Drawing on Our Strengths to
Expand Our Business Domains

Annual Report 2016
for the year ended December 31, 2016

ProﬁleBecoming a Company that Grows Together with its Customers
Our business is all about serving our customers as well as possible, and in doing so many of
their issues and underlying social concerns become evident to us.
We seek to address such concerns through the solutions that we have long cultivatedand to contribute to the progress of our customers as well as society. Based on our years ofexperience and accumulated know-how, the Canon Marketing Japan (Canon MJ) Group willcontinue to enhance its ability to create solutions and help customers overcome even greater
challenges in the years ahead.

Canon
EuropeCanon
Asia
Marketing

Canon
Inc.

Canon
USA

Canon Marketing Japan

Canon
Australia

Disclaimer Regarding Forward-Looking Statements
This annual report contains forward-looking statements about the performanceand management plans of Canon Marketing Japan Inc., based on management’s
assumptions in light of current information. The following factors may therefore
inﬂuence actual results. These factors include consumer trends in Japan as wellas other major global markets, private capital expenditures, currency ﬂuctuations,notably against the U.S. dollar, materials prices, and political turmoil in certain
countries and regions.

Canon MJ Group Companies
Canon System & Support Inc.

Canon Software America, Inc.

Canon Production Printing Systems Inc.

Canon Information Systems (Shanghai) Inc.

Canon IT Solutions Inc.

Canon IT Solutions (Thailand) Co., Ltd.

Canon Software Inc.

Material Automation (Thailand) Co., Ltd.

Canon ITS Medical inc.

Canon IT Solutions (Philippines), Inc.

Canon BizAttenda Inc.

Canon Customer Support Inc.

SuperStream Inc.

Canon Lifecare Solutions Inc.

Qualysite Technologies Inc.

ELQUEST CORPORATION

A&A Co., Ltd.

AZE, Ltd.

Ediﬁst Learning Inc.

Canon Business Support Inc.

Canon Marketing Japan Inc. Annual Report 2016

Analyze and provide
feedback on customer
needs and issues

1

Identify customer
needs and issues

Canon Marketing Japan
Business Areas

MarketingServices

Solutions

Canon Inc.

MarketBusiness Segment

Research andDevelopment
Manufacturing

Alliance Partners
in Japan and Overseas

Business
Solutions

IT
Solutions

Domestic
Overseas

Imaging
Systems

Industrial /MedicalCanon MJ’s original services and added value

Canon and otherpartners’ products
and services

Provide advanced
imaging andIT solutions

CONTENTS

2

Toward Our Mission

4

SPECIAL FEATURE 1:
Showcasing the Canon MJ Group’s IT Solutions

8

SPECIAL FEATURE 2:
Generating Fast Growth through Integrated Solutions: Network Cameras

10

Highlights of FY2016

13

To Our Stockholders and Stakeholders

14

An Interview with the President

20

At a Glance

22

Segment Review and Strategies

IT solutions that have served to enhance productivity, ensure network security, and30

Sustainable Management

promote work practice reforms. Special Feature 2 takes a look at the fast-growing

33

Corporate GovernanceCanon MJ, Masahiro Sakata, about his management policy, and explains segment

39

Financial Section

operating results and business strategies, as well as environmental, social contribution,

68

Canon MJ Group Companies

69

Corporate Data

Editorial Policy
In Annual Report 2016, Special Feature 1 highlights case studies involving our unique

network cameras business. The report also includes an interview with the president ofand corporate governance initiatives in light of the Company’s emphasis on sustainable
management objectives.

2

Canon Marketing Japan Inc. Annual Report 2016

Toward Our Mission

Performance Trend

The ﬁnancial crisis

2006

2007

2008

2009

The Great East
Japan Earthquake

2010

2011

2012

2013

Long-Term Management Objectives
Phase I

Phase II

2006–20102011–2015

Our priority strategies were to become No. 1

Our priority strategies were to expand thein terms of customer satisfaction and market

market shares of Canon products, diversify

shares in key product categories and tobusiness, evolve into a service company andestablish next-generation businesses.

to further Group management innovation.

