FOCUS
on a steady recovery

ANNUAL REPORT

2009
for the year ended December 31, 2009

Canon Marketing Japan Inc.

Profile... and long-term
growth development
Canon Marketing Japan Inc. (Canon MJ) is the global Canon Groupʼs independent
marketing arm for the Japanese market. Together with our 21 consolidated
subsidiaries (as of April 1, 2010), we manage all aspects of the marketing ofCanon products in Japan. We connect Canon Inc. with Japanese customers, andsupport product development by feeding back information about their diverse andsophisticated needs.
With our three business segments̶Business Solutions, Consumer Equipment andIndustrial Equipment̶we serve corporations and general consumers, providing
office equipment, IT solutions, digital cameras and home-use printers, as well as
industrial, medical and broadcasting equipment.
In-depth market knowledge, a powerful nationwide sales network, and the exclusive
right to sell products of the globally trusted Canon brand in Japan, are all importantstrengths of Canon MJ. But we also like to cite our ability to build long-term
customer relationships by delivering truly excellent customer service at all stages
from initial purchase to after-sales support.
When the global recession struck, we could not avoid being affected. But, as we
now take decisive steps to reinforce our financial structure and revenue base, these
distinct strengths position us well for a steady recovery and sound long-term growth.

CONTENTS
01

Raising Business
Performance in 200902

Our roles and Goals

03

FINANCIAL HIGHLIGHTS

04

TO OUR StockholderS

08

SPECIAL FEATURE 1

10

SPECIAL FEATURE 2

Holding the No. 1 Share in
Digital Photography
Introducing Next-Generation
Business Solutions

12

Business Solutions

DOCUMENT Business

14

Business Solutions

IT SOLUTIONS BUSINESS

16

CONSUMER EQUIPMENT

18

INDUSTRIAL EQUIPMENT20

SUSTAINABLE MANAGEMENT

27

FINANCIAL SECTION

51

Corporate data

Raising businessperformance In 2009
Maintained No. 1 market shares in the key areas of digital SLR cameras,
compact digital cameras, laser printers and home-use printers.
Moved to replace non-cost effective properties as part of an initiative to
reduce rental costs by building new facilities for Group subsidiaries. This
resulted in a one-time impairment loss of ¥10.8 billion (US$117.1 million).
Drastically reduced operating expenses by ¥20.8 billion (US$226.6 million)
year on year.
Increased efficiency of service and support with new organizational
structures and IT system architecture.
Increased the stockholdersʼ equity ratio to 54.9%.
Released imageRUNNER ADVANCE, a new multifunctional product series thatwill enhance earnings in the Document Business and IT Solutions Business.
Updated the Three-Year Management Plan as per our annual rolling review toinclude in-depth forecasts for the current situation. The decisive measuresof the new plan will drive a return to consolidated operating income at the¥30 billion (US$326.1 million) level by fiscal 2012.

Canon MJ is moving decisively to strengthen its
financial structure and revenue base, and position
the company for a steady recovery.

Canon Marketing Japan Inc. /1

Our Roles
and Goals

Canon MJ—A Core Company in
the Global Canon Group
Positioned between manufacturer and customer, Canon MJ supports productdevelopment by feeding back information about market needs, while supplying
consumers with products that meet those needs. Canon-branded products
account for most of Canon MJʼs inventory acquisitions: 57.4% in fiscal 2009.
Other products are sourced from partner companies.

CANON
MARKETING JAPANGroupCANON Inc.

CUSTOMERs(Canon MJ and
21 subsidiaries, as ofApril 1, 2010)

Our Basic Business Approach—Unwavering Customer Focus
Our guiding principle̶Customer Focus̶expresses our dedication to deliver service excellence
at all stages from the customerʼs initial approach through to after-sales support. Put simply,
we aim to become every customerʼs No. 1 choice for top-quality office technology and imaging
technology for consumer and industrial use.

An Independent Listed Company Committed to Sustained Value Growth
Our foremost priority is to bring value to our stockholders through the execution of business
operations, as well as to the communities around us via proactive CSR initiatives.

Business
Solutions

61%

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

CONSUmer
Equipment

35%

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

4%

In the Industrial Equipment segment, Canon MJ sells imported industrial
equipment, medical equipment, including X-ray digital cameras, and TV
broadcasting lenses.
The Semiconductor and LCD Lithography Systems Business was transferred
to Canon Inc. in January 2010.

INDUSTRIAL
Equipment

2of Net Salesof Net Salesof Net Sales/ Canon Marketing Japan Inc.

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

FOR THE YEAR:Net Sales

Operating Income

Net Income(Billions of yen)(Billions of yen)(Billions of yen)

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AT YEAR-END:
Total Assets andTotal Stockholders’Equity Ratio

Total Assets
Total Stockholders’Equity Ratio

Total Stockholders’Equity and ROE (Note 4)

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2. Net income per share is based on theweighted average number of shares ofcommon stock outstanding during therespective fiscal years.

PER SHARE OF COMMON STOCK:Net Income (Note 2)

Cash Dividends (Note 3)

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1. The figures have been presented in U.S.
dollars by translating all Japanese yenamounts at ¥92 to U.S.$1, the prevailingexchange rate as of December 31, 2009.

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4. Total stockholdersʼ equity in the abovetable represents the total ofstockholdersʼ equity and valuation andtranslation 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 bepresented as net assets, and net
assets to be classified as stockholdersʼ
equity, valuation and translation
adjustments and minority interests.

Canon Marketing Japan Inc. /3

TO OUR
STOCKHOLDERS

ChairmanHaruo Murase

President

Masami Kawasaki

OUR FOCUS:
RETURNING CANON MJ
TO THE GROWTH TRACK
A grave challenge requires a forceful response.
After an extraordinarily difficult year, we have launched acomprehensive plan to fortify our financial structure and revenue base.
Leveraging the Canon brandʼs reputation for quality, we are moving
to achieve a steady recovery and sound long-term growth.

4/ Canon Marketing Japan Inc.

Priority Strategies
Rebuild the income structure of the Document Business
Enhance the IT Solutions Business and expand service businesses
Maintain No. 1 position in digital photography by focusing on total solutions
Strengthen the Industrial Equipment segment with a focus on new markets andnew product development
Optimize sales, maintenance and logistics systems for greater earning power andmanagement efficiency“The slowdown seen in themarket environment was even worse
than anticipated.”
The main activity of the Canon MJ Group is salesof Canon products in the Japanese market. We
handle all aspects of marketing, including sales
and after-sales service, as well as the provision ofrelated solutions.
In fiscal 2009 (ended December 31, 2009) we
experienced an unprecedented slump in sales
to corporate customers. This was reflected in a
substantial decline in consolidated net sales, whichwere 17% lower year on year at ¥686.6 billion(US$7,463.2 million). Consolidated operating income
declined by 75% to ¥6.3 billion (US$68.4 million).
We also posted an impairment loss of ¥10.8 billion(US$117.1 million) in fiscal 2009. This resulted from agroup-wide review of company-owned properties aimed
at identifying non-cost effective properties and reducing
rental costs by building new facilities for companies
related to the Group.
As a result of the above factors, there was aconsolidated net loss of ¥4.3 billion (US$47.2 million).

“This is not simply a cyclical recession.
There are signs of a fundamental shift in
the needs of corporate customers.”
A major recession affected the Japanese economy
in the year under review. However, the slump in ourbusiness with corporate customers went beyond theeffects of a traditional cyclical downturn. We believethat sales were affected not only by the recession, butalso by a fundamental change in customer needs.
The Document Business within the Business
Solutions segment is a key source of both sales
and profit for Canon MJ. We earn income byselling office equipment, especially multifunctional
products (MFPs) designed to improve officeefficiency, and by providing maintenance services,
including document services. However, it is nolonger enough to just speed up individual officetasks̶customers now expect added functionality,
such as IT connectivity and security features, thatenables comprehensive workflows.
Furthermore, a continuing decline in document
output volumes has put pressure on sales ofmaintenance services. It is becoming increasingly
apparent that we will need to provide a different
kind of value and expand earnings with new
business models.

“We have proved the strength of theCanon brand in consumer markets.”
Consumers have become increasingly reluctant
to spend, and demand has also been affectedby a continuing deflationary trend. These factors
were reflected in a generalized slump in Japanese
consumer markets.
In the Consumer Equipment segment, net sales
declined year on year to ¥241.7 billion (US$2,627.7
million), but operating income was marginally higher
at ¥10.7 billion (US$116.1 million). In terms of sales
volumes, Canon MJ recorded the biggest shares ofCanon Marketing Japan Inc. /5

TO OUR
STOCKHOLDERS

the markets for digital SLR cameras, compact digital
cameras and home-use printers, all of which areflagship product categories. We attribute our sales andprofit results in this segment to our success in reading
customer needs and reflecting these in our marketingand the superior performance of our products.

potential of our maintenance services. We need to raise
the efficiency of our staff without compromising service quality, and will do this by continually reinforcing
systems, including IT systems, within the Canon MJ
Group. We aim to achieve positive operating income in
the Business Solutions segment in fiscal 2010.

“We expect the Japanese economy to remain
in recession. However, we anticipate a return
to positive net income in fiscal 2010.”

Maintaining Our No. 1 Positionin Digital Photography

We forecast that trends in corporate demand inJapan will remain challenging in fiscal 2010. We arealso seeing signs of a qualitative shift in the needs ofcorporate users. Yet, we are determined to achieve
positive consolidated net income in fiscal 2010 byfocusing on the following priority strategies.

Rebuilding the Document BusinessIn fiscal 2009, we recorded an operating loss of ¥3.3
billion (US$35.6 million) in the Business Solutions
segment. Our top priority as we work toward a return toprofitability in this segment will be to rebuild our
income structure for the Document Business. A key
factor in this recovery will be imageRUNNER ADVANCE,
which was launched in September 2009. Comparedwith earlier models, this new MFP has totally new
capabilities. In addition to network support andsecurity features, it offers new value to users
because of its superb support for the integration of
office document tasks into corporate IT systems.
Another urgent task will be to improve the earning

6/ Canon Marketing Japan Inc.

Digital camera products have very short lifecycles,
and the timing of new product launches is extremely
important. We maintained a healthy sales trend in
2009, and product inventories are at an appropriate
level. Conditions are now favorable for the systematic
launch of new products. We aim to maintain our position as No.1 in digital photography and achieve results
similar to the fiscal 2009 figures by further enhancing
our ability to offer consumers total solutions for theirphotographic needs, including home printing.

Strengthening the Industrial Equipment Segment
We radically reorganized the Industrial Equipment
segment, which was affected by the semiconductor
industry slump and showed an operating loss of ¥1.1
billion (US$12.1 million) in fiscal 2009. On January
1, 2010, we transferred the Semiconductor and LCD
Lithography Systems Business, a core category in thissegment, to Canon Inc. The workforce was also transferred, thereby halving the number of personnel in thissegment to 300. We aim to achieve positive operating
income in fiscal 2010 with a structure based on theStraTegies for the IT Solutions (ITS) Business

1.

2.

3.

4.

Restructure
IT Solutionsgroup companies

Renew IT systems inside
Canon Inc., Canon MJ
and other Canon Group
companies and usethat experience fornew business

Enhance sales power of
IT solutions

Develop Data Center
Business andstart cloud computing
services

three categories of imported industrial equipment,
medical equipment and broadcasting equipment.
Within these categories, we will focus on new markets and new product development.
The above combination of measures will allow us toreturn to positive consolidated net income in fiscal 2010.

“Our goal is to achieve a sustained return
to a growth track in fiscal 2012 and beyond.”
Our growth targets, which are contained in our financial
forecasts for fiscal 2012, are consolidated net sales of¥760 billion (US$8,260.9 million) and consolidated
operating income of ¥30 billion (US$326.1 million). The
priority strategies outlined here will enable us to achievethese goals. Of particular importance is our planned
expansion of the IT Solutions Business.

Enhancing Our Ability to Provide IT Solutions
The IT Solutions Business currently employs about
5,000 people and generates net sales of ¥140.0 billion(US$1,521.7 million). We are working to enhance
production and sales capabilities in this segment
through a range of measures (listed above).
Creating new service businesses is a key part. At
present, we have data centers in three locations, andwe plan to invest ¥15.0 billion (US$163.0 million) in
the establishment of a fourth center on the outskirtsof Tokyo. This new, cutting-edge facility will become
operational in the fall of 2012. We aim to create astock-type business model based on continuous

expansion of cloud computing services and system
operation services.

