Presentation of Financial Statements for Fiscal 2002 May 20, 2002 YAMAHA CORPORATION Review of Fiscal 2002 2 Financial Summary for the Fiscal Year Ended March 31, 2002 - Net sales and operating income decreased compared with the previous interim term; net loss recorded for the first time in two years. - Consolidated net sales fell ¥14.7 billion (2.8%) from the previous term. Net sales contracted ¥35.1 billion (6.8%), excluding gains on foreign exchange (¥20.4 billion). - Operating income decreased 52.0% to¥11.0 billion compared with the previous term. Gains on foreign exchange due to the weak yen totaled ¥6.7 billion. - Substantial inventory reduction achieved; size of inventories close to optimal levels. (Decreased ¥20.2 billion compared with the end of September; decreased ¥13.4 billion compared with the end of the previous term.) Accounts receivable contracted ¥13.9 billion. Free cash flow improved (¥18.6 billion in the black). Actual interest bearing liabilities decreased ¥15.3 billion. - Carried out revaluation of land for business use to ensure the accurate valuation of assets. An ¥8.2 billion reserve for land revaluation was recorded as a portion of shareholders' equity. 3 Performance Outline (Billions of Yen) FY2001 FY2002 519.1 23.0 504.4 11.0 4.4% 2.1% 19.2 7.6 3.7% 1.5% 13.3 (10.3) 2.6% EPS (Yen) ROE (%) Net Sales Operating Income Operating Income Ratio (%) Recurring Profit Recurring Profit Ratio (%) Net Income Net Income Ratio (%) Dividends per Share (Yen) Increase/ (Decrease) Initial Projection (announced on Nov. 16, 2001) (14.7) 505.5 (12.0) 13.0 (11.6) 10.0 (2.0)% (23.6) 9.0 64.5 (49.7) — 43.5 6.4 (5.2) — 4.6 7.00 8.00 — 8.00 4 Currency Exchange Rate FY2001 Net Sales US$ EUR Others Total Profit US$ EUR Others Total FY2002 Impact (Billions of Yen) ¥110 ¥100 ¥125 ¥110 + ¥11.3 + ¥5.1 + ¥4.0 + ¥20.4 ¥108 ¥98 ¥124 ¥107 + ¥2.5 + ¥3.5 + ¥0.7 + ¥6.7 5 Net Sales by Business Segment (Billions of Yen) Recreation and Others Electronic Equipment and Metal Products Lifestyle-Related Products 519.1 504.4 (-2.8 %) 43.9 43.2 46.9 40.0 36.6 45.7 (-8.9%) (-15.3%) (-2.6%) 100.2 95.2 AV/IT 484.0 (-6.8%) 40.0 36.6 45.7 (-8.9%) (-5.0%) (-15.3%) (-2.6%) (-11.4%) 88.8 Musical Instruments (+0.7%) 284.9 FY2001 286.9 FY2002 (-4.2%) 272.9 After translation adjustments FY2002 * Figures in parentheses represent changes from the previous period. 6 Net Sales by Region (Billions of Yen) 519.1 504.4 45.9 47.5 (-2.8%) (+3.5%) Europe 73.0 73.4 (+0.5%) North America 91.7 93.5 (+2.0%) Japan 308.5 290.0 (-6.0%) FY2001 FY2002 Other Regions 484.0 43.8 (-6.8%) (-4.6 %) 67.1 (-8.1%) 83.1 (-9.4%) 290.0 (-6.0%) FY2002 After translation adjustments * Figures in parentheses represent changes from the previous period. 7 Breakdown of Operating Income/Loss Gain on Foreign Decrease in Exchange Net Sales (Billions of Yen) 6.7 (8.3) Increase in Manufacturing Costs (10.6) 23.0 Pension Obligations (1.1) Decrease in SG&A Expenses 1.3 Other 0.2 11.0 Operating Income for FY2001 Operating Income for FY2002 8 Operating Income by Business Segment (Billions of Yen) Actual Currency Increase/ Exchange Increase/ (Decrease) Impact (Decrease) FY2001 FY2002 12.3 4.7 (7.6) 6.3 (13.9) AV/IT 3.9 3.0 (0.9) 0.4 (1.3) Lifestyle-Related Products 0.9 1.0 0.1 0.1 Electronic Equipment and Metal Products 6.7 4.4 (2.3) (2.3) (1.3) (1.7) (0.4) (0.4) 0.5 (0.4) (0.9) (0.9) 