FOCUS
Sharpening our

ANNUAL REPORT

2008
for the year ended December 31, 2008

Canon Marketing Japan Inc.

PROFILE

Exclusively focused on the Japanese market, Canon Marketing Japan
Inc. (Canon MJ) and its 18 subsidiaries manage all aspects of themarketing of Canon products in Japan. Operations cover sales, service,support and software development across three business segments—
Business Solutions, Consumer Equipment and Industrial Equipment.
The Company’s key strengths are its nationwide network and its
exclusive right to sell products made by Canon, a global brand trusted
by consumers for four decades, in Japan.
Canon MJ is now actively expanding its activities beyond sales ofCanon products into fields where it can take advantage of its uniquemarketing capabilities, such as IT solutions and support services.

On

Connecting customers
and canon Technology
Disclaimer Regarding
Forward-Looking Statements
This annual report contains forward-looking
statements about the performance andmanagement plans of Canon Marketing Japan
Inc., based on managementʼs assumptions
in light of current information. The following
factors may therefore inﬂuence actual results.
These factors include consumer trends inJapan as well as other major global markets,
private capital expenditures, currency
ﬂuctuations, notably against the U.S. dollar,materials prices and political turmoil in certain
countries and regions.

Contents
OUR
ROLE

1

FINANCIALHIGHLIGHTS

10

SEGMENT
Overview FOR
FISCAL 2008

TO OUR
StockholderS

1112review ofoperations

Business
Solutions
DOCUMENT Business16

16

OUR ROLE

Business
Corporations

Market needs
Products and services

CUSTOMERs

GeneralConsumerS

Industrial
manufacturers

CANON
MARKETING JAPAN
Group

OTHER
MANUFACTURErs

Interacting closely with customers
across three business segments,
Canon MJ develops an in-depth
understanding of market needs.

(18 Group companies)

CANON Inc.

Canon MJ feeds back accurate
information about market needs toCanon, thereby supporting productdevelopment.

An Independent Listed Company anda Core Member of the Global Canon GroupAs a Canon Inc. subsidiary positioned between Canon Inc. and the Japanese market,
Canon MJ’s role is to support product development by feeding back accurate information
about market needs, while supplying consumers with products that meet those needs.
Canon Inc. is responsible for R&D and production, while Canon MJ handles the marketingin Japan. Canon-branded products account for most of Canon MJ’s inventory acquisitions:
67.6% in fiscal 2008. Other products are sourced from partner companies.

Business
Solutions

CONSUMER
EQUIPMENTINDUSTRIAL
EQUIPMENTSUSTAINABLE
MANAGEMENTFINANCIALSECTION

Corporate
data

20

22

24

31

57

IT SOLUTIONS BUSINESS

18

On

Becoming theCustomers’ No. 1 Choice
Put simply, we aim to become every customer’s first choice for innovative,
top-quality imaging technology, be it for office needs, home or hobby use orindustrial applications.

2/ Canon Marketing Japan Inc.

To achieve this goal, the entire Canon MJ Group is dedicated tounderstanding customer needs from the customer’s perspective.
This is our basic approach to business, and we express it through the phrase“customer focus.” In the highly developed, technology-savvy Japanese market,
we must not only ensure that our products are highly competitive andgain the largest shares in their markets, we must also offer unmatched service atall stages of customer interaction—from the customer’s first approachthrough to the purchase and after-sales service.
By emphasizing close communication and the building of stable,
long-term customer relationships, we build a strong foundation for solid,
sustainable growth.

Canon Marketing Japan Inc. /3

On

PROVIDING THE
VERY HIGHEST QUALITY
Astounding image resolution and color reproduction enable our customers
to truly express themselves and capture the world around them.
By always offering top-class quality and features perfectly suited toeach type of user, we aim to become the market’s No. 1 provider ofimaging technology, IT solutions and maintenance services.

4/ Canon Marketing Japan Inc.

Canon Marketing Japan Inc. /5

OnGoing beyond
Expectations
To bring a smile of delight to a customer’s face, we strive to deliver
more than expected. Here, we not only leverage our in-depth
knowledge of market needs, we also consistently provide those little
extra things that make a difference—highly user-friendly manuals,
eco-friendly materials and more. Above all, we are always there,
both before and after the purchase, whatever the need.

6/ Canon Marketing Japan Inc.

Canon Marketing Japan Inc. /7

8/ Canon Marketing Japan Inc.

On

Always Delivering
Total Satisfaction
A customer expressing true satisfaction is our greatest reward,
our greatest motivator and our foremost gauge of success.
When we receive this response, we know we have reachedour goal of delivering unmatched quality and service,and begun building a firm long-term customer relationship.

Canon Marketing Japan Inc. /9

FINANCIALHIGHLIGHTS
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31

Thousands of
U.S. dollars (Note 1)

Millions of yen

2008
FOR THE YEAR:
Net sales
Operating income
Income before income taxes
and minority interests
Net income
AT YEAR-END:
Total assets
Total stockholdersʼ equity (Note 4)

2006

2008

¥ 827,487¥ 867,172¥ 905,137
		 25,416 		 36,886 		 33,919$ 9,093,264
		
279,297

		
		

		
		

2007

22,229 		
11,186 		

35,452 		
20,033 		

32,96718,807

		 484,937 		 526,125 		 526,578
		 255,220 		 266,086 		 260,367

		 5,328,978
		 2,804,615

U.S. dollars (Note 1)Yen

PER SHARE OF COMMON STOCK:Net income (Note 2)
Cash dividends (Note 3)

¥
		

78.63
¥
40.00 		244,275
122,923¥134.8440.00 		

$		125.64
36.00

0.86
0.44

Notes: 1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥91 to U.S.$1, the prevailing exchange rate as ofDecember 31, 2008.
2. Net income 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. Total stockholdersʼ equity in the above table represents the total of stockholdersʼ equity and valuation and translation adjustments in the
consolidated balance sheets. This is due to 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 stockholdersʼ equity and minority interests to be presented as net assets, and net assets
to be classified as stockholdersʼ equity, valuation and translation adjustments and minority interests.

Net Sales

Operating Income(Billions of yen)

816

822

Net Income(Billions of yen)

867

37

905

29

(Billions of yen)

19

34

827

Total Stockholders’ Equity(Billions of yen)

20
234

30

247

260

266

255

15
25
12

FY’04 ’05

10

’06 ’07 ’08/ Canon Marketing Japan Inc.

FY’04 ’05 ’06 ’07 ’08

FY’04 ’05

11

’06 ’07 ’08

FY’04 ’05

’06 ’07 ’08

SEGMENT OverView
FOR FISCAL 2008
( Consolidated)% of Net Sales

Business
Solutions- Business-use Multifunctional Products- Laser-beam Printers- Commercial Printing Systems- Maintenance Services- Other Products- IT Solutions

60%% of Operating Income

The Business Solutions segment consists of the Document Business, which
encompasses sales and servicing of business-use multifunctional products (MFPs)
and laser-beam printers (LBPs), and the IT Solutions Business, which includes
the development of systems and solutions.

CONSUmer
Equipment- Compact Digital Cameras- Digital Single-lens Reflex Cameras- Digital Video Cameras

53%% of Net Sales- Inkjet Printers- Compact Photo Printers- Other products

32%% of Operating Income

The main products sold in this segment are digital cameras and personal-use
printers. The former includes digital single-lens reflex cameras, compact digital
cameras and digital video cameras; the latter includes ink-jet printers andcompact photo printers.

% of Net Sales

INDUSTRIAL
Equipment- Lithography Equipment for
Semiconductor Manufacturers- Lithography Equipment for
LCD Manufacturers

40%- Other Semiconductor-related
Equipment- Medical Equipment- TV Broadcasting Lenses

In the Industrial Equipment segment, Canon MJ sells semiconductor and LCD
lithography systems, TV broadcasting lenses and medical equipment, including
X-ray digital cameras.

8%% of Operating Income

7%

Canon Marketing Japan Inc. /11To ourStockholders

ChairmanOn

Haruo Murase

President

Masami Kawasaki

Enhancing ourBusiness foundation
Determined to become the customers’ No. 1 choice, we continue to
implement strategies that will solidify our market position and drive
growth. We are also moving aggressively to boost our competitivenessin the currently severe market conditions.

12/ Canon Marketing Japan Inc.

UNWAVERING FOCUS AMID CHALLENGING CONDITIONS
Dear stockholders, in the year ended December 31, 2008, consolidated net sales andconsolidated net income were both below the previous yearʼs levels for the first time in six years.
In the latter part of the year, the global financial crisis, yen appreciation and falling shareprices began to have a serious impact on the Japanese economy, and there was a rapid decline
in business performance. There was also a conspicuous slump in consumer spending, reﬂecting
an uncertain employment outlook and increasing defensiveness on the part of ordinary people.
The Canon MJ Groupʼs key customer segments are business corporations, general
consumers and manufacturers in the industrial field, including semiconductor manufacturers.
In all of these areas, we experienced a continual downturn in business conditions in thesecond half of 2008. The Group responded to this environment by steadily implementing thepriority strategies defined in our Three-Year Management Plan: To become No. 1 in customer
satisfaction; to expand sales of our IT Solutions Business under a strategy called ITS 3000
Plan; to strengthen earning capacity in every business segment; to achieve No. 1 status for key
Canon products, and to optimize management quality.
However, economic conditions worsened unexpectedly, and we also had to contend withother negative factors, including a downturn in semiconductor markets. As a consequence,
we were unable to extend our five-year record of continuous growth in sales and income.
Consolidated net sales declined by 9% year on year to ¥827.5 billion (US$9,093.3 million).
Consolidated operating income was 31% lower at ¥25.4 billion (US$279.3 million). In addition
to this decline in operating income, consolidated net income was also affected by stock writedowns and was 44% below the previous yearʼs level at ¥11.2 billion (US$122.9 million).

CONTINUED IMPLEMENTATION OF PRIORITY Strategies
Segment Results
for the Year Ended
December 31, 2008

Business Solutions Our core product categories for the Document Business are multifunction
products (MFPs) and laser-beam printers (LBPs). In the domestic market, buyer preferences
continued to shift from monochrome to color models, but there was a downward trend in terms of
total units sold. In the IT Solutions Business, sales remained buoyant in the first half of the year.
However, difficulties arose in the second half, including the postponement of IT investment underpressure from economic deceleration.
The Canon MJ Group targeted further improvement in customer satisfaction through enhancements to service structures. Other priorities included the restructuring of group companies. Net
sales in the Business Solutions segment were marginally lower with a 4% year-on-year decline to¥495.9 billion (US$5,449.9 million). However, operating income was 22% lower at ¥13.4 billion(US$146.8 million), reﬂecting the impact of fierce competition.
Consumer Equipment Domestic demand for compact digital cameras, which are one of
our core product categories in this segment, matched the previous yearʼs level, while salesof digital SLR cameras were higher. The Canon MJ Group maintained the biggest share of
the market for compact digital cameras and also took the leading position in the digital SLR
camera market.
However, intense price competition was reﬂected in sales of consumer equipment, which
declined by 7% year on year to ¥265.8 billion (US$2,921.2 million). Operating income was
29% lower at ¥10.2 billion (US$112.6 million).

Industrial Equipment In this segment, trends remained firm in the areas of medical equipment
and broadcasting equipment. However, with semiconductor-related manufacturers continuing

Canon Marketing Japan Inc. /13

To ourStockholders

to reduce capital investment, there was a significant year-on-year decline in sales in the corearea of lithography equipment for semiconductor manufacturers. Sales of industrial equipment
were 37% below the previous yearʼs total at ¥65.7 billion (US$722.1 million), while operating
income was 66% lower at ¥1.8 billion (US$19.9 million).

Challenging Conditions
Reflected in New
Management Plan

This deterioration in business conditions in Japan has accelerated in 2009. This means that the
impact of the current economic downturn was not fully reﬂected in the business performance of
the Canon MJ Group in the year ended December 31, 2008. We must assume that conditions will
become even more challenging in the current year and the following year.
We have formulated a Three-Year Management Plan defining our numerical goals and priority
strategies for the next three years. Goals and strategies will be adjusted on a rolling basis through aprocess of yearly reviews.
Specific numerical goals and priority strategies are shown on the right-hand page. Brieﬂy,
the plan recognizes that a further decline in earnings is inevitable in the year ending December
31, 2009. We are aiming for a gradual return to a growth trend in 2010, and for a return to our
performance levels in 2007 by 2011.

