A New Way

ForwardAnnual Report2010

for the year ended December 31, 2010

Canon Marketing Japan Inc. (Canon MJ) is the global Canon Group’s independent marketing arm for the Japanese market,
and manages nearly all aspects of the sales and marketing of Canon products in Japan. Positioned between Canon Inc.
and Japanese customers, Canon MJ supports its parent company’s product development by feeding back information
about market needs, while supplying consumers with high-quality products that meet those needs. To further add value tocustomers, Canon MJ is also actively developing a wide range of business solutions in the field of IT.
Key facts:■ Near-exclusive right to sell products of the globally trusted Canon brand in Japan*■ Canon-branded products make up about 70% of net sales■ No. 1 market share for digital SLR cameras, digital compact cameras and ink-jet printers■ 21 subsidiaries, 330 sales offices and nearly 19,000 employees nationwide* Excludes semiconductor and LCD lithography systems, which were transferred to Canon Inc. in January 2010.

Canon Inc.

Canon
Marketing JapanGroup

Customers

New Thinking, New OpportC O N TE N TS
02

Performance Summary

03

To Our stakeholders04	president’s message
10	special feature:	Strengthening IT Solutions
13

Business Review and Outlook

22

SUSTAINABLE MANAGEMENT

31	FINANCIAL SECTION
57

Corporate dataSupporting creativity in all areas oflife, work and society is a key part of Canon

unities

MJ’s mission. We do this by carefully listening to customers
and supplying solutions that precisely meet their needs.
Our strengths are distinct: the near-exclusive right to sell
Canon products in Japan, top market shares in strategic
product areas, a powerful nationwide sales network, in-depth
market intelligence, and truly excellent service that fosters
long-term customer relationships.
Before the global recession, these strengths let us set records
in net sales and net income for five years straight. Now, with theworld economy back on the growth path, we see new ways for
us to use our strengths and capture opportunities for growth.
To do this, we need to think bigger. We must build a nimbler
Canon MJ not only focused on marketing innovation, but also
business innovation—that seeks out new paths for long-term
growth through new business models and new ways to meetcustomers’ ever more sophisticated needs.
This annual report is about how we are meeting that challenge.

Business areas
document Busi ness

CONSUmer Equipment- Business-use multifunctional products- Laser printers- Commercial printing systems- Maintenance services- Large-sized ink-jet printers- Projectors and other products- Compact digital cameras- Digital single-lens reflex cameras- Digital video cameras- Ink-jet printers- Compact photo printers- Calculators and other products

IT Soluti ons

INDUSTRIAL Equipment- System integration services- Embedded software- Solutions- Infrastructure and outsourcing- IT products- Industrial equipment- Medical equipment- Broadcasting lenses

Canon Marketing Japan Inc.

01

Performance
Summary
net sales

Operating Income(Billions of yen)(Billions of yen)

905

867

net Income AND
net income per share (Note 2)(Billions of yen)

37

19

34

827
687

20

Net income
Net income per share

134.84674
25

11125.64

78.63
4
26.70

8

6

-4
FY

’06

’07

’08

’09

’10

FY

’06

’07

’08

’09

’10

FY

’06

’07

’08

-31.62’09’10

Net sales were 2% lower year on year. One of
the reasons for the lower result was thetransfer of the semiconductor and LCD
lithography systems business to Canon Inc. inJanuary 2010, which reduced revenues byapproximately ¥15 billion.

Operating income increased by 23% year on
year. One reason behind this increase was a
year-on-year reduction of SG&A expenses,
including service-related guarantee
expenses, labor costs and depreciation, by
approximately ¥8 billion.

Net income recovered by ¥8.1 billion year on
year and returned to positive figures. The
results for fiscal 2010 did not include
impairment losses, which were approximately¥11 billion in the previous year. Net income
per share recovered by ¥58.32 from theprevious year’s figure to ¥26.70.

Stockholders’ Equity
and equity ratio

Roe and Roa

cash dividends (Note 3)

(%)

(Yen)

(Billions of yen/%)

ROE
ROA

Stockholders’ equity
Equity ratio

260

49.4

266

50.6

255

52.6

247

54.9

40

247

7.4

7.6

3.6

3.8

40

36

4.3
1.5

55.0

2.3

-0.9

20

20

’09

’10

0.8

-1.7
FY

’06

’07

’08

’09

’10

Stockholders’ equity ratio improved by 0.1
points year on year, while we continued tomaintain the virtually debt-free position we
have held since 2004.

FY

’06

’07

’08

’09

’10

ROE recovered by 3.2 points over theprevious year’s level.

FY

’06

’07

’08

Valuing the maintenance of stable
stockholder distributions, the dividend forfiscal 2010 was ¥20 per share.

Notes:
1. T he figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥81 to U.S.$1, the prevailing exchange rate as of December 31, 2010.
2. N
 et income per share is based on the weighted average number of shares of common stock outstanding during the respective fiscal years.
3. C ash dividends per share are the amounts applicable to the respective fiscal years, including dividends to be paid after the end of the year.

02 Canon Marketing Japan Inc.

TO OURSTAKEHOLDERS

Pursuing a New Vision for Canon Marketing Japan
Dear stakeholders, it is our pleasure to report to you that the Canon MJ Group is now moving decisively toward a future of
renewed growth.
In fiscal 2009 (ended December 31, 2009) economic stagnation in Japan pushed our results into negative figures.
However, in our annual report for last year, we promised a return to positive net income in fiscal 2010. We are pleased to tell youthat we achieved this target despite the persistently harsh economic environment.
Building on this success, in January 2011, we adopted and announced Phase II of our Long-Term Management Objectives
for the period fiscal 2011–2015, as well as a new three-year management plan for the period fiscal 2011–2013 under which
we will move toward realizing the long-term goals. The Long-Term Management Objectives Phase II follows the same direction ofbusiness diversification, technological innovation and drastic market share expansion as that outlined for the entire Canon Group
under Phase IV of the Excellent Global Corporation Plan.
This is our ambition, our challenge. To achieve it, we will over five years steadily focus investment into reinforcing our
income base, creating new businesses and expanding service activities in all segments. This dynamic strategy will not only put
us firmly back on the growth track; leveraging the potential of our IT solutions, we also aim to transform the Canon MJ Group intoa group of service creation companies that continuously provides original IT-based solutions with high added value.
Before closing, we wish to express our deepest sympathies tothose affected by the Great East Japan Earthquake, which occurredon March 11, 2011. We would also like to reassure ourstockholders that, although we are likely to see a short-term market
downturn, this event does not affect our strategic direction or ourcommitment to business innovation.
We look forward to the continuing support of all stakeholders.

“We promised a return to positive
net income in fiscal 2010. We arepleased to tell you that we achieved
this target despite the persistently
harsh economic environment.”

ChairmanHaruo Murase

President Masami Kawasaki

Canon Marketing Japan Inc.

03

President’s
Message
In fiscal 2010, the Japanese economy showed signsof recovery, although deflation persisted. In thisenvironment, Canon MJ achieved consolidated net
income of ¥3.7 billion.
Compared with the previous year, we saw signs that investment in office equipment and
IT-related products was recovering in the corporate market, especially among small andmedium-sized enterprises, our core market segment. However, other areas, such as system
integration (SI) services, continued to be affected by reduced or postponed investment in IT
systems. In consumer markets, there was strong demand for digital SLR cameras, compact
digital cameras and interchangeable lenses, which are key products for Canon MJ. However,continuing deflation and escalating competition eroded prices significantly, and conditions
remained challenging overall. We expect them to remain difficult for some time.
Consolidated net sales fell marginally to ¥674 billion (US$8,323 million). One key reason
was the transfer to Canon Inc. of the semiconductor and LCD lithography systems business,
which in the previous year contributed ¥14.6 billion to sales, in January 2010. However,decisive cost-cutting as well as healthy trends for key products in the Consumer Equipment
segment helped to lift consolidated operating income by 22.8% year on year to ¥7.7 billion(US$96 million), while consolidated net income recovered from the previous year’s loss to a
positive ¥3.7 billion (US$46 million).

From Marketing Innovation to

Business Innov
Capturing new opportunities in a
new market environment requires
new thinking. While leveraging allof our strengths in marketing, weare expanding the scope of Canon
MJ’s activities beyond our traditional
activities into new business models
with excellent growth potential.

04 Canon Marketing Japan Inc.

Going forward, our foremost priority is to continue tomeet customers’ needs through innovative products
and excellent service.
I am convinced that we have entered an era in which users will demand higher added value
than ever before. In fiscal 2010, we recorded substantially higher sales of the imageRUNNERADVANCE Series of business-use multifunctional products (MFPs). The first products in thisseries were announced in September 2009, and we completed the line-up with a compact
series in October 2010.
Besides networking and security functions, imageRUNNER ADVANCE products are superbly
designed for easy integration with corporate IT systems and office document operations. I believe
they have gained customers’ favor because of the added value that they provide.
In the digital camera market, in which we are No. 1, income remained steady despite
fierce competition. I attribute this to several factors, including the enhanced video capabilities
of digital SLR cameras and the development of multifunctional compact digital cameras,
as well as our own efforts to reflect customer input in product marketing, detailed productmanuals, prompt maintenance and product recovery systems.
In an environment this challenging, it is essential that we in this way stay true to ourCustomer Focus philosophy and provide enhanced added value.

ation

Under Long-Term Management Objectives Phase II,
we will transform our organization by focusing
Beyond Canon, Beyond Japan.
In January 2011, we adopted our Long-Term Management Objectives Phase II. Running fromfiscal 2011 through fiscal 2015, it is a dynamic growth strategy targeting consolidated net
sales of at least ¥850 billion, operating income of ¥42.5 billion with a margin of 5%, and net
income per share of at least ¥185 by fiscal 2015.
At the heart of the plan are four priority strategies:• Expand the market shares of Canon products• Diversify business• Evolve into a service company• Further group management innovation
Canon products that are already No. 1 in their markets will be central to our efforts to expand
market shares. Also, by expanding our non-Canon product line-up, we will branch out
into new areas including sales of production-grade printing solutions, Mixed Reality (MR),which includes computer-aided design (CAD) imaging solutions, and medical and industrial
equipment. This diversification is key to raising net sales. Focusing particularly on the IT
solutions business, we will also expand service activities across all segments so as to increase
their contribution to net sales from 38% in fiscal 2010 to at least 45% by fiscal 2015.
Our vision is to transform the Canon MJ Group into a group of service creation companies
that, alongside expanded maintenance and service, continually supplies original solutions withhigh added value based on IT. We also aim to develop overseas business activities, especially in
IT solutions. The words we use to express these goals are “Beyond Canon, Beyond Japan.”

Canon Marketing Japan Inc.

05

President’s
MessageAn overview of the New Three-Year Management Plan (from 2011 to 2013)

Basic Strategies and Targets
To evolve into a service creation group, we must across all segments integrate strong product value with ourability to offer unique solutions. To this end, the new three-year plan follows these basic strategies:■ Strengthen collaboration with the global Canon Group and enhance our own solutions capabilities so as toachieve overwhelming leadership for Canon products, and establish them as No. 1 in market shares.
■ Use the core competencies of the Canon Group and Canon MJ Group to create original solutions with highadded value.
■ Realize the “Beyond Canon, Beyond Japan” concept through the evolution of the Canon MJ Group toward
new business domains and business models.
The fiscal 2013 targets are net sales of ¥785 billion and operating income of ¥28.5 billion (consolidated).
Expanding our IT operations is central, and to improve strategic coordination we have established a dedicatedholding company, Canon MJ IT Group Holdings, and created a clearer segment structure. As of January 1, 2011,
IT Solutions is a separate segment, alongside Business Solutions, Consumer Imaging and Industrial Equipment.** This spread reflects the new structure. Please notethat the Business Review and Outlook section and thefinancial notes, which focus on fiscal 2010, use theold segmentation in which the IT solutions business
was part of the Business Solutions segment.

1

Net sales(¥ billion)

Fiscal 2010

Fiscal 2013

674

Operating income (¥ billion)
Fiscal 2010

785

Fiscal 2013

28.5

7.7

Business Solutions

We continue to reinforce this core business,
especially by rebuilding the income structure.

In the document business, we are rebuilding the income
structure. We aim to increase the number of office MFPs
in use, and raise our market share to 22% by fiscal
2013. Enhancing customer support is crucial. We will dothis via a dedicated BC sales division for medium-sized
and large corporations, and stronger partnerships withsmaller businesses.
In maintenance services, we aim to boost profitability
by cutting costs, raising subscription rates and graduallyshifting 15% of MFP support engineers to system
maintenance. We will also create stock-type businesses,
such as IT services for small and medium-sized offices
and managed document services.
In the production printing business, we are building a
powerful alliance with Océ, a Canon Group member, andpromoting packages of Canon and Océ products, targeting
sales of ¥50 billion by fiscal 2013.
Net sales(¥ billion)

Fiscal 2010

Fiscal 2013342.5 378.5

Operating income(¥ billion)
Fiscal 2010

2.3

06 Canon Marketing Japan Inc.

Fiscal 2013

7.5

Focus areas of the
production printing business

High-resolution,
large-format
graphics

High-speed,large-format,
B&W CADfor design andmanufacturing

canon

océ

High-resolution,color in-house
printing andcommercial
printing

Powerful
complementarybusinessalliancesHigh-resolution,
large-format,
color CAD for
construction andcivil engineering

High-speed
commercial printing
and form printing

High-durability,
large-format
graphics

2

IT Solutions

We are moving to build thisbusiness into a growth driver for
the Canon MJ Group.

Boosting earnings of existing IT businesses is key. In
system integration (SI) services, we are targeting morelarge-size contracts and improved revenue management.
For embedded software, we are targeting inclusion
into more Canon products as well as automobiles. In
our solutions business, we will boost sales in areas ofstrengths, such as security.
We will also launch new businesses. These include
the MR business, under which we will propose CAD
imaging solutions to corporate customers, as well as new
stock-type businesses such as outsourcing of data center
facilities and system operation, BPO* and cloud services.
We will also work with the Canon Group to develop
solutions for the global market, to be provided to Canon Groupsites overseas and to Japanese companies in Asian markets.
* BPO: Business process outsourcing

Net sales(¥ billion)

Fiscal 2010

Fiscal 2013

133.3 153.0

43Consumer Imaging

We will strengthen our No. 1
position while branching out
into new business areas.

For consumer imaging products, we are resolutely
pushing a “total No. 1 strategy” aimed at ensuring that
Canon-branded products are No. 1 in terms of market
shares, customer satisfaction and brand status byfiscal 2013. We will also move rapidly to launch new
businesses, including an online imaging portal site,where users can upload and share photos.
No.1
marketsharesDigitalSLR
camerasOperating income(¥ billion)

Net sales(¥ billion)

Fiscal 2010

Fiscal 2010

Fiscal 2013

-3.7

Fiscal 2013

6.5

Industrial Equipment

We aim to restore profitability inthis segment through a threepronged growth strategy.

First, in the industrial equipment business, we will
focus on reinforcing the inspection and measurementbusiness. We will target both semiconductor and nonsemiconductor fields, the latter including MEMS*,
photovoltaic cells, LED devices and organic EL displays.
Second, we will aggressively expand the medical
equipment business by strengthening marketing ofCanon products and imported products, and by launching
medical information solutions.
Third, we will build on our No. 1 market share forbroadcast TV lenses and launch a broadcasting andimaging solutions business, focusing specifically on
imaging solutions for disaster prevention and security
applications.

213.8 231.55(¥ billion)

Fiscal 2010

Fiscal 2013

13.4

50.0

Operating income(¥ billion)
Fiscal 2010

-0.2

Fiscal 2013

3.0

Operating income(¥ billion)
Fiscal 2010

9.8

Fiscal 2013

11.5

Investing for Growth

The new three-year
management plan will
be backed by aggressive
investment for the long term.

