Canon Marketing Japan Group

Three-Year Management Plan 2012-2014

January 27, 2012
Masami Kawasaki
President

2011 Recap

2010
Ratio
Net Sales(YoY)
Op. profit(YoY)
Ord. profit(YoY)
Net profit
(YoY)

674.2
7.7

1.1%

9.5

1.4%

3.7

0.6%

(billion)
2011
Ratio
632.4
(-6%)
8.4 1.3%(+9%)
10.7 1.7%(+13%)
6.8 1.1%(+82%)2

Long-Term Management Objectives Phase II 2011-2015~Beyond CANON, Beyond JAPAN~
Priority Strategies(1)Strengthen market shares ofCanon products(2) Diversify business(3) Evolve into a service company(4) Further group management innovation3

2015 Performance Objectives
Net Sales:¥850 b or more

Operating profit (margin) : ¥42.5 b (5%)
Profit per share:¥185 or moreIndicators
Area

TargetRemarks

Net Sales increase fromdiversification¥100.0 billion plus

Net sales increase versus 2010, fromdiversification

Service Business Ratio

45％

Non-hardware (excludingconsumables) net sales percentage

30％

Percent of net sales contributed byproducts procured from outside andCanon services

10％

Percent of net sales contributed byoverseas activities and importedproducts

Beyond CANON Ratio

Beyond JAPAN Ratio4

Long-Term Management Objectives Phase II Progress (2011)(1) Diversification
 Entry into retail photo market
 Launched “DreamLabo 5000” commercial photo printer (February) Expansion of medical equipment business Made ELK CORPORATION into a consolidated subsidiary (June) Strengthen commercial printing business Made Océ-Japan Corporation into a wholly owned subsidiary (June) Made Showa Information Systems Co., Ltd. into a consolidated
subsidiary (December) Full-scale entry into the motion picture productionindustry
 Launched “CINEMA EOS SYSTEM” (November)5

Long-Term Management Objectives Phase II Progress (2011)(2) Evolve into a Service Company
 Enhance cloud services
 “SOLTAGE” IT service platform up and running (January) “My-Promotion Web” online publishing service started (August) “Canon Business Imaging Online Business Form Printing Service”
started (August) Strengthen outsourcing service business Began construction of data center (April) Start photo application web service
 Established WithPhoto Inc. (April)
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Three-Year Management Plan

2012-2014

1. Basic Strategies

1

We will strengthen our collaboration with Global Canon Group and furtherenhance the solutions capabilities of the Canon MJ Group so as to achieve
overwhelming leadership for Canon products and establish them as No. 1 interms of world market shares.

2

We will use the core competencies and know-how of the Canon Group and theCanon MJ Group to create original solutions with high added value.

3

Contribute to the Global Canon Group by moving forward with the complete
revamping of the business model based on
the “Beyond CANON, Beyond JAPAN ”concepts.

The strength of Canon products and the capacity of the Canon MJ Group tooffer solutions will be the core drivers for our evolution into a service creation groupcapable of continually providing original added value in the global business arena.
82. Performance Targets
2-1. Group-wide(billion)
2011

2012
Ratio

2013
Ratio

2014
Ratio

Ratio

Net Sales

632.4

717.0

756.0

803.0

(YoY)

(-6%)

(+13%)

(+5%)

(+6%)

Op. profit(YoY)
Ord. profit(YoY)
Net profit(YoY)
Net profit/share

8.4 1.3%(+9%)

12.0 1.7%(+42%)

10.7 1.7%(+13%)(+75%)

13.1 1.8%(+23%)

6.8 1.1%(+82%)

7.0 1.0%

22.5 3.0%

31.5 3.9%(+40%)

12.0 1.6%(+71%)¥51

30.0 3.7%(+43%)(+72%)(+3%)¥49

21.0 2.8%

17.0 2.1%(+42%)¥87¥124* Net profit per share in 2012 and later is calculated based on the number of shares as of the end of FY2011.

