Fresh Wind
AnnualReport2012

for the year ended December 31, 2012

Customer Focus
Mission: To provide optimal value through marketing innovationthat enhances security and peace of mind and supports
creativity in all areas of life, work and society.

Better Communication
Vision: To be a group of service creationcompanies that practices the principle ofcustomer focus with a global perspective.

Canon MJ begins its
evolution into a service
creation group dedicatedto providing customers
with optimal value.

2000

The Color imageRUNNER iR C3200
and C3200N color multifunction
printers launch.

Diversification andevolution as a service
creation group

TODAY
For the Canon MJ Group, business diversification literallymeans the expansion of business areas, while evolution asa service creation group means not only the expansion ofmaintenance service sales, but also the development of arole as a creator of services based on IT solutions. At thesame time, we will expand our overseas business activities.
These strategies are summarized as“Beyond CANON,
Beyond JAPAN.”
Canon Marketing Japan Inc.

01

Our Role

As a member of the Canon Group, theCanon MJ Group provides high-added-value
solutions to meet the needs of its customers.
With our main focus on Canon and Japan,
we will further expand our business andgeographic scope to promising new areas.

Creation ofadded value
Solutions based on Canon products

Customers
High-added-value solutions centering on IT

LIFE

WORK

Support foroverseas
customers

Canon
MarketingJapan

SOCIETY

Two-Way Communication
Continual dialog with customers plays
a vital role in our ability to offer
high-added-value solutions.
Our role is not simply to supply products andservices, but to identify the real needs of ourcustomers and create new value in responseto those needs. We achieve this by continuallytalking to our customers and maintaining highquality communication.

Business Partners
02 Canon Marketing Japan Inc.

Alliance Partners

Procurement ofhigh-quality
foreign products

Canon products have earned the confidence of countless users. By linking products backed
by the advanced technology of this global business group with IT technology, the Canon MJ
Group is able to provide solutions that truly meet the needs of its customers. We are also
strengthening our collaboration with business partners and alliance partners throughout
Japan to enhance our ability to respond to the needs of customers by targeting new growth
opportunities within and beyond Japan.
Under our customer-focused business philosophy, all Canon MJ Group employees strive
to optimize two-way communication and participate in manufacturing. Our aim is to help
customers to achieve optimal value across all facets of life, work and society.

Marketing&
Sales

Service&
SupportParticipation in manufacturing

Canon Inc.

Provision of manufacturingexperience and expertise
Provision of IT solutions

RESEARCH

DEVELOPMENTPRODUCTION

IT
SolutionS

Participation in Manufacturing
We work with Canon to ensure that
customer feedback is reflected in research,development and production operations.
We place a high value on customer feedback as thestarting point for future manufacturing initiatives. Our
marketing activities provide a wide range of contact points
through which we carefully gather direct customer input
for use as feedback for the research, development andproduction operations of Canon Inc. Through this role, we
are key participants in product development and evolution.
We respond to the changing
needs of our customers incollaboration with a wide
variety of partners.

Canon Marketing Japan Inc.

03

Our Presence

We provide customers with added value through contact
points spanning many aspects of life, work and society.
Our 25 group companies and 18,500 employees work to grow
the Canon MJ Group into a service creation group providing
solutions that exceed customer expectations.

BUSINESSSOLUTIONSWe help to improve officeproductivity by providing a wide
range of products and services
centering on Canon products.

IT SOLUTIONS
We help customers to enhance thecompetitiveness and corporate valueof their businesses through the
optimized integration of IT into
their business activities.

IMAGINGSYSTEMS
By informing users about new ways
to enjoy photography and images,
we help them to discover new fun
and excitement.

INDUSTRIAL
EQUIPMENTWe help the semiconductor andhealthcare industries to fulfill their vitalroles in our lives by providing the world’s
most advanced equipment and solutions.

04 Canon Marketing Japan Inc.

Major Products- Business-use multifunctional
products- Commercial printing systems- Laser printers- Large-format inkjet printers- Maintenance services

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

Major Products- Interchangeable lensdigital cameras- Compact digital cameras- Inkjet printers- Commercial imaging equipment

Major Products- Industrial equipment- Medical equipment

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

Major companies /organizations- Canon MJ IT Group Holdings Inc.
- Canon IT Solutions Inc.
- Canon Software Inc.
- Edifist Learning Inc.
- Nine other companies

Major companies /organizations- Canon Marketing Japan Inc.
Imaging Systems Company- Canon Customer Support Inc.
- withPhoto Inc.

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.

4,400sales personnel identifying
and understanding problems
from the customerʼs
perspective.

4,200
systems engineers
carrying out marketing
activities in the customerʼs
best interests.

Customer-Focused Approach
We always think and act from the customerʼs perspective. By
consistently applying this focused approach, we are able to solve
each customerʼs problems and provide optimal value. We work
always to provide solutions that truly reflect customer needs.

2,800

350

customer engineers seeking
to provide value thatexceeds expectations.

sales and service centers,
an extensive nationwide
network.

Canon Marketing Japan Inc.

05

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

Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2011

2010

2012

Net sales¥ 681,234¥ 632,419¥ 674,159$ 7,830,276

Cost of sales

438,333

409,527446,616

5,038,311

Gross profit

242,901

222,892

227,543

2,791,965

SG&A expenses

226,099

214,450

219,8072,598,839

Operating income

16,802

8,442

7,736

193,126

Net income

10,579

6,764

3,724

121,598

Total assets

462,574

447,765448,592

5,316,943

Total stockholders’ equity

253,862

250,671

246,680

2,917,954

FOR THE YEAR:AT YEAR-END:

Yen

U.S. dollars (Note 1)

PER SHARE OF COMMON STOCK:
Stockholders’ equity¥ 1,907.50¥ 1,827.25¥ 1,798.16$ 21.93

Net income (Note 2)

77.45

49.30

26.70

0.89

Cash dividends (Note 3)

24.00

20.00

20.00

0.28

%

KEY RATIOS:
Total stockholders’ equity ratio

54.9

56.0

55.0

ROE

4.2

2.7

1.5

Thousands of shares

COMMON STOCK:
Number of shares outstanding at year-end

151,080

151,080

151,080

NOTES:
1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥87 to U.S.$1, the prevailing exchange rate as of December 31, 2012.
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.

Contents
02 Our Role
04 Our Presence
06 Financial Highlights
07 To Our Stockholders and Stakeholders
08 A Message from the President
12 Driving New Growth: Diversifying
14 Driving New Growth: Evolving
06 Canon Marketing Japan Inc.

16 Segment Review and Strategies
24 Sustainable Management
29 Financial Section
61 Corporate Data

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

To Our Stockholders and Stakeholders

ChairmanHaruo Murase (on left)

President Masami Kawasaki (on right)

New Strengths for a New Age
Accelerating growth by developing
new businesses and creating new markets
In 2012, there was a gradual improvement in the businessenvironment, in part because of reconstruction work following
the Great East Japan Earthquake. However, the recovery trend
was held back by a combination of factors, including a
prolonged global economic slump affecting Europe and otherregions, as well as a slowdown in the Japanese economy in thefall of 2012.
The Canon Marketing Japan (Canon MJ) Group achieved
year-on-year growth in both revenues and income in thisenvironment. This reflects strong trends in key business areas,
including the multifunctional product (MFP) business in theBusiness Solutions segment and the system integration (SI)service in the IT Solutions segment, and the interchangeablelens digital camera business in the Consumer Imaging segment.
We also laid foundations for a new phase of growth.
SHOWA INFORMATION SYSTEMS, CO., LTD. and OCE JAPANCORPORATION, which both joined the Canon MJ Group in
2011, led the development of our business base in thecommercial printing field, while the Nishi-Tokyo Data Center

went on stream and began providing services. In addition, we
strengthened our business base by restructuring our activities
serving the medical field. Other important moves included theestablishment of overseas subsidiaries in the areas of industrial
equipment and IT solutions.
At the heart of our management policy for the Canon MJ
Group is our customer-focused approach to marketing.
“Customer” is the most important word for the Canon MJ
Group, and our commitment to customers is the principle thatguides our thoughts and actions in response to each challenge.
This customer-focused philosophy will remain a constantguiding principle for our continuing efforts in 2013 to achieve
our goals by creating new businesses and markets under Phase
II of our Long-Term Management Objectives covering the period
to FY2015 and the Three-Year Management Plan (FY2013–2015), which is our action plan for this vision. These plans are
predicated on our determination to accelerate our growth.

Canon Marketing Japan Inc.

07

A Message from the President

Balancing
Our Approach
In FY2012, our consolidated net
income increased by 56.4% year
on year. This substantial increase
is attributable both to cost-cutting
efforts and sales growth resulting
from our dynamic approach
to income growth—balancing
new product marketing and the
proposal of wide-ranging solutions
with sustained restructuring.

In the first half of 2012, the Japanese economy
followed a recovery trend driven by post-earthquake
reconstruction demand and an improvement in capital
investment. However, the Japanese economy stalledin the second half under the impact of economic
stagnation in Europe and North America, combinedwith faltering growth in emerging economies. Theseand other factors weakened Japanʼs recovery
momentum over the whole of 2012.
The key concepts behind the Canon MJ Groupʼsstrategy in this business environment were growth
and transition. We worked to achieve sales growth byeffectively marketing new products and dynamicallyoffering a wide range of solutions.
Full-year contributions from consolidated
subsidiaries that joined in 2011, Canon Lifecare
08 Canon Marketing Japan Inc.

Solutions Inc. (formerly ELK CORPORATION), OCE
JAPAN CORPORATION and SHOWA INFORMATIONSYSTEMS CO., LTD., helped to lift consolidated net
sales by 7.7% over the previous yearʼs level to¥681.2 billion.
By combining this result with an improvement in
the ratio of gross profit to sales, structural reforms,
and sustained efforts to minimize costs, we wereable to achieve substantial income growth.
Consolidated operating income increased by 99.0%
to ¥16.8 billion, while consolidated net income was
56.4% higher at ¥10.6 billion.
Progress underLong-Term Management Objectives Phase II
In 2011, the Canon MJ Group launched the Long-Term Management Objectives Phase II, a five-year
program covering the period from 2011 to 2015.
The most importantaim
under the Long“ Our goal is to drive
Term Management
growth as a service
Objectives Phase II
creation group capable
is to move toward aof providing optimal
new growth phasethrough the further
value to customers.”
expansion of ourbusiness domains. Our four basic strategies for thispurpose are to expand the market shares of Canon
products, to diversify our business activities, toevolve into a service company, and to innovategroup management. By moving forward with thesepriority strategies, we aim to drive our growth into a
service creation group capable of providing optimalvalue to customers.
The following is an outline report on our progressunder these four priority strategies in FY2012.
Market Share Expansion
Sales volumes increased by 18%, and there wassustained improvement in market shares, reflecting thelaunch of a large number of second-generation models
in the imageRUNNER ADVANCE series of multifunction
printers (MFPs). We also reached the number-one

position in the laser printer market for the 21stconsecutive year and maintained our number-one
status in the large-format inkjet printer market.
We also held our top market share in theinterchangeable lens digital camera category. Amongthe new products launched were the EOS 6D midentry level model and the EOS M mirrorless camera.
Business Diversification
We strengthened our business structure by integrating
marketing and maintenance services for medical
equipment under Canon Lifecare Solutions Inc.
We also created an environment for further sales
expansion in the commercial printing market. We
enhanced our business structure in this area byacquiring SHOWA INFORMATION SYSTEMS CO., LTD.
as a wholly owned subsidiary. In addition, theproducts of Océ N.V. began to make a significant
contribution to sales.
There were further improvements to our Cinema
EOS System lineup, including the launch of the EOS
C 500 system, which is capable of capturing 4K
images. This resulted in a substantial increase insales of commercial imaging equipment.
Evolution into a Service Company
In October 2012, we completed preparations for theLong-Term Management Objectives Phase II (2011–2015)

Evolution into a service creation group through“growth and transition”

Beyond CANON, Beyond JAPANPriority Strategies

01

Strengthen market sharesof Canon products

into a03 Evolve
service company

02

Diversify businessgroup
04 Further
management innovation

Canon Marketing Japan Inc.

09

A Message from the President

expansion of our business process outsourcing
business with the start of operations at the NishiTokyo Data Center. In the IT solutions area, weestablished subsidiaries in Thailand and thePhilippines in August and November 2012 inpreparation for the accelerated expansion of ouroverseas activities. There was also evidence ofsustained progress in the area of medical solutions,
including strong financial results for Canon ITS Medical.
In the document business field, evidence of sustained
growth in demand for our services for small andmedium offices included an increase in the numberof subscribers to our HOME cloud service, and strong
sales of unified threat management security products.
Group Management Innovation
We enhanced our ability to respond to customer
needs while also improving operational efficiency byshifting to a work-style based on the use of mobile
equipment. For example, we issued approximately
12,000 thin, lightweight ultrabooks to employees
and allocated approximately 5,000 smartphones tomarketing personnel.
Our targets under the Long-Term Management
Objectives Phase II are net sales of ¥850 billion or
higher, operating income of ¥42.5 billion or higher,

and net income per share of ¥ 185 or higher in
FY2015. Some of these targets deviate from theThree-Year Management Plan ( 2013 – 2015 )announced in 2013 (table below), but our commitment
to the performance targets set down in the Long-Term
Management Objectives Phase II remains unchanged.
One of the reasons for the deviation in targets is achange in the way results are presented. Starting in thecurrent fiscal year, results will be stated as net
amounts rather than gross amounts. Also, the 2015
performance targets under the Long-Term
Management Objectives take into account thecompletion of M&A deals and the establishment of new
businesses. We therefore believe that the targets are
not unattainable, depending on the progress of our
M&A activities and the establishment of new
businesses over the next three years.
We will focus in particular on two of our four priority
strategies: business diversification and evolution into a
service company. Under our “Beyond CANON, Beyond
JAPAN” concept, we will expand the range of products
handled and accelerate the global expansion of ourbusiness activities. The entire Canon MJ organization is
united in our determination to make progress toward theachievement of our performance targets for FY2015
through approaches that will include both the start-up of
new businesses and mergers and acquisitions.