To achieve the targets of the Long-Term Management
Objectives Phase II and put Canon MJ on a sustained
growth path, we intend to invest a cumulative ¥100
billion during the period between fiscal 2011 and fiscal
2013. This investment will include M&A, especially in theareas of data centers, as well as cloud IT infrastructureand new categories.

(¥ billion)
2008-2010
cumulative(Actual)

2011-2013
cumulative(Plan)

Sales cash flow

94.4

82

Investment cash flow

67.8

100

Free cash flow

26.6

-18

* MEMS: Microelectromechanical systems, meaning very small
electrically powered mechanical devices.

Net sales

Digitalcompact
camerasInk-jetprinters

Canon Marketing Japan Inc.

07

President’s
Message

MissionVisionTo provide optimal value
through marketing innovationthat enhances security andpeace of mind and supports
creativity in all areas of life,
work and society.

To be a group of service
creation companies thatpractices the principle ofcustomer focus with a
global perspective.

We will steadily improve our corporate value
through sustainable growth andcustomer service excellence.
The strength of Canon products and the capacity of the Canon MJ Group to offer solutions
will be the core drivers of our evolution into a service creation group capable of continuallyproviding original added value in the global business arena.
“Value” is the keyword here. We are proud that many of the products that we market
are No. 1 in their respective markets. But I would like to emphasize that we judge value
not just according to the number of products that are No. 1 in terms of market share, butfrom a comprehensive perspective that includes customer satisfaction, brand strength andcompetitiveness in the market.
I view corporate value in the same way. A company needs to earn reasonable profits andmaintain continuous growth. Also extremely important, however, is a company’s ability to baseits activities on a global perspective as a member of society and the global community, andactively respond to the expectations of all stakeholders.

“We believe that real growth in corporate value comes not only
from effective strategies, but also from sound governance andfulfillment of stakeholders’ expectations.”

08 Canon Marketing Japan Inc.

“The strength of Canon products and the capacity of theCanon MJ Group to offer solutions will be the core drivers of
our evolution into a service creation group.”
I believe that real growth in corporate value comes not only from effective businessstrategies, but also from good corporate governance and a sense among stakeholders thatthe organization fulfills its wider responsibilities.
Meeting stakeholders’ expectations is not only the right thing to do, it also makes
business sense as it builds trust in our corporate brand and fosters close communication thatlets us improve products and services.
Going forward, we will focus our energies on the reinforcement of the Canon and Canon
MJ brands and the provision of stable returns to our stockholders, with a targeted consolidated
payout ratio of 30%. But we will also keep in mind the central tenet of our corporate mission, that
we “support creativity in all areas of life, work and society.”
We will also keep our minds sharply focused on one particular keyword in our corporate
vision—a word that is the foundation for everything that we do at Canon MJ, that drives thegrowth strategies that we undertake, that enables us to build strong, long-lasting customer
relationships.
That word is “service.” Truly excellent customer service.
We look forward to your continuing strong support as we move toward our goals.

President

Masami Kawasaki

Canon Marketing Japan Inc.

09

Special feature:
STRENGTHENING IT SOLUTIONSCreating a

New Driver of Future Growth
Strengthening the IT solutions business is a central part of the new Three-YearManagement Plan. Under the watchwords Synergy and Speed, we aim to build thissegment into a new growth driver for the Canon MJ Group.
Canon MJ IT Group Holdings—
A Strategic Company

Canon MJ IT Group Holdings
Canon IT Solutions Inc.

In April 2010, the Canon MJ Group established Canon MJ
IT Group Holdings as a holding company for IT-related groupcompanies. Its role will be to develop the IT solutions business,
which was made a separate segment from fiscal 2011.
The Canon MJ IT Group consists of 12 consolidated
subsidiaries affiliated to Canon MJ IT Group Holdings. These
companies, which employ approximately 6,000 people, areexpanding globally from Japan into the United States, China,
Vietnam and other countries.

CANON CONTROL SYSTEM (SHANGHAI) INC.
SSJ K.K.
Qualysite Technologies Inc.
Garden Network, Ltd.
Canon ITS Medical Inc.
Canon BizAttenda Inc.
AES Inc.

Canon Software Inc.
Canon Software Information Systems Inc.
Canon Software America, Inc.

Edifist Learning Inc.

A Highly Competitive Business Structure
Canon MJ IT Group Holdings’ operations span six business areas:
System integration (SI) services, embedded software, solutions, IT

SI services

products, infrastructure and outsourcing. Its mission is to provide
high-added-value solutions by combining the capabilities of three
corporate groups: Canon IT Solutions Inc., which has extensive

Major
Operations

expertise as an IT service provider; Canon Software Inc., which has
advanced development and technological resources, especially inthe field of embedded software for Canon products, and Edifist
Learning Inc., a provider of human resource development andcorporate IT training services.
The synergies gained through this restructuring will accelerate
our ability to provide total services encompassing applications
development, information security and other areas. It will also
optimize the structure of the IT Solutions segment, by improving
management efficiency and decision-making speed.

10 Canon Marketing Japan Inc.

Embedded
softwareIT products

SolutionsOutsourcing
Infrastructure

Strengthening Data Center Operations
Through our data centers in Tokyo and Okinawa, we provide outsourcing services that include 24/365
maintenance and administration of customers’ systems based in those facilities. We also offer Internetbased cloud services that enable use of software, servers and various other computer resources. In
recent years, as more and more customers have actively shifted IT assets out of their balance sheets,
we have seen a rapid increase in the use of our services, especially our data centers. To fully meetthis demand, we are currently building a new data center in Tokyo. We are investing approximately¥15 billion in this advanced facility, which will becompleted in the fall of 2012.
The new data center will enable us toenhance the quality of our operational systems,
infrastructure operations and facility management,
especially in the areas of cloud services and systemadministration. This will lead to further service
expansion, including the development of systems

Canon MJ’s Advanced New Data Center
To be completed:
Location:

July 2012

Nishitokyo-shi, Tokyo
17,000m2

Floorspace:

Server room floorspace: 5,480m2
Number of racks:
Investment:

2,310

Approx. ¥15 billion

for small and medium-sized companies.

Enhancing Cloud Services
In October 2010, we established the Cloud Business Center within Canon IT Solutions as our core organization for the development
and expansion of the cloud business. The main tasks of the new center are to formulate cloud business strategies and businessmodels, create common infrastructure for IT services, and strengthen and upskill business implementation organizations.
With the new center, we are now able to provide a comprehensive range of services, including consulting at all stages fromstudies on the introduction of new technology to the operational phase, the creation of private clouds, linkage with public clouds, line
provision, the creation of networks inside clients’ facilities, hardware supply and maintenance support.
We will provide cloud services in the three areas of imaging, printing and group IT, using Canon’s advanced imaging andprinting technology, as well as know-how that we ourselves have gained by migrating the Canon MJ Group’s IT systems into a cloudenvironment. We will progressively launch new services based on
our uniform group-wide IT service infrastructure, which became

Other Companies’ Clouds

Canon Inc. Cloud

operational in January 2011. In fiscal 2013, we plan to offer thisinfrastructure as a PaaS solution to outside SaaS vendors.
There is also considerable potential for expansion
overseas. Cloud technology will allow us to meet the needs ofglobal enterprises that want to introduce uniform systems for all
business sites. In this respect, this business plays an importantrole in advancing the “Beyond Japan, Beyond Canon” strategy.

Canon MJ Cloud Services
Data center services(system operation,
housing, etc.)

Imaging

Printing

Group IT

Common IT service infrastructure

1 PaaS: Platform-as-a-Service
2 SaaS: Soft-as-a-Software

Customers

Canon Marketing Japan Inc.

11

Special feature:
STRENGTHENING IT SOLUTIONS

Case studies
Canon MJ’s IT expertise enables advanced services with excellent growth potential.
The case studies below are examples of how our IT solutions benefit customers.

1

Cloud services withenhanced added value

The Canon MJ Group’s Vision for Cloud Services
Application services

Integration services

for customers who wish to use
software without owning it

Support for planningand implementation

Consulting services• Information security• Operations management

Cloud services use virtualization technology• Analysis of visualization
Platform servicesof operations
to offer a wide variety of solution services
for customers who wish to• Transfer of systems
BPO services
provide SaaS
simultaneously. Another feature is the easeand data
Support services
with which clouds can be interconnected. It• Linkage of systems• Education support
Infrastructure services• Call centers• Design and development
is possible to link public clouds, which arefor customers who wish to useof new systems• Outsourcing of operations
servers without owning themused by large numbers of general users,
Line and network services
and private clouds, which are available only
within specific organizations. For example,
a private cloud consisting of Canon printing solutions can be linked with public clouds such as Salesforce and Amazon. To the user, these
multiple services are available via a single screen.
The cloud-based approach is suitable for practically all of our IT solutions. To ensure that our cloud services offer genuine added
value, we will, as shown above, provide a comprehensive range of services that offers a high degree of flexibility. Applying our Customer
Focus philosophy to the cloud business is key to realizing our vision for cloud services.

2

HOME IT support and cloudservices for smaller offices

The HOME Concept
Customer’s premises
Communication

Security

There is strong demand from small and
HOME-UNIT
RouterInternet
medium-sized companies for IT solutions that
Security
digitize information, and improve operating
Viewing the• Firewall • Anti-spyware
portal site
efficiency and information security. However,• Anti-virus • Web filtering
HOME-PORTAL• Detection and prevention
many such organizations have no room forof unauthorized accessfull-time IT managers and lack the resources
to support the implementation of IT tools.
Corporate portal
Managed services
To meet this need, we are continuously• Scheduler• Reservation of facilities/
enhancing our HOME IT support service,equipment
which we launched in December 2009.
• File sharing• Notice boards
HOME portal
HOME-CC
HOME is a one-stop source for support
web server• Mobile access
ser vices, including net work securit y,groupware and IT administration, designed primarily for companies with 30 or fewer employees. Through HOME, we provide easy, low-costaccess to IT infrastructure, enabling customers to benefit from advanced cloud services for a monthly charge with minimal initial investment
and operating costs. We also help offices lacking IT managers to develop their support systems, including through remote tool support andcall centers.

12 Canon Marketing Japan Inc.

Document BusinessBusiness Review
and Outlook

Net Sales¥674
billionBusiness Solutions
IT s o l u t i on s B u s i n e s s

D ocument Business43%
IT Solutions Business

22%
C O NSUm er EQUiP MEN T

33%
Con s u m e r EQUI P M E N T

I N DUSTRIAL E q u i pm e n t

2%Enhancing

Efficiency and Focus
In fiscal 2010, Canon MJ worked ceaselessly to makeInd u s t r i a l E q u i pm e n teach business segment as competitive as possible inpreparation for a strategic restructuring of the earnings
base into four distinct segments in fiscal 2011.
Note: A s of January 1, 2011 the new segments are: Business Solutions, IT Solutions, Consumer
Imaging and Industrial Equipment. Please note that the Business Review and Outlook
section and financial notes follow the old segment structure as these sections mainly focus
on fiscal 2010.

Canon Marketing Japan Inc.

13

Business Review
and Outlook

Business Solutions
Document business

Efforts to build a new income structure will center on
expanding our share of the multifunctional product(MFP) market, and on improving the earning capacity ofmaintenance services.
We will expand our production printing business, which
includes not only Canon products but also commercial
printers manufactured by Océ, a Canon Group member.

Net sales(Millions of yen)2009

438,7382010

440,732

operating income(Millions of yen)2009

(3,021)

2010

(867)

Note: The above figures include sales
and operating income for the IT
solutions business.

Performance

Major Trends

In fiscal 2010, the Japanese market for office equipment

Office MFPs

benefited from a recovery trend in corporate capital investment,

We recorded growth in sales of our flagship color MFP range,and shipments of business-use MFPs and laser printers

the imageRUNNER ADVANCE series. We achieved this byappear to have exceeded the previous year’s level. There were

offering users new solutions, including efficiency improvements

double-figure increases in the quantities of MFPs and laser

and the ability to link into IT systems. In October, we further

printers sold by Canon MJ, and sales of toner cartridges were

strengthened the product line-up with the imageRUNNER

also higher.

ADVANCE C2000 series, a compact model range designed for

Despite a recovery in office printing demand, sales ofmaintenance services were below the previous year’s levelsmall and medium-sized offices. We aim to expand our market
share from 17% in fiscal 2010 to 22% in fiscal 2013.

because of reductions in unit prices.
Total net sales in the Business Solutions segment

Laser printersamounted to ¥441 billion (US$5441 million). There was also an

There was growth in sales of both color and monochrome

operating loss of ¥867 million (US$11 million) due to sluggish

printers, especially the Satera Series. Sales of toner cartridges

performance in the areas of system integration services and IT

also expanded steadily. We are determined to maintain the

products within the IT solutions business.

biggest share of the laser printer market.

14 Canon Marketing Japan Inc.

imagePRESS C7010VP
This printer combines all of Canon’s
unique digital photography technology
to create high-quality, high-resolution
output for all needs, from commercial
printing to corporate in-house
publishing.

imageRUNNER ADVANCE C2030F

We shifted to an aggressive
stance in fiscal 2010, and oursales of hardware in particularwere substantially higher than in
the previous year. There was also
growing evidence of a recovery insales of maintenance services. As
a positive and highly skilled team,
we will work with all the resourcesof our Group and our business
partners to make fiscal 2011 thefirst year of our recovery phase.

”

Satera LBP8630
Capable of printing 37 pages aminute, this environment-friendly A3
monochrome laser printer is ideal forsmaller offices.

IT s o l u t i on s B u s i n e s s

The most compact, space-savingcolor system yet produced, this modelfeatures a highly intuitive user interface
and a variety of personalization
options.

“

Document Businessproduct Highlights

Koji Ashizawa
Director, Executive Vice President

Large-format ink-jet printers
Con s u m e r EQUI P M E N T

Sales were substantially higher, thanks to our efforts to build
new markets in such areas as CAD and poster production.
Though sales are still small, we will continue to expand thisproduct category as rapidly as possible.
Expansion of production printing businessWe worked to expand sales of high-speed printers manufactured
by Océ, which complement our own product range. We aim to
expand sales from the production printing business to around¥50 billion by 2013.
Office MFP maintenance services
Sales of maintenance services were lower year on year because

Ind u s t r i a l E q u i pm e n tof a continuing decline in unit prices. We will continue to reduce
costs while also expanding new stock-type businesses, such as
remote IT-based monitoring systems.

Canon Marketing Japan Inc.

15

Business Review
and Outlook

Business Solutions
IT Solutions BusinessWe will work to improve earnings from system integration(SI) services and other existing businesses in this segment.
We will create new businesses, including aMixed Reality (MR) business that includes CAD imaging
solutions for corporations.
We will also expand stock-type IT service businesses,
including data center and cloud services.

On January 1, 2011, the IT
solutions business became
an independent segment
called IT Solutions, as part of aconcerted strategy to build thisbusiness area into a growth
driver for the Canon MJ Group.
Performance figures forfiscal 2010 are shown on page
14. To learn more about how
we are strengthening thisbusiness area, please see thespecial feature on page 10.