“Our medium- to long-term priority is the
expansion of shareholder returns.”
Our fundamental priorities are to achieve sustained
growth in Canon MJʼs corporate value in the mediumto long-term and to return income to our shareholders
through reliable dividends and a target consolidated
payout ratio of 30%.
Regrettably, the dividend for fiscal 2009 has been
reduced from ¥40 per share to ¥20 (US$0.22). We willcontinue to work relentlessly toward an improvement.
Our financial position is very sound, and we havesecured funds for investments totaling almost ¥70 billion (US$760.9 million) over the next three years.
Canon MJ is determined to achieve sustained
growth in the medium- to long-term by continuously
bringing customers new value, and to help build asustainable society through operations that minimize
environmental impact.
We look forward to your continuing strong support as
we move toward our goals.
Chairman Haruo Murase

President Masami Kawasaki

Canon Marketing Japan Inc. /7

SPECIALFEATURE 1

Holding the No. 1 Share in
Digital Photography
Canon MJʼs No. 1 share of the digital camera market,
held despite harsh conditions and sharp reductions in the
promotional activities of corporations, proves theCanon brandʼs resilience. Solidifying our position,
we continue to focus on surpassinguser expectations.

18-Megapixel
CMOS Sensor
Developed and manufactured by Canon, the EOS
7D features an APS-C-size CMOS sensor thatprovides ultra-high 18-megapixel resolution. Using
high-precision design and manufacturing
processes, Canon has combined extremely highresolution and ISO sensitivity with low noise.
Suitably, the EOS 7D is marketed as an “Image
Monster” in Japan.

Image Monster
Canon̶No. 1 in the Japanese Market for Digital Single-Lens Reflex Cameras
As digital cameras become more common, themarket has increasingly shifted toward digital SLR
cameras with enhanced functionality. Canonpioneered the market for entry-level digital SLR
cameras with the launch of the EOS Kiss Digital seriesin 2003. In addition, the EOS Digital series has earned
strong support across users ranging from advanced

8/ Canon Marketing Japan Inc.

amateurs to professionals.
Canonʼs key advantage in this market is a
product line-up with models for users at all levels
from beginners to professionals. This wide line-up
ensures Canonʼs position as Japanʼs leading digital
SLR camera manufacturer in terms of market share.

IXY and PowerShot Also Remain No. 1.
A key advantage for Canon MJ is its extensive line-up of compact digital
cameras. Canon offers two series of cameras̶IXY, which emphasizes
compactness, and PowerShot, which combines compact designs withsophisticated features. In 2009, Canon was Japanʼs leading manufacturer
in terms of its share of the compact digital camera market.

Total Service
To build long-term customer relationships andmake Canon products every customerʼs preferredchoice, we are particularly focused on responding
promptly to customer inquiries, and on providing
speedy, effective repairs.
General inquiries are handled at the Canon
Customer Support Center, which receives several

million phone calls annually from customers
seeking advice about products they are using. We
have progressively expanded our call centersystems to ensure that every call can be handled
promptly and appropriately. We have alsoenhanced our online support pages, which can beaccessed around the clock via the Canon website.

Almost 100% Field of View
Viewfinder performance is crucial to enjoying
photographic creativity with single-lens reflex cameras.
Canon viewfinders provide nearly 100% field of view anda magnification of 1.0. Previously such performance wasavailable only in high-end professional cameras.

Dual Digic 4
Canon has dramatically increased the EOS 7Dʼs image
processing power with dual Digic 4 advanced imaging
engines. The system supports rapid shooting at eightframes per second and high-speed processing of
18-megapixel images.

The Next Step
in Video Recording

Thanks to its high resolution, the EOS 7D brings new creative capabilities and lotsof fun to HD video recording. With EOS Movie mode activated, the 18-megapixel
CMOS sensor and dual Digic 4 advanced imaging engines enable users to retain
focus on the desired spot while blurring the background̶a feature unavailable
at this price point until now. The EOS Movie features are already seeing use in TV
commercial production and filmmaking.

Expanding the Canon Fan BaseCanon MJ offers camera users many opportunities to enhance theirenjoyment of photography. One channel used for this purpose is theCanon Photo Circle magazine, which turned 50 in 2009. There are also
86 local Canon photo clubs in Japan, all of which are actively supported
by Canon MJ. Other activities include the EOS School (pictured), whereusers can learn photographic techniques. By enhancing usersʼ enjoyment of photography, Canon MJ is building a fan base of people whowill continue to choose Canon products.

Canon Marketing Japan Inc. /9SPECIALFEATURE 2

User-Friendly Interface
The control panel of the imageRUNNER ADVANCE
is equipped with a tiltable 8.4-inch color LCD touch
screen. The information shown can be customized
for individual users.

Introducing Next-Generation
Business Solutions
Businesses today require ever-higher productivity, cost-efficiency, quality
and ease of use. Canon MJ fulfills these demands by combining marketleading multifunctional products (MFPs) with sophisticated IT solutions
into total packages that ensure smooth workflows.

USER-CENTRIC

User-Centric ̶A New Concept of Universal User-Friendliness
Under the User-Centric concept, “user” encompasses
not only customers, but also everyone involved inequipment sales and maintenance. If equipment isdifficult for Canon MJ staff to handle, we cannot
expect it to be easy for customers to use. We
continually emphasized this concept during ourfrequent consultations with Canon Inc. staff
throughout the development process.

10/ Canon Marketing Japan Inc.

Of course, imageRUNNER ADVANCE wasdesigned for use by all kinds of people, including
people with disabilities. For example, control panel
adjustment functions have been expanded to makethe system more convenient for wheelchair users,and colors have been selected to enhance visibility forusers with impaired color vision (dyschromatopsia).

Reduced Component Replacement TimeIn developing the imageRUNNER ADVANCE, a key aim was to reduce
maintenance downtime, which is invariably frustrating for users.
Canon MJ strongly pushed Canon Inc. to enable speedy maintenance,
resulting in significantly reduced component replacement time̶andgreater customer satisfaction.

User-Centric Combined with IT Connectivity
The new imageRUNNER ADVANCE series of
MFPs has features that will be vital for office-use
multifunctional systems in the future, including
powerful connectivity with IT systems, improved
control features, reduced total cost of ownership(TCO), and the ability to provide an optimized
workflow for each user. These products can be
combined with a variety of optional equipment
and software to create solutions for a wide rangeof needs.
One major advantage is the excellent
compatibility with existing MFPs. Significant
improvements in overall efficiency can be hadby installing multiple imageRUNNER ADVANCE
units and using them in conjunction withexisting MFPs.
Customers can also combine these productswith other solutions, such as user authentication

systems. For example, it is possible to create
highly customized security systems that enhance
end-user convenience while allowing managers
to set specific menu controls for each user.
Canon MJ has also created the HOME
service, an IT operations outsourcing service forsmall and medium-sized enterprises. This allows
companies to integrate their internal information
systems into corporate portal sites that provide
dramatic improvements in information sharing
and security, without the need to employ IT staff.
Canon MJ is committed to helping users realize
the full potential of imageRUNNER ADVANCE
technology and will continue to improve its
solutions-based marketing in step with thedevelopment of the series.

Advanced Box
The Advanced Box feature supports file sharing evenin a non-server environment by means of hard disks
installed within the system. A 9GB disk is provided as
standard, but this can be expanded up to 114GB.

Powerful Usage Rights
Management for PDFs
The imageRUNNER ADVANCE Series supports Adobe LiveCycle®
Rights Management ES functionality, which enables powerful handlingof sensitive information. Via a user-installed rights management server,
usage permissions for reviewing, copying, editing and printing can be
flexibly assigned to PDF files. These permissions are fully editable, andcan be modified for protected files even after distribution.

Active Commitment to Environmental Responsibility
CO2 emissions have been reduced by 50% compared withearlier products. imageRUNNER ADVANCE is also the first
Canon MFP made entirely from recycled plastic. Recyclable
packaging, which can be reused up to 10 times, is usedat the distribution stage. Moreover, Canon has anticipatedfuture requirements under the RoHS Directive by making
these products lead-free (except for electronic and electricalcomponents).

Canon Marketing Japan Inc. /11

REview of
OPerations

Business Solutions
Document Business

IN BRIEF
The key strategic product in thissegment is the new imageRUNNER ADVANCE.
Our challenge is to build a new businessmodel through the fusion of document
services with IT Solutions (ITS).
In maintenance services, we will
implement radical changes to create astructure that will allow us to earn income
while enhancing customer satisfaction.

PERFORMANCEThe Business Solutions segment, consisting of theDocument Business and the IT Solutions Business,
is a core business area and generates 61% of total
net sales. Unfortunately, corporate customers
reduced investments in facilities and officeequipment by a greater margin than predicted,
significantly lowering segment earnings year on year.

In the Document Business, the product categoryof business-use multifunctional products saw bigchanges in fiscal 2009. Total shipments of bothcolor and monochrome models in the domestic
market dropped sharply during the year, and net
sales were severely impacted. Sales of maintenanceservices were also below the previous yearʼslevel due to the reduction of printing volumes
by customers and cuts in the unit prices ofmaintenance services.
The IT Solutions Business was also hit by ageneral decline in corporate investment.
These factors were reflected in the fiscal 2009
results for this segment. Net sales were 15% lower
year on year at ¥419.2 billion (US$4,556.7 million),and there was an operating loss of ¥3.3 billion(US$35.6 million).

MAJOR TRENDS
BUSINESS-USE MULTIFUNCTIONAL PRODUCTS(MFPs) There was a generalized and dramatic
decline in shipments of both color and monochrome

Focused on a Sustained Recovery
Japan’s economy has yet to recover fully, and we expect theconditions seen in 2009, including deflationary pressure andcorporate cost-cutting, to persist in the first half of fiscal 2010.
Our top priority in fiscal 2010 will be to develop strategies totake us through and beyond this situation. We will increase
sales by emphasizing solutions centered on the imageRUNNERADVANCE, and have also launched a “Knock on the door”
initiative to get new clients.

Koji Ashizawa
12/ Canon Marketing Japan Inc.

Executive Vice President

NET SALES (Billions of yen)
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Document Business

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MFPs in the Japanese market in fiscal 2009. While
this situation directly impacted on the results for thissegment, we immediately took steps to reverse thedownward trend by building a new sales businessmodel centering on the imageRUNNER ADVANCE,
launched in September 2009.
LASER PRINTERS Shipments of color andmonochrome laser printers in the Japanesemarket fell year on year in fiscal 2009. We
maintained our No. 1 market share, but sales were
below the previous yearʼs level.
MAINTENANCE SERVICES Maintenance services
are provided mainly by a consolidated subsidiary,
Canon System & Support Inc. (Canon S&S). We
faced extremely difficult conditions, including a
reduction in print volumes by maintenance service
customers, a shift from color to monochrome
output, and a reduction in unit prices underpressure from escalating competition.

HIGHLIGHTS OF THE
YEAR 2009
FEBRUARY
Canonʼs lineup of color laser printers is further
expanded with the announcement of three A3
and two A4 models.
MARCH
The imagePRESS 1135, 1125 and 1100
monochrome on-demand systems go on sale.
JULY
Canon S&S graphic centers and CanonBusiness Support POD centers are integrated
under a new company, Canon Print Square Inc.
JULY
The new imageRUNNER ADVANCE is announced.
JULY
A new service license system is introduced withthe aim of improving customer engineer (CE)skills for imageRUNNER ADVANCE service staff.
SEPTEMBER
The new CANVAS service system becomes
operational.
WHOLE YEARFor laser printers, the biggest share of theJapanese market is retained for the 17th
consecutive year.

ImagePRESS 1135

Satera LBP9600C

ImageRUNNER ADVANCE C7065

This high-speed, high-performance printing
system offers excellent productivity forboth small runs and bulk printing thanks to
improved durability, and also has enhanced
security features for added reliability.
Designed for usability, this system is
extremely easy to operate.

Using original environmental technology,energy efficiency is an integral part ofthis printer’s design, and the excellent
environmental performance is shown by its
TEC rating. The printer is packed with userfriendly features, including a wide-screen
LCD monitor, and has extensive options forvarious business needs.

Based on the User-Centric concept, the newimageRUNNER ADVANCE line-up sets a new
standard in business device usability. A highperformance CPU dramatically improves
processing efficiency for high-speed, high-quality
printing. The system also supports efficientbusiness communication by allowing information
to be used and shared quickly and securely.