92. Performance Targets
2-2. By segment(billion)
20112012
Ratio

Business solutions

Sales
Op. profit

IT solutions

Consumer imaging

124.5

Op. profit

-3.1

Sales

182.1

OtherTotal

Ratio
352.0

3.5 1.1%

Sales

3.5 1.0%

-1.3

Ratio
360.0

134.9-2014

380.0

4.5 1.3%
149.5-212.5Ratio

8.5 2.2%
160.5

4.5 3.0%

7.5 4.7%

218.5

225.5

8.5 4.6%

9.3 4.4%

10.7 4.9%

11.9 5.3%

Sales

27.0

39.1

56.5

67.0

Op. profit-0.3

0.1 0.3%

1.3 2.3%

2.2 3.3%

Sales

-26.3

Op. profit

-0.1

Sales

632.4

Op. profit
Industrial equipment

325.1

2013

Op. profit--21.5-

8.4 1.3%

0.4

-28.5
-0.0

-30.0
-0.0

-717.0

756.0

803.0

12.0 1.7%

21.0 2.8%30.0 3.7%

This table shows the segment results for the year ended December 31,2011 based on the segment structure introducedin the year ended December 31, 2012.

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3. Priority Strategies by Segment
3-1. Business solutions(1) Increase earning performance in the document segment
 Achieve a turnaround by expanding MIF (Machine in Field) and DV (DocumentVolume) for office MFPs and LBPs
 Increase productivity of sales and service activities Reduce costs by using IT infrastructure and NetEye remote-monitoring system
 Improve CS(Customer Satisfaction) and efficiency by consolidating call centers Trim overall staffing through greater efficiency and staffing structure reforms(Reduce 2010 staffing level 10% by 2014)

 Create new stock-type businesses Expand cloud-based IT services in the document segment

 Expand MDS (Managed Document Service)11

3. Priority Strategies by Segment
3-1. Business solutions(2) Expand the production printing business Fully leverage synergies with Océ-Japan and Showa Information Systems
 Expand sales of equipment by applying formidable sales and service systems andgaining outstanding customers.
 Establish a high-speed continuous form printing business with Océ as the primary driver Expand sales of imagePRESS digital commercial printing equipment

 Significantly enhanced efforts to develop business in the commercial and in-house
printing markets
 Develop business in the retail photo market by installing commercial-use DreamLaboequipment
 Expand sales of large-format printers

Target: Commercial printing sales ¥60.0 bil. (2015)12

[Diagram] Commercial Printing Segment Areas Targeted forDevelopment
Business form printing

Digital commercial printing
Creative arts

In-House

In-housecore printing

In-house
High-speed printing(Printing center)
WFP(Wide format)

Outsource

Data print service(DPS)

Commercial printing(Printing industry)

LFP(Large format printer)

Retail photo

Print service business

PHOTOPRESSO service / iP design service
Printing consulting / Canon Print Square13

3. Priority Strategies by Segment
3-2. IT solutions(1) Implement structural reform to improve profitability
 Reform organizational structure Improve development productivity and sales productivity byconsolidating overlapping businesses and restructuring operations
 Consolidate overlapping headquarters and management functions
within the group Reform the staffing structure Shift staff to growth areas
 Optimally deploy development staff and add to their skill sets
 Achieve about 8% staffing reduction between 2010 and 2014

 Consolidate group locations
 Improve productivity and communications, and lower costs, bymoving forward with additional consolidations of group locations

Target: Operating profit margin of 4.7% (2014)14

3. Priority Strategies by Segment
3-2. IT solutions(2)-1 Strengthening and expansion of outsourcing businesses Strengthen outsourcing businesses with the new nextgeneration data center as the primary driver Scheduled service start, October 2012
 Will use cutting-edge facilities and thelatest security systems to offer optimal
operation services for customer needs
 Will meet everything from housing tosystem operation needs

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3. Priority Strategies by Segment
3-2. IT solutions(2)-2 Strengthening and expansion of outsourcing businesses Strengthen system-operation services
 SI, housing, and services in diversified strategic business development
 Enhancement of dedicated teams

 Active development and functional strengthening of SOLTAGE, which
will enable the provision of high-value-added cloud services* SOLTAGE is the group’s common IT platform for cloud services.