Performance

Major Trends

In the Japanese market for IT solutions, investment in

SI services and other existing businesses

computers and other hardware returned to a positive trend,

Our priority is profitability, and our efforts focus on expanding

but corporate customers continued to reduce or postpone

our portfolio of prime projects. We are also working to reduce

IT investment, and demand for SI services appears to havedevelopment costs. In the solutions business area, we areremained slow. In this environment, we were able to expand

expanding our involvement in CAD solutions through thesales in the areas of security and engineering solutions, andMR business, as well as in security and the development ofalso in the infrastructure and outsourcing category, especiallyembedded products for Canon products.

infrastructure development services.
However, both sales and income were disappointing in the

Stock-based IT services

key area of SI services. This reflects unprofitable projects andWe will build outsourcing, operations and maintenancepressure from customers to reduce costs. Sales of IT products

services into a second core business area alongside ourwere also lower year on year.

existing activities. Specifically, we will strengthen our data
center services, expand our systems operations services,and commence full-scale development of cloud services. As
part of our efforts to strengthen data center services, we will
invest approximately. ¥15 billion in a fourth data center, tobe completed in the fall of 2012. In January 2011, we also

16 Canon Marketing Japan Inc.

YouYan Series
In the Chinese market, we provide software solutions optimized for Japaneseowned companies and Chinese companies in the three areas of document
management, production management and warehouse management.

“

Document Businessproduct Highlights”

IT s o l u t i on s B u s i n e s s

A year has passed since thebusiness restructuring that resulted
in the establishment of Canon MJ
IT Group Holdings Inc. on April 1,
2010. Trends in IT investment bycustomers still present significant
challenges. However, we arepreparing for the cloud computing
era through strategies centering
on service model evolution andglobalization.

Kazunori Asada
President, Canon MJ IT Group Holdings Inc.

established a new specialized cloud organization of 100
Con s u m e r EQUI P M E N T

people. Our goal is to build this into a ¥45 billion businessby 2013.
Creating new businesses
There are also plans for other new activities, including abusiness linked to sales of CAD software to customers’ designand development departments. We will also be active in theprovision of IT services to the overseas business sites ofJapanese companies, including Canon Group companies.
Canon MJ has long supported the domestic activities ofJapanese companies through innovative IT solutions, and weare confident that we will be highly competitive even outsideof Japan.

Ind u s t r i a l E q u i pm e n t

Canon Marketing Japan Inc.

17

Business Review
and Outlook

Net sales

Consumer Equipment
We will maintain and strengthen Canon’s position as
No. 1 in terms of market share, customer satisfaction
and brand power in the areas of digital SLR cameras,
digital compact cameras and home-use ink-jet printers.

(Millions of yen)2009

222,2272010

219,781

operating income(Millions of yen)2009

10,428

2010

9,184

We will move quickly to create new businesses,
including an imaging portal site business.

Performance

Major trends

In the Japanese digital camera market, fiscal 2010 shipments

Digital SLR camerasof both digital SLR cameras and compact digital cameras

The EOS Kiss X4, with improved full hi-vision video capabilities,

appear to have exceeded the previous year’s levels. Our sales

maintained its position as the top model of the year. Canonof digital SLR cameras followed a healthy trend, increasing

also achieved the biggest market share of any manufacturer.

by 16% in volume terms. However, sales of compact digital

In addition, sales of interchangeable lenses set a new record incameras were sharply lower year on year in both volume andvolume terms. We are determined to maintain our top market

value terms due to a steep downward trend in unit prices. In

share in this area.

contrast, we recorded strong sales of digital video cameras
and home-use ink-jet printers.
Net sales in the Consumer Equipment segment wereCompact digital cameras
Prices continued to fall, and the product line-up weighted

slightly lower than the previous year’s figure at ¥220 billion

increasingly toward low-priced models. Canon maintained its(US$2,713 million). Operating income was 11.9% lower year on

position as the leading manufacturer in terms of market shareyear at ¥9.2 billion (US$113 million).

by introducing a number of cutting-edge new models, including
the IXY 10S with its touch-panel LCD monitor, and the IXY 30S
and IXY 50S, which produce beautiful pictures even in low-light
conditions. However, sales were below the previous year’s level.

18 Canon Marketing Japan Inc.

EOS Kiss X4This entry-level digital SLR camera isequipped with a high-definition CMOS
sensor capable of approximately
18 megapixel resolution. Alongsideenhanced ISO sensitivity, this camera
also supports full Hi-Vision video
recording.

IXY 10S

PIXUS MG6130
This printer can be linked into awireless LAN for enhanced wirelessprinting capabilities. New features
include full high-definition printing
from videos.

Despite continuing price erosion,
especially in the digital camera
market, we maintained an
operating margin of 4% andgained the biggest market sharesin key product categories.
In existing business areas, we
aim to be No. 1 in terms of bothcustomer satisfaction and market
share. In 2011, we will also focus
on establishing new businesses,
and on building a new future byusing all the resources of ourentire organization and optimizing
all aspects of our activities.

Osamu Sasaki
Director, Senior Vice President”

IT s o l u t i on s B u s i n e s s

For enhanced ease of use, all buttons
on the rear of the camera have been
replaced with a 3.5-inch touchscreen.
The camera also features a 14.1
megapixel, high-resolution CCD and awide-angle 24mm 5x zoom lens.

“Document Businessproduct Highlights

Digital video cameras
Con s u m e r EQUI P M E N T

In fiscal 2010, we launched the iVIS HF M31, which has
a touch-screen monitor, and the iVIS HF M32, which has
increased internal memory capacity. In volume terms, sales
were over 60% higher year on year. Canon is currently ranked
third in terms of market share, but we will continue our efforts
to increase our slice of the market.
Home-use ink-jet printers
We expanded sales and gained the biggest market share of any
manufacturer by introducing new products, including the PIXUS
MP640, which was launched in 2009, and the PIXUS MG6130,
which went on sale in September 2010 with improvements
in both design and usability. We also achieved steady growth

Ind u s t r i a l E q u i pm e n t

in sales of ink-jet cartridges and other consumables bysuggesting a wide range of uses for ink-jet printers. We willcontinue to strengthen Canon’s position as the leading name inhome-use ink-jet printers.

Canon Marketing Japan Inc.

19

Business Review
and Outlook

Net sales

Industrial Equipment
We will expand the industrial equipment business withemphasis on imported products.

(Millions of yen)2009

25,6502010

13,646

operating income(Millions of yen)In the medical equipment area, we will expand sales
and launch a medical information solutions business.

2009(1,110)

2010

(581)

We will create a new broadcasting and imaging
solutions business, while maintaining our leading
market share for TV broadcast lenses.

Performance

Major trends

Most of our industrial equipment products are imported. Sales

Industrial equipment, including imported productsof semiconductor-related equipment, optical measuring systems

A production recovery in the semiconductor industry andand other products were higher year on year, mainly because of

firm trends in capital investment were reflected in a recovery

a recovery in semiconductor production.

trend in our sales of inspection and measuring equipment,

In the area of medical equipment, we recorded pleasing

including wafer inspection systems, and precision industrial

sales of digital X-ray systems. The full-scale start-up ofcomponents. In both semiconductor and non-semiconductor

activities as a distributor of automated external defibrillators also

areas, our priority is to expand sales of industrial inspection

helped to lift sales in this area above the previous year’s level.

and measurement equipment for use with products including

However, sales of broadcast equipment were lower year on year

microelectromechanical systems (MEMS), photovoltaic cells,

due to a continuing investment slump among broadcasters.

LED devices and organic EL displays.

One of the business areas in this segment, namely sales,
service and support of semiconductor and LCD substrate

Medical equipment businesslithography systems, was transferred to Canon Inc. on January

Our priority in this category is to expand sales of digital X-ray

1, 2010. In the previous year, this business contributed ¥14.6

systems, our core products in this area, and ultrasound andbillion (US$180 million) to net sales. As a result, net sales in thismammography systems. We also plan to expand sales bysegment were halved year on year, but the operating loss wasworking with a manufacturer of digital radiography systems,

substantially reduced to ¥581 million (US$7 million).

and by introducing new ophthalmological products. Another key

20 Canon Marketing Japan Inc.

XDI-70C WirelessThis is Canon’s first wireless X-ray
imaging device*. For enhanced
usability, data can be transferred
wirelessly to a computer.
* The battery and charger are shown at left.

HJ15e×8.5B KRSE-V

In fiscal 2010, we struggled backfrom the all-time lows recorded
last year. Every member of ourteam worked to create new
businesses and take advantage ofeven the smallest opportunity. In
fiscal 2011, we are determined tolead the efforts of our corporategroup to move back into positive
figures by realizing the “Beyond
Canon, Beyond Japan” concept.

”

MicroXCT-200—
Industrial X-Ray CT
Manufactured by Xradia, Inc. of theUnited States, this system capturesinternal images from all angles. The
computer then reconstitutes theseimages to produce cross-sectionalviews.

IT s o l u t i on s B u s i n e s sThis 15x zoom lens is the world’s firstportable HDTV zoom lens with a builtin anti-vibration system.

“

Document Businessproduct Highlights

Kunio Kurihara
Vice President

growth strategy calls for the establishment of a new medical
Con s u m e r EQUI P M E N T

information solutions business that will make extensive use of
our IT expertise.
Broadcasting and imaging solutions
In this area, we are determined to maintain our leading shareof the market for TV broadcast lenses. We anticipate a gradual
recovery in capital investment by broadcasters. We will also
step up our efforts to provide imaging solutions for the disasterprevention and monitoring markets.

Ind u s t r i a l E q u i pm e n t

Canon Marketing Japan Inc.

21

Sustainable
Management

Linking

CSR to Our Brand
The Canon MJ Group closely monitors society’s changing needs as a matter of sound marketing.
From a business perspective, we use technology and expertise accumulated over many years to
help resolve problems confronting customers through products and IT solutions.
We also use our management resources from a non-business perspective to contribute tosociety. Not only do we have countless points of contact with people and communities; CSR
is also an integral part of our Customer Focus philosophy, by which we always strive to see
our company from the customers’ perspective. This philosophy is shared by all employees,
and enables a CSR approach based on the participation of all members of the Group.
By always striving to reduce our environmental load, we not only help to build a sustainable
society, we also meet our customers’ expectations for a brand that responds to the needs of our times.

CSR P h i lo s op h y

Customer Focus
philosophy brings full
CSR participation— CSR is marketing —CSR awareness

Shared philosophy:
the “Three Selfs” spirit

22 Canon Marketing Japan Inc.

CSR AwarenessOur participatory approach to CSR is basedon the sharing of the Canon MJ Group’s CSR
philosophy and values by all employees, andon a commitment to accurate knowledge.
Our efforts to foster CSR awareness in our

CO 2 REduction

Co 2 emissions
39,981 41,471

The entire Canon MJ
Group is working to
reduce CO2 emissions at
its business sites.

38,444(t)34,389 32,728

employees are coordinated by the CSR
Promotion Division.

2006

2007

2008

2009

2010

The “Three Selfs” Spirit
Our “Three Selfs” spirit is a code of conductthat dates back to the founding of Canon andis part of our corporate DNA. The code statesthat employees should take an active approachto every situation (self-motivation), maintainself-control (self-management) and be fully
aware of their position, role and situation(self-awareness). The Three Selfs spirit is the

Recycling

Used cartridges
recovered133.8

We have established avariety of recovery systems
for cartridges and otherconsumables.
Note:Gross weight of ink and tonercartridges recovered from schools
registered with the Bellmark
Foundation.

(t)

109.2
90.6
66.7
31.1
2006

2007

2008

2009

2010

foundation for our CSR activities.

United Nations
Global Compact
In December 2009, Canon MJ signed the
UN Global Compact. Under this initiative,
companies commit themselves to universal
principles relating to human rights, labor

donations
We have set up various
donation methods
through which employees
can support charitable
activities.

donated amount2010¥1,777,843

standards, the environment and theprevention of corruption. The underlying
principle is that companies should work tosolve global problems through responsible
corporate activities. By reflecting thisprinciple in our business activities, we willcontribute to the realization of a better andmore sustainable society.

Security
We have made thetraining of information
security specialists apriority.

No. of specialists trainedISMS*
promotion staff:

1,506

ISMS*
internal auditors:

419

Personal information
protection
contact persons:349* ISMS: Information security
management systems

Canon Marketing Japan Inc.

23

Committed to doing more
for society

President

Masami Kawasaki

By meeting stakeholders’ expectations throughproactive CSR activities, the Canon MJ Group
strives to bring a greater sense of security,
peace of mind and fulfillment to life,
work and society.

Social needs and values in such areas as environmental protection, compliance and information security are continuallychanging. Through CSR management, we monitor these changes sensitively and accurately, and reflect them in ourbusiness activities as we help our customers to create value. We believe these efforts will bring a greater sense of security,
peace of mind and fulfillment to life, work and society.
We have further expanded our commitment to CSR activities. Under our new environmental vision, Future Forest
2015, we have intensified our efforts to reduce CO2 emissions from our operations and help customers to reduce energy
consumption when using our products, at the same time as we also enhance user convenience.
In the area of information security, we must strengthen the infrastructure on which systems are based, as well as
raise employee awareness of the importance of information security. We are achieving this by implementing awarenessprograms linked to compliance activities, and by periodically verifying that appropriate attitudes are being consolidated
throughout our group. At the same time, we are helping to create a secure society by providing information security
know-how to our customers. We regard this work as a mission that we cannot neglect.
As befits a marketing company, our approach to social contribution is based on a framework encompassing not justCanon MJ, but also our business partners, customers, and non-profit and non-governmental associations. We are actively
using this framework to expand our CSR activities. We took an important step forward in December 2009, when we signed
the United Nations Global Compact to establish a focused direction for our CSR activities and reaffirm our commitment to abetter, safer, more sustainable world.
As a member of the Canon Group, and as a business group with countless points of contact with stakeholders, Canon
MJ will continue to base its CSR on its strengths as a marketing company, and on participation by all employees.

24 Canon Marketing Japan Inc.

enVironmental
Management

We are continually strengthening our environmental management infrastructure by refining
the vision and management systems at its heart. This enables us to lessen the environmentalload of our operations, as well as that of our customers and society.

The Future Forest 2015
Environmental Vision

New CO2 Reduction Target
The Canon MJ Group is committed to helping our corporate

The Future Forest 2015 vision adopted by the Canon MJ Groupcustomers reduce their CO 2 emissions. Under a special

is based on Canon’s Action for Green environmental action

initiative, we use our own CO2 reduction as a base and set aplan. In addition to efforts to reduce environmental loads, thespecific CO2 amount that we “contribute” toward our customers’

Canon MJ Group uses its many contact points with customers

CO2 reductions.

in Japan to reduce CO2 emissions and contribute to society in

As shown by the chart below, in 2007 we contributed apartnership with communities and customers. In this way, we

reduction of 83,895 tons toward our customers’ CO2 reductions.

contribute toward a society that can reconcile prosperity with

Under Future Forest 2015, we have set a strict target figure of

global environmental protection.

at least 100,000 tons of CO2, and at least double the amount of

We chose the name “Future Forest” for our environmental
vision as it reflects the long-term perspective that guides ourefforts, and the fundamental role that forest resources have

our own CO2 reductions.
We call this ratio between our own CO2 emissions andthose of our customers the Green Ratio.

played in the activities of the Canon MJ Group for many years
through its products, including paper used in photographic
printing and office automation systems.

Future Forest 2015
Canon’s philosophy emphasizes the concept ofkyosei, or harmonious coexistence. In keepingwith this concept, the Canon MJ Group iscontributing toward a society that reconciles

New Target for co 2 reduction
Our contribution to the reduction of CO2 emissions at customers’
business sites will be at least 100,000 tons per year and at least
double the level of our own CO2 emissions.
Positive effect on global environment

2007 actual

prosperity with global environmental protection,2015 target
Green
Ratio

and that is committed to respecting theContribution tocustomers’ CO2
reductions

Earth’s biodiversity and preserving forests andcountryside for future generations. We aim to
maximize our resource productivity throughefficient operations that minimize resource
consumption, and work with communities andcustomers to reduce the environmental loads ofthe products and IT solutions that we supply.

83,895 tons

±049,305 tons

100,000 tons
or higher

Double or
higher1

CO2 emissions ofCanon MJ Group

Negative impact on global environment

Canon Marketing Japan Inc.