Canon Marketing Japan Inc. /13

REview of
OPerations

Business Solutions
IT Solutions Business

IN BRIEF
Japanese companies are still reducing their
IT investment, but Canon MJ is preparing fora return to demand growth in the mediumto long-term by channeling its total group
resources into structural reinforcement.
We have launched major initiatives
aimed at creating a stock-type businessmodel. Measures include the expansionof our network of data centers, and thedevelopment of cloud computing services.

PERFORMANCE
We see the IT Solutions Business as a growth
driver. In fiscal 2009, however, IT investment cutsby our customers caused net sales to fall 16% year
on year to ¥140.0 billion (US$1,521.4 million).
Our IT Solutions Business is divided into fourareas: system integration (SI) services, solutions,infrastructure/outsourcing and IT products.

Performance trends in the solutions category
remained strong, especially in the security-related
area. However, there were significant declines insales of SI services to customers in the financial
and manufacturing sectors, and in sales of IT
products. We also faced difficult conditions in theinfrastructure/outsourcing category.

MAJOR TRENDS
GROUP RESTRUCTURING AND REINFORCEMENT
In fiscal 2009, we restructured related groupcompanies to raise production and sales power. In
January 2009, Canon Network Communications Inc.
was absorbed into Canon IT Solutions Inc.
We also established two new companies:
Canon ITS Medical Inc. and Canon BizAttenda Inc.
In April, we acquired Edifist Learning Inc., which
provides IT and management training for corporate
customers. On April 1, 2010, we will further
strengthen this business through the establishmentof Canon MJ IT Group Holdings Inc., which willplay a key strategic role. Also, in May 2010, we

Focused on Strengthening IT Solutions
In fiscal 2010, the establishment of Canon MJ IT Group Holdings Inc.
on April 1 will bring a clearer direction for the IT Solutions Business.
This new company will make investment decisions andmanage income, and also help to expand earnings by intensifying
dialog with customers. Maintaining portfolio balance in these
difficult conditions is extremely important, and our immediatepriority will be to create and expand a stock-type IT service businesscapable of sustained income streams.

Kazunori Asada
14/ Canon Marketing Japan Inc.

President, Canon MJ IT Group Holdings Inc.

will boost our total group resources by acquiring
Canon Software Inc. as a wholly owned subsidiary.
LINKAGE WITH THE imageRUNNER ADVANCE
The imageRUNNER ADVANCE is more than an
MFP. Its powerful networking and security features
enable users to build highly effective systems
by networking the imageRUNNER ADVANCE
with computers and other office equipment. We
have increased our sales force in this area by 70
people in preparation for the introduction of a newproposal-based business model.
DATA CENTER BUSINESS AND CLOUD SERVICES
We currently have two data centers in the Tokyo
area and one in Okinawa. We plan to invest ¥15.0
billion (US$163.0 million) in a fourth data center,
which will open in the fall of 2012 within the Tokyo
Metropolitan Area.
Moreover, the development of our cloud service
business has now begun in earnest. We will create
a stock-type business model centering mainly on
existing customers.

HIGHLIGHTS OF THE
YEAR 2009
JANUARY
Canon NC merges with Canon ITS.
JANUARY
The medical solutions business of Canon ITS istransferred to FMS, and Canon ITS Medical Inc.
is established.
JANUARY
AIS and Solutions Service merge to form Canon
BizAttenda Inc.
APRIL
Edifist Learning Inc. joins the Canon MJ Group.
SEPTEMBER
Canon MJ, Canon ITS and Canon BS presenta joint exhibit at Cloudforce Japan, the biggest
cloud computing event in Japan.
SEPTEMBER
Data center services are expanded using data
centers operated by Qualysite Technologies Inc.
OCTOBER
Domestic sales of ESET security products exceed
1 million units.
NOVEMBER
SSJ K.K. announces Super Stream-NX, a new
Enterprise Resource Planning (ERP) product.

ESET Smart Security 4
Designed for ease of use, this comprehensive
security package integrates anti-virus, antispyware, anti-phishing, anti-spam andfirewall tools. To prevent virus infections fromremovable storage devices, access to these canbe restricted. Also, the ESET Smart Security
Program protects itself from modifications,partial deletion or other problems caused byvirus attacks or operator error.

Canon Marketing Japan Inc. /15

REview of
OPerations

Consumer Equipment
IN BRIEF
New product launches and strategic marketing
campaigns earned us the No. 1 market sharefor this segmentʼs major products, which are
digital SLR cameras, compact digital cameras
and home-use printers.
We aim to maintain our performance at
fiscal 2009 levels in fiscal 2010 by offering
consumers a variety of new ideas for enjoyment of digital photography.

PERFORMANCE
A worsening employment environment, fallingpersonal incomes and other factors werereflected in a deflationary trend in Japanese
consumer markets in fiscal 2009. Conditions in
the digital camera market were extremely tough.
Sales volumes were lower across the board, while
fierce competition drove down selling prices.

In this market environment, Canon MJ
launched new digital SLR cameras and digitalcompact cameras. We also strengthened our
integrated approach to sales promotion, a
key feature of which is our strategy of offering
consumers a variety of new ways to enjoy
photography, including home2printing.
Net sales were 9% lower year on year at ¥241.7
billion (US$2,627.7 million), but operating income
was 4% higher at ¥10.7 billion (US$116.1 million).

MAJOR TRENDSDIGITAL SLR CAMERAS Total shipments in thedigital SLR camera market fell during the year. In
April, we launched a new entry-level model, theEOS Kiss X3, which gained the biggest market
share in its class. A powerful line-up of products
matched to consumer needs and marketing
campaigns targeted toward specific user profiles
helped us to maintain our position as No. 1 interms of market share.

Focused on Enhancing Customer Satisfaction
In fiscal 2009, among other reforms, we realigned our salesorganizations and integrated management in the service andsupport area. These initiatives raised income beyond the 2008
level, and we secured No. 1 market shares in key productcategories. As many of our products are in the mature phaseof their life cycles, our priority is to enhance customers’satisfaction. To this end, we will ensure that every Canon MJ
employee has truly professional communication skills.

Osamu Sasaki
16/ Canon Marketing Japan Inc.

Senior Managing Director

NET SALES (Billions of yen)
;NÉ%*
É%+
É%,
É%Ê&/

Operating Income (Billions of yen)'*)#'',%#'-)#)'+*#')&#,COMPACT DIGITAL CAMERAS Conditions weredifficult in this market also. Total shipments
fell below the previous yearʼs level, and pricecompetition remained intense. Our marketing forthis category focused on our reputation for quality
products, especially the IXY Digital 930 IS, a highend camera packed with the latest features. Sales
volumes exceeded the previous yearʼs level, andwe secured the No. 1 market share.
HOME-USE PRINTERS Total shipments ofhome-use printers in the Japanese domestic
market shrank in fiscal 2009. Reactions to the
PIXUS MP630, which we launched in fiscal
2008, and the PIXUS MP640, which debutedin September 2009, were very positive, and wewere able to maintain the top market share.
We recorded a steady trend in sales of printerconsumables.

;NÉ%*

&&#,
&(#*
&)#)

É%+
É%,

&%#'
&%#,

É%Ê&/

HIGHLIGHTS OF THE
YEAR 2009
JUNE
Canon MJ commences joint shipping with
Epson Sales Japan Corporation to reduce
environmental loads.
JULY
Service center and call center functions areintegrated under Canon RS to strengthen
customer response capabilities.
JULY
Canon Photo Circle magazine celebrates the50th anniversary of its 1959 launch. Membershipexceeded 20,000 by the end of 2009.
SEPTEMBER
Presentations are held to announce the launchof the EOS 7D digital SLR camera and new
PIXUS products.
OCTOBER, NOVEMBER
Canon Photo Festival 2009 is held. Events
include mass photography shoots, handson demonstrations, talk shows, seminars andphoto exhibitions.

EOS KISS X3IXY DIGITAL 930 IS

PIXUS MP640

This user-friendly camera combines 15.1
megapixel resolution with high-speed
processing, including continuous shooting
at 3.4 frames per second. Other advanced
features include nine-point auto focus,
face detection and HD video recording.

This elegant camera sports a new Touch
Focus system that holds the focus on any
target. The 24 mm wide-angle lens andautomatic selection of scene settings
enable great expressivity, with images
shown on a 3.0-inch LCD screen.

Perfectly suited for both photographs andtext thanks to double black-ink cartridges
and resolution of up to 9600 dpi, PIXUS
MP640 lets users enjoy wireless printing
thanks to connectivity with both wired andwireless LANs.

Canon Marketing Japan Inc. /17

REview of
OPerations

Industrial Equipment
IN BRIEF
In January 2010, we transferred two key
product categories̶lithography equipment
for semiconductor manufacturers and LCD
lithography equipment̶to Canon Inc. andradically restructured the segment organization.
We aim to achieve a rapid return topositive operating income in fiscal 2010
with a structure based on three businesscategories: imported industrial equipment,
medical equipment and broadcasting
equipment.

PERFORMANCE
While there were signs of a recovery in operating
rates in some areas of the Japanese semiconductor
manufacturing industry, manufacturers continued
to limit their investment in plant and equipment.
Consequently, domestic shipments of lithographyequipment for semiconductor manufacturers fell

substantially year on year. Medical equipment
and broadcasting equipment were also affectedby investment cutbacks in related industries, andthe overall business environment for industrial
equipment was extremely challenging.
Net sales of industrial equipment were 61%
lower year on year at ¥25.7 billion(US$278.8
2
million). This inevitably resulted in an operating
loss of ¥1.1 billion (US$12.1 million).

MAJOR TRENDS
RADICAL CHANGES TO BUSINESS STRUCTURE
On January 1, 2010, we transferred sales,
service and support for lithography equipment
for semiconductor manufacturers and LCD
lithography equipment, which were this segmentʼs
core product categories, to Canon Inc. We also
streamlined our workforce in the segment andcreated a new structure that will support a rapid
return to profitability.

Focused on New Markets and New Customers
Meeting customers’ needs quickly is always our foremost priority.
That is why we transferred our Semiconductor and LCD Lithography
Systems Business to Canon Inc. Also, since our customers operate
globally, we will develop sales and service structures that are global
rather than domestic in scope. In fiscal 2010, we will focus onachieving a good balance between growth and income strategies, anddevelop new markets and new customers in the areas of imported
industrial equipment, medical equipment and broadcasting equipment.

KUNIO KURIHARA
18/ Canon Marketing Japan Inc.

Director

NET SALES (Billions of yen)

Operating Income (Billions of yen)

;NÉ%*

&&)#'
&%)#%

É%,

+*#,

É%Ê&/

)#+

;NÉ%*

.&#-

É%+

*#-

É%+

*#(

É%,

&#-

É%-

'*#,

Ê&/

RETURN TO POSITIVE OPERATING INCOME
Investment cutbacks by related industries in Japanare expected to affect the business environment
for this segment for some time. By transferringsome of our business units to Canon Inc., wehave reduced our workforce to approximately 300.
Our future activities in this segment will centeron imported industrial equipment, including
products in non-semiconductor fields; on medical
equipment, notably digital x-ray photographysystems and ophthalmological equipment; andbroadcasting equipment, such as portable zoom
lenses and HDTV wide-angle zoom lenses. We
plan to build a sales structure consisting of 40%
imported products, 40% medical equipment
and 20% broadcasting equipment. We also aim
to achieve an early return to positive operating
income in fiscal 2010.

"&#&

HIGHLIGHTS OF THE
YEAR 2009APRIL
A compact, lightweight 17x portable zoom lensfor HDTV cameras is announced.
JULY
The CXDI-60C, CXDI-55C and CXDI-55G digitalradiography systems are announced.
SEPTEMBER
Canon MJ announces the transfer of its
semiconductor equipment business to Canon Inc.
SEPTEMBER
The CX-1, a digital fundus camera capable ofdilated and non-dilated photography, goes on sale.

Zygo NewView 6300

CX-1 Digital Fundus Camera

Manufactured by Zygo Corporation in the
United States, this non-contact 3D surface
profiler can produce high-precision surface
profiles of a wide range of materials, fromsemiconductors and optical components tosoft materials such as resins and films.

This newly developed digital camera isdesigned specifically for use as a fundus
camera, and combines dilated andnon-dilated photographic systems in asingle easy-to-use unit with a compact,
lightweight body.

HJ14e×4.3B HD Wide-Angle
HDTV Zoom Lens
This extremely robust, yet compact andlightweight, wide-angle HDTV zoom lens
is ideal for news gathering and field
production. It is best-in-class in terms ofboth fixed focal (4.3 mm) and field angle(96.3º horizontal field in 16:9 mode).