Priority Strategies in
the Management Plan

Our priority strategies are largely unchanged. First, we aim to become No. 1 in terms ofcustomer satisfaction and market shares in key product categories. To achieve this, we willneed to maintain and expand our income in Japanʼs mature markets and strengthen thecompetitiveness of our business operations.
Second, we will move forward with the ITS 3000 Plan and establish next-generation
business activities. Our goal for the IT Solutions Business is to grow sales of this business from¥166.5 billion (US$1,829.4 million) at present to ¥300 billion under the ITS 3000 Plan. This will
require changing and expanding the Groupʼs structure, and M&A.
Third, we will continue to place considerable importance on consolidating management. In
the current challenging conditions, we need to focus not only on the reduction of costs, but also
on the consolidation of our internal structures on various levels, including the improvement of
day-to-day operating efficiency, and the realignment of IT systems and approaches within theGroup. We also intend to strengthen our commitment to CSR.

Maximizing
Long-Term
Stockholder Value

We have set the dividend for the year ended December 31, 2008 at ¥40 (US$0.44), and we
aim to maintain our consolidated dividend payout ratio at around 30%. In the year underreview, we bought back about 9 million shares from the market at a cost of approximately¥15 billion (US$164.8 million). The aim of this process was to improve our capital efficiency.
In closing it has been decided that Haruo Murase should become Chairman after ten
years as President, and that Senior Managing Director Masami Kawasaki should become thenext President.
Masami Kawasaki has for some time served as an executive officer and been in chargeof our management organization. In the future, we will work closely together on all aspectsof management.
We look forward to your continued strong support as we move toward our goals.
March 26, 2009

ChairmanHaruo Murase

14/ Canon Marketing Japan Inc.

President
Masami Kawasaki

MANAGEMENT VISIONAND OBJECTIVES

Outlining Our Vision:
LONG-TERM MANAGEMENT OBJECTIVE (January 2006–December 2010)

Canon MJ aims to secure overwhelming advantages for Canon products in terms of customer
satisfaction and domestic market shares. This objective is driven by the following creeds:
MISSIONAs a member of the global Canon Group, we will through innovative marketing consistently provide
products and services of the highest value that contribute to peopleʼs creativity in life, at work andin the community.

VISION

Based on a fundamental philosophy of “customer focus,” we will grow as a corporate group with areputation for excellence, and maintain a global perspective in our thinking.

Turning the Vision into Reality:
THREE-YEAR MANAGEMENT PLAN (January 2009−December 2011)

Priority
strategies

TArgets

1. Achieve No. 1 in customer satisfaction and status for key Canon products.
2. Implement ITS 3000 Plan
3. Pursue income-linked growth and the establishment of new revenue sources
4. Improve group management quality
Net Sales

Operating Income(Billions of yen)
827.5

814.0

Net Income(Billions of yen)
840.0

920.0

(Billions of yen)

27.5

25.4

14.0
11.2

21.0

FY’08

MEASURES TOREALIZE NO. 1
POSITION

’09

’10

’11

17.0

32.0

FY’08

Become No. 1 in service and support
Enhance variety of solutions● Support digital photo culture● Strengthen marketing throughmaximized use of IT● Strengthen sales power● Strengthen cooperation with makers● Continuously improve product quality● Strengthen ability topropose optimal solutions

’09

’10

’11

FY’08

10.0

’09

’10

’11

●
●

Enhancedcustomersatisfaction

No. 1

in terms ofmarket share

Canon Marketing Japan Inc. /15

REview Of
Operations

Business
Solutions [Document Business]On

EFFECTIVE
MANAGEMENT
Koji Ashizawa
Executive Vice President

In tough times, we need to hold our ground and sow the seeds offuture success. Speed is a management resource as important as
people, money, products and information. Momentum comes fromspeedy decisions. In this rapidly changing market, we will face defeat if
we are too slow in implementing our strategies.

Highlights
Of the Year

Canon MJ introduces the new“Sales Force” CRM system.
This software system, producedby Sales Force.com enhances
sales and marketing efficiency.

The imagePRESS C6000
commercial printer islaunched.

Canon B.M. Tokyo Inc.,
Canon B.M. Kanagawa Inc.
and Canon B.M. Osaka Inc.
are merged into Canon
System & Support Inc.

2008

February

February

July

16/ Canon Marketing Japan Inc.

1

Office MFP: iR C2110F

2

Despite its compact size, this A4 color
multifunction printer offers a range of
sophisticated features. It has gained
a reputation for high productivity andsuperb functionality.

Color LBP: Satera LBP 5610

3

Canon has been the leader in the Japanese
LBP market for 17 consecutive years.
A special feature of this printer is its
ability to print at the same speeds in bothcolor and black-and-white.

Digital commercial printer:
imagePRESS C6000
This digital commercial printing system isdesigned primarily for on-demand officeand printing service and corporate copy
centers. It can produce 60 pages of highquality printing a minute in either color or
black-and-white.

Performance

Major Trends

The Business Solutions segment is divided into theDocument Business and the IT Solutions Business. In
the year ended December 31, 2008, the results for theBusiness Solutions segment were affected by a slump
in demand from corporate customers. Sales were 4%
lower year on year at ¥495.9 billion (US$5,449.9 million),while operating income declined by 22% to ¥13.4 billion(US$146.8 million). Document Business sales were
5% below the previous yearʼs level at ¥329.5 billion(US$3,620.6 million). The Business Solutions segment
contributed 60% of consolidated net sales and 53% ofconsolidated operating income.

Business-Use Multifunctional Products (MFPs) Sales of

Net Sales

Operating Income*(Billions of yen)(Billions of yen)473.4 475.9 482.2
141.2 141.8

516.7 495.9
13.4

236.9

14.6

13.4

9.6
334.7 340.4 345.7 329.4

236.5

FY’04 ’05 ’06 ’07 ’08

FY’04 ’05 ’06 ’07 ’08* Total of Document and
IT Solutions businesses

IT Solutions Business
Document Business

Laser-Beam Printers (LBPs) In the LBP market, demandfor color printers was close to the previous yearʼs level, butthere was a substantial decline in sales of monochrome
units. Although sales declined year on year, Canon MJ
maintained its leadership in terms of market share. In the
consumables category, there was a slight upward trend in
the sales of toner cartridges.

Maintenance Services

17.2

171.0 166.5

color MFPs expanded in the Japanese market, but there wasa decline in sales of monochrome systems, with the resultthat total shipments were lower. We launched three new color
MFPs in 2008. Shipments of color MFPs remained strong,but sales of monochrome units were significantly below theprevious yearʼs level, with the result that the total number ofunits sold declined on a year-on-year basis.

Continuing price competition pushed down the unit pricesof MFP maintenance services. However, sales matched
the previous yearʼs level because of growth in document
volumes. Our main subsidiary in this area is Canon
System & Support Inc., which sells equipment to small
and medium-sized enterprises and provides service andsupport. Its sales were moderately lower than the previous
yearʼs result at ¥119.2 billion (US$1,310.0 million).

2
1
3

Two large-format SRA1-sizedprinters, the imagePROGRAF
iPF 6200 and theimagePROGRAF iPF 6200s,
are launched.

The Color imageRUNNER iR
C2110N/C2110F A4 printers
go on sale.

The imagePRESS1135/
1125/1110 high-speed
monochrome printers andthe imagePRESS C1+ color
MFP go on sale.

Canon Business Solution
Forum (CBSF) 2008 @ Shinagawa is held.

The MF8450 Satera A4 color
MFP is launched.

September

September

September

October

October

Canon Marketing Japan Inc. /17

REview Of
Operations

Business
Solutions [ IT Solutions Business]On

DEVELOPING
SOLUTIONS

Kazunori Asada
Senior Managing Director

Unlike other segments, the IT Solutions Business is being developed
by Canon MJ Group companies as a joint team of professionals.
Therefore, we will need to optimize our structure and further clarify theroles and functions of Canon MJ and its group companies, so that we
can create solutions that reflect our group’s characteristics.

Highlights
Of the Year
2008

18

/ Canon Marketing Japan Inc.

Canon System Solutions’NOD32 Antivirus is selected by
AV-Comparatives as the best
antivirus software of 2007.

The headquarters of Canon
Software Inc. is relocated.

Argo 21 Corp. and Canon
System Solutions, Inc.
merge to form Canon IT
Solutions Inc.

January

February

April

1

Easy-to-use antivirus software:
ESET NOD32 Antivirus V3.0
Designed to protect systems against viruses andspyware, this software is extremely effective in
detecting new threats that may elude conventional
definition-based systems.

Performance
In the domestic market for IT solutions, demand trends
remained firm in the first half of 2008, but in the second half
a rapidly deteriorating economic situation was reﬂected in aclear trend toward the postponement of IT investment. Canon
MJ sought to strengthen group unity and build a broader
foundation for growth by expanding into the data center
business through M&A. Sales of IT services were moderately
higher year on year, but sales of IT products declined.
Total sales in the IT Solutions Business were 3% below theprevious yearʼs level at ¥166.5 billion (US$1,829.4 million).
1

Canon Software Inc. Canon Software is a strong
performer in the fields of computer-aided design (CAD)
and embedded software, and is also expanding its salesof solutions. In the year ended December 31, 2008, its
net sales amounted to ¥26.8 billion (US$294.1 million).

Canon Network Communications Inc. Canon Network
Communications provides IT management services,
especially IT infrastructure services. The company
has enjoyed considerable success with its network
infrastructure development and Internet data center
businesses. Net sales in the year ended December 31,
2008 amounted to ¥9.7 billion (US$106.5 million).
In January 2009, this company merged into Canon
IT Solutions Inc.

Major Trends
Canon IT Solutions Inc. In April 2008, Canon IT Solutions
Inc. was formed through the merger of Canon System
Solutions, a systems integration company within the Canon
MJ Group, with Argo 21 Corp., a system integrator thatjoined the group in 2007. The new subsidiary made an
excellent start with net sales of ¥75.1 billion (US$825.3
million) in the year ended December 31, 2008.

Qualysite Technologies joined the CANON MJ
Group in September 2008. The company supports
customers and contributes to the development of the
IT industry in Okinawa, Japan, through its leadingedge IT technologies. The company engages in JAVA
development and Data Center businesses.

• Development of individual
applications to industry
specifications

ITS 3000 Plan
The IT Solutions Business focuses on six businessareas. In each of these, we work to expand operations
and enhance our skills so as to strengthen ourcompetitiveness. In the outsourcing business, we expect
significant contributions from new group companies,
both those that recently joined the Group andcompanies that will be acquired through future M&A.

• Canon products• Car-related products

SI
Services

Embedded
SoftwareSolutions

Brand Building in the
IT Solution Market
The IT solutions
offered by theCanon MJ Group• Creation of
infrastructure for server Infrastructure
network solutions• Migration• Brand proposition andproposal of EPR products

Outsourcing

IT
Products• Data center
business•B usiness PCs•H and-held data terminals•P ackaged software

Canon IT Solutions Inc.
receives the Sao Khue Award
from the Vietnam Software
Association (VINASA).

NOD32 Antivirus receives
the 50th VB100 Award.

Canon IT Solutions Inc.
acquires all shares in Biknius
K.K., which changes its
trading name to Qualysite
Technologies Inc.

Canon IT Solutions Inc. forms abusiness partnership with Orc
Software providing for collaboration
on market development and salesof algorithm trading solutions.

All shares in NRI
Learning Network, Ltd.
are acquired.

May

June

September

December

DecemberCanon Marketing Japan Inc. /19

REview Of
Operations

1

Digital SLR: Camera EOS Kiss X2
This entry-level digital SLR camera
provides features normally found only on
high-end models. In 2008, it gained thebiggest share of the domestic market.

Consumer
Equipment

On

ACTIVECOMMUNICATION
Osamu Sasaki
Managing Director

Alongside selling cameras and printers, we need to offer a continuous
stream of ideas about the possibilities of digital technology and new
ways to enjoy photography. Only through active communication withcustomers can we convey the fun of photography. The power of ourbrand is the result of our day-to-day efforts on this level.

Highlights
Of the YearIn the 2008 BCN Awards,
Canon MJ achieved the top
ranking in six categories (fourfor output equipment, two for
input equipment).

The Canon EOS Kiss X2,
an entry-level digital SLR
camera, goes on sale.