Canon Marketing Japan Inc. Annual Report 2016

Group Mission
Help resolve social issues with advanced
imaging and IT solutions.

Group Vision
The Canon Marketing Japan Group
understands and grows with its customers.

Net Sales¥629,314
million2016
Operating margin hit the record

Long-Term
Management
Objectives

OperatingMargin4.4%
Medium-term
management planfor 2017–2019

The consumption tax rateincrease (to 8% from 5%)

2014

2015

2016

Phase III

2016–2020
This ﬁve-year initiative encompasses a mission and vision. This is because we wish tocollaborate with customers in resolving social issues by combining Canon’s strengths inimaging technologies with our years of expertise in IT technologies. Our Group ﬁnancial
targets for 2020 are ¥800 billion in net sales and ¥40 billion in operating income.

3

4Canon Marketing Japan Inc. Annual Report 2016

SPECIAL FEATURE 1

Showcasing
the Canon MJ Group’s
IT Solutions
Steadily Expanding Group IT Solutions
IT solutions are expanding across all operations as

on higher demand for core financial and manufacturing

pivotal to the growth of the Canon MJ Group. In fiscal

systems development. In the Business Solutions segment,

2016, aggregate revenues of the IT Solutions segment

we also generated growth in such areas as IT equipment

and IT solutions in other segments (after eliminating

maintenance services, security-related solutions, and theintersegment sales) accounted for 28% of consolidated

cloud business, primarily for our numerous multifunction

net sales.

printer (MFP) customers. We also expanded our business

The year saw expansions in the IT service and packaged

with electronic health records and systems development forsoftware markets. In IT Solutions segment, sales rose

medical institutions. IT solutions sales in other segments

Large-Company-Oriented Segment-Specific Solutions Strategy
Finance

Manufacturing

Distribution

PublicDeepen markets with industry-speciﬁc solutions
Resolve customers’ business management issues
Expand customer base

IT technological capabilities&

Customer base

Education

Canon Marketing Japan Inc. Annual Report 2016

IT solutions sales in other segments¥93.3
billions of yen¥73.2
billions of yen¥58.6
billions of yen

2015

2016

(before eliminating intersegment sales) increased to ¥73.2
billion.

2019 (Plan)

resolving those issues.
The Group has endeavored to enhance its technological

We attribute our gains to our customer-centriccapabilities by acquiring such companies as Sumitomo

approach and advanced technological capabilities.

Metal System Solutions Co., Ltd. (now Canon IT Solutions

Customer-centricity is one of the Canon MJ Group’s guidingInc.), and Argo 21 Corporation. As well, the Group always

principles. We endeavor to build trust as a true partner for

maintains optimal customer services by drawing on

our customers so they will consult with us first whenever

specialized R&D units and operating as a systems integrator

issues arise, and are committed to understanding andwith strengths in manufacturing and financial systems that

Solution Strategy for Resolving Issues Specific to Mid-Sized Companies and Small & MediumSized Enterprises
Customer issues in IT investment & utilization
IT maintenanceservices

Cloudsolutions

IT assetmanagement

Lack of dedicatedpersonnel

Information leakcountermeasures

Workflowefficiency

Evaluation of
deployment benefits

Anti-virus
countermeasures

Security
solutionsTask-specificsolutions56

Canon Marketing Japan Inc. Annual Report 2016

SPECIAL FEATURE 1

CASE STUDY 1:

Leveraging IT Solutions to Safeguard Society from Cyber Threats

Malware Analysis Service
Although the Internet has made modern living more convenient, it issolutions vendor. With this service, the company’s engineers evaluatealso rife with malware and other cyber threats that have become major

malware and suspicious ﬁles. They then produce reports explaining

social issues. Losses are fast rising from targeted attacks throughtechniques to check for infections, malware destinations, registry andvirus-infected emails and from ransomware, which locks the users’

other infectious manipulations, and recovery methods. The reports

ﬁles unless a ransom is paid.

help the Information Systems Department in managing crises and also

Customer requests to Canon IT Solutions for advice on how

provide information that companies need for internal reporting.