23.0 11.0 (12.0) Musical Instruments Recreation Others TOTAL 6.7 (18.7) 9 Operating Income by Region (Billions of Yen) Currency Increase/ Exchange (Decrease) Impact Actual Increase/ (Decrease) FY2001 FY2002 13.4 3.2 (10.2) 6.6 (16.8) North America 5.8 3.4 (2.4) 0.2 (2.6) Europe 1.3 0.6 (0.7) (0.1) (0.6) Other Regions 3.0 3.7 0.7 0.7 Elimination (0.5) 0.1 0.6 0.6 TOTAL 23.0 11.0 (12.0) Japan 6.7 (18.7) 10 Non-Operating Income/Expenses (Billions of Yen) FY2001 FY2002 Increase/ (Decrease) 2.4 3.0 0.6 Financial Gains/Losses (1.9) (2.2) (0.3) Other Non-Operating Income/Expenses (4.3) (4.2) 0.1 TOTAL (3.8) (3.4) 0.4 Equity in Earnings of Unconsolidated Subsidiaries and Affiliates 11 Other Profit / Losses (Billions of Yen) FY2001 FY2002 Increase/ (Decrease) Gain/Loss on Sale of Fixed Assets 4.1 (1.7) (5.8) Gain on Sale of Investment Securities 3.2 3.7 0.5 Loss from Revaluation on Investment Securities (0.5) (14.9) (14.4) Amortization of Unfunded Retirement Benefits (2.8) — 2.8 — (1.0) (1.0) Others 0.2 0.4 0.2 Total 4.2 (13.5) (17.7) Special Retirement Benefits 12 Medium-Term Management Plan and Forecast for Fiscal 2003 13 Medium-Term Management Plan < Striving for Growth > - Accelerate growth in the Core Business segment Musical Instruments Increase market share in existing operating domains Expand sales in high growth fields (professional audio products for music production market) Expand business in the rapidly growing Chinese market AV/IT Expand home theater business, including visual products Add value to IT-related devices (CD-R/RW drives, DVD+RW, and routers) to survive in market - Aim for growth by taking advantage of the recoveries now under way in the markets for IT-related products and materials (electronic metals and FA and metallic molds). - Selectively allocate resources to enhance the profitability and operating bases of the recreation and lifestyle-related products business units. 14 Medium-Term Management Plan < Strengthen Consolidated Group Management and Enhance Enterprise Value > - Improve the quality and efficiency of Group working practices using IT - Raise employee productivity - Take vigorous measures to overcome environmental problems - Revise Group production strategies - Promote Group-wide human resource system to strengthen competitiveness through merit-based compensation 15 Medium-Term Management Plan < Financial Outlook > (Billions of Yen) FY2002 FY2004 504.4 560.0 11.0 25.0 7.6 20.0 FCF 18.6 7.0 ROE(%) (5.2)% 6.6% Net Sales Operating Income Recurring Profit (9.0% for FY2005) 16 Forecasts of Results for FY2003 (Billions of Yen) FY2002 Results FY2003 Forecasts Increase/ (Decrease) Ratio 1st Half 2nd Half Full Year 1st Half 2nd Half Full Year 248.7 255.7 250.0 280.0 Operating Income 7.7 3.3 504.4 11.0 9.0 12.0 530.0 21.0 Recurring Profit 7.5 0.1 8.0 10.5 Net Income 7.2 (17.5) [(2.0)%] 6.5 7.5 [2.6%] EPS (Yen) — — (49.7) — — 67.8 — ROE (%) — — (5.2) — — 6.7 — 4.00 4.00 8.00 4.00 4.00 8.00 — Net Sales Dividends per Share (Yen) [2.1%] 7.6 [1.5%] (10.3) [4.0%] 18.5 [3.5%] 14.0 5.1% 90.9% 140.3% — 17 Currency Exchange Rate Net Net Sales Sales US$ EUR Profit Profit Impact FY2002 Results FY2003 Forecasts 1st Half 2nd Half Full Year 1st Half 2nd Half Full Year ¥122 ¥128 ¥125 ¥130 ¥130 ¥130 + ¥4.1 ¥108 ¥113 ¥110 ¥115 ¥115 ¥115 + ¥2.5 (Billions of Yen) Others + ¥1.7 Total + ¥8.3 US$ ¥122 ¥127 ¥124 ¥130 ¥130 ¥130 + ¥0.0 EUR ¥106 ¥108 ¥107 ¥115 ¥115 ¥115 + ¥3.7 Others + ¥0.2 Total + ¥3.9 18 Operating Environment (1) FY2002 FY2003 Musical Instruments - Japanese market stagnated - Continuing stagnation in Japanese market - North American economies decelerated - Signs of market recovery in North America - Asian market grew - Expanded mobile-phone content business in Japan AV/IT - Home theater market expanded and competition intensified - Prices fell and competition intensified in market for CD-R/RW drives - Router prices fell and market expanded due to the proliferation of broadband technologies - Growth in Chinese market - Flat growth projected for Japanese mobile-phone business; Overseas expansion expected - Market for visual products (PDP and others) expected to expand - Home theater market should expand and competition will increase - Competition will continue to increase, while prices fall - Full-scale provision of DVD products that combine video recording and play functions - Prices expected to continue falling in the individual consumer market 19 Operating Environment (2) FY2002 FY2003 Semiconductors - Use of mobile phones became more widespread and inventory reductions were achieved - Difficult sales growth expected for mobile phones in Japan - Market development of i-mode in Europe Electronic Metal - Weak demand in semiconductor market - Positive outlook for semiconductor market Lifestyle-Related Products - The number of owner-occupied housing starts declined - Further decline in the number of owneroccupied housing starts - Returns per customer fell due to weak economy - Continued slide in returns per customer Resorts 20 Outline of Plan to Increase Profits for FY 2003 (Billions of Yen) - Restore profits by reducing inventories to optimal levels Musical instruments, AV/IT ¥5.0 - Increase production in response to improved conditions in the IT market Lead frame materials, magnesium parts ¥3.0 - Profit from weak yen Musical instruments, AV/IT ¥3.9 - Reduce fixed expenses Lifestyle-related products, recreation business - Increased pension obligations ¥1.2 ¥(3.0) 21 Forecasts of Net Sales by Business Segment (Billions of Yen) Recreation and Others Electronic Equipment and Metal Products Lifestyle-Related Products AV/IT Musical Instruments 530.0 (+5.1 %) 40.0 36.6 45.7 41.0 44.0 47.0 (+2.5%) (+20.2%) 95.2 96.0 286.9 302.0 504.4 FY2002 521.7 (+3.4 %) (+2.5 %) (+20.2 %) (+2.8%) 41.0 44.0 47.0 (+0.8%) 93.7 (-1.6%) 296.0 (+5.3%) FY2003 Forecast (+2.8%) (+3.2%) FY2003 After translation adjustments * Figures in parentheses represent changes from the previous period. 22 Forecasts of Net Sales by Region (Billions of Yen) 504.4 530.0 (+5.1%) 521.7 (+3.4%) 47.5 Europe 73.4 52.0 83.0 (+9.5%) 50.4 (+6.1%) (+13.1%) 79.8 (+8.7%) 93.5 100.0 (+7.0%) 96.5 (+3.2%) Japan 290.0 295.0 (+1.7%) 295.0 (+1.7%) Other region North America FY2002 FY2003 Forecast * Figures in parentheses represent changes from the previous period. FY2003 After translation adjustments 23 Forecasts of Breakdown of Operating Income/Loss (Billions of Yen) Pension Obligations (3.0) Decrease in SG&A Expenses 0.9 Decrease in Manufacturing Costs Gain on Foreign Exchange 3.9 Increase in Sales 5.1 (2.1) Other 3.1 21.0 11.0 Operating Income for FY2002 Operating Income for FY2003 24 Forecasts of Operating Income by Business Segment (Billions of Yen) FY2002 