Raising,
Delivering,
ExpandingAnnualReport2013

for the year ended December 31, 2013

Profile

The globally respected Canon Group participates across a broad spectrum ofbusiness activities in over 180 countries worldwide. The role of the Canon
Marketing Japan (Canon MJ) Group within the Canon Group includes marketingand the proposal of solutions, primarily within Japan.
We create new value for our customers through interactions in a wide rangeof business areas—life, work and society. Each of the 18,400 people employedby our 29 group companies is dedicated to customer needs and working tobuild our future as a service creation group providing value that exceeds
customer expectations.

Canon Marketing Japan Group’s Role
Maintain customer focus

Overseas

We will always think and act from thecustomer’s perspective.

Products + Add value

Canon products

Canon MJ

Customers
Customerneeds

Feed back accurate information
about market needs

Establish two-way
communication
We will identify real customer needs throughcontinual dialog with our customers.

Canon INC.

Participate in manufacturing

Business Partners
Alliance Partners

We will work with Canon Inc. to reflect “voiceof customer” perspectives in research,development and production.

COntents
02 Growth Scenario

16 At a Glance

28 Sustainable Management

08 To Our Stockholders and Stakeholders

18 Segment Review and Strategies

35 Financial Section

10 Financial Highlights

26	Special Feature:

65 Corporate Data

11 A Message from the President

New Approaches in Production Printing

Disclaimer Regarding Forward-Looking Statements
This annual report contains forward-looking statements about the performance and management plans of Canon Marketing Japan Inc., based on management’s assumptions in light ofcurrent information. The following factors may therefore influence actual results. These factors include consumer trends in Japan 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.

Under Way
with growing momentum
from new markets
Market paradigms have changed
radically in recent years because of therapid pace of technological innovation.
For Canon MJ, it is not enough simply tokeep pace with these dramatic changes.
We must play a role in helping to shape
this new era.
Our return to a consistent growth track
depends on our ability to develop newmarkets and provide new products andservices. That is why we are alreadysowing the seeds of future growth under
our Three-Year Management Plan andLong-Term Management Objectives
Phase II.
The preliminary results of our recent
efforts point to a robust growth scenario.

Canon Marketing Japan Inc.

01

01

GrowthScenario

Raising

the Canon Brand

Our customer contact points are vital to
our ability to consider every aspect of ouractivities from a customer-focused
perspective. We help to raise the value of
the Canon brand by applying thatperspective to our role in informing thedevelopment of attractive Canon
products.
In our existing Canon Group-related
business domains, we aim to maintainstable growth averaging 3% annually.
We are working toward this goal bybuilding a robust income structure,including further improvement in the
productivity and income potential of the
document business, and continuing
efforts to increase sales of Canoninterchangeable lens cameras andconsolidate our leadership in terms ofmarket share.

02 Canon Marketing Japan Inc.

Average
growth rate

3%

Growth scenario:
Canon’s existingdomains(Billions of yen)

427

426

448

460

2013 2014 2015 2016
resultobjectiveImproving the Productivity andIncome Potential of
the Document BusinessWe aim to expand the number of machines in field (MIF) anddocument volumes by actively developing new customers. We willachieve this goal by further enhancing our iR-ADV range of officemultifunctional products (MFPs), and by using our document
solutions to strengthen customer contact points.
We are also working to maintain income streams fromcontracted maintenance services by improving service efficiency
and reducing costs. At the same time, we are improving
productivity by decisively implementing reforms across all
business processes, including marketing and back-end
processes. In addition, we have begun to aggressively roll out
managed document services.

Maintaining and Strengthening our Number-One
Share of the Interchangeable Lens Camera Market
The Japanese market for interchangeable lens cameras is expanding. In this expanding market, we will use ourunique marketing methods to target all consumers, from entry-level users to professionals, by making optimaluse of our accumulated knowledge of the relationships between customers and their photos. Our continuing
strategy will be to encourage compact camera and smartphone camera users to step up to entry-level EOS
Kiss range and the EOS M mirrorless cameras, and from those to middle-range models. Canon’s extensive
range of interchangeable lenses is a key strategic asset as we work to expand and improve our stable earnings
base, while maintaining our number-one position in terms of market share.

Canon Marketing Japan Inc.

03

02

GrowthScenario

Deliveringhigh customer value

Canon products evolve to meet changing user needs. We
provide our customers with enhanced value by offeringsolutions centering on those products.
We are determined to strengthen our earning
performance in areas with growth potential that comprise
Canon Group’s new priority business domains, and we
aim to achieve annual sales growth averaging 18%. Oneof our goals is the expansion of the production printing
business, which is a new priority field for Canon. We also
aim to expand our line-up of commercial imaging
equipment, build a major presence in the network camera
business, and strengthen our mixed reality system
imaging technology business.
04 Canon Marketing Japan Inc.

Integrated Service Structure
for the Production Printing
Business
The size of the Japanese digital printing
market is expected to double over the next
five years. In April 2014, we established a
new company, Canon Production Printing
Systems Inc., to strengthen ourorganization in the emerging growth area ofcommercial printing and digital printing
services. As a result of this move, we haveestablished an integrated structureencompassing all stages from the supply
of a wide range of products and systemdevelopment to marketing, maintenancesupport and printing services.

Becoming a Major Player in
the Network Camera Business
Factors driving the growth of the network camera market
include the trend toward digitization and high pixel counts,
as well as the expansion of marketing applications. Ouradvantages in this area include high-resolution products
embodying Canon’s expertise as a camera manufacturer,
and the solutions development capabilities of the Canon MJ
Group. We aim to expand our business activities in the
network visual solutions business.

Average
growth rate

18%

Growth scenario:
Canon’s newpriority domains(Billions of yen)

65
51
40

44

2013 2014 2015 2016
resultobjective

Expanding Our Line-up
of Commercial Imaging Equipment
The commercial imaging equipment market is trending toward 4K andeven higher resolutions. In January 2014, Canon MJ responded to thistrend by strengthening its system structure for 4K workflows, including
the introduction of a new 4K image production display. We will continue
to expand our business in this area by offering high-quality Canon
products with 4K input and output capabilities to support high-resolution
imaging solutions for users in fields requiring high-end video production.

Canon Marketing Japan Inc.

05

03

GrowthScenario

Expandingour horizons and services

In addition to our role in marketing Canon products, we will also
continue to expand our activities in other business domains. We areenhancing our IT service capabilities even as we strengthen our
trading company role, including the importation of advanced products
from overseas manufacturers, and the provision of technical andmaintenance support for those products.
We also continue to strengthen Canon MJ’s independent businessactivities, including the data center business. Another goal is thereinforcement of our cross-organizational IT solutions capabilities
within the Canon MJ Group. In overseas markets, our focus is on
developing our IT solutions business in Asia and accelerating theevolution of our independent business activities, such as the medical
business. Our goal is to achieve sales growth averaging 13% per year.

Expansion of theData Center BusinessContinuing growth is predicted for the data center
service market. Contributing factors include anincreased emphasis on disaster recovery after the Great
East Japan Earthquake, as well as growing volumes ofdigital data.
Our Nishi-Tokyo Data Center, which became
operational in October 2012, combines advanced security
measures with an inland location on solid bedrock.
Equipped with Tier 4 facilities, the Nishi-Tokyo Data Centerhas already established an excellent reputation with users
and continues to attract a steady flow of new contracts. We
will continue to expand this business aggressively byoffering a diversified range of data center services.

06 Canon Marketing Japan Inc.

Average
growth rate

13%

Growth scenario:
Independent
business(Billions of yen)

275
239
190

204

2013 2014 2015 2016
resultobjective

Material Automation (Thailand) Co., Ltd.
President: Hidesato Kodama
Established: January 1992
Capital: THB50 million
No. of employees: 171 (As of December 31, 2013)
Core business:
The provision of IT solutions in Thailand

Expanding Our Overseas Activities in the Areas of
Infection Control and Pharmaceutical Dispensing
We have unique technologies in the fields of sterilization equipment
for infection management and packaging systems for pharmaceuticaldispensing. We will continue to expand our product line-up in theseareas while working with overseas Canon Group subsidiaries to build
distributor networks and strengthen our presence in overseas
markets. We have already signed distributorship contracts in
Singapore and Russia.

Canon IT Solutions (Shanghai) Company Limited
President: Kazunori Asada
Established: June 1997
Capital: ¥150 million
No. of employees: 101 (As of April 1, 2013)
Core business:
Product development and sales of Canon products, System Integration andConsulting for Canon Group companies and Japanese-affiliated companies

Canon IT Solutions (Thailand)
President: Hidesato Kodama
Canon IT Solutions (Philippines), Inc.
President: Yutaka Haraki
Established: November 2012
Capital: US$200 thousand
No. of employees: 3 (As of April 1, 2013)

Established: August 2012
Capital: THB8.9 million
No. of employees: 3 (As of April 1, 2013)
Core business:
The provision of IT solutions in Thailand

Core business:
The provision of IT solutions in the Philippines

Dynamic Development of
IT Solutions Business in Asia
Investment by foreign-owned companies continues to expand inSoutheast Asia, which is playing an increasingly prominent role as adriver for world economic growth.
The Canon MJ Group has strengthened its IT service businessstructure in Southeast Asia by acquiring Material Automation(Thailand) Co., Ltd. (MAT), which has built an excellent reputation asa provider of IT services to Japanese-owned companies in Thailand
based on a track record spanning over 20 years. Southeast Asia,
especially Thailand, has achieved remarkable economic growth inrecent years. MAT, which also has a local subsidiary in Vietnam, will
actively expand its IT business in the region in anticipation ofopportunities arising from the establishment of the ASEAN
Economic Community (AEC) in 2015.
Canon Marketing Japan Inc.

07

To Our Stockholders and Stakeholders

Adhering

to an aggressive management agenda

Positive trends emerged in the Japanese

Our vision for 2016 under the new

economy in 2013. Expectations of an

medium-term management plan

improvement in business earnings

announced in 2014 is to build therose in step with progress toward

Canon MJ Group into a service creation

the correction of the overvalued yen,group capable of continuously offeringand both consumption expenditure

unique new added value. Our financial

and production activity showed signs

target for 2016, which will be the finalof recovery. The Canon MJ Group’s

year of the plan, is net income of ¥23

financial indicators also began tobillion, which is higher than the ¥20

improve conspicuously in the second

billion record set in 2007.

half of the year, and we achieved growth

The Canon MJ Group is determinedat the operating income level for theto meet the expectations offourth consecutive year. We see thesestockholders and stakeholders bytrends as evidence that our structural

working to achieve this target throughreform measures and continuing efforts

further strengthening of its income

to improve productivity have started

structure in existing Canon Group-

to drive a steady shift toward a robust

related business domains, and throughincome structure.

the pursuit of proactive business

Our policy on shareholder returns

strategies in growth areas.

calls for a consolidated dividend payout
ratio of around 30%. We therefore

We look forward to continuing support

set the dividend for the year endedof our stockholders and stakeholders.

December 31, 2013 at ¥24 per share,
consisting of interim and final dividendsof ¥12 each.

Chairman Haruo Murase

08 Canon Marketing Japan Inc.

President Masami Kawasaki

Canon Marketing Japan Inc.

09

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

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

2011

2013

Net sales¥ 657,216¥ 659,218¥ 632,419$ 6,259,200

Cost of sales

437,006

438,333

409,527

4,161,962

Gross profit

220,210

220,885

222,892

2,097,238

SG&A expenses

203,197

204,083

214,450

1,935,209

Operating income

17,013

16,802

8,442

162,029

Net income

10,168

10,5796,764

96,838

Total assets

467,076

462,574

447,7654,448,343

Total stockholders’ equity

256,795

253,862

250,671

2,433,886

FOR THE YEAR:AT YEAR-END:

Yen

U.S. dollars (Note 1)

PER SHARE OF COMMON STOCK:
Stockholders’ equity¥ 1,980.22¥ 1,907.50¥ 1,827.25$ 18.86

Net income (Note 2)

76.67

77.45

49.30

0.73

Cash dividends (Note 3)

24.00

24.00

20.00

0.23

%

KEY RATIOS:
Total stockholders’ equity ratio

55.0

54.9

56.0

ROE

4.0

4.2

2.7

Thousands of shares

COMMON STOCK:
151,080

Number of shares outstanding at year-end

151,080

151,080

Notes:
1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥105 to U.S.$1, the prevailing exchange rate as of December 31, 2013.
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. ‌Effective fiscal 2013, we have changed to an accounting method that deducts a portion of sales incentives (which had previously been accounted for under selling, generaland administrative expenses) from net sales; therefore, the amount of net sales for fiscal 2012 and relevant key management indicators have been adjusted retroactively.

Net sales

Operating income

Net income per share(Billions of yen)(Billions of yen)

(Yen)

77.45
687

674

632

659

17

657

17

76.67
49.30
26.70

8

8

6
-31.62

2009 2010 2011 2012 2013

10 Canon Marketing Japan Inc.

2009 2010 2011 2012 20132009 2010 2011 2012 2013

A Message from the President

President Masami Kawasaki

Thriving
in the digital world
We are determined to achieve success and growth in achallenging business environment by leveraging groupsynergies in the areas of business solutions, IT solutions,
imaging systems, and industrial and medical systems toprovide enhanced value to our customers.
Canon Marketing Japan Inc.

11

A Message from the President

Five General
Strategies Based on
our Vision for the
Future1

Establish Canon as undisputed market leader in Japan ineach of its businesses2 nhance productivity and added value in existing businessEdomains by maximizing group synergies

3

Strengthen and expand growth areas in existing businesses4 oncentrate all group efforts on creating businesses and procuringC
new products with a sense of speed

5

Promote the “Beyond Japan” concept in all business domains

Despite negative factors, including concerns
about instability in some overseas economies, theJapanese economy followed a recovery trend in

Launch of New Medium-Term
Management Plan (FY2014–16)

2013. Rising expectations toward the “Abenomics”

The Canon MJ Group formulates a three-year

policies introduced by the Abe administration thatmanagement plan each year on a rolling basis. Our

took office at the end of 2012 were reflected infocus under the new medium-term management

signs of improving economic performance, including

plan, which has FY2016 as its target year, is ona sustained recovery in personal consumption

extending and refining the objectives of recent plans

expenditure, and a gradual improvement in businessto build the Canon MJ Group into a service creation

sector capital expenditure.

business group.

The Canon MJ Group worked dynamically toSpecifically, we aim to evolve beyond productexpand sales of new products and offer a variety

sales into a value-creating trading company andof solutions in this economic environment. Despite

provider of enhanced solutions. We will also build

slower growth in our performance indicators in

the Canon MJ Group into a company dedicatedthe first half of fiscal 2013 (January 1–December

to the improvement and training of in-house talent31, 2013), our net sales rose year on year in thecapable of leading growth strategies and driving

second half, and the total for the year was closebusiness activities. Our future vision also calls forto the previous year’s level with a 0.3% decline tofurther reinforcement of the income potential of¥657.2 billion.

existing business domains through continual reform

Income trends followed a similar pattern, withof our income structure.

slow growth in the first giving way to a recovery

We aim to realize our vision for the Canon MJ

in the second. Also, as a result of continual cost

Group in FY2016 through five overall strategies. First,

reduction, consolidated operating income was 1.3%

we will strive to establish an overwhelming position

higher year on year at ¥17.0 billion.

of leadership for Canon businesses in the Japanese

There were extraordinary losses, including

market. Second, we will improve productivity

retirement losses on rental assets and otherand added value in existing business domains bylosses on sales of fixed assets. As a result,maximizing group synergies. Third, we will strengthen

consolidated net income declined by 3.9% year

and expand growth areas in conjunction with existingon year to ¥10.1 billion.