Canon Marketing Japan Inc. /19

Sustainable
Management

CSR as a Part ofMarketing Innovation
We believe that real growth in corporate value comes from effective andtransparent corporate governance, and from fulfilling our responsibilities
as a corporation.
Responding to stakeholdersʼ expectations is not only the right thing
to do, it also builds trust in our corporate brand and fosters close
communication that enables us to enhance products and services, andmeet needs better. In this sense, CSR becomes an essential part of ourmarketing efforts, at the same time as it lets us bring value to society.
We believe that if we work closely together with the people andcommunities around us, we can find solutions for every problem whilesteadily enhancing corporate excellence and corporate value.

20/ Canon Marketing Japan Inc.

Canon Marketing Japan Inc. /21

Sustainable
Management

Canon Marketing Japan
Environmental Policy
As a member of the Canon Group, the Canon MJ Group will contribute tosustainable economic development and harmony with the global environment.
We seek to do this by combining a solid commitment to marketing innovation
with wide-ranging environmental protection initiatives. We aim to earn thetrust of society through actions that contribute to a sustainable future,including the following priority initiatives:
CANON MARKETING JAPAN ENVIRONMENTAL POLICY
All employees and executive officers follow this environmental policy,
and it is also available to the general public.

1. Supplying environment-friendly products,
systems and services

We want customers to feel reassured that our
products, systems and services do not impact
unnecessarily on the environment.

2. Environmentally responsible productdevelopment and planningWe will work to reduce environmental loads
and act responsibly toward the environment inproduct development and planning activities.

3. Pollution prevention
We will protect the global environment by working
to prevent pollution through careful use ofharmful chemicals.

4. Green procurement
We will focus on environmental responsibility
from the procurement stage by purchasing
products and services designed to minimize
environmental loads.

5. Improving business efficiency
We will contribute to business efficiency andfacilitate environmental protection by helping
to reduce resource and energy consumption,
promote recycling, and improve the efficiency oflogistical and business systems.

22/ Canon Marketing Japan Inc.

6. Compliance with laws and regulations
We will comply with environment-related laws
and regulations, as well as other requirements
under voluntary agreements.

7. Social contribution
We will cooperate with government policies andwork to contribute to local communities.

8. Disclosure
We will disclose information about ourenvironment-friendly products and environmental
protection activities.

9. Education
We will implement educational and awarenessprograms to raise the environmental awarenessof individual employees.

10. Environmental management systems
We will continually improve our environmental
performance by establishing environmental
management systems, and by setting andregularly reviewing environmental targets.

CANON GREEN RECYCLING ACTIVITIESCanon MJ offers a convenient fee-based recovery service for office equipment that is no longer
needed. Users can arrange to have their unwanted products collected for reuse and recycling
simply by completing a form on our website. Since May 11, 2005, Canon MJ has been an approved
waste disposal agent under Japanʼs wide-area waste disposal certification system*.
*Wide-Area Waste Disposal Certification System:
This system was established to reduce waste and ensure appropriate disposal by allowing companies that manufacture, sell orotherwise supply products to dispose of waste without obtaining approval from local authorities, which is a basic requirement
under Japanese waste disposal regulations.

http://cweb.canon.jp/ecology/cgrs/

ENVIRONMENTAL SOLUTIONS
Canon MJ and its group companies have resources of environmental technology and knowledge basedon many years of experience. We have begun to share these resources on a significant scale as products
and services supplied through our expanding Environmental Solutions Business. We supply environmental
cleaning technology and offer a variety of products and services, especially consulting and IT services. By
enabling customers to use our technology and knowledge, we hope to contribute to reduced environmentalloads in industry and throughout society in general. We provide solutions that help our customers to
implement environmental initiatives, reduce costs and maximize their corporate value.
http://cweb.canon.jp/ecology/customer/solution

GREEN PROCUREMENT ACTIVITIESWhen purchasing office equipment and supplies that we need for our business activities, we
preferentially choose products with reduced environmental footprints. The entire Canon Group iscommitted to careful management of environmentally harmful substances, including raw materials,
parts and subsidiary materials used in our products.
http://cweb.canon.jp/ecology/procurement/
GREEN PROCUREMENT OF STATIONERY AND OFFICE SUPPLIES
Using the following criteria, we preferentially purchase products that impose minimal environmental loads:(1) Reduction of environmental contaminants(2) Reduction of resource and energy consumption(3) Sustainable use of natural resources(4) Maximization of economic life of products

(5)
(6)
(7)
(8)

Facilitation of reuse
Facilitation of recycling
Use of recycled materials
Facilitation of disposal

PARTNERSHIP WITH SUPPLIERS
Canonʼs commitment to harmonious coexistence is reflected in our green procurement policy, which is a
key part of our contribution to the protection of the global environment. We were among the first Japanesecompanies to adopt green procurement policies, and in 1997, we further solidified our commitment by
issuing the Global Canon Green Procurement Standards and Global Canon Green Procurement Guidebook.
Environmental protection activities need to involve not only the corporate organization, but also our
suppliers. Our cooperation with suppliers include green procurement seminars based on the Global Canon
Green Procurement Standards, and we also regularly ask them to verify the effectiveness of their own
environmental protection efforts and systems.

Canon Marketing Japan Inc. /23

Sustainable
Management

CORPORATE GOVERNANCE(As of March 26, 2010)

GENERAL STOCKHOLDERSʼ MEETING
Appointment / dismissal
Audits14 Directors

5 Corporate Auditors

Board of Directors

Appointment / dismissal
Cooperation

Board of Corporate Auditors
Management Committee
Auditing ofaccounts

Internal Auditors
OfficeCSR Committee

Auditing company

Appointment / dismissal

Internal
auditsInternal Controls Evaluation Committee

AdviceGroup companies
Staff managers

Lawyers/
Licensed tax accountants

Disclosure Committee

BASIC STANCE ON CORPORATE GOVERNANCE
We recognize that sustainable growth in corporate value requires ongoing improvement in such areas as managementtransparency and the monitoring of progress toward management targets. This is reflected in our wide-ranging
initiatives to strengthen corporate governance.
THE CORPORATE GOVERNANCE STRUCTURE
In addition to the Board of Directors and the Board of Corporate Auditors, our corporate governance structure 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.
BOARD OF DIRECTORSAs of March 26, 2010, there were 14 directors. By limiting the term of office for directors to one year, we have createda management 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 of Canon MJ and the presidents of key subsidiaries. There are no outside directors.
BOARD OF CORPORATE AUDITORS
There are five corporate auditors, of whom three are appointed from outside of the Company. The Board of Corporate
Auditors sets audit policies and allocates responsibilities to the auditors, who conduct stringent audits in accordancewith those policies. Specific activities include attending Board meetings, interviewing directors and examining
documents containing important Board resolutions. The corporate auditors also monitor the Companyʼs operations
and assets.

24/ Canon Marketing Japan Inc.

BOARD OF DIRECTORS AND CORPORATE AUDITORS

Board ofdirectors

ChairmanPresident

Executive Vice President

Senior Managing Director

Managing Director

Haruo Murase

Masami Kawasaki

Koji Ashizawa

Osamu Sasaki

Yo Shibasaki

Managing Director

Director

Director

Director

Director

Director

Masahiro Sakata

Tetsuo Yoshida

Masaki Sawabe

Masanori Koyama

Yutaka Usui

Kunio Kurihara

Director

Director

Director

Keizo Go

Shinichi Inoue

Koichi Yagi

Corporate Auditor

Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Toshio Matsumoto

Taiji Miyazaki

Hiroshi Kawashimo

Keijiro Yamazaki

Kuniyoshi Kitamura

BOARD OFCorporate
auditors

INTERNAL AUDITORS OFFICEInternal audits are conducted by the Internal Auditors Office, an independent specialist unit that also assesses andadvises Canon MJ and its subsidiaries on legal compliance, the effectiveness of processes, internal control systems
and information security. The Internal Auditors Office works in coordination with similar units established in major
subsidiaries. The Canon MJ Group has 44 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 involvedin the conduct of internal audits of Canon MJ. To ensure that involvement is limited to specific periods, the audit
corporation rotates operating officers who have been involved in audits of any company for more than seven years.

Canon Marketing Japan Inc. /25

Sustainable
management

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

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

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

COMPLIANCE All employees of the Canon MJ Group are subject to the Canon Group
Code of Conduct, which mandates compliance with laws and corporate rules. To raiseawareness and ensure full implementation of the Code of Conduct, handbooks andpocket-sized Compliance Cards have been distributed to all employees. Every week,compliance case studies relating to business operations are issued and distributed
to all Canon MJ Group employees. All departments hold compliance meetings twice
each year. There are also continual corporate-level activities under the leadership of
the Corporate Ethics and Compliance Committee.
Canon MJ has established an internal reporting system, known as the “Speak up”
system, to facilitate the early discovery and rectification of compliance infringements
and prevent recurrences. Employees can report problems within the Company or to alegal office outside of the organization.
INFORMATION SECURITY AND PRIVACY Canon MJ has adopted acomprehensive approach to information security under the leadership of theInformation Security Committee. The Company is currently in the process of obtaining
company-wide information security certification under the ISMS scheme, a Japanese
third-party assessment system. In the area of personal information protection, Canon
MJ has obtained certification under the Privacy Mark system and will continue totighten internal management systems and improve employee education.
DISCLOSURE The task of the Disclosure Committee is to make prompt decisions
concerning important corporate information, including the identification of information
for which timely disclosure is required, and decisions concerning the content andtiming of disclosure. To ensure that information can be gathered promptly, disclosure
officers have been appointed in each department and subsidiary. As part of ourInvestor Relations activities, Canon MJ holds briefings on medium-term planning,
quarterly results briefings and business briefings. We also distribute timely, accurate
information continually via websites and other channels.
INTERNAL CONTROLS Chaired by the President, the Internal Controls Evaluation
Committee 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 establishing systems based on the same standards.
RELATIONSHIP WITH CANON INC. Canon MJ is a subsidiary of Canon Inc., whichowns 55.2% of Canon MJ stock (as of December 31, 2009). 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 exclusive right tosell all products manufactured by Canon Inc. under the Canon brand in Japan. In
fiscal 2009, our purchases from Canon Inc. amounted to ¥269.2 billion (US$2,926.1
million), or 57.4% of our total purchases.
Because of this relationship, a major shift in the management policies or businessactivities of Canon Inc. could have a significant impact on the business activities,
performance and financial position of the Canon MJ Group.

26/ Canon Marketing Japan Inc.

Financial
section
CONTENTS
28

Ten-Year Consolidated
Financial Summary

35

Consolidated Statements of
Changes in Net Assets

30

FINANCIALREVIEW

36

ConsolidaTed sTaTemenTs
oF Cash Flows

32

Consolidated
Balance Sheets

37

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

34

Consolidated Statementsof OPERATIONS

50

Report of Independent
Auditors

Canon Marketing Japan Inc. /27

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

Millions of yen

2009

2008

2007

2006

¥ 686,615
6,297
(595)
(4,343)¥ 827,487
25,41622,22911,186¥ 905,137
36,88635,452
20,033¥ 867,172
33,91932,96718,807

449,607
246,829484,937
255,220

526,125
266,086

526,578
260,367

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

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

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

18,094(19,217)(6,126)108,248¥ 134.84
40.00
1,817.59¥ 125.64
36.00
1,739.50

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 6)
Cash flows (Note 4):
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:¥

Net income (loss) (Note 2)
Cash dividends (Notes 3 and 5)
Stockholdersʼ equity (Note 6)(31.62)
20.00
1,797.31

¥

78.63
40.00
1,858.39

Notes: 1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥92 to U.S.$1, the prevailing exchange rate as of December 31, 2009.
2. Net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the respective fiscal years.
3. Cash dividends per share are the amounts applicable to the respective fiscal years, including dividends to be paid after the end of the year.
4. The “Accounting Standard for Consolidated Statements of Cash Flows” (Business Accounting Council, issued on March 13, 1998) has been adopted effective
the year ended December 31, 2000.

Return on Sales (ROS)Net Sales

Working Capital(Billions of yen/%)

ROS(Billions of yen/Times)

816 822795 787

757
696

382

905

347

827

345
325

2.2 2.2
1.9

1.5

867

687

2.1

2.0

335

1.7 1.7 1.7 1.7 1.7

182

257

198 196
174 175

1.8

220 221 225

247

260 266 255

247

7.4 7.6
6.4
5.4

212 220 214

3.2
2.5

184

4.3

1.6

-1.7

-0.6
-4.2

28 / Canon Marketing Japan Inc.