Indicators and Targets
Indicators(Billions of yen)2012 Actual

2015 Target

Net sales increase fromdiversification¥43 billion¥100 billion plus

Service Business Ratio

39%

45%

Non-hardware (excluding consumables) net sales percentage

Beyond CANON Ratio

29%

30%

Percent of net sales contributed by products procured from outside and Canon MJ services

Beyond JAPAN Ratio

2.2%

10%

Percent of net sales contributed by overseas activities and imported products

Area

Remarks

Net sales increase versus 2010, from diversification

Three-Year Management Plan (2013–2015)̶Performance Targets
2012 Actual(Billions of yen)

Ratio2015 Target(Billions of yen)

Ratio

Net sales

659.2

Operating income

16.8

2.5%

30.0

3.8%

Net income

10.6

1.6%

18.5

2.4%

Net income/share

780.0

¥77

¥139

* Due to the change in accounting policy since 2013, the 2012 actual net sales wasreclassified by deducting certain deductible items.
* Net income per share in 2013 and later is calculated based on the number of shares asof the end of FY2012.

10 Canon Marketing Japan Inc.

2015 Performance Objectives by Segment
Area

Business
Solutions
IT Solutions
Imaging
Systems
Industrial
Equipment

Net sales
Operating income
Net sales(Billions of yen)2012 Actual

2015 Target

330.9

370.0

6.3

11.0

131.0

168.0

0.2

5.0

199.2

210.5

Operating income

9.7

11.0

Net sales

30.7

62.0

Operating income

(1.2)

2.5

Operating income
Net sales

Basic Policies and Priority Strategies under theThree-Year Management Plan
We have adopted a Three-Year Management Plancovering the period from 2013 to 2015 as aframework for our efforts to realize our goals for theCanon MJ Group under the Long-Term Management
Objectives Phase II. Our basic management policies
under this plan are to contribute to the achievementof overwhelming leadership for Canon products inworld markets, to create original, high-added-value
solutions, and to strengthen our trading capabilities
and achieve radical business model innovation underthe “Beyond CANON, Beyond JAPAN” concept.
Based on these policies, we aim to evolve into a
service creation group capable of consistently
providing uniqueadded value in a
“ We aim to achieve
global businessradical business model
environment byinnovation under the
combining Canon‘Beyond CANON,
products with the
Beyond JAPAN’ concept.” capabilities of theCanon MJ Group
as a solutions provider. We will approach this goal
through the following priority strategies in eachbusiness segment.
Business Solutions
1. We aim to improve the earning potential of the
document business, including office MFPs andlaser printers.
2. We will use synergies among OCE JAPANCORPORATION and SHOWA INFORMATIONSYSTEMS CO., LTD., which are now members of
the Canon MJ Group, to expand the commercial
printing business.
IT Solutions
1. We aim to improve our earning performance by
maintaining growth potential and modifying
business structures in existing business areas.
2. We aim to strengthen and expand our IT
outsourcing business and create new businesses
based on the use of our own data centers and theprovision of cloud-based services.
3. We aim to provide IT services to the overseas
business sites of Japanese companies, including
Canon Group companies.

Imaging Systems (formerly Consumer Imaging)
1. We aim to achieve No. 1 market shares for key
products while maintaining profitability.
2. We aim to expand sales of commercial imaging
equipment.
3. We aim to raise customer satisfaction levels andexpand new businesses by strengthening thephotography lifestyle support business andservice and support structures.
Industrial Equipment
1. We aim to expand our range of products for thesemiconductor and non-semiconductor markets.
2. We aim to restore and expand the earning
performance of the medical solutions business byachieving business synergies in the activities ofCanon Lifecare Solutions Inc.
We will work to expand our business activities andimprove the financial performance of the Canon MJ
Group through these strategies. Canon MJʼs ThreeYear Management Plans are formulated annually ona rolling basis. Segment targets under the plan forthe period through FY2015 are presented on thepage opposite.
Outlook for FY2013
We expect our financial results for FY2013 to include
consolidated net sales of ¥684.8 billion, a year-onyear increase of 0.5%. Consolidated operating income
is expected to increase by 7.1% to ¥18.0 billion, andconsolidated net income by 0.2% to ¥10.6 billion.
Our dividend policy emphasizes dividend stability,
and we aim to achieve a consolidated payout ratio ofaround 30%. In FY2013, we expect to pay a total
annual dividend of ¥24.
We would like to emphasize that the managementof the Canon MJ Group is focused on the delivery ofsustainable growth over the long term, and that ourbusiness policies are based on the view that there issubstantial potential for growth through strategies
that include diversification and evolution as aservice creation group. We thank you for yourcontinuing support.

Canon Marketing Japan Inc.

11

Driving New GrowthDiversifying¥100 billion
2015 Target
An increase of¥100 billion in net
sales by diversifying,versus 2010

Under our Long-Term Management Objectives Phase II, a five-year plan started in2011, we aim to achieve a sales increase of at least ¥100 billion from FY2010, byimplementing diversification strategies in a variety of business areas. These include
expansion of the commercial printing business, reinforcement of the healthcarerelated business, and sales expansion in the commercial imaging equipment category.

Expanding the Commercial Printing Business

Synergy

We aim to expand the commercial printing business by taking maximum
advantage of synergy benefits with other Canon Group companies.
We aim to expand the commercial printing business throughthe benefits of synergies among Canon Group company Océ
N.V. (Netherlands), and Canon MJ Group companies OCE
JAPAN CORPORATION and SHOWA INFORMATION SYSTEMS
CO., LTD.
Specifically, by taking advantage of not only the customer
base and know-how of Canon MJ, but also of SHOWAINFORMATION SYSTEMS CO., LTD., we will expand sales ofOcé printing products including the ColorStream series of highspeed continuous form models and the VarioPrint series of

The form
printing market

Corporate core
in-house printing
Data printing
services (DPS)

12 Canon Marketing Japan Inc.

high-speed cut-sheet models. We will also aggressively strive
to develop markets for commercial printing and corporate inhouse high-speed printing for the Canon imagePRESS series,
and for the imagePROGRAF series of large-format inkjet
printers. In the retail photo market, we will also strive to expand
market share with the industrial photo printer DreamLabo.
Additionally, by integrating technologies from Canon and Océ,we will develop and introduce products better suited to theneeds of the Japanese market. We aim to achieve sales of ¥50
billion from the commercial printing business in FY2015.

The digital commercial
printing market

Major
printing
companies

Corporate in-househigh-speed printing(central printing rooms)

Commercial
printing(Printing industry)

Integration

Strengthening the Healthcare-Related Business

The group will bolster earnings in the healthcare-related business by
integrating medical equipment sales and service under Canon Lifecare Solutions Inc.
In November 2012, ELK CORPORATION was renamed Canon
Lifecare Solutions Inc., and the sales and service functionsof medical equipment service category of Canon MJ Group
were transferred to Canon Lifecare Solutions Inc. with the aimof creating a core firm in the medical and healthcare-related
business. By establishing an integrated system from sales
through to service and support, we aim to strengthen sales
capabilities and improve customer satisfaction.
We will further strengthen our healthcare-related
business by promoting IT/network solutions for medical
institutions, including the PACS:PRIMITUS series introduced
in January 2013 that is capable of storing, browsing andmanaging medical image data via network.
Canon ITS Medical Inc., which deals with medical
information systems including receipt computers, electronic
medical record systems and health checking systems, is also

showing robust performance. Our sales target in FY2015 forthe entire healthcare-related business including the above
sectors is ¥40 billion.

Various Canon MJ Group
medical equipment sales,
maintenance and support operations
ELK CORPORATION
Canon Lifecare Solutions Inc.
ELK products

Canon MJ products

Share

Expanding Sales of Commercial Imaging Equipment

We are working to increase market share in the areas ofimage monitoring, image production and broadcast systems.
In the area of image monitoring, we will work on responding
to the need for higher image quality, accumulating imagemonitoring know-how and acquiring public sector business.
We will focus on expanding sales in the image production
market in areas such as motion pictures and TV commercials
by reinforcing the lineup of our CINEMA EOS SYSTEM,
including EOS C500, capable of capturing 4K high-definition
images. With regard to broadcast systems, remote-controlled

Sales expansion of commercial imaging equipment

Image
monitoring
Security and othertypes of monitoring
cameras■ Accumulate image
monitoring know-how■ Acquire business from thepublic sector■ Create high-sensitivity
camera business■ Develop solutions

platform cameras arebeing adopted by manybroadcasters, and withdemand expected to
grow in areas beyond
broadcasting, we will aggressively develop the market. Our
sales target for the commercial imaging equipment business
in FY2015 is ¥10 billion.

GrowthImage
production■ Strengthen the product development capability■ Improve efficiency and productivity■ Proactive expansion into the non-broadcast market

CINEMA EOS SYSTEMEOS MOVIE
Commercial digital
video camera■ Gain a substantial share in the 4K/8K market■ Expand the channels■ Improve the ability to sell solutions directly

Broadcastsystems

Share

Broadcast TV lenses
Pan heads

Canon Marketing Japan Inc.

13

Driving New Growth

Evolving
45%
2015 Target
Non-hardware(excluding consumables)
net sales percentage

Under our Long-Term Management Objectives Phase II, we will also implement
strategies in various business areas, including reinforcement of the outsourcing
business and expansion of IT solutions overseas, with the objective of evolving into
a service creation group and raising the proportion of sales of non-hardware products(excluding consumables) to 45% of total sales.

Promoting Further Expansion of IT Solutions Overseas

Global

We will expand the IT solutions business in China andother Asian countries, mainly focusing on Japanese companies.
For Japanese companies that expand their business in China
and other Asian countries, we aim to become a true partnerin the IT area, offering a variety of solutions extending toapplication development, service and support. In addition
to our existing base in Shanghai, we established Canon IT
Solutions (Thailand) Company Limited in the Kingdom ofThailand in August 2012, and Canon IT Solutions (Philippines),
Inc. in the Republic of the Philippines in November 2012.
In the significantly growing IT markets in the Southeast
Asian countries, demand for IT solutions is expected toincrease further, especially from Japanese companies fortheir local bases. By establishing a system for conveniently
providing services both from Japan and from Southeast Asian
countries, we aim to obtain IT service business from Japanesecompanies that are expanding in this region.
In the future, we will aggressively pursue expansion of
the IT business not only in Thailand and the Philippines but
also in other Southeast Asian countries.

Canon IT Solutions (Shanghai)Company Limited
President: Kazunori Asada
Established: June 1997
Capital: ¥100 million
No. of employees:
101 (As of April 1, 2013)
Core business:
Product development and sales ofCanon products, System Integration andConsulting for Canon Group companies
and Japanese-affiliated companies

Canon IT Solutions (Thailand)Company Limited

President: Yutaka Haraki

President: Hidesato Kodama

Established: November 2012

Established: August 2012

Capital: US$200 thousand

Capital: THB600 million

No. of employees:
3 (As of April 1, 2013)

No. of employees:
3 (As of April 1, 2013)
Core business:
The provision of IT solutions in Thailand

14 Canon Marketing Japan Inc.

Canon IT Solutions(Philippines), Inc.

Core business:
The provision of IT solutions in
the Philippines

Reinforcement of Outsourcing Service BusinessOne-stop

Canon MJ Group aims to strengthen our outsourcing
service business by offering a variety of “one-stop” services.
Nishi-Tokyo Data Center (total area of 16,532m2, about 2,300
racks), a next-generation data center with cutting-edge
facilities and security, commenced operation in October 2012.
By leveraging the know-how accumulated from many yearsof data center operation, we will offer more flexible highreliability system operating services. Nishi-Tokyo Data Center
will play a core role in strengthening both Canon MJ Groupʼs
SOLTAGE cloud service platform, in pursuit of convenience forcustomers, and our business process outsourcing (BPO)
service that is to support customers in accelerating theirbusiness. Our target is to achieve sales of ¥ 50 billion by
FY2015 from the entire stock-type IT service business* thatconsists of outsourcing and maintenance services.
* Stock-type IT service business consists of data center services, system
operating services, cloud services, business process outsourcing services,and maintenance services.

Cloud Service provides strong support
for customersʼ IT strategies

SOLTAGE
Overseas Sales
Company Clouds
Other Companiesʼ
CloudsCanon Inc. Cloud

Printing

Data Center
We provide customers with safety and reassurance ofworld-class-strength security in storing their IT assets
such as servers in our data center under our Facility
Service; providing them with use of our networking
equipment and servers under our Hosting Service; andmonitoring and operating customersʼ systems for themunder our MSP* Service.

Canon MJ Group
CloudsImaging

SOLTAGE, our independently-developed platform forcloud services, as well as the advanced IT services wecontinue to offer, will provide a solution for customers to
optimize their usage of cloud services, and realize InterCloud that connects different cloud services.

Group IT* MSP (Management Service Pack) provides operation,
monitoring and maintenance services on customersʼ
servers and network equipment.

SOLTAGE
Data Center
Nishi-Tokyo Data Center

Network Service
Network service

We offer suggestions tailored to customersʼ
needs, principally in relation to cost-cutting andimprovement of convenience with FMC* Service, andthe secure interconnection of office devices throughVPN network service.
* FMC (Fixed-Mobile Convergence) is a service to integrate
landline network and cell phone network.

Network Construction

Network Construction
We set up and provide support for networks for
Canon products, including office multifunction
products and printers, digital cameras and various
mobile devices.

Canon Marketing Japan Inc.

15

Segment Review and Strategies

Business
Solutions
We will aggressively target increased sales of MFPs, especially
products in the second-generation imageRUNNER ADVANCE
series launched last year, with the aim of increasing thenumber of machines in field (MIF). We will also work to
improve earning performance by raising productivity
in both sales and services. At the same time, we
Senior Vice
President
will work with group companies to build theMasahiro Sakata
infrastructure needed to support a major expansionof the commercial printing business.

Our Strategies• We aim to expand both document volumes and MIF for office multifunction products and laser printers.
• As part of our productivity improvement efforts, we aim to reduce the number of service personnel by
10% from the FY2010 level (excluding new consolidated subsidiaries) by FY2015.
• We aim to achieve sales of ¥50 billion from the commercial printing business, which is our biggest
growth driver, by FY2015, by maximizing synergies with SHOWA INFORMATION SYSTEMS CO., LTD.
and OCE JAPAN CORPORATION.

Operating Review
Office Multifunction Products (MFPs)
In FY 2011 , we were affected more severely than ourcompetitors by product supply problems resulting fromthe Great East Japan Earthquake, with the result that sales
declined year on year. In FY2012, we worked to recover ourlost share through determined efforts to expand sales of MFPs.
This was reflected in excellent results, including a substantial
19% increase over the number of units sold in FY2011, and a
14% increase over the pre-earthquake level in FY2010.
Laser Printers
Evidence of our powerful sales base in Japan includes thefact that we were number one in the domestic market forthe 21st consecutive year in FY2012 in terms of our total
market share for both monochrome and color laser printers.
Sales of monochrome printers were slower because of factorsthat included a reactionary downswing following major

16 Canon Marketing Japan Inc.

orders received in FY2011, as well as the expansion of thereplacement cycle. However, we successfully completed
major deals for color laser printers, and there was sustained
growth in the number of units sold. Sales of toner cartridges
were similar to the previous yearʼs level.
Large-Format Inkjet Printers
There was sustained sales growth led by products forcomputer aided design and poster production. Key growth
drivers included the competitive imagePROGRAF iPF650 highquality printer.
Maintenance Services and Document Services
Despite year-on-year growth in printing demand, sales ofmaintenance services were marginally below the previous
yearʼs level because of falling unit prices.

