Management Policies(Fiscal Year Ended March 2014 – 2017)
Hiroyuki Sasa
President and Representative DirectorOlympus Corporation
May 15, 2013

Today’s ContentsI.

A Look Back at the 1st Year under New Management

II.

Restructuring of the Imaging BusinessIII. Initiatives to Meet Medium-Term Vision Goals(For FY Ended March 2014 - 2017)

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I.

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A Look Back at the 1st Year under
New Management

3Consolidated Financial Results for FY Ended March 2013

YoY(%)

Comparedto forecast(Billions of yen)March 2012

March 2013

March 2013

(Results)(Forecast as of Feb. 2013)(Results)

Net sales

848.5

740.0

743.9

-12%+1%

Operating income(% of sales)

35.5

35.0

35.1(4.2%)(4.7%)(4.7%)-1%+0%

Ordinary income

17.9

11.5

13.0

-27%

+13%

Net income

-49.0

6.0

8.0

-+34%

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Medium-Term Vision - Progression of Four Basic Strategies -(i) Rebuilding of business portfolio/
Optimal allocation of management resources(ii) Review of cost structures(iii) Restoration of financial health(iv) Restructuring of governance
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A Look Back at the 1st Year under New Management (1)Results and Challenges(ⅰ)
Rebuilding of business portfolio/Optimal
allocation of management resources•Gastrointestinal endoscope field: Introduced new products
worldwide, which contributed to improved earnings

Medical•Surgical field: Introduced new products, formed businessalliance with Sony (established JV)•Management resource allocation: Increase production
capacity of major production sites

Life Science& Industrial

Imaging•Introduced new products in mainstay
model lines on schedule•Rationalized production sites(Philippines, Nagano)•Revised product lineup(shifted to high-value-added products)•Reorganized manufacturing systems•Implemented SG&A expense reduction measures

Restructuringof non-corebusiness

Copyright Olympus Corporation•Transferred Information & Communication Business(Sept. 2012)•Liquidated / sold approx. 30 subsidiaries andaffiliated companies
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A Look Back at the 1st Year under New Management (2)Results and Challenges(ⅱ)
Review of coststructures• Reorganized production sites worldwide: 30 → 22 sites• Optimized staff size: Accomplished ahead of schedule→ Approx. 6,000* lower than on March 2012(*includes full-time and part-time employees)(ⅲ)
Restoration offinancial health• Commenced capital alliance with Sony(ⅳ)
Restructuringof governance• Instituted new management system clearly separatingsupervision and execution

Copyright Olympus Corporation• Interest-bearing debt: Decreased approx. ¥82 billion• Equity ratio: Improved from approx. 5% to over 15%• Submitted a “written affirmation on the internal control system”
to the TSE
7II. Restructuring of the Imaging Business

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Factors Preventing Accomplishment of Forecasts in FY Ended March 2013 (1)【Imaging Business losses (FY Ended March 2013)】
March 2013

YoY Change(Initial plans in June)(Results)(Difference)

Compact camera

91.2

57.2

-34.0

SLR（mirrorless）

42.5

37.8

-4.7

Others（IC recorder）

15.3

12.5

-2.8

Net sales

149.0

107.6

-41.4

Gross margin

61.0

32.6

-28.4

SG&A expenses

60.0

55.7

-4.3

Operating income

1.0

-23.1

-24.1

(Billions of yen)

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March 2013

Compact camera sales
significantly lower than forecasts

Gross profit down due tolower sales
Unable to reduce SG&A expenses,
operating loss recorded9Factors Preventing Accomplishment of Forecasts in FY Ended March 2013 (2)Copyright Olympus Corporation

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Policy Changes

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Future Imaging Business

1.
Minimize risks incompact cameraoperations

2.
Focus resourceson high-margin
mirrorless cameras

3.
Improve
responsiveness tomarket changes

Construct cost structure appropriate
for business scale
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121. Minimize Risks in Compact Camera Operations

 Substantially reduce number of compact camera models(cease production of low-price models)Reduce target for compact camera sales volumes to halfof FY2013’s target(FY2013 results: 5.1 mil. → FY2014 forecast: 2.7 mil.)

