Translation

Interim Report forthe 49th Business Term
January 1, 2016 ▶ June 30, 2016

To Our Shareholders

1Segment Review

3

Consolidated Financial Statements

5Topics

6

Canon Marketing Japan Inc.
Securities Code: 8060

To Our Shareholders
As we, Canon Marketing Japan Inc. ("Canon MJ"), publish our Interim Report for the 49th businessterm (from January 1, 2016 to December 31, 2016) 2016, we would like to once again extend our sincerest gratitude to all of our shareholders for the continued support.
We would also like to offer our deepest condolences to all those affected by the 2016 KumamotoEarthquake.
*For the purposes of this report, the term "interim" refers to the period from January 1, 2016 to June 30, 2016.

■ Increased profit achieved thanks to strong performance of highly profitable services.

Looking back over the first half of this year, the economy has beenstagnant due to sluggish growth in personal consumption andweakness in capital investments.
Against this economic environment, Canon MJ Group's sales
underwent modest growth in the Business Solutions segment due
to strong sales of products including office MFPs (multifunctionproducts) and maintenance services, and revenue rose in the IT
Solutions segment thanks to the strong performance of the SI services business and products business. On the other hand, revenues
fell in the Imaging Systems segment due to poor sales of digital
cameras due to sluggish personal consumption. In addition, performance declined slightly in the Industrial/Medical segment due toweak performance in the medical business. As a result of theabove, revenue was down company-wide.
Meanwhile, strong performance of highly profitable services andsolutions as well as increased productivity through improvements
in administrative efficiency and optimization of selling, general andadministrative expenses, led to increased profit. (See the figure on
the right for the sales and profit data.)
We have set interim dividends at ¥20 per share (the same amountas the same period last year). Annual dividends are projected at¥45 per share (the same as last year) as announced at the beginning of the period, since we have not made any changes to the net
income figures in our full-year forecast.

while we expect revenues to continue to decline in the Industrial/
Medical segment, we aim to maintain revenue growth in both theBusiness Solutions segment and IT Solutions segment. Meanwhile,
the Imaging Systems segment is expected to turn profitable thanks
to factors including the introduction of new products. Based onthese projections, we expect increases in both revenue and profit in
our full-year forecast, as can be seen in the figure to the right.
Moreover, in order to achieve our Long-Term Management
Objectives Phase III, we will work to grow businesses in Canon'sGrowth Areas and Canon MJ Group's Independent Growth Areas
while pursuing business process reform and cultivation of newbusinesses.
We hope we can rely on even greater support from all of ourshareholders in the future.
August 2016

Haruo Murase,Chairman & Representative Director

Masahiro Sakata,President & Representative Director■ Project increase in revenue and profit from the introduction of new products

Looking ahead to the second half of this year, the outlook for theJapanese economy is uncertain due to concerns over the impact ofa downturn in overseas economies on the Japanese economy andsluggish personal consumption.
Against this economic environment, in terms of the outlook ofCanon MJ Group's performance in the second half of this year,
1

Haruo Murase

Canon Marketing Japan Inc.

Masahiro Sakata

Net sales, operating income, and profit attributableto owners of parent (Billion yen)
700

657.2

659.2

Full-year

Projected

Interim

Net sales
Operating income
Profit attributable toowners of parent

659.4

646.0

328.4

314.1

650.0
(+1%)

306.2
350

323.0

309.4

25.1

(-3%)

27.0

26.6

30(+1%)

17.7

17.0

16.8
10.6

16.0

(+21%)

8.5

7.9

7.8
4.1

10.3

12.5

10.2

4.7

(+13%)

15.7

2.06.6(+31%)

5.1002012

2013

2014

2015

2016

Net sales by segment and operating income by segment (Billion yen)
164.9

Net Sales Operating Income

Business Solutions
IT Solutions
Imaging Systems
Industrial / Medical

165.6

+0%

Left: Previous interim period
Right: Current interim period

5.1
4.4
+15%

78.6

72.4

71.1

68.1

2.6

+2%

-13%

2.6
1.7

1.5

-34%

+71%

14.1

14.0-1%

2015

2016

2015

Business Solutions

2016

2015

2016

2015

IT Solutions

2016

2015

2016

2015

Imaging Systems

2016

2015

0.7–△0.3
2016

2015

2016

Industrial/MedicalCanon Marketing Japan Inc.