25

Corporate
governanceCorporate GOvernance organization(As of March 29, 2011)

GENERAL STOCKHOLDERSʼ MEETING
Appointment / dismissal
Audits

7 Directors

Board of Directors

5 Corporate Auditors

Appointment / dismissal
Cooperation

Board of Corporate Auditors

Management Committee

Cooperation

Internal Auditors
OfficeCSR Committee

Auditing ofaccounts

Cooperation

Auditing Company

Appointment / dismissal

Internal Controls Evaluation Committee

Internal
auditsAdviceGroup Companies
Staff Managers

Basic Stance on Corporate
Governance

Lawyers/
Licensed Tax Accountants

Disclosure Committee

Board of Directors
There are now seven directors, including one outside director.

We recognize that sustainable growth in corporate value

By limiting the term of office for directors to one year, we haverequires ongoing improvement in such areas as manage­

created a management structure capable of adapting quickly

ment transparency and the monitoring of progress toward

to changes in the business environment. Important decisions

management targets. This is reflected in our wide-ranging

are made by the Board of Directors, which normally meets

initiatives to strengthen corporate governance.

once a month, and at Management Committee meetings
attended by the directors of Canon MJ and the presidents of

The Corporate Governance
Structure

key subsidiaries.
On March 29, 2011, we introduced an executive
officer system. The purpose of the new system is to speed

In addition to the Board of Directors and the Board of Corporate

up management decision-making in the Canon MJ Group

Auditors, our corporate governance structure also includes anby separating management decision-making from executive

internal auditing system. We have also established a rangefunctions and reducing the number of directors. It also clarifies

of committees, including the CSR Committee, the Disclosure

responsibility for the performance of business operations andCommittee and the Internal Controls Evaluation Committee, tostrengthens executive systems.

implement policies across the entire organization.
26 Canon Marketing Japan Inc.

Board of directors and corporate auditors

Board ofdirectors

ChairmanPresident

Director

Director

Director

Haruo Murase

Masami Kawasaki

Koji Ashizawa

Osamu Sasaki

Yo Shibasaki

Director

Outside Director

Masahiro Sakata

Ikuo Soma

Corporate Auditor

Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Taiji Miyazaki

Tetsuo Yoshida

Hiroshi Kawashimo

Keijiro Yamazaki

Kuniyoshi Kitamura

BOARD OFCorporate
auditors

Board of Corporate Auditors

coordination with similar units established in major subsidiaries.
The Canon MJ Group has 44 audit staff members.

There are five corporate auditors, of whom three are appointed
from outside of the Company. The Board of Corporate Auditors

Auditing of Accounts

sets audit policies and allocates responsibilities to the auditors,
who conduct stringent audits in accordance with those

Canon MJ’s accounts are audited under an audit agreement

policies. Specific activities include attending Board meetings,

with Ernst & Young ShinNihon LLC. There are no special

interviewing directors and examining documents containing

interests between Canon MJ and this audit corporation, nor

important Board resolutions. The corporate auditors also

are any operating officers of the audit corporation involved inmonitor the Company’s operations and assets.

the conduct of internal audits of Canon MJ. To ensure thatinvolvement is limited to specific periods, the audit corporation

Internal Auditors Officerotates operating officers who have been involved in audits ofany company for more than seven years.

Internal audits are conducted by the Internal Auditors Office,an independent specialist unit that also assesses and advises
Canon MJ and its subsidiaries on legal compliance, theeffectiveness of processes, internal control systems andinformation security. The Internal Auditors Office works in
Canon Marketing Japan Inc.

27

information
security
In an ever more digitalized and interconnected world, information security is a key concern.
Through stringent information security measures, the Canon MJ Group contributes to amore secure society and greater peace of mind for its customers.

Framework and Key Themes
for Information Security Initiative

Major Objectives in Fiscal 2010

1. Implement uniform management systems
group-wide, and improve efficiency

The Canon MJ Group regards the reinforcement of information
security as part of its responsibilities toward the creation of a more

2. O
 ptimize information security according
to each Group company’s characteristics

secure society, and as essential to meeting customers’ expectations
in line with our Customer Focus philosophy.

3. D evelop human resources in the areaof information security

Our efforts follow two central themes: Reinforcing the grouplevel information security infrastructure by improving uniformity and4. Active information disclosure about
information security activities

efficiency, and improving the security, reliability and efficiency of

5. P rovide peace of mind andsecurity to customers

the processes through which we provide value to customers.
Through continuous monitoring and evaluation, we strive

・Improve information security in processes
that provide value to customers

to identify factors that hinder or contribute to better information
security, a process that we also use to upgrade our services to・Help resolve customers’ information
security issues

customers and our IT solutions.

Enhancing customer satisfaction

Improving the information securityof the Canon MJ Group

High-quality information security solutions(products, services)

Consideration for information security and the protectionof personal information in service maintenanceAlleviation of factors that hinder the
improvement of customer satisfaction throughbetter handling of information assets
Reinforcement of information
security governance

ReportImprovement of information
security in relation to processes
that provide value to customers

Reinforcement of information security management

DirectEvaluate

Plan
Act

MonitorImprovement of uniformity and efficiency
Optimization of measures according tobusiness characteristics

Expansion of factors that help improvecustomer satisfaction through better
handling of information assets

Reinforcement of group-level
information security infrastructure

ISMS1
PMS2

Do

Check
Active utilization of the Group’s products
Accumulation and feedback of application
expertise

Creation of a secure society
1 ISMS: Information security management systems
2 PMS: Personal information protection management systems

28 Canon Marketing Japan Inc.

Management
systems
Raising the value of the Canon MJ Group’s corporate brand is an ongoing priority. We do thisby maintaining high standards of corporate ethics group-wide, and by developing structures
capable of responding to a variety of management risks.

compliancecanon MJ compliance activities
・Messages from senior management
・Canon Group Code of Conduct
・Compliance Cards
・Awareness training

For the Canon MJ Japan Group, compliance is not simply a matterof obeying laws and regulations. We define compliance as obedience
to regulatory requirements and social rules, a commitment to social
justice, and continuing efforts to meet the expectations of society. Our
compliance activities are designed to encourage high ethical values

Awareness
activities

and respect for the law in individual employees through awarenessactivities, employee education and organizational activities.
To raise awareness of the Canon Group Code of Conduct, allemployees and officers of Canon Marketing Japan carry Compliance

Employeeeducation

Cards. Printed on these cards are the Three Selfs spirit andOrganizational
activities

compliance tests that can be used byindividuals to check their own conduct.
・Distribution of complianceinformation (weekly)
・Business ethics handbook
・C ompliance web education(once yearly)

・Compliance meetings (twice yearly)・Compliance awareness surveys(once yearly)
・“Speak up” system
・Linkage with personnel evaluation

disclosure policy

risk management

The task of the Disclosure Committee is to make prompt

The Canon MJ Group has taken steps to ensure the continuity

decisions concerning important corporate information,of its business activities in the event of a major earthquake,

including the identification of information for which timely

an influenza outbreak or other contingencies that could impact

disclosure is required, and decisions concerning the content

on its activities. These initiatives are coordinated by the BCM1

and timing of disclosure. To ensure that information can beExpert Committee.

gathered promptly, disclosure officers have been appointed

In July 2007, we established the BCP2 Expert Committee

in each department and subsidiary. As part of our Investor

as a subsidiary organization of the Management Committee

Relations activities, Canon MJ holds briefings on medium-termtasked with developing, maintaining and managing businessplanning, quarterly results briefings and business briefings.

continuity management systems. Renamed the BCM Expert

We also distribute timely, accurate information continually via

Committee in fiscal 2009, its activities include deliberations on

websites and other channels.

BCP policies for the entire Canon MJ Group.
1 BCM: Business continuity management
2 BCP: Business continuity plan

Canon Marketing Japan Inc.

29

Management
systems
Internal controlS
Chaired by the President, the Internal Controls Evaluation Committee consists of officials representing
corporate departments and subsidiaries. Its task is to develop internal control systems for the entire
Canon MJ Group.
Canon Inc., which is listed on the New York Stock Exchange, has adopted systems that comply
with the Sarbanes-Oxley Act, a U.S. law designed to improve corporate governance. As a member of the
global Canon Group, Canon MJ has also applied global perspectives by establishing systems based on
the same standards.

FTSE4Good and MS-SRI
Canon MJ actively discloses information that is of particular interest to stockholders and investors. We
also actively cooperate in surveys by SRI evaluation agencies and other organizations. The recognition
we receive for our CSR initiatives includes our continuing inclusion in the FTSE4Good index.
Morningstar, Inc. has consistently included Canon MJ in the MS-SRI, the first socially
responsible stock index in Japan, which consists of 150 Japanese companies selected for theirsuperior CSR performance.

Quality Management
Under our basic product safety policy, we maintain quality management and quality- and risk-control
systems designed to ensure that customers can use our high-quality products and services in safety
and with confidence.
All products, services and support provided to customers are guaranteed to meet the same Canon
Quality standards as Canon products. We are continually working to improve customer satisfaction
through the development and implementation of our quality management system (QMS).
In addition to product safety, we also regard product and service quality as important targets forrisk management. We have established a Quality and Product Liability Expert Committee under thejurisdiction of the Management Committee. Its task is to ensure an appropriate and timely response in
the unlikely event of a contingency concerning products or services supplied to customers.

Relationship with Canon Inc.
Canon MJ is a subsidiary of Canon Inc., which owns 55.3% of Canon MJ stock (as of December 31,2010). This percentage figure excludes Canon MJ’s treasury stock holdings. With these holdings, theownership percentage for Canon Inc. would be 50.1%. Canon MJ has the near-exclusive right to sell
products (excluding semiconductor and LCD lithography systems) manufactured by Canon Inc. under
the Canon brand in Japan. In fiscal 2010, our purchases from Canon Inc. amounted to ¥268.0 billion(US$3,308.0 million), or 68.7% of our total purchases.
Because of this relationship, a major shift in the management policies or business activities
of Canon Inc. could have a significant impact on the business activities, performance and financial
position of the Canon MJ Group.
30 Canon Marketing Japan Inc.

Canon MJ’s strong commitment to
CSR is reflected in our inclusion in
FTSE4Good and MS-SRI.

Financial
section
CONTENTS
32

Ten-Year Consolidated
Financial Summary

39

Consolidated Statements of
Changes in Net Assets

34

FINANCIALREVIEW

40

ConsolidaTed sTaTemenTs
oF Cash Flows

36

Consolidated
Balance Sheets

41

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

38

Consolidated Statementsof OPERATIONS

56

Report of Independent
Auditors

Canon Marketing Japan Inc.

31

Ten-Year Consolidated
Financial Summary
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31

Millions of yen		2010 		

2009 		

2008 		

2007

FOR THE YEAR:¥ 674,159¥ 686,615¥ 827,487¥ 905,137
Operating income		
7,736 		6,297 		25,416 		
36,886
Income (loss) before income taxes and minority interests 		
8,584 		(595) 		22,229 		
35,452
Net income (loss)		
3,724 		(4,343) 		
11,186 		
20,033
Net sales

At year-end:
Total assets
Total stockholders’ equity (Note 5)				448,592 		
246,680 		

449,607 		
246,829 		

484,937 		
255,220 		

526,125
266,086

		
		
		
		

35,186 		
(13,012) 		
(8,171) 		
109,575 		

18,144 		
(25,834) 		
(4,324) 		
95,575 		

41,122 		
(28,967) 		
(21,738) 		
107,589 		

47,214(21,912)(16,345)
117,206

Cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents

Yen

Per share of common stock:

¥
26.70
¥
(31.62)¥78.63¥ 134.84
		
20.00 		20.00 		40.00 		40.00		 1,798.16 		 1,797.31 		 1,858.39 		 1,817.59

Net income (loss) (Note 2)
Cash dividends (Notes 3 and 4)
Stockholders’ equity (Note 5)

Notes: 1.	The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥81 to U.S.$1, the prevailing exchange rate as of December 31, 2010.
2. Net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the respective fiscal years.
3. Cash dividends per share are the amounts applicable to the respective fiscal years, including dividends to be paid after the end of the year.
4.	Year-end cash dividends applicable to the year ended December 31, 2005 include a ¥2.00 bonus dividend reflecting record-high consolidated net sales, operating income andnet income.

Return on Sales (ROS)Net Sales

Working Capital(Billions of yen/%)

ROS(Billions of yen/Times)

816 822

787

757

867

905
347

827

325

2.2 2.2

696

687 674

1.9
1.5

345

362

2.0

335

328

1.7 1.7 1.7 1.7 1.7

198 1960.6

174 175

1.8

220 221 225

247

260 266 255

247 247

7.4 7.6
6.4
5.4

212 220 214

3.2
184
154

157

4.3

1.6

1.5

-1.7

-0.6

32 Canon Marketing Japan Inc.

234

1.9

-4.2

FY’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Total Stockholders’ Equity
ROE(Billions of yen/%)

2.0

1.9

0.9

Total Stockholders’Equity and ROE

374 369

302 302

1.4

0.5

Current Assets
Current Liabilities
Current Ratio

FY’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10-13.8

FY’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Thousands of
U.S. dollars (Note 1)

Millions of yen

		2006 		

2005 		

2004 		

2003 		

2002 		

2001 		

2010

¥ 867,172¥ 821,948¥ 815,511¥ 757,033¥ 695,585¥ 786,828 $		33,919 		
29,723 		
29,274 		
16,987 		
10,885 		
19,397 		
		
32,967 		
27,086 		
20,186 		
20,438 		
6,873 		 (63,280) 		
		
18,807 		
15,358 		
12,364 		
7,043 		3,436 		 (32,831) 		

8,322,951
95,506
105,975
45,975				526,578 		
260,367 		

513,335 		
247,244 		

482,337 		
234,158 		

495,396 		
225,317 		

495,298 		
220,797 		

514,698 		
220,418 		

5,538,173
3,045,432

		
		
		
		

18,094 		
(19,217) 		
(6,126) 		
108,248 		

36,985 		
(17,887) 		
(4,311) 		
115,504 		

22,053 		
(7,963) 		
(39,045) 		
98,844 		

23,671 		
(16,258) 		
(20,305) 		
123,815 		

36,275 		
(26,869) 		
(13,889) 		
136,448 		

(3,384)(7,364)(6,182)141,045

		
		
		
		

434,395(160,642)(100,877)
1,352,772
U.S. dollars(Note 1)Yen

¥ 125.64¥ 101.78
¥
81.78
¥
46.24
¥
22.96
¥ (217.39)$ 0.33
		
36.00 		28.00 		22.00 		18.00 		18.00 		18.00 		 0.25
		 1,739.50 		 1,650.52 		 1,562.23 		 1,496.74 		 1,464.43 		 1,459.60 		 22.20
5.	Total stockholders’ equity in the above table represents the total of stockholders’ equity and valuation and translation adjustments in the consolidated balance sheets. This is dueto the adoption of an accounting standard for the presentation of net assets in the balance sheet effective the year ended December 31, 2006, which requires former
stockholders’ equity and minority interests to be presented as net assets, and net assets to be classified as stockholders’ equity, valuation and translation adjustments andminority interests.

Total Assets andTotal Stockholders’Equity Ratio

Total Assets
Total Stockholders’Equity Ratio

Net Income (Loss)(Billions of yen)(Billions of yen/%)515

495 495513

18.8

527 526

482

485

15.4

450 44944.6 45.5

48.5 48.2 49.4

50.6 52.6

54.9

20.0

12.4

11.2

7.0

55.0

3.7

3.4

42.8
-32.8

FY’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10-4.3

FY’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Canon Marketing Japan Inc.