Canon Group-related business domains. Fourth, wewill focus the total energies of the Canon MJ Group
toward the rapid creation of new businesses and the

12 Canon Marketing Japan Inc.

Financial Targets
under theMedium-Term
Management Plan
(FY2014–16)

Results for FY2013

Target for FY2016¥657.2 billion¥800.0 billion

Net sales
Operating income
Operating income-net sales ratio
Net income

procurement of new goods. Fifth, we will develop
activities based on the “Beyond Japan” concept in all
business domains.
By putting these five strategies into effect, weAverage annual
growth rate: 6.8%

¥17.0 billion¥36.0 billion

2.6%

4.5%

¥10.2 billion¥23.0 billion

Growth Scenario Driven
by Independent Business Domains
The markets in Japan for existing Canon Group-

aim to achieve sales and income growth in eachrelated business domains are maturing, andof the next three years, and to achieve net sales ofcompetition is intense. We expect moderate growth in¥800 billion and operating income of ¥36.0 billion inthese domains, but don’t anticipate significant growth.

FY2016. Our target for net income is ¥23.0 billion,

Canon Group is therefore focusing on thewhich is higher than the previous record of ¥20.0

development of products for new priority areas. In

billion set in FY2007.

addition to marketing these new Canon products,

Our target for the Business Solutions segment,
which is the biggest segment in terms of net sales,is operating income of ¥12.3 billion. This is a mature

Canon MJ is also strengthening its own independent
business domains as a source of future growth.
We will improve human productivity in existing

market, and we aim to maintain steady growth inbusiness domains through IT investment andnet sales while improving our profit margins.

other measures. At the same time, we will

We are predicting operating income of ¥7.5
billion for the IT Solutions segment, based on
net sales growth of 9.1% per year. The Imaging

redeploy personnel into new priority domains andindependent business domains.
In FY2013, net sales from new business domains

Systems segment centers on existing businessamounted to ¥40.1 billion, while independent

domains, such as cameras and inkjet printers,

business areas contributed ¥190.3 billion. By

and we anticipate a stable trend in earnings.

FY2016, we aim to increase these totals to ¥65.0

Operating income is expected to remain closebillion and ¥274.5 billion respectively. This will require

to the FY2013 level. The strong growth potential

annual growth averaging 18% and 13% respectively.

of the industrial and medical systems areas isreflected in a projected net sales growth rate

Business Solutions While major growth is unlikelyof 31.2% per year. From an ¥1.8 billion loss inin the existing Canon Group-related business

FY2013, the operating result is expected to move

domains of office multifunction products (MFP) andsubstantially into positive figures with operating

laser printers, these products will continue to be core

income of ¥3.3 billion.

contributors to earnings in the business solutions
segment. To expand sales in the mature MFP market,
we will need to capitalize on the potential of ourCanon Marketing Japan Inc.

13

A Message from the President

Financial Targets
by Business Segment
Business Solutions
IT Solutions
Imaging Systems
Industrial/Medical

Results for FY2013

Target for FY2016¥327.3 billion¥375.0 billion¥5.5 billion¥12.3 billion¥142.3 billion¥185.0 billion¥0.4 billion¥7.5 billion

Net Sales¥191.7 billion¥215.0 billion

Operating Income¥12.5 billion¥12.3 billion

Net Sales¥26.1 billion¥59.0 billion

Operating Income-¥1.8 billion¥3.3 billion

Net Sales
Operating Income
Net Sales
Operating Income

products and solutions to expand our market shareadministration of those systems. The business isand increase the number of machines in field (MIF).

now expanding steadily. We have plans for further

The realization of these goals will also lead toexpansion in the future, including the enhancement

increased document volumes, resulting in the growthof contracting schemes to include system

of maintenance services and sustained income flows.

administration.

We also aim to improve segment profitability by

Our recently acquired IT solutions company

slowing the downward trend in maintenance unit

in Thailand, Material Automation (Thailand) Co.,

prices and enhancing service efficiency. We will alsoLtd. (MAT), is steadily expanding its customer

target growth in laser printer sales by combiningbase among Japanese companies with businessproducts with unique solutions for specific business

operations in Thailand. It currently has businessneeds offering future growth potential, such as

relationships with over 500 companies. We plan

healthcare, distribution and retailing. In the area of

to make MAT the hub for the expansion of our IT

commercial printing, which is a new priority domain

solutions business into other in Southeast Asian

for Canon, we have established an expert marketing

countries, including the Philippines and Vietnam.

organization capable of appealing to highly
specialized users by establishing Canon Production

Imaging Systems In the digital camera category,

Printing Systems Inc. in April 2014. In the area of

we will continue to pursue marketing strategies

independent business activities, we are fully

designed to encourage people who now takecommitted to the development of new businesses

photographs with their compact cameras andbased on packages combining hardware withsmartphones to move up to the entry-level EOS

services, such as the SME IT solutions provided by

KISS and EOS M Series cameras, which provide a

Canon System & Support Inc.

real photographic experience, and thence to
mid-range models, such as the EOS70D and the

IT Solutions Most of the IT solutions provided by

EOS 5D Mark III. We also aim to enhance ourCanon MJ are based on our independent businessearning potential in this area by achieving the top

activities and offer significant growth potential.

market share in all classes of interchangeable lensOur Nishi-Tokyo Data Center has earned an
excellent reputation with business users since
it became operational in October 2012, thanks

cameras, and by expanding sales of Canon’s
extensive range of interchangeable lenses.
Major international sporting events, including

to its provision of total support at all levels fromthe Winter Olympics and Soccer World Cup in

the creation of advanced security systems to the2014, the Rio de Janeiro Olympics in 2016, and the

14 Canon Marketing Japan Inc.

Growth Scenario(changes in net sales)(Billions of yen)

Independent businesses‌Canon’s new priority
domains‌Canon’s existingdomains

274.5
238.8
190.3

203.6

40.1
426.9

43.7
425.9

50.9
448.3

65.0
460.5

13%

18%

3%
Average
growth rate2013
result2014

2015
objective

2016

Tokyo Olympics in 2020 are driving a shift to high-in existing business, and there is a limit to our ability

resolution technology, including 4K systems, into achieve sustainable growth solely by expanding

the fields of broadcasting and image production.

our market shares. However, we have a robust

We are determined to expand our business in thisfinancial structure, and over the next three years wearea by supplying high-quality Canon products with

aim to achieve our financial targets by investing a

4K input and output capabilities to support high-cumulative total of ¥50.0 billion, including investment

resolution imaging solutions. The Canon MJ Groupin new business domains and investment in IT

will also expand its range of commercial imaging

systems to improve productivity.

equipment solutions based on our extensive line-upof monitoring camera systems.

We will also expand our business domains
through mergers and acquisitions. We will provide a¥40.0 billion reserve for strategic M&A activities.

Industrial/Medical In the industrial equipment

According to our forecasts for the Canon MJ

category, which includes semiconductor-relatedGroup in FY2014, consolidated sales will increase

equipment, our goal is to increase our sales byby 2.4% year on year to ¥673.2 billion, consolidated

adding more manufacturers and expanding ouroperating income by 10.5% to ¥18.8 billion, andproduct line-up in order to strengthen our capacity toconsolidated net income by 18.0% to ¥12.0 billion.

handle not only semiconductor-related applications,

As in FY2013, we again plan to pay a yearly dividend

but also non-semiconductor applications.

of ¥24.

In the medical systems field, we will dynamically

I will conclude this message by expressing our

expand our independent business activities relating

determination to ensure that the Canon MJ Groupto infection management and pharmaceuticaloffers the highest possible value to all stakeholders,

dispensing systems, while also building a presence inincluding our stockholders, by achieving sustainable

overseas markets. We will also enhance our medical-

income expansion while fulfilling our corporate

related solutions, including medical imaging andsocial responsibilities. We will continue our efforts toelectronic medical record systems.

enhance our reputation with all people and society
in general by reflecting the wishes and expectations

Investment Plan and
Financial Forecasts for FY2014

of our many stakeholders in the materiality
thresholds set up in 2013 for the Canon MJ Group.

One of the strengths of the Canon MJ Group is ourstable financial structure. We face maturing markets

Canon Marketing Japan Inc.

15

At a Glance

Close cooperation among the 29 companies in the Canon MJ Group andthe combined abilities of our 18,400 employees enable us to provide
customers in Japan and overseas with unique new added value in all areasof life, work and society.
*Under a new accounting policy introduced in the year ended December 2013, some items that were included in sales promotion expenses in the results for the year ended
December 2012 have been restructured as net amounts deducted from net sales. This change has no effect on operating income.

Business Solutions
Through our Business Solutions segment, wehelp customers to improve their competitivenessand operating efficiency by providing solutions
that combine a wide range of businessequipment, especially Canon products with
software and operating services.

Sales target(Billions of yen)327.3 332.5

354.0

375.0

2013 2014 2015 2016
resultobjective

Operating income target

Growth Scenario
Category(Billions of yen)

Annual average growth rate
(between 2013 and 2016)

Included businesses

10%

IT Solutions, Document Solutions,Support Business

Canon’s new priority domain

13%

Production Printing Business,
Network Cameras

Canon’s existing domain

2%

MFP (including maintenance business),
LBP (‌including cartridges and maintenance business)

Independent business

12.3

5.5

7.5

6.4

2013 2014 2015 2016
resultobjective

IT Solutions
The goal of the IT Solutions Business is to help
customers to improve their businesscompetitiveness and corporate value by using
the total resources of the Canon MJ Group to
create advanced IT environments based on
optimal combinations of IT.

Sales target(Billions of yen)

142.3 146.2

167.5

185.0

2013 2014 2015 2016
resultobjective

Operating income target

Growth Scenario
Category

Annual average growth rate
(between 2013 and 2016)

Independent business

Canon’s new priority domain* Mixed Reality

16 Canon Marketing Japan Inc.

Included businesses(Billions of yen)

7.5

12%

System Integration Business13%

IT Infrastructure & Service Business

16%

Embedded System Business-2%

Products Business

0.4

63%

MR*

2013 2014 2015 2016
resultobjective

5.0

1.8

Composition of Net Sales

Business Solutions

IT Solutions

Imaging Systems

Industrial/Medical

47.6%

20.7%

27.9%

3.8%

¥657.2 billion

Imaging Systems
In this business segment, we provide people at
all levels from beginners to professionals with
innovative ways to enjoy the fun and emotion ofphotography.

Sales target(Billions of yen)

191.7 192.3

204.0 215.0

2013 2014 2015 2016
resultobjective

Growth Scenario

Operating income target
Annual average growth rate
(between 2013 and 2016)

Included businesses

Independent business

34%

Framed photo rental (Shuttle Photo),
Photo-related online services (withPhoto), IT products

Canon’s new priority domain

29%

Commercial imaging equipment ,Commercial photo printers (DreamLabo)

Canon’s existing domain

3%Interchangeable lens digital cameras,Compact digital cameras,
Digital video cameras, Inkjet printers,
Other consumer equipment

Category(Billions of yen)

12.5

11.1

11.2

12.3

2013 2014 2015 2016
resultobjective

Industrial/Medical
We use the world’s most advanced equipment
and leading-edge technology to provide highly
specialized solutions for industry, especiallysemiconductor manufacturing and healthcare
applications, both of which play an essential
role in modern life.
Growth Scenario
Category*Effective from the year ending December 2014, the Industrial Equipment
segment has been renamed as the Industrial/Medical Segment.
Annual average growth rate
(between 2013 and 2016)

Included businesses

Industrial

Independent business

64%

Testing and measurement, Process equipment,
Field engineers, ecoFab, New products

Canon’s new priority domain—

New products

Canon’s existing domain

3%Component business

MedicalOriginal businesses

14%

Procurement modality/Ophthalmic products,
PACS/Medical imaging solutions, Ophthalmic
equipment, Infection management, Pharmaceuticaldispensing, Healthcare products

Canon’s existing domain

25%

CXDI, Digital non-mydriatic retinal cameras/OCT

Sales target(Billions of yen)

59.0
44.0
26.1

30.3

2013 2014 2015 2016
resultobjective

Operating income target(Billions of yen)

3.3
1.4
-0.8
-1.8

2013 2014 2015 2016
resultobjective

Canon Marketing Japan Inc.

17

Segment Review and Strategies

Business
Solutions

Major Products-

Business-use multifunctional products
Commercial printing systems
Laser printers
Large-format inkjet printers
Maintenance services
Major companies / organizations-	Canon Marketing Japan Inc.
Business Solutions Company- Canon System & Support Inc.
-	Canon Production Printing Systems Inc.
(from April 2014)

The recovery trend in the Japanese BtoB
business environment has intensified. We will
seize this opportunity to expand sales by offering
individual customers optimized hardware and IT
solutions. In the area of maintenance services,which are our core source of earnings, we aim tosecure income levels by halting the downtrend inunit prices while also improving productivity.
With the establishment of a new company, we
have created a structure to support the full-scale
expansion of the production printing business asa key growth driver. Our goal now is to achieve
the growth needed to meet the targets set downin the medium-term plan.

Performanceand Key
Trends
Office Multifunction
Products (MFPs)
The Canon MJ Group worked
aggressively to expand sales ofoffice MFPs by developing newcustomers, ranging from major
corporations to small and medium
enterprises. We focused inparticular on the imageRUNNERADVANCE Series, including theC5200 series of entry-level color
MFPs, the C2200 series ofcompact models, and theC2218F-V series for small andmedium-scale office environments.
In the area of production MFPs forthe commercial printing market, we
actively sought orders forcommercial printers, including theimagePRESS Series and the Océ

Senior Vice
President

Masahiro Sakata

VarioPrint 6000 Ultra＋ Series. As aresult of these efforts, the total
quantity of MFPs shipped
increased faster than the industry
average, and sales exceeded theprevious year’s total.

Laser Printers
In the domestic market for laser

18 Canon Marketing Japan Inc.

Growth strategies
1. Improve productivity and profitability of document business
2.	Expand specific printing (LBP) and sector-specific solutions
3. Fully launch solutions for SMEs
4. 	Establish base for turning production printing business into growth engine,
headed by new company
5. Fully launch network camera businessprinters, there was a recovery

Total net sales in the Business

Printing Systems Inc. We are now

trend in demand for printers for

Solution segment increased byworking proactively to expand thespecialist applications, especially

1.1% year on year to ¥327.3

commercial printing business,in the healthcare and distribution

billion, but operating income wasstarting with the launch of asectors. However, general office12.1% lower at ¥5.5 billion.

high-speed continuous feed printerdemand continued to stagnate,

MeasuresandDevelopments

manufactured by Océ in April.

and the number of units shipped
appears to have fallen below theprevious year’s level. The Canon
MJ Group also recorded a
year-on-year decline in sales in

Outlookfor
FY2014

this market, in part because of aorders in the previous year.

Expansion of Market Shareand MIF for Office MFPs

Energetic marketing of key

However, we maintained our

Aided by a recovery in businessproducts, especially MFPs, isnumber one position in terms ofcapital expenditure, we will

expected to lift net sales by 1.6%

units shipped.

continue to work proactively toyear on year to ¥332.5 billion indevelop new customers, while also

FY2014. We aim to increase

Large-Format Inkjet Printersworking to build market share andoperating income by 15.6% to ¥6.4

In this business category, there

increase the number of machines

billion by expanding the quantity of

was sustained growth in sales ofin field (MIF) through strategies that

MFPs sold, and by stepping up ourentry-level models for computer-include the provision ofefforts to cut costs.

aided design (CAD) use. Ink

industry-specific solutions, thecartridge sales also increased

introduction of new products, andsteadily, and sales were higher

sales promotion activities.

reactionary downswing after major

year on year.

Despite strong trends in printing

Integration of Commercial
Printing Business andEstablishment of New
Company

demand, sales of maintenance

In April 2014 we integrated allservices were affected by falling

Canon MJ Group companies andunit prices, with the result thatdivisions involved in commercial

sales fell below the previous

printing under a newly established

year’s level.

company, Canon Production

Maintenance Services,Document Services

Canon Marketing Japan Inc.