The Satogaeri Project,a collaborative recovery
scheme for used inkjet
cartridges, is launched.

2008

January

January

April

20/ Canon Marketing Japan Inc.

2

Compact Digital Camera:
IXY DIGITAL 920 IS

3

Ink Jet Printer: PIXUS MP630

4This high-performance all-in-one printerepitomizes the “Play! Pixus” themewith its unique combination of fun andpracticality.

Equipped with a 28mm wide-angle
lens and a 3.0 LCD screen, this camerafeatures a new engine that raises
photographic quality and fun to an evenhigher level.

Digital Video Camera: VIS HF11
With a double memory system consistingof 32GB of internal memory and an SD
card, this extremely popular digital video
camera supports prolonged recording atfull Hi-Vision quality.

Performance

Major Trends

In the year ended December 31, 2008, sales in the Consumer
Equipment segment were ¥265.8 billion (US$2,921.2 million)
and operating income of ¥10.2 billion (US$112.6 million).
These results were 7% and 29% respectively below theprevious yearʼs levels.
In the current year, we regained our position as
leader in terms of market share in the digital SLR camera
market. We faced fierce competition in the compact digital
camera and digital video camera markets. However, ourresults were affected by the erosion of unit prices in anenvironment of escalating competition. This segment
accounted for 32% of consolidated net sales and 40% ofconsolidated operating income.

Compact Digital Cameras While domestic demand for

Net Sales

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

239.1

254.2

270.8

284.4

265.8

13.5

14.4

11.8 11.7

Digital SLR Cameras Many manufacturers introduced newmodels in 2008, and there was also replacement demand
from consumers upgrading from older or lesser-specified
models. These factors helped to push domestic demandin this market above the previous yearʼs level. Our ﬂagshipproduct, the EOS Kiss X2, has been a bestseller since its
launch and continued to sell well in 2008. We also launchedseveral new models, including the EOS 50D in September
and the EOS 5D Mark II in November. As a result of these
efforts, we were able to gain the biggest share of this market.
Home-Use Printers Our marketing activities for homeuse inkjet printers were based on the slogan “Play! PIXUS”.
While printer unit sales slipped below the previous yearʼslevel, unit sales of consumables were higher.

10.2

FY’04 ’05 ’06 ’07 ’08

compact digital cameras was similar to the previous yearʼslevel in volume terms, intense price competition continued toaffect the market. We launched a number of new products,
including the IXY Digital 20IS and IXY Digital 920IS, and wereable to maintain our leadership in terms of market share.
However, unit prices were affected by competition, and unit
sales fell below the previous yearʼs level.

FY’04 ’05 ’06 ’07 ’08

3

1

2

4

A customer satisfaction survey
by J.D. Power ranks Canon firstin the compact digital camera
category.

The Canon EOS Kiss F,an entry-level digital SLR
camera, is launched.

The EOS 50D, a middlerange digital SLR camera,
goes on sale.

Seven new inkjet printers
are launched.
They use dye-based ink
with excellent longevity
and color reproduction.

The EOS 5D Mark II
Premium digital SLR
camera is announced atpress conferences in sevenlocations throughout Japan.

June

June

AugustOctoberNovemberCanon Marketing Japan Inc. /21

REview Of
Operations

INDUSTRial
Equipment

On

THINKING
AHEAD
Hiroshi Shibuya
Senior Managing Director

In these challenging times, we must remain sharply focused on
customers. We must be at the customers’ side with support andadvice before issues occur—this is central to truly enhancing customer
satisfaction. It is also key to attract highly skilled human resources,
and to seek out and introduce overseas resources, including superb
products not yet known in Japan.

Highlights
Of the Year
2008

22

The DIGISUPER27AF HD
studio lens is announced.

An exclusive agreement is signed covering sales inJapan of ophthalmological equipment manufactured
by Optopol Technology S.A. (Poland). Canon MJ
commences sales of optical coherence tomography(OCT) equipment.

The CR-1, a nonmydriatic digital fundus
camera designed toreduce stress on test
subjects, goes on sale.

The CXDI-60G, acompact, lightweightand portable medical
X-ray system, goeson sale.

April

May

June

June

/ Canon Marketing Japan Inc.

1

Lithography equipment for use in
semiconductor manufacturing

2

Canon MJ’s top market share in thisfield is built on long-lasting and stablecustomer relationships.

Medical digital X-ray system:
CXDI-60G

3

Broadcasting lenses
Canon’s High Definition (HD) portablelenses provide superb images for relay
broadcasting of baseball, soccer, golf andother sporting events. Despite its compact, lightweight design,
this system has an effective image fieldof 234×284 mm, making it a highly
effective tool for x-ray imaging of limb
joints and other locations.

Performance

Major Trends

In the year ended December 31, 2008, net sales in the
Industrial Equipment segment were significantly lower,with a 37% year-on-year decline to ¥65.7 billion (US$722.1
million), while operating income was 66% down at ¥1.8 billion(US$19.9 million). The main reason for this downward trend
was the global slump in the semiconductor market, whichcaused Japanese memory chip makers to reduce or stop
their capital investment. Sales of semiconductor lithographysystems, our core products in this segment, declined
substantially compared with the previous yearʼs result. There
was a significant reduction in this segmentʼs contributions toconsolidated net sales and consolidated operating income,which fell to 8% and 7% respectively.

Semiconductor Lithography Systems Capital investment
cutbacks by memory chip makers caused a severe downturnin domestic demand for semiconductor lithography systems.
Despite intensive marketing of key products, especially i-line
steppers and KrF step-and-scan systems, the results weredisappointing.

Net Sales

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

114.2
103.0

Broadcasting Equipment Sales of portable lenses remained
strong. There was also growth in sales of Hi-Vision cameras
with built-in remote-control pan-tilt systems.

7.9

104.0

91.8

5.8
65.7

Medical Equipment Sales of the CXDI Series of digital X-ray
camera systems showed strong growth. In August 2008,
we launched a portable model, the CXDI-60G. One of ourmost successful products in the field of ophthalmologicalequipment was the CR-1, a non-mydriatic fundus camerathat first went on sale in June. We also launched a 3D retinal
image analysis system manufactured by Optopol Technology
S.A. of Poland.

5.3

4.6

1.8

FY’04 ’05 ’06 ’07 ’08

FY’04 ’05 ’06 ’07 ’08

1

2

3

The Canonet VB-C60/
VB-C60B network
cameras go on sale.

Canon MJ commences importof semiconductor inspection
and analysis equipment, ophthalmological equipment andother products.

Canon MJ acquires exclusive Japanese sales
rights for semiconductor inspection equipment manufactured by Metryx Limited andcommences sales of the Mentor DF3/SF3
semiconductor mass metrology systems.

Canon MJ acquires exclusive Japanese sales rights forsemiconductor inspection equipment manufactured by
Jordan Valley Semiconductors, Inc. and commences
sales of the BEDE Series of systems, which are used tomeasure advanced semiconductors.

AugustDecember

December

DecemberCanon Marketing Japan Inc. /

23

On

the Bigger
PictureWe believe that the true value of a company is shown not only by its
approach to customers, but also by its way of interacting with thewider world. In all of our activities, we seek to do so responsibly andwith respect for all of our stakeholders.

24/ Canon Marketing Japan Inc.

Canon Marketing Japan Inc. /25

Sustainable
management

OUR COmmitment to stakeholders
Public relations,advertising,investor relations

WebsiteGroup vision

Fair and clear disclosures through new
product presentations, press releases andfinancial reports

canon.jp

Information exchange, confirmation of customer satisfaction,communication with customers about their product experiences

Products andservices

Stakeholders

Canon Marketing Japan Group

Public relations and advertising activities,
press releases for Canonʼs products andsolutions

Communication spaces

Customer
supportCanon
Digitalhouse

Canon S Tower

Fundamental
Philosophy on Social
Responsibility

We believe that Canon MJʼs primary corporate mission is to maintain sound growth bysupporting human creativity in all facets of life, work and the community with products andservices of the highest value. We also recognize that Canon MJ has obligations as a member ofsociety, and have therefore made corporate social responsibility (CSR) a management priority.
The reinforcement of Group-level CSR activities is also identified as an important aspectof management quality improvement, one of the strategic priorities of the Three-YearManagement Plan.

Building Good
Relationships with All
Stakeholders

Canon MJ has an extremely wide range of stakeholders, including stockholders, consumers,
corporate customers, business partners, employees and local communities. We are determined
to work in good faith with all stakeholders at all times by ensuring that all our directors
and employees act in accordance with the law and, of course, high ethical standards. Asa marketing company, we are fundamentally aware that good communication and mutual
understanding with people and communities are essential to developing good relationships with
our stakeholders.

26/ Canon Marketing Japan Inc.

Every year since 1994, high schools from all over Japan join aphoto competition held in Hokkaido, stimulating the students’creativity and helping local economies. Canon MJ provides
cameras and printers to schools that make it to the final.

Support for Imaging
and Cultural Activities

Environmental
Initiatives

The business activities of Canon MJ are closelyintertwined with imaging, and we place great importanceon creating new opportunities for the development ofimage culture. One of the ways in which we encourage
photography is through our support for activities that
help to expand the world of photography and imaging.
For example, every year we support a nationwide photochampionship for high school students in Japan.
And, the seven Canon Galleries we host in major
Japanese cities present mixes of both permanent andtemporary photo exhibitions.
Harmonious coexistence is a fundamental principle for the
global Canon Group. As a company that interacts directlywith its customers, Canon MJ has a special responsibility
to support and strengthen environmental conservation in
all its business activities. We led the industry in establishinga toner cartridge recycling program and promoting thereuse of copiers. To reduce CO2 emissions, we use rail andsea transport in our product recovery systems, and are
expanding our green procurement activities and actively
introducing electric vehicles.
Canon MJ is also leading the industry in the supply ofenvironment-friendly products. For example, we are working
to eliminate the use of hazardous substances by introducing
products that comply with the European Unionʼs RoHS
Directive concerning six hazardous substances.

The Canon gallery in Ginza,
Tokyo, offers both permanent andtemporary exhibitions.

In April 2008, Canon and six otherinkjet printer makers launched
the Satogaeri Project, which aims
to recycle home-use inkjet printercartridges in partnership with Japan
Post Group.

Canon Marketing Japan Inc. /27

Sustainable
management

Corporate GOvernance(As of March 26, 2009)

GENERAL STOCKHOLDERSʼ MEETING

16 Directors
Board of Directors

Appointment / dismissal
Audits

5 Corporate Auditors
Board of Corporate Auditors

Appointment / dismissal
Cooperation

Management Committee
Auditing ofaccounts

Internal Auditors
OfficeCSR Committee

Auditing company

Appointment / dismissal

Internal
auditsInternal Controls Evaluation Committee

AdviceGroup companies
Staff managers

Lawyers/
Licensed tax accountants

Disclosure Committee

Basic Stance on
Corporate GovernanceWe recognize that sustainable growth in corporate value requires ongoing improvement insuch areas as management transparency and the monitoring of progress toward managementtargets. This is reﬂected in our wide-ranging initiatives to strengthen corporate governance.

The Corporate
Governance Structure

In addition to the Board of Directors and Board of Corporate Auditors, our corporate governancestructure also includes an internal auditing system. We have also established a range ofcommittees, including the CSR Committee, the Disclosure Committee and the Internal Controls
Evaluation Committee, to implement policies across the entire organization.

Board of Directors

As of March 26, 2009, there were 16 directors. By limiting the term of office for directors to one
year, we have created a management structure capable of adapting quickly to changes in thebusiness environment. Important decisions are made by the Board of Directors, which normallymeets once a month, and at Management Committee meetings attended by the directors ofCanon MJ and the presidents of key subsidiaries. There are no outside directors.

Board of Corporate
Auditors

There are five corporate auditors, of whom three are appointed from outside of the Company.
The Board of Corporate Auditors sets audit policies and allocates responsibilities to theauditors, who conduct stringent audits in accordance with those policies. Specific activities
include attending board meetings, interviewing directors and examining documents containing
important Board resolutions. The corporate auditors also monitor the Companyʼs operations
and assets.

28/ Canon Marketing Japan Inc.