to resolve these problems have accordingly surged. Inquiries have

In preparing for the launch of this service, Canon IT Solutions

commonly sought highly trustworthy information on techniques toobtained training for its engineers from ESET, spol. s r.o., a global

check for malware infections, assess damage, and recover data as

cybersecurity leader. The Canon MJ Group exclusively imports andsoon as possible.

markets ESET’s anti-virus software in Japan. We are proud that our

Canon IT Solutions responded to such interest in July 2016engineers are among a select few in Japan with malware analysis skills

by launching its Malware Analysis Service, which draws on years ofand experience.

amassing information and threat analysis capabilities as a security

Flow of Service Provision
Analysis request
CompanyA

Virus-infected emails
ReportAnalysis request
Company
B

Backdoors

Malware Analysis Engineers
ReportAnalysis request
CompanyC

CMJ

Ransomware
ReportCanon Marketing Japan Inc. Annual Report 2016

CASE STUDY 2:

Supporting Work Practice Reforms with IT Solutions“Telework Supporter”
Work practice reforms have become an urgent social issue in Japanthat it can be difﬁcult to manage job attendance, including when people

against the backdrop of a declining birth rate, eldercare shortages, a

are working from home. The second is that PCs can be hacked if thegreater emphasis on workplace diversity, and a rising awareness ofright security measures are not in place.

work–life balance. Teleworking from home or satellite ofﬁces is thus
commanding attention as a tool in tackling these challenges.

Canon IT Solutions addressed these two issues with proprietary
image analysis technology in “Telework Supporter,” which it launched inJapan already has more than 9.55 million teleworkers. Large

February 2017. This system uses an app to remotely control teleworker

companies have led the way in rolling out teleworking programs.

web cameras, capturing and uploading facial images to a cloud server.

More and more companies have found that these setups reduce

The app also takes and sends screenshots to the server. If someone

employee turnover and enhance productivity. A common issue forhas accessed a teleworker’s PC, the system sends notiﬁcation to thesmall & medium-sized enterprises is that they have found it hard toadministrator and automatically switches off the PC screen. We beganﬁnd replacements for specialist personnel when childcare or eldercare

receiving numerous inquiries about this service immediately following

prevents them from working full-time.

its introduction.

There are two prime challenges to offering telework. The ﬁrst is

Functions of “Telework Supporter”

Telework management

Security measures• On-duty information• Peep detection• Planning• Absence information• Impersonation• Recording• Sharing of job
attendance information• Task management

Work planning and recording

detection• Tabulate tasks• Screen lock

• Data outputting• Recording incidents

78Canon Marketing Japan Inc. Annual Report 2016

SPECIAL FEATURE 2

Generating Fast Growth through Integrated Solutions:

Network Cameras
Leveraging Group Strengths
Demand for network cameras to enhance security is rising toward
the Tokyo 2020 Olympic and Paralympic Games. Applications forthese products are broadening to include marketing and businessprocess improvements, and these markets are continuing to grow.
As the network camera business is categorized in Canon’s growthareas, the Canon MJ Group aims to fully harness its assets aswell as those of the Canon Group to offer integrated solutions that
expand this business.
By drawing on Canon’s advanced network cameras, the network
cameras of Canon Group member Axis Communications AB, andthe video management software of Milestone Systems A/S, anotherpopular choice among Japanese and overseas companies on themember of the Group, the Canon MJ Group can combine thosestrength of its reputation for integrating its technologies with its

assets with its robust customer base and marketing capabilities andcustomer base and solutions proposal capabilities. In ﬁscal 2016,

also draw on alliances in video analysis software and other areas tosales of the network camera business rose 24% year on year, and we

supply network cameras as solutions for an array of industries.

look for even higher sales in the year ahead.

The Canon MJ Group’s network cameras have become aNote: Network cameras are video camera systems that distribute captured images through IP networks.