Results FY2003 Forecasts Currency Actual Increase/ Exchange Increase/ (Decrease) Impact (Decrease) Musical Instruments 4.7 10.4 5.7 3.0 2.7 AV/IT 3.0 3.5 0.5 0.9 (0.4) Lifestyle-Related Products 1.0 1.6 0.6 0.6 Electronic Equipment and Metal Products 4.4 6.2 1.8 1.8 Recreation (1.7) (0.6) 1.1 1.1 Others (0.4) (0.1) 0.3 0.3 TOTAL 11.0 21.0 10.0 3.9 6.1 25 Forecasts of Operating Income by Region (Billions of Yen) FY2002 Results FY2003 Forecasts Currency Increase/ Exchange (Decrease) Impact Actual Increase/ (Decrease) Japan 3.2 7.5 4.3 3.9 0.4 North America 3.4 6.0 2.6 — 2.6 Europe 0.6 3.0 2.4 — 2.4 Other Regions 3.7 4.0 0.3 — 0.3 Elimination 0.1 0.5 0.4 — 0.4 11.0 21.0 10.0 3.9 6.1 TOTAL 26 Inventories 2.26 Months 2.01 1.76 Inventories at the end of the Term Average Net Sales per Month 77.4 1.85 97.7 (Billions of Yen) 84.3 81.6 33.8 27.9 27.6 6.5 12.9 3.7 8.6 6.5 6.8 36.9 44.5 44.1 40.7 FY2000 FY2001 FY2002 FY2003 27.3 4.1 9.1 (Forecast) Goods in Process/ Materials Other Products AV/IT Products Musical Instruments 27 Capital Investments/ Depreciation and Amortization (Billions of Yen) 28.6 Capital Investments 18.5 14.8 17.3 16.6 18.7 19.0 18.5 Depreciation and Amortization FY2000 FY2001 FY2002 FY2003 (Forecast) 28 R&D Expenses (Billions of Yen) 22.5 6.9 5.0 21.2 5.0 5.0 22.5 5.9 5.1 24.0 5.9 Electronic Equipment, etc. 5.5 AV/IT Musical Instruments 10.6 11.2 11.5 12.6 FY2000 FY2001 FY2002 FY2003 (Forecast) 29 Free Cash Flow (Billions of Yen) 23.4 18.6 5.0 FY2001 01/3 00/3 FY2000 02/3 FY2002 FY2003 (Forecast) (14.5) 30 Interest-Bearing Liabilities (Billions of Yen) 62.7 Employee Savings 8.3 Convertible Bonds 24.3 Long-Term Debt (Excluding Cash and Deposits 70.4 24.3 55.1 53.0 24.3 24.3 30.8 28.7 FY2002 FY2003 (Forecast) 46.1 30.1 FY2000 FY2001 In addition, resort deposits total approximately ¥38.5 billion. 31 Balance Sheets (Billions of Yen) Cash and Bank Deposits Accounts and Notes Receivable Inventories Other Current Assets Fixed Assets Total Assets Accounts and Notes Payable Short and Long Term Loans Convertible Bonds Other Liabilities Total Liabilities Total Liabilities and Shareholders’ Equity As of March 31, 2001 As of Sept. 30, 2001 As of March 31, 2002 As of March 31, 2003 32.9 85.7 97.7 15.6 290.6 522.5 48.9 79.0 24.3 173.6 196.7 522.5 38.2 79.6 104.5 15.7 282.8 520.8 42.1 95.4 24.3 163.9 195.1 520.8 41.1 71.8 84.3 13.9 298.6 509.7 36.9 71.8 24.3 174.7 202.0 509.7 38.4 77.0 81.6 10.1 300.8 507.9 36.0 67.1 24.3 164.5 216.0 507.9 32 Number of Employees 23,020* 23,200** 11,174 11,500 21,599 22,277 9,034 9,952 12,565 12,325 11,846 11,700 FY2000 FY2001 FY2002 FY2003 Overseas Japan (Forecast) * Including 1,027 employees added due to expanded scope of consolidation. ** Including 250 employees added due to expanded scope of consolidation. 33 Sales of Musical Instruments and AV/IT Products (Billions of Yen) 408.0 FY1999 387.0 FY2000 385.1 382.1 398.0 100.2 95.2 96.0 AV/IT 284.9 286.9 302.0 Musical Instruments FY2001 FY2002 FY2003 (Forecast) 34 Domestic Musical Instrument Market <By Category, excluding PA> Wind Instruments Strings and Percussion Synthesizers, etc. Portable Keyboards Digital Pianos Electric Organs Pianos 1997 1998 1999 Source: Statistics of miscellaneous goods by Ministry of Economy, Trade and Industry (Calendar Year) 2000 2001 * Figures in parentheses total as a percentage of the previous period’s results. 