(42,533)
(23,078) 519
192,636
(11,274) 26,055
17 (23,078) 686
(22,559) (65,093)
(7,593) 185,042
Balance at April 1, 2019 Changes of items during period Dividends of surplus Net income Reversal of revaluation reserve for land Reserve for tax purpose reduction entry Purchase of treasury stock Disposal of treasury stock Net changes of items other than shareholders'
equity
Valuation and translation adjustments
Valuation difference on availablefor-sale securities
Deferred gains or losses on hedges
Revaluation reserve for
land
Total valuation
and translation
adjustments
54,771
85
20,379
75,237
(23,546)
(17)
(17)
(23,581)
Total changes of items during period
(23,546)
(17)
(17)
(23,581)
Balance at March 31, 2020
31,225
67
20,362
51,655
Note: Figures of less than ¥1 million have been omitted.
Total net assets
267,873
(11,274) 26,055
17 (23,078) 686 (23,581) (31,175) 236,698
Notes to Non-consolidated Financial Statements
I. Significant Accounting Policies
1. Accounting Policy for Measuring Assets
(1) Securities Securities of subsidiaries and affiliates are stated at cost, determined by the average method. Other securities Marketable securities classified as available-for-sale securities are stated at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Cost of securities sold is determined by the weighted-average method. Nonmarketable securities classified as available-for-sale securities are stated at cost.
(2) Derivatives Derivatives are stated at fair value.
(3) Inventories Inventories 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.
2. Accounting Policy for Depreciation of Assets
(1) Property, plant and equipment (excluding leased assets) Property, plant and equipment are calculated by the straight-line method The range of useful lives by major asset item is as follows:
Buildings: 31 to 50 years (Equipment attached to the buildings: Mainly 15 years) Structures: 10 to 30 years Machinery and equipment: 4 to 9 years Tools, furniture and fixtures: 5 to 6 years (Molds and dies: Mainly 2 years)
(2) Intangible assets Intangible assets are amortized mainly over a period of five years on a straight-line method.
(3) Leased assets Leased assets under finance leases, other than those for which the ownership transfers to the lessee. Depreciation is calculated by the straight-line method over the lease period with the residual value at zero.
3. Accounting Policy for Provisions
(1) Allowance for doubtful accounts To properly evaluate accounts receivable, the allowance for doubtful accounts is provided at an amount sufficient to over possible losses on the collection of receivables. The amount of the provision is based on the historical experience with write-offs for normal receivables and individual estimation of the collectability of receivables due from specific companies in financial difficulties.
(2) Provision for product warranties To provide for the expense of repairing products after their sale, the amount of provision for product warranties is determined using ratios of expense to net sales and unit sales based on past experience or estimation for individual products.
(3) Provision for loss of subsidiaries Provision for loss of subsidiaries is provided at an amount anticipated to be incurred by the Company in order to eliminate losses carried by subsidiaries.
(4) Provision for retirement benefits
Employees' retirement benefits are provided on accrual basis based on the projected retirement benefit obligation and the pension fund assets calculated as of the end of the period. Prior service cost is being amortized by the straight-line method over periods (10years) which are shorter than the average remaining service of the employees. Actuarial differences (gain and Loss) are amortized in the following year in which gain or loss is recognized by the straight-line method over periods (10years) which are shorter than the average remaining years of service the employees.
4. Accounting Policy for Recognition of Significant Revenues and Expenses
Sales for Construction Completions For 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 above condition is not met, the completed-contract method has been applied. The method for estimating the percentage-of-completion amount is based on the percentage of the cost incurred to
the estimated total cost.
5. Accounting Policy for Foreign Currency Translation
Monetary assets and liabilities of the Company are translated at the current exchange rates in effect at each balance sheet date. The resulting foreign exchange gains or losses are recognized as income or expenses.
6. Accounting Policy for Hedging
(1) Hedge accounting Translation differences arising from forward foreign exchange contracts with respect to receivables and payables denominated in foreign currencies are accounted for using the allocation method. Anticipated transactions denominated in foreign currencies designated as hedging instruments are accounted for using deferral hedge accounting.