19

Segment Review and Strategies

IT
Solutions

Major Products-

System integration business
IT infrastructure & service business
Embedded system business
Products business
Major companies / organizations-

IT investment in Japan is expected to remain
on an expansionary trend in the foreseeable
future. Particularly significant is the focus on
individual system development in the financial
sector, which is an area in which the Canon MJ
Group excels. This is likely to drive continuing
expansion. We are determined to seize thisexcellent opportunity to expand the Canon MJ
Group’s income by working proactively to win
new contracts. We are also winning large
numbers of contracts for the data center
business, which is expanding steadily, and wewill continue to work actively to attract neworders in this area as well.

Canon MJ IT Group Holdings Inc.
Canon IT Solutions Inc.
Canon Software Inc.
Edifist Learning Inc.
14 other companies

Performanceand Key
TrendsWe responded to a recovery
trend in the domestic market for
IT solutions by working
proactively to win new orders.
This strategy resulted in sustained
growth in sales of systems
integration (SI) services andproducts to financial institutions,and sales exceeded the previous
year’s level.

SI Service Business
Sales increased year on year
because of growth in the numberof customized systemdevelopment projects, especiallyfor financial institutions.

Executive Vice
President

Kazunori Asada

IT Infrastructure andServices Business
The Canon MJ Group provides
outsourced services in this area.
Sales were marginally higher
year on year, thanks to growth insales of cloud services and data
center services.

Embedded System BusinessIn this business category, the20 Canon Marketing Japan Inc.

Growth strategies
1. Strengthen customer base and improve development productivity in SI services
2.	Expand data center business3. Start up new solutions business and promote commercialization of technologies held
4.	Expand global business according to each region
5.	Strengthen Group’s IT solutions capabilities in other segments besides the
IT Solutions segment

Canon MJ Group develops

the Nishi-Tokyo Data Center, whichsales in high-margin businessembedded software. Sales

became operational in Octoberareas, and the improvement of

were lower year on year

2012. We will also expand ourdevelopment productivity.

because of a downturn inbusiness activities in the area of

projects for key customers inbusiness continuity planning (BCP).

the manufacturing sector.

Product Business

Proactive Development of
Global Businesses

Replacement demand resulting

In late 2013 we acquired Material

from the termination of support

Automation (Thailand) Co., Ltd. as

for Windows XP helped to drivea consolidated subsidiary. Thatstrong growth in sales of corecompany will be the hub for our

products, including business PCs

determined efforts to build our IT

and memory-related products.

business activities in Southeast

Net sales were substantially

Asian markets, which have grown

above the previous year’s level.

dramatically in recent years.

These trends were reflected in
an 8.6% year on year increase insegment net sales, which reached¥142.3 billion. Operating income
doubled to ¥0.4 billion.

MeasuresandDevelopments

Outlookfor
FY2014The Japanese IT market is
expected to expand gradually in
FY2014, and we will implement
dynamic marketing activities instep with that trend. Net sales

Reinforcement andExpansion of Outsourcing
Businessare expected to increase by

We will further strengthen theoperating income by a factor ofoutsourcing business, including

4.6 times to ¥1.8 billion. Ourdata center services and systemstrategies for achieving thisadministration services based attarget include the expansion of

2.7% year on year to ¥146.2
billion. We aim to increase ourCanon Marketing Japan Inc.

21

Segment Review and Strategies

Imaging
Systems

Major Products-Interchangeable lens digital cameras
Compact digital cameras
Inkjet printers
Commercial imaging equipment
Major companies / organizations-	Canon Marketing Japan Inc.
Imaging Systems Company- Canon Customer Support Inc.
- withPhoto Inc.

Personal consumption expenditure expanded
steadily, and the number of interchangeablelens cameras sold was substantially higher year
on year. Reasons for this growth include a
powerful product range backed by Canon’s
brand image, and the success of our marketing
activities, especially user campaigns targetinghigh-demand periods. We anticipate further
market growth in the current year, and we will
work to stimulate market demand byencouraging users to step up to models withhigher specifications, and by promoting
photographic culture.

Performanceand Key
TrendsDigital Cameras
Our interchangeable lens cameras
continued to perform well in all
product categories, including
entry-level models, such as theEOS Kiss X7, which was launchedin April 2013 as the world’s
lightest and most compact singlelens reflex camera, our line-up of
mirrorless camera models, which
was expanded with the launch of
the EOS M2, and the mid-range
EOS-70D, which went on themarket in August. Our dynamic
marketing activities, including
user campaigns, were also
successful, resulting in record
shipments of both camera bodies
and interchangeable lenses, andsales were substantially higher

Senior Vice
President

Koichi Yagi

year on year.
We secured the biggest shareof the Japanese market forcompact digital cameras bycontinuing our strategy ofmaintaining a well-balanced
product line-up, ranging frompremium models, such as thePowerShot S120, to the

22 Canon Marketing Japan Inc.

Growth strategies
1. Strengthen inkjet products and services for home, professional and business markets
2.	Become No. 1 in all classes of interchangeable lens/mirrorless digital cameras throughcontinued step-up strategy
3.	Improve profitability of compact digital camera business by strengthening premium models
4.	Expand and improve line-up of commercial imaging equipment and strengthen solutions
5.	Expand and improve CRM (Customer Relationship Management) and promote digitalmarketing
6.	Expand new businesses for photo-related content

entry-level IXY 620F. However,¥191.7 billion, while operating

while also building an extensive

the market contracted

income increased by 14.4% toproduct line-up, including

significantly because of the¥12.5 billion.

television lenses for broadcastinguse, monitoring cameras andspread of smartphones, and sales
were lower year on year.

Inkjet Printers
Strong sales of the PIXUS
MG7130, which was launched in

MeasuresandDevelopments

September 2013, and othervideo production equipment for
the Cinema EOS System.

Outlookfor
FY2014the year, and shipments rose

Continuation of Step-up
Strategy for Interchangeable
Lens Cameras

above the previous year’s level.

In the area of interchangeable lens

We plan to launch new products

However, slower progress in thecameras and lenses, we will

and carry out proactive marketing

first half was reflected in acontinue our strategy ofactivities. However, net sales will

year-on-year decline in sales.

encouraging users to step up frombe affected by the consumption

entry-level models, including

tax increase and other factors

Commercial Imaging
Equipment

mirrorless cameras, to mid-range

and are expected to increase only

models. We aim to maintain our

marginally year on year to ¥192.3

In addition to healthy sales ofsolid position of leadership inbillion. Sales of interchangeable

monitoring cameras forterms of market share whilelens cameras in particular will bebroadcasting and surveillance

expanding reliable income

lower because of a reactionary

applications, there was also

streams, including income fromdownswing after a stock build-up

strong demand for the Cinema

our extensive range of high-margin

in the previous year ahead of the

EOS System video production

interchangeable lenses.

consumption tax increase. We

products helped to lift
performance in the second half ofare therefore predicting operatingcameras and lenses with support

well, and sales were higher year

Expansion of Solutions
Development Capabilities
for Commercial Imaging
Equipmenton year.

We will continue to expand ourfor 4K optical performance. The
new XA20/25 range of HD handy
video cameras also performed

Net sales in the Imaging

income of ¥11.1 billion, a
year-on-year decline of 11.1%.

solutions development

Systems segment were similar tocapabilities in the area ofthe previous year’s level atcommercial imaging equipment,

Canon Marketing Japan Inc.

23

Segment Review and Strategies

Industrial/
MedicalMajor Products- Industrial equipment- Medical equipment
Major companies / organizations-	Canon Marketing Japan Inc.
Industrial Equipment Sales Headquarters-	Canon Marketing Japan Inc.
Medical Equipment Sales Headquarters- Canon Lifecare Solutions Inc.
- ELQUEST CORPORATION- Canon Advanced Technologies Taiwan Inc.

Industrial Equipment:
Industrial equipment is an independent
business domain for the Canon MJ Group andis an area in which we anticipate rapid growthin the future. Last year we faced a continuing
uphill struggle in the semiconductor category,
but we aim to expand both sales and income
by moving into non-semiconductor categories
that offer strong potential in both domestic
and overseas markets, including 3D printers.

Performanceand Key
TrendsIndustrial Equipment(including Semiconductor
Fabrication Equipment, etc.)
There were signs of a gradual
recovery in the previous year,
including a year-on-year increasein sales of testing andmeasurement equipment in thesecond half of the year. However,investment by Japanese

Medical Equipment:

manufacturers of semiconductor-

Last year, we recorded strong sales ofpromising new products in the field of digitalradiography. In the current year we will market
these products proactively with the aim ofwinning more contracts, including lot sales tomajor hospitals. We also anticipate growth in
the healthcare field following the start of
shipments of sterilization equipment tooverseas markets.

first half of the year, with therelated products stagnated in the

President

Masami Kawasaki

result that sales were lower year
on year.

Medical Equipment
Medical equipment sales werehigher because of strong demand
for fully automated pharmaceuticaldispensing systems andsterilization equipment in thehealthcare area. In the medical
imaging category, there was asubstantial increase in shipmentsof digital radiography (X-ray
imaging) systems, including the
CXDI-401G COMPACT system, inthe second half of the year.

24 Canon Marketing Japan Inc.

Growth strategies
1. Expand and improve line-up of new products handled and build into pillar of growth
Industrial
Equipment

2. Strengthen technology trading company function
3. Develop Taiwan market through Canon Advanced Technologies Taiwan Inc.
1.	Expand sales of modalities by strengthening sales force
2. Strengthen and expand medical imaging IT solutions

MedicalEquipment

3. Bolster product line-up by developing new products
4.	Rigorously expand independent business areas of infection management andpharmaceutical dispensing in Japan and overseas
5.	Establish total Group presence in the medical market

However, the increasing shift

also target increased sales of

products, our performance intoward digital technology resulted

semiconductor fabrication

FY2014 will also benefit from thein lower sales of film and otherequipment in the Taiwanese

expansion of our line-up of new

consumables. There was amarket through Canon Advanced

products sourced from outside

reactionary downswing after

Technologies Taiwan Inc., which

manufacturers, such as 3D

FY2012, when major orders were

we established in March 2012.

printers, as well as thedevelopment of the Taiwaneserecorded, with the result that sales

market for industrial equipment.

reflected in lower sales for the

Expansion of Medical
Equipment Business

entire medical equipment category.

Our FY2016 target for total group

significantly higher year on year.

declined in FY2013. This was

We expect sales to be
In the area of medical products,

These factors were reflectedsales in the medical equipment

in segment net sales, which werecategory is ¥37.0 billion. We aim

we are predicting strong sales of

14.9% lower year on year at

to achieve this goal by enhancing

digital radiography systems, fully¥26.1 billion. There was an

our line-up of medical imaging

automated pharmaceuticaloperating loss of ¥1.8 billion.

solutions, including the Picture

dispensing systems andArchiving and Communication

sterilization equipment. We will also

System (PACS), operationaltarget increased sales of thesystem solutions, such as

Picture Archiving andelectronic medical record

Communication System (PACS)

systems, and infection control

and ophthalmic equipment. At thesolutions, including sterilization

same time, we will work proactively

and cleaning systems.

to expand sales in Asia and otherMeasuresandDevelopments
Enhancing Our Line-up
of New Industrial Equipment
Products
In the industrial equipment
category, we are working todevelop new markets byoverseas markets, especially for

Outlookfor
FY2014

ELK brand products.
We estimate that net sales forthis segment will increase by
16.1% year on year to ¥30.3
billion, and that the operating loss
will be reduced by ¥1.0 billion to

expanding our line-up of new
products, including non-In addition to increased sales ofsemiconductor equipment. We will

existing industrial equipment¥0.8 billion.

Canon Marketing Japan Inc.

25

Special Feature

Under the Long-Term Management Objectives Phase II, a five-year plan launched in 2011,
the Canon MJ Group aims to expand its commercial printing operations into a businessthat will contribute ¥46 billion to consolidated net sales in 2016. Since Océ N.V. joined theCanon Group in March 2010, we have developed strong product complementation
between Océ and Canon. The addition of Showa Information Systems Co., Ltd.
to the Canon MJ Group in May 2012 has resulted in closer collaboration in the areas ofmarketing and support.
In April 2014, we established Canon Production Printing Systems
Inc. Its mission is to expand our track record in the
production printing market by successively
introducing new products, andto build a presence as aleading company in the market.

*Our 2016 target for the production printing businessis net sales of ¥46 billion after the elimination ofinter-company transactions.

New Approaches in
Production
Printing—
A Growth Market

Currently worth around ¥400 billion, the Japanese market for production printing
equipment, including high-end, mid-range and low-end systems, is expected to expand
to around ¥1 trillion. The driving force for this growth, which could occur as early as within
five years, is a rapid shift to digital printing. As shown in the diagram, the target markets
for the Canon MJ Group can be divided into four classifications. On the left are largescale in-house printing in central reprographics departments (CRDs), and document
printing. On the right are outsourced commercial printing and data printing services (DPS).
Our analyses indicate that market is currently
divided evenly between the corporate and outsourced
Market targets in production printing
printing segments. However, we expect the divisionof sales to shift toward outsourcing, because of
Bulk Printing
From
Outsourcing
withinEnterprises
growing demand for business process outsourcing,
Corporate Groupand a trend toward streamlining and cost-cutting
High-speed
PrivateCommercial
within corporate groups. We also expect the trend
Printing (CRD)
Enterprises
Printing
toward digital printing to accelerate because of
Government
advantages that include high printing quality, color
Document
Data Print
and
Printing
Services (DPS)
support, easier collaboration on post-processing, andPublic Offices
added value opportunities. For these reasons, we are
predicting substantial market growth in the range of
102%–110% per year in the area of outsourced
Retail Photo
Creative Arts
Large-format Printerscommercial printing and DPS.

26 Canon Marketing Japan Inc.

Organizational
Strengthening and
Production Range
Expansion throughEstablishment of
the New Company

In April 2014 we established Canon Production Printing Systems Inc. through themerger of Showa Information Systems Co., Ltd., which manufacturescommercial high-speed, continuous feed printers, Océ Japan Corporation, which
is a manufacturer of commercial large-format printers, and Canon Print Square Inc.,
which provides printing services, including graphics and POD. Production printing units
from Canon MJ and related marketing units from Canon System & Support Inc. werealso transferred to the new company.
The establishment of a specialist company for the production printing market will
enable us to offer a wide range of products and build an integrated structure
spanning all stages from system development to sales,
maintenance support and printing services. We will target
customers with high levels of specialist knowledge throughProduct
dynamic proposal marketing in the data printing service andStrengthcommercial printing markets.
We are working to establish a full-scale presence in theProviding wide range
product line-up
continuous feed printer market following the launch of the Océ
ColorStream 3000 Z Series of high-speed continuous feed
inkjet printers in April 2014. These products were developed toSales
Supportmeet market needs in Japan, including space-saving designs
Strength
Strengthand support for fanfold forms and pressure-seal postcards.
We will progressively launch more Océ products onto theStrengthening direct
Supporting 7 service
sales by Canon MJ
centers dedicated toJapanese market. Our goal is to capture at least one-third ofand new company
production printing
the domestic market for commercial high-speed continuous
feed printers.

Production Printing
We will build a robust income basefor the production printing business.
Analog offset printing still accounts for over 95% of the printing
market, and only a small minority of companies have adopted digitalon-demand printers. We intend to challenge the printing market
head-on by building a comprehensive and versatile line-up of digitalproduction printers, ranging from continuous feed printers to cut
paper and wide-format systems, that rival offset printing in terms of
quality and running costs while offering a variety of additional
functions that cannot be achieved with analog systems. I believe that
we can consistently provide our customers with excellent products
backed by excellent services. We are determined to realize the fullpotential of the Canon Group and become the leading company inthis field by bringing together the customer bases, accumulated
experience and technology of Showa Information Systems
Co., Ltd., Océ Japan Corporation and Canon Print Square Inc.

Canon Production Printing Systems Inc.
President
Kenji Minematsu

Canon Marketing Japan Inc.