33

FINANCIAL
REVIEW
Business
Performance
Net Sales
Consolidated net sales in the year ended December 31, 2010
were 1.8% below the previous year’s level at ¥674,159
million. One key reason for this reduction was the transfer toCanon Inc. of business units involved in sales of lithographyequipment for semiconductors and LCD substrates, andrelated service and support.
As described in Note 12 Segment Information, effective
the year ended December 31, 2010, the Company has adopted
a new reclassification of its business segments. The year-onyear comparison shown below uses the figures for the year
ended December 31, 2009 adjusted based on the new
segment structure.
Segment Information
In the Business Solutions segment, we achieved sustained
growth in sales of office multifunctional products (MFPs) throughmarketing efforts combined with the proposal of solutions basedon linkage with IT systems, efficiency improvements and otherbenefits. Sales of laser printers were also higher year on year,
reflecting a healthy trend in demand for office printing. Our
efforts to build new markets brought substantial year-on-year
growth in sales of large-format ink-jet printers. Despite arecovery trend in demand for office printing, sales of MFP
maintenance services were lower year on year because of adecline in maintenance charges. Canon System & Support Inc.,a member of the Canon MJ Group, benefited from healthy
trends in the areas of business equipment and IT solutions, andits net sales increased over the previous year.
In the IT Solutions Business, there was a year-on-year
decline in sales in the system integration (SI) service category.
This resulted from the elimination of unprofitable projects in thearea of individual system development, as well as clientpressure to reduce costs. Sales in the solutions category
exceeded the previous year’s level thanks to a strong trend indemand for engineering solutions, including security and CAD
solutions. Sales in the infrastructure/outsourcing area werealso higher year on year because of major orders from thepublic sector and the education sector, which helped to lift
sales of infrastructure development services. Sales of IT
products were marginally lower year on year because of amajor review of our handling of unprofitable items.
Total consolidated net sales in the Business Solutions
segment were 0.5% above the previous year’s level at¥440,732 million.
34 Canon Marketing Japan Inc.

In the Consumer Equipment segment, Canon MJ gained
the biggest share of the market for digital single-lens reflex(SLR) cameras. Higher camera sales were also reflected inincreased shipments of exchangeable lenses, and annual sales
set a new record in volume terms. These factors helped to lift
total sales of digital SLR cameras above the previous year’slevel. We were also the leading manufacturer in the market forcompact digital cameras. However, lower shipments and falling
unit prices were reflected in a substantial year-on-year decline
in sales for this market segment.
Shipments of digital video cameras were significantly
higher, and sales surpassed the previous year’s level. In the
ink-jet printer category, we maintained steady growth in salesof consumables by suggesting a variety of printing applications,and sales in this category increased year on year.
Total consolidated net sales in the Consumer Equipment
segment were 1.1% lower year on year at ¥219,781
million, mainly due to the fall in sales revenue from compact
digital cameras.
In the Industrial Equipment segment, a recovery insemiconductor production helped to lift sales of imported
equipment and other items above the previous year’s level.
Sales of medical equipment were also higher. This reflects
increased demand in the health screening market, closer
collaboration with equipment manufacturers and the start offull-scale sales of automated external defibrillators (AED)
under a distributorship agreement signed in 2009. Sales ofbroadcasting equipment were lower because of reduced
capital investment by broadcasters.
Business units involved in sales of lithography equipment for
semiconductors and LCD substrates and related service andsupport, which were formerly included in this segment, weretransferred to Canon Inc. as of January 1, 2010. Sales from these
activities amounted to ¥14,564 million in the previous year.
Mainly as a result of the transfer, total consolidated net
sales in the Industrial Equipment segment were reduced by
46.8% year on year to ¥13,646 million.

IncomeOperating income increased by 22.8% year on year to ¥7,736
million. This increase resulted from reductions in selling,
general and administrative expenses, including lower payroll
costs. Net income, which was affected by losses on sales of
fixed assets and impairment losses in the previous year,
recovered to ¥3,724 million.
Net income per share was ¥26.70, compared withnegative ¥31.62 in the previous year. The annual dividend
per share was ¥20.00.

Financial
Position

Cash
Flows

Current assets declined by ¥135 million year on year to¥301,693 million. The main changes were a ¥16,479 million
increase in marketable securities, a ¥6,851 million decrease innotes and accounts receivable and a ¥5,253 million reduction
in inventories.
A year-on-year reduction of ¥880 million took fixed assets
to ¥146,899 million. Significant changes included a ¥3,455
million increase in the value of land, a ¥2,170 million reduction
in buildings and structures, and a ¥1,021 million decline ininvestment securities.
Current liabilities increased by ¥3,537 million over theprevious year to ¥157,247 million. Key factors were a ¥4,357
million increase in accrued income taxes, and a ¥3,594 million
reduction in notes and accounts payable.
Long-term liabilities were reduced by ¥524 million year on
year to ¥44,498 million. Key changes included a ¥566 million
increase in lease obligations, and a ¥1,032 million reduction in
the allowance for employees’ retirement benefits.
Net assets declined by ¥4,028 million year on year to¥246,847 million. The main factors were as follows: ¥3,724
million in net income; reductions caused by dividend paymentsof ¥2,789 million; a ¥2,239 million reduction in retained
earnings, resulting from a ¥3,173 million reduction relating toa share exchange; a net reduction in treasury stock of ¥2,567
million, mainly resulting from a ¥5,003 million acquisition oftreasury stock through market purchases and a ¥7,567 million
decrease related to a share exchange; and a ¥3,925 million
reduction in minority interests relating to a share exchange.
As a result of these changes, total assets declined by¥1,015 million year on year to ¥448,592 million.
Return on equity (ROE) was 1.5%, compared with negative
1.7% in the previous year, while the stockholders’ equity ratio
increased from 54.9% to 55.0%. Net assets per shareamounted to ¥1,798.16, compared with ¥1,797.31 in theprevious year.

Cash and cash equivalents increased by ¥14,000 million to¥109,575 million as of December 31, 2010.
Net cash provided by operating activities amounted to¥35,186 million, compared with ¥18,144 million in theprevious year. The main factors influencing this result were
net income before provision for income taxes of ¥8,584
million, as well as depreciation of ¥13,739 million, a ¥6,901
million decline in notes and accounts receivable and a ¥3,927
million reduction in inventories.
Net cash used in investing activities amounted to ¥13,012
million, compared with ¥25,834 million in the previous year.
The main inflows and outflows were proceeds of ¥1,777
million resulting from the transfer of business units, andexpenditure of ¥11,489 million on the acquisition of tangible
fixed assets and ¥5,238 million on the acquisition of intangible
fixed assets.
Net cash used in financing activities amounted to ¥8,171
million, compared with ¥4,324 million in the previous year.
This total consisted mainly of expenditure of ¥5,003 million for
the acquisition of treasury stock, and dividend payments of¥2,857 million.

Canon Marketing Japan Inc.

35

Consolidated
Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2010 and 2009

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS		2010 		

2009 		

2010

CURRENT ASSETS:
Cash and cash equivalents (Notes 8 and 9)
Notes and accounts receivable (Note 8)
Short-term investments in securities (Notes 3, 8 and 9)
Inventories (Note 5)
Deferred tax assets (Note 11)
Short-term loans receivable (Note 8)
Other current assets
Allowance for doubtful receivables
Total current assets
PROPERTY AND EQUIPMENT:Land
Buildings and structures
Machinery and vehicles (Note 7)
Furniture and fixtures (Note 7)
Rental assets
Lease assets
Construction in progress
Total
Accumulated depreciation
Net property and equipment
INTANGIBLE ASSETS:
Goodwill (Note 2)
Software (Note 7)
Lease assets
Utilization rights
Other intangible assets
Total intangible assets
INVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 8 and 9)
Long-term loans receivable
Lease deposits
Deferred tax assets (Note 11)
Other investments
Allowance for doubtful receivables
Total investments and other assets
Total assets

36 Canon Marketing Japan Inc.

¥ 109,575
		 118,887
		
1,000
		 20,532
		
4,930
		 40,001
		
7,278
		
(510)
		 301,693¥ 95,575
		 125,738
		221
		 25,785
		
4,361
		 40,001
		 10,715
		
(568)
		 301,828$ 1,352,778
		 1,467,741
		
12,345
		
253,481		
60,864
		
493,840
		
89,852
		(6,296)
		 3,724,605

		 35,084
		 70,167		
13
		 16,604
		 22,669
		
1,710
		
504
		 146,751
		 (60,624)
		 86,127

		 31,629
		 71,605		
17
		 18,733
		 21,568
		
702
		
－
		 144,254
		 (60,064)
		 84,190

		
		
		
		
		
		
		
		
		
		

433,136866,259160
204,988279,864
21,111
6,222
1,811,740(748,444)
1,063,296

		
		
		
		
		
		

		
		
		
		
		
		

		
		
		
		
		
		

17,654
269,840
691
3,556
1,309
293,050

1,430
21,85756
288
106
23,737

		
4,134
		
15
		
8,624
		 20,875
		
3,716
		
(329)
		 37,035¥ 448,592

2,335
21,63826289
104
24,392

		
5,155
		
21
		
9,016
		 21,236
		
5,301
		
(1,532)
		 39,197¥ 449,607

		
51,037
		
185
		
106,469		
257,716
		
45,877
		
(4,062)
		
457,222$ 5,538,173

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

		2010 		

2009 		

2010

CURRENT LIABILITIES:
Notes and accounts payable (Note 8)¥ 102,850¥ 106,444$ 1,269,753

Lease obligations (Note 15)

		

432

		

190

		

5,333

Accrued income taxes (Note 11)

		

5,055

		

698

		

62,408Consumption taxes payable

		

2,607

		

2,268

		

32,185

Deferred tax liabilities (Note 11)

		

—

		

8

Accrued expenses

		24,389		

22,903

		Reserves

		

4,273

		

4,174

		

52,753

Other current liabilities		

17,641

		

17,025

		

217,790

		 157,247

		 153,710

		

1,941,321

		

1,069

		

503

		

13,197

Total current liabilities
LONG-TERM LIABILITIES:
Lease obligations (Note 15)		—301,099

Deferred tax liabilities (Note 11)

		

2,022

		

2,079

		

24,963

Allowance for employees’ retirement benefits (Notes 2 and 10)		36,506

		

37,538

		

450,691

Allowance for long-term continuous service rewards (Note 2)

		

916

		

1,007

		

11,309Allowance for directors’ and corporate auditors’
retirement benefits (Note 2)

		

801

		

844

		

9,889

Other long-term liabilities

		

3,184

		

3,051

		

39,309Total long-term liabilities		

44,498		

45,022

		

549,358

		

73,303

		

73,303

		904,975

Capital surplus		82,820		

83,289		

1,022,469

Retained earnings

		 112,914

		 115,153

		

1,394,000

Treasury stock		 (22,192) 		

(24,759) 		

(273,975)(117) 		(40) 		

(580)

CONTINGENT LIABILITIES (Note 4)
NET ASSETS:STOCKHOLDERS’ EQUITY (Note 16):
Common stock:
Authorized̶—299,500,000 shares;
Issued̶—151,079,972 shares in 2010 and 2009

VALUATION AND TRANSLATION ADJUSTMENTS:
Net unrealized loss on available-for-sale securities		

Foreign currency translation adjustments		(47) 		
(118) 				167MINORITY INTERESTS
Total net assets
Total liabilities and net assets

		(1,457)

4,046

		

2,062

		 246,847

		 250,875

		

3,047,494¥ 448,592¥ 449,607$ 5,538,173• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

37

Consolidated Statementsof Operations
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2010 and 2009

Thousands of
U.S. dollars (Note 1)

Millions of yen

		NET SALESCOST OF SALES
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income

2010 		

2009 		

2010

¥
		
		
		
		

674,159446,616
227,543
219,807
7,736

¥
		
		
		
		

686,615
453,557
233,058
226,761
6,297

$
		
		
		
		

8,322,951
5,513,778
2,809,173
2,713,667
95,506

		
		
		
		
		
		
		
		
		
		
		

466
(36)
597
4
(493)
212
(313)
(45)
400
(207)
—

		
		
		
		
		
		
		
		
		
		
		

712
(87)
544
5,596
(10,769)1(414)(1,104)
—
—
(66)

		
		
		
		
		
		
		
		
		
		
		

5,753
(444)
7,370
49
(6,086)
2,617(3,864)(556)
4,938(2,555)
—

		

—

		

(1,299) 		

—

		
		
		

263
848
8,584

		
		
		

(6) 		
(6,892) 		
(595) 		3,24710,469105,975

		
		
		
		
		
¥

5,097
(326)
4,771
3,813
89
3,724

		
		
		
		
		
¥

1,477
1,926
3,403
(3,998)345(4,343)62,926(4,025)58,90147,074
1,099
45,975OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Insurance Income
Gain on sales of noncurrent assets
Loss on impairment of fixed assets
Gain on sales of investments in securities
Loss on sales and disposal of property and equipment
Loss on devaluation of investments in securities
Gain on transfer of business
Loss on cancellation of lease contracts
Expenses related to restructuring of consolidated subsidiaries
Loss on adjustment for changes of accounting standard
for inventories measurement
Other, net
Income (loss) before income taxes and minority interests
INCOME TAXES (Note 11):
Current
DeferredIncome (loss) before minority interests
MINORITY INTERESTS
Net income (loss)

		
		
		
		
		
$

U.S. dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2):
Net income (loss)
Cash dividends applicable to the year
• See accompanying notes to consolidated financial statements.

38 Canon Marketing Japan Inc.

¥
¥

26.70
20.00

¥
¥

(31.62)
20.00

$
$

0.33
0.25

Consolidated Statements of
Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2010 and 2009

Millions of yen
Valuation and translation
adjustments

Stockholders’ equity

Net unrealized
loss onavailable-for-salesecurities

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

BALANCE AT DECEMBER 31, 2008
Net income (loss)
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes due to sales of investments
in subsidiaries
Contributions to employee welfare
pension fund
Other, net

151,079,972¥73,303¥83,289¥123,616(4,343)(4,120)¥(24,731)

BALANCE AT DECEMBER 31, 2009
Net income (loss)
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes due to share exchange
Contributions to employee welfare
pension fund
Other, net
BALANCE AT DECEMBER 31, 2010

151,079,972

Foreigncurrencytranslation
adjustments¥(212)¥ (45)

Minority
interests

Total
net assets¥ 3,8230(4)
2¥259,043(4,343)(4,120)
(4)
2

0

(26)

(26)

0
¥73,303¥83,289¥115,153
3,724(2,789)¥(24,759)0(1)(5,003)3(469)(3,173)7,567(0)
151,079,972¥73,303¥82,820¥112,914¥(22,192)

0
323

95

5

223

¥(117)¥ (40)¥ 4,046¥250,875
3,724(2,789)(5,003)2(3,925)

—

45
167

(0)
37
¥246,84770¥ (47)(78)¥(118)¥

Thousands of U.S. dollars (Note 1)
Valuation and translation
adjustments

Stockholders’ equity

Commonstock

BALANCE AT DECEMBER 31, 2009
Net income
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes due to share exchange
Contributions to employee welfare
pension fund
Other, net
BALANCE AT DECEMBER 31, 2010

$904,975

CapitalsurplusRetainedearnings

Treasurystock$1,028,259 $1,421,642 $(305,667)
45,975(34,432)(61,765)0(12)
37(5,790)(39,173)
93,420Minority
interests

Net unrealized
loss onavailable-for-salesecurities

Foreigncurrencytranslation
adjustments$(1,444)$ (494)$ 49,951

864$ (580)(963)$(1,457)556$ 2,062

Total
net assets$3,097,222
45,975(34,432)(61,765)25(48,457)0(0)$904,975$1,022,469 $1,394,000(0)$(273,975)

457$3,047,494• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

39

ConsolidaTed sTaTemenTs
oF Cash Flows
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2010 and 2009

Thousands of
U.S. dollars (Note 1)

Millions of yen

		CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in provision for retirement benefits(Reversal of) provision for liability for directors’ andcorporate auditors’ retirement benefits

Interest and dividend income

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of finance lease obligations
Payments for purchases of treasury stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
• See accompanying notes to consolidated financial statements.