Net Sales
330.9(Billions of yen)

336.7

352.5

Operating Income

370.0

11.0
9.0
6.3

2012

Actual2013

Forecast

2014(Billions of yen)

2015

2012

Actual

Note:

7.0

2013

Forecast

2014

2015

Until 2012 , a portion of sales promotion
expenses was included in selling, general andadministrative expenses. Starting in 2013, thisamount will be deducted from net sales, which
will be shown as a net amount. This change
does not affect operating income.

Outlook
Expanding Market Share and MIF for Office MFPs
Because the Japanese MFP market has entered its maturephase, our efforts to gain market share now center ondetermined marketing of products with highly attractive
characteristics, such as the second-generation imageRUNNERADVANCE series launched last year. We are also targeting
growth in the commercial printing area, which is the biggest
growth driver in the Business Solutions segment. We aim toachieve this by maximizing synergies with OCE JAPANCORPORATION and SHOWA INFORMATION SYSTEMS CO., LTD.,
which joined the Canon MJ Group in 2011. OCE JAPANCORPORATIONʼs high-speed continuous form printing models
have gained a reputation for excellent productivity, and sales

remain strong. In the future we aim to achieve further expansion
in this area by working with Océ N.V. to develop products
specifically designed for the Japanese market.
Improving the Earning Potential of theMaintenance Service Business
Document volumes fell temporarily immediately after the
Lehman shock but have returned to a growth trend since2010. In the future we expect document volumes to expandin step with growth in the amount of information handled bybusinesses. We therefore expect our earning performance inthis area to improve, in part because of the additional impetus
provided by cost reductions and other factors.

Outlook for FY2013
We expect sales to increase by 2% year on year to ¥336.7
billion (comparison based on same conditions) to ¥336.7
billion in FY2013 through growth of unit sales of major

Topicsproducts, such as MFPs. We aim to increase operating
income by 11% to ¥7 billion through continuing cost cutting
efforts.

IT Solutions Driving a V-Shaped Recovery for Canon System & Support

Last year, Canon System & Support Inc.
provided the impetus for growth in bothrevenues and income in the Business Solutions
segment. One of the sources of that impetus
was the IT Solutions Business. Canon System& Support Inc. achieved substantial revenue
growth through efforts to expand sales in a
number of areas, including HOME advanced
cloud services for small and medium-size
enterprises, and security solutions, such as
unified threat management (UTM).

What is HOME?
HOME is an IT system outsourcing service provided by the Canon MJ Group.
IT utilization and administration are important priorities for small and mediumsize businesses. Through its HOME service, Canon MJ not only handles IT
administration and management on behalf of businesses, but also provides ITbased marketing and security enhancements.
This business activity has helped us to gain an advantage over ourcompetitors by building closer relationships with customers that use the service.
As a stock business based on monthly charges, this business is also expected tocontribute to sustained income flows in the future.

Canon Marketing Japan Inc.

17

Segment Review and Strategies

IT
Solutions
The IT Solutions segment is playing a key role in the Canon MJ
Group’s globalization and evolution into a service company
through initiatives that include the commencement of operations
at a new data center, the establishment of overseas
offices, and the development of new businesses andproducts. Last year brought substantial growth in
Executive Vice
President
both sales and income, and we aim to achieve further
Kazunori Asada
growth and earnings improvement in the future byaccelerating this trend.

Our Strategies• Using the Nishi-Tokyo Data Center, which became operational in 2012, as a core facility, we aim
to raise the contribution from stock-type IT services, such as the cloud services, systems operation
services and data center services, to 29% or higher by FY2015.
• We aim to increase the overseas ratio for the IT Solutions business to 10% or higher by FY2015 byusing our operations in Shanghai, Thailand and the Philippines to expand our business with Japanesecompanies in Asia, and by strengthening collaboration with the overseas Canon Group.

Operating Review
In FY2012, we combined sales growth achieved throughdetermined efforts to win orders with significant cost savings
made possible by restructuring and the consolidation of
offices. As a result, operating income increased by ¥3.3 billion
year on year to a positive result of ¥200 million for the year.
SI Service Business
There was an increase in the number of individual systemdevelopment contracts, especially for financial institutions andmanufacturers, and sales were higher year on year.
IT Infrastructure Service BusinessOutsourcing services are provided through this segment. In
FY2011, we won major earthquake-related contracts, and in
FY2012 sales were marginally lower year on year because ofa reactionary downswing following that growth.

18 Canon Marketing Japan Inc.

Embedded Software Business
Sales from this segment exceeded the previous yearʼs level,
thanks to a sustained flow of projects for customers in the
motor vehicle industry and other sectors.
IT Products
A downturn in the core PC business was offset by strong salesof security products and smart devices, such as tablets, andsales were higher year on year.

Net Sales
131.0(Billions of yen)

139.4

152.0

Operating Income

168.0(Billions of yen)

5.0

Note:
2.5
0.7

0.2
2012

Actual2013

Forecast

2014

2015

2012

Actual2013

Forecast

2014

2015

Until 2012 , a portion of sales promotion
expenses was included in selling, general andadministrative expenses. Starting in 2013, thisamount will be deducted from net sales, which
will be shown as a net amount. This change
does not affect operating income.

Outlook
Maintaining Growth Performance in
Existing Business Segments, Restructuring Measures
We are developing and strengthening our business structures tomaintain growth in existing segments. One of the ways in which
we will achieve this goal is through the upskilling of our sales
and development personnel to improve both productivity andour ability to meet customer needs. At the same time, we aim
to enhance our earning potential by targeting productivity
improvements, including the elimination of duplication, by
continuing the structural reforms that we started last year.
Reinforcement and Expansion of Outsourcing Service BusinessWe aim to increase the percentage of stock-type IT service

earnings from 24% in FY2012 to 29% or higher in FY2015,
by not only providing SI services, but also by attracting
subsequent related business, such as system operation andmaintenance services. The new Nishi-Tokyo Data Center,
which became operational in October 2012, will be the corefacility for these activities.
Dynamic Global Business Development
We will use our offices in Shanghai, Thailand and the Philippines
as bases to expand our IT Solutions business by serving
Japanese companies in China and Asia. We aim to increase thebeyond Japan ratio to 10% or higher through closer collaboration
with the global business operations of the Canon Group.

Outlook for FY2013
We expect net sales to increase by 6.4% (comparison basedon same conditions) to ¥139.4 billion. This forecast is basedon a range of factors, including the expansion of existing

Topicsbusiness activities and the start-up of new ones. We aim toachieve operating income of ¥0.7 billion through ongoing cost
reduction efforts.

MREAL Mixed Reality System Helping to Reduce Development Lead Times,
Costs and Environmental Loads

In July 2012 , we launched the MREAL mixed reality system.
Designed to merge the real world with computer graphics, thissystem helps users to shorten development lead times at the productdesign stage while also reducing costs and environmental loads.
MREAL is expected to be used not only in development activities
in the manufacturing sector, but also in awide range of other fields, including design,
healthcare, housing and entertainment.

Canon Marketing Japan Inc.

19

Segment Review and Strategies

Imaging
Systems
Strong sales of interchangeable lens digital cameras
helped to lift operating income substantially above
target in 2012. In 2013 our efforts to expand sales
will focus not only on consumer products, butalso on business-to-business sales of commercial
imaging products.

Senior Vice
President

Osamu Sasaki
Note:	In 2013 the Consumer Imaging segment became the Imaging Systems segment.

Our Strategies• We aim to improve earning performance and achieve number-one market shares in the key production
categories of interchangeable lens digital cameras, compact digital cameras and inkjet printers.
• By 2015 we aim to achieve sales of ¥10 billion in the commercial imaging equipment category,including video production cameras marketed under the CINEMA EOS SYSTEM, and security cameras.
• We aim to expand our content business, including the withPhoto web service, while also working toincrease the Canon fan base and enhance customer satisfaction through the photo culture businessand other initiatives.

Operating Review
Digital Cameras and Digital Video Cameras
We achieved overwhelming market shares with entry-levelinterchangeable lens digital cameras, including the EOS Kiss
X5 and the EOS Kiss X6i. The launch of the EOS M mirrorlesscamera in September also allowed us to attract new users ina market segment that we have not previously been able totap. Also popular were products with full-size sensors, suchas the EOS 5D Mark III and the EOS 6D, which we launchedin March and November respectively. Sales were substantiallyhigher year on year.
In the compact digital camera category, we worked to
expand sales of the IXY 430F, which has enhanced Wi-Fi
functions, and the premium PowerShot G15 and PowerShot
S110 models. While sales of the PowerShot A series wereexcellent, sales were lower year on year because of the increased
weighting of the product mix toward entry-level models.
We sought to expand sales of digital video cameras by

20 Canon Marketing Japan Inc.

strengthening our product lineup. However, sales fell below
the previous yearʼs level, in part because of a shrinking
market for products in the medium price range.
Inkjet Printers
Sales expansion initiatives included the launch of the new
PIXUS MG6330 in October 2012. Sales were higher than in theprevious year, when results were affected by floods in Thailand.
Commercial Imaging Equipment
Commercial imaging products, including television lenses
and security cameras and other types of monitoring cameras,previously formed part of the Industrial Equipment segment.
These products were shifted to this segment in January 2012.
Sales were substantially higher year on year, in part becauseof strong sales of video production cameras and lenses in the
CINEMA EOS SYSTEM, which was launched in January.

Net Sales
192.0

2012

Actual(Billions of yen)

199.2

2013

Forecast

204.0

2014

210.5

2015

Operating Income
10.9

2012

Actual9.7

2013

Forecast

10.5(Billions of yen)

11.0

Note:

2014

Until 2012 , a portion of sales promotion
expenses was included in selling, general andadministrative expenses. Starting in 2013, thisamount will be deducted from net sales, which
will be shown as a net amount. This change
does not affect operating income.

2015

Outlook
Maintaining Our Number-One Position in theInterchangeable Lens Camera Market
We aim to maintain our number-one share of the market forinterchangeable lens digital cameras by strengthening ourlineup of products for all users from entry-level to professionals,
including mirrorless cameras.
Strengthening Our Range of Inkjet Printers forProfessional and Business Users
While consolidating our number-one position in the home
printer market, we will also step up our marketing of printers for

professional and business users. We expect sales of ink
cartridges to exceed the previous yearʼs level.
Expanding Sales of Commercial Video Equipment
We aim to achieve sales of ¥10 billion by 2015. This growth
will be driven by strong sales of television lenses, security
cameras and other types of monitoring cameras and video
production equipment in the CINEMA EOS SYSTEM.

Outlook for FY2013
We expect Imaging Systems sales to increase by 3.8% overthe previous yearʼs level to ¥ 199. 2 billion (comparison
based on the same conditions), thanks to the launch of new
products and aggressive marketing activities. Operating

Topicsincome is expected to be 11.0% lower year on year at ¥9.7
billion because of lower unit prices for key products andincreased marketing expenses resulting from aggressive
promotional activities.

Marketing the EOS M Mirrorless Camera to New Users

Canonʼs first mirrorless camera, theEOS M, went on sales in September
2012. Canon aims to use this camera,
together with the EOS Kiss entry-level
single-lens reflex camera, to expand
the user profile. As the entry-level userbase expands, more users are
expected to take the next step up to
more sophisticated cameras.

Canonʼs positioning of mirrorless cameras
Professional

By encouraging people
within the expanding
entry-level user base to
move up to higher-levelproducts, Canon aims to
expand the user base for
middle-level products andinterchangeable lenses,
thereby achieving strong
growth in sales of EOS
system products.

Middle

Entry

Step
up

Step
up

Compact cameras/smartphones

Step
up

Canon Marketing Japan Inc.

21

Segment Review and Strategies

Industrial
Equipment
We regret to report that last year we were unable to reach our targets
because of deteriorating trends in the industrial and healthcare markets
and escalating competition in various product categories. This year, we
aim to expand our range of industrial equipment, andto use the Taiwanese subsidiary that we establishedlast year as a foothold for further growth in the Asian
President
market. In the medical equipment category, Canon
Masami Kawasaki
Lifecare Solutions will lead efforts to maximize
synergies between the Canon and ELK brands.

Our Strategies• In the Industrial Equipment segment, we will expand our range of products for the semiconductor andnon-semiconductor markets and develop the Asian market through our Taiwanese subsidiary, Canon
Advanced Technologies Taiwan Inc.
• We will expand our healthcare-related business by enhancing synergies with Canon Lifecare Solutions
Inc., with the aim of achieving net sales of ¥40 billion from this business area, alone, in 2015.

Operating Review
Industrial Equipment(semiconductor fabrication equipment, etc.)
In the non-memory category, there was steady demand forwashing and etching systems and other products. However,the semiconductor category was significantly impacted byinvestment cutbacks, and demand was slower, with the resultthat sales were lower year on year.
Medical Equipment
Shipments of digital radiography equipment increased, inpart as a result of efforts to stimulate replacement demandand closer cooperation with system manufacturers. However,sales were marginally lower because of escalating pricecompetition.
Sales of ophthalmic equipment were also below theprevious yearʼs level because of factors that included theshrinkage of the fundus camera market. However, sales of

22 Canon Marketing Japan Inc.

ultrasonic diagnostic equipment were higher.
In November 2012 , the Canon MJ Groupʼs medical
equipment sales and maintenance service operations were
integrated under ELK CORPORATION, which was renamed
Canon Lifecare Solutions Inc.

Net Sales

(Billions of yen)

Operating Income

62.0

2.5

48.5
30.7

2012

2013

Forecast

2014

Note:

1.5

35.6
–1.2

Actual(Billions of yen)

2015

2012

Actual

0.1
2014

2013

Forecast

2015

Until 2012 , a portion of sales promotion
expenses was included in selling, general andadministrative expenses. Starting in 2013, thisamount will be deducted from net sales, which
will be shown as a net amount. This change
does not affect operating income.