(2) Hedging instruments and hedged items Hedging instruments: Forward foreign exchange contracts, purchased options with foreign currency-denominated put and yen-denominated call options Hedged items: Receivables and payables denominated in foreign currencies and anticipated transactions denominated in foreign currencies
(3) Hedging policy The Company enter into forward foreign exchange contracts and currency options as hedging instruments within the limit of actual foreign transactions to reduce risk arising from future fluctuations of foreign exchange rates with respect to export and import transactions in accordance with the internal management rules of each company.
(4) Assessment of hedge effectiveness The Company does not make an assessment of effectiveness for hedging activities because the anticipated cash flows fixed by hedging activities and avoidance of market risk are clear; therefore, there is no need to evaluate such effectiveness.
7. Other Significant Items for the Preparation of Non-consolidated Financial Statements
(1) Consumption taxes National and local consumption taxes are excluded from transaction amounts. Non-deductible national and local consumption taxes on assets are treated as expenses.
(2) Application of the consolidated taxation system The Company applies the consolidated taxation system.
(3) Treatment of tax effect accounting for the transition from the consolidated taxation system to the group tax sharing system With respect to the transition to the group tax sharing system established under the "Act on Partial Revision of the Income Tax Act" (Act No. 8 of 2020) and the items for which the non-consolidated taxation system was revised in line with the transition to the group tax sharing system, pursuant to the treatment stipulated in Paragraph 3 of the "Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation
System to the Group Tax Sharing System" (PITF No. 39, March 31, 2020), the Company does not apply the provisions of Paragraph 44 of the "Implementation Guidance on Tax Effect Accounting" (ASBJ Guidance No. 28, February 16, 2018) and the amounts of deferred tax assets and deferred tax liabilities are based on the provisions of the pre-revision tax act.
II. Notes to Non-consolidated Balance Sheets
1. Receivables from and Payables to Subsidiaries and Affiliates
Short-term receivables: Short-term payables:
(Millions of yen) 20,023 25,069
2. Accumulated Depreciation of Property, Plant and Equipment
(Millions of yen) 57,999
3. Revaluation of Land
The Company have carried out the revaluation of landholdings in accordance with the Act on Revaluation of the Land (Act No. 34, published on March 31, 1998).
(1) Date of revaluation
March 31, 2002
(2) Method of revaluation
As provided for in Article 2-3 of the Enforcement Order for Act on Revaluation of the Land (Cabinet Order No. 119, issued on March 31, 1998), land values were determined based on the land prices registered in the land tax list specified in Article No. 341, No. 10, of the Local Tax Act or the supplementary land tax list specified in No. 11 of the same Article No. 341.
(3) Difference between the fair value of the revalued land used for business at the end of the fiscal year ended March 31, 2020 and the book value after revaluation (Millions of yen) (948)
4. Guarantee Obligations
Guarantees are given for the following company's payments under operating transactions. (Millions of yen)
Yamaha Travel Service Co., Ltd.