40 Canon Marketing Japan Inc.

2009 		

2010

¥

8,584

¥

(595)

$

105,975

		
		
		
		
		

13,739
493
905
(222)
(326)

		
		
		
		
		

12,356
10,769
849
510
846

		
		
		
		
		

169,617
6,087
11,173(2,741)(4,025)(43) 		

40

		

(531)

		
		

(466)
36
309
(400)
(212)
6,901
3,927
(3,594)
2,639
32,270
(36)
478
2,474
35,186

		
		
		
		
		
		
		
		
		
		
		
		
		
		

(712)
87
(5,182)—
7
23,282
8,635(16,829)(6,145)27,918(88)
737(10,423)
18,144

		
		
		
		
		
		
		
		
		
		
		
		
		
		

(5,753)444
3,815(4,938)(2,617)
85,19848,481(44,370)
32,580398,395(444)
5,901
30,543434,395

		
		
		
		
		
		

386
(11,489)646(5,238)
(232)
520

		
		
		
		
		
		

—
(6,958)6,204(9,590)
(9)
16

		
		
		
		
		
		

4,765
(141,839)
7,975(64,667)(2,864)
6,420

		

—

		

(396) 		

—

		

—

		

(188) 		

—Interest expense		Loss (gain) on sales and disposal of property and equipment, net 		
Loss (gain) on transfer of business		
Loss (gain) on sales of investment securities
		
Decrease (increase) in notes and accounts receivable-trade		
Decrease (increase) in inventories
		
Increase (decrease) in notes and accounts payable-trade		
Other, net
		Sub-total		Interest paid		Interest and dividends received
		Income taxes received (paid)		Net cash provided by operating activities
		
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities
Payments for purchases of property and equipment
Proceeds from sales of property and equipment
Payments for purchases of intangible assets
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Payments for purchases of investments in subsidiaries
accompanying changes in scope of consolidation
Payments for sales of investments in subsidiaries accompanying
changes in scope of consolidation
Net decrease (increase) in short-term loans receivable
Decrease (increase) in time deposits
Proceeds from transfer of business
Other
Net cash used in investing activities

2010 		

		
		
		
		
		

0 		
— 		
1,777 		618 		
(13,012) 		

		
(313)
		
(5,003)
		
(2,857)		2
		
(8,171)
		(3)
		
14,000		
95,575¥ 109,575(20,000)
5,010—
77(25,834)

		
0
		
—
		
21,938		
7,630
		 (160,642)

		
(77)
		
(4)
		
(4,244)		1
		
(4,324)		(0)		 (12,014)
		 107,589¥ 95,575

		
(3,864)
		
(61,766)		
(35,272)		
25
		 (100,877)
		
(36)
		
172,840
		 1,179,938$ 1,352,778

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

1

Basis of Presentation ofConsolidated Financial Statements

Supplies are valued at cost determined by the last-purchase pricemethod. The carrying amount in the balance sheet is calculated withconsideration of write-downs due to decreased profitability.

The accompanying consolidated financial statements of Canon Marketing
Japan Inc. (the “Company”) and its consolidated subsidiaries (the “Group”)(e) Property and Equipment

are prepared on the basis of accounting principles generally accepted in

Property and equipment are stated at cost. Depreciation is computed by

Japan, which are different in certain respects as to application andthe declining-balance method for property and equipment, with thedisclosure requirements of International Financial Reporting Standards,

exception of items that are depreciated by the straight-line method atand are compiled from the consolidated financial statements prepared byrates based on the estimated useful lives of the respective assets. These

the Company as required by the Financial Instruments and Exchange Law

items are buildings purchased on or after April 1, 1998 (exclusive ofof Japan.

furniture and fixtures), all buildings and structures of the Company’s

The U.S. dollar amounts are included solely for convenience of the

Makuhari office, all property and equipment of certain consolidated

reader and are stated, as a matter of arithmetical computation only, at thesubsidiaries, and rental assets in the Business Solutions segment. The

exchange rate of ¥81=U.S.$1, the rate prevailing at December 31, 2010.

useful lives are as follows: buildings, mainly 50 years; furniture andThese translations should not be construed as representations that the

fixtures, mainly five years; and rental assets, mainly three years. Normal

Japanese yen amounts actually represent, or have been or could be

repairs and maintenance, including minor renewals and improvements,

converted into U.S. dollars at that or any other rate.

are charged to income as incurred.
In accordance with the amendment to the Corporation Tax Law, from2

Summary of Significant
Accounting Policies

the first accounting period after the fiscal year in which fixed assets
acquired on or before March 31, 2007 reach 5% of their acquisition value
under the application of methods of depreciation based on the pre-(a) Principles of Consolidation

amendment Corporation Tax Law, the Company shall apply straight-line

The accompanying consolidated financial statements for the year ended

depreciation over a period of five years to the difference between the

December 31, 2010 include the accounts of the Company and all of its

amount equivalent to 5% of the acquisition value of the fixed assets

21 (20 in 2009) subsidiaries. Investments in nonconsolidated subsidiaries

acquired on or before March 31, 2007 and the memorandum value (1 yen)

and affiliated companies are accounted for by the equity method.

of those assets. The resulting amount will be recorded under depreciation

All intercompany accounts and transactions are eliminated inand amortization in the accounts.

consolidation.
The excess of acquisition costs over net assets acquired is amortized
generally over five years.

(f) Allowance for Employees’ Retirement Benefits
In order to provide for employees’ retirement benefits, the Company and its
consolidated subsidiaries provide liability for employees’ retirement(b) Cash Equivalents

benefits in an amount calculated based on the estimated projected benefit

For purposes of the consolidated statements of cash flows, the Company

obligation and plan assets at the end of the fiscal year.

and its consolidated subsidiaries consider all highly liquid investments,

Unrecognized prior service cost is amortized by the straight-line

including securities, time deposits and certificates of deposit, all of which

method over the average service period of the eligible employees remaining

mature or become due within three months of the date of acquisition, toat the time when it arose. Unrecognized actuarial gain or loss is amortized

be cash equivalents.

from the fiscal year following the year in which it arose, by the straight-line
method over the average service period of the eligible employees(c) Securities

remaining.

The held-to-maturity debt securities are stated at amortized cost.

<Change in Accounting Standards>

Available-for-sale marketable securities are stated at fair market value,

Effective the year ended December 31, 2010, the Company has adopted

with unrealized gain or loss, net of the applicable taxes, reported as a“Partial Amendments to Accounting Standard for Retirement Benefits

separate component of net assets. Availablefor-sale marketable securities(Part 3)” (the Accounting Standards Board of Japan (ASBJ) Statement

whose fair value is not readily determinable are stated at cost determined

No. 19, issued on July 31, 2008). Since the Company amortizes theby the moving-average method.

unrecognized actuarial gain or loss from the fiscal year following theyear in which it arises, there was no impact on operating income and(d) Inventories

income before income taxes and minority interests for the fiscal year

Merchandise and service parts are valued at cost determined by the monthly

ended December 31, 2010. Unrecognized liability for employees’

moving-average method. The carrying amount in the balance sheet isretirement benefit incurred as a result of this accounting change wascalculated with consideration of write-downs due to decreased profitability.

¥380 million.

Work in process is valued at cost determined by the specificidentification method.

Canon Marketing Japan Inc.

41

Leased assets under finance lease contracts are depreciated by the(n) A llowance for Directors’ andCorporate Auditors’ Retirement Benefits

straight-line method over their respective lease contract term with zero

The Company and its consolidated subsidiaries pay lump-sum retirement

residual value.

benefits to directors and corporate auditors, the amounts of which are(g) Leases

Leased assets under finance lease contracts that do not deem todetermined in accordance with the Company’s and its consolidated

transfer ownership to the lessee and were entered into before January 1,

subsidiaries’ internal regulations. Also, in accordance with the Company’s

2009 when the latest accounting standards for lease transactions wereand its consolidated subsidiaries’ internal regulations, a reserve is provided

adopted are accounted for as operating leases.

for such benefits at the amount that would be required to be paid if all
directors and corporate auditors retired at the end of the fiscal year.

(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amount(o) Allowance for Long-Term Continuous Service Rewards

required to cover possible losses on collection. It is determined by

In order to set aside money for payment of rewards to employees who haveadding individually estimated uncollectible amounts for specific items

given long-term continuous service determined in accordance with theto an amount based on the actual rate of uncollected receivables of theCompany’s internal regulations, we book allowance for long-term continuous

Company in prior years.

service rewards based on the amount we expect to pay in the future.

(i) Income Taxes

regulations related to the Refresh and Vacation System for employees who

Deferred tax assets and liabilities are recorded to reflect the impact of

have been very diligent and have given long-term and continuous service.

temporary differences between assets and liabilities recognized for

The system grants vacations and pays rewards at fixed intervals in order tofinancial reporting purposes and such amounts recognized for tax

refresh the minds and bodies of these employees and enable them to work

purposes. These deferred taxes are measured by applying the normal

with new vigor in the future.

The Company and some of its subsidiaries have established internal

statutory rate of income taxes to the temporary differences.
(j) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at thecurrent exchange rates in effect at the balance sheet date. The foreignexchange gains and losses on translation are recognized in theaccompanying consolidated statements of income.
(k) Foreign Currency Financial Statements
The balance sheet accounts and revenue and expense accounts of theforeign subsidiaries are translated into Japanese yen at the current
exchange rates except for the components of net assets excluding minority
interests which are translated at their historical exchange rates.
(l) Per Share Amounts of Common Stock
Net income per share is calculated using net income available to holdersof common stock which is computed more precisely than under previous
standards, and the weighted average number of shares of common stock
outstanding for the period.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective fiscal years, including dividends to be paid after the end of therespective fiscal years.
(m) Bonuses to Directors
The estimated amount payable for the next round of directors’ bonuses,
which are classed as expenses for the current year, has been included in
the accounts for the current fiscal year.

(p) R ecognition of Revenues and Expenses and Recognition
of Revenue from Customized Software Development
For contracts under which software development started on or afterJanuary 1, 2010 and which were in progress as of December 31, 2010,
the percentage-of-completion method is applied in cases where theoutcomes of such software development contracts can be estimatedreliably. When the percentage-of-completion method is applied, thepercentage of completion at the end of the fiscal year is determined basedon actual costs incurred and estimated total contract costs. For all othercontracts, the completed-contract method is applied.
<Change in Accounting Standards>

Until the previous fiscal year, the completed-contract method was applied
to recognize revenue from software development contracts. Effective theyear ended December 31, 2010, the Company has adopted the “AccountingStandard for Construction Contracts” (ASBJ Statement No.15, issued on
December 27, 2007) and the “Implementation Guidance on AccountingStandard for Construction Contracts” (ASBJ Guidance No. 18, issued on
December 27, 2007).
In accordance with the new accounting standards, for contracts
under which software development started on or after January 1, 2010
and which were in progress as of December 31, 2010, the percentage-ofcompletion method is applied in cases where the outcomes of such
software development contracts can be estimated reliably, with thepercentage of completion at the end of the fiscal year being determinedbased on actual costs incurred and estimated total contract costs. For allother contracts, the completed-contract method continues to be applied.
As a result of this accounting change, consolidated net sales
increased by ¥3,598 million, and operating income and income before
income taxes and minority interests increased by ¥750 million, for the year
ended December 31, 2010 from the corresponding amounts which would
have been recorded under the method applied in the previous year.

42 Canon Marketing Japan Inc.

3

Assets Pledged
as Collateral

Assets pledged as collateral for deferred payments of customs duties as of December 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		2010 				 —

Short-term investments in securities

42009 		¥ 221 		2010

—Contingent
Liabilities

Contingent liabilities at December 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		¥Guarantees for employees’ housing loans

52010 		97

2009 		
¥ 114

2010

$ 1,198

Inventories

Inventories at December 31, 2010 and 2009 were composed of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2010
¥ 16,448
		 2,557
		 1,116
		
411¥ 20,532

Merchandise
Service parts
Work in process
Supplies

		

		

2009
¥ 18,233
		 3,794
		 3,213		545¥ 25,785

2010$ 203,062
		 31,568
		 13,777
		
5,074$ 253,481

Note:	For the software development contracts from which contract losses are expected, the inventory relating to such contracts and relevant reserves for contract losses do not offset eachother and have been recorded in gross amounts in current assets and current liabilities, respectively. Out of inventories, ¥358 million ($4,420 thousand) for work in progress relates
to software development contracts from which losses are expected and corresponds to the reserve for contract losses.

6

Consolidated Statements of
Changes in Net Assets

Current Fiscal Year (from January 1, 2010 to December 31, 2010)
1. Matters pertaining to the types and total number of shares issued and the types and number of shares of treasury stock
End of the previous fiscal year
(Thousands of shares)

Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Increase(Thousands of shares)

Decrease(Thousands of shares)

End of the current fiscal year
(Thousands of shares)				

151,080
151,080

		

—

		

—

		
		

151,080
151,080				

13,74813,748

		
		

4,351
4,351

		
		

4,203
4,203

		
		

13,896
13,896

Notes: 1.	The increase of 4,351 thousand shares of treasury stock consists of an increase of 4,349 thousand shares due to the purchase through the market, and 2 thousand shares
due to the purchase of fractional stock.
2.	The decrease of 4,203 thousand shares of treasury stock consists of a decrease of 4,201 thousand shares due to a share-for-share exchange, and 2 thousand shares dueto the sale of fractional stock.

Canon Marketing Japan Inc.

43

2. Matters regarding dividends(1) Payment of dividends
Resolution

Total dividends(Millions of yen)

Dividend per share(Yen)

Common stock¥ 1,373

Common stock¥ 1,415Type of stock

March 26, 2010
General stockholders’ meeting
July 26, 2010
Board of Directors’ meeting

Base date

Date effective¥ 10

December 31, 2009

March 29, 2010

¥ 10

June 30, 2010

August 27, 2010

(2) Dividends for which the base date falls within the current fiscal year and the date effective is in the following fiscal year
Type of stock

Funds used to pay
the dividend

Common stock

Retained earnings

Resolution

March 29, 2011
General stockholders’meeting

Total dividends(Millions of yen)

Dividend per share(Yen)¥ 1,372¥ 10

Base date

Date effective

December 31, 2010 March 30, 2011

Previous Fiscal Year (from January 1, 2009 to December 31, 2009)
1. Matters pertaining to the types and total number of shares issued and the types and number of shares of treasury stock
End of the previous fiscal year
(Thousands of shares)

Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Increase(Thousands of shares)

Decrease(Thousands of shares)

End of the current fiscal year
(Thousands of shares)				

151,080
151,080

		

—

		

—

		
		

151,080
151,080				

13,746
13,746

		
		

3
3

		
		

1
1

		
		

13,74813,748Notes: 1. The increase of 3 thousand shares of treasury stock was due to the purchase of fractional stock.
2. The decrease of 1 thousand shares of treasury stock was due to the sale of fractional stock.