Board of directors and corporate auditors

Board ofdirectors

ChairmanPresident

Executive Vice President

Senior Managing Director

Senior Managing Director

Haruo Murase

Masami Kawasaki

Koji Ashizawa

Kazunori Asada

Hiroshi Shibuya

Managing Director

Managing Director

Managing Director

Director

Director

Director

Osamu Sasaki

Yo Shibasaki

Masahiro Sakata

Kenichiro Goto

Tetsuo Yoshida

Masaki Sawabe

Director

Director

Director

Director

Director

Masanori Koyama

Yutaka Usui

Kunio Kurihara

Keizo Go

Shinichi Inoue

Corporate Auditor

Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Toshio Matsumoto

Taiji Miyazaki

Hiroshi Kawashimo

Kunihiro Nagata

Minoru Shishikura

BOARD OFCorporate
auditors

Internal Auditors OfficeInternal 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, the effectivenessof processes, internal control systems and information security. The Internal Auditors Office
works in coordination with similar units established in major subsidiaries. The Canon MJ Grouphas 42 audit staff members.

Auditing of Accounts

Canon MJʼs accounts are audited under an audit agreement with Ernst & Young ShinNihon
LLC. There are no special interests between Canon MJ and this audit corporation, nor are any
operating officers of the audit corporation involved in the conduct of internal audits of Canon
MJ. To ensure that involvement is limited to specific periods, the audit corporation rotates
operating officers who have been involved in audits of any company for more than seven years.

Canon Marketing Japan Inc. /29

Sustainable
management

Compliance All employees of the Canon MJ Group are subject to the Canon Group Code of

To promote compliance,
Canon MJ supplies all
employees with pocket-sized
Compliance Cards.

Conduct, which mandates compliance with laws and corporate rules. To raise awareness andensure full implementation of the Code of Conduct, handbooks and pocket-sized Compliance
Cards have been distributed to all employees. Every week, compliance case studies relating
to business operations are issued and distributed to all Canon MJ Group employees. All
departments hold compliance meetings twice each year. There are also continual corporatelevel activities under the leadership of the Corporate Ethics and Compliance Committee.
Canon MJ has established an internal reporting system, known as the “Speak up”
system, to facilitate the early discovery and rectification of compliance infringements andprevent recurrences. Employees can report problems within the Company or to a legal officeoutside of the organization.

Information Security and Privacy Canon MJ has adopted a comprehensive approach
to information security under the leadership of the Information Security Committee. The
Company is currently in the process of obtaining company-wide information security
certification under the ISMS scheme, a Japanese third-party assessment system. In
the area of personal information protection, Canon MJ has obtained certification under
the Privacy Mark system and will continue to tighten internal management systems andimprove employee education.

Canon MJ is seeking
company-wide certification
under the ISMS information
security management system(certification currently held bysome sections).

Disclosure The task of the Disclosure Committee is to make prompt decisions
concerning important corporate information, including the identification of information
for which timely disclosure is required, and decisions concerning the content andtiming of disclosure. To ensure that information can be gathered promptly, disclosure
officers have been appointed in each department and subsidiary. As part of our Investor
Relations activities, Canon MJ holds briefings on medium-term planning, quarterly
results briefings and business briefings. We also distribute timely, accurate information
continually via websites and other channels.

Internal Controls Chaired by the President, the Internal Controls Evaluation Committee

The Privacy Mark guarantees
protection of personal
information. Through its
know-how of the Privacy Markrequirements, Canon MJ can
assist customers seeking thiscertification.

30/ Canon Marketing Japan Inc.

consists of officials representing corporate departments and subsidiaries. Its task is todevelop 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.

Relationship with Canon Inc. Canon MJ is a subsidiary of Canon Inc., which owns 55.2%
of Canon MJ stock (as of December 31, 2008). This percentage figure excludes Canon MJʼstreasury stock holdings. With these holdings, the ownership percentage for Canon Inc. would
be 50.1%. Canon MJ has the exclusive right to sell all products manufactured by Canon
Inc. under the Canon brand in Japan. In fiscal 2008, our purchases from Canon Inc.
amounted to ¥339.6 billion (US$3,732.2 million), or 67.6% of our total purchases.
Because of this relationship, a major shift in the management policies or businessactivities of Canon Inc. could have a significant impact on the business activities,
performance and financial position of the Canon MJ Group.

FINANCIAL
SECTION

TEN-YEAR
Consolidated
FINANCIAL SUMMARYFINANCIALREVIEW

Consolidated
Balance Sheets

Consolidated
Statements ofIncomeConsolidated
Statements of
Changes in net Assets

32

34

36

38

39

Consolidated
Statements ofCash Flows

Notes toReport ofConsolidated
Independent
Financial Statements Auditors

40

41

56

Canon Marketing Japan Inc. /31

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

Millions of yen

2008

2007

2006

2005

¥ 827,487¥ 905,137¥ 867,172¥ 821,948

33,91932,96718,807

29,72327,086
15,358526,578
260,367

513,335
247,244

		
FOR THE YEAR:
Net sales		

25,416

Income (loss) before income taxes and minority interests 		

22,229		

11,18636,88635,452
20,033

		 484,937
		 255,220

526,125
266,086

Operating income
Net income (loss)
AT YEAR-END:
Total assets
Total stockholdersʼ equity (Note 6)
CASH FLOWS (Note 4):
Net cash provided by operating activities		41,122

47,21418,09436,985

Net cash used in investing activities		(28,967)(21,912)(19,217)(17,887)

Net cash used in financing activities

		 (21,738)
		 107,589(16,345)
117,206(6,126)108,248(4,311)
115,504

Cash and cash equivalents

Yen

PER SHARE OF COMMON STOCK:

78.63¥ 134.84¥ 125.64¥ 101.78

		
40.00
		 1,858.39

¥

40.00
1,817.59

36.00
1,739.50

28.00
1,650.52

Net income (loss) (Note 2)
Cash dividends (Notes 3 and 5)
Stockholdersʼ equity (Note 6)

Notes: 1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥91 to U.S.$1, the prevailing exchange rate as of December 31, 2008.
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. The “Accounting Standard for Consolidated Statements of Cash Flows” (Business Accounting Council, issued on March 13, 1998) has been adopted effective
the year ended December 31, 2000.

Return on Sales (ROS)Net Sales

Working Capital

Current Assets(Billions of yen/%)

ROS(Billions of yen/Times)

Current Liabilities
Current Ratio

795

816

787

720

867

822

382

905
827

347

343

2.2

2.2

2.2

2.1

1.9
1.5

0.9

2.0

182
157

1.9

328

1.7

1.7
198

174

369

335

1.4

0.9

0.8

362

345
325

757
696

374

196

1.7

1.7

1.7

212

220

214

1.8

184

175

0.5

-4.2

FY’99 ’00

32

’01

’02

’03

’04

/ Canon Marketing Japan Inc.

’05

’06

’07

’08

FY’99

’00

’01

’02

’03

’04

’05

’06

’07

’08

Thousands of
U.S. dollars (Note 1)

Millions of yen

2004

2003

2002

2001

2000

¥ 815,511¥ 757,033¥ 695,585¥ 786,828¥ 794,917

29,274
20,186
12,364

16,987
20,438
7,043

10,885
6,873
3,436

19,397(63,280)(32,831)

20,512
15,313
6,460

18,178 		
13,770 		
6,345 		482,337
234,158

495,396
225,317495,298
220,797

514,698
220,418

518,958
256,959

486,176 		 5,328,978257,740 		 2,804,615

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

1999 		

$ 9,093,264¥ 720,259

81.78
22.00
1,562.23¥

279,297244,275
122,923

23,671

36,275(3,384)

12,324

N/A 		

451,890(16,258)(26,869)(7,364)(13,015)

N/A 		

(318,319)(20,305)
123,815(13,889)
136,448(6,182)141,045(2,909)157,921

N/A 		

(238,879)

N/A 		 1,182,297
U.S. dollars(Note 1)

Yen

¥

2008

46.24
18.00
1,496.74

¥

22.96
18.00
1,464.43¥ (217.39)

¥

18.00
1,459.60

42.77
18.00
1,701.44¥$ 0.8642.01
18.00 		 0.44
1,706.64 		 20.42

5. 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 and net income.

6. Total stockholdersʼ equity in the above table represents the total of stockholdersʼ equity and valuation and translation adjustments in the consolidated balance
sheets. This is due to 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 stockholdersʼ equity and minority interests to be presented as net assets, and net assets to be classified as stockholdersʼ equity,
valuation and translation adjustments and minority interests.

Total Stockholders’ Equity and ROE

Total Stockholders’ Equity(Billions of yen/%)

ROE

Total Assets andTotal Stockholders’ Equity Ratio

Total Assets
Total Stockholders’ Equity Ratio(Billions of yen/%)
258

257
220

234

225

221

266

260

247

255

519

515

486

7.6

7.4

495

485

44.6

42.8

49.4

48.2

48.5

49.5

5.4

526

482

53.0

6.4

527

513

495

52.6

50.6

45.5

4.3
3.2

2.5

2.5
1.6

-13.8

FY’99

’00

’01

’02

’03

’04

’05

’06

’07

’08

FY’99

’00

’01

’02

’03

’04

’05

’06

’07

’08

Canon Marketing Japan Inc. /33

FINANCIAL
REVIEW

Business
Performance
Net Sales
Consolidated net sales in the year ended December 31,
2008 were lower year on year in all business segments, andcame to ¥827.5 billion, a year-on-year decrease of 8.6%.
In the Business Solutions segment, sales of office multifunctional products (MFPs) were lower than in the previous
year. Although color MFPs sold steadily, sales of monochrome MFPs fell along with the cooling of that market.
Sales of laser-beam printers (LBPs) were also lower
than in the previous year. The total number of color units
sold increased year on year, but sales of monochrome
units declined. Regarding large-format ink-jet printers, we
introduced new products and worked hard to expand
sales, and as a result sales were higher than in the previous year and consumables also performed well.
Although unit prices for office MFP maintenance services continued to decline, sales remained at about thesame level as in the previous year thanks to steady growth
in printing volumes.
Canon System & Support Inc., a member of theCanon MJ Group, recorded steady sales of maintenanceservices, but its sales of business equipment declined,
and on balance its overall sales were slightly down.
In the IT Solutions Business, we endeavored to expand
our system integration (SI) services in sectors such as
finance and manufacturing, and in the area of IT products
sales of handy terminals for beverages, finance and meterreading operations grew strongly. However, overall sales
were lower than in the previous year due to the impact offactors including reduced IT investment by companies.
At Canon Software Inc., a member of the Canon MJ
Group, sales of computer-aided design (CAD) softwareand embedded software were strong and sales also grewin the solutions division. At Canon IT Solutions Inc., the SI
services division increased its sales due to the effect ofthe merger, and the packaged products division, which
offers electronic medical records and other products tomedical examination clinics, and the server solutions
division also achieved steady sales. At Canon Network
Communications, Inc., sales grew in the network infrastructure building and internet data center businesses.
Net sales in the Business Solutions segment amounted to ¥495.9 billion, a year-on-year decline of 4.0%.
In the Consumer Equipment segment, sales of compact digital cameras were lower than in the previous year,
when they had performed well, due to the impact of34/ Canon Marketing Japan Inc.

declining unit prices, but we endeavored to promote sales
centered on new products and were able to maintain the
biggest market share. We captured the biggest share of
the digital single-lens reﬂex camera market through ourintroduction of new products, and sales of exchangeable
lenses increased again this year. We also worked to
expand sales of digital video cameras by launching new
products, and as a result sales increased and our market
share also expanded. Sales of ink-jet printers were lower
than in the previous year, but sales of consumables, suchas ink cartridges and glossy photographic paper, weregenerally strong.
Net sales in the Consumer Equipment segment amounted to ¥265.8 billion, a year-on-year decline of 6.5%.
In the Industrial Equipment segment, we mounted amarketing campaign centered on our ﬂagship products
for lithography equipment for semiconductor manufacturers, but sales were still much lower than in the previous year. In the medical equipment business, sales ofophthalmological equipment grew thanks to the strong
trend towards digitalization. Sales of broadcasting equipment grew due to steady sales of portable lenses andother products.
Net sales in the Industrial Equipment segment amounted to ¥65.7 billion, a year-on-year decline of 36.8%.
IncomeOperating income decreased by 31.1% from the previous
yearʼs level to ¥25.4 billion. Although selling, general andadministrative expenses declined year on year due to a
reduction in advertising expenses and sales promotion
expenditure, as well as a decline in payroll costs, this wasmore than offset by the decline in gross profit on sales
resulting from the decline in sales.
Net income came to ¥11.2 billion, 44.2% less than lastyear, because we booked a loss on devaluation of investments in securities, recorded a new provision for expenses
related to continuous service rewards carried over fromprevious years due to a change in our accounting treatment, and incurred expenses related to restructuring of
consolidated subsidiaries.
Net income per share was ¥78.63, compared with
¥134.84 in the previous year. The annual dividend pershare was ¥40.00, the same as last year.