Outlook
An Expanding Lineup of Industrial Equipment Products
In the area of industrial equipment, we are working to develop
new markets, in part through the expansion of our lineup of new
products. Despite forecasts that conditions in the Japanese
semiconductor market will remain difficult until mid-2013, we
anticipate that sales will exceed the previous yearʼs level.
We will also work through Canon Advanced Technologies
Taiwan Inc., which we established in March 2012, to use theTaiwanese market as a foothold for the expansion of sales ofsemiconductor fabrication equipment in Asian markets.

Expansion of Healthcare-Related BusinessWe aim to expand the sales in this area to ¥40 billion by
2015 by achieving synergies through the efforts of Canon
Lifecare Solutions to expand sales of Canon and ELK brandproducts, and through the launch of a medical imaging
solutions business centering on the Picture Archiving andCommunication System (PACS)*.
* PACS is a medical imaging system designed to support integrated management ofdata from diagnostic imaging equipment. Integrated management of the vast amountsof image data generated in hospitals will improve efficiency in medical facilities by
speeding up processing operations, including storage, retrieval and transmission.

Outlook for FY2013
Sales of industrial equipment are expected to increase by
16.0% year on year to ¥35.6 billion (comparison based on thesame conditions), reflecting the recovery of semiconductorrelated investment in Japan and the development of new
industrial and medical markets. Operating income is expected

Topicsto improve from a loss of ¥1.2 billion in the previous year to a
positive result of ¥0.1 billion, in part because of the benefits
from the integration of the medical equipment business under
Canon Lifecare Solutions Inc.

Canon Moves into the PACS Market with Primitus

Picture archiving and communication systems (PACS) are networkbased storage, retrieval and management systems for medical
imaging data obtained using diagnostic imaging equipment, suchas digital X-ray systems and CT and MRI scanners.
Launched in January 2013, the Primitus series consistsof new PACS products developed by the Canon MJ Group.
These products will be marketed primarily by Canon Lifecare
Solutions, which is the Canon MJ Groupʼs core company forbusiness activities relating to medicine and healthcare. They
will help to improve the quality of healthcare and the efficiency
of diagnostic processes.

Canon Marketing Japan Inc.

23

Sustainable Management

CSR is Marketing
The Canon MJ Group aims to create new markets by pursuing marketing
innovation, by sensitively and accurately monitoring the rapidly changing
needs and values of society, and by proposing new value in partnershipwith society. The essence of CSR is to earn trust and support by responding
effectively to the evolving needs and expectations of society. That is why “CSR
is marketing” is a key concept for our CSR activities.
Philosophy

Customer Focus
Philosophy Brings Full
CSR Participation— CSR is Marketing —CSR Awareness

Shared Philosophy:
The “Three Selfs” Spirit

CSR AwarenessThe “Three Selfs” Spirit

United Nations Global Compact

Our participatory approach
to CSR is based on the
sharing of the Canon MJ
Groupʼs CSR philosophy
and values by all
employees, and on acommitment to accurate
knowledge. Our efforts tofoster CSR awareness inour employees arecoordinated by the CSR
Promotion Division.

Our “Three Selfs” spirit is a central
guiding principle that dates back to
the founding of Canon and is part ofour corporate DNA. The code statesthat employees should proactively
take the initiative (self-motivation),
conduct oneself responsibly and withaccountability (self-management) andknow oneʼs position, roles andcircumstances (self-awareness). The
Three Selfs spirit is the foundation for
our CSR activities.

In December 2009, Canon MJ signed the UN
uN Global
Compact. under this initiative, companies commit
themselves to universal principles relating to humanrights, labor standards, the environment and theprevention of corruption. The underlying principle isthat companies should work to solve global problems
through responsible corporate
activities. By reflecting thisprinciple in our businessactivities, we will contribute to
the realization of a better andmore sustainable society.

24 Canon Marketing Japan Inc.

Environmental Activities
Setting the Green Ratio Target
In addition to the reduction of CO2 emissions from the business sites and logistics activities of the Canon MJ Group, we
also help our customers to reduce their CO2 emissions. We define the Green Ratio as the ratio between our emissions
and our contribution to the reduction of customersʼ emissions. Our target for this ratio is that CO2 emission reductions at
our customers should be at least 100,000 tons and at least double our own CO2 emissions.
GREEN RATIOTARGET ACHIEVED IN 2011

Green Ratio for 2011: 1:2.9
・Reduction of CO2 emissions from thebusiness sites and logistics activitiesof the Canon MJ Group.

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

2007 actual

・Also, reduction of CO2 emissions at
customer sites through expanded
sales of the new imageRuNNERADVANCE.
* Our Green Ratio target of 1:2 or higher for 2015
takes into account the opening of a new data
center in 2012.

2015 target
Green
Ratio

Contribution tocustomersʼ CO2
reductions

83,895 tons

±0

100,000 tons
or higher

49,305 tons

Double or
higher1

CO2 emissions ofCanon MJ Group

Negative impact on global environment

Social Contribution Activities
Contributing to Community Safety
In recent years,
years elevatedelevatedsecurity
securitycamera
camerasystems
systemshave
havebeen
beeninstalled
installed
in a growing number of locations, especially by local governments, toallow immediate monitoring of areas affected by earthquakes,
tsunami, fires and other emergencies. Canon Marketing Japan is
helping to build safer and more secure social infrastructure by
supplying elevated security camera systems, such as this systeminstalled by Kawasaki City* as part of a facility-based disasterpreparedness program.
* Located near Tokyo, Kawasaki City has a population of approximately 1.43 million.

An elevated monitoring camera

Interior view of a disaster
response coordination centerin Kawasaki Cityʼsadministration building

Canon Marketing Japan Inc.

25

Sustainable Management

Corporate GovernanceCorporate Governance Organization(As of March 27, 2013)

General Stockholdersʼ Meeting
Appointment / Dismissal
Audits

7 Directors
Board of Directors

5 Corporate Auditors
Board of Corporate Auditors

Management Committee

Cooperation

Internal Auditors
OfficeCSR Committee

Appointment / Dismissal
Cooperation

Auditing ofaccounts

Cooperation

Auditing Company

Appointment / Dismissal

Internal
auditsInternal Controls Evaluation Committee

AdviceGroup Companies
Staff Managers

Basic Stance on Corporate Governance

Board of Directors

We recognize that sustainable growth in corporate
value requires ongoing improvement in such areas
as management transparency and the monitoring of
progress toward management targets. This isreflected in our wide-ranging initiatives tostrengthen corporate governance.

There are now seven directors, including one
outside director. By limiting the term of office fordirectors to one year, we have created amanagement structure capable of adapting quickly
to changes in the business environment. Important
decisions are made by the Board of Directors, which
normally meets once a month, and at Management
Committee meetings attended by the directors ofCanon MJ and the presidents 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 theCanon MJ Group by separating management
decision-making from executive functions andreducing the number of directors. It also clarifies
responsibility for the performance of business
operations and strengthens executive systems.

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

26 Canon Marketing Japan Inc.

Lawyers/
Licensed Tax Accountants

Disclosure Committee

Board of Directors and Corporate Auditors

Board ofDirectors

ChairmanPresident

Director

Director

Director

Haruo Murase

Masami Kawasaki

Osamu Sasaki

Yo Shibasaki

Masahiro Sakata

Director

Outside Director

Masaki Sawabe

Ikuo Soma

Corporate Auditor

Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Tetsuo Yoshida

Masahiro Shimizu

Hiroshi Kawashimo

Kuniyoshi Kitamura

Kengo Uramoto

Board ofCorporate
Auditors

Board of Corporate Auditors
There are five corporate auditors, of whom three areappointed from outside of the Company. The Boardof Corporate Auditors sets audit policies andallocates responsibilities to the auditors, who
conduct stringent audits in accordance with thosepolicies. Specific activities include attending Board
meetings, interviewing directors and examining
documents containing important Board resolutions.
The corporate auditors also monitor the Companyʼsoperations and assets.

Internal Auditors OfficeInternal audits are conducted by the Internal
Auditors Office, an independent specialist unit that
also assesses and advises Canon MJ and its
subsidiaries on legal compliance, the effectivenessof processes, internal control systems andinformation security. The Internal Auditors Office

works in coordination with similar units establishedin major subsidiaries. The Canon MJ Group has 50
audit staff members.

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

Canon Marketing Japan Inc.

27

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 of responding
to a variety of management risks.
Risk Management

Information Security

The Canon MJ Group has taken steps to ensure the continuityof its business activities in the event of a major earthquake, aninfluenza outbreak or other contingencies that could impact on
its activities. These initiatives are coordinated by the BCM1Expert Committee.
In July 2007, we established the BCP2 Expert Committee
as a subsidiary organization of the Management 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.

The Canon MJ Group regards the reinforcement of information
security as part of its responsibilities toward the creation of amore secure society, and as essential to meeting customersʼ
expectations in line with our Customer Focus philosophy.
Our efforts follow two central themes: Reinforcing thegroup-level information security infrastructure by improving
uniformity and efficiency, and improving the security, 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 to better information
security, a process that we also use to upgrade our services tocustomers and our IT solutions.

1 BCM: Business continuity management
2 BCP: Business continuity plan

See here for details

Internal Controls

Relationship with Canon Inc.

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

Canon MJ is a subsidiary of Canon Inc., which owns 57.0% ofCanon MJ stock (as of December 31, 2012). This percentage
figure excludes Canon MJʼs 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 lithographysystems) manufactured by Canon Inc. under the Canon brandin Japan. In fiscal 2012, our purchases from Canon Inc.
amounted to ¥250.2 billion (US$2,876.3 million*), or 68.5%
of our total purchases.
Because of this relationship, a major shift in the
management policies or business activities of Canon Inc. could
have a significant impact on the business activities,
performance and financial position of the Canon MJ Group.

Compliance

See here for details

For the Canon MJ Group, compliance is not simply a matter ofobeying laws and regulations. We define compliance as
obedience to regulatory requirements and social rules, acommitment to social justice, and continuing efforts to meetthe expectations of society. Our compliance activities aredesigned to encourage high ethical values and respect for thelaw in individual employees through awareness activities,
employee education and organizational activities.
To raise awareness of the Canon Group
Code of Conduct, all employees and officers ofCanon Marketing Japan carry Compliance Cards.
Printed on these cards are the Three Selfs spirit
and compliance tests that can be used byindividuals to check their own conduct.
28 Canon Marketing Japan Inc.

* The figures have been presented in U.S. dollars by translating all Japanese yenamounts at ¥87 to U.S.$1, the prevailing exchange rate as of December 31, 2012.

Financial Section
Contents

30

32

34

36

37

Ten-Year Consolidated
Financial Summary

Financial
Review

Consolidated
Balance Sheets

Consolidated Statementsof IncomeConsolidated Statementsof Comprehensive Income

38

39

40

60

Consolidated Statementsof Changes in Net Assets

Consolidated Statementsof Cash Flows

Notes to Consolidated
Financial Statements

Independent Auditor’sReportCanon Marketing Japan Inc.

29

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

Millions of yen

2012

2011

2010

2009

¥ 681,234
16,802
17,52910,579¥ 632,419
8,442
10,972
6,764¥ 674,159
7,736
8,584
3,724

¥ 686,615
6,297
(595)
(4,343)

462,574
253,862447,765
250,671448,592
246,680449,607
246,829

33,767(16,067)(11,813)108,260

8,716(12,108)(3,811)
102,373

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

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

FOR THE YEAR:
Net sales
Operating income
Income (loss) before income taxes and minority interests
Net income (loss)
AT YEAR-END:
Total assets
Total stockholdersʼ equity (Note 5)
CASH FLOWS:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents

Yen

PER SHARE OF COMMON STOCK:

77.45
24.00
1,907.50

Net income (loss) (Note 2)¥

Cash dividends (Notes 3 and 4)
Stockholdersʼ equity (Note 5)

¥

49.30
20.00
1,827.25

26.70
20.00
1,798.16¥¥(31.62)
20.00
1,797.31

Notes: 1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥87 to U.S.$1, the prevailing exchange rate as of December 31, 2012.
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)

757

816 822

867

905
827
687 674

2.2 2.2
1.9
1.5

Current Assets
Current Liabilities
Current Ratio

632

681

345

362
335

328
2.0

1.4

0.9
0.6

1.7 1.7 1.7 1.7 1.7

1.1

198 196

1.8

1.9

317

247

260 266 255

247 247 251

254

7.4 7.6
6.4

1.9
5.4

4.3

212 220 214
184

-0.6

30 Canon Marketing Japan Inc.

225

234

2.0

154 157 151

FY’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

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

302 302 302
1.6

Total Stockholders’Equity and ROE

163

3.2

4.2

1.5 2.7-1.7

FY’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

FY’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

Thousands of
U.S. dollars (Note 1)

Millions of yen

2008

2007

2006

2005

2004

2003

2012

¥ 827,487
25,41622,22911,186¥ 905,137
36,88635,452
20,033¥ 867,172
33,91932,96718,807¥ 821,948
29,72327,086
15,358¥ 815,511
29,274
20,186
12,364¥ 757,033
16,987
20,4387,043$ 7,830,276
193,126
201,483
121,598

484,937
255,220

526,125
266,086

526,578
260,367

513,335
247,244482,337
234,158

495,396
225,317

5,316,943
2,917,954

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

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

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

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

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

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

388,127(184,678)(135,782)
1,244,368
U.S. dollars(Note 1)

Yen

78.63
40.00
1,858.39¥ 134.84
40.00
1,817.59¥¥ 125.64
36.00
1,739.50¥ 101.78
28.00
1,650.52

81.78
22.00
1,562.23

¥

¥

46.24
18.00
1,496.74$ 0.890.28
21.93

5. Total stockholdersʼ equity in the above table represents the total of stockholdersʼ 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
stockholdersʼ equity and minority interests to be presented as net assets, and net assets to be classified as stockholdersʼ equity, valuation and translation adjustments andminority interests.

Total Assets andTotal Stockholders’Equity Ratio

Total Assets
Total Stockholders’Equity Ratio

Net Income (Loss)(Billions of yen)
20.0(Billions of yen/%)
495

513

18.8
527 526

482

15.4

485
450 449 448

463

12.4
11.2

45.5

48.5 48.2 49.4

50.6 52.6

54.9 55.0 56.0

54.9

10.6

7.0

6.8
3.7

-4.3

FY’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

FY’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

Canon Marketing Japan Inc.