35 Trends in Domestic Demand for Piano Oriented Keyboard (Number of Pianos) 250,000 200,000 150,000 100,000 50,000 Digital pianos Used pianos (estimate) New pianos 0 1995 1996 1997 1998 1999 2000 Source: Statistics of miscellaneous goods by Ministry of Economy, Trade and Industry (Calendar Year) Estimates for used pianos were made by YAMAHA. 2001 36 Trends in Sales of YAMAHA Musical Instruments <Non-Consolidated Net Sales> 85.2 25.0 34.6 25.6 FY1998 82.2 (96%) 24.2 36.4 21.6 FY1999 75.8 (92%) Wholesale Price Basis (Billions of Yen) 69.8 (92%) 21.4 32.1 22.3 FY2000 19.2 67.4 (97%) 19.0 62.2 (92%) 20.4 Other Musical Instruments 23.2 Digital Musical Instruments Pianos 28.9 27.9 21.7 20.5 18.6 FY2002 FY2003 FY2001 (Forecast) * Figures in parentheses total as a percentage of the previous period’s results. 37 Musical Instrument Market in the U.S. <Musical Instruments and Professional Audio Products> 5.68 5.56 (102%) 1995 1996 6.15 6.42 (108%) (104%) 1997 1998 6.80 (106%) 1999 7.15 (105%) 2000 6.88 Retail Price Basis (US$ Billions) (96%) 2001 * Figures in parentheses total as a percentage of the previous period’s results. Source: International Music Products Association (Music USA 2001), Calendar Year 38 Trends in Demand for Pianos in the U.S. <By Category> Retail Price Basis 799 714 650 629 (112%) 798 834 (100%) (105%) (114%) (US$ Millions) 685 (82%) (97%) Player Pianos Upright Pianos Grand Pianos 1995 1996 1997 1998 1999 Source: International Music Products Association (Music USA 2001), Calendar Year 2000 2001 * Figures in parentheses total as a percentage of the previous period’s results. 39 Signs of Recovery in the U.S. Musical Instrument Market Overall Musical Instrument Market 2000 2001 Pianos Only (103%) (104%) (97%) (88%) (101%) (97%) (93%) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter (87%) 1st Quarter * Figures in parentheses total as a percentage of the previous period’s results. 2nd Quarter 3rd Quarter 4th Quarter 40 Sales of YAMAHA Musical Instruments <U.S.A.> Wholesale Price Basis (US$ Millions) 421 376 464 530 520 (114%) (98%) (110%) 470 (90%) 491 (104%) (112%) FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 (Forecast) * Figures in parentheses total as a percentage of the previous period’s results. 41 Sales of YAMAHA Musical Instruments <Germany> Wholesale Price Basis (DM. Millions) 313 281 337 361 (107%) 371 (103%) 364 (98%) 384 (105%) (108%) (111%) FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 (Forecast) * Figures in parentheses total as a percentage of the previous period’s results. 42 Sales of YAMAHA Musical Instruments <U.K.> Wholesale Price Basis (£ Millions) 52 48 (108%) 56 (108%) FY1997 FY1998 FY1999 56 (100%) 57 (102%) 60 (105%) 61 (102%) FY2000 FY2001 FY2002 FY2003 (Forecast) * Figures in parentheses total as a percentage of the previous period’s results. 43 Sales of YAMAHA Musical Instruments <France> Wholesale Price Basis (Fr Millions) 336 306 (110%) 348 (104%) FY1997 FY1998 FY1999 370 (106%) 378 (102%) 400 (106%) 424 (106%) FY2000 FY2001 FY2002 FY2003 * Figures in parentheses total as a percentage of the previous period’s results. 