234

2.0

154

FY’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

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

328

1.9

1.4

0.5

362

374 369

Total Stockholders’Equity and ROE

302

0.9

0.8

Current Assets
Current Liabilities
Current Ratio

FY’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09-13.8

FY’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

Thousands of
U.S. dollars (Note 1)

Millions of yen

2005

2004

2003

2002

2001

2000

2009

¥ 821,948
29,72327,086
15,358¥ 815,511
29,274
20,186
12,364¥ 757,033
16,987
20,4387,043¥ 695,585
10,885
6,873
3,436¥ 786,828
19,397(63,280)(32,831)¥ 794,917
20,512
15,313
6,460$ 7,463,207
68,447(6,467)(47,207)513,335
247,244482,337
234,158

495,396
225,317495,298
220,797

514,698
220,418

518,958
256,959

4,887,033
2,682,924

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

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

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

36,275(26,869)(13,889)
136,448(3,384)(7,364)(6,182)141,045

12,324(13,015)(2,909)157,921

197,217(280,804)(47,000)
1,038,859
U.S. dollars(Note 1)

Yen

¥ 101.78
28.00
1,650.52

¥

81.78
22.00
1,562.23

¥

46.24
18.00
1,496.74

¥

22.96
18.00
1,464.43¥ (217.39)
18.00
1,459.60

¥

42.77
18.00
1,701.44$ (0.34)
0.22
19.54

5. Year-end cash dividends applicable to the year ended December 31, 2005 include a ¥2.00 bonus dividend reflecting record-high consolidated net sales,
operating income and net income.
6. Total stockholdersʼ equity in the above table represents the total of stockholdersʼ equity and valuation and translation adjustments in the consolidatedbalance sheets. This is due to the adoption of an accounting standard for the presentation of net assets in the balance sheet effective the year ended
December 31, 2006, which requires former stockholdersʼ equity and minority interests to be presented as net assets, and net assets to be classified as
stockholdersʼ equity, valuation and translation adjustments and minority interests.

Total Assets andTotal Stockholders’Equity Ratio

Total Assets
Total Stockholders’Equity Ratio

Net Income (Loss)(Billions of yen)(Billions of yen/%)519 515495 495513

18.8

527 526

482

485

15.4

450
12.4

49.5

44.6 45.5

48.5 48.2 49.4

50.6 52.6

54.9

20.0

11.2

7.0

6.5
3.4

42.8
-32.8

FY’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09-4.3

FY’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09

Canon Marketing Japan Inc. /29

FINANCIAL
REVIEW

Business
Performance
Net Sales
All business segments were affected by negative
economic trends in the year ended December 31, 2009.
Consolidated net sales were substantially lower year on
year with a 17.0% decline to ¥686,615 million.

Segment Information
In the Business Solutions segment, a downward trend
in corporate capital investment was reflected in asignificant year-on-year decline in sales of office multifunctional products (MFPs). In the laser printercategory, we were able to maintain our position as
market leader by focusing our marketing efforts on A3
color printers. However, sales fell below the previous
yearʼs level. We recorded firmer trends in sales of largeformat ink-jet printers and consumables, in part
because of the conclusion of major deals.
In the office MFP maintenance category, lower unit
prices for maintenance services, and a tendency for users
to reduce office printing were reflected in a year-on-year
decline in sales. Canon System & Support Inc., amember of the Canon MJ Group, also recorded a year-onyear decline in sales. Reasons included the reduction ofcapital investment and cost-cutting efforts by small andmedium-sized enterprises, which are the core customers,
as well as tighter credit criteria for leasing transactions.
In the IT Solutions Business, net sales in thesolutions category remained at a level similar to that ofthe previous year, due to strong performance from security
solutions and business systems that are based on handy
terminals for use in the public sector and in distribution
services. However, moves by businesses to reduce theircapital expenditure adversely affected system integration(SI) services and the circuit board and IT products
categories, resulting in total net sales for the IT Solutions
Business as a whole to fall year on year.
Total sales in the Business Solutions segment
amounted to ¥419 , 217 million, a year-on-year decline of 15 . 5 %.
In the Consumer Equipment segment, sales ofdigital single-lens reflex cameras were lower year on
year because of market contraction. However, we
maintained our position as the leading manufacturer by
maintaining a powerful product line-up in all
categories, and by implementing marketing activities
targeted toward specific consumer profiles.

30 / Canon Marketing Japan Inc.

Sales of compact digital cameras declined becauseof price reductions. However, consumers responded
positively to marketing campaigns focusing on the highquality of Canon products. Sales exceeded the previous
yearʼs level in volume terms, and we were able tomaintain our position as the leading manufacturer interms of market share. We also worked to expand salesof digital video cameras by emphasizing the ease ofoperation and excellent picture quality of our products.
Unfortunately, sales were below the previous yearʼs level,in part because of a reduction in the product line-up.
Canon became the leading manufacturer of ink-jet
printers in terms of market share, and sales ofconsumables were higher year on year. Total sales,
including equipment and consumables, weremaintained at the previous yearʼs level.
Total consolidated sales in the Consumer Equipment segment were 9 . 1 % lower year on year at¥241,748 million.
In the Industrial Equipment segment, sales oflithography equipment for semiconductor manufacturers
were sharply lower year on year because of reduced
capital investment. Sales of medical equipment werealso eroded by the impact of reduced capital investment
on the hospital market. Sales of broadcasting equipment
were similarly affected by a decline in capital investment
by broadcast stations.
Consolidated sales in the Industrial Equipment
segment amounted to ¥25,650 million, a year-on-year
decline of 61.0%.

IncomeOperating income was 75.2% below the previous yearʼs
result at ¥ 6 , 297 million. Selling, general andadministrative expenses declined year on year due toreductions in advertising expenses, sales promotion
expenditure and payroll costs. However, these savings
were outweighed by a decline in gross profit on sales
resulting from the lower net sales figure.
Higher extraordinary losses were reflected in a net
loss of ¥4,343 million. This resulted in part from efforts
to improve the effective use of company-owned realestate through replacement construction. The portionof the costs involved that were estimated to be nonrecoverable were treated as impairment losses.
Net income per share was negative ¥ 31 . 62 ,compared with a positive figure of ¥78.63 in the previous
year. The annual dividend per share was set at ¥20.00.

Financial
Position

Cash
Flows

Current assets declined by ¥25,865 million from theprevious yearʼs level to ¥301,828 million. The main
reasons for the lower figure were a ¥ 23,810 million
reduction in notes and accounts receivable resulting
from the decline in sales and an ¥8,359 million decline
in inventories, despite a ¥20,000 million increase in
short-term loans receivable.
Fixed assets reached ¥147,779 million, a year-onyear reduction of ¥9,465 million. This change resulted
primarily from a ¥10,110 million decline in the value ofland owing to impairment losses and other factors.
Current liabilities ended the year ¥30,030 million below
the previous yearʼs level at ¥153,710 million. Key reasonsfor this decline included reductions of ¥17,453 million innotes and accounts payable, ¥5,235 million in accrued
expenses, and ¥5,387 million in accrued income taxes.
Long-term liabilities increased by ¥2,868 million year
on year to ¥45,022 million. Significant factors affecting
long-term liabilities were a ¥503 million increase in leaseobligations resulting from the application of new leaseaccounting standards, and a ¥1,799 million increase indeferred tax liabilities.
Net assets declined by ¥8,168 million year on year
to ¥ 250 , 875 million. Factors that had a significant
effect on net assets included an ¥ 8 , 463 million
reduction in retained earnings, which resulted mainly
from the net loss of ¥ 4 , 343 million and dividend
payments totaling ¥4,120 million.
These changes resulted in a ¥35,330 million yearon-year reduction in total assets, which amounted to¥449,607 million as of December 31, 2009.
Return on equity (ROE) declined from 4.3% in theprevious year to negative 1.7%, while the stockholdersʼ
equity ratio increased from 52.6% to 54.9%.
Stockholdersʼ equity per share was reduced from
¥1 , 858 . 39 in the previous year to ¥ 1 , 797 . 31 as ofDecember 31, 2009.

Cash and cash equivalents as of December 31, 2009amounted to ¥95,575 million, a reduction of ¥12,014
million from the position at end of the previous year.
Net cash provided by operating activities totaled¥18,144 million, compared with ¥41,122 million in theprevious year. One major factor influencing this result
was a ¥ 595 million loss before income taxes andminority interests. Key factors influencing cash inflows
included depreciation and amortization of ¥ 12 , 356
million, impairment losses of ¥ 10 , 769 million, a¥ 23 , 282 million reduction in notes and accounts
receivable, and an ¥ 8 , 635 million reduction ininventories. Major outflows included a ¥5,182 million
loss on sales of property and equipment, a ¥16,829
million reduction in notes and accounts payable, andincome tax payments amounting to ¥10,423 million.
Net cash used in investing activities amounted to¥25,834 million, compared with ¥28,967 million in theprevious year. Major inflows included ¥6,204 million ofproceeds from sales of property and equipment and a¥ 5 , 010 million net reduction in time deposits.
Significant outflows included expenditure of ¥ 6,958
million on the acquisition of property and equipmentand ¥9,590 million on the acquisition of intangible
fixed assets, and a net increase of ¥20,000 million in
short-term loans receivable.
Net cash used in financing activities amounted to¥4,324 million, compared with ¥21,738 million in theprevious year. This consisted mainly of ¥4,244 million
in dividend payments.

Canon Marketing Japan Inc. /31

Consolidated
Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2009

2008

2009

¥ 95,575
125,738
221
25,785
4,361
40,001
10,715(568)
301,828¥ 107,589$ 1,038,859
1,366,717
2,402
280,272
47,402434,794
116,467(6,174)
3,280,739

31,62971,60517
18,733
21,568702
144,254(60,064)
84,19041,73976,189369
19,73821,508̶cURRent assets:
Cash and cash equivalents (Note 8)
Notes and accounts receivable
Short-term investments in securities (Note 3)Inventories (Notes 2 and 5)
Deferred tax assets (Note 10)
Short-term loans receivable
Other current assets
Allowance for doubtful receivables
Total current assets
PRoPeRtY and eQUiPMent:
Land
Buildings and structures
Machinery and vehicles (Note 7)
Furniture and fixtures (Note 7)
Rental assets
Lease assets (Note 2)
Total
Accumulated depreciation
Net property and equipment
intanGiBle assets:
Goodwill (Note 2)
Software (Note 7)
Lease assets (Note 2)
Utilization rights
Other intangible assets
Total intangible assets
inVestMents and otHeR assets:
Investments in securities (Note 8)Long-term loans receivable
Lease deposits
Deferred tax assets (Note 10)
Other investments
Allowance for doubtful receivables
Total investments and other assets
Total assets

32 / Canon Marketing Japan Inc.