2. Matters regarding dividends(1) Payment of dividends
Resolution

Total dividends(Millions of yen)

Dividend per share(Yen)

Common stock¥ 2,747

Common stock¥ 1,373

Type of stock

March 26, 2009
General stockholders’ meeting
July 23, 2009
Board of Directors’ meeting

Base date

Date effective¥ 20

December 31, 2008

March 27, 2009¥ 10

June 30, 2009

August 28, 2009

(2) Dividends for which the base date falls within the current fiscal year and the date effective is in the following fiscal year
Resolution

March 26, 2010
General stockholders’meetingType of stock

Funds used to pay
the dividend

Common stock

Retained earnings

44 Canon Marketing Japan Inc.

Total dividends(Millions of yen)

Dividend per share(Yen)¥ 1,373¥ 10

Base date

Date effective

December 31, 2009 March 29, 2010

7

Leases(a) Finance Leases
Lease payments for finance leases excluding subleases, except for the lease agreements which stipulate the transfer of ownership of the leased property
to the Company and its consolidated subsidiaries, were ¥2,495 million ($30,802 thousand) and ¥3,173 million for the years ended December 31, 2010
and 2009, respectively.
(As Lessee)
Future minimum lease payments subsequent to December 31, 2010 and 2009 are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter

2010 		

2009 		

2010

¥ 2,063¥ 2,723$ 25,469
		583 		 2,660 		 7,198¥ 2,646¥ 5,383$ 32,667

Future minimum lease payments included the following subleases:
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter¥		¥

2010 		

38
¥
22 		
60
¥

2009 		

2010

66
$
60 		
126
$

469
272
741

The following pro forma amounts represent acquisition cost, accumulated depreciation and amortization, and net book value of leased property as ofDecember 31, 2010 and 2009, excluding subleases:
Millions of yen		Acquisition cost:
Machinery and vehicles
Furniture and fixtures
SoftwareAccumulated depreciation and amortization:
Machinery and vehicles
Furniture and fixtures
Software
Net book value:
Machinery and vehicles
Furniture and fixtures
Software2010 		

Thousands of
U.S. dollars (Note 1)

2009 		

2010

¥
22
¥
51
$
272
		 8,662 		 11,311 		 106,938
		283 		
505 		
3,494
¥ 8,967¥ 11,867$ 110,704
¥
17
¥
40
$
		 6,161 		 6,248 		
		203 		
322 		
¥ 6,381¥ 6,610$210
76,062
2,506
78,778¥5¥
11$
		 2,501 		 5,063 				80 		
183 		
¥ 2,586¥ 5,257$62
30,876988
31,926(As Lessor)
Future minimum lease payments, which consist of subleases subsequent to December 31, 2010 and 2009, are summarized as follows:
Millions of yen		
Future minimum lease payments:
Within one year
Thereafter¥		¥

2010 		

Thousands of
U.S. dollars (Note 1)

2009 		

2010

38
¥ 66
$ 469
23 		 60 		 284
61
¥ 126
$ 753

Canon Marketing Japan Inc.

45

(b) Operating Leases (Non-cancelable)(As Lessee)
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter

8

2010 		

¥		¥2009 		

16
¥
— 		
16
¥

2010

17
$ 198
16 		 —
33
$ 198

Financial Instruments

Current Fiscal Year (from January 1, 2010 to December 31, 2010)
1. Informations on financial instruments(1) Policies for financial instruments
The Company and its consolidated subsidiaries (the “Group”) invest their surplus funds only in highly secure financial instruments, and take advantage ofthe group finance system to procure funds. The Group does not hold or issue derivative financial instruments.
(2) Types and risks of financial instruments and systems to control those risks
Operating receivables, consisting of notes and accounts receivable, are exposed to credit risks of customers. The Group strives to mitigate these risks bystrict credit control utilizing credit information provided by external credit agencies, as well as by credit insurance and other risk-hedging means.
Short-term loans receivable are the loans to the parent company by the Company, rendered in compliance with the internal regulations forinvestment and management of funds.
Short-term investments in securities and investments in securities consist primarily of held-to-maturity debt securities and equity securities issued
by business counterparties of the Group, and are exposed to market price fluctuation risk. Regarding this risk, the Group periodically monitors the fairvalues of the securities and the financial condition of their issuers i.e., business counterparties. In addition, for securities other than held-to-maturity
debt securities, the Group continuously reviews the status of security holdings, taking market conditions and relationships with business counterparties
into consideration.
Operating payables, consisting of notes and accounts payable, are mainly those due within six months.
(3) Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include not only values based on market quotations, but also values calculated on a theoretical basis in cases where
market quotations are not available. Such values may vary depending on different assumptions, as variables are factored into the calculation of such values.
2. Fair values of financial instruments
The book values of financial instruments in the consolidated balance sheet as of December 31, 2010, their fair values, and the differences between the twoare as follows. The table below, however, excludes the financial instruments whose fair values are considered extremely difficult to assess (see Note 2).
Millions of yen(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities

Book value

Fair value

¥

¥

¥

15,975
118,887
97,92140,001
272,784
102,850
102,850

15,975
118,887
97,92240,001
272,785
102,850
102,850

Difference

¥ —
—
1
—
1
—
¥ —

Thousands of U.S. dollars (Note 1)(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities

46 Canon Marketing Japan Inc.

Book value

Fair value$$

197,222
1,467,741
1,208,901
493,840
3,367,704
1,269,753$ 1,269,753

197,222
1,467,741
1,208,913
493,840
3,367,716
1,269,753$ 1,269,753

Difference

$ —
—
12
—
12
—
$ —

Notes: 1. Calculation methods of fair values of financial instruments and other matters relating to securities are as below;
Assets(1) Cash and deposits, (2) notes and accounts receivable, and (4) short-term loans receivable
	The book values of these assets are used as their fair values, since they are to be settled in the short term and accordingly their fair values
approximate their book values.
(3) Short-term investments in securities and investments in securities
	The fair values of equity securities are based on the prices at the security exchanges, and those of debt securities are based on the prices at the
security exchanges or quotations obtained from counterparty financial institutions. Details of securities by holding objectives are described in Note
9 Securities.
Liabilities(5) Notes and accounts payable	The book values of these liabilities are used as their fair values, since they are to be settled in the short term and accordingly their fair values
approximate their book values.
2. The book values of financial instruments whose fair values are considered extremely difficult to assess are as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
Category

Book value

¥ 617
¥ 196

Unlisted equity securities
Investments in partnerships$ 7,617$ 2,419

	These financial instruments are not included in (3) short-term investments in securities and investments in securities in the preceding table of fairvalues, since they do not have market prices and therefore assessment of their fair values is considered to be extremely difficult.
3. The redemption schedule of monetary claims and securities with maturities as of December 31, 2010 is summarized as follows:
Millions of yen
Due within 1 year

Cash and deposits
Notes and accounts receivable
Short-term investments in securities andinvestments in securities
Held-to-maturity debt securities(1) Corporate bonds(2) Other
Short-term loans receivable
Total

¥

¥

Due after 1 year
but within 5 years

Due after 5 years
but within 10 years

Due after 10 years

15,975
118,887

—
—

—
—

—
—

1,000
93,60040,001
269,463

—
—
—
—

—
—
—
—

—
—
—
—

Thousands of U.S. dollars (Note 1)
Due within 1 year

Cash and deposits
Notes and accounts receivable
Short-term investments in securities andinvestments in securities
Held-to-maturity debt securities(1) Corporate bonds(2) Other
Short-term loans receivable
Total

$

Due after 1 year
but within 5 years

Due after 5 years
but within 10 years

Due after 10 years

197,222
1,467,741

—
—

—
—

—
—

12,345
1,155,556
493,840$ 3,326,704

—
—
—
—

—
—
—
—

—
—
—
—

(Additional Information)	Effective the year ended December 31, 2010, the Company has adopted “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10,
revised on March 10, 2008) and “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
issued on March 10, 2008).

Canon Marketing Japan Inc.

47

9

Securities

Securities held by the Company and its consolidated subsidiaries as of December 31, 2010 and 2009 were classified and included in the following
accounts:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		Securities classified as:
Available-for-sale:
Investments in securities
Held-to-maturity:
Cash and cash equivalents
Short-term investments in securities
Investments in securities

2010 		¥

2009 		

4,134

¥

4,155

2010

$

51,037

		 93,600 		 77,899 		 1,155,556
		
1,000 		221 		
12,345		— 		1,000 		
—		 94,600 		 79,120 		 1,167,901¥ 98,734¥ 83,275$ 1,218,938

The carrying amounts and aggregate fair values of investments in securities at December 31, 2010 and 2009 were as follows:
Millions of yen

2010
Book value

Securities classified as:
Held-to-maturity:
Corporate bonds¥ 1,000¥ 1,000

Unrealized gains¥¥

Unrealized losses

1 		
1 		

—
—

Fair value¥ 1,001¥ 1,001

Millions of yen

2010
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other

Unrealized gains¥ 3,573¥		
11 		
¥ 3,584¥

Unrealized losses

Fair value523¥ (785)¥ 3,311— 		(1) 		
10523
¥ (786)¥ 3,321
Millions of yen

2009Book value

Securities classified as:
Held-to-maturity:
Corporate bonds
Government bonds

Unrealized gains¥ 1,000¥		
221 		
¥ 1,221¥

Unrealized losses

2 		
2 		
4 		

Fair value—¥ 1,002— 		223—¥ 1,225

Millions of yen

2009
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other

48 Canon Marketing Japan Inc.

Unrealized gains¥ 3,577¥		
11 		
¥ 3,588¥

Unrealized losses

590
¥
— 		
590
¥

Fair value(918)¥ 3,249(2) 		
9(920)
¥ 3,258

Thousands of U.S. dollars (Note 1)

2010
Book value

Securities classified as:
Held-to-maturity:
Corporate bonds

Unrealized gains$ 12,346$ 12,346$$

Unrealized losses

12 		
12 		

Fair value——$ 12,358$ 12,358

Thousands of U.S. dollars (Note 1)

2010
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other

Unrealized gains

Unrealized losses

Fair value$ 44,111$ 6,457$ (9,691)$ 40,877
		136 		— 		(13) 		123
$ 44,247$ 6,457$ (9,704)$ 41,000

Available-for-sale and held-to-maturity securities whose fair values are not readily determinable as of December 31, 2010 and 2009 were as follows:
Carrying amountThousands of
U.S. dollars (Note 1)

Millions of yen

		Available-for-sale:
Equity securities
Investments in investment partnerships
Held-to-maturity:
Certificates of deposit
Commercial paper

102010 		

¥
¥

617
196

¥ 92,600¥ 1,000¥ 94,413

2009 		

¥
¥

872
25

¥ 76,900¥
999¥ 78,796

2010

$
$

7,617
2,420

$ 1,143,210$
12,346$ 1,165,593

Employees’ Retirement andSeverance Benefits

The Company has a defined contribution pension plan, a pension plan with a market-based variable accumulation rate (quasi-cash balance plan), and a
lump-sum severance payment plan, and its domestic consolidated subsidiaries have defined benefit corporate pension plans, tax-qualified retirement
pension plans and lump-sum severance payment plans.
The liability for employees’ retirement benefits as of December 31, 2010 and 2009 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

		Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension cost
Allowance for employees’ retirement benefits

2010 		2009 		2010
¥ 160,696¥ 152,040$ 1,983,901
		 (121,578) 		 (123,316) 		 (1,500,963)
		 (32,412) 		 (25,543) 		 (400,148)
		 29,549 		 34,065 		
364,802		251 		
292 		
3,099
¥ 36,506¥ 37,538$ 450,691

The components of net periodic benefit costs for the years ended December 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		Service cost
Interest cost
Expected return on plan assets
Expenses incurred due to the change in accounting standards for retirement
benefit obligations from the simplified method to the standard method
Amortization of prior service cost
Amortization of actuarial loss
Other
Net periodic benefit costs

2010 		2009 		2010
¥ 6,173¥ 6,176$ 76,210
		 3,472 		 3,471 		 42,864
		 (3,802) 		 (3,607) 		 (46,938)

		

— 		

202 		—

		 (3,864) 		 (3,925) 		 (47,704)
		 2,849 		 3,103 		 35,173
		 1,394 		 1,268 		 17,210¥ 6,222¥ 6,688$ 76,815

Canon Marketing Japan Inc.

49

Assumptions used in accounting for the above plans for the years ended December 31, 2010 and 2009 were principally as follows:
		
2010
		
Discount rate
1.4% - 2.1%
Expected rates of return on plan assets
1.0 - 3.4%
Amortization period of prior service cost
10-14 years
Recognition period of actuarial loss
10-14 years

11

2009
2.4% - 2.5%
1.0% - 3.4%
10-15 years
10-15 years

IncomeTaxes

The normal statutory rate of income taxes was approximately 40.0% for the years ended December 31, 2010 and 2009.
The effective tax rates for the years ended December 31, 2010 and 2009, differed from the normal statutory tax rate following the adoption of taxeffect accounting for the reasons outlined in the table below.
		

2010
40.0%
6.9%
4.4%
4.1%
2.8%
(0.6)%——(2.0)%
55.6%

Normal statutory tax rate
Change in valuation allowance
Per-capita levy of inhabitants taxes
Amortization of goodwill
Entertainment and other expenses permanently not deductible for tax purposes
Dividend income not taxable
Effects of realignment of subsidiaries
Deduction entry reserve for fixed assets
Other
Effective tax rate following the adoption of tax-effect accounting

		

2009
40.0%
(571.7)%(34.6)%(56.3)%(39.0)%
8.5%
52.5%
21.7%
7.1%
(571.7)%The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31, 2010 and 2009, were as follows:
Millions of yen		
DEFERRED TAX ASSETS:
Loss on disposal and devaluation of inventories
Accrued business tax and business office tax
Accrued bonuses to employees
Excess amortization of software
Loss on impairment of fixed assets
Excess depreciation of fixed assets
Allowance for doubtful receivables
Allowance for employees’ retirement benefits
Loss on devaluation of investments in securities
Loss carried forward
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
DEFERRED TAX LIABILITIES:Net unrealized gain on available-for-sale securities
Deferred capital gain
Other
Total deferred tax liabilities
Net deferred tax assets

50 Canon Marketing Japan Inc.

¥
		
		
		
		
		
		
		
		
		
		
		
		
¥

2010 		

Thousands of
U.S. dollars (Note 1)

2009 		

2010

334
¥
622
$
4,123
658 		
71 		
8,123
1,256 		1,367 		 15,506
5,201 		4,177 		 64,210
723 		
770 		
8,926
639 		
342 		
7,889
66 		404 		
815
14,666 		 15,050 		 181,062
1,524 		1,634 		 18,815
1,871 		2,899 		 23,099
4,349 		4,021 		 53,692
31,287 		 31,356 		 386,260(5,470) 		 (5,729) 		 (67,531)
25,817¥ 25,627$ 318,729

¥
69
¥
68
$
852
		
1,933 		1,942 		 23,864
		31 		
107 		
383
		2,033 		2,117 		 25,099¥ 23,784¥ 23,510$ 293,630

12

Segment
Information(a) Business Segment Information
Millions of yen

2010

Year ended or as of December 31,
Business
Solutions

Net sales:
Third-party customers
Intersegment
Total
Operating expenses
Operating income (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Consumer
Equipment¥ 440,732¥ 219,781
		— 		—		 440,732 		 219,781
		 441,599 		 210,597
¥
(867)
¥
9,184
¥ 205,158¥ 74,126
		 11,463 		
1,922
		
493 		—
		 16,315 		
1,457

Industrial
Equipment

¥
		
		
		
¥
¥
		
		
		

Total

13,646¥ 674,159— 		
—
13,646 		 674,159
14,227 		 666,423
(581)
¥
7,736
8,688
¥ 287,972
355 		 13,740— 		493
224 		 17,996

Corporate andeliminations

Consolidated

		
—
		
—
		
—
		
—
		
—
¥ 160,620
		
—
		
—
		
—

¥ 674,159
		—		 674,159
		 666,423¥
7,736¥ 448,592
		 13,740
		
493
		 17,996

Corporate andeliminations

Consolidated

		
—
		
—
		
—
		
—
		
—
¥ 150,756
		
—
		
—
		
—

¥ 686,615
		—		 686,615
		 680,318¥
6,297¥ 449,607
		 12,356
		 10,769
		 17,040

Corporate andeliminations

Consolidated

		
—
		
—
		
—
		
—
		
—
$ 1,982,963
		
—
		
—
		
—

$ 8,322,951
		—		 8,322,951
		 8,227,445$
95,506$ 5,538,173
		
169,630
		
6,086
		
222,173

Millions of yen

2009Year ended or as of December 31,
Business
Solutions

Net sales:
Third-party customers
Intersegment
Total
Operating expenses
Operating income (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Consumer
Equipment¥ 419,217¥ 241,748		— 		—		 419,217 		 241,748
		 422,494 		 231,064¥ (3,277)¥ 10,684¥ 199,711¥ 81,644
		 10,507 		
1,308
		
700 		
150
		 12,456 		
3,467

Industrial
Equipment

¥
		
		
		
¥
¥
		
		
		

Total

25,650¥ 686,615— 		
—25,650 		 686,615
26,760 		 680,318(1,110)¥6,297
17,496¥ 298,851
541 		 12,356
9,919 		 10,769
1,117 		 17,040
Thousands of U.S. dollars (Note 1)

2010

Year ended or as of December 31,
Business
Solutions

Net sales:
Third-party customers
Intersegment
Total
Operating expenses
Operating income (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Consumer
Equipment$ 5,441,136 $ 2,713,346
		
— 		
—
		 5,441,136 		 2,713,346
		 5,451,840 		 2,599,963$(10,704) $ 113,383$ 2,532,815 $ 915,136
		
141,519 		
23,728
		
6,086 		
—
		201,420 		
17,988Industrial
Equipment

$
		
		
		
$
$
		
		
		

Total

168,469 $ 8,322,951— 		—
168,469 		 8,322,951
175,642 		 8,227,445(7,173) $95,506107,259 $ 3,555,210
4383 		169,630— 		
6,086
2,765 		222,173

Notes: Change in business segments	Personal copiers and personal computers were previously included in the Consumer Equipment segment. A review of our segment structure indicated that there were increased
opportunities to market these products through business channels. Because of similarities in the markets in which these products are sold, it was decided to allocate them to theBusiness Solutions segment beginning with the fiscal year ended December 31, 2010.
		The table below shows the segment results for the year ended December 31, 2009 based on the segment structure introduced in the year ended December 31, 2010.