27

Sustainable Management

Under the Canon corporate philosophy of kyosei*, the Canon
MJ Group aims to provide benefits to society through its
business activities, and to contribute to the development of asustainable society while also justifying its existence as anenterprise. By continuing to pursue sustainable synergies
between the Canon MJ Group and society, we can ultimately
enhance our corporate value and corporate brand.

Philosophy

Customer Focus
Philosophy Brings Full
CSR Participation— CSR is Marketing —CSR Awareness*Translated as: “living and working together
for the common good.”

Shared Philosophy:
The “Three Selfs” Spirit

CSR AwarenessThe “Three Selfs” Spirit

Our participatory approach to CSR is basedon the sharing of the Canon MJ Group’s
CSR philosophy and values by all
employees, and on a commitment toaccurate knowledge. Our efforts to foster
CSR awareness in our employees arecoordinated by the CSR Promotion Division.

Our “Three Selfs” spirit is a central guiding principle that dates backto the founding of Canon and is part of our corporate DNA. The
code states that employees should proactively take the initiative(self-motivation), conduct oneself responsibly and withaccountability (self-management) and know one’s position, rolesand circumstances (self-awareness). The Three Selfs spirit is thefoundation for our CSR activities.

United Nations Global Compact
In December 2009, Canon MJ signed the UN Global Compact. Under this initiative, companies
commit themselves to universal principles relating to human rights, labor standards, theenvironment and the prevention of corruption. The underlying principle is that companies should
work to solve global problems through responsible corporate activities. By reflecting thisprinciple in our business activities, we will contribute to the realization of a better and moresustainable society.

28 Canon Marketing Japan Inc.

CSR Policies and Organization
The key concept guiding our CSR activities is that CSR is marketing. As a business group that has
numerous points of contact with stakeholders, we approach CSR activities from a marketing perspective.
We are creating structures that allow individual segments and companies within the Canon MJ Group to
implement CSR activities on an organized basis with participation by all employees.

CSR Activity Policy
The Canon MJ Group has published theCanon Marketing Japan Group CSR
Activity Policy with the aim of enabling
all employees to implement CSR
activities in the context of their
day-to-day work. We contribute to thedevelopment of the sustainable society
by sharing and applying this policy
throughout the entire Canon MJ Group.

CSR Activity Policy• ‌We will contribute to the creation of an enriched social environment inwhich people can live in safety and with peace of mind.
• ‌We will provide dependable quality through all of our business activities.
• ‌We will contribute to the development of human resources capable ofcontributing to improvement of society.
• ‌We will conduct our business activities fairly and in good faith, withparticular emphasis on dialog with stakeholders.
• ‌We will strive to develop safe, healthy working environments.
• ‌We will contribute to the conservation of the environment and biodiversity.
• ‌We will respect human rights.

CSR Promotion Organization
The role of the CSR Committee, which is chaired by the President,
is to facilitate CSR activities throughout the Canon MJ Group. The
CSR Committee makes decisions about group-level efforts topromote CSR activities. It drafts and adopts policies relating mainly
to measures to ensure consistent compliance with business ethics
and regulatory requirements, the improvement of information
security and governance, and the reinforcement of environmentrelated measures. These policies are implemented through the CSR
Promotion Subcommittee, which is comprised of CSR Promotion
Officers from each of the divisions and companies that make up
the Canon MJ Group.

Establishment of Materiality

Canon Marketing Japan

Group companies with
CSR Promotion
Committees

Board ofDirectors
President

Management
Committee
CSR
Committeen Canon System & Support Inc.
n ‌Canon MJ IT Group
Holdings Inc.

General administration:
CSR Promotion Division

CSR Promotion General administration:
Subcommittee CSR Promotion Division
Working
GroupsMateriality Map
4

Priorities of Stakeholders

In August and September of 2013, the Canon MJ Group carried out
a CSR survey of internal and external stakeholders. The purpose ofthis survey was to ensure that the wishes and expectations of ourmany stakeholders, including customers, stockholders, investors,
business partners, employees, communities and the global
environment, would be reflected in our CSR activities. We thenconducted an analysis using a graph in which the priorities of
stakeholders, as identified from the results of the survey, were placedon the vertical axis, and the priorities of the Canon MJ Group, whichwere extracted from our medium/long-term management strategies
and business plans, on the horizontal axis. After discussions withindependent experts and decision-making by management, we
adopted six material themes for the Canon MJ Group.
These material themes will form the core of future CSR
activity plans, under which we will redouble our efforts toensure that the expectations of stakeholders are reflected in our
CSR activities.

CSR Promotion Organization (As of April 2014)

5

1

6

2

3

Priorities of Canon MJ Group
1. Value creation in the photography and imaging field
2.	Creation of solutions in the environment and information
security fields
3.	Creation of solutions in the health and medical systems field
4.	Quality improvement and reinforcement of quality
management
5. Improvement of our ability to respond to customer needs
6.	Reinforcement of resource and energy conservation measures

Canon Marketing Japan Inc.

29

Sustainable Management

Environmental Management
We have strengthened the environmental management infrastructure of the Canon MJ Group by
developing an environmental vision and management systems. We are working to reduce environmentalloads resulting from our own business activities and the activities of our customers and society.

2015 Environmental Vision—“Future Forest 2015”
Based on the Canon Group’s “Action for Green” environmental
vision, the “Future Forest 2015” concept embodies theenvironmental vision for the Canon MJ Group. As a company withcustomer contact points in Japan, we are helping to achieve
harmony between affluence and the global environment not only by
reducing our own environmental loads, but also by working withsociety and our customers to cut CO2 emissions. We aim to realize
our “Future Forest 2015” vision through the following three activities.

Establishment of a Green Ratio
In addition to the reduction of CO2 emissions
from the business sites and logistics activitiesof the Canon MJ Group, we also help ourcustomers to reduce their CO2 emissions. Our
target for the Green Ratio, which we define as
the ratio between our emissions and those of
our customers, is that our contribution to the
reduction of CO2 emissions by our customers
should be at least 100,000 tons per year and at
least double our own CO2 emissions. In 2013,
the Green Ratio was 1:3.18.

Three Approaches to the Realizationof “Future Forest 2015”• Reduction‌of CO2 emissions from businesssites and logistics operations• Significant‌
contribution to the reduction ofcustomers’ CO2 emissions through products
and IT solutions• Environment-related contributions to society

Target for CO2 Reduction
Our contribution to the reduction of CO2 emissions at customers’
business sites will be at least 100,000 tons per year and at least
double the level of our own CO2 emissions.

2013 Green Ratio: 1: 3.18
Positive effect on global environment

2007 actual

2015 target
Green
Ratio

Contribution tocustomers’ CO2
reductions

83,895 tons

±0

100,000 tons
or higher

149,305 tons
CO2 emissions ofCanon MJ Group

Negative impact on global environment

01

TopicsResponding to the Conflict Minerals Problem
As a member of the Canon Group, the Canon MJ Group implements various
initiatives in response to the problem of conflict minerals*. In April 2013, we
held a seminar about surveys concerning conflict minerals for Canon MJ
Group suppliers. To ensure that our customers can use Canon products withconfidence, we require our suppliers to cooperate in our efforts to trace thesources of all minerals used and ensure that no conflict minerals are used.
*	Conflict minerals are certain types of minerals from African countries, including the
Democratic Republic of the Congo and its neighbors. Widely distributed through global
supply chains, these minerals have become a source of funding for armed groups in the
countries concerned. This problem has become the focus of increasing international concern.
In the United States, for example, listed companies are now required by law to disclose
information about any use of conflict minerals.

30 Canon Marketing Japan Inc.

Double or
higherSeminar on Conflict Minerals

Social Contribution
As a good corporate citizen, the Canon MJ Group contributes to society not only through its
business activities, but also through activities that are helping to create a society in which all people
can enjoy enriched lives.

Promoting the Furusato Project
In May 2010 the Canon MJ started the “Furusato Project—
Linking Our Dream to the Future,” a restoration project with theaim of bequeathing beautiful verdant furusato (rural hometowns)
to the children of the future.
This nationwide effort involves forging links with local
environmental NPOs to create beautiful furusato through such
efforts as preserving terraced rice fields and planting forests,
reviving arable land that is no longer under cultivation, andrestoring tidal flats. Since 2013, we have expanded the scope of
this program to involve the entire Canon Group. To date, over
800 volunteers have participated in 35 projects in 14 regions
within Japan.
Other forms of support provided by Canon MJ include
donations based on the number of used print cartridges collectedfrom customers for recycling.

“Smile for the Future” Project
Since January 2012, the Canon MJ Group has supported
community development through the “Smile for the Future”
project, as part of its support for recovery efforts in areas
affected by the Great East Japan Earthquake. The aim of the
project is to foster communication and support the emotional
development of children by encouraging people to enjoy nature
through the fun of photography. Activities include photography
programs and nature experience programs.

Tea-picking in Mie Prefecture

Rice-planting in Yamanashi Prefecture

A photography class in the community of Minamisanriku

02

TopicsOver 60,000 AED Seminar Participants
We believe that the Canon MJ Group can achieve growth and success byhelping to solve social problems while also creating economic value. As amarketing company, we are constantly working to meet the needs ofcustomers by supplying Canon brand products and services and otherproducts and services. As a multi-vendor for a manufacturer of automatedexternal defibrillators (AEDs), we supply AEDs to meet specific user
requirements. In addition to selling the equipment, we also organize seminars
and provide instructors to each participant how to carry out emergency firstaid using AEDs. To date, over 60,000 people have attended our seminars. We
will continue to help people to save lives through this activity.

At an AED seminar

Canon Marketing Japan Inc.

31

Sustainable Management

Corporate GovernanceCorporate Governance Organization(As of March 27, 2014)

General Stockholders’ Meeting
Appointment / Dismissal
Audits

7 Directors
Board of Directors

5 Audit & Supervisory Board Members
Audit & Supervisory Board

Management Committee

Appointment / Dismissal
Cooperation

Cooperation

Internal Auditors
OfficeCSR Committee

Auditing ofaccounts

Cooperation

Auditing Company

Appointment / Dismissal

Internal Controls Evaluation Committee

Internal
auditsAdviceGroup Companies
Staff Managers

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

The Corporate Governance Structure
In addition to the Board of Directors and the Audit &Supervisory Board, our corporate governance structure
also includes an internal auditing system. We have alsoestablished a range of committees, including the CSR
Committee, the Disclosure Committee and the Internal
Controls Evaluation Committee, to implement policies
across the entire organization.

Board of Directors
There are now seven directors, including one outside
director. By limiting the term of office for directors to
one year, we have created a management structure

32 Canon Marketing Japan Inc.

Lawyers/
Licensed Tax Accountants

Disclosure Committee

capable of adapting quickly to changes in the businessenvironment. Important decisions are made by the
Board of Directors, which normally meets once amonth, and at Management Committee meetings
attended by the directors of Canon MJ and thepresidents of key subsidiaries.
On March 29, 2011, we introduced an executive officer
system. The purpose of the system is to speed up
management decision-making in the Canon MJ Group by
separating management decision-making from executivefunctions and reducing the number of directors. It also
clarifies responsibility for the performance of business
operations and strengthens executive systems.

Audit & Supervisory Board
There are five Audit & Supervisory Board members, ofwhom two are standing members, and three areappointed from outside of the Company. The Audit &Supervisory Board sets audit policies and allocates
responsibilities to the Audit & Supervisory Board
members, who conduct stringent audits in accordanceBoard of Directors and Audit & Supervisory Board Members
Board ofDirectors

ChairmanPresident

Haruo Murase

Masami Kawasaki

Director

Director

Director

Director

Outside Director

Yo Shibasaki

Masahiro Sakata

Yutaka Usui

Koichi Yagi

Norihisa Doi

Standing

Standing

OutsideOutsideOutsideMasahiro Shimizu

Fumio Ogaki

Shigeo Hasegawa

Kuniyoshi Kitamura

Kengo Uramoto

Audit &
Supervisory
Board
Members

with those policies. Specific activities include attending
Board meetings, interviewing directors and examining
documents containing important Board resolutions. The
Audit & Supervisory Board members also monitor theCompany’s operations and assets.

corporation, nor are any operating officers of the audit
corporation involved in the conduct of internal audits ofCanon 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.

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 effectiveness of processes, internal
control systems and information security. The Internal
Auditors Office works in coordination with similar units
established in major subsidiaries. The Canon MJ Group
has 50 audit staff members.

Auditing of Accounts
Canon MJ’s accounts are audited under an audit
agreement with Ernst & Young ShinNihon LLC. There areno special interests between Canon MJ and this audit

Outside Directors and Outside Audit &Supervisory Board Members
Canon MJ has one outside director and three outside
Audit & Supervisory Board members. We have not
adopted a policy or criteria concerning the selection ofoutside directors and outside Audit & Supervisory Board
members, who are independent from Canon MJ.
However, the people that we appoint to these positions
have extensive knowledge and are able to provide
effective monitoring and supervision of management. Our
outside director, who has experience as a university
professor and official of an academic organization, has nodirect interest in Canon MJ.

Canon Marketing Japan Inc.

33

Sustainable Management

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

Risk Management
The Canon MJ Group has taken steps to ensure thecontinuity of its business activities in the event of a major
earthquake, an influenza outbreak or other contingencies
that could impact on its activities. These initiatives arecoordinated by the BCM1 Expert Committee.
In July 2007, we established the BCP2 Expert
Committee as a subsidiary organization of theManagement Committee tasked with developing,
maintaining and managing business continuity
management systems. Renamed the BCM Expert
Committee in 2010, its activities include deliberations on
BCP policies for the entire Canon MJ Group.
1 BCM: Business continuity management
2 BCP: Business continuity planInternal Controls
Chaired by the President, the Internal Controls Evaluation
Committee consists of officials representing corporate
departments and subsidiaries. Its task is to developinternal 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.

Compliance

See here for details

For the Canon MJ Group, compliance is not simply amatter of obeying laws and regulations. We definecompliance as obedience to regulatory requirements
and social rules, a commitment to social justice, andcontinuing efforts to meet the expectations of society.
Our compliance activities are designed to encouragehigh ethical values and respect for the law in individual
employees through awarenessactivities, employee educationand organizational activities.
To raise awareness of theCanon Group Code of

34 Canon Marketing Japan Inc.

Conduct, all employees and officers of Canon Marketing
Japan carry Compliance Cards. Printed on these cards
are the Three Selfs spirit and compliance tests that canbe used by individuals to check their own conduct.

Information Security

See here for details

The Canon MJ Group regards the reinforcement of
information security as part of its responsibilities toward
the creation of a more secure society, and as essential
to meeting customers’ expectations in line with ourCustomer Focus philosophy.
Our efforts follow two central themes: Reinforcing thegroup-level information security infrastructure by
improving uniformity and efficiency, and improving thesecurity, reliability and efficiency of the processes
through which we provide value to customers.
Through continuous monitoring and evaluation, we
strive to identify factors that hinder or contribute tobetter information security, a process that we also use to
upgrade our services to customers and our IT solutions.

Relationship with Canon Inc.
Canon MJ is a subsidiary of Canon Inc., which owns
58.4% of Canon MJ stock (as of December 31, 2013).
This percentage figure excludes Canon MJ’s treasury
stock holdings. With these holdings, the ownership
percentage for Canon Inc. would be 50.1%. Canon MJ
has the near-exclusive right to sell products (excluding
semiconductor and LCD lithography systems)
manufactured by Canon Inc. under the Canon brand inJapan. In fiscal 2013, our purchases from Canon Inc.
amounted to ¥242.2 billion (US$2,306.3 million*), or
66.0% of our total purchases.
Because of this relationship, a major shift in the
management policies or business activities of Canon Inc.
could have a significant impact on the businessactivities, performance and financial position of theCanon MJ Group.
* ‌The figures have been presented in U.S. dollars by translating all
Japanese yen amounts at ¥105 to U.S.$1, the prevailing exchange
rate as of December 31, 2013.