0
III. Notes to Non-consolidated Statements of Income
Transactions with subsidiaries and affiliates
Net Sales Purchases Transaction volume of non-operating transactions
(Millions of yen)
198,639 122,181
9,182
IV. Notes to Non-consolidated Statements of Changes in Equity
Treasury shares
Type of share
Common stock (shares)
At the beginning of the fiscal year ended March 31,
2020
11,919,368
Increase 3,952,516
Decrease
At the end of the fiscal year ended March 31, 2020
136,800
15,735,084
(Overview of reasons for changes) The details of the increase are as follows:
Increase due to the purchase of treasury shares based on the decision of the Board of Directors Increase due to the purchase of shares less than one unit
The details of the decrease are as follows:
Decrease due to the disposal of treasury shares as restricted stock compensation
V. Notes to Deferred Tax Accounting
(Shares) 3,950,500 2,016
(Shares) 136,800
Principal deferred tax assets and liabilities
Deferred tax assets: Revaluation loss on inventories Allowance for doubtful accounts Depreciation, excess Impairment loss of non-current assets
Revaluation loss on investment securities
Accrued bonuses Provision for product warranties Long-term accounts payable - other Provision for retirement benefits Other Gross deferred tax assets Valuation allowance Total deferred tax assets
Deferred tax liabilities: Deferred gains on hedges Reserve for tax purpose reduction entry Valuation difference on available-for-sale securities Total deferred tax liabilities Net deferred tax assets
(Millions of yen)
184 156 5,111
3,258
15,515
1,129 345 841
3,916 4,151 34,611 (19,732) 14,878
(28) (2,758) (12,986) (15,773)
(894)
VI. Notes to Per Share Information
Net assets per share Net income per share
¥1,346.25 ¥146.53
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Independent Accounting Auditor's Report
May 26, 2020
The Board of Directors YAMAHA CORPORATION
Ernst & Young ShinNihon LLC Hamamatsu Office
Toshikatsu Sekiguchi Certified Public Accountant Designated and Engagement Partner
Toshiyuki Matsuura Certified Public Accountant Designated and Engagement Partner
Shuji Okamoto Certified Public Accountant Designated and Engagement Partner
Opinion Pursuant to Article 444, Paragraph 4 of the Companies Act, we have audited the accompanying consolidated financial statements, which comprise the consolidated statement of financial position, the consolidated statement of income, the consolidated statement of changes in equity and the notes to the consolidated financial statements of YAMAHA CORPORATION (the "Company") for the fiscal year from April 1, 2019 through March 31, 2020.
In our opinion, the consolidated financial statements referred to above, which were prepared in accordance with the provisions of the second sentence of Article 120, Paragraph 1 of the Regulation on Corporate Accounting, which provide for the omission of certain disclosure items required under Designated International Accounting Standards, present fairly, in all material respects, the financial position and results of operations of the Yamaha Group, which consists of the Company and its consolidated subsidiaries, for the period covered by the consolidated financial statements.
Basis for the Opinion We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing standards is stated in "Auditor's Responsibility for the Audit of the Consolidated Financial Statements." We are independent of the Company and its consolidated subsidiaries in accordance with the provisions related to professional ethics in Japan, and are fulfilling other ethical responsibilities as an auditor. We believe that we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of Management and the Audit Committee for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the provisions of the second sentence of Article 120, Paragraph 1 of the Regulation on Corporate Accounting, which provide for the omission of certain disclosure items required under Designated International Accounting Standards, and for
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designing and operating such internal control as management determines is necessary to enable the presentation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate to prepare the consolidated financial statements in accordance with the premise of a going concern, and for disclosing matters relating to going concern when it is required to do so in accordance with the provisions of the second sentence of Article 120, Paragraph 1 of the Regulation on Corporate Accounting, which provide for the omission of certain disclosure items required under Designated International Accounting Standards.
The Audit Committee is responsible for monitoring the execution of Executive Officers' and Directors' duties related to designing and operating the financial reporting process.
Auditor's Responsibility for the Audit of the Consolidated Financial Statements Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to express an opinion on the consolidated financial statements from an independent standpoint in an audit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they can be reasonably expected to, either individually or collectively, influence the decisions of users taken on the basis of the consolidated financial statements.
We make professional judgment in the audit process in accordance with auditing standards generally accepted in Japan, and perform the following while maintaining professional skepticism.
Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures to address the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
In making those risk assessments, the auditor considers internal control relevant to the entity's audit in order to design audit procedures that are appropriate in the circumstances, although the purpose of the audit of the consolidated financial statements is not to express an opinion on the effectiveness of the entity's internal control.
Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as the reasonableness of accounting estimates made by management and the adequacy of related notes.
Determine whether it is appropriate for management to prepare the consolidated financial statements on the premise of a going concern and, based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. If there is a significant uncertainty concerning the premise of a going concern, the auditor is required to call attention to the notes to the consolidated financial statements in the audit report, or if the notes to the consolidated financial statements pertaining to the significant uncertainty are inappropriate, issue a modified opinion on the consolidated financial statements. While the conclusions of the auditor are based on the audit evidence obtained up to the date of the audit report, depending on future events or conditions, an entity may be unable to continue as a going concern.