149,548
̶
34,144
5,389
20,001
11,483(461)
327,693

159,543(61,553)
97,990343,794
778,315
185
203,620
234,435
7,630
1,567,979(652,870)
915,109

2,335
21,63826289
104
24,392

2,926
15,598̶
389
116
19,02925,380235,196
283
3,141
1,130
265,130

5,155
21
9,016
21,236
5,301(1,532)
39,197¥ 449,607

6,420
26
8,792
20,327
5,829(1,169)40,225¥ 484,937

56,033228
98,000230,826
57,620(16,652)
426,055$ 4,887,033

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND NET ASSETS

2009

2008

2009

¥ 106,444
190
698
2,268
8
22,903
4,174
17,025
153,710¥ 123,897

6,085
2,281
7
28,1384,596
18,736
183,740$ 1,157,000
2,065
7,587
24,652
87
248,946
45,370185,054
1,670,761

503
2,079
37,538
1,007

̶
280
37,122
937

5,467
22,598408,022
10,946

844

805

9,174

3,051
45,022

3,010
42,15433,163
489,370

73,303
83,289115,153(24,759)

73,303
83,289123,616(24,731)

796,772
905,3151,251,663(269,119)

(117)
(40)
4,046
250,875¥ 449,607(212)(1,272)(435)
43,9782,726,902$ 4,887,033

cURRent liaBilities:
Notes and accounts payable
Lease obligations (Note 13)
Accrued income taxes (Note 10)
Consumption taxes payable
Deferred tax liabilities (Note 10)
Accrued expenses
Reserves
Other current liabilities
Total current liabilities
lonG-teRM liaBilities:
Lease obligations (Note 13)
Deferred tax liabilities (Note 10)
Allowance for employeesʼ retirement benefits (Notes 2 and 9)
Allowance for long-term continuous service rewards (Note 2)
Allowance for directorsʼ andcorporate auditorsʼ retirement benefits (Note 2)
Other long-term liabilities (Note 13)
Total long-term liabilities̶

continGent liaBilities (Note 4)
NET ASSETS:
stockHoldeRsʼ eQUitY (Note 14):
Common stock:
Authorized̶299,500,000 shares;
Issued̶151,079,972 shares in 2009 and 2008
Capital surplus
Retained earnings
Treasury stock
ValUation and tRanslation adJUstMents:
Net unrealized loss on available-for-sale securities
Foreign currency translation adjustments
MinoRitY inteRests
Total net assets
Total liabilities and net assets

(45)
3,823

259,043¥ 484,937• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. /33

Consolidated Statementsof OPERATIONS
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

2009

2008

2009

¥ 686,615
453,557
233,058
226,761
6,297¥ 827,487

25,416$ 7,463,207
4,929,967
2,533,240
2,464,793
68,447

Loss on devaluation of investments in securities

712
(87)
—
5,596
(10,769)1(414)(1,104)970(67)(1,614)
0
(144)
0
(578)
(1,125)

7,739
(946)
—
60,826(117,054)
11(4,500)(12,000)

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

—

(929)

—

Expenses related to restructuring of consolidated subsidiaries

(66)

(592)

(718)

Loss on adjustment for change of accounting standard
for measurement of inventories(1,299)̶(14,120)

Other, net

538(6,892)(595)

892(3,187)22,2295,848(74,914)(6,467)

1,477
1,926
3,403
(3,998)345(4,343)

10,336239
10,575
11,654468¥ 11,186

16,05520,93536,990(43,457)
3,750(47,207)

net sales
cost oF sales
Gross profit
sellinG, GeneRal and adMinistRatiVe eXPenses
Operating income

554,467
273,020
247,604

otHeR incoMe (eXPenses):
Interest and dividend income
Interest expense
Loss on disposal and devaluation of inventories
Gain on sales of property and equipment
Loss on impairment of fixed assets
Gain on sales of investments in securities
Loss on sales and disposal of property and equipment

Income (loss) before income taxes and minority interests
incoMe taXes (Note 10):
Current
DeferredIncome (loss) before minority interests
MinoRitY inteRests
Net income (loss)¥

U.s. dollars(note 1)Yen

PeR sHaRe oF coMMon stock (Note 2):
Net income (loss)
Cash dividends applicable to the year
• See accompanying notes to consolidated financial statements.

34 / Canon Marketing Japan Inc.

¥¥

(31.62)
20.00

$

¥
¥

78.63
40.00

$
$

(0.34)
0.22

Consolidated Statements of
Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2009 and 2008

Millions of yen
Valuation and translation
adjustments

Stockholdersʼ equity

Balance at deceMBeR 31, 2007
Net income (loss)
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Contributions to employee welfare
pension fund
Other, net
Balance at deceMBeR 31, 2008
Net income (loss)
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes due to sales of investments
in subsidiaries
Contributions to employee welfare
pension fund
Other, net
Balance at deceMBeR 31, 2009

Number ofshares ofcommonstock

Commonstock

Capitalsurplus151,079,972¥ 73,303¥ 83,296

Retainedearnings

Treasurystock¥ 118,528 ¥ (9,695)
11,186(6,094)(15,066)
(7)
30
(4)

151,079,972¥ 73,303¥ 83,2890¥ 123,616 ¥ (24,731)(4,343)(4,120)
(4)
2

0

(26)

0
151,079,972¥ 73,303¥ 83,289¥ 115,153¥ (24,759)

Minority
interests

Total
net assets¥ 14¥ 3,482¥ 269,568
11,186(6,094)(15,066)
23(59)¥ (45)

341¥ 3,823

Net unrealized
gain (loss) on
availablefor-salesecurities

Foreigncurrencytranslation
adjustments

640

(852)
¥ (212)

¥

(4)
(570)
¥ 259,043(4,343)(4,120)
(4)
2
(26)

95
¥ (117)5¥ (40)

223¥ 4,0460323¥ 250,875

Minority
interests

Total
net assets

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

Stockholdersʼ equity

BALANCE AT DECEMBER 31, 2008
Net income (loss)
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes due to sales of investments
in subsidiaries
Contributions to employee welfare
pension fund
Other, net
BALANCE AT DECEMBER 31, 2009

Commonstock

CapitalsurplusRetainedearnings

Treasurystock$ 796,772$905,315 $ 1,343,652 $ (268,815)(47,207)(44,782)
(43)
0
22

0

Net unrealized
gain (loss) on
availablefor-salesecurities

Foreigncurrencytranslation
adjustments$ (2,304)$ (489)$ 41,554 $ 2,815,685(47,207)(44,782)
(43)
22

(283)

(283)

0
$ 796,772$905,315 $ 1,251,663 $ (269,119)

0
1,032$ (1,272)54$ (435)

2,424
3,510
$ 43,978 $ 2,726,902• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. /35

ConsolidaTed sTaTemenTs
oF Cash Flows
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2009 and 2008

Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2009

2008 		

2009$

(6,467)casH Flows FRoM oPeRatinG actiVities:
Income (loss) before income taxes and minority interests

¥

(595)

¥

22,229Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase in allowance for doubtful receivables(Reversal of) provision for liability for employeesʼ retirement benefits
Provision for liability for directorsʼ andcorporate auditorsʼ retirement benefits
Interest and dividend income
Interest expense
Loss (gain) on sales and disposal of property and equipment, net
Loss (gain) on sales of investments in securities
Decrease in notes and accounts receivable
Decrease in inventories
Decrease in notes and accounts payable
Other
Sub-totalInterest paid
Interest and dividends received
Income taxes paid
Net cash provided by operating activities

12,356
10,769849
510
846

12,059144
833
324(1,515)

134,304
117,054
9,228
5,543
9,196

40
(712)
87
(5,182)
7
23,282
8,635(16,829)(6,145)27,918(88)
737(10,423)
18,144

51
(970)
67
578
(0)
38,7903,577(24,450)
1,452
53,169(86)
977(12,938)
41,122435(7,739)946(56,326)76
253,065
93,859(182,924)(66,793)
303,457(958)
8,011(113,293)
197,217(6,958)6,204(9,590)(9)
16—(9,047)
̶(8,580)
(816)
4,075
(18)

(75,631)
67,435(104,239)
(98)
174
—

(396)

̶

(4,304)

—

33

—

(188)
(20,000)
5,010
77(25,834)

̶
(19,994)5,300
80(28,967)(2,044)(217,391)
54,457837(280,804)

(77)
—
(4)
(4,244)1(4,324)(0)(12,014)
107,589¥ 95,575

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

(837)
—
(44)
(46,130)11(47,000)(0)(130,587)
1,169,446$ 1,038,859

casH Flows FRoM inVestinG actiVities:
Payments for purchases of property and equipment
Proceeds from sales of property 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
Payments for purchases of investments in subsidiaries
accompanying changes in scope of consolidation
Proceeds from purchases of investments in subsidiaries
accompanying changes in scope of consolidation
Payments for sales of investments in subsidiaries
accompanying changes in scope of consolidation
Increase in short-term loans receivable
Decrease in time deposits
Other
Net cash used in investing activities
casH Flows FRoM FinancinG actiVities:
Repayments of finance lease obligations
Net decrease in short-term bank loans
Payments for purchases of treasury stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
• See accompanying notes to consolidated financial statements.

36 / Canon Marketing Japan Inc.

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

1

Basis of Presentation ofConsolidated Financial Statements

The accompanying consolidated ﬁnancial statements of Canon
Marketing Japan Inc. (the “Company”) and its consolidated
subsidiaries are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled
from the consolidated financial statements prepared by theCompany as required by the Financial Instruments andExchange Law of Japan.
The U.S. dollar amounts are included solely for convenienceof the reader and are stated, as a matter of arithmeticalcomputation only, at the exchange rate of ¥92=U.S.$1, the rate
prevailing at December 31, 2009. These translations should not
be construed as representations that the Japanese yen amounts
actually represent, or have been or could be converted into U.S.
dollars at that or any other rate.

2

Summary of Significant
Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for theyear ended December 31 , 2009 include the accounts of theCompany and all of its 20 (20 in 2008) subsidiaries. Investments
in nonconsolidated subsidiaries and affiliated companies areaccounted for by the equity method.
All intercompany accounts and transactions are eliminatedin consolidation.
The excess of acquisition costs over net assets acquired isamortized generally over ﬁve years.
(b) Cash Equivalents
For purposes of the consolidated statements of cash ﬂows, theCompany and its consolidated subsidiaries consider all highly
liquid investments, including securities, time deposits andcertiﬁcates of deposit, all of which mature or become due within
three months of the date of acquisition, to be cash equivalents.
(c) Securities
The held-to-maturity debt securities are stated at amortized cost.
Available-for-sale marketable securities are stated at fair market
value, with unrealized gain or loss, net of the applicable taxes,
reported as a separate component of net assets. Available-for-salemarketable securities whose fair value is not readily determinable
are stated at cost determined by the moving-average method.
(d) Inventories
Merchandise and service parts are valued at cost determined by
the monthly moving-average method. The carrying amount in
the balance sheet is calculated with consideration of write-downs
due to decreased proﬁtability.
Work in process is valued at cost determined by the speciﬁc
identiﬁcation method.

Supplies are valued at cost determined by the last-purchaseprice method. The carrying amount in the balance sheet is
calculated with consideration of write-downs due to decreased
proﬁtability.
<Change in Accounting Standards>
Effective the year ended December 31 , 2009 , the Company
has adopted the “Accounting Standard for Measurement of
Inventories” (the Accounting Standards Board of Japan (ASBJ)
Statement No. 9, issued on July 5, 2006).
As a result of this change, operating income and income
before income taxes and minority interest for the fiscal year
ended December 31, 2009 have been reduced by ¥1,722 millionand ¥1,317 million respectively.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation iscomputed by the declining-balance method for property andequipment, with the exception of items that are depreciatedby the straight-line method at rates based on the estimateduseful lives of the respective assets. These items are buildings
purchased on or after April 1 , 1998 (exclusive of furnitureand fixtures), all buildings and structures of the Companyʼs
Makuhari office, all property and equipment of certain
consolidated subsidiaries, and rental assets in the Business
Solutions segment. The useful lives are as follows: buildings,
mainly 50 years; furniture and fixtures, mainly five years;
and rental assets, mainly three years. Normal repairs andmaintenance, including minor renewals and improvements, arecharged to income as incurred.
In accordance with the amendment to the Corporation
Tax Law, from the ﬁrst accounting period after the ﬁscal year inwhich ﬁxed assets acquired on or before March 31, 2007 reach
5% of their acquisition value under the application of methods ofdepreciation based on the pre-amendment Corporation Tax Law,
the Company shall apply straight-line depreciation over a periodof five years to the difference between the amount equivalent
to 5 % of the acquisition value of the ﬁxed assets acquired onor before March 31 , 2007 and the memorandum value ( 1 yen)of those assets. The resulting amount will be recorded under
depreciation and amortization in the accounts.
(f) Allowance for Employees’ Retirement Benefits
In order to provide for employeesʼ retirement benefits, theCompany and its consolidated subsidiaries provide liability for
employeesʼ retirement beneﬁts in an amount calculated basedon the estimated projected beneﬁt obligation and plan assets at
the end of the ﬁscal year.
Unrecognized prior service cost is amortized by the straightline method over the average service period of the eligible
employees remaining at the time when it arose. Unrecognizedactuarial gain or loss is amortized from the ﬁscal year following
the year in which it arose, by the straight-line method over the
average service period of the eligible employees remaining.
(g) Leases<Change in Accounting Standards>
Until the previous ﬁscal year, ﬁnance lease transactions that did
not deem to transfer ownership to the lessee were accounted for
as operating leases.