Financial
Position

Cash
Flows

Current assets amounted to ¥327.7 billion as of December
31, 2008, a decline of ¥41.0 billion from the previous yearʼslevel. The main changes were a ¥40.0 billion reduction innotes and accounts receivable, resulting from the decline
in sales, and a ¥3.5 billion decline in inventories.
Fixed assets were ¥0.2 billion lower at ¥157.2 billion.
Items showing significant changes included software,
which increased by ¥6.2 billion because of the creation ofsoftware for in-house use. There was also a ¥5.9 billion
decrease in investments in securities.
Current liabilities declined by ¥30.2 billion year on yearto ¥183.7 billion. Significant changes included a ¥24.4 billion
reduction in notes and accounts payable and a ¥2.6 billion
decline in accrued income taxes.
Long-term liabilities were reduced by ¥0.4 billion
from the previous yearʼs level to ¥42.2 billion. Although
we booked allowance for long-term continuous service
rewards of ¥0.9 billion, allowance for employeesʼ retirement benefits declined by ¥1.5 billion.
Net assets decreased by ¥10.5 billion from the previous yearʼs figure to ¥259.0 billion. Key movements included a ¥5.1 billion increase in retained earnings resulting
from the booking of ¥11.2 billion in net income and ¥6.1
billion in dividend payments. There was also a ¥15.0
billion increase in stockholdersʼ equity due to purchasesof treasury stock.
These changes were reﬂected in a ¥41.2 billion reduction in total assets, which amounted to ¥485.0 billion as ofDecember 31, 2008.
Return on equity (ROE) fell from 7.6% in the previous year to 4.3%, while the stockholdersʼ equity ratiorose from 50.6% to 52.6%. Stockholdersʼ equity pershare increased from ¥1,817.59 in the previous year to¥1,858.39.

Cash and cash equivalents as of December 31, 2008
amounted to ¥107.6 billion, down ¥9.6 billion from theposition at the end of the previous year.
Net cash provided by operating activities amounted to¥41.1 billion, compared with ¥47.2 billion in the previous
year. This consisted mainly of ¥22.2 billion from income
before income taxes and minority interests, ¥12.1 billion
from depreciation and amortization, ¥38.8 billion from thereduction of notes and accounts receivable, ¥3.6 billion
from the reduction of inventories, ¥24.5 billion from thereduction of notes and accounts payable, and ¥12.9 billion
from income tax payments.
Net cash used in investing activities amounted to¥29.0 billion, compared with ¥21.9 billion in the previous
year. This total consisted mainly of a net increase of ¥20.0
billion in short-term loans receivable, and ¥9.0 billion in
payments for purchases of property and equipment.
Net cash used in financing activities amounted to¥21.7 billion, compared with ¥16.3 billion in the previous
year. This amount consisted mainly of ¥15.1 billion in
payments for purchases of treasury stock and ¥6.2 billion
in dividend payments.

Canon Marketing Japan Inc. /35

Consolidated
Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS		

2008

2007 		

2008

CURRENT ASSETS:
Cash and cash equivalents (Note 8)¥ 107,589

Notes and accounts receivable		 149,548

Inventories (Note 5)		Deferred tax assets (Note 12)

		

5,389

Short-term loans receivable		

20,001Other current assets				

11,483(461)

Allowance for doubtful receivables
Total current assets

34,144

		 327,693

PROPERTY AND EQUIPMENT:
Land

		

41,739Buildings and structures		

76,189Machinery and vehicles (Note 7)

		

369

Furniture and fixtures (Note 7)				

19,73821,508

Rental assets
Total
Accumulated depreciation
Net property and equipment

		 159,543
		 (61,553)
		

97,990INTANGIBLE ASSETS:
Goodwill (Note 2)

		

2,926

Software (Note 7)		15,598

Utilization rights
Other intangible assets

		
		

389
116

Total intangible assets		

19,029INVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 3 and 8)

		

6,420

Long-term loans receivable		

26

Lease deposits

		

8,792

Deferred tax assets (Note 12)		20,327

Other investments

		
		

5,829
(1,169)		

40,225

Allowance for doubtful receivables
Total investments and other assets
Total assets

36/ Canon Marketing Japan Inc.

¥ 484,937$ 1,182,297
189,552 		 1,643,384
37,692 		 375,209
59,2206,056 		7 		 219,791
18,451 		 126,187(5,066)(311) 		368,653 		 3,601,022¥ 117,206

41,866 		 458,670
75,375 		 837,242
4,055
504 		
20,832 		 216,901
20,234 		 236,352
158,811 		 1,753,220(59,151) 		 (676,407)
99,660 		 1,076,813

3,772
9,396
394
45
13,607

		32,154

		

171,406

		
		

4,275
1,275

		

209,11070,54912,370 		
286
30 		
96,615
8,627 		19,262 		 223,374
64,055
4,936 		(12,846)(1,020) 		
44,205 		 442,033$ 5,328,978¥ 526,125

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

		

2008

2007 		

2008

CURRENT LIABILITIES:
Notes and accounts payable¥ 123,897

Short-term bank loans		—

Accrued income taxes (Note 12)

		

6,085

Consumption taxes payable

		

2,281

Deferred tax liabilities (Note 12)		7Accrued expenses

		28,138Reserves

		
		

4,596
18,736

Other current liabilities
Total current liabilities

		 183,740¥ 148,330

343
8,682
3,361
12
30,167
5,387
17,678
213,960$ 1,361,506
		

—

		

66,868

		

25,066

		

77		

309,209				

50,505
205,890

		 2,019,121

LONG-TERM LIABILITIES:Long-term bank loans		—

Deferred tax liabilities (Note 12)

		

280

Allowance for employeesʼ retirement benefits (Notes 2 and 10) 		

37,122

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

937

131 		
338 		
38,577 		̶ 		Allowance for directorsʼ and corporate auditorsʼ
retirement benefits (Note 2)

		

805

739 		

8,846

Other long-term liabilities

		

3,010

Total long-term liabilities		

42,1542,812 		42,597 		

463,231

		

73,303

Capital surplus

		83,289Retained earnings

		 123,616

Treasury stock		

(24,731)

Net unrealized gain (loss) on available-for-sale securities 		

(212)

		
		

(45)
3,823

—
3,077
407,934
10,29733,077

CONTINGENT LIABILITIES (Note 4)
NET ASSETS (Note 2):
STOCKHOLDERS’ EQUITY (Note 17):
Common stock:
Authorized̶299,500,000 shares;
Issued̶151,079,972 shares in 2008 and 2007

73,303 		 805,527
83,296 		 915,264
118,528 		 1,358,418(9,695) 		 (271,769)

VALUATION AND TRANSLATION ADJUSTMENTS:
Foreign currency translation adjustments
MINORITY INTERESTS
Total net assets
Total liabilities and net assets

		 259,043¥ 484,937

640
14
3,482
269,568¥ 526,125		

(2,330)

		
		

(495)
42,011

		 2,846,626$ 5,328,978• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. /37

Consolidated Statementsof IncomeCanon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

		NET SALES

2008 		

2007 		

2008

¥ 827,487¥ 905,137$ 9,093,264

COST OF SALES

		 554,467

		 6,093,044

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

		 273,020
		 247,604

Operating income		

25,416615,390289,747
252,861
36,886

Interest and dividend income

		

970

Interest expense

		

(67)

Loss on disposal and devaluation of inventories		

(1,614)

Loss on impairment of fixed assets

		

(144)

Gain on sales of investments in securities

		0

Loss on sales and disposal of property and equipment

		

(578)

Loss on devaluation of investments in securities

		 3,000,220
		 2,720,923
		

279,297911 		
(67) 		
(1,901) 		
(95) 		806 		
(440) 		(1,236) 		
̶ 		
̶ 		
588 		
(1,434) 		
35,452 		

10,659244,275				

113,5832,626

		

116,209				

128,066
5,143$

122,923

OTHER INCOME (EXPENSES):		

(1,125)

Provision of allowance for prior yearsʼ long-term continuous service rewards 		

(929)

Other, net

		
		

(592)
892

		

(3,187)

Income before income taxes and minority interests		22,229				

10,336239

Expenses related to restructuring of consolidated subsidiaries

INCOME TAXES (Note 12):Current
DeferredIncome before minority interests
MINORITY INTERESTS
Net income		

10,575				

11,654468¥

11,186

14,470278
14,74820,704671¥ 20,033

Cash dividends applicable to the year
• See accompanying notes to consolidated financial statements.

38/ Canon Marketing Japan Inc.

¥ 78.63¥ 40.00(1,582)0(6,352)(12,363)(10,209)(6,505)9,802(35,022)

U.S. dollars (Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2):
Net income(736)(17,736)¥ 134.84¥

40.00$ 0.86$ 0.44

Consolidated Statements of
Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2008 and 2007

Millions of yen
Valuation and translation
adjustments

Stockholders’ equity

BALANCE AT DECEMBER 31, 2006
Net income
Cash dividends
Business combination by means ofan exchange of stock
Purchases of treasury stock
Disposition of treasury stock
Acquisition by the parent companyof parent company stock held byconsolidated subsidiaries
Contributions to employee welfare
pension fund
Other, net
BALANCE AT DECEMBER 31, 2007
Net income
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Contributions to employee welfare
pension fund
Other, net
BALANCE AT DECEMBER 31, 2008

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

150,523,896¥ 73,303¥ 82,530¥ 104,077
20,033(5,575)¥ (1,236)

556,076

Net unrealized
gain (loss) on
availablefor-salesecurities

Minority
Foreigninterests
currencytranslation
adjustments¥ 1,676¥ 17¥ 3,101

Total
net assets¥ 263,468
20,033(5,575)767

1,563(10,025)

2,330(10,025)

1

3

4

(2)

(2)
(7)

		151,079,972¥ 73,303¥ 83,296

		¥ 118,528
		 11,186
		 (6,094)¥ 73,303

(3)

¥ 640

¥ 14

381
¥ 3,482		 (15,066)
		
30

(7)
		

		151,079,972¥ (9,695)(1,036)¥ 83,289(4)¥ 123,616

(7)
(658)

¥ 269,568
		 11,186
		 (6,094)		 (15,066)
		
23

		
(4)
		 (852) 		 (59) 		 341 		
(570)¥ (24,731)¥ (212)¥ (45) ¥ 3,823¥ 259,043

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

Stockholders’ equity
Commonstock

BALANCE AT DECEMBER 31, 2007
Net income
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Contributions to employee welfare
pension fund
Other, net$ 805,527

BALANCE AT DECEMBER 31, 2008

$ 805,527

CapitalsurplusRetainedearnings

Treasurystock$ 915,341 $ 1,302,505 $ (106,538)
		 122,923
		 (66,967)
		 (165,561)
		
(77)
		
330
		

(43)

$ 915,264 $ 1,358,418

Net unrealized
gain (loss) on
availablefor-salesecurities$ 7,033

Minority
Foreigninterests
currencytranslation
adjustments$ 154$ 38,264

Total
net assets$ 2,962,286
		 122,923
		(66,967)		 (165,561)
		
253

		
(43)
		 (9,363) 		 (649) 		 3,747 		
(6,265)$ (271,769)$ (2,330)$ (495) $ 42,011 $ 2,846,626• 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, 2008 and 2007

Thousands of
U.S. dollars (Note 1)

Millions of yen

		2008 		

2007 		

2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests¥ 22,229$

244,275

12,059144
833
324(1,515)

11,968 		
95 		(62) 		
(251) 		(1,658) 		

132,516
1,582
9,154
3,560
(16,648)

		
51
		
(970)
		
67
		
578
		
(0)
		
—
		 38,790
		
3,577
		 (24,450)
		
1,452
		 53,169
		
(86)
		
977
		 (12,938)
		 41,122(10) 		(911) 		560(10,659)
736
6,352
(0)
—
426,264
39,308(268,681)
15,956584,275(945)
10,736(142,176)
451,890¥