Besides assessing whether the presentation of and notes to the consolidated financial statements are in accordance with the provisions of the second sentence of Article 120, Paragraph 1 of the Regulation on Corporate Accounting, which provide for the omission of certain disclosure items required under Designated International Accounting Standards, assess the presentation, structure, and content of the consolidated financial statements including related notes, and whether the consolidated financial statements fairly present the transactions and accounting events on which they are based.
Obtain sufficient and appropriate audit evidence regarding the financial information of the Company and its consolidated subsidiaries in order to express an opinion on the consolidated financial statements. The auditor is responsible for instructing, supervising, and implementing the audit of the consolidated financial statements, and is solely responsible for the audit opinion.
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The auditor reports to the Audit Committee regarding the scope and timing of implementation of the planned audit, material audit findings including material weaknesses in internal control identified in the course of the audit, and other matters required under the auditing standards.
The auditor reports to the Audit Committee regarding the observance of provisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor's independence and any safeguards that are in place to reduce or eliminate obstacles.
Interest Our firm and engagement partners have no interests in the Company or its consolidated subsidiaries requiring disclosure under the provisions of the Certified Public Accountants Act of Japan.
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Independent Accounting Auditor's Report
May 26, 2020
The Board of Directors YAMAHA CORPORATION
Ernst & Young ShinNihon LLC Hamamatsu Office
Toshikatsu Sekiguchi Certified Public Accountant Designated and Engagement Partner
Toshiyuki Matsuura Certified Public Accountant Designated and Engagement Partner
Shuji Okamoto Certified Public Accountant Designated and Engagement Partner
Opinion Pursuant to Article 436, Paragraph 2, Item 1 of the Companies Act, we have audited the accompanying financial statements, which comprise the balance sheet, the statement of income, the statement of changes in net assets and the related notes, and the accompanying supplementary schedules of YAMAHA CORPORATION (the "Company") for the 196th fiscal year from April 1, 2019 through March 31, 2020.
In our opinion, the financial statements and the accompanying supplementary schedules referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2020, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in Japan.
Basis for the Opinion We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibility under the auditing standards is stated in "Auditor's Responsibility for the Audit of the Financial Statements and the Accompanying Supplementary Schedules." We are independent of the Company in accordance with the provisions related to professional ethics in Japan, and are fulfilling other ethical responsibilities as an auditor. We believe that we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Responsibilities of Management and the Audit Committee for the Financial Statements and the Accompanying Supplementary Schedules Management is responsible for the preparation and fair presentation of the financial statements and the accompanying supplementary schedules in accordance with accounting principles generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the financial statements and the accompanying supplementary schedules that are free from material misstatement, whether due to
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fraud or error. In preparing the financial statements and the accompanying supplementary schedules, management is responsible for
assessing whether it is appropriate to prepare the financial statements and the accompanying supplementary schedules in accordance with the premise of a going concern, and for disclosing matters relating to going concern when it is required to do so in accordance with accounting principles generally accepted in Japan.
The Audit Committee are responsible for monitoring the execution of Executive Officers' and Directors' duties related to designing and operating the financial reporting process.
Auditor's Responsibility for the Audit of the Financial Statements and the Accompanying Supplementary Schedules Our responsibility is to obtain reasonable assurance about whether the financial statements and the accompanying supplementary schedules as a whole are free from material misstatement, whether due to fraud or error, and to express an opinion on the financial statements and the accompanying supplementary schedules from an independent standpoint in an audit report, based on our audit. Misstatements can occur as a result of fraud or error, and are deemed material if they can be reasonably expected to, either individually or collectively, influence the decisions of users taken on the basis of the financial statements and the accompanying supplementary schedules.
We make professional judgment in the audit process in accordance with auditing standards generally accepted in Japan, and perform the following while maintaining professional skepticism.
Identify and assess the risks of material misstatement, whether due to fraud or error. Design and implement audit procedures to address the risks of material misstatement. The audit procedures shall be selected and applied as determined by the auditor. In addition, sufficient and appropriate audit evidence shall be obtained to provide a basis for the audit opinion.