Canon Marketing Japan Inc. /37

Effective the year ended December 31, 2009, the Company
has adopted the “Accounting Standard for Lease Transactions”(ASBJ Statement No. 13 , originally issued by the First
Subcommittee of the Business Accounting Council on June
17 , 1993 and revised by the ASBJ on March 30 , 2007 ), and“Guidance on Accounting Standard for Lease Transactions” (ASBJ
Guidance No. 16 , originally issued by the Japanese Institute ofCertiﬁed Public Accountants on January 18, 1994 and revised by
the ASBJ on March 30, 2007).
In accordance with the revised accounting standards,
finance lease transactions that do not deem to transfer
ownership to the lessee are now accounted for as ordinarypurchase transactions.
However, finance lease transactions that do not deemto transfer ownership to the lessee commencing prior to theadoption of the new accounting standards are accounted for as
operating leases as in previous ﬁscal years.
The effect of this accounting change on income is immaterial
for the year ended December 31, 2009.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amountrequired to cover possible losses on collection. It is determinedby adding individually estimated uncollectible amounts for
specific items to an amount based on the actual rate of
uncollected receivables of the Company in prior years.
(i) Income Taxes
Deferred tax assets and liabilities are recorded to reflect the
impact of temporary differences between assets and liabilities
recognized for ﬁnancial reporting purposes and such amounts
recognized for tax purposes. These deferred taxes aremeasured by applying the normal statutory rate of income taxes
to the temporary differences.
(j) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated into
Japanese yen at the current exchange rates in effect at thebalance sheet date. The foreign exchange gains and losses ontranslation are recognized in the accompanying consolidated
statements of income.
(k) Foreign Currency Financial Statements
The balance sheet accounts and revenue and expense accountsof the foreign subsidiaries are translated into Japanese yen at
the current exchange rates except for the components of net
assets excluding minority interests which are translated at their
historical exchange rates.
(l) Per Share Amounts of Common Stock
Net income per share is calculated using net income available toholders of common stock which is computed more precisely thanunder previous standards, and the weighted average number ofshares of common stock outstanding for the period.

38 / Canon Marketing Japan Inc.

Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective ﬁscal years, including dividends to be paid after
the end of the respective ﬁscal years.
(m) Bonuses to Directors
The estimated amount payable for the next round of directorsʼ
bonuses, which are classed as expenses for the current year, hasbeen included in the accounts for the current ﬁscal year.
(n) Allowance for Directors’ and Corporate Auditors’
Retirement Benefits
The Company and its consolidated subsidiaries pay lump
sum retirement benefits to directors and corporate auditors,
the amounts of which are determined in accordance with
the Companyʼs and its consolidated subsidiariesʼ internal
regulations. Also, in accordance with the Companyʼs and its
consolidated subsidiariesʼ internal regulations, a reserve isprovided for such beneﬁts at the amount that would be required
to be paid if all directors and corporate auditors retired at theend of the ﬁscal year.
(o) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards to employees
who have given long-term continuous service determined inaccordance with the Companyʼs internal regulations, we bookallowance for long-term continuous service rewards based on theamount we expect to pay in the future.
The Company and some of its subsidiaries have establishedinternal regulations related to the Refresh and Vacation Systemfor employees who have been very diligent and have given longterm and continuous service. The system grants vacations andpays rewards at ﬁxed intervals in order to refresh the minds andbodies of these employees and enable them to work with new
vigor in the future.
Until the year ended December 31, 2007, rewards related
to the Refresh and Vacation System were formerly treatedas an expense at the time they were paid. However, theirmonetary signiﬁcance has increased as a result of the increasein the number of employees and rational estimates havebecome possible with the enhancement of the functions of
the Companyʼs attendance management system. Therefore,
effective January 1 , 2008 , the Company have changed to amethod in which the liability is booked from the current period
based on the amount we expect to pay in the future according
to our internal regulations, in order to calculate period profit
and loss more appropriately.

3

Assets Pledged
as Collateral

Assets pledged as collateral for deferred payments of customs duties as of December 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2009

4

2008 		

¥ 221

Short-term investments in securities2009$ 2,402¥ 222

Contingent
Liabilities

Contingent liabilities at December 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2009

5

2008 		

¥ 114

Guarantees for employeesʼ housing loans

2009$ 1,239¥ 134

Inventories

Inventories at December 31, 2009 and 2008 were composed of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

		

6

2009

2008 		

¥ 18,233
3,794
3,213
545
—
¥ 25,785

Merchandise
Service parts
Work in progress
Supplies
Other¥ 24,767
5,143
3,411
812
11
¥ 34,144

2009$ 198,185
41,23934,9245,924—$ 280,272

Consolidated Statements of
Changes in Net Assets

Current consolidated ﬁscal year (from January 1, 2009 to December 31, 2009)
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)

Increase(Thousands of shares)

Decrease(Thousands of shares)

End of the current fiscal year
(Thousands of shares)

Issued stock
Common stock

151,080̶

―

151,080

Total

151,080̶

―

151,080

Treasury stock
Common stock

13,7463

1

13,748

Total

13,7463

1

13,748Notes: 1. The increase of 3 thousand shares of treasury stock was due to the purchase of fractional stock.
2. The decrease of 1 thousand shares of treasury stock was due to the sale of fractional stock.

Canon Marketing Japan Inc. /39

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

Total dividends(Millions of yen)Type of stock

Dividend per share(Yen)

Base date

Date effective

March 26, 2009
General stockholdersʼmeeting

Common stock¥ 2,747¥ 20

December 31, 2008

March 27, 2009

July 23, 2009
Board of Directorsʼ meeting

Common stock¥ 1,373¥ 10

June 30, 2009

August 28, 2009

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

Type of stock

Funds used to pay
the dividend

Total dividends(Millions of yen)

Dividend per share(Yen)

March 26, 2010
General stockholdersʼmeeting

Common stock

Retained earnings¥ 1,373¥ 10

Base date

Date effective

December 31, 2009

March 29, 2010

Previous consolidated ﬁscal year (from January 1, 2008 to December 31, 2008)
1. Matters pertaining to the types and total number of shares issued and the types and number of shares of treasury stock
End of the previous fiscal year
(Thousands of shares)

Increase(Thousands of shares)

Decrease(Thousands of shares)

End of the current fiscal year
(Thousands of shares)

Issued stock
Common stock

151,080̶

―

151,080

Total

151,080̶

―

151,080

Treasury stock
Common stock

4,685

9,077

16

13,746

Total

4,685

9,077

16

13,746

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

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

Total dividends(Millions of yen)Type of stock

Dividend per share(Yen)

Base date

Date effective

March 27, 2008
General stockholdersʼmeeting

Common stock¥ 3,221¥ 22

December 31, 2007

March 28, 2008

July 23, 2008
Board of Directorsʼ meeting

Common stock¥ 2,873¥ 20

June 30, 2008

August 26, 2008

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

Type of stock

Funds used to pay
the dividend

Total dividends(Millions of yen)

Dividend per share(Yen)

March 26, 2009
General stockholdersʼmeeting

Common stock

Retained earnings¥ 2,747¥ 20

40 / Canon Marketing Japan Inc.

Base date

Date effective

December 31, 2008

March 27, 2009

7

Leases(a) Finance Leases
Lease payments for ﬁnance leases excluding subleases, except for the lease agreements which stipulate the transfer of ownership ofthe leased property to the Company and its consolidated subsidiaries, were ¥3,173 million ($34,489 thousand) and ¥3,082 million forthe years ended December 31, 2009 and 2008, respectively.
(As Lessee)
Future minimum lease payments subsequent to December 31, 2009 and 2008 are summarized as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2009

Future minimum lease payments:
Within one year
Thereafter2008 		

¥ 2,723
2,660¥ 5,3832009$ 29,598
28,913$ 58,511¥ 3,300
5,412¥ 8,712Future 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

2009

2008 		

66
60
¥ 126

¥

¥

2009
718
652
$ 1,370
$

95
126
¥ 221

The following pro forma amounts represent acquisition cost, accumulated depreciation and amortization, and net book value of leased
property as of December 31, 2009 and 2008, 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
Software2009
51
11,311505¥ 11,867

¥

40
6,248
322
6,610

¥

11
5,063
183
5,257

¥

¥

¥

¥
Net book value:
Machinery and vehicles
Furniture and fixtures
Software2008 		

¥

¥

2009
554
122,946
5,489$ 128,989

269
12,643612¥ 13,524

$

191
4,525
317
5,033

$

78
8,118
295
8,491

$

¥

¥

435
67,9133,500$ 71,848
119
55,033
1,989$ 57,141

Canon Marketing Japan Inc. /41

(As Lessor)
Future minimum lease payments, which consist of subleases subsequent to December 31, 2009 and 2008, are summarized as follows:
Thousands of
U.S. dollars (Note 1)

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

2009

2008 		

¥ 66
60
¥ 126

¥ 95
126
¥ 221

2009
718
652
$ 1,370$(b) Operating Leases (Non-cancelable)(As Lessee)
Thousands of
U.S. dollars (Note 1)

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

8

2009

2008 		

2009

¥ 17
16
¥ 33

¥ 26
33
¥ 59

$ 185
174
$ 359

Securities

Securities held by the Company and its consolidated subsidiaries as of December 31, 2009 and 2008 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

42 / Canon Marketing Japan Inc.

2009
¥

4,155

77,899221
1,000
79,120¥ 83,275

2008 		¥

5,198

88,097
̶
1,222
89,319¥ 94,517

2009$

45,163846,728
2,402
10,870860,000$ 905,163

The carrying amounts and aggregate fair values of investments in securities at December 31, 2009 and 2008 were as follows:
Millions of yen

2009Book value

Securities classified as:
Held-to-maturity:
Corporate bonds
Government bonds¥ 1,000221¥ 1,221

Unrealized gains

Unrealized losses

¥ 2
2
¥ 4

¥ —
—
¥ —

Fair value¥ 1,002223¥ 1,225

Millions of yen

2009
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other¥ 3,57711¥ 3,588

Unrealized gains

Unrealized losses

¥ 590
—
¥ 590

¥ (918)(2)¥ (920)Fair value¥ 3,2499¥ 3,258

Millions of yen

2008
Book value

Securities classified as:
Held-to-maturity:
Corporate bonds
Government bonds¥ 1,000
222¥ 1,222

Unrealized gains

Unrealized losses

¥ ̶
3
¥ 3

¥ (10)
̶¥ (10)

Fair value990
225¥ 1,215¥

Millions of yen

2008
Cost

Unrealized gains

Unrealized losses

¥ 579
̶
¥ 579

¥ (1,032)(3)¥ (1,035)

Fair value

Securities classified as:
Available-for-sale:
Equity securities
Other¥ 3,90811¥ 3,919¥ 3,4558¥ 3,463

Thousands of U.S. dollars (Note 1)

2009Book value

Securities classified as:
Held-to-maturity:
Corporate bonds
Government bonds$ 10,870
2,402$ 13,272

Unrealized gains

Unrealized losses

$ 21
22
$ 43

$ —
—
$ —

Fair value$ 10,891
2,424$ 13,315

Thousands of U.S. dollars (Note 1)

2009
Cost

Securities classified as:
Available-for-sale:
Equity securities
Other$ 38,880
120$ 39,000

Unrealized gains$ 6,413—$ 6,413

Unrealized losses(9,978)(22)$ (10,000)$

Fair value$ 35,31598$ 35,413

Canon Marketing Japan Inc. /43

Available-for-sale and held-to-maturity securities whose fair value is not readily determinable as of December 31, 2009 and 2008 wereas follows:
Carrying amountThousands of
U.S. dollars (Note 1)

Millions of yen

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

9

2009
¥

2008 		

87225¥

76,900999¥ 78,796

2009
$

1,697
38

9,478
272

835,869
10,859$ 856,478

87,100997¥ 89,832

Employees’ Retirement andSeverance 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, 2009 and 2008 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen

		

2009
¥ 152,040(123,316)(25,543)
34,065292¥ 37,538

Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension cost
Allowance for employeesʼ retirement benefits

2008 		
¥ 144,721(114,614)(31,282)
37,990307¥ 37,1222009$ 1,652,608(1,340,391)(277,641)
370,272
3,174$
408,022

The components of net periodic beneﬁt costs for the years ended December 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

		Service cost
Interest cost
Expected return on plan assets
Expenses incurred due to the change in accounting
standards for retirement benefit obligations from thesimplified method to the standard method
Amortization of prior service cost
Amortization of actuarial loss
Other
Net periodic benefit costs

2009

2008 		

2009

¥ 6,176
3,471(3,607)¥ 6,211
3,371(4,245)$ 67,131
37,728(39,207)

202

̶

2,196

(3,925)
3,103
1,268¥ 6,688(3,679)1,256
1,263¥ 4,177(42,663)
33,72813,783$ 72,696

Assumptions used in accounting for the above plans for the years ended December 31, 2009 and 2008 were principally as follows:		
Discount rate
Expected rates of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial loss

44 / Canon Marketing Japan Inc.