44 Consolidated Sales of Musical Instruments and Economic Growth Rates in Major Asian Markets Economic Growth Rates (2.5)% 0.4% 3.32% 1.5% (2.1)% 7.3% (Forecast) Singapore Indonesia Taiwan China Thailand Malaysia Consolidated Sales (Change from the previous year) 27% 12% 15% 12% 4% (12)% 45 Measures for Musical Instruments < Market-Specific Policies > Japanese market Assuming that structural problems and weak consumption persist, we will work to keep our fixed expenses low to improve profitability. European markets Achieve stable sales growth by securing a larger share of the expanding European markets Continue cultivating markets through the establishment of a European holding company Asian market Expand sales and open new markets through strategic investment of management resources. In particular, accelerate the cultivation of markets in China and South Korea through the establishment of subsidiaries. < Product Policies > - Expand business for the promising music production market. Develop products and strengthen organization in Europe and North America. - Develop adult-oriented business model Develop products and programs to increase market penetration; set up new music schools - Develop next-generation content 46 Establishment of Holding Companies in Europe and China In the increasingly integrated European market, we will strengthen our competitiveness by implementing uniform policies that apply across national borders and improve the efficiency of our consolidated management through inventory consolidation. Company name: Yamaha Music Holding Europe GmBH Capital: €70 million Establishment: October 2002 In China, YAHAHA is establishing an investment holding company to expedite market development and unify the Company's sales, marketing, R&D, and manufacturing activities in the rapidly growing Chinese market. Company name: Yamaha Music and Electronics (China) Co., Ltd. Establishment: October 2002 Capital: US$30 million Sales target: ¥20 billion (within 3 years of establishment) Business: - Manage investments in China - Sales and marketing of musical instruments and AV/IT products - R&D 47 Number of Subscribers for Ringer Melody Distribution Service No. of Subscribers (millions) 27.0 24.0 15.0 10.0 1.0 0.9 1.60 2.90 3.25 YAMAHA As of March As of March As of March As of As of 31, 2000 Sept. 30, 2000 31, 2001 Sept. 30, 2001 31, 2002 48 Overseas Development of YAMAHA’s Ringer Melody Distribution Service Holland,Belgium England Germany France Spain China Italy U.S.A. Hong Kong Japan Taiwan Singapore Australia Already Started: Under Work Country Operator 1) Taiwan TCC, KGT, CHT 2) Hong Kong, China Hutchison 3) Spain Telefonica 4) German, E-Plus, KPN, KPN-Orange The Netherlands, Belgium 1) Singapore 2) Other European Countries 3) U.S.A. 49 Domestic AV Amplifier Market Scale <Trends in the Number of Annual Shipments*> Units 300,000 262,651 250,000 200,000 Total number of AV amplifiers 150,000 100,000 Pre-installed AV amplifiers 52,895 50,000 12 9 6 '01/3 12 9 6 '00.3 12 9 6 3 12 9 6 3 '97.12 0 34,544 Source: Japan Electronics and Information Technology Industries Association *The graph represents the total number of shipments for the 12-month periods ended in the months indicated. 50 Domestic AV Amplifier Market Share 100% 80% 60% 7.3% 13.0% 10.1% 21.1% 22.3% 17.4% 40% 20% 11.5% 10.9% 21.3% 16.1% 20.2% 8.9% 43.7% 36.7% 31.0% '99 '00 '01 '01=Jan-Dec '01 Others Columbia Pioneer Onkyo Sony YAMAHA 0% Source: GfK Marketing Services Japan Ltd. 51 AV Receiver Market Scale in the U.S. <Trends in the Number of Annual Shipments*> 5,000,000 Units 4,031,208 4,000,000 Stand-alone + HTiB 3,000,000 2,639,663 2,000,000 1,000,000 2,251,806 Stand-alone 1,653,879 HTiB 985,784 1,779,402 '02/1 7 '01/1 7 00/1 7 '99/1 7 '98/1 0 Source: Consumer Electronics Association *The graph represents the total number of shipments for the 12-month periods ended in the months indicated. 