In making those risk assessments, the auditor considers internal control relevant to the entity's audit in order to design audit procedures that are appropriate in the circumstances, although the purpose of the audit of the financial statements and the accompanying supplementary schedules is not to express an opinion on the effectiveness of the entity's internal control.
Assess the appropriateness of accounting policies adopted by management and the method of their application, as well as the reasonableness of accounting estimates made by management and the adequacy of related notes.
Determine whether it is appropriate for management to prepare the financial statements and the accompanying supplementary schedules on the premise of a going concern and, based on the audit evidence obtained, determine whether there is a significant uncertainty in regard to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. If there is a significant uncertainty concerning the premise of a going concern, the auditor is required to call attention to the notes to the financial statements and the accompanying supplementary schedules in the audit report, or if the notes to the financial statements and the accompanying supplementary schedules pertaining to the significant uncertainty are inappropriate, issue a modified opinion on the financial statements and the accompanying supplementary schedules. While the conclusions of the auditor are based on the audit evidence obtained up to the date of the audit report, depending on future events or conditions, an entity may be unable to continue as a going concern.
Besides assessing whether the presentation of and notes to the financial statements and the accompanying supplementary schedules are in accordance with accounting principles generally accepted in Japan, assess the presentation, structure, and content of the financial statements and the accompanying supplementary schedules including related notes, and whether the financial statements and the accompanying supplementary schedules fairly present the transactions and accounting events on which they are based.
The auditor reports to the Audit Committee regarding the scope and timing of implementation of the planned audit, material audit findings including material weaknesses in internal control identified in the course of the audit, and other matters required under the auditing standards.
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The auditor reports to the Audit Committee regarding the observance of provisions related to professional ethics in Japan as well as matters that are reasonably considered to have an impact on the auditor's independence and any safeguards that are in place to reduce or eliminate obstacles.
Interest Our firm and engagement partners have no interests in the Company requiring disclosure under the provisions of the Certified Public Accountants Act of Japan.
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Copy of Audit Report of the Audit Committee
Audit Report
May 26, 2020
We at the Audit Committee audited the Directors' and Executive Officers' performance of duties during the 196th business year, from April 1, 2019 through March 31, 2020. We hereby report the method and results thereof as follows.
1. Methods and Contents of the Audit
In regard to the content of resolutions passed by the Board of Directors in relation to the matters listed in Article 416, Paragraph 1, item (i), (b) and (e) of the Companies Act and systems developed pursuant to these resolutions (internal control systems), the Audit Committee received regular reports from Executive Officers, Operating Officers, employees, etc. concerning the creation and status of operation thereof, and requested explanations and expressed its views as necessary.
In addition, the Audit Committee coordinated with the Internal Auditing Division of the Company, etc. and other corporate departments to investigate the decision-making process at important committees, etc. and the content thereof, the content of approval forms and other important documents, the status of the execution of duties by Directors, Executive Officers, etc., and the status of the Company's business operations and assets, pursuant to audit plans that set forth audit policies, the division of duties, etc. in accordance with the audit standards determined by the Audit Committee.
In regard to subsidiaries, the Audit Committee worked to ensure mutual communication with Corporate Auditors at subsidiaries, Independent Accounting Auditors, etc., in addition to visiting subsidiaries as necessary, receiving business reports from Directors, General Managers, etc. at each company, and investigating the status of business operations, assets, and other matters.
Moreover, each Audit Committee Member has monitored the Independent Accounting Auditor to verify their independence and the propriety of their audit implementation, and has requested reports and received explanations from them when necessary. In addition, each Audit Committee Member received a notice from the Independent Accounting Auditor that "the system for securing appropriate execution of duties" (in each items of Article 131 of the Corporate Accounting Rules) has been developed in accordance with "the Standard on Quality Control Concerning Audit" (established by the Business Accounting Council on October 28, 2005), and requested reports and received explanations from them as necessary.
Based on the methods described above, the Audit Committee reviewed non-consolidated financial statements (non-consolidated balance sheets, non-consolidated statements of income, non-consolidated statement of changes in net assets, and notes to non-consolidated financial statements) and their supplementary schedules in addition to the business report and its supplementary schedules, and consolidated financial statements (consolidated statement of financial position, consolidated statement of income, consolidated statement of changes in equity, and notes to consolidated financial statements) for the business year.