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2. Focus Resources on High-Margin Mirrorless Cameras

Focus management resources on major cities wheremirrorless camera demand is expected to growAccelerate investment in sales channels highly suited
to mirrorless cameras
Achieve strong growth in conjunction with mirrorlesscamera market trends
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3. Improve Responsiveness to Market Changes

Respond swiftly and objectively based on monitoringfindings
 Monitor plan progression in timely manner Make companywide decisions based on objective viewpoint

Minimize inventory risks,maintain appropriate level of costs
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Establishment of Cost Structure Appropriate for Business Scale (1)Significantly reorganize manufacturing systems(consolidate 5 sites into 2) → Shenzhen and Vietnam
Cut R&D expenditures and operating costs by substantiallyreducing number of models
 Reduce Imaging Business staff by 30% by March 2014
compared with March 2012 levels
Significantly reorganize sales systems (consolidateoverseas sales bases, reduce sales channels efficiently)
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Establishment of Cost Structure Appropriate for Business Scale (2) Reduction targets for manufacturing costs and SG&A expenses
FY2014 (YoY)
Initiative
Manufacturing
costs
SG&A
expenses

Improve manufacturing cost ratio by shifting to mirrorlesscameras (adjusting product mix)

+ ¥4bil.

Reduce costs by reorganizing manufacturing systems+ ¥3bil.

Reduce costs by decreasing inventory expenses+ ¥4bil.

Lower R&D expenditures by reducing number of models+ ¥3bil.

Reduce expenses by consolidating sales bases and channels+ ¥2bil.

Implement other reduction measures(IT/distribution expenses, system revisions, etc.)+ ¥7bil.

Total reductions
Copyright Olympus CorporationApprox.+ ¥23bil.

(Change in costs
as a percentageof net sales after
reduction costs
and expenses)

+11pt

+12pt
+23pt
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Earnings Improvement Forecasts for FY2014

Earnings structure after substantial reduction ofcompact camera business scale【Imaging Business profit & losses forecast (FY Ending March 2014)】(Billions of yen)March 2013
(Results)

March 2014
(Forecast)

YoY
ChangeCompact camera

57.2

40.3

-16.9

SLR（mirrorless）

37.8

50.0

+12.2

Others（IC recorder）

12.5

13.7+1.2

Net sales

107.6

104.0-3.6

Gross margin

32.6

44.0+11.4

SG&A expenses

55.7

44.0-11.7

Operating income
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0.0+23.1

Account for substantial reduction
in compact camera sales

Increase gross profit byreducing costs
Breakeven on operating income
basis by cutting SG&A expenses
18Medium- to Long-Term Direction

200
Others（IC recorder）
150(Billions of yen)

Net sales

Operating income

SLR（Mirrorless）

100
Compact camera
500-50
Copyright Olympus CorporationMarch2010March
2011

March
2012

March
2013

March
2014

March
2015

March
2016

(Forecast)(Target)(Target)

March
2017
(Target)19

III. Initiatives to Meet Medium-Term Vision Goals

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Major Initiatives and Tasks (Medical Business)

Reinforcementof thegastrointestinalendoscope field
Realization ofdrastic growthin the surgical
field
Sales expansionin emerging
markets
Copyright Olympus Corporation• Further expand scale of operations by enhancing sales efforts forstrong-performing new products• Address standardization of early diagnosis procedures utilizing NBI• Promote use of definitive diagnosis methods for lung cancer
in bronchial tube field• Imaging field Enhance lineup of differentiated products geared
toward minimally invasive procedures• Energy field Develop surgery-related business into new growth
pillar by bolstering lineup and expanding share• Expand market by accelerating training center construction• Introduce new products for emerging markets(lower-cost models)21

Major Initiatives and Tasks (Life Science & Industrial, Review of cost structures)Life Science& Industrial
Business• Improve profitability by introducing high-value-added products(focus development resource allocation, expand sales inemerging markets)• Further innovate production structure(reduce costs through centralized purchasing)• Rationalize back-office departments on a global scale• Expand product portfolio

Review ofcoststructures
Copyright Olympus Corporation• Rationalize and reorganize redundant indirect departments(reduce IT, distribution, indirect material, and corporate expenses;
standardize workflow processes)• Cut costs by accelerating revision of production sites andstrengthening procurement capabilities
22Quantitative Goals of Medium-Term Vision (Consolidated)(Billions ofyen)(Billions ofyen)