Financial Section
COntents
36 Ten-Year Consolidated Financial Summary
38 Financial Review
40 Consolidated Balance Sheets
42 Consolidated Statements of Income
43 Consolidated Statements of Comprehensive Income
44 Consolidated Statements of Changes in Net Assets
45	Consolidated Statements of Cash Flows
46 Notes to Consolidated Financial Statements
64	Independent Auditor’s Report

Canon Marketing Japan Inc.

35

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

Millions of yen

2013

2012

2011

2010

Net sales (Note 6)¥ 657,216¥ 659,218¥ 632,419¥ 674,159

Operating income

17,013

16,802

8,442

7,736

Income (loss) before income taxes and minority interests

17,055

17,52910,972

8,584

Net income (loss)

10,168

10,579

6,764

3,724

467,076
256,795

462,574
253,862447,765
250,671448,592
246,680

FOR THE YEAR:At year-end:
Total assets
Total stockholders’ equity (Note 5)
Cash flows:
Cash flows from operating activities

28,781

33,767

8,716

35,186

Cash flows from investing activities(25,757)(16,067)(12,108)(13,012)

Cash flows from financing activities(9,105)102,183(11,813)108,260(3,811)
102,373(8,171)
109,575

Cash and cash equivalents

Yen

Per share of common stock:¥

Net income (loss) (Note 2)

76.67

¥

24.00
1,980.22

Cash dividends (Notes 3 and 4)
Stockholders’ equity (Note 5)

77.45

¥

24.00
1,907.50

49.30

¥

20.00
1,827.25

26.70
20.00
1,798.16

Notes: 1.	The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥105 to U.S.$1, the prevailing exchange rate as of December 31, 2013.
2. Net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the respective fiscal years.
3. Cash dividends per share are the amounts applicable to the respective fiscal years, including dividends to be paid after the end of the year.
4.	Year-end cash dividends applicable to the year ended December 31, 2005 include a ¥2.00 bonus dividend reflecting record-high consolidated net sales, operating income
and net income.

Return on Sales (ROS)Net Sales

Working Capital(Billions of yen/%)

ROS(Billions of yen/Times)

816 822

867

905
827

362
687 674

2.2 2.2
1.9
1.5

Current Assets
Current Liabilities
Current Ratio

632

659 657328
302 302 302
2.0

1.5

0.6

1.7 1.7 1.7 1.7

1.1
196

1.8

1.9

2.0

317

325

1.9

247

260 266 255

247 247 251

254 257

7.4 7.6
2.0

6.4

4.3

212 220 214

4.2
4.0

184

163

-0.6

36 Canon Marketing Japan Inc.

234

5.4

154 157 151

FY’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Total Stockholders’EquityROE(Billions of yen/%)374 369

335

1.6
1.4

Total Stockholders’Equity and ROE

165

1.5 2.7-1.7

FY’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

FY’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Thousands of
U.S. dollars (Note 1)

Millions of yen

2009

2008

2007

2006

2005

2004

2013

¥ 686,615¥ 827,487¥ 905,137¥ 867,172¥ 821,948¥ 815,511$ 6,259,200

6,297

25,41636,88633,91929,72329,274

162,029(595)

22,22935,45232,96727,08620,186

162,429(4,343)

11,186

20,03318,807

15,35812,364

96,838449,607
246,829484,937
255,220

526,125
266,086

526,578
260,367

513,335
247,244482,337
234,158

4,448,343
2,433,886

18,144

41,122

47,21418,09436,98522,053274,105(25,834)(28,967)(21,912)(19,217)(17,887)(7,963)(245,305)(4,324)
95,575(21,738)
107,589(16,345)
117,206(6,126)108,248(4,311)
115,504(39,045)
98,844(86,714)
973,171
U.S. dollars(Note 1)

Yen¥

(31.62)¥

20.00
1,797.31

78.63

¥

40.00
1,858.39

134.84¥40.00
1,817.59

125.64¥36.00
1,739.50

101.7828.00
1,650.52

¥

81.78
22.00
1,562.23

$

0.73
0.23
18.86

5.	Total stockholders’ equity in the above table represents the total of stockholders’ equity and valuation and translation adjustments in the consolidated balance sheets. This isdue 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
stockholders’ equity and minority interests to be presented as net assets, and net assets to be classified as stockholders’ equity, valuation and translation adjustments andminority interests.
6.	Effective fiscal 2013, we have changed to an accounting method that deducts a portion of sales incentives (which had previously been accounted for under selling, generaland administrative expenses) from net sales; therefore, the amount of net sales for fiscal 2012 and relevant key management indicators have been adjusted retroactively.

Total Assets andTotal Stockholders’Equity Ratio

Total Assets
Total Stockholders’Equity Ratio

Net Income (Loss)(Billions of yen)
20.0(Billions of yen/%)
513

18.8

527 526482

485
450 449 448

15.4

463 467
12.4

11.2
48.5 48.2 49.4

50.6 52.6

54.9 55.0 56.0 54.9

10.6 10.2

55.0

6.8
3.7

-4.3

FY’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

FY’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

Canon Marketing Japan Inc.

37

Financial Review

Business Performancecustomers in the manufacturing industry. Sales in the

Net Salesfavorable performance of products for business PCs

In the year ended December 31, 2013, consolidated

and strong sales of memory-related products.

net sales were mostly unchanged from the previous
year, decreasing 0.3% to ¥657,216 million. Following
a slow start in the first half, sales developed favorably
and increased year on year in the second half.

IT products category increased substantially thanks to

Net sales in this segment increased by 8.6% year
on year to ¥142,299 million.
In the Imaging Systems segment, sales ofinterchangeable-lens digital cameras increased
substantially thanks to strong sales of entry-level

Segment Information

models, mid-range models, and mirrorless cameras

In the Business Solutions segment, overall shipments

alike. In addition, we captured the top market share inof multifunctional products (MFPs) showed growth

all three categories: professional, mid-range, andabove the industry average, and sales increased year

entry-level. In the compact digital camera category,on year. This is the result of aggressive efforts tosales of premium models and entry-level models wereincrease sales of office MFPs, including thestrong. As a result, we captured the top market sharedevelopment of new customers, as well as efforts toby offering a balanced product line ranging frompromote orders for Canon and Océ commercial

premium to entry-level products. Nevertheless, sales

printers in the production MFP category. In the laser

decreased from the previous year due to factors

printer category, despite measures to increase sales

including market contraction. Full-year sales of inkjet

focused primarily on A3 monochrome printers, sales

printers decreased as a result of a slow start in thedecreased as a result of factors including major orders

first half, despite strong second-half unit shipments

booked in the previous year. Nevertheless, wethat exceeded the first-half result. Sales of ink

maintained our number-one share in units shipped. In

cartridges decreased, partly as a result of retailer

addition, sales of toner cartridges decreased year on

inventory adjustments in the first half. Sales from theyear for reasons including the non-recurrence of largecommercial imaging equipment category increased

purchases accompanying the major orders booked inon solid performance of lenses for broadcasting andthe previous year.

monitoring applications, the CINEMA EOS SYSTEM,

Although demand for printing continued to rise,sales of maintenance services for office MFPs
decreased due to falling unit prices. Sales at Canon
System & Support Inc., a member of the Canon MJ

and high-definition camcorders.
Net sales in this segment decreased by 0.1% year
on year to ¥191,730 million.
In the Industrial Equipment segment, industrial

group, exceeded the prior-year level on growth inequipment (semiconductor fabrication equipment,

units shipped, in part through the development of newetc.) showed signs of a gradual recovery, such as

customers, and favorable development of the IT

second-half year-on-year sales increases for someSolutions business. Sales at SHOWA INFORMATION

products, such as inspection and measuring systems.

SYSTEMS, CO., LTD. also increased on a healthy

Nevertheless, sales decreased due to the impact ofincrease in sales of mainstay production printers andstagnant semiconductor-related capital investment instrong sales of POP advertising production printers.

Japan in the first half. Overall sales of medical

As a result, net sales in this segment decreasedby 1.1% year on year to ¥327,264 million.

equipment decreased. Sales from the healthcare
category increased on strong performance from fully

In the IT Solutions segment, sales from the SI

automatic packing machines and sterilizers. Sales

service business increased year on year, boosted byfrom the medical imaging category decreased onhigher orders for individual system development,

lower sales of film and other consumables and theespecially from financial institutions. Sales from the IT

non-recurrence of large orders booked in the previous

infrastructure service business increased slightly on

year, despite a substantial second-half increase in unit

higher sales of cloud services, data center services,

shipments of digital radiography systems.

and other services. Sales of embedded software werelower, reflecting a decrease in orders from key

38 Canon Marketing Japan Inc.

As a result, net sales in this segment decreasedby 14.9% year on year to ¥26,106 million.

Income Analysis

Net assets increased by ¥2,988 million from theend of the previous year to ¥257,076 million as aConsolidated net sales decreased by 0.3% year on

result of factors including net income of ¥10,168

year to ¥657,216 million. This reflects lower sales inmillion, treasury stock acquisitions of ¥5,006 million,

the Business Solutions, Imaging Systems, andand dividend payments of ¥3,460 million. Total

Industrial Equipment segments, despite being offset

stockholders’ equity ratio was 55.0%, an increase ofby higher sales in the IT Solutions segment.

0.1 percentage point from the end of the previous

Cost of sales decreased by ¥1,327 million,
accompanying the sales decrease. Gross profit
decreased by 0.3% to ¥220,210 million. Selling,
general and administrative expenses decreased by

year, while stockholders’ equity per share increasedby ¥72.72 to ¥1,980.22.
As a result, total assets increased by ¥4,502 million
from the end of the previous year to ¥467,076 million.

0.4% to ¥203,197 million as a result of factors
including lower advertising expenses and sales
promotion expenses. As a result, operating income
increased by 1.3% year on year to ¥17,013 million.

Cash Flows

In fiscal 2013, we recorded net other income ofCash and cash equivalents (“net cash”) amounted to¥42 million, compared with net other income of ¥727

¥102,183 million as of December 31, 2013, a decrease

million in the previous year. The difference was mainlyof ¥6,077 million from the end of the previous year.

due to special extra retirement payments of ¥597
million in fiscal 2013.
As a result, net income decreased by 3.9% year

Net cash provided by operating activities
amounted to ¥28,781 million, compared with ¥33,767
million in the previous year. The change is mainly

on year to ¥10,168 million. Net income per share

attributable to income before income taxes anddecreased by ¥0.78 to ¥76.67.

minority interests of ¥17,055 million, depreciation of¥17,448 million, and an increase of ¥4,192 million inaccounts payable, partially offset by an increase of

Financial Position
Current assets increased by ¥8,330 million from the¥4,730 million in accounts receivable and ¥8,417
million in income tax payments.
Net cash used in investing activities amounted to

end of the previous year to ¥324,939 million.

¥25,757 million, compared with ¥16,067 million in the

Increases of ¥5,048 million in notes and accounts

previous year. The change is mainly attributable toreceivable and ¥9,997 million in short-term loans

expenditure of ¥13,691 million for the acquisition ofreceivable offset decreases of ¥6,077 million in cash

property, plant and equipment and a net increase ofand cash equivalents.

¥9,998 million in short-term loans receivable.

Fixed assets decreased by ¥3,828 million from theNet cash used in financing activities amountedend of the previous year to ¥142,137 million.

to ¥9,105 million, compared with ¥11,813 million in

Decreases of ¥3,369 million in software and ¥1,511

the previous year. The change is mainly attributable

million in deferred tax assets and decreases in otherto payments of ¥5,006 million for the acquisition of

items offset an increase of ¥1,195 million intreasury stock and dividend payments of ¥3,468

investments in securities.

million.

Current liabilities increased by ¥1,517 million fromthe end of the previous year to ¥164,914 million. An
increase of ¥4,337 million in notes and accounts
payable and increases in other items offset a decreaseof ¥2,125 million in accrued income taxes.
Long-term liabilities decreased by ¥3 million fromthe end of the previous year to ¥45,086 million due todecreases of ¥405 million in lease obligations andother items, which offset an increase of ¥433 million in
the allowance for employees’ retirement benefits.
Canon Marketing Japan Inc.

39

Consolidated Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2013 and 2012

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2013

2012

2013

¥ 102,183¥ 108,260

132,697

127,649—

30—

28,234

28,827

268,895

CURRENT ASSETS:
Cash and cash equivalents (Notes 9 and 10)
Notes and accounts receivable (Note 9)
Short-term investments in securities (Notes 9 and 10)
Inventories (Note 5)$

973,171
1,263,781

Deferred tax assets (Note 12)

5,089

4,709

48,467

Short-term loans receivable (Note 9)50,00040,003476,190

Other current assets

6,924
(188)

7,361
(230)

65,943(1,790)324,939

316,609

3,094,657

Land (Note 3)

36,01336,342342,981

Buildings and structures (Note 3)

85,97384,276

818,790

Machinery and vehicles (Note 8)

160

167

1,524

Furniture and fixtures (Note 8)

19,917

19,641

189,686

Rental assets

27,601
1,852

25,302
2,308

262,867
17,638

171,516(71,832)

168,036(68,472)

1,633,486(684,114)

99,68499,564

949,372

Allowance for doubtful receivables
Total current assets
PROPERTY, PLANT AND EQUIPMENT:

Lease assets
Total
Accumulated depreciation
Net property, plant and equipment
INTANGIBLE ASSETS:
Goodwill (Note 2)

448

62

4,267

Software (Note 8)

12,007

15,376

114,352

Lease assets

93

177

886

Utilization rights
Other intangible assets

316
30

317
54

3,009
286

Total intangible assets

12,894

15,986

122,800

50,514INVESTMENTS AND OTHER ASSETS:

5,304

4,109

Long-term loans receivable

12

24

114

Lease deposits (Note 15)

5,571

6,202

53,057

Deferred tax assets (Note 12)

16,085

17,596

153,190

Other investments

2,981
(394)

2,985
(501)

28,391(3,752)

Investments in securities (Notes 3, 9 and 10)

Allowance for doubtful receivables
Total investments and other assets
Total assets

40 Canon Marketing Japan Inc.

29,55930,415281,514¥ 467,076¥ 462,574$ 4,448,343

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2013

2012

2013

¥ 108,499¥ 104,162$ 1,033,324

CURRENT LIABILITIES:
Notes and accounts payable (Notes 3 and 9)
Lease obligations (Note 16)
Accrued income taxes (Note 12)

447

586

4,257

2,997

5,122

28,543

Consumption taxes payable

2,965

2,680

28,238

Accrued expenses

24,97625,029237,867

Reserves
Other current liabilities

4,311
20,7193,838
21,98041,057
197,324

Total current liabilities

164,914163,397

1,570,610

LONG-TERM LIABILITIES:Long-term loans payable (Notes 3 and 16)

74

—

705

Lease obligations (Note 16)

455

860

4,333

Deferred tax liabilities (Note 12)

579

570

5,514

Deferred tax liabilities for land revaluation (Note 12)

31

31

295

Allowance for employees’ retirement benefits (Notes 2 and 11)

38,23437,801

364,133

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

933

901

8,886

Other long-term liabilities

—
4,780

1,046
3,880

—
45,524

Total long-term liabilities

45,08645,089429,390

698,124

Allowance for directors’ retirement benefits

CONTINGENT LIABILITIES (Note 4)
NET ASSETS (Note 2):STOCKHOLDERS’ EQUITY (Note 17):Common stock:
Authorized—299,500,000 shares;

73,30373,303

Capital surplus

82,82082,820788,762

Retained earnings

131,332

124,624

1,250,781

Treasury stock(31,897)(26,892)(303,781)

Foreign currency translation adjustments

1,139
98

61
(54)

10,848933

Total accumulated other comprehensive income

1,237

7

11,781

281

226

2,676

Issued—151,079,972 shares in 2013 and 2012

ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized gain on available-for-sale securities