2. Results of Audit
(1) Results of the audit of the business report and other documents
1) The business report and its supplementary schedules present fairly the condition of the Company in accordance with applicable laws and regulations, as well as the Articles of Incorporation.
2) With regard to the execution of Directors' and Executive Officers' duties, we have found no misconduct or material matters in violation of laws, regulations, or the Articles of Incorporation.
3) We find the content of the Board of Directors' resolution on the internal control system sufficient. Also, as to the content of the Business Report and the execution of Directors' and Executive Officers' duties with regard to internal control systems, nothing unusual is to be pointed out.
(2) Results of the audit of non-consolidated financial statements and their supplementary schedules
The method and results of the audit conducted by Ernst & Young ShinNihon LLC, the Company's Independent
(TRANSLATION ONLY) Accounting Auditor, are recognized as fair and proper. (3) Results of the audit of consolidated financial statements The method and results of the audit conducted by Ernst & Young ShinNihon LLC, the Company's Independent Accounting Auditor, are recognized as fair and proper.
The Audit Committee YAMAHA CORPORATION
Taku Fukui Audit Committee Member Yoshimi Nakajima Audit Committee Member Mikio Fujitsuka Audit Committee Member
Note: Audit Committee Members Taku Fukui, Yoshimi Nakajima, and Mikio Fujitsuka are Outside Directors as stipulated in Article 2, item 15 and Article 400, Paragraph 3 of the Companies Act.
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Concerning Procedures for Exercise of Voting Rights Via the Internet
1. For shareholders who exercises voting rights via the Internet The following items should be verified when exercising voting rights via the Internet.
(1) For those using smartphones It is possible to exercise voting rights via the website for smartphone by reading the "Login QR Code" indicated on the enclosed Exercise of Voting Rights form.
(2) For those using computers It is only possible to exercise voting rights from the computers by using the following website designated by the Company (https://www.web54.net). Pleas access the above website, use the voting rights code and password indicated on the enclosed Exercise of Voting Rights form and input your vote for or against the proposals by following the on-screen instructions.
(3) Please note the exercise deadline Shareholders voting via the Internet are requested to exercise their voting rights prior to 5:00 p.m. (JST) on Monday, June 22, 2020, after reviewing the Reference Documents for the General Shareholders' Meeting.
(4) The vote arriving latest will be deemed valid When voting rights are exercised more than once via the Internet, the vote that arrives the latest will be deemed the valid vote.
(5) Voting rights exercised via the Internet will be prioritized When a shareholder exercises voting rights via the Internet and by the Exercise of Voting Rights form, the vote via the Internet will be deemed the valid vote.
(6) Bearing of access fees Shareholders will bear the expenses incurred when accessing the Internet to exercise shareholder voting rights.
* For questions related to exercising shareholder voting rights via the Internet, please contact the following:
The Sumitomo Mitsui Trust Bank Limited. Securities Agent Web Support Tel: 0120-652-031 (toll-free) Service hours: 9:00 a.m. to 9:00 p.m.
2. For institutional investors If you are a nominee shareholder such as an administrative trust bank (including a standing proxy), and apply in advance for the platform for exercising voting rights via the Internet, you may use such platform as a method for exercising your voting rights via the Internet at this meeting.
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Concerning Exercise of Voting Rights Via "Smart Exercise" QR Code Scanning
How to exercise voting rights via the website for smartphone Voting rights may be easily exercised by scanning the unique "QR Code" with a smartphone or tablet device.
Step 1: Scan the "Exercise of Voting Rights Website Login QR Code for Smartphones" on the lower right of the enclosed Exercise of Voting Rights form by smartphone or tablet device.
Step 2: Open the displayed URL to go to the Exercise of Voting Rights website. You have two options for exercising your voting rights.
Step 3: Follow the on-screen instructions to indicate your votes of approval or disapproval for each proposal.
Step 4: If you are all set, press the "Exercise with these votes" button on the confirmation screen to complete your vote.
*QR Code is a registered trademark of DENSO WAVE INCORPORATED.
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