 Strengthen BPO services by enhancing operations of Canon
BizAttenda Inc.
* BPO stands for “business process outsourcing.”

Target: At least 29% of total sales from service businesses (2015)* More specifically, the percentage of total sales contributed by stock-type IT
services (cloud, system operation, data center, BPO, and maintenanceservices).

16

[Diagram] Overall Cloud Business Strategy
Other-company clouds

Overseas sales company
cloudsCanon Inc. cloud

Canon MJ Cloud
Imaging

Printing

GroupＩＴＳＯＬＴＡＧＥ
Data center services(System operation, housing, etc.)

Circuits

Networkconstruction
Customers

Device support

MFPs, printers, digital cameras, smartdevices, etc.17

3. Priority Strategies by Segment
3-2. IT solutions(3) Active global business development
 Internal system support of the global Canon Group Global business development in cooperation with CanonGroup Active development of solutions businesses targeting
Japanese and local companies in Asia
 Procurement of advanced overseas software products
and business expansion

Target: Beyond JAPAN ratio of 15%+ (2015)18

3. Priority Strategies by Segment
3-3. Consumer imaging(1) Pursue total No.1 strategy
 Establish No.1 positions in terms of market shares,customer satisfaction, and brand status for main products
 Improve customer satisfaction
 Apply COPC-2000® Customer Operations Performance Center quality
assurance standard in enhancing CS activities (Canon Customer Support)(2) Strengthen and grow new businesses Strengthen the commercial imaging equipment business(CINEMA EOS SYSTEM, etc.)

 Expand the content business (Expansion of the “withPhoto” web-basedservices) Increase sales by developing new products

19[Diagram] Commercial Imaging Equipment Performance Targets

Content Creation Market
CINEMA EOS SYSTEM

Professional DSLRs(EOS MOVIE)Broadcast Systems Market
Broadcast TV Lenses

Commercial VideoCameras

Imaging Solutions
MarketSecurity and other typesof monitoring cameras

Strengthen B-to-B Business2015
Net Sales Target¥10.0 billion

20

3. Priority Strategies by Segment
3-4. Industrial equipment(1) Expand industrial equipment business Enhance handling of equipment for the semiconductor, LED, and other markets

 Aggressive global business development (In 2012, establish Canon Advanced Technologies Taiwan Inc.) Get new environmental businesses up and running(2) Aggressively expand medical equipment business Fully leverage synergies with ELK CORPORATION Expand sales of Canon medical equipment and Elk products by cross-selling Swiftly launch new businesses (ultrasound diagnostic equipment, mammography equipment) ascooperative ventures
 Develop sales of ELK products globally Establish and strengthen medical solutions businesses Strengthen medical systems at Canon ITS Medical Inc.

Target: Medical sales of ¥60.0 billion (2015)21

4. Investing for Growth
Investment Cash Flow Plan
Aggressive investment to achieve Long-Term Management Objectives Phase II(billion)
2009-2011cumulative(Actual)

2012-2014 cumulative(Plan)

Operating cash flow

62.1

85.5

Investment cash flow

51.0

100.0

Free cash flow

11.1

-14.5

<Strategic Investments>
Ｍ＆Ａ

Cloud ITinfrastructure

Newbusinesses

Data centers
22

Returning profits to shareholders

Dividends are main way toreturn profits to shareholders
 Stable dividends
 Rough guide is consolidated
payout ratio of 30%
23

GrowthTransition

Evolution into a service creation group24

Canon Marketing Japan Group
Performance and future projections made in this document are based on information
available at present time, and include potential risks and inaccuracies.
Owing to various factors, actual results may differ substantially from these projections.
All estimated/actual performance figures are for consolidated performance.

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