MINORITY INTERESTS
Total net assets
Total liabilities and net assets

257,076

254,088

2,448,343¥ 467,076¥ 462,574$ 4,448,343• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

41

Consolidated Statements of Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

2012

2013

¥ 657,216¥ 659,218$ 6,259,200

COST OF SALES

437,006

438,333

4,161,962

Gross profit

220,210203,197

220,885
204,083

2,097,238
1,935,209

17,013

16,802

162,029

NET SALESSELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income

347

382

3,305

Interest expense

(31)

(76)

(295)

Insurance income

648

640

6,171

Gain on sales of fixed assets

26

116

248

Gain on negative goodwill

—

132

—

Loss on impairment of fixed assets

(5)

(0)

(48)

Gain on sales of investments in securities

603

116

5,743

Loss on sales and disposal of fixed assets

(639)

(518)

(6,086)

Loss on devaluation of investments in securities

—

(39)

—

Expenses related to change of business name

(3)

(149)

(28)

—

(0)

—

Office transfer expenses

(204)

(142)

(1,943)Special extra retirement payments

(597)
(103)

—
265

(5,686)(981)

Loss on cancellation of lease contracts

Other, net
Income before income taxes and minority interests

42

727

400

17,055

17,529162,429

6,331
518

5,890
1,035

60,295
4,934

INCOME TAXES (Note 12):Current
Deferred

6,849

6,925

65,22910,20638

10,60425

97,200362¥ 10,168¥ 10,579

Income before minority interests
MINORITY INTERESTS
Net income

Yen$

96,838

U.S. dollars (Note 1)

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

42 Canon Marketing Japan Inc.

¥
¥

76.67
24.00

¥
¥

77.45
24.00

$
$

0.73
0.23

Consolidated Statements of Comprehensive Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Thousands of
U.S. dollars (Note 1)

Millions of yen

INCOME BEFORE MINORITY INTERESTS

2013

2012

2013

¥ 10,206¥ 10,604$ 97,200

1,078

126

10,267

—
168

0
85

—
1,600

OTHER COMPREHENSIVE INCOME (Note 6)
Net unrealized gain on available-for-sale securities
Deferred gain on hedges
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income

1,246

211

11,867¥ 11,452¥ 10,815$ 109,067¥ 11,398
54¥ 10,781
34$ 108,552
515

Comprehensive income attributable to
Shareholders of Canon Marketing Japan Inc.
Minority interests• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

43

Consolidated Statements of Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Millions of yen

BALANCE AT JANUARY 1, 2012
Net income
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Changes due to share exchange
Other, net
BALANCE AT JANUARY 1, 2013
Net income
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Other, net
BALANCE AT DECEMBER 31, 2013

Accumulated othercomprehensive income

Stockholders’ equity

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

151,079,972¥ 73,303¥ 82,820¥ 116,933
10,579(2,745)¥ (22,190)

(1)
(142)

Foreigncurrencytranslation
adjustments

Minority
interests(62)¥ (133)

¥ 636

123
¥ 61

79
¥ (54)

(441)
31
¥ 226

1,078
¥ 1,139

152
¥ 98

55
¥ 281

Net unrealized
gain (loss) on
available-forsale securities¥(5,105)1402

151,079,972¥ 73,303¥ 82,820¥ 124,624 ¥ (26,892)
10,168(3,460)(5,006)(0)
1

151,079,972¥ 73,303¥ 82,820¥ 131,332¥ (31,897)

Total
net assets¥ 251,307
10,579(2,745)(5,105)0(181)
233¥ 254,088
10,168(3,460)(5,006)1
1,285¥ 257,076

Thousands of U.S. dollars (Note 1)
Accumulated othercomprehensive income

Stockholders’ equity

Commonstock

BALANCE AT JANUARY 1, 2013
Net income
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Other, net
BALANCE AT DECEMBER 31, 2013

Retainedearnings

Treasurystock$ 698,124$ 788,762 $ 1,186,895 $ (256,114)
96,838(32,952)(47,676)(0)
9$ 698,124$ 788,762 $ 1,250,781 $ (303,781)• See accompanying notes to consolidated financial statements.

44 Canon Marketing Japan Inc.

Capitalsurplus

Net unrealized
gain onavailable-forsale securities$

Foreigncurrencytranslation
adjustments

581$ (514)

10,267$ 10,848

1,447
$ 933

Minority
interests

Total
net assets$ 2,152 $ 2,419,886
96,838(32,952)(47,676)9524
12,238$ 2,676 $ 2,448,343

Consolidated Statements of Cash Flows
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2013 and 2012

Thousands of
U.S. dollars (Note 1)

Millions of yen

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables
Gain on negative goodwill
Increase in allowance for employees’ retirement benefits
Increase (decrease) in allowance for directors’ retirement benefits, net
Interest and dividend income
Interest expense
Loss on sales and retirement of property, plant and equipment, net
Gain on sales of investments in securities
Increase in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase in notes and accounts payable-trade
Other, net
Sub-totalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from purchase of investments in
subsidiaries resulting in change in scope of consolidation
Decrease (increase) in short-term loans receivable, net
Decrease (increase) in time deposits, net
OtherNet cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term loans payable, net
Repayments of finance lease obligations
Payments for purchases of treasury stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

2013

2012

2013

¥ 17,055¥ 17,529$ 162,429

17,448
5
53
(150)
—
483
(1,046)
(347)
31
510
(599)
(4,730)
433
4,192
3,541
36,879350(31)(8,417)28,781

16,318
0
462
70
(132)
630
140
(382)
76
279
(110)
(4,689)(2,301)
4,115
3,963
35,968380(77)(2,504)33,767

166,17148
505(1,428)—4,600(9,962)(3,305)295
4,857(5,705)(45,048)
4,124
39,92433,724351,2293,333(295)(80,162)
274,10530(13,691)327(3,513)
(194)
1,307

20
(15,753)666(2,768)
(15)
219

285
(130,391)
3,114(33,457)(1,848)12,44845—429(9,998)47(117)(25,757)

28
(16)
1,552
(16,067)(95,219)448(1,114)(245,305)—(631)(5,006)(3,468)0(9,105)
4(6,077)108,260¥ 102,183(2,180)(618)(5,105)(2,755)(1,155)(11,813)
0
5,887
102,373¥ 108,260—(6,010)(47,676)(33,028)0(86,714)38(57,876)
1,031,047$ 973,171• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

45

Notes to Consolidated Financial Statements

01

Basis of Presentation of Consolidated Financial Statements

The accompanying consolidated financial statementsof Canon Marketing Japan Inc. (the “Company”) and its
consolidated subsidiaries (the “Group”) are prepared on thebasis of accounting principles generally accepted in Japan,
which are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial
statements prepared by the Company as required by the
Financial Instruments and Exchange Law of Japan.

02

The U.S. dollar amounts are included solely forconvenience of the reader and are stated, as a matterof arithmetical computation only, at the exchange rateof ¥105=U.S.$1, the rate prevailing at December 31,
2013. 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.

Summary of Significant Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for theyear ended December 31, 2013 include the accounts of theCompany and all of its 30 (30 in 2012) subsidiaries.
All intercompany accounts and transactions are
eliminated in consolidation.
The excess of acquisition costs over net assets acquired
is amortized generally over five years.
(b) Cash Equivalents
For purposes of the consolidated statements of cash flows,
the Company and its consolidated subsidiaries consider all
highly liquid investments, including securities, time deposits
and certificates of deposit, all of which mature or becomedue within three months of the date of acquisition, to be cash
equivalents.
(c) Securities
The held-to-maturity debt securities are stated atamortized cost.
Available-for-sale marketable securities are stated atfair market value, with unrealized gain or loss, net of theapplicable taxes, reported as a separate component of net
assets. Available-for-sale securities whose fair value is notreadily determinable are stated at cost determined by themoving-average method.
(d) Inventories
Merchandise and service parts are valued at cost determinedby the monthly moving-average method. The carrying
amount in the balance sheet is calculated with considerationof write-downs due to decreased profitability.
Work in process is valued at cost determined by the
specific identification method.
Supplies are valued at cost determined by the lastpurchase price method. The carrying amount in the balance
sheet is calculated with consideration of write-downs due todecreased profitability.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation is computed by the declining-balance method
for property and equipment, with the exception of items thatare depreciated by the straight-line method at rates basedon the estimated useful lives of the respective assets. These46 Canon Marketing Japan Inc.

items are buildings purchased on or after April 1, 1998
(exclusive of furniture and fixtures), all buildings and structuresof the Company’s Makuhari office, property and equipmentof certain consolidated subsidiaries, and rental assets in theBusiness Solutions segment. The useful lives are as follows:buildings, mainly fifty years; furniture and fixtures, mainly
five years; and rental assets, mainly three years. Normal
repairs and maintenance, including minor renewals andimprovements, are charged to income as incurred.
(f) Allowance for Employees’ Retirement Benefits
In order to provide for employees’ retirement benefits, theCompany and its consolidated subsidiaries provide liability
for employees’ retirement benefits in an amount calculated
based on the estimated projected benefit obligation and plan
assets at the end of the fiscal year.
Unrecognized prior service cost is amortized by thestraight-line method over the average service period of theeligible employees remaining at the time when it arose.
Unrecognized actuarial gain or loss is amortized from thefiscal year following the year in which it arose, by the straightline method over the average service period of the eligible
employees remaining.
(g) Leases
Leased assets under finance lease contracts are depreciatedby the straight-line method over their respective lease
contract term with zero residual value.
Leased assets under finance lease contracts that do notdeem to transfer ownership to the lessee and were enteredinto before January 1, 2009 when the latest accounting
standards for lease transactions were adopted are accounted
for as operating leases.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in theamount required to cover possible losses on collection. It isdetermined by adding individually estimated uncollectible
amounts for specific items to an amount based on the actual
rate of uncollected receivables of the Group in prior years.
(i) Income Taxes
Deferred tax assets and liabilities are recorded to reflect
the impact of temporary differences between assets andliabilities recognized for financial reporting purposes andsuch amounts recognized for tax purposes. These deferredtaxes are measured by applying the statutory income tax rate
to the temporary differences.

(p) Application of Consolidated Taxation System
The Company and certain consolidated subsidiaries haveadopted the consolidated taxation system.

(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 effectat the balance sheet date. The foreign exchange gains andlosses on translation are recognized in the accompanying
consolidated statements of income.

(q) Accounting Standards Not Yet Applied
Effective from the fiscal year beginning January 1, 2014, theCompany will apply “Accounting Standard for Retirement
Benefits” (Accounting Standards Board of Japan (ASBJ)
Statement No. 26, May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25, May 17, 2012).
The effects of applying these accounting standards are
currently under examination.

(k) Foreign Currency Financial Statements
The balance sheet accounts of the foreign subsidiaries aretranslated into Japanese yen at the current exchange rates in
effect at the balance sheet date, except for the components
of net assets excluding minority interests which are translated
at their historical exchange rates.
Revenue and expense accounts are translated at the
average exchange rates prevailing during the year.
(l) Per Share Amounts of Common Stock
Net income per share is calculated using net income
available to holders of common stock, and the weighted
average number of shares of common stock outstanding forthe 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
The estimated amount payable for the next round of
directors’ bonuses, which are classed as expenses for thecurrent year, has been included in the accounts for thecurrent fiscal year.
(n) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards toemployees who have given long-term continuous service
determined in accordance with the Company’s internal
regulations, an allowance for long-term continuous service
rewards is recorded based on the amount the Company andcertain consolidated subsidiaries expect to pay in the future.
The Company and some of its subsidiaries haveestablished internal regulations related to the Refresh andVacation System for employees who have been very diligent
and have given long-term and continuous service. The
system grants vacations and pays rewards at fixed intervals
in order to refresh the minds and bodies of these employees
and enable them to work with new vigor in the future.
(o) ‌Recognition of Revenues and Expenses and Recognition
of Revenue from Customized Software Development
For software development contracts in progress as ofDecember 31, the percentage-of-completion method isapplied in cases where the outcomes of such softwaredevelopment contracts can be estimated reliably. When thepercentage-of-completion method is applied, the percentage
of completion at the end of the fiscal year is determinedbased on actual costs incurred and estimated total contract
costs. For all other contracts, the completed-contract method
is applied.

(r) Changes in Accounting Policies<Change in Accounting Policies for Net Sales>
In 2012 and previous years, the Company and its subsidiaries
included a certain portion of sales promotion expenses inselling, general and administrative expenses, but starting in2013 this amount is deducted from net sales, which will bepresented as a net amount.
For the purpose of increasing its competitive positionin the face of intensifying price competition in recent years,
thereby leading to greater sales, the Company and its
subsidiaries have implemented a new pricing policy forbusiness partners and introduced a new incentive systemstarting in 2013. In light of this situation, the Company
and its subsidiaries conducted a comprehensive reviewof trading activities, and as a result now consider sales
promotion expenses, which are increasingly factored inwhen trading conditions are determined, as a componentof the sales price. For these reasons, the Company and its
subsidiaries changed the accounting policy and introduced
a new accounting policy so that these transactions are more
properly reflected in consolidated statements of income.
The change in accounting policy is applied retroactively,
and the prior fiscal year consolidated financial statements arepresented after retrospective application. As a result of thischange, net sales and the selling, general and administrative
expenses for the prior fiscal year are each ¥22,016 million lessthan before the retrospective application. For the year ended
December 31, 2013, there is no effect on operating income
and income before income taxes and minority interests.
<Change in Depreciation Method>
In conjunction with the revisions to the Corporation Tax
Act of Japan, the Company and its domestic subsidiaries
have changed their method of depreciation accounting
applicable to property, plant and equipment acquired on
or after January 1, 2013, in accordance with the revised
provisions of the Act.
The effect of this change on operating income and income
before income taxes and minority interests is minimal.

Canon Marketing Japan Inc.

47

03

Assets Pledged as Collateral

Assets pledged as collateral as of December 31, 2013 and 2012 were as follows:(1) Pledged assets
Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

¥

647
435
¥ 1,082Land
Buildings

2012
647
451
¥ 1,098¥2013$ 6,162
4,143$ 10,305(2) Liabilities secured by the above assets
Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

¥ 315
¥ 315

Accounts payable

04

2012
¥ 402
¥ 402

2013

$ 3,000$ 3,000

Contingent Liabilities

Contingent liabilities at December 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2013

¥ 38
¥ 54

Joint and several guarantee on lease payment of two customers
Guarantees for employees’ housing loans

05

2012
¥ 83
¥ 67

2013

$ 362
$ 514

Inventories

Inventories at December 31, 2013 and 2012 were composed of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

2013
Merchandise
Service parts
Work in progress
Supplies
Other¥ 24,414
2,427
578
669
146
¥ 28,234

2012¥ 24,618
2,710
575
723
201
¥ 28,8272013$ 232,514
23,114
5,505
6,371
1,391
$ 268,895

Note: ‌For the software development contracts from which contract losses are expected, the inventory relating to such contracts and relevant reserves for contract losses do not offset
each other and have been recorded in gross amounts in current assets and current liabilities, respectively. Out of inventories, ¥24 million ($229 thousand) for work in progress
relates to software development contracts from which losses are expected and corresponds to the reserve for contract losses.