35,452Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill (negative goodwill)
Increase (decrease) in allowance for doubtful receivables
Reversal of liability for employeesʼ retirement benefits(Reversal of) provision for liability for directorsʼ and corporate
auditorsʼ retirement benefits
Interest and dividend income
Interest expense
Loss on sales and disposal of property and equipment, net
Gain on sales of investments in securities
Gain on sales of affiliated companies, net
Decrease in notes and accounts receivable
Decrease in inventories
Decrease in notes and accounts payable
Other
Sub-totalInterest paid
Interest and dividends received
Income taxes paid
Net cash provided by operating activities

		
		
		
		
		

67 		
425 		
(806) 		(189) 		10,799 		
14,607 		
(10,371) 		
1,256 		60,411 		
(49) 		881 		
(14,029) 		
47,214 		

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of a marketable security
Payments for purchases of property and equipment
Payments for purchases of intangible asset
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Payments for purchases of investments in subsidiaries
Payments for purchases of investments in subsidiaries
accompanying changes in scope of consolidation
Proceeds from purchases of investments in subsidiaries
accompanying changes in scope of consolidation
Proceeds from sales of affiliated companies(Increase) decrease in short-term loans receivable
Payments for deposit of long-term time deposits
Proceeds from withdrawal of long-term time deposits
Increase in time deposits
Other
Net cash used in investing activities

		
		
		
		
		
		

—
(9,047)(8,580)
(816)
4,075
(18)

		

220 		

(964) 		3,189 		(344) 		

—(99,418)(94,286)(8,967)44,780(198)—(9,439) 		

—

		
33
—
		
		 (19,994)
		
—
		
—
		
5,300
		
80
		 (28,967)

̶ 		
4,167 		2 		(1,000) 		
100 		
(4,995) 		
194 		
(21,912) 		

363—(219,714)——
58,242879(318,319)(7,271) 		
(5,771) 		

CASH FLOWS FROM FINANCING ACTIVITIES:Net decrease in short-term bank loans
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.

		
(474)
		 (15,067)
		 (6,221)		
24
		 (21,738)		(34)
		 (9,617)
		 117,206¥ 107,589(588) 		

(5,209)(165,571)(5,715) 		
(68,363)(23) 		264
(16,345) 		 (238,879)
1 		
(373)
8,958 		 (105,681)
108,248 		 1,287,978¥ 117,206$ 1,182,297(10,019) 		

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

of Presentation of Consolidated
1 BasisFinancial Statements
The accompanying consolidated financial statements of Canon
Marketing Japan Inc. (the “Company”) and its consolidated
subsidiaries are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled
from the consolidated financial statements prepared by theCompany as required by the Financial Instruments andExchange Law of Japan.
The U.S. dollar amounts are included solely for convenienceof the reader and are stated, as a matter of arithmeticalcomputation only, at the exchange rate of ¥91=U.S.$1, the rate
prevailing at December 31, 2008. These translations should not
be construed as representations that the Japanese yen amounts
actually represent, or have been or could be converted into U.S.
dollars at that or any other rate.

of Significant
2 Summary
Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for theyear ended December 31 , 2008 include the accounts of theCompany and all of its 20 (24 in 2007) subsidiaries. Investments
in nonconsolidated subsidiaries and affiliated companies areaccounted for by the equity method.
All intercompany accounts and transactions are eliminatedin consolidation.
The excess of acquisition costs over net assets acquired isamortized generally over five years.
(b) Cash Equivalents
For purposes of the consolidated statements of cash ﬂows, theCompany and its consolidated subsidiaries consider all highly
liquid investments, including securities, time deposits andcertificates of deposit, all of which mature or become due within
three months of the date of acquisition, to be cash equivalents.
(c) Securities
The held-to-maturity debt securities are stated at amortizedcost. Available-for-sale marketable securities are stated at fairmarket value, with unrealized gain or loss, net of the applicabletaxes, reported as a separate component of net assets. Availablefor-sale marketable securities whose fair value is not readily
determinable are stated at cost determined by the movingaverage method.
(d) Inventories
Inventories are valued at cost. Cost is determined mainly by themoving-average method.

(e) Property and Equipment
Property and equipment are stated at cost. Depreciation iscomputed by the declining-balance method for property andequipment, with the exception of items that are depreciatedby the straight-line method at rates based on the estimateduseful lives of the respective assets. These items are buildings
purchased on or after April 1 , 1998 (exclusive of furniture andfixtures), all buildings and structures of the Companyʼs Makuhari
office, all property and equipment of certain consolidated
subsidiaries, and rental assets in the Business Solutions segment.
The useful lives are as follows: buildings, mainly 50 years;
furniture and fixtures, mainly five years; and rental assets, mainly
three years. Normal repairs and maintenance, including minor
renewals and improvements, are charged to income as incurred.
In accordance with the amendment to the Corporation
Tax Law, from the first accounting period after the fiscal year inwhich fixed assets acquired on or before March 31, 2007 reach
5% of their acquisition value under the application of methods ofdepreciation based on the pre-amendment Corporation Tax Law,
the Company shall apply straight-line depreciation over a periodof five years to the difference between the amount equivalent
to 5 % of the acquisition value of the fixed assets acquired onor before March 31 , 2007 and the memorandum value ( 1 yen)of those assets. The resulting amount will be recorded under
depreciation and amortization in the accounts.
(f) Allowance for Employees’ Retirement Benefits
In order to provide for employeesʼ retirement benefits, theCompany and its consolidated subsidiaries provide liability for
employeesʼ retirement benefits in an amount calculated basedon the estimated projected benefit obligation and plan assets at
the end of the fiscal year.
Unrecognized prior service cost is amortized by the straightline method over the average service period of the eligible
employees remaining at the time when it arose. Unrecognizedactuarial gain or loss is amortized 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 remaining.
(g) Leases
Non-cancelable lease transactions are accounted for as
operating leases regardless of whether such leases are classified
as operating leases or capital leases, except in the case of leaseagreements stipulating the transfer of ownership of the leased
property to the lessee, which are accounted for as capital leases.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amountrequired to cover possible losses on collection. It is determinedby adding individually estimated uncollectible amounts for
specific items to an amount based on the actual rate of
uncollected receivables of the Company in prior years.
(i) Income Taxes
Deferred tax assets and liabilities are recorded to reflect the
impact of temporary differences between assets and liabilities
recognized for financial reporting purposes and such amounts
recognized for tax purposes. These deferred taxes are measured
by applying the normal statutory rate of income taxes to thetemporary differences.
Canon Marketing Japan Inc. /41

(j) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated into
Japanese yen at the current exchange rates in effect at thebalance sheet date. The foreign exchange gains and losses ontranslation are recognized in the accompanying consolidated
statements of income.
(k) Foreign Currency Financial Statements
The balance sheet accounts and revenue and expense accountsof the foreign 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 toholders of common stock which is computed more precisely thanunder previous standards, and the weighted average number ofshares of common stock outstanding for the period.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective fiscal years, including dividends to be paid after
the end of the respective fiscal years.
(m) Bonuses to Directors
Effective the year ended December 31 , 2006 , “AccountingStandard for Directorsʼ Bonus” (Accounting Standards Board ofJapan (ASBJ) Statement No. 4 , issued on November 29 , 2005 )was adopted. The estimated amount payable for the next roundof directorsʼ bonuses, which are classed as expenses for the year
ended December 31 , 2008 , has been included in the accounts
for the current fiscal year.

(o) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards to employees
who have given long-term continuous service determined inaccordance with the Companyʼs internal regulations, we bookallowance for long-term continuous service rewards based on theamount we expect to pay in the future.
The Company and some of its subsidiaries have establishedinternal regulations related to the Refresh and Vacation Systemfor employees who have been very diligent and have given longterm and continuous service. The system grants vacations andpays rewards at fixed intervals in order to refresh the minds andbodies of these employees and enable them to work with new
vigor in the future.
Rewards related to the Refresh and Vacation Systemwere formerly treated as an expense at the time they were
paid. However, due to the fact that their monetary significancehas increased as a result of the increase in the number of
employees, and the fact that rational estimates have become
possible with the enhancement of the functions of theCompanyʼs attendance management system, we have changed
to a method in which the liability is booked from the current
period based on the amount we expect to pay in the futureaccording to our internal regulations, in order to calculate
period profit and loss more appropriately.
As a result of this change, operating income decreasedby ¥116 million and income before income taxes and minority
interests decreased by ¥1,045 million.

(n) A llowance for Directors’ and Corporate Auditors’
Retirement Benefits
The Company and its consolidated subsidiaries pay lumpsum retirement benefits to directors and corporate auditors,
the amounts of which are determined in accordance with
the Companyʼs and its consolidated subsidiariesʼ internal
regulations. Also, in accordance with the Companyʼs and its
consolidated subsidiariesʼ internal regulations, a reserve isprovided for such benefits at the amount that would be required
to be paid if all directors and corporate auditors retired at theend of the fiscal year.

Pledged3 Assetsas Collateral
Assets pledged as collateral for deferred payments of customs duties as of December 31, 2008 and 2007 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		Investments in securities

42/ Canon Marketing Japan Inc.

2008 		

¥ 222

2007 		

¥ 224

$

2008
2,440

4 Contingent
Liabilities
Contingent liabilities at December 31, 2008 and 2007 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		Guarantees for employeesʼ housing loans
Contingent liabilities related to the reduction of corporate
bonds by debt assumption

2008 		

¥ 134

		2007 		
159

¥

—

¥ 134

2008

$ 1,473

10,000 		—$ 1,473

10,159¥5 Inventories
Inventories at December 31, 2008 and 2007 were composed of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

		2008 		

2007 		

¥ 24,767
		 5,143
		 3,411
		
812
		
11
¥ 34,144

Merchandise
Service parts
Work in progress
Supplies
Other

2008

$ 272,165
		 56,516
		 37,484
778 		
8,923
31 		
121
¥ 37,692$ 375,209¥ 29,756
5,086
2,041

Statement of
6 Consolidated
Changes in Net Asset
Current consolidated fiscal year (from January 1, 2008 to December 31, 2008)
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

4,685
4,685

9,077
9,077

16
16

13,746
13,746

Notes: 1. The increase of 9,077 thousands of shares of treasury common stock consists of an increase of 9,032 thousands of shares from the market purchase of treasury stock, and an increase of 45 thousands of shares from the purchase, etc. of fractional stock.
2. The decrease of 16 thousands of shares of treasury common stock is a decrease due to the sale of fractional stock.

Canon Marketing Japan Inc. /43

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

Total dividends(Millions of yen)Type of stock

Dividend per share (Yen)

Base date

Date effective

March 27, 2008
General stockholdersʼmeeting

Common stock¥ 3,221¥ 22

December 31, 2007

March 28, 2008

July 23, 2008
Board of Directorsʼ meeting

Common stock¥ 2,873¥ 20

June 30, 2008

August 26, 2008

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

Type of stock

Funds used to pay
the dividend

Total dividends(Millions of yen)

Dividend per share(Yen)

March 26, 2009
General stockholdersʼmeeting

Common stock

Retained earnings¥ 2,747¥ 20

Base date

Date effective

December 31, 2008

March 27, 2009

Previous consolidated fiscal year (from January 1, 2007 to December 31, 2007)
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)

150,524
150,524

556
556

―
―

151,080
151,080

845
845

4,642
4,642

802
802

4,685
4,685

Notes: 1. The increase of 556 thousands in the total number of shares of common stock issued can be attributed to the issuance of new stock through a shareexchange.
2. The increase of 4,642 thousands of shares of treasury common stock consists of an increase of 4,626 thousands of shares through market purchases oftreasury stock, an increase of 4 thousands of shares from the acquisition of companies that held stock in this company, an increase of 4 thousands ofshares from the acquisition of treasury stock (this companyʼs stock) by consolidated subsidiaries as a result of a share exchange, and an increase of 8
thousands of shares from the purchase, etc. of fractional stock.
3. The decrease of 802 thousands of shares of treasury common stock consists of a decrease of 800 thousands of shares from a share exchange and adecrease of 2 thousands of shares from the sale, etc. of fractional stock.