31

Financial Review

Business Performance
Net Sales
In addition to the contributions from Canon Lifecare Solutions
Inc. (formerly ELK CORPORATION), SHOWA INFORMATIONSYSTEMS, CO., LTD. and OCE-JAPAN CORPORATION, whichbecame consolidated subsidiaries in fiscal 2011, businessperformance in the year ended December 31, 2012 also
benefited from our efforts to expand sales through strategies
focused on growth and evolution. Net sales increased by
7.7% year on year to ¥681,234 million.
Segment Information
In the Business Solutions segment, shipments of officemultifunctional products (MFPs) were higher year on year.
This reflects aggressive marketing efforts, including thedevelopment of new customers, as well as strong sales of
new products. Shipments of production MFPs also increased
year on year thanks to our efforts to promote orders for bothCanon and Océ commercial printers. In the laser printercategory, there was a healthy increase in shipments, despite
slow sales of monochrome printers due to a lengthening
replacement cycle, and sales were moderately higher year on
year. This result was partly attributable to the negotiation ofmajor orders, especially for color printers, which helped toboost shipment volumes. Sales of toner cartridges weresimilar to the previous yearʼs level.
Despite strong demand for printing, sales of maintenanceservices for office MFPs were marginally lower year on year
because of cuts in unit prices. Canon System & Support Inc.,a member of the Canon MJ group, achieved significant growthin the number of units shipped, in part through thedevelopment of new customers. Healthy trends were also
recorded in the IT solutions area, with the result that net sales
exceeded the previous yearʼs result. SHOWA INFORMATIONSYSTEMS, CO., LTD., which became a consolidated subsidiaryin the previous fiscal year, recorded healthy results, especiallyin its core areas of kanji printing systems and advertisingproduction printers.
Net sales in this segment increased by 5.8% year on yearto ¥344,000 million.
In the IT Solutions segment, results for the SI service
business benefited from increased orders for individual systemdevelopment, especially from financial institutions andmanufacturers. Orders in other categories, including medical
solutions, manufacturing solutions and mixed reality (MR)systems, also helped to lift sales over the previous yearʼslevel. Despite healthy trends in BPO services and other areas,

32 Canon Marketing Japan Inc.

sales from the IT infrastructure service business weremoderately lower compared with the result for the previous
year, when there were orders relating to earthquake damage.
Sales of embedded software were also higher year on year
thanks to a healthy trend in orders from customers in the
motor vehicle industry and other areas. In the IT products
category, reduced sales in the core area of business PCs wereoffset by strong sales of security-related products, tablets andother smart devices, and new memory-related products.
Net sales in this segment were 5.5% higher year on yearat ¥131,303 million.
In the Consumer Imaging segment, sales ofinterchangeable-lens digital cameras remained strong,allowing us to gain an overwhelming share of the market forentry-level models. We also enjoyed sustained success with
our efforts to attract new users for mid-range models, andmirrorless cameras also brought sustained growth. On a
yearly basis, we gained the biggest market share andachieved a substantial year-on-year increase in sales. As withcamera bodies, sales of exchangeable lenses were also
dramatically above the previous yearʼs level. In the compact
digital camera category, we worked to expand sales ofpremium models. Entry-level products were also popular, andshipments exceeded the previous yearʼs total in volume terms.
However, a percentage increase in sales of entry-levelproducts meant that sales were lower year on year. Despite
our efforts to strengthen our product line-up and expand
sales, our sales of digital video cameras were below theprevious yearʼs result, in part because of a shrinking market
for products in the medium price range. Our efforts to boost
sales of ink-jet printers included the introduction of new
products with improved designs. Sales exceeded the figure forthe previous year, when there was a decline resulting from thefloods in Thailand. Sales of ink cartridges were similar toprevious yearʼs total, despite the impact of reduced printershipments in the previous year due to the floods in Thailand.
The commercial imaging equipment category, which
includes television lenses for broadcasting stations andsecurity and other types of monitoring cameras, which
previously belonged to the Industrial Equipment segment, wasshifted to this segment in January. A recovery in capital
investment by broadcast stations was reflected in strong salesof television lenses, and sales of security and other types ofmonitoring cameras were also strong. There was a strong
demand for cameras and lenses in the CINEMA EOS SYSTEM,
which went on sale in January, and sales were substantiallyhigher year on year.
Net sales in this segment amounted to ¥200,618 million,

an increase of 10.2% over the previous yearʼs level.
In the Industrial Equipment Segment, we recorded strong
sales of some products, such as inspection and measuringsystems. However, demand for other manufacturing systems
was significantly reduced by a decline in semiconductorrelated capital investment in Japan, and stagnation in thisarea resulted in a year-on-year decline in sales of industrial
equipment. In the medical equipment category, we increased
the number of digital radiography systems shipped bystrengthening our collaboration with equipment manufacturers
and stimulating replacement demand. However, sales were
marginally lower because of intense price competition. Salesof ophthalmic equipment were also below the previous yearʼslevel, in part because of the shrinking market for fundus
cameras. Demand for ultrasound equipment remained strong.
There was also a substantial increase in sales resulting fromthe addition of new businesses, including the medical systems
and healthcare businesses, following the conversion of ELKCORPORATION into a consolidated subsidiary in June 2011.
Total sales were substantially higher year on year.
Net sales in this segment amounted to ¥30,690 million,a year-on-year increase of 13.7%.

million increase in notes and accounts payable, a ¥3,437
million increase in accrued income taxes, and a ¥3,559
million increase in accrued expenses.
Long-term liabilities were reduced by ¥278 million year
on year to ¥45,089 million. The main factors were a ¥542
million increase in the allowance for employeesʼ retirement
benefits, a ¥565 million reduction in long-term loans payable,
and a ¥293 million reduction in lease obligations.
Net assets increased by ¥2,781 million year on year to¥254,088 million. The main factors were an increase inretained earnings which were ¥7,691 million higher after
taking into account ¥10,579 million in net income less
¥2,745 million due to dividend payments and other factors,
offset by ¥4,702 million net increase in treasury stock due to¥5,105 million acquisition of treasury stock through market
purchases offset by ¥402 million due to a share exchange.
Total assets increased by ¥14,809 million year on yearto ¥462,574 million. ROE rose to 4.2% from 2.7% in theprevious year. Total stockholdersʼ equity ratio was 54.9%,
compared with 56.0% in the previous year, while
stockholdersʼ equity per share increased from ¥1,827.25 to¥1,907.50.

IncomeCash Flows

Operating income increased by 99.0% year on year to¥16,802 million, and net income by 56.4% to ¥10,579
million. This growth reflects an improved ratio of gross profit
to sales, as well as structural reforms and sustained efforts to
reduce costs.

Cash and cash equivalents amounted to ¥108,260 million as ofDecember 31, 2012, an increase of ¥5,887 million comparedwith the position at the end of the previous fiscal year.
Net cash provided by operating activities amounted to¥33,767 million, compared with ¥8,716 million in theprevious fiscal year. In addition to income before income taxes
and minority interests of ¥17,529 million, this total was also
impacted by depreciation of ¥16,318 million and an increasein accounts payable of ¥4,115 million, offset by an increasein accounts receivable of ¥4,689 million and income tax
payments of ¥2,504 million.
Net cash used in investing activities amounted to ¥16,067
million, compared with ¥12,108 million in the previous year.
This resulted mainly from expenditure of ¥15,753 million for
the acquisition of property, plant and equipment.
Net cash used in financing activities amounted to¥11,813 million, compared with ¥3,811 million in theprevious year. The main items were payments of ¥5,105
million for the acquisition of treasury stock, dividend paymentsof ¥2,755 million, and a ¥2,180 million net decrease in
short-term loans payable.

Financial Position
Current assets increased by ¥14,731 million year on year to¥316,609 million. The main changes were a ¥5,887 million
increase in cash and cash equivalents, a ¥4,622 million
increase in notes and accounts receivable, and a ¥2,494
million increase in inventories.
Fixed assets increased by ¥78 million year on year to¥145,965 million. The main factors were a ¥10,418 million
increase in buildings and structures, a ¥3,882 million reduction
in software, a ¥2,799 million reduction in construction inprogress, a ¥1,656 million reduction in lease deposits, and a¥1,425 million reduction in deferred tax assets.
Current liabilities increased by ¥12,306 million year on
year to ¥163,397 million. The main changes were a ¥4,115

Canon Marketing Japan Inc.

33

Consolidated Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2012 and 2011

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2012

2011

2012

¥ 108,260
127,64930
28,827
4,709
40,0037,361(230)
316,609¥ 102,373
123,027
20
26,333
4,410
40,028
5,902(215)
301,878$ 1,244,368
1,467,230
345
331,345
54,126459,805
84,609(2,644)
3,639,184

36,342
84,276167
19,64125,3022,308
̶
168,036(68,472)
99,56436,83373,858166
19,632
23,4022,180
2,799
158,870(66,942)
91,928417,724
968,690
1,919
225,759
290,827
26,529̶
1,931,448(787,034)
1,144,414

62
15,376177317
54
15,986524
19,258253317
83
20,435

713
176,735
2,034
3,644
621
183,747

4,109
24
6,202
17,5962,985(501)
30,415¥ 462,574

4,084
30
7,858
19,021
2,977(446)
33,524¥ 447,765

47,230276
71,287202,253
34,310(5,758)349,598$ 5,316,943

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)
Deferred tax assets (Note 13)
Short-term loans receivable (Note 9)
Other current assets
Allowance for doubtful receivables
Total current assets
PROPERTY, PLANT AND EQUIPMENT:Land (Note 3)
Buildings and structures (Note 3)
Machinery and vehicles (Note 8)
Furniture and fixtures (Note 8)
Rental assets
Lease assets
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
INTANGIBLE ASSETS:
Goodwill (Note 2)
Software (Note 8)
Lease assets
Utilization rights
Other intangible assets
Total intangible assets
INVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 3, 9 and 10)
Long-term loans receivable
Lease deposits (Note 17)
Deferred tax assets (Note 13)
Other investments
Allowance for doubtful receivables
Total investments and other assets
Total assets

34 Canon Marketing Japan Inc.

Thousands of
U.S. dollars (Note 1)

Millions of yen

2012

2011

2012

¥ 104,162¥ 100,047$ 1,197,264

Other current liabilities

586
̶
̶
5,122
2,680
25,0293,838
21,980

605
1,616
1,115
1,685
2,208
21,4704,386
17,9596,736
̶̶
58,87330,805
287,690
44,115
252,644

Total current liabilities

163,397

151,091

1,878,127

Bonds payable (Note 19)

̶
̶

860
570
31
37,801
901

60
565
1,153
639
31
37,259918

̶Long-term loans payable (Notes 3 and 18)

9,885
6,552
356
434,494
10,356

Allowance for directorsʼ andcorporate auditorsʼ retirement benefits (Note 2)

1,046

907

12,023

Other long-term liabilities

3,880

3,835

44,598

Total long-term liabilities

45,08945,367518,264

73,30382,820124,624(26,892)

73,30382,820116,933(22,190)

842,563
951,954
1,432,460(309,103)

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Notes and accounts payable (Notes 3 and 9)
Lease obligations (Note 18)
Short-term loans payable (Notes 3 and 18)
Current portion of bonds payable (Note 19)
Accrued income taxes (Note 13)
Consumption taxes payable
Accrued expenses
Reserves

LONG-TERM LIABILITIES:

Lease obligations (Note 18)
Deferred tax liabilities (Note 13)
Deferred tax liabilities for land revaluation (Note 13)
Allowance for employeesʼ retirement benefits (Notes 2 and 11)
Allowance for long-term continuous service rewards (Note 2)

̶

CONTINGENT LIABILITIES (Note 4)
NET ASSETS (Note 2):
STOCKHOLDERSʼ EQUITY (Note 20):
Common stock:
Authorized ̶ 299,500,000 shares;
Issued ̶ 151,079,972 shares in 2012 and 2011
Capital surplus
Retained earnings
Treasury stock
ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized gain (loss) on available-for-sale securities

61

(62)

701

Foreign currency translation adjustments

(54)

(133)

(621)

7
226
254,088¥ 462,574

(195)

80
2,598
2,920,552$ 5,316,943

Total accumulated other comprehensive income
MINORITY INTERESTS
Total net assets
Total liabilities and net assets

636
251,307¥ 447,765• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

35

Consolidated Statements of Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2012 and 2011

Thousands of
U.S. dollars (Note 1)

Millions of yen

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

2012

2011

2012

¥ 681,234
438,333
242,901
226,099
16,802¥ 632,419
409,527
222,892
214,450
8,442$ 7,830,276
5,038,311
2,791,965
2,598,839
193,126

382
(76)
640
116
132
(0)
116
(518)
(39)
(149)
(0)
(142)
̶
̶

421
(89)
622
1
4,492
(484)
12
(426)
(286)
̶
(36)
(503)
475
(992)

4,391
(873)
7,356
1,333
1,517
(0)
1,333
(5,954)(448)(1,712)(0)(1,632)̶̶̶

(1,173)

̶

265
727
17,529496
2,530
10,972

3,046
8,357
201,483

5,890
1,035
6,925
10,60425¥ 10,579

3,234
971
4,205
6,767
3
6,764

67,701
11,897
79,598
121,885287$ 121,598

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Insurance income
Gain on sales of fixed assets
Gain on negative goodwill
Loss on impairment of fixed assets
Gain on sales of investments in securities
Loss on sales and disposal of fixed assets
Loss on devaluation of investments in securities
Expenses related to change of business nameLoss on cancellation of lease contracts
Office transfer expenses
Gain on bad debts recovered
Loss on disaster
Loss on adjustment for changes of accounting standard for
asset retirement obligations
Other, net
Income before income taxes and minority interests
INCOME TAXES (Note 13):
Current
DeferredIncome before minority interests
MINORITY INTERESTS
Net income¥

U.S. dollars (Note 1)Yen

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

36 Canon Marketing Japan Inc.

¥
¥

77.45
24.00

¥
¥

49.30
20.00

$
$

0.89
0.28

Consolidated Statements of Comprehensive Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2012 and 2011

Thousands of
U.S. dollars (Note 1)

Millions of yen

INCOME BEFORE MINORITY INTERESTS

2012

2011

2012

¥ 10,604¥ 6,767$ 121,885

126
0
85
211
¥ 10,815

(17)
(0)
(17)
(34)
¥ 6,733

1,448
0
977
2,425
$ 124,310¥ 10,781
34¥ 6,734(1)$ 123,919
391

OTHER COMPREHENSIVE INCOME (Note 6)
Net unrealized gain (loss) on available-for-sale-securities
Deferred gain (loss) on hedges
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to
The companyʼs shareholders
Minority interests• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

37

Consolidated Statements of Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2012 and 2011

Millions of yen

BALANCE AT JANUARY 1, 2011
Net income
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Other, net

Accumulated othercomprehensive income

Stockholdersʼ equity

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

151,079,972¥ 73,303¥ 82,820¥ 112,914
6,764(2,744)¥ (22,192)¥ 73,303¥ 82,820¥ 116,933
10,579(2,745)(1)(142)¥ 73,303¥ 82,820¥ 124,624

Foreigncurrencytranslation
adjustments

Minority
interests¥ (47)¥ (118)

¥ 167

(15)
¥ (62)(15)¥ (133)

469
¥ 636

123
¥ 61

79
¥ (54)

(441)
31
¥ 226

(1)
3

(1)

BALANCE AT JANUARY 1, 2012
151,079,972
Net income
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Changes due to share exchange
Other, net
BALANCE AT DECEMBER 31, 2012 151,079,972

Net unrealized
gain (loss) on
available-forsale securities¥ (22,190)(5,105)1402¥ (26,892)

Total
net assets¥ 246,847
6,764(2,744)(1)
2439¥ 251,307
10,579(2,745)(5,105)0(181)
233¥ 254,088

Thousands of U.S. dollars (Note 1)

Accumulated othercomprehensive income

Stockholdersʼ equity
Commonstock

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 DECEMBER 31, 2012

Retainedearnings

Treasurystock$ 842,563$ 951,954 $ 1,344,058 $ (255,057)
121,598(31,552)(58,678)(12)
12(1,632)4,620$ 842,563$ 951,954 $ 1,432,460 $ (309,103)• See accompanying notes to consolidated financial statements.