48 Canon Marketing Japan Inc.

06

Other Comprehensive Income

The following table shows reclassification adjustments for each component of other comprehensive income for the years ended
December 31, 2013 and 2012
Millions of yen

Thousands of U.S. dollars (Note 1)

2012

2013
Net unrealized gain on available-for-sale securities
Amount arising during the year
Reclassification adjustments
Deferred gain on hedges
Amount arising during the year
Reclassification adjustments
Foreign currency translation adjustments
Amount arising during the year
Total other comprehensive income before tax effectTax effectTotal other comprehensive income

2013¥ 2,217
(564)

1,653

¥ 179
(16)

163

$ 21,114(5,371)

15,743

—
—

—

0
—

0

—
—

—

168

168
1,821
(575)
¥ 1,246

85

85
248
(37)
¥ 211

1,600

1,600
17,343(5,476)$ 11,867

The following table shows tax effects for each component of other comprehensive income for the years ended December 31,
2013 and 2012
Millions of yen

2012

2013
Pre-tax
amountNet unrealized gain on available-for-sale securities
Deferred gain on hedges
Foreign currency translation adjustments
Total other comprehensive income

Tax effect¥ 1,653—168¥ 1,821¥ (575)——¥ (575)Net-of-tax
amount¥ 1,078—168¥ 1,246

Pre-tax
amountTax effect

¥ 163
0
85
¥ 248

¥ (37)(0)—¥ (37)

Net-of-tax
amount

¥ 126
0
85
¥ 211

Thousands of U.S. dollars (Note 1)

2013
Net unrealized gain on available-for-sale securities
Deferred gain on hedges
Foreign currency translation adjustments
Total other comprehensive income

Pre-tax
amountTax effectNet-of-tax
amount$ 15,743—
1,600$ 17,343$ (5,476)——$ (5,476)$ 10,267—
1,600$ 11,867

Canon Marketing Japan Inc.

49

07

Consolidated Statements of Changes in Net Assets

Current Fiscal Year (from January 1, 2013 to December 31, 2013)
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

17,993
17,993

3,407
3,407

0
0

21,40021,400Notes: 1. ‌The increase of 3,407 thousand shares of treasury stock consists of an increase of 3,403 thousand shares due to the purchase through the market, and 4 thousand shares
due to the purchase of fractional stock.
2. ‌The decrease of 0 thousand shares of treasury stock mainly consists of 0 thousand shares due to the sale of fractional stock.

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

March 27, 2013
General stockholders’ meeting
July 23, 2013
Board of Directors’ meeting

Type of stock

Total dividends(Millions of yen)

Dividend per share(Yen)

Base date

Date effective

Common stock¥ 1,863¥ 14

December 31, 2012

March 28, 2013

Common stock¥ 1,597¥ 12

June 30, 2013

August 27, 2013

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

Type of stock

Funds used to pay
the dividend

March 27, 2014
General stockholders’ meeting Common stock Retained earnings

Total dividends(Millions of yen)

Dividend per share(Yen)

Base date

Date effective¥ 1,556¥ 12

December 31, 2013

March 28, 2014

Previous Fiscal Year (from January 1, 2012 to December 31, 2012)
1. Matters pertaining to the types and total number of shares issued and the types and number of shares of treasury stock
End of the previous fiscal year
(Thousands of shares)

Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Increase(Thousands of shares)

Decrease(Thousands of shares)

End of the current fiscal year
(Thousands of shares)

151,080
151,080————

151,080
151,080

13,895
13,895

4,350
4,350

252
252

17,993
17,993

Notes: 1. ‌The increase of 4,350 thousand shares of treasury stock consists of an increase of 4,248 thousand shares due to the purchase through the market, 100 thousand shares dueto the purchase from stockholders dissenting against the share-for-share exchange resulting in making the acquired company a wholly owned subsidiary, and 2 thousand
shares due to the purchase of fractional stock.
2. ‌The decrease of 252 thousand shares of treasury stock consists of a decrease of 251 thousand shares due to a share-for-share exchange, and 1 thousand shares due to thesale of fractional stock.

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

March 28, 2012
General stockholders’ meeting
July 24, 2012
Board of Directors’ meeting

Type of stock

Total dividends(Millions of yen)

Dividend per share(Yen)

Base date

Date effective

Common stock¥ 1,372¥ 10

December 31, 2011

March 29, 2012

Common stock¥ 1,373¥ 10

June 30, 2012

August 27, 2012

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

Type of stock

Funds used to pay
the dividend

March 27, 2013
General stockholders’ meeting Common stock Retained earnings

50 Canon Marketing Japan Inc.

Total dividends(Millions of yen)

Dividend per share(Yen)

Base date

Date effective¥ 1,863¥ 14

December 31, 2012

March 28, 2013

08

LeasesFinance Leases
Lease payments for finance leases excluding subleases, except for the lease agreements which stipulate the transfer ofownership of the leased property to the Company and its consolidated subsidiaries, were ¥82 million ($781 thousand) and ¥448
million for the years ended December 31, 2013 and 2012, respectively.
(As Lessee)
Future minimum lease payments subsequent to December 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Future minimum lease payments:
Within one year
Thereafter

2013

2012

2013

¥ 15
—
¥ 15

¥ 84
17
¥ 101

$ 143
—
$ 143

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

Millions of yen

Future minimum lease payments:
Within one year
Thereafter

2013

2012

2013

—
—
—

¥ 3
—
¥ 3

—
—
—

The following pro forma amounts represent acquisition cost, accumulated depreciation and amortization, and net book value ofleased property as of December 31, 2013 and 2012, 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
Software

2013

2012

2013

—
¥ 210
—
¥ 210

¥ 35
814
58
¥ 907

—
$ 2,000—$ 2,000

—
¥ 195
—
¥ 195

¥ 32
723
51
¥ 806

—
$ 1,857—$ 1,857

—
¥ 15
—
¥ 15

¥

—
$ 143
—
$ 143

3
91
7
¥ 101

(As Lessor)
Future minimum lease payments, which consist of subleases subsequent to December 31, 2013 and 2012, are summarized
as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Future minimum lease payments:
Within one year
Thereafter

2013

2012

2013

—
—
—

¥ 3
—
¥ 3

—
—
—

Canon Marketing Japan Inc.

51

09

Financial Instruments

Current Fiscal Year (from January 1, 2013 to December 31, 2013) andPrevious Fiscal Year (from January 1, 2012 to December 31, 2012)
1. Information on financial instruments(1) Policies for financial instruments
The Group limits its asset management to financial instruments characterized as very safe and believes that financing should
mainly be conducted through the use of Group finances whenever necessary. Also, the Group does not enter into derivativetransactions for trading purposes.
(2) Types and risks of financial instruments and systems to control those risks
Operating receivables, consisting of notes and accounts receivable, are exposed to credit risks of customers. The Group strives
to mitigate these risks by strict credit control utilizing credit information provided by external credit agencies, as well as by credit
insurance and other risk-hedging means.
Short-term loans receivable are mainly the loans to the parent company by the Company, rendered in compliance with theinternal regulations for investment and management of funds.
Short-term investments in securities and investments in securities consist primarily of held-to-maturity debt securities andequity securities issued by business counterparties of the Group, and are exposed to market price fluctuation risk. Regarding
this risk, the Group periodically monitors the fair values of the securities and the financial condition of their issuers i.e., businesscounterparties. In addition, for securities other than held-to-maturity debt securities, the Group continuously reviews the statusof security holdings, taking market conditions and relationships with business counterparties into consideration.
Operating payables, consisting of notes and accounts payable, are mainly those due within six months.
(3) Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include not only values based on market quotations, but also values calculated on atheoretical basis in cases where market quotations are not available. Such values may vary depending on different assumptions,as variables are factored into the calculation of such values.
2. Fair values of financial instruments
The book values of financial instruments in the consolidated balance sheets as of December 31, 2013 and 2012, their fairvalues, and the differences between the two are as follows. The table below, however, excludes the financial instruments whose
fair values are considered extremely difficult to assess (see Note 2).
Millions of yen

2013
Book value(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities

Fair value¥ 20,083
132,697
86,83650,000¥ 289,616
108,499¥ 108,499

Difference¥ 20,083
132,697
86,83650,000¥ 289,616
108,499¥ 108,499

—
—
—
—
—
—
—

Millions of yen

2012Book value(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities¥ 23,407
127,649
88,61940,003¥ 279,678
104,162¥ 104,162

Note: The amounts for derivative transactions shown above are the net of assets and liabilities. Liabilities are shown in parentheses.

52 Canon Marketing Japan Inc.

Fair value¥ 23,407
127,649
88,61740,003¥ 279,676
104,162¥ 104,162

Difference

—
—
¥ (2)
—
¥ (2)
—
—

Thousands of U.S. dollars (Note 1)

2013(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments in securities and investments in securities(4) Short-term loans receivable
Total assets(5) Notes and accounts payable
Total liabilities

Book value

Fair value$ 191,267
1,263,781
827,010476,190$ 2,758,248
1,033,324$ 1,033,324$ 191,267
1,263,781
827,010476,190$ 2,758,248
1,033,324$ 1,033,324

Difference

—
—
—
—
—
—
—

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

Millions of yen

2012

2013

¥ 289
¥ 231

$ 3,114$ 3,248

2013
Category

Book value

¥ 327
¥ 341

Unlisted equity securities
Investments in partnerships

	These financial instruments are not included in (3) Short-term investments in securities and investments in securities in the preceding table of fairvalues, since they do not have market prices and therefore assessment of their fair values is considered to be extremely difficult.
3. The redemption schedule of monetary claims and securities with maturities as of December 31, 2013 and 2012 is summarized as follows:
Millions of yen

2013
Due within 1 year

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

Due after 1 year
but within 5 years

Due after 5 years
but within 10 years

Due after 10 years¥ 20,083
132,697

—
—

—
—

—
—

—
82,20050,000¥ 284,980

—
—
—
—

—
—
—
—

—
—
—
—

Canon Marketing Japan Inc.

53

Millions of yen

2012
Due after 1 year
but within 5 years

Due within 1 year

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

Due after 5 years
but within 10 years

Due after 10 years¥ 23,407
127,649

—
—

—
—

—
—

—
85,03040,003¥ 276,089

—
—
—
—

¥ 100
103
—
¥ 203

—
—
—
—

Thousands of U.S. dollars (Note 1)

2013
Due after 1 year
but within 5 years

Due within 1 year

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

10

Due after 5 years
but within 10 years

Due after 10 years$ 191,267
1,263,781

—
—

—
—

—
—

—
782,857
476,190$ 2,714,095

—
—
—
—

—
—
—
—

—
—
—
—

Securities

Securities as of December 31, 2013 and 2012 were classified and included in the following accounts:
Thousands of
U.S. dollars (Note 1)

Millions of yen

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

2013

2012

2013

¥ 5,304¥ 3,907$ 50,514

82,200——82,200¥ 87,504

85,00030
20385,233¥ 89,140

782,857——
782,857$ 833,371

The carrying amounts and aggregate fair values of investments in securities at December 31, 2013 and 2012 were as follows:
Millions of yen

2013
Book value

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

54 Canon Marketing Japan Inc.

Unrealized gains

—
—
—

—
—
—

Unrealized losses———

Fair value———

Millions of yen

2013
Cost

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

Unrealized gains¥ 3,030
11¥ 3,041

Unrealized losses¥ 1,7120¥ 1,712Fair value¥ (117)—¥ (117)¥ 4,625
11¥ 4,636

Millions of yen

2012Book value

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

Unrealized gains

¥ 203
30
¥ 233

Unrealized losses———

Fair value

¥ (2)
—
¥ (2)

¥ 201
30
¥ 231

Millions of yen

2012
Cost

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

Unrealized gains¥ 3,287152¥ 3,439

Unrealized losses

¥ 397
8
¥ 405

Fair value¥ (456)(1)¥ (457)¥ 3,228159¥ 3,387

Thousands of U.S. dollars (Note 1)

2013
Book value

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

Unrealized gains———

Unrealized losses———

Fair value

—
—
—

—
—
—

Thousands of U.S. dollars (Note 1)

2013
Cost

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

Unrealized gains$ 28,857
105$ 28,962

Unrealized losses$ 16,304
0$ 16,304$ (1,114)—$ (1,114)

Fair value$ 44,047
105$ 44,152

Available-for-sale and held-to-maturity securities whose fair value is not readily determinable as of December 31, 2013 and2012 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2013
Available-for-sale:
Equity securities
Investments in investment partnerships
Held-to-maturity:
Certificates of deposit

¥

327
341

82,200¥ 82,868

¥

289
231

85,000¥ 85,520

2013

$

3,114
3,248

782,857$ 789,219

Canon Marketing Japan Inc.

55

11

Employees’ Retirement and Severance Benefits

The Company has a defined contribution pension plan, a pension plan with a market-based variable accumulation rate (quasicash balance plan), and a lump-sum severance payment plan, and its domestic consolidated subsidiaries have defined benefit
corporate pension plans and lump-sum severance payment plans.
The liability for employees’ retirement benefits as of December 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

2012¥ 179,479(134,525)(28,731)
21,49187¥ 37,801

2013
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension cost
Allowance for employees’ retirement benefits¥ 187,143(154,829)(10,941)
16,84219¥ 38,2342013$ 1,782,314(1,474,562)(104,200)
160,400181$ 364,133

The components of net periodic benefit costs for the years ended December 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2013
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Other
Net periodic benefit costs¥ 6,832
3,147(3,739)(4,649)4,863
1,389¥ 7,8432012¥ 6,790
3,195(3,411)(3,784)4,549
1,409¥ 8,7482013$ 65,067
29,971(35,610)(44,276)
46,314
13,229$ 74,695

Assumptions used in accounting for the above plans for the years ended December 31, 2013 and 2012 were principally as follows:
2013
Discount rate
Expected rates of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial loss

56 Canon Marketing Japan Inc.

1.4 - 2.0%
1.0 - 3.0%
5-13 years
5-13 years

2012
1.2 - 2.0%
1.0 - 3.0%
5-13 years
5-13 years

12

Income Taxes

The statutory income tax rates were approximately 38.0% and 40.0% for the years ended December 31, 2013 and 2012,
respectively.
For the year ended December 31, 2013, the difference between the statutory income tax rate (38.0%) and the effective
income tax rate following the adoption of tax-effect accounting (40.2%) was 2.2 percentage points. The effective income tax
rate for the year ended December 31, 2013, differed from the statutory income tax rate following the adoption of tax-effectaccounting for the reasons outlined in the table below.
Because the difference between the statutory income tax rate and the effective income tax rate for the year ended
December 31, 2012 is not material, the tax reconciliation for 2012 is not disclosed.
2013

38.0 %
2.0 %2.1 %(2.0)%(0.5)%
0.6 %
40.2 %

Statutory income tax rate
Entertainment and other expenses permanently not deductible for tax purposes
Per-capita levy of inhabitant’s taxes
Valuation allowance
Dividend income not taxable
Other
Effective income tax rate following the adoption of tax-effect accounting

The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31, 2013
and 2012, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2013
DEFERRED TAX ASSETS:
Loss on disposal and devaluation of inventories
Accrued business tax and business office tax
Accrued bonuses to employees
Excess amortization of software
Loss on impairment of fixed assets
Excess depreciation of fixed assets
Allowance for doubtful receivables
Allowance for employees’ retirement benefits
Loss on devaluation of investments in securities
Loss carried forward
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
DEFERRED TAX LIABILITIES:Net unrealized gain on available-for-sale securities
Deferred capital gain
Other
Total deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities for land revaluation

2013

¥

642
504
1,491
2,563
261
497
46
13,653
695
2,129
4,390
26,871(3,872)¥ 22,999

¥

641
660
1,252
3,580
309
526
64
13,517
702
3,129
4,322
28,702(4,987)¥ 23,715

6,114
4,800
14,20024,410
2,486
4,733
438
130,029
6,619
20,27641,809255,914(36,876)$ 219,038

¥

¥

$

539
1,684
212
¥ 2,435¥ 20,595
¥
31

98
1,691
222
¥ 2,011¥ 21,704
¥
31

$

5,124
16,0382,028$ 23,190$ 196,143$
295

Canon Marketing Japan Inc.

57

13

Segment Information

1. Segment Information(1) Description of Reportable Segments
Reportable segments are constituent units of the Group for which separate financial information is available and they are subject
to periodic reviews by the Board of Directors to determine the allocation of management resources and assess their respective
operating results.
The Company has four reportable segments, Business Solutions, IT Solutions, Imaging Systems and Industrial Equipment,
all of which are determined based on the organizational structure of the Group and include companies of the Group.
The “Consumer Imaging” segment has been renamed the “Imaging Systems” segment.
This change in segment description has no impact on any financial information of this segment.
Major companies and organizations in each segment
Reportable Segments

Major companies / organizations

Business Solutions

Canon Marketing Japan Inc.
Business Solutions Company
Canon System & Support Inc.
SHOWA INFORMATION SYSTEMS CO., LTD.
OCE-JAPAN CORPORATION
Canon Print Square Inc.