2009
2.4% - 2.5%
1.0% - 3.4%
10-15 years
10-15 years

		

2008
2.5%
1.0% - 3.4%
10-16 years
10-16 years

10

IncomeTaxes

The normal statutory rate of income taxes was approximately 40.0% for the years ended December 31, 2009 and 2008.
The effective tax rates for the years ended December 31, 2009 and 2008, differed from the normal statutory tax rate following the
adoption of tax-effect accounting for the reasons outlined in the table below.
Normal statutory tax rate
Effects of realignment of subsidiaries
Deduction entry reserve for fixed assets
Dividend income not taxable
Per-capita levy of inhabitants taxes
Entertainment and other expenses permanently not deductible for tax purposes
Amortization of goodwill
Change in valuation allowance
Other
Effective tax rate following the adoption of tax-effect accounting

2009

2008

40.0%
52.5%
21.7%
8.5%
(34.6%)(39.0%)(56.3%)(571.7%)7.1%(571.7%)

40.0%
̶
̶
̶
1.8%
1.9%
1.4%
1.7%
0.8%
47.6%

The effects of signiﬁcant temporary differences, which resulted in deferred tax assets and liabilities as of December 31 , 2009 and2008, were as follows:
Thousands of
U.S. dollars (Note 1)

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

2009

2008 		

2009

¥

622
71
1,366
4,177
770
342
404
15,050
1,634
2,899
4,021
31,356(5,729)¥ 25,627

¥

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

$

68
1,942
107
2,117
¥ 23,510

¥

90
261
177
528
¥ 25,429

739
21,1091,163
23,011$ 255,543

¥

6,761
772
14,84845,402
8,370
3,717
4,391
163,587
17,761
31,511
43,706
340,826(62,272)$ 278,554$

Canon Marketing Japan Inc. /

45

11

Segment
Information(a) Business Segment Information
Millions of yen

2009Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment

Industrial
Equipment¥ 419,217—
419,217422,494¥ (3,277)¥ 199,711
10,507700
12,456¥ 241,748—
241,748
231,064¥ 10,684¥ 81,644
1,308
150
3,467

¥

¥
¥

25,650—25,65026,760(1,110)17,496
541
9,919
1,117

Total

Corporate andeliminations

Consolidated¥ 686,615—
686,615680,318¥
6,297¥ 298,851
12,356
10,76917,040—————¥ 150,756———¥ 686,615—
686,615680,318¥6,297¥ 449,607
12,356
10,76917,040Millions of yen

2008

Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment

Industrial
Equipment

Total

Corporate andeliminations

Consolidated¥ 495,944
̶495,944482,587¥ 13,357¥ 208,181
10,479144
13,703¥ 265,828
̶265,828
255,584¥ 10,244¥ 86,654
1,012
̶
3,019

¥ 65,715
̶
65,71563,900¥1,815¥ 48,009
568
̶
1,060

¥ 827,487
̶827,487
802,071¥ 25,416¥ 342,844
12,059144
17,782̶̶̶̶̶¥ 142,093
̶̶̶¥ 827,487
̶827,487
802,071¥ 25,416¥ 484,937
12,059144
17,782

Total

Corporate andeliminations

Consolidated$ 7,463,207—
7,463,207
7,394,760$
68,447$ 3,248,381
134,304
117,054
185,217—————$ 1,638,652———$ 7,463,207—
7,463,207
7,394,760$
68,447$ 4,887,033
134,304
117,054
185,217

Thousands of U.S. dollars (Note 1)

2009

Year ended or as of December 31,

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

Business
Solutions

Consumer
Equipment$ 4,556,707—
4,556,707
4,592,326$ (35,619)$ 2,170,772
114,207
7,609
135,391$ 2,627,696—
2,627,696
2,511,565$ 116,131$ 887,435
14,217
1,630
37,685

Industrial
Equipment$$$

278,804—
278,804
290,869(12,065)
190,174
5,880
107,815
12,141(b) Geographic Segment Information
As international sales of the Company and its consolidated subsidiaries for the years ended December 31 , 2009 and 2008
constituted less than 10% of consolidated net sales, geographic segment information has not been disclosed.
(c) Overseas Sales
Overseas sales amounted to less than 10% of consolidated net sales for the years ended December 31, 2009 and 2008. For thisreason, overseas sales have not been disclosed.

46 / Canon Marketing Japan Inc.

12

Transactions withAffiliated Companies

Current consolidated ﬁscal year (from January 1, 2009 to December 31, 2009)
Parent company and major corporate stockholders, etc.

Category

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

ParentOhta-ku,company Canon Inc. Tokyo

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

Manufactureand sale of(Ownership)business
Direct55.2%¥ 174,762 equipment,
consumerIndirectequipment,
0.0%
and industrial
equipment

Related contents
Boardmembers
holding
concurrent
positionsTwo hold
concurrent
positions

Businessrelationships

Manufactureof products
sold by
Canon MJ

Subject

Balance at
end offiscal year
(Millionsof yen)Purchases of
products¥ 269,211 Accounts
payable¥ 79,575

Operatingtransactions

Sales ofbusiness
equipment
andconsumables,etc.

¥

Accounts
receivableand others¥ 4,229

Nonoperatingtransactions

Loans ofcapital¥ 40,000 Short-term
loans¥ 40,000

Transaction
amount(Millionsof yen)Contents oftransactions

7,400

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 afﬁliatedcompanyʼs 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.

Previous consolidated ﬁscal year (from January 1, 2008 to December 31, 2008)
Parent company and major corporate stockholders, etc.

Category

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

ParentOhta-ku,company Canon Inc. Tokyo

Business
contents or
occupation

Percentage
possession of
voting rights(Ownership)(%)

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

Related contents
Boardmembers
holding
concurrent
positionsTwo hold
concurrent
positions

Businessrelationships

Manufactureof products
sold by
Canon MJ

Subject

Balance at
end offiscal year
(Millionsof yen)Purchases of
products¥ 339,635 Accounts
payable¥ 89,467

Operatingtransactions

Sales ofbusiness
equipment
andconsumables,etc.

¥ 15,716

Accounts
receivableand others¥ 3,712

Nonoperatingtransactions

Loans ofcapital¥ 20,000 Short-term
loans¥ 20,000

Transaction
amount(Millionsof yen)Contents oftransactions

Note: Transaction amounts do not include sales tax, etc., and the balance of credit and debt includes sales tax, etc.

Transaction conditions and policies for deciding transaction conditions, etc.
(1) Purchases of products are decided based on price negotiations each ﬁscal year, after considering market prices and the afﬁliatedcompanyʼs 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. /

47

13

Long-Term
Debt

Lease obligations and deposits at December 31, 2009 and 2008 consisted of the following:

		

14

0.1%

693
(190)
¥ 503
2,915
¥ 3,418

2008 		

̶
̶
̶
2,781
¥ 2,7812009$ 7,532(2,065)$ 5,467
31,685$ 37,152

Stockholders’EquityThe Corporate Law of Japan went into effect on May 1 , 2006 ,replacing the Commercial Code. It is applicable to events ortransactions of companies in Japan occurring on or after May 1,
2006 and for ﬁscal years ending on or after May 1, 2006.
The Corporate Law stipulates that the amounts actually paidin or provided in consideration for newly issued stock shall berecorded as common stock. However, it also allows 50% or lessof such amounts to be recorded as additional paid-in capital.
Under the Corporate Law, a company that meets certain
criteria can establish its Articles of Incorporation so that
dividends can be paid to its existing stockholders by resolutionof the Board of Directors, without requiring the approval of aresolution at a general stockholdersʼ meeting. The Company

15

2009
¥

Lease obligations
Current portion of lease obligations
DepositsThousands of
U.S. dollars (Note 1)

Millions of yen

Averageinterest rate

has met said criteria and amended its Articles of Incorporation
at the annual general stockholdersʼ meeting for ﬁscal 2006. The
Corporate Law provides that an amount equal to 10 % of theamount to be disbursed as distributions of capital surplus (otherthan the capital reserve) and retained earnings (other than thelegal reserve) be transferred to the capital reserve and the legal
reserve, respectively, until the sum of the capital reserve andthe legal reserve equals 25 % of the common stock account.
However, such appropriation cannot be made if the aggregate
amount of the legal reserve exceeds 25 % of common stock(i.e. the aggregate amount of the Companyʼs legal reserve has
already reached 25% of its common stock).

Subsequent
Events(a) Transfer of Semiconductor Equipment Business to Canon Inc.
On September 25 , 2009 , the Companyʼs Board of Directors
resolved to transfer the semiconductor equipment business tothe parent company, Canon Inc., effective from January 1, 2010.

1. Aims and Reasons
The Companyʼs activities in the area of semiconductor
equipment involve sales, service and support, primarily in
relation to lithography equipment for semiconductors and
LCD substrates. The change will be implemented becauseof the need for the Canon Group to establish an integrated
structure covering all stages from development and design
through to manufacture, sales, service and support, inorder to respond ﬂexibly in the rapidly changing market for
semiconductor equipment.

48 / Canon Marketing Japan Inc.

2. Name of Company Assuming Control of the Business
Canon Inc.
3. Scope and Scale of Business to Be Transferreda Scope of Business
The semiconductor equipment business primarily consistsof sales, service and support of lithography equipment for
semiconductors and LCD substrates.
b Financial Results for the Current Fiscal YearNet sales: ¥14,564 million
4. Assets and Liabilities to Be Transferred
Assets:¥2,084 million
Liabilities: ¥707 million

5. Date of Transfer
January 1, 2010
6. Transfer Price¥1,777 million(b) Conclusion of Exchange of Stock Agreement
At meetings held on January 26, 2010, the Boards of Directorsof the Company and Canon Software Inc. resolved to implement
an exchange of stock with a view to make Canon Software Inc. awholly owned subsidiary, and an exchange of stock agreement
was concluded.

1. Name and Business Activities of Merger Partiesa Merging Company(sole parent company after exchange of stock)
Name
Canon Marketing Japan Inc.
Activities Marketing of business equipment, consumer
equipment and industrial equipment, andprovision of related solutionsb Merged Company(wholly owned subsidiary after exchange of stock)
Name
Canon Software Inc.
Activities Provision of information services, sales of
information processing equipment and related
software

6. Items Relating to Acquisition of Subsidiarya Cost of acquisition
Share acquisition cost: To be decidedb Exchange ratio, calculation method, number of shares tobe allocated and valuation of each type of shares(1) Type of stock and exchange of stock ratio
Type of stock: Common stock
The share exchange ratio is one share ofCanon Software Inc. for 0.43 share of the Company.
(2) Method Used to Calculate Exchange of Stock Ratio
Each company has been analyzed using the market
share price method, comparisons with similar listedcompanies and the discounted cash ﬂow method. The
results of all three analyses were taken into account in
the calculation of the exchange of stock ratio.
(3) Number of Shares to Be Granted
4,201,141 (tentative)(4) Valuation
To be decided

2. Legal Format of Merger
Exchange of stock
3. Name of Company After Merger
Unchanged
4. Outline of Transaction, Including Purpose
An exchange of stock will be implemented, resulting in
the acquisition of Canon Software Inc. as a wholly owned
subsidiary as of May 1, 2010. The purpose of the acquisition
is to accelerate the development of the IT Solutions Businessas a core business segment and create the capacity toprovide greater enhanced quality services to customers bymaking optimal use of the accumulated technology andexpertise of Canon Software Inc. within the Group.
5. Overview of Accounting Process
The merger will be treated as a transaction under common
control (no goodwill) under the provisions of the AccountingStandard for Business Combinations (ASBJ Statement No. 21,
December 26 , 2008 ) and the Guidance on the AccountingStandard for Business Combinations and AccountingStandard for Business Divestitures (ASBJ Guidance No. 10 ,December 26, 2008).

Canon Marketing Japan Inc. /49

Report of Independent
Auditors

50 / 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: 19,165
Non-consolidated: 5,666(As of December 31, 2009)

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, 2010)

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
Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank Of New York, Treaty JASDEC Account
The Master Trust Bank of Japan, Ltd.
RBC Dexia Investor Service Bank Account Luxembourg Non-Resident Domestic Rate
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account
Mellon Bank, N.A. as agent for its client, Mellon Omnibus US Pension
Japan Trustee Services Bank, Ltd. (Trust Account 9)

Number of shares held
(thousands)

Percentage of ownership(%)

75,70913,748
4,398
4,128
2,756
2,193
1,295
1,136
1,099
1,084

50.11
9.09
2.91
2.73
1.82
1.45
0.85
0.75
0.72
0.71

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 2010–2012)• Stock information• Annual reports

http://cweb.canon.jp/co-profile/ir-e/Canon Marketing Japan Inc. /51

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

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