Canon Marketing Japan Inc. Annual Report 2016

LEGOLAND® Japan Chooses Canon Network Cameras
In January 2017, Canon MJ concluded an agreement with
LEGOLAND® Japan Ltd. to become an ofﬁcial marketing partnerin the imaging ﬁeld of LEGOLAND® Japan, which opened in Aichi
Prefecture in April 2017.
Numerous network cameras from Canon and Axis
Communications are installed around the premises to help safeguard
visitors. Milestone Systems’ video management software has also
been deployed at the site to manage captured images.
The network cameras that help streamline operations at
LEGOLAND® Japan also have applications in new ﬁelds beyond
monitoring. We will continue to analyze images taken at LEGOLAND®
Japan to add value by providing new solutions through marketingdomain applications.

©2017 The LEGO Group.

910

Canon Marketing Japan Inc. Annual Report 2016

Highlights of FY2016

Financial Highlights

Net sales

Operating income

Proﬁt attributableto owners of parent¥629,314¥27,676¥18,162

millionmillion2.6% decrease
2015: ¥646,003 million

3.9% increase
2015: ¥26,647 million

15.9% increase
2015: ¥15,670 million

Total
stockholders’ equity

Total
stockholders’equity ratio

ROE¥280,473

million

6.5%

million56.4%

1.3% increase
2015: ¥277,008 million

0.5pp decrease
2015: 56.9%

0.8pp increase
2015: 5.7%

Proﬁt attributableto owners of parent
per share

Cash dividends
per share

Dividend
payout ratio¥50.0035.7%

11.1% increase¥45.001.5pp decrease
2015: 37.2%¥140.06
15.9% increase
2015: ¥120.84

Canon Marketing Japan Inc. Annual Report 2016

Business Highlights

No. 1 Market Share
Digitalinterchangeablelens cameras

Compact digital
cameras

Laser printers

Inkjet printers

Non-Financial Highlights

Number of
female employees inmanagement positions

Rate of paid holidays
taken by employees

tons

80

71.6%

1.2% increase
2015: 47,872 tons

6.7% increase
2015: 75

2.1pp increase
2015: 69.5%

CO2 emissions

48,46511

12Canon Marketing Japan Inc. Annual Report 2016

Haruo Murase
Chairman

Masahiro Sakata
President

Canon Marketing Japan Inc. Annual Report 2016

To Our Stockholders and Stakeholders

Endeavoring to Realize
Social Sustainability
In fiscal 2016, ended December 31, 2016, the Canon MJ Group launched Long-Term
Management Objectives Phase III, covering 2016 through 2020, so as to further expand its
business domains. Although sales were down as business-to-consumer (BtoC) demand was
lower than initially anticipated, operating income rose for the seventh consecutive year. This
reflected such factors as the growth of more profitable businesses and productivity gains.
Management accordingly increased cash dividends for the year by ¥5 per share, to ¥50.
We will pursue several key strategies in fiscal 2017. Among them, we will better focus
on areas with high growth potential, including network cameras, digital commercial andother production printing, IT security, and outsourcing. As well, we will endeavor to cultivate
demand by making use of resources within the Group. In such areas as cameras, printers,
and multifunction printers (MFPs), we will expand our market share and deploy marketing andservices employing information technology (IT), thereby striving to increase both sales andprofit margins.
The Canon MJ Group is endeavoring to realize social sustainability because it recognizes
that helping to resolve environmental problems, to drive progress in an information-intensive
society, and to tackle such social challenges as a declining birth rate and an aging population
through business are the very reasons why it exists as an enterprise.
We look forward to the ongoing support of our stockholders and other stakeholders in
our endeavors.

Haruo Murase
Chairman

Masahiro Sakata
President

13

14

Canon Marketing Japan Inc. Annual Report 2016

An Interview with the President

Creating a ﬂexible organization that can change direction quickly,
whether that be in BtoB or BtoC areas, so that we always meetcustomer expectations.

Masahiro Sakata
President

Canon Marketing Japan Inc. Annual Report 2016

Q

How did the Canon MJ Group perform in fiscal 2016?