38 Canon Marketing Japan Inc.

Capitalsurplus

Net unrealized
gain (loss) on
available-forsale securities

Foreigncurrencytranslation
adjustments

Minority
interests$ (713)$ (1,529)$ 7,310

1,414
$ 701

908
$ (621)Total
net assets$2,888,586
121,598(31,552)(58,678)
0(5,069)(2,081)357
2,679$ 2,598 $2,920,552

Consolidated Statements of Cash Flows
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2012 and 2011

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
Loss on disaster
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables
Gain on negative goodwill
Increase (decrease) in allowance for employeesʼ retirement benefits
Increase (decrease) in allowance for directorsʼ andcorporate auditorsʼ retirement benefits, net
Interest and dividend income
Interest expense
Loss on sales and retirement of property,
plant and equipment, net
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable-trade
Increase in inventories
Increase (decrease) 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
Payments for purchases of investments in
subsidiaries resulting in changes in scope of consolidation
Decrease 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

2012

2011

2012

¥ 17,529¥ 10,972$ 201,483

16,318
0
−
462
70
(132)
630

15,332
484
992
906
(335)
(4,492)(652)

187,563
0
−
5,310
805
(1,517)
7,241

140

(64)

1,609

(382)
76

(421)
89

(4,391)
873

279

293

3,207

(110)
(4,689)(2,301)
4,115
3,963
35,968380(77)(2,504)33,767182
4,983(2,164)(9,781)(1,357)
14,967430(89)(6,592)
8,716(1,264)(53,897)(26,448)
47,29945,552
413,425
4,368(885)(28,781)
388,127

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

1,000
(11,977)
1,600(3,625)
(19)
317

230
(181,069)
7,655(31,816)
(172)
2,517

̶

(418)

̶

28
(16)
1,552
(16,067)

13
1,000
1
(12,108)

322(184)
17,839(184,678)(2,180)(618)(5,105)(2,755)(1,155)(11,813)
0
5,887
102,373¥ 108,260

(350)
(603)
(2)
(2,810)(46)(3,811)
1(7,202)
109,575¥ 102,373(25,058)(7,103)(58,678)(31,667)(13,276)(135,782)
067,667
1,176,701$ 1,244,368• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc.

39

Notes to Consolidated Financial Statements

1

Basis of Presentation ofConsolidated Financial Statements

method. The carrying amount in the balance sheet is calculated withconsideration of write-downs due to decreased profitability.

The accompanying consolidated financial statements of Canon Marketing(e) Property, Plant and Equipment

Japan Inc. (the “Company”) and its consolidated subsidiaries (the “Group”)

Property, plant and equipment are stated at cost. Depreciation isare prepared on the basis of accounting principles generally accepted incomputed by the declining-balance method for property and equipment,

Japan, which are different in certain respects as to application andwith the exception of items that are depreciated by the straight-line

disclosure requirements of International Financial Reporting Standards,

method at rates based on the estimated useful lives of the respective

and are compiled from the consolidated financial statements prepared byassets. These items are buildings purchased on or after April 1, 1998

the Company as required by the Financial Instruments and Exchange Law(exclusive of furniture and fixtures), all buildings and structures of theof Japan.

Companyʼs Makuhari office, property and equipment of certain

The U.S. dollar amounts are included solely for convenience of theconsolidated subsidiaries, and rental assets in the Business Solutions

reader and are stated, as a matter of arithmetical computation only, atsegment. The useful lives are as follows: buildings, mainly fifty years;

the exchange rate of ¥87=U.S.$1, the rate prevailing at December 31,

furniture and fixtures, mainly five years; and rental assets, mainly three

2012. These translations should not be construed as representations

years. Normal repairs and maintenance, including minor renewals andthat the Japanese yen amounts actually represent, or have been or could

improvements, are charged to income as incurred.

be converted into U.S. dollars at that or any other rate.
(f) Allowance for Employeesʼ Retirement Benefits2

Summary of
Significant Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for the year ended

In order to provide for employeesʼ retirement benefits, the Company andits consolidated subsidiaries provide liability for employeesʼ 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 the straight-line

December 31, 2012 include the accounts of the Company and all of its

method over the average service period of the eligible employees

30 (27 in 2011) subsidiaries.

remaining at the time when it arose. Unrecognized actuarial gain or loss is

All intercompany accounts and transactions are eliminatedin consolidation.
The excess of acquisition costs over net assets acquired is amortized

amortized from the fiscal year following the year in which it arose, by thestraight-line method over the average service period of the eligible
employees remaining.

generally over five years.
(g) Leases(b) Cash Equivalents

Leased assets under finance lease contracts are depreciated by the

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

straight-line method over their respective lease contract term with zeroand its consolidated subsidiaries consider all highly liquid investments,

residual value.

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

Leased assets under finance lease contracts that do not deem tomature or become due within three months of the date of acquisition, totransfer ownership to the lessee and were entered into before January 1,

be cash equivalents.

2009 when the latest accounting standards for lease transactions wereadopted are accounted for as operating leases.

(c) Securities
The held-to-maturity debt securities are stated at amortized cost.
Available-for-sale marketable securities are stated at fair market(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amount required

value, with unrealized gain or loss, net of the applicable taxes, reported as

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

a separate component of net assets. Available-for-sale securities whose

individually estimated uncollectible amounts for specific items to anfair value is not readily determinable are stated at cost determined by theamount based on the actual rate of uncollected receivables of the Group in

moving-average method.

prior years.

(d) Inventories(i) Income Taxes

Merchandise and service parts are valued at cost determined by theDeferred tax assets and liabilities are recorded to reflect the impact ofmonthly moving-average method. The carrying amount in the balance

temporary differences between assets and liabilities recognized forsheet is calculated with consideration of write-downs due tofinancial reporting purposes and such amounts recognized for tax

decreased profitability.

purposes. These deferred taxes are measured by applying the normal

Work in process is valued at cost determined by the specificidentification method.
Supplies are valued at cost determined by the last-purchase price

40 Canon Marketing Japan Inc.

statutory rate of income taxes to the temporary differences.

(j) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables and payables(p) Recognition of Revenues and Expenses and Recognition
of Revenue from Customized Software Development

denominated in foreign currencies are translated into Japanese yen at the

For software development contracts in progress as of December 31, thecurrent exchange rates in effect at the balance sheet date. The foreign

percentage-of-completion method is applied in cases where the outcomesexchange gains and losses on translation are recognized in theof such software development contracts can be estimated reliably. Whenaccompanying consolidated statements of income.

the percentage-of-completion method is applied, the percentage of(k) Foreign Currency Financial Statements

costs incurred and estimated total contract costs. For all other contracts,

The balance sheet accounts of the foreign subsidiaries are translated into

the completed-contract method is applied.

completion at the end of the fiscal year is determined based on actual

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(q) Application of Consolidated Taxation System
Effective from the fiscal year ended December 31, 2012, theCompany and certain consolidated subsidiaries have adopted theexchange rates prevailing during the year.

consolidated taxation system.

(l) Per Share Amounts of Common Stock(r) Accounting Standards Not Yet Applied

Net income per share is calculated using net income available to holders

Effective from the fiscal year beginning January 1, 2014, the Companyof common stock, and the weighted average number of shares of common

will apply “Accounting Standard for Retirement Benefits” (Accounting

stock outstanding for the period.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective fiscal years, including dividends to be paid after the end of therespective fiscal years.

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.

(m) Bonuses to Directors(s) Additional Information

The estimated amount payable for the next round of directorsʼ bonuses,＜Application of Accounting Standard for Accounting Changes andError Corrections＞

which are classed as expenses for the current year, has been included in
the accounts for the current fiscal year.
(n) Allowance for Directorsʼ and Corporate Auditorsʼ
Retirement Benefits
The Company and its consolidated subsidiaries pay lump-sum retirement

Effective January 1, 2012, the Group adopted “Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Statement No. 24,
December 4, 2009) and “Guidance on Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Guidance No. 24,
December 4, 2009).

benefits to directors and corporate auditors, the amounts of which are
determined in accordance with the Companyʼs and its consolidated
subsidiariesʼ internal regulations. Also, in accordance with the Companyʼsand its consolidated subsidiariesʼ internal regulations, a reserve isprovided for such benefits at the amount that would be required to be paid
if all directors and corporate auditors retired at the end of the fiscal year.
(o) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards to employees who
have given long-term continuous service determined in accordance with
the Companyʼs internal regulations, an allowance for long-term continuous
service rewards is recorded based on the amount the Company andcertain consolidated subsidialies expect to pay in the future.
The Company and some of its subsidiaries have established internal
regulations related to the Refresh and Vacation 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 orderto refresh the minds and bodies of these employees and enable them towork with new vigor in the future.

Canon Marketing Japan Inc.

41

3

Assets Pledged as Collateral

Assets pledged as collateral as of December 31, 2012 and 2011 were as follows:(1) Pledged assets
Thousands of
U.S. dollars (Note 1)

Millions of yen

Land
Buildings
Investments in securities

2012
¥ 647
451
̶
¥ 1,0982011¥ 2,136513
164¥ 2,8132012$ 7,437
5,184
̶$ 12,621(2) Liabilities secured by the above assets
Thousands of
U.S. dollars (Note 1)

Millions of yen

Accounts payable
Short-term loans payable
Long-term loans payable

4

2012
¥ 402
̶
̶
¥ 402

2011
¥ 620
555
326
¥ 1,5012012$ 4,621̶̶
$ 4,621

Contingent Liabilities

Contingent liabilities at December 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

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

5

2012
¥ 83
67

2011
¥ 129
85

2012
$ 954
770

Inventories

Inventories at December 31, 2012 and 2011 were composed of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

Merchandise
Service parts
Work in progress
Supplies
Other

2012
¥ 24,618
2,710
575
723
201
¥ 28,8272011¥ 22,012
2,690
438
1,023
170
¥ 26,333

2012$ 282,966
31,150
6,609
8,310
2,310
$ 331,345

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, ¥2 million ($23 thousand) for work in progress
relates to software development contracts from which losses are expected and corresponds to the reserve for contract losses.

42 Canon Marketing Japan Inc.

6

Other Comprehensive Income

The following table shows reclassification adjustments for each component of other comprehensive income for the year ended December 31, 2012

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

Millions of yen

Thousands of U.S. dollars (Note 1)

2012

2012

¥ 179
(16)

¥ 163

$ 2,058(184)$ 1,873

0
̶

0

0
̶

0

85

85
248
(37)
¥ 211

977

977
2,850
(425)
$ 2,425

The following table shows tax effects for each component of other comprehensive income for the year ended December 31, 2012
Thousands of U.S. dollars (Note 1)

Millions of yen

2012
Pre-tax
amount

¥ 163
0
85
¥ 248

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

72012
Net-of-tax
amountTax effect¥ (37)(0)̶¥ (37)

Pre-tax
amount

¥ 126
0
85
¥ 211

Net-of-tax
amountTax effect$ 1,873
0977$ 2,850

$ 425
(0)
̶
$ 425

$ 1,448
0977$ 2,425

Consolidated Statements of Changes in Net Assets

Current 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
due to 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 stockholdersʼ meeting
July 24, 2012
Board of Directorsʼ 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 stockholdersʼ meeting Common stock Retained earnings

Total dividends(Millions of yen)

Dividend per share(Yen)¥ 1,863¥ 14

Base date

Date effective

December 31, 2012 March 28, 2013

Canon Marketing Japan Inc.