2Segment Review*The statements regarding increases and decreases in the section below are based on comparisons with the previous interim period. See the previous page for information on net sales and operating income by segment.

Business Solutions

In office MFPs, we worked to cultivate new customers through efforts including
expanded sales of the "imageRUNNER ADVANCE C3300" series. In addition,
we enhanced the product lineup by releasing the "C5500" series, which is thethird generation of the "imageRUNNER ADVANCE" series and, as a result, netsales grew.
In production printing (commercial printing, etc.), we promoted sales expansion
through the launch of our new product "imagePRESS C65/C650." However,sales decreased as a result of factors including a delay in shipments of newcontinuous-feed printers.
In laser printers, efforts were made to develop the high-speed and large output
market through the release of products such as "Satera LBP352i," which is thefastest version of the "Satera" series. While we were able to maintain the top
share as a result of these efforts, sales decreased due to factors including adecrease in the number of large-scale projects. On the other hand, sales
increased for toner cartridges.
Sales of network cameras grew due to the strong performance of crime prevention and monitoring applications.
Sales increased slightly for maintenance services for MFPs and other products
as a result of a steady increase in print volume stemming from factors including
an increase in the number of units currently operating in the market.

imagePRESS C65

Satera LBP352i

IT Solutions

In the SI services business, sales were up because of an increase in projects forfinancial institutions, medical institutions, and the manufacturing industry.
In the IT infrastructure and services business, sales increased due to the strong
performance of businesses including the system platform construction services
and data center services.
In the embedded systems business (development of software that is embedded in products), sales were down due to a decrease in projects for major clients in the manufacturing industry.
In the products business, sales were up due to the strong performance ofproducts including security-related products.
3Canon Marketing Japan Inc.

Nishi-Tokyo Data CenterImaging Systems

We maintained the top share in interchangeable lens digital cameras, by releasing andactively marketing the "EOS 80D" high-end amateur model and the "EOS-1D X Mark II"
professional model, and by focusing on expanding sales of entry-level model single-lensreflex camera and mirrorless camera. However, sales were down due to the sluggishmarket.
For compact digital cameras, while we expanded sales of long zoom models such as thenew "PowerShot SX720 HS" and maintained the top share, sales were down due to a
slowdown in the market.
With regard to inkjet printers, we worked to improve the average unit price and maintained the top share by expanding sales through efforts including user campaigns
focused on high value-added model such as the "PIXUS MG7730." As a result, we wereable to achieve increase in net sales. On the other hand, sales decreased for ink cartridges.
For commercial imaging equipment, sales increased slightly due to an increase in broadcast TV lenses as a result of strong performance in projects for broadcasting stations.

EOS 80D

PowerShot SX720 HS

Industrial / MedicalFor industrial equipment, shipments of semiconductor manufacturing equipment andtasting and measuring systems increased. Furthermore, sales increased as a result of
steady sales growth in maintenance services and repair parts as well.
In the medical business, while sales for digital radiography (X-ray equipment) in the
medical imaging sector grew steadily, sales decreased due to sluggish performance
among the dispensing sector.

Digital radiography

Canon Marketing Japan Inc.

4

Consolidated Financial Statements(

Consolidated Balance Sheets As of June 30, 2016

Millions of yen,amounts less thanone million yen are
rounded down(Millions of yen,amounts less than
one million yen are
rounded down

From January 1,2015 to June 30,
2015
314,096

196,292

201,967

109,943

112,128

99,628103,606

Operating income

10,315

8,522

Non-operating income

1,138

1,263

Non-operating expenses

231

200

Ordinary income

11,221

9,585

Extraordinary income

159

23

Extraordinary losses

412

279

Net sales
Cost of sales

Current assets

326,397

347,542

Noncurrent assets

136,296

138,959

Property, plant and equipment

99,673

99,310Intangible assets

8,370

9,499

Investments and other assets

28,25130,150Total assets

462,693

486,502

Current liabilities

134,916

159,678

Noncurrent liabilities

46,031

49,385

Income before income taxes and minority interests

10,9689,330

Total liabilities

180,947

209,064

Income taxes

4,308

4,235

ProfitProfit attributable tonon-controlling interests
Profit attributable toowners of parent