52 AV Receiver Market Share in the U.S. 30% 25.6% 24.2% 25% YAMAHA 20% SONY DENON 15% 12.6% 10% 9.1% 6.9% 5% ONKYO TECHNICS Dec.01 Aug.01 Apr.01 Dec.00 Aug.00 Apr.00 Dec.99 Aug.99 Apr.99 Dec.98 Aug.98 Apr.98 Dec.97 May.97 Sep.96 4.6% Dec.95 0% PIONEER 53 AV Receiver Market Scale in Germany <Trends in the Number of Annual Shipments*> 1,000 Units 450 420.7 400 350 300 250 200 150 AV Rec & Amp Total 203.2 100 '02 A/S A/M '01 A/S '00 D/J A/S '99 D/J A/S '98 D/J A/S '97 0 '96 50 Source: GfK Marketing Services Japan Ltd. *The graph represents the total number of shipments for the 12-month periods ended in the months indicated. 54 AV Receiver Market Share in Germany 30.0% 25.0% 24.2% 20.0% 18.1% 15.0% SONY YAMAHA 10.0% TECHNICS KENWOOD 5.0% ONKYO PIONEER DENON Source: GfK Marketing Services Japan Ltd. O/N J/J '01/F/M O/N J/J '00F/M O/N J/J '99F/M O/N J/J '98F/M O/N J/J '97F/M 0.0% 55 CD-R Market Scale by Region* and YAMAHA’s Market Share (units: thousands) 45,357 Others 32,185 Japan Europe 14,265 North America 5,732 11.0% 10.0% 1998 1999 5.1% 2000 2.8% YAMAHA 2001 56 Measures for AV/IT Products < Policies for AV/IT Segment > - Provide total solutions through the sale of visual product and the further execution of its “#1 in home theaters” strategy - Ensure survival through the launch of a new DVD/RW drive and the provision of differentiated products. - Change the router business into a solution business targeting SOHO and corporate clients - Continue to pursue global manufacturing strategy (goal: lower manufacturing costs 10%) < Yamaha Electronics (Suzhou) Co., Ltd. > - Established: May 2002 - Capital: US$13 million (100% funding by Yamaha Music & Electronics (China) Co., Ltd.) - Sales target: ¥10 billion (within three years of establishment) - Business: Manufacturing of AV/IT products and sale of such products in China and abroad 57 Lifestyle-Related Business Market Environment - Continued slide in the number of owner-occupied housing starts and expansion of market reforms. - Business alliances and efforts to consolidate capital needed to survive. Priority Policies - Lower the break-even point for income through structural manufacturing reforms (purchasing CDs, in-house production, etc.) - Preserve market share through the provision of value-added products tailored to specific areas and customer segments. 1,226 Housing Starts 593 Houses Owned and Houses for Installment Sale Bathrooms (units: thousands) 1,173 563 496 46.9 46.9 45.7 47.0 9.0 8.3 6.4 6.0 17.5 16.9 Others System Kitchens 1,213 17.6 17.3 (Billions of Yen) Net Sales Operating Income 24.1 20.3 FY2000 (1.0) 21.3 21.8 0.9 1.0 FY2001 FY2002 * Source: Statistics of Housing Starts by Ministry of Land, Infrastructure and Transport 1.6 FY2003 (Forecast) 58 Semiconductors Market Environment - Due to the broad proliferation of mobile phones, the Japanese market for mobile phone audio chips is saturated. - With the advent of i-mode in Europe and the proliferation of next-generation mobile phones, competition has intensified. - The introduction of software synthesizers will be delayed due to various quality problems. Priority Policies - Expand sales of mobile phone audio chips and ensure profitability. In particular, growth is expected in the Chinese and South Korean markets. - Launch products for new fields. 