43

Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
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
151,080̶̶̶̶

151,080
151,080

13,896
13,8961
1

2
2

13,895
13,895

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

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

March 29, 2011
General stockholdersʼ meeting
July 21, 2011
Board of Directorsʼ meeting

Type of stock

Total dividends(Millions of yen)

Dividend per share(Yen)

Base date

Date effective

Common stock¥ 1,372¥ 10

December 31, 2010

March 30, 2011

Common stock¥ 1,372¥ 10

June 30, 2011

August 26, 2011

(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 28, 2012
General stockholdersʼ meeting Common stock Retained earnings

8

Total dividends(Millions of yen)

Dividend per share(Yen)¥ 1,372¥ 10

Base date

Date effective

December 31, 2011 March 29, 2012

LeasesFinance Leases
Lease payments for finance leases excluding subleases, except for the lease agreements which stipulate the transfer of ownership of the leased property
to the Company and its consolidated subsidiaries, were ¥448 million ($5,149 thousand) and ¥2,009 million for the years ended December 31, 2012
and 2011, respectively.
(As Lessee)
Future minimum lease payments subsequent to December 31, 2012 and 2011 are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Future minimum lease payments:
Within one year
Thereafter

2012

2011

2012

¥ 84
17
¥ 101

¥ 478
121
¥ 599

$ 966
195
$ 1,161

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

44 Canon Marketing Japan Inc.

2012

2011

2012

¥3
̶
¥3

¥ 19
3
¥ 22

$ 46
̶
$ 46

The following pro forma amounts represent acquisition cost, accumulated depreciation and amortization, and net book value of leased property as ofDecember 31, 2012 and 2011, 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

2012

2011

2012

¥ 35
814
58
¥ 907

¥

67
6,298
206
¥ 6,571

402
9,356
667
$ 10,425

¥ 32
723
51
¥ 806

¥

55
5,767
172
¥ 5,994

368
8,310
586
$ 9,264

3
91
7
¥ 101

12
531
34
¥ 577

$

¥

$

$

34
1,046
81
$ 1,161¥(As Lessor)
Future minimum lease payments, which consist of subleases subsequent to December 31, 2012 and 2011, are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

Future minimum lease payments:
Within one year
Thereafter

9

2012

2011

2012

¥3
̶
¥3

¥ 19
3
¥ 22

$ 46
̶
$ 46

Financial Instruments

Current Fiscal Year (from January 1, 2012 to December 31, 2012) and Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
1. Informations on financial instruments(1) Policies for financial instruments
The Group invests surplus funds only in highly secure financial instruments, and mostly takes advantage of the group finance system to procure funds.
The Group also utilizes derivative transactions solely to hedge future risks of exchange rate and interest rate fluctuations, but not for speculative 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 bystrict credit control utilizing credit information provided by external credit agencies, as well as by credit insurance and other risk-hedging means.
Short-term loans receivable are mainly the loans to the parent company by the Company, rendered in compliance with the internal regulations forinvestment and management of funds.
Short-term investments in securities and investments in securities consist primarily of held-to-maturity debt securities and equity securities issued
by business counterparties of the Group, and are exposed to market price fluctuation risk. Regarding this risk, the Group periodically monitors the fairvalues of the securities and the financial condition of their issuers i.e., business counterparties. In addition, for securities other than held-to-maturity
debt securities, the Group continuously reviews the status of security holdings, taking market conditions and relationships with business counterparties
into consideration.
Operating payables, consisting of notes and accounts payable, are mainly those due within six months.
The counterparties of derivative transactions are domestic financial institutions with a high credit rating, and derivative transactions are believed to be
exposed to very little default risk of the counterparties.
(3) Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include not only values based on market quotations, but also values calculated on a theoretical basis in cases where
market quotations are not available. Such values may vary depending on different assumptions, as variables are factored into the calculation of such values.

Canon Marketing Japan Inc.

45

2. Fair values of financial instruments
The book values of financial instruments in the consolidated balance sheets as of December 31, 2012 and 2011, their fair values, and the differences
between the two are as follows. The table below, however, excludes the financial instruments whose fair values are considered extremely difficult toassess (see Note 2).
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

Fair value¥ 23,407
127,649
88,61940,003¥ 279,678
104,162¥ 104,162

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

̶
̶
¥ (2)
̶
¥ (2)
̶
̶

Millions of yen

2011Book 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
Derivative transactions

Fair value¥ 19,304
123,027
86,79240,028¥ 269,151
100,047¥ 100,047¥(2)

Difference

̶
̶
¥ (0)
̶
¥ (0)
̶
̶
̶

¥ 19,304
123,027
86,79240,028¥ 269,151
100,047¥ 100,047¥(2)

Note: The amounts for derivative transactions shown above are the net of assets and liabilities. Liabilities are shown in parentheses.
Thousands of U.S. dollars (Note 1)

2012(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$ 269,046
1,467,230
1,018,609
459,805$ 3,214,690
1,197,264$ 1,197,264$ 269,046
1,467,230
1,018,586
459,805$ 3,214,667
1,197,264$ 1,197,264

Difference̶̶$ (23)
̶$ (23)
̶̶

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.
Derivative transactions
The fair values of interest rate swap transactions are based on quotations obtained from counterparty financial institutions.

46 Canon Marketing Japan Inc.

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

2011

Category

2012

Book value

¥ 289
¥ 231

Unlisted equity securities
Investments in partnerships

¥ 288
¥ 224

$ 3,322$ 2,655

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, 2012 and 2011 is summarized as follows:
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

̶
̶
̶
̶

Millions of yen

2011
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¥ 19,304
123,027

̶
̶

̶
̶

̶
̶

̶

̶

̶

̶

̶
83,22040,028¥ 265,579

̶
¥ 10
̶
¥ 10

¥ 100
103
̶
¥ 203

̶
̶
̶
̶

Thousands of U.S. dollars (Note 1)

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$ 269,046
1,467,230

̶
̶

̶
̶

̶
̶

̶

̶

̶

̶

̶
977,356
459,805$ 3,173,437

̶
̶
̶
̶

$ 1,149
1,184
̶$ 2,333

̶̶̶̶Canon Marketing Japan Inc.

47

10 Securities
Securities as of December 31, 2012 and 2011 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

2012

2011

2012

¥ 3,907¥ 3,871$

85,00030
20385,233¥ 89,140

83,20020
213
83,433¥ 87,304

977,011345
2,333
979,689$ 1,024,597

44,908The carrying amounts and aggregate fair values of investments in securities at December 31, 2012 and 2011 were as follows:
Millions of yen

2012Book value

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

¥ 203
30
¥ 233

Unrealized gains

Unrealized losses

¥ (2)
̶
¥ (2)

̶
̶
̶

Fair value

¥ 201
30
¥ 231

Millions of yen

2012
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other¥ 3,287152¥ 3,439

Unrealized gains

Unrealized losses

¥ 397
8
¥ 405

¥ (456)(1)¥ (457)

Fair value¥ 3,228159¥ 3,387

Millions of yen

2011Book value

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

¥ 203
30
¥ 233

Unrealized gains

Unrealized losses

¥1
̶
¥1

¥ (1)
̶
¥ (1)

Fair value

¥ 203
30
¥ 233

Millions of yen

2011
Cost

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

48 Canon Marketing Japan Inc.

¥ 3,473153¥ 3,626

Unrealized gains

¥ 429
3
¥ 432

Unrealized losses¥ (694)(5)¥ (699)Fair value¥ 3,208151¥ 3,359

Thousands of U.S. dollars (Note 1)

2012Book value

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

Unrealized gains$ 2,333345$ 2,678

Unrealized losses

Fair value$ (23)
̶$ (23)̶̶̶

$ 2,310345$ 2,655

Thousands of U.S. dollars (Note 1)

2012
Cost

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

Unrealized gains$ 37,782
1,747$ 39,529

Unrealized losses$ 4,56392$ 4,655$ (5,242)(11)$ (5,253)

Fair value$ 37,103
1,828$ 38,931

Available-for-sale and held-to-maturity securities whose fair value is not readily determinable as of December 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2012
Available-for-sale:
Equity securities
Investments in investment partnerships
Held-to-maturity:
Certificates of deposit

¥

289
231

85,000¥ 85,520

2012

2011

288
224

¥

83,200¥ 83,712

$

3,322
2,655

977,011$ 982,988

11 Employeesʼ Retirement and Severance Benefits
The Company has a defined contribution pension plan, a pension plan with a market-based variable accumulation rate (quasi-cash balance plan), and a
lump-sum severance payment plan, and its domestic consolidated subsidiaries have defined benefit corporate pension plans, tax-qualified retirement
pension plans and lump-sum severance payment plans.
The liability for employeesʼ retirement benefits as of December 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension cost
Allowance for employeesʼ retirement benefits2012¥ 179,479(134,525)(28,731)
21,49187¥ 37,8012011¥ 173,070(122,048)(39,227)
25,288176¥ 37,2592012$ 2,062,977(1,546,264)(330,242)
247,0231,000$ 434,494

The components of net periodic benefit costs for the years ended December 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

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

2012¥ 6,790
3,195(3,411)(3,784)4,549
1,409¥ 8,7482011¥ 6,584
3,233(3,829)(4,261)4,014
1,380¥ 7,1212012$ 78,046
36,724(39,207)(43,494)
52,287
16,196$ 100,552

Canon Marketing Japan Inc.

49

Assumptions used in accounting for the above plans for the years ended December 31, 2012 and 2011 were principally as follows:2012
1.2 - 2.0%
1.0 - 3.0%
5 - 13 years
5 - 13 years

Discount rate
Expected rates of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial loss

12 Stock Option Plans
Current Fiscal Year (from January 1, 2012 to December 31, 2012)
1. Description of stock option plans, number of stock options and changes in number of stock options(1) Description of stock option plans
SHOWA INFORMATION SYSTEMS CO., LTD.
2003 Stock Option Plan

Type and number of recipients
Number of stock options by type of stock to be issued (Note)
Grant date
Vesting requirements
Service period
Exercisable period

Directors of the subsidiary 8
Employees of the subsidiary 133
Common stock 320,000
September 29, 2003
Unspecified
Unspecified
From April 1, 2005 to March 31, 2012

Note: The number of stock options is expressed based on the number of shares to be issued upon exercise.

(2) Number of stock options and changes in number of stock options
The following tables are based on the stock options which existed as of December 31, 2012.
The number of stock options is expressed based on the number of shares to be issued upon exercise.
q Number of stock options
SHOWA INFORMATION SYSTEMS CO., LTD.
2003 Stock Option Plan

Nonvested:
As of December 31, 2011
GrantedForfeited
VestedAs of December 31, 2012
Vested:As of December 31, 2011
VestedExercised
Forfeited
As of December 31, 2012

̶
̶
̶
̶
̶

219,000̶̶
219,000
̶Note: The above table shows the outstanding number of stock options only, since SHOWA INFORMATION SYSTEMS CO., LTD.
became a consolidated subsidiary of the Company as of the previous fiscal year-end.

w Per unit information
SHOWA INFORMATION SYSTEMS CO., LTD.
2003 Stock Option Plan

Exercise price (Yen)
Average stock price on exercise (Yen)Fair value per unit (as of grant date) (Yen)

50 Canon Marketing Japan Inc.

412
̶
̶

2011
1.3 - 2.1%
1.0 - 3.4%
5 - 14 years
5 - 14 years

13 Income Taxes
The normal effective statutory rate of income taxes was approximately 40.0% for the years ended December 31, 2012 and 2011.
Because the differences between the normal effective statutory tax rates and the actual effective tax rates for the years ended December 31, 2012
and 2011 are not material, the tax reconciliations are not disclosed.
The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31, 2012 and 2011, were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2012
DEFERRED TAX ASSETS:
Loss on disposal and devaluation of inventories
Accrued business tax and business office tax
Accrued bonuses to employees
Excess amortization of software
Loss on impairment of fixed assets
Excess depreciation of fixed assets
Allowance for doubtful receivables
Allowance for employeesʼ retirement benefits
Loss on devaluation of investments in securities
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

2011

2012

¥

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

¥

535
403
1,468
4,776
284
649
29
13,622
831
3,564
4,581
30,742(5,941)¥ 24,801

7,368
7,586
14,391
41,149
3,552
6,046
736
155,368
8,069
35,96549,678329,908(57,322)$ 272,586

98
1,691
222
¥ 2,011¥ 21,704
¥
31

122
1,876
42
¥ 2,040¥ 22,792
¥
31

1,126
19,437
2,552$ 23,115$ 249,471
$
356

¥

¥

$

$

Canon Marketing Japan Inc.

51

14 Segment Information
1. Segment Information(1) Description of Reportable Segment
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, Consumer Imaging and Industrial Equipment, all of which are
determined based on the organizational structure of the Group and include companies of the Group.
The commercial imaging equipment category, which includes television lenses, and sales of security and other types of monitoring cameras, which
previously belonged to the Industrial Equipment segment, was shifted to the Consumer Imaging segment.
The table shows the segment results for the year 2011 based on the segment structure introduced in 2012.
Major companies and organizations in each segment
Reportable segments

Business Solutions

IT Solutions

Consumer Imaging

Industrial Equipment

Major companies / organizations

Canon Marketing Japan Inc.
Business Solutions Company
Canon System & Support Inc.
SHOWA INFORMATION SYSTEMS CO., LTD.
OCE-JAPAN CORPORATION
Canon Print Square Inc.
Canon Marketing Japan Inc.
IT Product Promotion Headquarters
Canon MJ IT Group Holdings Inc.
Canon IT Solutions Inc.
Canon Software Inc.
Edifist Learning Inc.
other 10 companies
Canon Marketing Japan Inc.
Imaging System Company
Canon Customer Support Inc.
Canon Field Assist Inc.
withPhoto Inc.
Canon Marketing Japan Inc.
Industrial Equipment · Medical Equipment, Business
Canon Lifecare Solutions Inc.
Canon Advanced Technologies Taiwan Inc.
other 2 companies

Major products and services in each segment
Reportable segments

Major products / services

Business Solutions

Business-use multifunctional products, print-on-demand (POD) digitalpresses, 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

Consumer Imaging

Digital cameras, interchangeable lenses, digital video cameras, ink-jet
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 of significant accounting policies.
Segment income (loss) is measured based on the amount of operating income. Intersegment sales and transfers are based on market prices.

52 Canon Marketing Japan Inc.

(3) Information by reportable segment for the years ended December 31, 2012 and 2011 was as follows:
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

Other

Total

Adjustments

Consolidated

Business
Solutions

IT Solutions

Consumer
ImagingIndustrial
Equipment¥ 344,000
̶
¥ 344,000¥ 6,299¥ 143,911¥ 105,722
25,581¥ 131,303¥
196¥ 63,864¥ 200,618
̶¥ 200,618¥ 10,917¥ 77,448¥ 30,690
̶¥ 30,690¥ (1,202)¥ 18,739

204
̶
¥ 204
¥ 592
¥ 11,912

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¥¥ 681,234
̶
25,581 ¥ (25,581)¥ 706,815 ¥ (25,581)¥ 16,802
̶¥ 315,874 ¥ 146,700¥ 681,234
̶¥ 681,234¥ 16,802¥ 462,574

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.

Millions of yen

2011Year 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

Industrial
Equipment

Other

Business
Solutions

IT Solutions

Consumer
Imaging¥ 325,137
̶¥ 325,137¥ 3,489¥ 147,928¥ 97,941
26,531¥ 124,472¥ (3,073)¥ 55,294¥ 182,124
̶¥ 182,124¥ 8,462¥ 64,149

9,842
7

2,627
899

2,155
̶

524
̶

184
̶

6,767

5,259

1,627

429

2,103

Total

Adjustments

Consolidated̶¥ (26,531)¥ (26,531)
̶¥ 146,142¥ 632,419
̶¥ 632,419¥ 8,442¥ 447,765

15,332906

̶̶

15,332906

16,185

̶

16,185¥ 26,990 ¥227 ¥ 632,419
̶̶
26,531¥ 26,990 ¥227 ¥ 658,950¥ (320) ¥ (116) ¥ 8,442¥ 21,952 ¥ 12,300 ¥ 301,623

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 ¥146,142 million.
3. Segment income (loss) corresponds to operating income stated on the consolidated statement of income.