Canon Marketing Japan Inc.

51

Millions of yen

2009Year ended or as of December 31,
Business
Solutions

Net sales:
Third-party customers
Intersegment
Total
Operating expenses
Operating income (loss)
Total assets
Depreciation and amortization
Loss on impairment of fixed assets
Capital expenditures

Consumer
Equipment¥ 438,738¥ 222,227		— 		—		 438,738 		 222,227
		 441,759 		 211,799¥ (3,021)¥ 10,428¥ 204,953¥ 76,402
		 10,580 		
1,235
		
700 		
150
		 12,726 		
3,197

Industrial
Equipment

¥
		
		
		
¥
¥
		
		
		

Total

25,650¥ 686,615— 		
—25,650 		 686,615
26,760 		 680,318(1,110)¥6,297
17,496¥ 298,851
541 		 12,356
9,919 		 10,769
1,117 		 17,040

Corporate andeliminations

Consolidated

		
—
		
—
		
—
		
—
		
—
¥ 150,756
		
—
		
—
		
—

¥ 686,615
		—		 686,615
		 680,318¥
6,297¥ 449,607
		 12,356
		 10,769
		 17,040(b) Geographic Segment Information
As international sales of the Company and its consolidated subsidiaries for the years ended December 31, 2010 and 2009 constituted less than 10% ofconsolidated net sales, geographic segment information has not been disclosed.
(c) Overseas Sales
Overseas sales amounted to less than 10% of consolidated net sales for the years ended December 31, 2010 and 2009. For this reason, overseas sales
have not been disclosed.

13

Transactions withAffiliated Companies

Current Fiscal Year (from January 1, 2010 to December 31, 2010)
Parent Company and Major Corporate Stockholders, Etc.
Percentage
possession of
voting rights(Ownership)(%)

Name of
Address
Category
company, etc.

Capital orinvestment
capital(Millions of yen)

Parentcompany

Manufacture andsale of business(Ownership)
equipment,¥ 174,762
consumer
Direct 55.3%
equipment, and Indirect 0.0%
industrial
equipment

Canon Inc.

Ohta-ku,Tokyo

Business
contents or
occupation

Related contents
Boardmembers
holding
concurrent
positionsTwo hold
concurrent
positions

Transaction
amount(Millions of yen)

Subject

Balance at endof fiscal year
(Millions of yen)

Purchases of
products¥ 267,952

Accounts
payable¥ 78,498

Sales ofbusiness
equipment
andconsumables,
etc.

¥

8,183

Accounts
receivableand others¥

Loans of capital¥

40,000

Short-term
loans¥ 40,000

Contents oftransactions

Businessrelationships

Operatingtransactions

Manufactureof products soldby Canon MJ

Non-operatingtransactions

3,819

Note: Transaction amounts do not include sales tax, etc., and the balance of credit and debt includes sales tax, etc.

Transaction conditions and policies for deciding transaction conditions, etc.
(1) Purchases of products are decided based on price negotiations each fiscal year, after considering market prices and the affiliated company’s proposals
regarding desired prices.
(2) Sales of business equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is not
accepted.

52 Canon Marketing Japan Inc.

Previous Fiscal Year (from January 1, 2009 to December 31, 2009)
Parent Company and Major Corporate Stockholders, Etc.
Category

Parentcompany

Name of
Address
company, etc.

Canon Inc.

Ohta-ku,Tokyo

Capital orinvestment
capital(Millions of yen)

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

Manufacture andsale of business(Ownership)
equipment,¥ 174,762
consumer
Direct 55.2%
equipment, and Indirect 0.0%
industrial
equipment

Related contents
Boardmembers
holding
concurrent
positionsTwo hold
concurrent
positions

Transaction
amount(Millions of yen)

Subject

Balance at endof fiscal year
(Millions of yen)

Purchases of
products¥ 269,211

Accounts
payable¥ 79,575

Sales ofbusiness
equipment
andconsumables,
etc.

¥

7,400

Accounts
receivableand others¥

Loans of capital¥

40,000

Short-term
loans¥ 40,000

Contents oftransactions

Businessrelationships

Operatingtransactions

Manufactureof products soldby Canon MJ

Non-operatingtransactions

4,229

Note: Transaction amounts do not include sales tax, etc., and the balance of credit and debt includes sales tax, etc.

Transaction conditions and policies for deciding transaction conditions, etc.
(1) Purchases of products are decided based on price negotiations each fiscal year, after considering market prices and the affiliated company’s
proposals regarding desired prices.
(2) Sales of business equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is
not accepted.

14

Business
Combinations

Current Fiscal Year (from January 1, 2010 to December 31, 2010)
Business Transfer
1. N
 ame of the company to which the business was transferred, content of transferred business, principal reasons, the date, and outline of the business
transfer including its legal form
(1) Name of the company to which the business was transferred
Canon Inc.
(2) Content of transferred business
Semiconductor equipment business of the Company(3) Principal reasons of business transfer
	The Company’s activities in the area of semiconductor equipment involved sales, service and support, primarily in relation to lithography equipment
for semiconductors and LCD substrates. The business of the Company in this area was transferred to Canon Inc., the parent company, because of theneed for the Canon Group to establish an integrated structure covering all stages from development and design through to manufacture, sales, service
and support, in order to respond flexibly in the rapidly changing market for semiconductor equipment.
(4) Date of business transfer
January 1, 2010(5) Outline of the business transfer including its legal form
Business transfer for which the consideration received consisted of cash only
2. Outline of accounting procedures applied(1) Amount of transferred profit and loss
¥400 million ($4,938 thousand)(2) Book values and principal assets and liabilities relating to the transferred businessCurrent assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars (Note 1)¥ 1,371713¥ 2,084
¥
42
665
¥ 707

$ 16,926
8,802$ 25,728
$
518
8,210
$ 8,728

Canon Marketing Japan Inc.

53

(3) Business segment in which transferred business had been included
Industrial equipment(4)	Estimated amounts of profit and loss attributable to the transferred business recorded in the consolidated statement of operations for the fiscal year
ended December 31, 2010
Net sales¥ —million
Operating income¥ —million

Transaction under Common Control
1. Name and business activities of merger parties(1) Merging company (sole parent company after share-for-share exchange)
Name: Canon Marketing Japan Inc.
Business activities: Marketing of business equipment, consumer equipment and industrial equipment, and provision of related solutions(2) Merged company (wholly-owned subsidiary after share-for-share exchange)
Name: Canon Software Inc.
Business activities: Provision of information services, sales of information processing equipment and related software
2. Legal format of merger
Share-for-share exchange
3. Name of company after merger
Unchanged
4. Outline of the merger including its purpose
A share-for-share exchange was implemented as of May 1, 2010, resulting in the acquisition of Canon Software Inc. as a wholly-owned subsidiary of
the Company. The purpose of the merger was to accelerate the development of the IT Solutions Business as a core business segment, and create thecapacity to provide services of higher quality to customers by realizing optimal use of the technology and expertise accumulated by Canon Software Inc.
within the Group.
5. Outline of accounting procedures applied
The merger was accounted for as a transaction under common control, generating no goodwill, under the provisions of the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, revised on December 26, 2008) and the “Implementation Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, revised on December 26, 2008).
6. Details of additional acquisition of shares of the subsidiary(1) Details of the acquisition cost
Common stock of the Company¥3,925 million ($48,457 thousand)Acquisition cost
¥3,925 million ($48,457 thousand)(2) Share exchange ratio by type of shares, calculation method of share exchange ratio, number of shares granted, and valuation of the shares granted
1) Type of shares and share exchange ratio		 Type of shares: Common stock
Name of company

Canon Marketing Japan Inc.
Canon Software Inc.

Share exchange ratio

10.432) Calculation method of share exchange ratio		Each company has been analyzed using the market share price method, comparisons with similar listed companies and the discounted cash flow
method. The results of all three analyses were taken into account in the calculation of the share exchange ratio.
3) Number of shares granted
		 4,201,096 shares
4) Valuation of the shares granted		 ¥3,925 million ($48,457 thousand)		 <Change in Accounting Standards>
		Effective the year ended December 31, 2010, the Company has adopted the “Accounting Standard for Business Combinations” (ASBJ Statement
No. 21, revised on December 26, 2008), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, issued on
December 26, 2008), the “Partial amendments to Accounting Standard for Research and Development Costs” (ASBJ Statement No. 23, issued on

54 Canon Marketing Japan Inc.

December 26, 2008), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, revised on December 26, 2008), and the“Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ GuidanceNo. 10, revised on December 26, 2008).
Previous Fiscal Year (from January 1, 2009 to December 31, 2009)
Notes on business combinations are omitted due to the immateriality of the impact on the consolidated financial statements.

15

Long-Term
Debt

Lease obligations and deposits at December 31, 2010 and 2009 consisted of the following:
Average interest rate

Lease obligations
Current portion of lease obligations

0.0%

Deposits

16

Thousands of
U.S. dollars (Note 1)

Millions of yen

		

¥
		
¥
		
¥

2010 		1,501¥
(432) 		1,069
¥3,069 		4,138
¥2009 		693$
(190) 		503
$2,915 		
3,418
$

2010

18,530(5,333)
13,19737,88951,087

Stockholders’EquityThe Corporate Law of Japan went into effect on May 1, 2006, replacing the Commercial Code. It is applicable to events or transactions of companies inJapan occurring on or after May 1, 2006 and for fiscal years ending on or after May 1, 2006.
The Corporate Law stipulates that the amounts actually paid in or provided in consideration for newly issued stock shall be recorded as common stock.
However, it also allows 50% or less of such amounts to be recorded as additional paid-in capital.
Under the Corporate Law, a company that meets certain criteria can establish its Articles of Incorporation so that dividends can be paid to its existing
stockholders by resolution of the Board of Directors, without requiring the approval of a resolution at a general stockholders’ meeting. The Company has
met said criteria and amended its Articles of Incorporation at the annual general stockholders’ meeting for fiscal 2006. The Corporate Law provides thatan amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the common stock account. However, such appropriation cannot be made if the aggregate amount of the legal reserve exceeds 25% ofcommon stock (i.e. the aggregate amount of the Company’s legal reserve has already reached 25% of its common stock).

17

Subsequent
Events(Subsequent to Current Fiscal Year, January 1 to December 31, 2010)
Damage Resulting from the Great East Japan Earthquake
The Group suffered damage to inventories and equipment in some of its buildings as a result of the Great East Japan Earthquake that occurred on March 11, 2011.
(1) Level of damagea Human impact		The safety of all Group employees has been confirmed, and there was no significant human impact.
b Status of business sites, etc.
		Merchandise at distribution centers in Tohoku and Kanto suffered some damage including breakage as a result of falling. The buildings and otherfacilities also suffered some partial damage.
(2) Amount of losses
	The amount of loss is currently being calculated, and the amount has not yet been determined.
(3) Significant effects of the disaster on business activities, etc.
	In addition to the damage listed above, business activities could also be affected by the partial suspension of operations by Canon, Inc. and its
production subsidiaries, as well as damage suffered by customers and business partners in the affected area.

Canon Marketing Japan Inc.

55

Report of Independent
Auditors

56 Canon Marketing Japan Inc.

Corporate
Data

HEADQUARTERS

Number of Employees

Canon S Tower, 16-6, Konan 2-chome,
Minato-ku, Tokyo 108-8011, Japan

Consolidated: 18,571
Non-consolidated: 5,298(As of December 31, 2010)

Date of Establishment
February 1, 1968

Capital Stock¥73,303,082,757

Stock

Main Locations of Operations
Headquarters, Makuhari office and branches(Sapporo, Sendai, Nagoya, Osaka, Hiroshima
and Fukuoka)(As of April 1, 2011)

151,079,972 shares

Stock Listing
Canon Marketing Japan Inc.’s common
stock is traded on the First Section of theTokyo Stock Exchange.

Major Stockholders
Name of stockholder

Canon Inc.
Canon Marketing Japan Inc.
Canon Marketing Japan Group Employee Stock Ownership Association
The Bank Of New York, Treaty JASDEC AccountJapan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd.
RBC Dexia Investor Service Bank Account Luxembourg Non-Resident Domestic Rate
State Street Bank and Trust Company
Canon Marketing Japan Group Business Partner Stock Ownership Association
Mizuho Bank, Ltd.

Number of shares held
(thousands)

		
		
		
		
		
		
		
		
		
		

75,70813,895
5,803
2,633
2,524
2,293
1,526
1,321
1,083
1,001

Percentage of ownership
(%)

		
		
		
		
		
		
		
		
		
		

50.11
9.20
3.84
1.74
1.67
1.52
1.01
0.87
0.72
0.66

Canon MJ Investor Relations Website
Canon MJ maintains a comprehensive Investor Relations website to further
facilitate communication with stockholders. The website contains:• News for investors• IR calendar• Financial results and other financial information• Information on the Three-Year Management Plan (fiscal year 2011–2013)• Stock information• Annual reports

http://cweb.canon.jp/eng/ir/
Canon Marketing Japan Inc.

57

A New Way

Forward
Canon Marketing Japan Inc.

Annual Report 2010
for the year ended December 31, 2010

Canon Marketing Japan Inc.
Headquarters
Canon S Tower, 16-6, Konan 2-chome,
Minato-ku, Tokyo 108-8011, Japan
Canon Marketing Japan Website(Investor Relations)
http://cweb.canon.jp/eng/ir/

This annual report was printed on theCanon imagePRESS C7000VP high-speed,
high-resolution printer.