IT Solutions

Canon Marketing Japan Inc.
IT Product Promotion Headquarters
Canon MJ IT Group Holdings Inc.
Canon IT Solutions Inc.
Canon Software Inc.
Edifist Learning Inc.
12 other companies

Imaging Systems

Canon Marketing Japan Inc.
Imaging System Company
Canon Customer Support Inc.

Industrial Equipment

Canon Marketing Japan Inc.
Industrial Equipment-Medical Equipment, Business
Canon Lifecare Solutions Inc.
Canon Advanced Technologies Taiwan Inc.
1 other company

Major products and services in each segment
Reportable Segments

Major products / services

Business Solutions

Business-use multifunctional products, print-on-demand (POD)
digital presses,personal-use plain-paper copiers, laser printers,
large format ink-jet printers,office-use facsimiles, liquid crystal
projectors, document scanners, color cardprinters, color label printers,
teleconference system, network cameras, service and support

IT Solutions

System integration, embedded software, infrastructure & operation,
solution & software products, computer devices, network devices

Imaging Systems

Digital cameras, interchangeable lenses, digital video cameras, inkjet printers, compact photo printers, personal-use scanners, electronic
dictionaries, calculators, commercial imaging equipment

Industrial Equipment

Semiconductor manufacturing equipment, medical equipment (digital
X-ray cameras, ophthalmic equipment), medical system, healthcare
related products(2) Methods of measurement for sales, segment income (loss), assets, and other items for reportable segments
Accounting methods for reportable segments are the same as the accounting methods described in Note 2 Summary ofsignificant accounting policies.
Segment income (loss) is measured based on the amount of operating income. Intersegment sales and transfers are basedon market prices.

58 Canon Marketing Japan Inc.

(3) Information by reportable segment for the years ended December 31, 2013 and 2012 was as follows:
Millions of yen

2013Year ended or as of December 31,
Reportable Segments

Net sales:
External customers
Intersegment
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Changes in the amount ofproperty, plant and equipment
and intangible assets

Other

Total

Adjustments

Consolidated

67
—
¥
67
¥ 365
¥ 11,089¥ 657,216
30,250¥ 687,466¥ 17,013¥ 314,164—¥ (30,250)¥ (30,250)—¥ 152,912¥ 657,216—¥ 657,216¥ 17,013¥ 467,076

461
—

178
—

17,44853——

17,44853

540

12

14,417—

14,417

Business
Solutions

IT Solutions

Imaging
Systems

Industrial
Equipment¥ 327,264—¥ 327,264¥ 5,535¥ 135,459¥ 112,049
30,250¥ 142,299¥
387¥ 66,660¥ 191,730—¥ 191,730¥ 12,491¥ 81,881¥ 26,106—¥ 26,106¥ (1,765)¥ 19,075

10,812
—

3,186
53

2,811
—

9,285

2,926

1,654

¥

Notes: 1. “Other” represents operating segments which are not included in the reportable segments, and includes operations such as the shared-services business.
2.	Major items of adjustments of segment assets are surplus operating funds (cash, cash equivalents and short-term investments in securities) of the Company and assets ofadministrative departments, totaling ¥152,912 million ($1,456,305 thousand).
3. Segment income (loss) corresponds to operating income stated on the consolidated statement of income.
4.	Starting in 2013, certain promotion expenses that were previously included in selling, general and administrative expenses are deducted from net sales in order to present
them on a net basis. As a result of the retrospective reclassification for the year ended December 31, 2012, selling, general and administrative expenses decreased by¥13,080 million in the Business Solutions segment, by ¥304 million in the IT Solutions segment, by ¥8,615 million in the Imaging Systems segment, by ¥17 million in the
Industrial Equipment segment and ¥0 million in the other segment from the amounts before the reclassification. Nonetheless, such decreases do not have an effect on
segment income (loss).
Millions of yen

2012Year ended or as of December 31,
Reportable Segments

Net sales:
External customers
Intersegment
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Changes in the amount ofproperty, plant and equipment
and intangible assets

Business
Solutions

IT Solutions

Imaging
Systems

Industrial
Equipment

Other

Total

Adjustments

Consolidated¥ 330,920—¥ 330,920¥ 6,299¥ 143,911¥ 105,418
25,581¥ 130,999¥
196¥ 63,864¥ 192,003—¥ 192,003¥ 10,917¥ 77,448¥ 30,673—¥ 30,673¥ (1,202)¥ 18,739

¥

204
—
¥ 204
¥ 592
¥ 11,912¥ 659,218
25,581¥ 684,799¥ 16,802¥ 315,874—¥ (25,581)¥ (25,581)—¥ 146,700¥ 659,218—¥ 659,218¥ 16,802¥ 462,574

10,288
1

2,585
461

2,661
—

542
—

242
—

16,318462——

16,318462

8,504

11,303

1,629

491

34

21,961—

21,961

Notes: 1. “Other” represents operating segments which are not included in the reportable segments, and includes operations such as the shared-services business.
2.	Major items of adjustments of segment assets are surplus operating funds (cash, cash equivalents and short-term investments in securities) of the Company and assets ofadministrative departments, totaling ¥146,700 million.
3. Segment income (loss) corresponds to operating income stated on the consolidated statement of income.

Canon Marketing Japan Inc.

59

Thousands of U.S. dollars (Note 1)

2013

Year ended or as of December 31,
Reportable Segments

Net sales:
External customers
Intersegment
Total
Segment income (loss)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Changes in the amount ofproperty, plant and equipment
and intangible assets

Other

Total

Adjustments

Consolidated

Business
Solutions

IT Solutions

Imaging
SystemIndustrial
Equipment$ 3,116,800—$ 3,116,800$ 52,714$ 1,290,086$ 1,067,133
288,095$ 1,355,228$
3,686$ 634,857$ 1,826,000—$ 1,826,000$ 118,962$ 779,819$ 248,629—$ 248,629$ (16,809)$ 181,667

638
—
$
638
$ 3,476$ 105,609

102,971—

30,343505

26,771
—

4,390
—

1,695
—

16,617505——

166,171505

88,42927,86715,752

5,143

114

137,305—

137,305$$ 6,259,200— $ 6,259,200
288,095 $ (288,095)—$ 6,547,295 $ (288,095) $ 6,259,200$ 162,029— $ 162,029$ 2,992,038 $ 1,456,305 $ 4,448,343

2. Related Information(1) Information by product and service
Disclosure of information by product and service is omitted since the segment information contains the same information.
(2) Information by geographical area
q Sales		Disclosure of information on sales by geographical area is omitted since sales to domestic external customers accounts
for more than 90% of consolidated net sales.
w Property, plant and equipment
		Disclosure of information on property, plant and equipment by geographical area is omitted since the amount of domestic
property, plant and equipment accounts for more than 90% of total property, plant and equipment recorded on the
consolidated balance sheet.
(3) Information by major customers
Disclosure of information by major customers is omitted since no customer accounts for 10% or more of consolidated net sales.
3. Information on impairment loss on property, plant and equipment by reportable segment
Millions of yen

2013Year ended December 31,
Reportable Segments
Business
Solutions

IT Solutions—

Impairment loss

Imaging
System¥0

Other

Industrial
Equipment

—

¥5

Total

—

Adjustments¥5—Consolidated¥5Note: “Other” represents operating segments which are not included in the reportable segments and includes operations such as the shared-services business.
Millions of yen

2012Year ended December 31,
Reportable Segments
Business
Solutions

Impairment loss

IT Solutions—

Imaging
System¥0

Other

Industrial
Equipment

—

—

Total

—

Adjustments¥0—Consolidated¥0

Thousands of U.S. dollars (Note 1)

2013

Year ended December 31,
Reportable Segments
Business
Solutions

Impairment loss

60 Canon Marketing Japan Inc.

IT Solutions—$0

Imaging
SystemIndustrial
Equipment

—

$ 48

Other

Total

—

$ 48

Adjustments—

Consolidated$ 48

4. Information on amortization and balance of goodwill by reportable segment
Millions of yen

2013Year ended or as of December 31,
Reportable Segments
Business
Solutions

IT Solutions——

Amortization of goodwill
Goodwill at December 31, 2013

Imaging
System

¥ 53
¥ 448

Other

Industrial
Equipment

—
—

—
—

Total

—
—

Adjustments

¥ 53
¥ 448

Consolidated

—
—

¥ 53
¥ 448

Millions of yen

2012Year ended or as of December 31,
Reportable Segments
Business
Solutions

Amortization of goodwill
Goodwill at December 31, 2012

IT Solutions¥1—

Imaging
System

¥ 461
¥ 62

Other

Industrial
Equipment

—
—

—
—

Total

—
—

Adjustments

¥ 462
¥ 62

Consolidated

—
—

¥ 462
¥ 62

Thousands of U.S. dollars (Note 1)

2013

Year ended or as of December 31,
Reportable Segments
Business
Solutions

Amortization of goodwill
Goodwill at December 31, 201314

IT Solutions——

Imaging
System$ 505$ 4,267

Other

Industrial
Equipment

—
—

—
—

Total

—
—

Adjustments$ 505$ 4,267

Consolidated

—
—

$ 505
$ 4,267

Transaction
amount(Millions of yen)Accounts

Balance at endof fiscal year
(Millions of yen)

Purchases of
products¥ 242,165

Accounts
payable¥ 76,241

Sales of officeequipment andconsumables,
etc.

¥

4,284

Accounts
receivableand others¥ 2,785¥ 50,000

Short-term
loans¥ 50,000

Related Party Transactions

Current Fiscal Year (from January 1, 2013 to December 31, 2013)
Parent company and major corporate stockholders, etc.
Name ofCategory
Address
company, etc.

ParentCanon Inc.
company

Ohta-ku,Tokyo

Capital orinvestment
capital(Millions of yen)

¥ 174,762

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

Related contents
Boardmembers
holding
concurrent
positions

Manufactureand saleof officeequipment,(Ownership) Two holdimaging
Direct 58.5% concurrent
systemIndirect 0.0% positions
equipment,
and industrial
equipment

Contents oftransactions

Businessrelationships

Manufactureof products
sold by
Canon MJ

Operatingtransactions

Non-operating
Loans of capitaltransactions

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 theaffiliated company’s proposals regarding desired prices.
(2) Sales of office 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.

Canon Marketing Japan Inc.

61

Previous Fiscal Year (from January 1, 2012 to December 31, 2012)
Parent company and major corporate stockholders, etc.
Name ofCategory
Address
company, etc.

ParentCanon Inc.
company

Ohta-ku,Tokyo

Capital orinvestment
capital(Millions of yen)

¥ 174,762

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

Related contents
Boardmembers
holding
concurrent
positions

Manufactureand sale ofbusiness(Ownership) Two holdequipment,
Direct 57.0% concurrent
consumerIndirect 0.0% positions
equipment,
and industrial
equipment

Transaction
amount(Millions of yen)Accounts

Balance at endof fiscal year
(Millions of yen)

Purchases of
products¥ 250,235

Accounts
payable¥ 75,191

Sales ofbusiness
equipment andconsumables,
etc.

¥

4,314

Accounts
receivableand others¥ 2,730¥ 40,000

Short-term
loans¥ 40,000

Contents oftransactions

Businessrelationships

Operatingtransactions

Manufactureof products
sold by
Canon MJ

Non-operating Loans oftransactions capital

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 theaffiliated company’s proposals regarding desired prices.
(2) Sales of business equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) ‌With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates.
Furthermore, collateral is not accepted.

15

Asset Retirement Obligations

Current Fiscal Year (from January 1, 2013 to December 31, 2013)
The Group recognizes restoration obligations under real estate rental agreements of buildings and other real estates as asset
retirement obligations.
Instead of recognizing liabilities, the Group reasonably estimates the uncollectible amount of lease deposits relating to
the real estate rental agreements, and accounts for the portion of such estimated amount attributable to the current fiscal
year as an expense.
The outstanding balance of lease deposits as of December 31, 2013 includes ¥1,900 million ($18,095 thousand) considered
uncollectible.
Previous Fiscal Year (from January 1, 2012 to December 31, 2012)
The Group recognizes restoration obligations under real estate rental agreements of buildings and other real estates as asset
retirement obligations.
Instead of recognizing liabilities, the Group reasonably estimates the uncollectible amount of lease deposits relating to
the real estate rental agreements, and accounts for the portion of such estimated amount attributable to the current fiscal
year as an expense.
The outstanding balance of lease deposits as of December 31, 2012 includes ¥1,929 million considered uncollectible.

16

Lease Obligations, Long-Term Loans Payable and Deposits

Lease obligations, long-term loans payable and deposits at December 31, 2013 and 2012 consisted of the following:

Lease obligations
Current portion of lease obligations
Lease obligations (excluding current portion)
Long-term loans payable (excluding current portion)
Deposits

62 Canon Marketing Japan Inc.

2013

2012

2013

447
455
902
74
3,603
¥ 4,579

¥ 586
860
1,446
—
3,508
¥ 4,954$ 4,257
4,333
8,590
705
34,314$ 43,609

¥

6.2%
0.0%

Thousands of
U.S. dollars (Note 1)

Millions of yen

Average interest rate

17

Stockholders’ Equity

The 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 paid in or provided in consideration for newly issued stock shall berecorded as common stock. However, it also allows 50% or less of such amounts to be recorded as additional paid-in capital.
Under the Corporate Law, a company that meets certain criteria can establish its Articles of Incorporation so that dividends
can be paid to its existing stockholders by resolution of the Board of Directors, without requiring the approval of a resolution
at a general stockholders’ meeting. The Company has met said criteria and amended its Articles of Incorporation at the annual
general stockholders’ meeting for fiscal 2006. The Corporate Law provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the common stock account. However, such appropriation cannot be made if the aggregate amount of the legal
reserve exceeds 25% of common stock (i.e. the aggregate amount of the Company’s legal reserve has already reached 25% of
its common stock).

Canon Marketing Japan Inc.

63

Independent Auditor’s Report

64 Canon Marketing Japan Inc.

Corporate Data

Headquarters

Number of Employees

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

Consolidated: 18,409
Non-consolidated: 5,480(As of December 31, 2013)

Date of Establishment
February 1, 1968

Capital Stock¥73,303,082,757

Stock

Main Locations of Operations
Headquarters, Makuhari office and branches(Sapporo, Sendai, Nagoya, Osaka, Hiroshima
and Fukuoka)(As of April 1, 2014)

151,079,972 shares

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

Major Stockholders
Name of stockholder

Canon Inc.
Canon Marketing Japan Inc.
Canon Marketing Japan Group Employee Stock Ownership Association
THE CHASE MANHATTAN BANK, N. A. LONDON SECS LENDING OMNIBUS ACCOUNTThe Master Trust Bank of Japan, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank of New York Mellon SA/NV 10
Canon Marketing Japan Group Business Partner Stock Ownership Association
State Street Bank and Trust Company
Mizuho Bank, Ltd.

Number of shares held
(thousands)

Percentage of ownership(%)

75,70821,400
7,161
1,775
1,579
1,539
1,300
1,288
1,183
1,001

50.11
14.16
4.74
1.17
1.05
1.02
0.86
0.85
0.78
0.66

Canon MJ Investor Relations Website
Canon MJ maintains a comprehensive Investor Relations website to further
facilitate communication with stockholders. The website contains:• News for investors• IR calendar• Financial results and other financial information• ‌Information on the Three-Year Management Plan
(fiscal year 2014–2016)• Stock information• Annual reports

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

65

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

This annual report was printed on theCanon imagePRESS C7010VP high-speed,
high-resolution printer.