26.8 22.2 FY2000 FY2001 24.5 FY2002 25.8 (Billions of Yen) Net Sales Operating Income FY2003 (Forecast) 59 Metal Products Business Market Environment Market Environment - Signs of recovery in the stagnant semiconductor market - Despite the increasing use of liquid crystal and plasma displays, cathode ray tubes will remain the dominant technology for large screens. Priority Policies - Increase production of lead frame materials in line with market recovery. - By improving quality, establish system for increasing the production of ultra-invar materials for sale in the CDT market. Shipments of processed copper and 42 Alloys for semiconductors 80 84 (units: thousand tons) 52 16.4 <Net Sales> (Billions of Yen) Net Sales Operating Income 18.2 Others 13.5 11.9 Invar Lead frames FY2000 FY2001 FY2002 FY2003 (Forecast) 60 Recreation Business Market Environment - Persistent stagnation in the Japanese market and changes in customer lifestyles Priority Policies - Use management subsidiaries to increase profitability. - Maintain customer visitation rate of two million visits per year. - Take advantage of the world cup to boost brand image and recognition. No. of Visitors (millions) 1.98 1.86 23.5 2.0 21.8 (0.8) FY2000 (1.7) FY2002 Net Sales Operating Income 22.0 21.6 (1.3) FY2001 (Billions of Yen) (0.6) FY2003 (Forecast) 61 Absorption of YAMAHA Resort Corporation < Goal > - Solve YAMAHA Resort’s fund procurement problems - Maintain the trust of resort members, financial institutions, and other external parties < Outline of merger > - Merger method: Absorption by YAMAHA Corporation - Date of merger and registration: October 1, 2002 < Policy > - Achieve profitability within three years by immediately implementing a selective resource allocation policy. 62 Others Market Environment - Demand remains flat in the Japanese market. - China is rising as a major market and prime location for manufacturing operations. Priority Policies - Expand business producing MG parts for mobile phones in line with market recovery. - In interior automotive components and fittings, reduce costs and expand customer base through the introduction of new manufacturing methods. - Rebuild golf product business. 22.1 (Billions of Yen) Net Sales Operating Income 14.6 8.7 English Schools, etc. 3.1 6.5 2.0 2.6 FY2000 11.4 10.4 0.5 0.2 FY2001 9.1 Other Businesses by Yamaha Fine Technologies Co., Ltd. 1.6 Golf and Other Sports 8.3 Automobile Interior Components 1.5 3.4 5.5 19.0 18.4 (0.3) FY2002 (0.1) FY2003 (Forecast) “English Schools” Schools ” were reclassified into the Musical Instruments segment in March 2001. 63 In this report, the figures forecast for the Company’s future performance have been calculated on the basis of information currently available to YAMAHA and the YAMAHA Group. Forecasts are, therefore, subject to risks and uncertainties. Accordingly, our actual performance may differ greatly from our predictions depending on changes in our operating and economic environments, demand trends, and the value of key currencies, such as the U.S. dollar and the EURO. 64 65