6,659

5,094

1818

6,641

5,075

■ Liabilities■ Net assets

Shareholders' equity

278,646

275,247

Capital stock

73,30373,303

Capital surplus

82,82082,820Retained earnings

154,436

151,036

Treasury shares∆ 31,913∆ 31,911Accumulated other comprehensive income

2,656

1,760

Valuation difference on available-for-salesecurities

2,192

2,775

Deferred gains or losses on hedges∆ 42

Gross profit
Selling, general and administrative expenses

Consolidated Statements ofCash Flows(Millions of yen,amounts less than
one million yen are
rounded down)

Cash flows from operating activities

From January 1,
2016 to June 30,
2016
15,788From January 1,
2015 to June 30,
2015
12,9520Cash flows from investing activities∆ 15,051∆ 38,372

Cash flows from financing activities
Effect of exchange rate change
on cash and cash equivalents
Net increase (decrease) in cash andcash equivalents
Cash and cash equivalents atbeginning of period
Cash and cash equivalents at end of period∆ 3,377∆ 3,482∆ 1610∆ 2,801∆ 28,903

99,573

120,607

96,771

91,704Foreign currency translation adjustment

40224

Remeasurements of defined benefit plans465∆ 1,240

Non-controlling interests

443

430

Total net assets

281,745

277,438

Total liabilities and net assets

462,693

486,502

Canon Marketing Japan Inc.

)

From January 1,2016 to June 30,2016
306,236As of December 31,
2015■ Assets5)

Consolidated Statements ofIncome

Topics

Released the flagship "EOS-1D X Mark II" for professionals
In April, we released the flagship "EOS-1D X Mark II" digital single-lens reflex camera targeted at both professional photographers and high-end amateurs that seek high performance.
This model caters to the needs of the professionals with the combined features of high image
quality and high-speed continuous shooting of up to approximately 14 frames per second, as
well as strengthened communication functions. Since its launch, it has been used in variousfields including the news media and for sporting occasions.

Introduction of the third generation of the "imageRUNNER ADVANCE" series
The MFP imageRUNNER ADVANCE series has been well-received since its release in 2009. In
June, we newly introduced two models for each of the four products under the "C5500"
series, which is the third generation of the "imageRUNNER ADVANCE" series. Equipped withpersonalized functions that enable optimized setting appropriate for each user, as well as theindustry top first copy time, high-quality print with the introduction of the newly developed
toner, this model boasts the functions fit for a machine of the new generation.

Enhanced lineup of IT security products and services
The IT security market is expected to grow significantly in the future, and at the same time, it is one of our areas of focus in our LongTerm Management Objectives. In this context, Canon IT Solutions Inc., one of our group companies responsible for this field, has begun
to sell "Clavister Wolf" series that is effective in protecting against ransomware (unauthorized programs that demand ransom payments) and offer a "Malware Analysis Service" that analyzes and reports on malware (generic term for malicious software). We havealso enhanced the lineup of our security products and services through the full-scale deployment of an encryption solutions business forenterprises leveraging on products from US-based Vormetric, Inc.

Canon Marketing Japan Inc.

6

Information on Communication Activities
Company briefings and IR events

Distribution of e-mail newsletters

In April, we participated in a company briefing session for individual investors
sponsored by Daiwa Investor Relations Co., Ltd. President Sakata provided anexplanation on the Canon MJ Group's history, description of its business, businessperformance, the medium- and long-term management plans, and other related
topics to some 380 participants. In addition, we also held company briefings at
branches of Nomura Securities Co., Ltd. and SMBC Nikko Securities Inc.
Going forward we plan to create these kind of opportunities as much as we can.
Our future plans will be posted on our website as they arise.

Every week we distribute e-mail newsletters that include information on
investor relations (IR), our participationin various events, and free seminars.
Please register from the mark below
under "Investor Information."

Company briefing session for individual investors sponsored by Daiwa Investor Relations Co., Ltd.

Our IR website

Please see our website (http://cweb.canon.
jp/eng/ir/) for the following information.

• IR News• IR Library• Management Policy• Stock Information• Financial Information

Canon Marketing Japan Inc.
Headquarters: 16-6, Konan 2-chome, Minato-ku, Tokyo 108-8011, Japan
Telephone: +81-3-6719-9111

Cover photo: Naoki Ishikawa
Form the Canon Calendar 2016
"Encounter Nature: Nihon no Fūdo"