1,200
1,000

140

1,160
1,010

600

760

130

120920800(%：Op margin)

143

10080

90

93

16%

60
400

12%

40
200
020

11%

9%

0Exchange rate assumptions for revised targets: US$1 = ¥90, 1 EUR = ¥120 (previous target assumptions: US$1 = ¥80, 1 EUR = ¥100 )(Note) Previous targets are those detailed in the medium-term vision that was released on June 8, 2012. Revised targets reflect the recently announced revisions.
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Quantitative Goals (By Segment)(Billions of yen)
Medical BusinessTotal for other businesses

Elimination or Corporate

1,200
1,000800

16011060040060200

100-40Exchange rate assumptions for revised targets: US$1 = ¥90, 1 EUR = ¥120 (previous target assumptions: US$1 = ¥80, 1 EUR = ¥100 )(Note) Previous targets are those detailed in the medium-term vision that was released on June 8, 2012. Revised targets reflect the recently announced revisions.
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Performance Indices and Targets
FY Ended March 2012

FY Ended March 2013

FY Ending March 2017

(Results)(Results)(Target)Return on investedcapital(ROIC)

2.7％

2.7％

10％ or more

Operating margin

4.2％

4.7％

10％ or more

-4.8 billion yen

58.7 billion yen

70 billion yen
or more

4.6％

15.5％

30％ or more

Free cash flow
(Cash flow from operating activities +cash flow from investing activities)

Equity ratio

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Supplementary Materials (Consolidated)
FY Ending March 2015

FY Ending March 2017

Previous target

Revised target

Previous target

Revised target

1,010 billion yen

760 billion yen

1,160 billion yen

920 billion yen

Operating income(Operating margin)

90 billion yen

93 billion yen
１２%

143 billion yen

９％130 billion yen
１１％

１６%

Ordinary income(Ordinary income ratio)

70 billion yen

70 billion yen
９%125 billion yen

７％

115 billion yen
１０％

１４%

Net income(Net income ratio)

40 billion yen

45 billion yen

85 billion yen

85 billion yen

Net sales

４％

６%

７％

９%

Exchange rate assumptions for revised targets: US$1 = ¥90, 1 EUR = ¥120 (previous target assumptions: US$1 = ¥80, 1 EUR = ¥100 )(Note) Previous targets are those detailed in the medium-term vision that was released on June 8, 2012. Revised targets reflect the recently announced revisions.
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Supplementary Materials (By Segment)
FY Ending March 2015

FY Ending March 2017

Previous target

Revised target

Previous target

Revised target

Life Science & Industrial

470 billion yen
108 billion yen

520 billion yen
115 billion yen

570 billion yen
120 billion yen

650 billion yen
135 billion yen

Imaging

160 billion yen

100 billion yen

170 billion yen

100 billion yen

Others38 billion yen

25 billion yen

55 billion yen

35 billion yen

Total

1,010 billion yen

760 billion yen

1,160 billion yen

920 billion yen

MedicalLife Science & Industrial

97 billion yen
8 billion yen

111 billion yen
9 billion yen

126 billion yen
14 billion yen

150 billion yen
15 billion yen

Imaging

7 billion yen

7 billion yen

9 billion yen

9 billion yen

Others1 billion yen-1 billion yen

5 billion yen

1 billion yen

Elimination or
Corporate-28 billion yen-33 billion yen-29billion yen-32 billion yen

Total

90 billion yen

93 billion yen

130 billion yen

143 billion yen

Medical
Net sales
Operating income

Exchange rate assumptions for revised targets: US$1 = ¥90, 1 EUR = ¥120 (previous target assumptions: US$1 = ¥80, 1 EUR = ¥100 )(Note) Previous targets are those detailed in the medium-term vision that was released on June 8, 2012. Revised targets reflect the recently announced revisions.
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Performance forecasts and other forward-looking statements inthis presentation reflect judgments and assumptions based on
information available at the time of writing. Because of theuncertainty inherent to judgments and assumptions, and becauseof the potential for future changes in business operations,conditions in Japan or overseas, or other factors, actual results,
etc., may differ substantially from the targets stated.

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