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

Total dividends(Millions of yen)Type of stock

March 28, 2007
General stockholdersʼmeeting

Common stock¥ 2,694

July 25, 2007
Board of Directorsʼ meeting

Common stock¥ 2,694

Dividend per share (Yen)

Base date

Date effective¥ 18

December 31, 2006

March 29, 2007

¥ 18

June 30, 2007

August 24, 2007

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

Type of stock

Funds used to pay
the dividend

Total dividends(Millions of yen)

Dividend per share(Yen)

March 27, 2008
General stockholdersʼmeeting

Common stock

Retained earnings¥ 3,221¥ 22

44/ Canon Marketing Japan Inc.

Base date

Date effective

December 31, 2007 March 28, 2008

7 Leases(a) Finance Leases
Lease payments for finance leases excluding subleases, except for the lease agreements which stipulate the transfer of ownership ofthe leased property to the Company and its consolidated subsidiaries, were ¥3,082 million ($33,868 thousand) and ¥1,842 million forthe years ended December 31, 2008 and 2007, respectively.
(For Lessee)
Future minimum lease payments subsequent to December 31, 2008 and 2007 are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter2008 		

¥ 3,300
		 5,412¥ 8,712¥¥2007 		

2008

1,738
$
2,634 		4,372
$36,26459,472
95,736

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
Thereafter2008 		

2007 		

¥ 95		 126
¥ 221

2008

93
$ 1,044
133 		 1,385¥ 226$ 2,429¥

The following pro forma amounts represent acquisition cost, accumulated depreciation and amortization, and net book value of leased
property as of December 31, 2008 and 2007, excluding subleases:
Thousands of
U.S. dollars (Note 1)

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
Software2008 		

2007 		

2008

¥
269
		 12,643
		612¥ 13,524

¥

300
$
2,956
6,044 		 138,934
791 		
6,726
¥ 7,135$ 148,616

¥
		
		
¥

191
4,525
317
5,033

¥

203
$
2,383 		403 		
¥ 2,989$

2,099
49,7253,484
55,308

¥
		
		
¥

78
8,118
295
8,491

¥

97
$
3,661 		388 		
¥ 4,146$857
89,2093,242
93,308Canon Marketing Japan Inc. /45

(For Lessor)
Future minimum lease payments, which consist of subleases subsequent to December 31, 2008 and 2007, are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter2008 		

2007 		

¥ 95		 126
¥ 221

2008

93
$ 1,044
133 		 1,385¥ 226$ 2,429¥(b) Operating Leases (Non-cancelable)(For Lessee)
Thousands of
U.S. dollars (Note 1)

Millions of yen		
Future minimum lease payments:
Within one year
Thereafter2008 		

2007 		

¥ 26
		 33
¥ 59

2008

$ 286
10 		 362
¥ 165
$ 648
¥ 155

8 Securities
Securities held by the Company and its consolidated subsidiaries as of December 31, 2008 and 2007 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
Investments in securities

46/ Canon Marketing Japan Inc.

2008 		
¥ 5,198

		 88,097
		 1,222
		 89,319¥ 94,517

2007 		
¥

9,147

2008
$

57,121

86,492 		
968,099
3,223 		13,42889,715 		
981,527¥ 98,862$ 1,038,648

The carrying amounts and aggregate fair values of investments in securities at December 31, 2008 and 2007 were as follows:
Millions of yen

2008
Book value

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

Unrealized gains

Unrealized losses

Fair value¥ 1,000¥ —¥ (10)¥ 990
		 222 		 3 		 — 		 225
¥ 1,222¥ 3¥ (10)¥ 1,215
Millions of yen

2008
Cost

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

Unrealized gains

Unrealized losses

Fair value¥ 3,908¥ 579¥ (1,032)¥ 3,455		
11 		 — 		(3) 		
8
¥ 3,919¥ 579¥ (1,035)¥ 3,463

Millions of yen

2007
Book value

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

Unrealized gains

Unrealized losses¥ 2,999¥ 1

224¥ 3,223

1
¥ 2

¥ (5)
̶
¥ (5)

Fair value¥ 2,995

225¥ 3,220

Millions of yen

2007
Cost

Unrealized gains

Unrealized losses

Fair value

Securities classified as:
Available-for-sale:
Equity securities
Other¥ 4,023
2,015¥ 6,038¥ 1,64317¥ 1,660¥ (606)(0)¥ (606)¥ 5,060
2,032¥ 7,092

Thousands of U.S. dollars (Note 1)

2008
Book value

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

Unrealized gains

Unrealized losses

Fair value$ 10,989$ —$ (110)$ 10,879
		 2,440 		 33 		— 		 2,473$ 13,429$ 33$ (110)$ 13,352
Thousands of U.S. dollars (Note 1)

2008
Cost

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

Unrealized gains

Unrealized losses

Fair value$ 42,945$ 6,363$ (11,341)$ 37,967		121 		— 		(33) 		88
$ 43,066$ 6,363$ (11,374)$ 38,055

Canon Marketing Japan Inc. /47

Available-for-sale and held-to-maturity securities whose fair value is not readily determinable as of December 31, 2008 and 2007 wereas 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		2008 		

¥
		

1,697
38

		 87,100
		
997¥ 89,832¥

2007 		

2008

1,983
$
72 		

18,648417

80,500 		 957,143
5,992 		 10,956¥ 88,547$ 987,164

Certificates of deposit, which had previously been classified as cash and cash equivalents, are included in marketable securities
effective the year ended December 31, 2007. This change reﬂects the application of the revised “Practical Guideline on AccountingStandard for Financial Instruments” (Statement No. 14 of the Accounting Practice Committee, revised on July 4, 2007).

9 Derivatives(For the year ended December 31, 2007)

1. Matters concerning derivative transactions(1) Types of derivative transactions
A consolidated subsidiary uses interest rate swap
transactions.
(2) Policies of derivative transactions
Derivatives are used only to avoid exposure tointerest rate risk on loans, and speculative derivativetransactions are prohibited.
(3) Purpose of derivative transactions
Derivatives are used only to avoid exposure to interest
rate risk on loans, for the purpose of hedge accounting.
 Hedging instruments
Interest rate swap agreements
 Hedged items
Interest rates on borrowings
 Hedging policies
Interest rate swaps are used to hedge against futureinterest rate rises by fixing variable interest rates, andno speculative transactions are undertaken.
 Method of evaluation of hedge effectivenessBecause interest rate swaps qualify for “special
accounting,” an evaluation of hedge effectivenesshas been omitted.

48/ Canon Marketing Japan Inc.

(4) Risk from derivative transactions
The Group believes that the related credit risk isminimal, since the counterparties are Japanese bankswith high credit ratings.
(5) Risk management
The managers of the subsidiary concerned implement
and manage interest rate swaps according to theirpredictions of ﬂuctuations in loan interest rates.

2. Matters concerning fair value
There are no applicable items.
Interest rate swap transactions are implemented, butthese are subject to hedge accounting and, therefore,
have not been disclosed.

Retirement and
10 Employees’
Severance 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 employeesʼ retirement benefits as of December 31, 2008 and 2007 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 employeesʼ retirement benefits

2008 		

¥ 144,721
		 (114,614)
		 (31,282)
		 37,990
		
307¥ 37,122

2007 		

2008

¥ 137,181$ 1,590,341(131,465) 		 (1,259,495)(9,272) 		
(343,758)
41,886 		
417,472¥247 		
38,577$

3,374
407,934

The components of net periodic benefit costs for the years ended December 31, 2008 and 2007 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Other
Net periodic benefit costs

2008 		

2007 		

¥ 6,211
		 3,371
		 (4,245)
		 (3,679)
		 1,256		 1,263¥ 4,1772008¥ 5,945$ 68,253
3,276 		 37,044(4,182) 		 (46,648)(3,690) 		 (40,429)
1,181 		 13,802
1,220 		 13,879¥ 3,750$ 45,901

Assumptions used in accounting for the above plans for the years ended December 31, 2008 and 2007 were principally as follows:
Discount rate
Expected rates of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial loss

		

2008

		

2007

		
		
		
		

2.5%
1.0% - 3.4%
10-16 years
10-16 years

		
		
		
		

2.5%
1.0% - 3.4%
10-16 years
10-16 years

Canon Marketing Japan Inc. /49

Option
11 Stock
Plans(For the year ended December 31, 2007)
1. Description of stock option plans, number of stock options and changes in number of stock options(1) Description of stock option plans
ARGO 21 Corp.
Notes: 1. Employees include advisors and temporary (part-time) workers.
2003 Stock Option Plan
2. The number of stock options is expressed based on the number of shares to be issued upon exercise.

Type and number of recipients

9
4
1,211
17

Directors of the subsidiary
Corporate auditors of the subsidiary
Employees of the subsidiary (Note 1)
Directors of subsidiaries of the subsidiary2005 Stock Option Plan

9
8
973
11

Directors of the subsidiary
Corporate officers of the subsidiary
Employees of the subsidiary
Directors of subsidiaries of the subsidiary

Number of stock options by type ofstock to be issued (Note 2)

Common stock

Grant dateAugust 5, 2003

August 8, 2005

Vesting requirements

Remain employed from the grant date(August 5, 2003) to the end of the vesting period(August 31, 2005)

Remain employed from the grant date(August 8, 2005) to the end of the vesting period(August 31, 2007)

Service period

For two years(from September 1, 2003 to August 31, 2005)

For two years(from September 1, 2005 to August 31, 2007)

Exercisable period

From September 1, 2005 to August 31, 2007

From September 1, 2007 to August 31, 2009

588,300

492,300

Common stock

Notes: 1. Employees include advisors and temporary (part-time) workers.
2. The number of stock options is expressed based on the number of shares to be issued upon exercise.

(2) Number of stock options and changes in number of stock options
The following tables are based on the stock options which existed as of December 31, 2007. The number of stock options is expressed
based on the number of shares to be issued upon exercise.
 Number of stock options
ARGO 21 Corp.
2003 Stock Option Plan

2005 Stock Option Plan

343,100

Unvested:
As of December 31, 2006

̶Granted̶̶

Forfeited̶

Vested̶8,300
334,800

As of December 31, 2007

̶̶

Vested:356,200̶

Vested̶

Exercised

265,700
90,500334,800
197,400
137,400̶̶

As of December 31, 2006

Forfeited
As of December 31, 2007

Notes: 1. The amounts as of December 31, 2006 have been newly disclosed as a result of the consolidation of Argo 21 Corp. during the year ended December 31, 2007.
2. The amount forfeited after the exercise of the 2005 stock options represents the reduction resulting from cancellations.

 Per unit information
2003 Stock Option Plan

2005 Stock Option Plan

Average stock price on exercise (Yen)

1,099
1,393

1,092
1,325

Fair value per unit (as of grant date) (Yen)̶̶

Exercise price (Yen)50/ Canon Marketing Japan Inc.

12 Income
Taxes
The normal statutory rate of income taxes was approximately
40.0% for the years ended December 31, 2008 and 2007.
The effective tax rate for the year ended December 31, 2008,
differed from the normal statutory tax rate following the adoptionof tax-effect accounting for the reasons outlined in the tablebelow. For the year ended December 31 , 2007 , the difference

between the normal statutory tax rate (40.0%) and the effective
tax rate following the adoption of tax-effect accounting ( 41 . 6 %)was 1.6 percentage points. Since this difference falls within therange of 0%-5% of the normal statutory tax rate, a breakdown ofrelated items has been omitted.