A

Surpassed our operating income target
Although net sales declined 2.6%, to ¥629,314 million,

management endeavors to increase proﬁtability began to bear

operating income advanced 3.9%, to ¥27,676 million. At 4.4%,

fruit. Our analysis is that the backdrop to this was that as welloperating margin was our highest since we began presenting

as driving growth in high-margin businesses we reviewed ourconsolidated ﬁnancial statements in ﬁscal 2001. Our return on

spending.

equity (ROE) jumped 0.8 percentage point, to 6.5%.
The Japanese economy remained stagnant in ﬁscal 2016,

We boosted net sales on the strength of gains in such
independent growth areas as systems integration (SI), security,

reﬂecting delays in the recovery of personal consumption andand industrial equipment. Sales in Canon’s growth areas were up

capital expenditure. These factors and the impact of a majorslightly. This expansion was less than anticipated, and stemmed

earthquake in Kumamoto resulted in a challenging year infrom a delay until year-end of the launch of a continuous feedbusiness-to-consumer (BtoC) products for the Canon MJ

printer in the production printing ﬁeld, overshadowing solidGroup. Consumption behavior seems to be shifting fromdemand for network cameras. In Canon’s proﬁtability growth

products to services.

areas, slow BtoC demand offset business-to-business (BtoB)

That said, we surpassed our operating income target, andprogress, which resulted in a year-on-year decrease in sales.

our operating margin also increased in a year in which
Progress of Weight Shift Towards Growth Areas
Actual results for 2015

Q
A

Actual results for 2016

Target for 2020

Independent
Growth Areas

30%

31%

40%

(¥193.8 billion)(¥196.6 billion)(¥320.0 billion)

Canon’s Growth
Areas

7%

7%

10%

(¥44.0 billion)(¥44.5 billion)(¥80.0 billion)

Canon’s
Proﬁtability Growth Areas

63%

62%

50%

(¥408.2 billion)(¥388.2 billion)(¥400.0 billion)

What are the three prime strengths and competencies of the Canon MJ Group that are key tomaterializing Long-Term Management Objectives Phase III?
Three main competencies are our customer base, our IT technical skills, and the strengths ofa manufacturer’s sales companies
The Canon MJ Group aims to resolve customer issues bycompanies and slightly higher-ranked customers among small

packaging outstanding Canon brand products and marketing& medium-sized enterprises.

capabilities with IT technical skills. In other words, we seek to

We also have advanced IT technical skills, and I feel thatempower customers to do what they want. Our three main

we should expand these capabilities beyond the segmentscompetencies are our customer base, our IT technical skills,

within the Group. For example, to a certain extent we canand the strengths of a manufacturer’s sales companies.

switch from scratch ordering to packaged solutions. Sales ofI oversaw our customer base earlier in my career, andstandalone hardware items are plunging, and IT will ultimately

these customers were mainly large companies and small &become part and parcel of all businesses. As such, we need tomedium-sized enterprises, forming a solid underpinning for us.

further strengthen our IT technical skills as we will be expected

We will reinforce our base by cultivating both mid-sized

to add additional value.

15

16

Canon Marketing Japan Inc. Annual Report 2016

When we say the strengths of a manufacturer’s sales

from that company. That is our strength. We face a reality incompanies, we are not talking about the era in which we soldwhich the merchandizing clout of hardware is declining, so to

products that Canon developed and manufactured. Instead, we

broaden even small advantages we need to work more closely

are referring to providing feedback on the offerings we want

together with Canon with a sense of unity.

produced, working as one with Canon to materialize products

Q
A

You implemented a range of measures under Long-Term Management Objectives Phase III.
Tell us about the positioning and importance of the ITS Company as part of those measures.
ITS Company to become more synergistic with business segments
We are set to change our organizational framework, andstructure it will be difﬁcult for the IT Solutions segment to workorganizing the ITS Company was a part of that transition. We

with the other segments even if it functions well within itself.

have a vertically integrated structure, and our four businessAccordingly, we established the ITS Company in order tosegments are Business Solutions, IT Solutions, Imaging

become more synergistic with our Business Solutions, Imaging

Systems, and Industrial / Medical. IT solutions will ultimately be

Systems, and Industrial / Medical segments.