Thousands of U.S. dollars (Note 1)

2012

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

IT Solutions

Consumer
ImagingIndustrial
Equipment

Other

Total

Adjustments

Consolidated

Net sales:
External customers$ 3,954,023 $ 1,215,195 $ 2,305,954 $ 352,759 $ 2,345 $ 7,830,276
̶ $ 7,830,276
Intersegment
̶
̶
̶
̶
̶
294,034
294,034 $ (294,034)
Total$ 3,954,023 $ 1,509,229 $ 2,305,954 $ 352,759 $ 2,345 $ 8,124,310 $ (294,034) $ 7,830,276
Segment income (loss)$ 72,402 $̶ $ 193,126
2,253 $ 125,483 $ (13,816) $ 6,804 $ 193,126
Segment assets$ 1,654,149 $ 734,069 $ 890,207 $ 215,391 $ 136,920 $ 3,630,736 $ 1,686,207 $ 5,316,943
Other items:
Depreciation and amortization
̶
118,253
29,71330,586
6,230
2,781
187,563
187,563
Amortization of goodwill
̶
̶
̶
̶
11
5,299
5,310
5,310
Changes in the amount ofproperty, plant and equipment
̶97,747
129,919
18,724
5,644
391
252,425
252,425and intangible assets

Canon Marketing Japan Inc.

53

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% ofconsolidated 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 andequipment 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

2012Year ended December 31,
Reportable Segments
Business
Solutions

Impairment loss̶

IT Solutions

Consumer
Imaging¥0̶Industrial
Equipment

Other

̶

Total

Adjustments

Consolidated̶¥0Adjustments

Consolidated

̶

¥ 484

Adjustments

Consolidated̶$0Adjustments

Consolidated

̶
̶

¥ 462
¥ 62

Adjustments

Consolidated

̶
̶

¥ 906
¥ 524

¥0

̶

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

2011Year ended December 31,
Reportable Segments
Business
Solutions

Impairment loss

¥ 156

IT Solutions¥ 140

Consumer
Imaging¥ 44

Industrial
Equipment

Other

Total

̶

¥ 144

¥ 484

Thousands of U.S. dollars (Note 1)

2012

Year ended December 31,
Reportable Segments
Business
Solutions

Impairment loss̶

IT Solutions

Consumer
Imaging$0̶Industrial
Equipment

Other

̶

Total

$0

̶

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

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

Amortization of goodwill
Goodwill at December 31, 2012

¥1̶

IT Solutions

Consumer
Imaging

¥ 461
¥ 62

̶
̶

Industrial
Equipment

Other

̶
̶

Total

̶
̶

¥ 462
¥ 62

Millions of yen

2011Year ended or as of December 31,
Reportable Segments
Business
Solutions

Amortization of goodwill
Goodwill at December 31, 2011

54 Canon Marketing Japan Inc.

¥7
¥1

IT Solutions

¥ 899
¥ 523

Consumer
Imaging̶̶Industrial
Equipment

̶
̶

Other

Total

̶
̶

¥ 906
¥ 524

Thousands of U.S. dollars (Note 1)

2012

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

Amortization of goodwill
Goodwill at December 31, 2012$ 11
̶IT Solutions$ 5,299$ 713

Consumer
Imaging

Other

Industrial
Equipment

̶
̶

̶
̶

Total

̶
̶

Adjustments

Consolidated̶̶$ 5,310$ 713$ 5,310$ 713

5. Information on gain on negative goodwill by reportable segment
Current Fiscal Year (from January 1, 2012 to December 31, 2012)
The Company acquired shares of SHOWA INFORMATION SYSTEMS CO., LTD. through a share-for-share exchange, making the acquired company awholly owned subsidiary, and ¥132 million ($1,517 thousand) of negative goodwill was recognized. The negative goodwill was recorded as other income(gain on negative goodwill) for the current fiscal year, but was not allocated to individual reportable segments.
Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
The Company acquired shares of ELK CORPORATION, OCE-JAPAN CORPORATION and SHOWA INFORMATION SYSTEMS CO., LTD., resulting in thesecompanies becoming consolidated subsidiaries, and ¥4,492 million of negative goodwill was recognized. The negative goodwill was recorded as otherincome (gain on negative goodwill) for the previous fiscal year, but was not allocated to individual reportable segments.

15 Transactions with Affiliated Companies
Current Fiscal Year (from January 1, 2012 to December 31, 2012)
Parent company and major corporate stockholders, etc.
Category

Name ofcompany,etc.

ParentCanon Inc.
company

Percentage
possession of
voting rights(Ownership)(%)

Related contents

Capital orinvestment
Address
capital(Millions of yen)

Business
contents or
occupation

Ohta-ku,Tokyo

Manufactureand sale ofbusiness(Ownership) Two holdequipment,
Direct 57.0% concurrent
consumerIndirect 0.0% positions
equipment,
and industrial
equipment¥ 174,762

Boardmembers
holding
concurrent
positionsContents oftransactions

Businessrelationships

Purchases of
products
Manufactureof products
sold by
Canon MJ

Operatingtransactions

Transaction
amount(Millions of yen)

Subject

Balance at endof fiscal year
(Millions of yen)

¥ 250,235

Accounts
payable¥ 75,191

4,314

Accounts
receivableand others¥ 2,730¥ 40,000

Short-term
loans¥ 40,000

Sales ofbusiness
equipment and ¥consumables,
etc.

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 the affiliated companyʼs 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.

Canon Marketing Japan Inc.

55

Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
Parent company and major corporate stockholders, etc.
Category

Name ofcompany,etc.

ParentCanon Inc.
company

Percentage
possession of
voting rights(Ownership)(%)

Related contents

Capital orinvestment
Address
capital(Millions of yen)

Business
contents or
occupation

Ohta-ku,Tokyo

Manufactureand sale ofbusiness(Ownership) Two holdequipment,
Direct 55.3% concurrent
consumerIndirect 0.0% positions
equipment,
and industrial
equipment¥174,762

Board
members
holding
concurrent
positionsContents oftransactions

Businessrelationships

Purchases of
products
Manufactureof products
sold by
Canon MJ

Operatingtransactions

Transaction
amount(Millions of yen)

Subject

Balance at endof fiscal year
(Millions of yen)

¥ 235,276

Accounts
payable¥ 69,824

4,697

Accounts
receivableand others¥ 1,959¥ 40,000

Short-term
loans¥ 40,000

Sales ofbusiness
equipment and ¥consumables,
etc.

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 the affiliated companyʼs
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.

16 Business Combination
Current Fiscal Year (from January 1, 2012 to December 31, 2012)
Disclosure is omitted due to immateriality.
Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
Business Combination through Acquisition
Acquisition of ELK CORPORATION
1. Name and business activities of the acquired company, principal reasons for business combination, date of business combination, legal form ofbusiness combination, name of company after business combination, percentage of voting rights acquired, and principal reasons for determining theacquiring company(1) Name and business activities of the acquired company
Name: ELK CORPORATIONBusiness activities: Sales and production of medical supplies and medical equipment(2) Principal reasons for business combination
ELK CORPORATION has fostered know-how in the medical field and developed its own sales channels. It also has its own sales methods based on themarket-in approach, which considers needs of customers and users first, and reflects them in the development and market introduction of products,
both in-house and with the cooperation of manufacturers. The Company concluded that both companies should aim at development and growth in a
direction that will result in joint enhancement of corporate value, by organically harmonizing ELK CORPORATIONʼs strengths as “a creative trading
company” and the Groupʼs resources, and strengthening functions of the medical imaging business, healthcare business, infection control business,overseas business, and customer support.
(3) Date of business combination
June 15, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of company after business combination
Unchanged(6) Percentage of voting rights acquired
100.00%56 Canon Marketing Japan Inc.

(7) Principal reasons for determining the acquiring company
Since the Company delivered the consideration of the acquired shares which consisted of cash only, the Company is determined as the acquiring company.

2. Period of the acquired companyʼs financial results included in the consolidated financial statements
From April 1, 2011 to December 31, 2011
3. Acquisition cost of the acquired company and its breakdown
Consideration paid for the acquisition¥3,796 million
Expenses directly required for the acquisition¥213 million
Acquisition cost
¥4,009 million
4. Amount and cause of gain on negative goodwill(1) Amount of gain on negative goodwill incurred¥2,482 million(2) Cause of gain on negative goodwill
The net amount of acquired assets and liabilities exceeded the acquisition cost of the acquired shares and was recognized as gain on negative goodwill.

5. Amounts of assets and liabilities acquired on the day of business combination
Current assets¥11,520 million
Non-current assets¥5,976 million
Total assets¥17,496 million
Current liabilities¥6,528 million
Long-term liabilities¥4,467 million
Total liabilities¥10,995 million
6. Estimated impact on the consolidated statement of income for the current fiscal year assuming that the business combination had been completed
on the commencement date of the fiscal year
Net sales¥11,316 million
Operating income¥223 million
Net income¥184 million(Calculation method of estimated amounts)
The above estimated amounts were calculated based on the amounts of consolidated net sales and income of ELK CORPORATION from January
1, 2011 to March 31, 2011.
The above estimated amounts have not been audited.
Business Combination through Acquisition
Acquisition of SHOWA INFORMATION SYSTEMS CO., LTD.
1. Name and business activities of the acquired company, principal reasons of business combination, date of business combination, legal form ofbusiness combination, name of company after business combination, percentage of voting rights acquired, and principal reasons for determining theacquiring company(1) Name and business activities of the acquired company
Name: SHOWA INFORMATION SYSTEMS CO., LTD.
Business activities: Development and sales of high-speed kanji information processing and other systems(2) Principal reasons of business combination
The Company concluded that the strengthened capital ties with SHOWA INFORMATION SYSTEMS CO., LTD., as well as early establishment of an
operating structure based on a firm alliance to utilize management resources of both companies, will benefit business expansion in the production
market, and eventually enhancement of corporate value and sustainable growth of both companies.
(3) Date of business combination
December 28, 2011(4) Legal form of business combination
Acquisition of shares(5) Name of company after business combination
Unchanged

Canon Marketing Japan Inc.

57

(6) Percentage of voting rights acquired
Percentage share of voting rights owned before business combination
Percentage share of voting rights additionally acquired
Percentage share of voting rights after acquisition

0.20%
90.58%
90.78%(7) Principal reasons for determining the acquiring company
Since the Company delivered the consideration of the acquired shares, which consisted of cash only, the Company is determined to be theacquiring company.

2. Period of the acquired companyʼs financial results included in the consolidated financial statements
The consolidated statement of income for current fiscal year does not include the financial results of SHOWA INFORMATION SYSTEMS CO., LTD.
3. Acquisition cost of the acquired company and its breakdown
Consideration of the acquisition
Fair value as of the day of business combination of common stock of SHOWA INFORMATION SYSTEMS CO., LTD.
owned before the business combination¥5 million
Fair value of common stock of SHOWA INFORMATION SYSTEMS CO., LTD.
acquired on the day of business combination¥2,164 million
Expenses directly required for the acquisition¥94 million
Acquisition cost
¥2,263 million
4. Difference between the acquisition cost of the acquired company and the total of each acquisition transaction amount
Gain on step acquisition¥2 million
5. Amount and cause of gain on negative goodwill(1) Amount of gain on negative goodwill incurred¥1,980 million(2) Cause of gain on negative goodwill
The net amount of acquired assets and liabilities exceeded the acquisition cost of the acquired shares, and the exceeding amount was recognized asgain on negative goodwill.

6. Amounts of assets and liabilities acquired on the day of business combination
Current assets¥7,361 million
Non-current assets¥1,816 million
Total assets¥9,177 million
Current liabilities¥3,202 million
Long-term liabilities¥1,282 million
Total liabilities¥4,484 million
7. Allocation of acquisition cost
Since the allocation of acquisition cost has not been completed as of the current fiscal year-end, the acquisition was temporarily accounted for basedon the reasonable information available on that date.
8. Estimated impact on the consolidated statement of income for the current fiscal year assuming that the business combination had been completed
on January 1, 2011.
Net sales¥10,428 million
Operating income¥23 million
Net loss¥247 million(Calculation method of estimated amounts)
The above estimated amounts were calculated based on the amounts of net sales and income of SHOWA INFORMATION SYSTEMS CO., LTD. fromJanuary 1, 2011 to December 31, 2011.
The above estimated amounts have not been audited.

58 Canon Marketing Japan Inc.

17 Asset Retirement Obligations
Current 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 ($22,172 thousand) considered uncollectible.
Previous Fiscal Year (from January 1, 2011 to December 31, 2011)
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, 2011 includes ¥2,045 million considered uncollectible.

Obligations, Short-Term Loans Payable,
18 Lease
Long-Term Loans Payable and Deposits
Lease obligations, short-term loans payable, long-term loans payable and deposits at December 31, 2012 and 2011 consisted of the following:
Average interest rate

Lease obligations
Current portion of lease obligations
Short-term loans payable
Long-term loans payable
Deposits̶̶
0.0%

Thousands of
U.S. dollars (Note 1)

Millions of yen

2012¥ 1,446
586
¥ 860
̶
̶
3,508
¥ 4,3682011¥ 1,758605¥ 1,153
1,616
565
3,341
¥ 6,6752012$ 16,621
6,736$ 9,885̶̶
40,322$ 50,207

19 Bonds Payable
Bonds payable at December 31, 2012 and 2011 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

Unsecured 1.4% corporate bonds due through August 2012
Unsecured 0.8% corporate bonds due through February 2013
Total

2012
̶
̶
̶

2011
¥ 1,019156¥ 1,175

2012
̶
̶
̶

Note: Both bonds payable were issued by Canon Lifecare Solutions Inc.

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

Canon Marketing Japan Inc.

59

Independent Auditor’s Report

60 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: 18,490
Non-consolidated: 4,892(As of December 31, 2012)

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, 2013)

151,079,972 shares

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

Major Stockholders
Name of stockholder

Canon Inc.
Canon Marketing Japan Inc.
Canon Marketing Japan Group Employee Stock Ownership Association
The Master Trust Bank of Japan, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank Of New York, Treaty JASDEC AccountCanon Marketing Japan Group Business Partner Stock Ownership Association
Japan Trustee Services Bank, Ltd. (Trust Account 9)
State Street Bank and Trust Company
Mizuho Bank, Ltd.

Number of shares held
(thousands)

Percentage of ownership(%)

75,70817,993
7,286
2,789
2,299
2,107
1,271
1,128
1,051
1,001

50.11
11.91
4.82
1.85
1.52
1.40
0.84
0.75
0.70
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 2013–2015)• Stock information• Annual reports

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

61

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.