Q&As on the Presentation of Performance Results through the Second Quarter of the Fiscal Year Ending March 31, 2017 (FY2017.3)

A1: This point is explained in our Medium-Term Management Plan. I believe it is because we develop differentiated products, and, as a result, our products are highly evaluated. Particularly, guitars and digital pianos, for which sales are also expanding, we introduce new products that have superior features, and this contributes to sales expansion.

A2: For example, in digital pianos, we already have a market share of about 50%, and it may be difficult to expand market share substantially, However, since, along with overall market growth, sales of these products are expanding, we believe expanding market share by several points is possible.

A3: We are using our budgeted expenditures strategically, but, because we are working to cut ordinary expenses through increasing efficiency, SG&A expenses as a whole are declining.

A4: We are expanding our product lineup through the introduction of new products, so, in addition to sales of new products as such, sales of products newly introduced through the previous period are also expanding and contributing to overall sales growth.

A5: In the first half of the fiscal year, in part because of the introduction of new products, shipments in advance of the year-end selling season were favorable. However, they did not reach the expected level, and it took somewhat longer than we had anticipated to raise awareness in the market through sales promotion. In view of these circumstances, we have estimated sales in the second half more conservatively than in the first half.

A6: In addition to coping with foreign currency fluctuations, we are appraising our price competitiveness in each of our markets to advance toward more appropriate price levels. In some cases, we are also reducing prices of products that are not competitive. By moving to proper price levels in the market, we are able to absorb the impact of yen appreciation to some degree.

A7: If we consider that we are experiencing success in bidding for medium-sized to-small projects and that our market share is rising, I believe that we will continue to show favorable performance also in the second half. Accordingly, we believe that performance will not change significantly in the next period.

A8：

Wind Instruments:
Demand in the principal markets of the U.S. and Japan is holding firm, but because supply is not keeping up with demand, the pace of shipments in the U.S. has declined slightly. Looking ahead, since the outlook is that we will solve issues on the supply side, we think we can anticipate growth. As regards profitability, we are already reporting high profit ratios.

Guitars:
Thus far, we have reported robust expansion in sales in the Asian region, and, since we are focusing on marketing in Europe and the North America, we believe we can look forward to expansion in Europe and the North America, which are key markets. Regarding profitability, since we are making improvements on the production and progress in sales expansion, profit levels are showing steady expansion.

A9: Turning first to ROE, we have cleared our target of 10%, but, at the end of the second quarter, we eliminated our accumulated losses, so our objective for the time will be to achieve an ROE of more than 10% with our tax rate at normal levels.

As for capital policy, at this time, we have made no changes in policy from those stated in our Medium-Term Management Plan.

A10: Competition in our principal Revolabs brand product area, which is wireless microphones, has become more intense, but there have been no major changes in the business environment, and we regard this slowdown as a temporary adjustment. In the second half of the fiscal year, we are expecting a slowdown in OEM supply, but this will not have much of an impact on profitability.

A11: The principal reasons are that, first, because of the sudden appreciation of the yen since the beginning of the period, we have worked to tighten regular expenditures, but have left the strategic expenses mentioned in the Medium-Term Management Plan unchanged. Second, some expenses were also postponed to the latter half of the fiscal year.

In the latter half of the year, we plan to make planned expenditures, principally strategic expenses, but, depending on conditions, it is possible that we may postpone some expenditures to the next period, etc., and make some decisions not in our original plans.

A12: There were several factors in the first and second quarters, with some sales of some products coming in and others falling, but, since sales in the first half were up 4% year on year on a local currency basis, we think demand for musical instruments is firm. Certainly, the sales outlook for the third quarter may be somewhat high, but, since we will be introducing some new products in the second half, we think we can reach this target.

A13: Compared with the top two companies in terms of market share in the network audio business, our view is that there is still a large gap at this time between us and them. However, although we have not reached the position where we would like to be, our sales have expanded substantially in comparison with the previous year and we want to catch up going forward.

A14: There have been no major change since the previous outlook.

A15: We believe that our sales in real terms, excluding the effects of foreign currency fluctuations, are above expectations and this is a major reason we have been able to cope with the effects of yen appreciation. However, it will take more than just one factor to cope; and our view is that many measures must be implemented effectively to achieve results.

A16: We combined all the devices and component related businesses into one division and are working to create new value within a single organization while aiming to realize synergies.

At present, the results have not been apparent in the sale figures, but we are moving forward in a number of areas on a project basis. We said we want to move ahead to show visible results in the third year of our Medium-Term Management Plan, and we believe these efforts are moving ahead according to plan.

A17: We have forward contracts only for our euro exposure, and these extend for three months forward. We have confirmed that the settlement rate for the third quarter will be 114 yen per euro.