related to all our businesses. If we maintain our current

QA

As well as setting up the ITS Company, you launched a call center project, a digital marketing
project, and other projects. You also invested in Prodrone Co., Ltd., and in FinTech funds. This
gave the impression in the first year of Long-Term Management Objectives Phase III that theGroup is going full steam ahead.
Improving efﬁciency through functional consolidation
That is certainly true. Take our project launches. With our

dispatch services. Rather, they should include a little more

framework changing, we noted that our resources werebroadly an outbound element to them.

scattered all over the place because we had a very strong

I decided to start a cross-organizational project to lookvertically integrated structure. We have several call centers in

into how we could beneﬁt the Canon MJ Group as a whole by

the Group, for example. If we unify operations like we do forconsolidating our organizations in such a way and bolstering

procurement, we might ask how we can generate morefunctions. Once we thought about it, there were a lot of

efﬁciencies. We might also ask whether the role of call centers

projects that we needed to embark on, and so we planned tois just to answer customers’ questions. That is an inboundbegin them in the current ﬁscal year. The ﬁrst area in whichbusiness. But what about outbound ones? We actually have

we got things prepared was in service and support, which wesome outbound teams. They are at around the same level asorganized on January 1, 2017. I believe that business process

our BtoB call centers although they don’t have that many staff.

outsourcing and other operations will be integrated in time.

Call centers shouldn’t just answer customer inquiries andCanon Marketing Japan Inc. Annual Report 2016

QA

A major priority in your management plan for 2017 to 2019 is to change the organizationalframework. What was the backdrop to this and what steps are you taking?
Consolidating and integrating Group resources to resolutely resolve customer issues
For a start, we evaluated how the business climate mightsolutions to our market and customer base. We will thereby

change over the next three years and the businessconsolidate and integrate the scattered resources of the Group

opportunities that would arise for the Canon MJ Group. Japanand resolutely resolve customer issues.

is obviously aging, and its market will mature. Once thatAs I explained a little earlier, we positioned such functions

happens there will be a need to enhance efﬁciencies in all

as service and support, IT infrastructure, security, and businessareas of business and society.

process outsourcing as cross-sectional functions that areThat actuality represents an opportunity for the Canon MJ

necessary across the Group. In other words, service andGroup. As companies concentrate on core businesses, there

support, IT infrastructure, security, and business process

will be more outsourcing needs in the peripheral areas andoutsourcing function more effectively for each channel whenmore use of the cloud. Mid-sized companies and small &they are organized cross-sectionally.

medium-sized enterprises will inevitably use more IT,

On the other hand, the requirements from large

increasing demand for support in that area. And as society

companies and small & medium-sized enterprises are totallyages, it will become a pressing issue to constrain medical

different, so we need to create structures suitable for individual

expenditures. IT can offer solutions that cut healthcare costs.

customer groups rather than for products.

While a decreasing birth rate, the aging of the population,

Those are the two key points of our new framework. And

and the maturation of the market can present opportunities forthis is possibly the ﬁrst time that a major reorganization of thethe Canon MJ Group, we have to fully harness our resources toCanon MJ Group will occur since its establishment.

capitalize on them. We may not be able to do as well as we

I believe that switching to a new framework will enable us

could with our vertically integrated four-segment structure. We

to greatly expand our business scope.

therefore decided to reorganize so that we can better provide
Conversion to a New Customer-Centric Framework
Current situation
Main / ﬂagship products
×
Channels

New framework (conceptual image)
Individuals

Large
companies

Business Solutions
Personal

IT Solutions

Business / 0fﬁce• Finance• Manufacturing• Distribution• Public• Education

Mid-sized
companies
and small &mediumsizedenterprises

Specialist ﬁelds

Professional• Industry• Medical• Production
printing

IT infrastructure & solutions

Imaging Systems

IT security / outsourcing
Services and support

Industrial / Medical

Product planningGroup headquarters

Professional
imaging• Network
cameras• Imagingcreation17

18

Canon Marketing Japan Inc. Annual Report 2016

Q
A

Under your management plan for 2017 to 2019, you seek to grow sales and improve profit
margins. For a start, how will you increase sales?
Push ahead with IT solutions and add value to businesses
Growing sales is the biggest priority in our three-year

important in this respect to note that it is hard to promotemanagement plan, and we also seek to bolster proﬁtability.