2008		
Normal statutory tax rate
Entertainment and other expenses permanently not deductible for tax purposes 				Per-capita levy of inhabitants taxes
Change in valuation allowance				
Amortization of negative goodwill
		
Other
		
Effective tax rate following the adoption of tax-effect accounting

40.0 %
1.9
1.8
1.7
1.4
0.8
47.6 %The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31 , 2008 and2007, were as follows:
Thousands of
U.S. dollars (Note 1)

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 employeesʼ retirement benefits
Loss on devaluation of investments in securities
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
Special depreciation reserve
Other
Total deferred tax liabilities
Net deferred tax assets

2008 		

2007 		

¥
460
		
776
		 1,356
		 3,173
		
960
		
824
		
394
		 14,912
		 1,111
		 5,380
		 29,346
		 (3,389)¥ 25,957

¥

¥
90
		
261
		
0
		
177
		
528
¥ 25,429

¥

2008

$
5,055
		
8,528
		 14,901
		 34,868
		 10,549
		
9,055
		
4,330
		 163,868
̶ 		 12,209
5,316 		 59,121
28,370 		 322,484(2,313) 		 (37,242)¥ 26,057$ 285,242

372
1,012
1,465
2,629
905
815
252
15,604

533
269
3
284
1,089
¥ 24,968

$
989
		
2,868
		
0
		
1,945
		
5,802
$ 279,440

Canon Marketing Japan Inc. /51

13 Segment
Information(a) Business Segment Information
Millions of yen

2008

Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment

Industrial
Equipment

Total

Corporate andeliminations

Consolidated¥ 495,944		—		 495,944
		 482,587¥ 13,357¥ 208,181
		 10,479
		
144
		 13,703¥ 265,828		—		 265,828
		 255,584¥ 10,244¥ 86,654
		
1,012
		
—
		
3,019

¥ 65,715		—		 65,715
		 63,900¥ 1,815¥ 48,009
		
568
		
—
		 1,060¥ 827,487		—		 827,487
		 802,071¥ 25,416¥ 342,844
		 12,059
		144
		 17,782

		
—
		
—
		
—
		
—
		
—
¥ 142,093
		
—
		
—
		
—

¥ 827,487		—		 827,487
		 802,071¥ 25,416¥ 484,937
		 12,059
		144
		 17,782

Corporate andeliminations

Consolidated

̶
̶
̶
̶
̶

¥ 905,137
̶
905,137
868,251¥ 36,886¥ 526,125
11,968Millions of yen

2007

Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment

Industrial
Equipment¥ 516,720
̶
516,720
499,496¥ 17,224¥ 217,682
10,126¥ 284,376
̶
284,376
270,042¥ 14,334¥ 92,508
1,118
̶
1,939

¥ 104,041
̶
104,041
98,713¥
5,328¥ 80,209

95
9,750

Total

¥ 905,137
̶
905,137
868,251¥ 36,886¥ 390,399
11,968724
̶

95
12,7631,074¥ 135,726
̶̶̶

95
12,763Thousands of U.S. dollars (Note 1)

2008

Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment

Industrial
Equipment

Total

Corporate andeliminations

Consolidated$ 5,449,934
		—		 5,449,934
		 5,303,154$ 146,780$ 2,287,703
		 115,154
		
1,582
		 150,583$ 2,921,187
		—		 2,921,187
		 2,808,615$ 112,572$ 952,242
		
11,121
		—		
33,176$ 722,143		—		 722,143
		 702,198$ 19,945$ 527,571
		
6,241
		
—
		 11,648$ 9,093,264
		—		 9,093,264
		 8,813,967$ 279,297$ 3,767,516
		 132,516
		
1,582
		 195,407

		
—
		
—
		
—
		
—
		
—
$ 1,561,462
		
—
		
—
		
—

$ 9,093,264
		—		 9,093,264
		 8,813,967$ 279,297$ 5,328,978
		 132,516
		
1,582
		 195,407(b) Geographic Segment Information
As international sales of the Company and its consolidated subsidiaries for the years ended December 31 , 2008 and 2007
constituted less than 10% of consolidated 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, 2008 and 2007. For thisreason, overseas sales have not been disclosed.

52/ Canon Marketing Japan Inc.

with
14 Transactions
Affiliated Companies
Current consolidated fiscal year (from January 1, 2008 to December 31, 2008)
Parent company and major corporate stockholders, etc.

Category

Capital or
Name ofinvestmentcompany, Address
capitaletc.
(Millions ofyen)

ParentOhta-ku,company Canon Inc. Tokyo

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

Manufactureand sale of(Ownership)business
Directequipment,
55.2%¥ 174,762 consumer
Indirectequipment,
0.0%
and industrial
equipment

Related contents
Boardmembers
holding
concurrent
positionsTwo hold
concurrent
positions

Businessrelationships

Manufactureof products
sold by
Canon MJ

Transaction
amount(Millionsof yen)Subject

Balance at
end offiscal year
(Millionsof yen)Purchases of
products¥ 339,635

Accounts
payable¥ 89,467

Operatingtransactions

Sales ofbusiness
equipment
andconsumables,etc.

¥ 15,716

Accounts
receivableand others¥ 3,712

Nonoperatingtransactions

Loans ofcapital¥ 20,000

Short-term
loans¥ 20,000

Contents oftransactions

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 proposing thiscompanyʼs 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.

Previous consolidated fiscal year (from January 1, 2007 to December 31, 2007)
Parent company and major corporate stockholders, etc.
Capital or
Name ofinvestment
Category company, Address
capitaletc.
(Millions ofyen)

ParentOhta-ku,company Canon Inc. Tokyo

Related contents
Percentage
Board
Business possession ofcontents or voting rights members
Businessholding
occupation (Ownership)concurrent relationships(%)
positions

Manufactureand sale of(Ownership)business
Directequipment,
51.8%¥ 174,698 consumer
Indirectequipment,
0.0%
and industrial
equipment

Two hold
concurrent
positions

Manufactureof products
sold by
Canon MJ

Transaction
amount(Millionsof yen)Subject

Balance at
end offiscal year
(Millionsof yen)Purchases of
products¥ 368,968

Accounts
payable¥ 107,466

Sales ofbusiness
equipment
andconsumables,etc.

¥ 18,518

Accounts
receivableand others¥

Contents oftransactions

Operatingtransactions

5,899

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 proposing thiscompanyʼs desired prices.
(2) Sales of business equipment and consumables, etc. are subject to similar conditions as general transactions.

Canon Marketing Japan Inc. /53

15 Business
Combination

11. Assets and liabilities of the acquired company as of thedate of the business combination

Application of the purchase method
Purchase of ARGO 21 Corp.ʼs stock

1. Corporate name of the acquired entity
ARGO 21 Corp.

Thousands of
U.S. dollars (Note 1)

Millions of yen(For the year ended December 31, 2007)
 Current assets
 Fixed assets
 Total assets
 Current liabilities
 Long-term liabilities
 Total liabilities¥ 10,330
7,272¥ 17,602¥ 4,587
2,818¥ 7,405

90,61463,789$ 154,403$ 40,237
24,719$ 64,956$

2. Business of the acquired entity
Supply of IT solutions (principally the supply of core systemsolutions to financial institutions and public corporations)

12. Estimated effect on the consolidated statement of income
for the year ended December 31 , 2007 if the businesscombination had been completed on January 1, 2007

3. Purpose of business combination

Millions of yen

To expand and strengthen the IT solutions business

4. Date of business combination
June 21, 2007
5. Legal form of business combination

Thousands of
U.S. dollars (Note 1)(Unaudited) Sales Gross profit
 Operating income Income before income
taxes and minority interests
 Net income¥ 7,067¥ 1,983¥ 522$ 61,991$ 17,395$ 4,579

¥

218

$

1,912

¥

19

$

167

Purchase of stock(Method of calculation and main assumptions for estimates)

6. Corporate name after business combination of the acquired
entity ARGO 21 Corp.
7. Percentage of total shares acquired
83.18%
8. Period of operations of the acquired company included in
the consolidated statement of income. From April 1, 2007
to December 31, 2007
9. Acquisition cost and its breakdown
Acquisition cost of shares¥12,460 million ($109,298 thousand)Expense directly incurred for acquisition (advisory fee)¥315 million ($2,763 thousand)10.  Amount of goodwill¥4,316 million ($37,860 thousand) Reason for the generation of goodwill

Expected increase in future profitability as a result of
business development

The above estimated amounts were calculated on the basisof the consolidated sales and income figures of Argo 21 Corp.
for the period from January 1, 2007 to March 31, 2007. The
estimated amount of amortization of goodwill during this threemonth period has been deducted.
Transaction under common control

1. Names and businesses of parent and subsidiary companies
after business combination
 Sole parent company through stock exchange(1) Corporate name
Canon Marketing Japan Inc.
(2) Business
Marketing of Business Solutions, Consumer
Equipment, Industrial Equipment and provision ofsolutions with respect to these businesses Wholly owned subsidiary through an exchange of stock(1) Corporate nameArgo 21 Corp.
(2) BusinessSupply of IT solutions (principally the supply ofcore system solutions to financial institutions andpublic corporations) Method of amortization of goodwill

Straight-line method
 Period of amortization of goodwill

Over 5 years

54/ Canon Marketing Japan Inc.

2. Legal form of business combination
Exchange of stock3. Corporate name of subsidiary after business combination
Argo 21 Corp.

6. Additional acquisition of subsidiaryʼs shares Acquisition cost

Acquisition cost of shares¥2,339 million ($20,518 thousand)4. Outline and purpose of the transaction

 Stock exchange ratio and basis for determination of

Based on the results of tender offers made up to June
2007, it was determined that Argo 21 Corp. should be
converted into a wholly owned subsidiary through an
exchange of stock to be implemented on November 1,
2007. This was done in order to protect the interestsof minority stockholders, and to facilitate the planned
merger of Argo 21 Corp. and Canon System Solutions
Inc. in fiscal year 2008.

stock exchange ratio(1) Type of shares and stock exchange ratio
Common stock
Canon Marketing Japan Inc. 1: Argo 21 Corp. 0.6(2) Basis for determination of stock exchange ratio
The stock of the Company was valued at market.
The stock of Argo 21 Corp. was valued at market
and on the basis of the market value of net assets,comparisons with similar companies, and discounted
cash ﬂows. The stock exchange ratio was based on
the combined results of these calculations.

5. Method of accounting
Accounting treatment for the transaction under common
control was in accordance with the “Accounting Standard
for Business Combinations.” (No goodwill was recognized.)(3) Number of shares delivered
1,356,076 shares (including 800,000 shares ofsubstitute treasury stock)(4) Value¥2,339 million ($20,518 thousand)Bank Loans,
16 Short-Term
Long-Term Bank Loans and Deposits
Short-term bank loans, long-term bank loans and deposits at December 31, 2008 and 2007 consisted of the following:

Short-term bank loans
Long-term bank loans maturing in installmentsfrom March 31, 2009 to October 31, 2009
DepositsThousands of
U.S. dollars (Note 1)

Millions of yen

Averageinterest rate̶		2008 		
¥

—

—
̶ 		
0.30% 		 2,781¥ 2,7812007 		
¥

343

2008
$

—

—
131 		
2,572 		 30,560¥ 3,046$ 30,560

17 Stockholders’EquityThe Corporate Law of Japan went into effect on May 1 , 2006 ,replacing the Commercial Code. It is applicable to events ortransactions of companies in Japan 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 paidin or provided in consideration for newly issued stock shall berecorded as common stock. However, it also allows 50% or lessof 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 resolutionof the Board of Directors, without requiring the approval of aresolution at a general stockholdersʼ meeting. The Company

has met said criteria and amended its Articles of Incorporation
at the annual general stockholdersʼ meeting for fiscal 2006. The
Corporate Law provides that an amount equal to 10 % of theamount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than thelegal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve andthe 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 % of common stock(i.e. the aggregate amount of the Companyʼs legal reserve has
already reached 25% of its common stock).

Canon Marketing Japan Inc. /55

Report of Independent
Auditors

56/ Canon Marketing Japan Inc.

Corporate
Data

HEADQUARTERS

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

Date of Establishment
February 1, 1968

Capital Stock¥73,303,082,757

Stock

Number of Employees

Consolidated: 19,034
Non-consolidated: 5,762(As of December 31, 2008)

Main Locations of Operations
Headquarters, Makuhari office and branches(Sapporo, Sendai, Nagoya, Osaka, Hiroshima
and Fukuoka)(As of April 1, 2009)

151,079,972 shares

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

Major Stockholders
Name of Stockholder

Number of shares held
(thousands)

Percentage of ownership*(%)

75,70913,746
5,110
3,679
2,916
2,815
2,408
1,560
1,535
1,319

50.11
9.09
3.38
2.43
1.92
1.86
1.59
1.03
1.01
0.87

Canon Inc.
Canon Marketing Japan Inc.
CB New York Orbis SI CAV
Canon Marketing Japan Inc. Employee Stockholding Plan
Japan Trustee Services Bank, Ltd.(4 G)Japan Trustee Services Bank, Ltd.
Northern Trust Company AVFC re Fidelity Funds
The Bank of New York Treaty Jasdec Account
The Master Trust Bank of Japan, Ltd.
Danske Bank Clients Holdings*Percentage figures exclude Canon MJʼs treasury stock holdings. With these holdings, the figure for Canon Inc. would be 50.1%

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 2009–2011)• Stock information• Annual reports

Canon Marketing Japan Inc. /57

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/co-profile/ir-e

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