individual products alone in growth areas, and so we need to

We will increase sales by shifting to the new framework

add value with our solutions and merchandise expertise. For

that I explained and also by concentrating human and ﬁnancial

example, our network cameras are great products and highly

resources in Canon’s growth areas and independent growthcompetitive, but we need to go beyond talking about them as

areas.

simply cameras. It is important to incorporate them into one

As I mentioned in last year’s annual report, IT solutions

system and add value, notably by safely storing images,

are pivotal to driving growth for the Canon MJ Group. Sales ofmaking it possible to use with images for marketing, and to

IT solutions in ﬁscal 2016 were ¥175.0 billion, or around 28%

prevent the danger or the damage.

of net sales. Sales of IT solutions in other segments expanded

It is also important to be good at selling. We have mainly

at a faster rate than that of the IT Solutions segment. With thesold general-purpose products over the years. Cameras, inkjet

ITS Company at the core, promoting IT solutions businesses forprinters, MFPs, and business printers are not specialist

the entire Group and leveraging its expertise therein, we will

equipment. But we must also offer production printers, network

steadily provide solutions to our customers.

cameras, and other products and services that we expect toAlso, we anticipate particular growth in such areas asgrow to professionals. As such, I believe we need to further

production printing, network cameras, security, businessenhance our solutions capabilities while also simultaneously

process outsourcing, and other products and services. It is

increasing the sales skills and know-how of our sales staff.

Q

You aim to boost margins in your profitability growth areas. How will you go about doing that?

A

Seeking to become a dominant player
We will endeavor to enhance productivity in Canon’sfor these offerings, but since these markets are maturing we

proﬁtability growth areas, including BtoC and document

need to improve proﬁtability by boosting our shares.

businesses and other businesses, which should improve
proﬁtability.

Because the Canon MJ Group is an industry leader, weare strong at selling and doing business. It is vital for us to

We have No. 1 market shares for many products in
Canon’s proﬁtability growth areas. They include single-lenspursue market share growth and become a dominant player.
At the same time, we need to lower operational costs. We

reﬂex and whole digital interchangeable lens cameras, as well

will simplify our business processes, build IT support, andas inkjet and laser printers. Our proﬁt margins are very good

thereby bolster proﬁtability.

Consolidated Performance Targets(Billions of yen)

Net sales
YoY growth rate
Operating income
Operating margin
Proﬁt attributable to owners of parent
Net income margin
EPS (Yen)
ROEFree cash ﬂow (Three years cumulative amount)

Results
FY2016 Results
629.3
̶
27.7
4.4%
18.2
2.9%
140
6.5%
220 (2014 to 2016)

Medium-Term Management Plan Targets
FY2017 Targets
FY2018 Targets
FY2019 Targets
645.0
670.0
700.0
2.5%
3.9%
4.5%
28.8
30.6
34.0
4.5%
4.6%
4.9%
19.8
20.7
23.0
3.1%
3.1%
3.3%
153
160
177
6.8%
6.9%
7.1%
270 (2017 to 2019)

Canon Marketing Japan Inc. Annual Report 2016

Q

The Group’s financial targets for 2020 are ¥800 billion in net sales and ¥40 billion in operating
income. You will likely need to engage in mergers and acquisitions (M&As) to grow that much.
How far have you progressed with the ¥40 billion that you set aside initially for such activity?

A

Deploying new investments to expand growth areas
Our strategic investments mainly target two growth areas.

production printing, and professional video equipment.

One is to accelerate expansion in the independent growth

On entering ﬁscal 2017, for example, in April Canon

areas. Among these are systems infrastructure, including IT

Production Printing Systems Inc. set up Commercial Printing

security, business process outsourcing, business and industry

Lab Inc. with printing company Ishida Taiseisha Inc. We will

solutions, and core technologies for digital businesses.

integrate the digital printing expertise of Canon Production

The second focus is on helping to expand Canon’s growth

Printing Systems with the commercial printing capabilities ofareas. The areas in which we will pursue growth are those in

Ishida Taiseisha to expand production printing business, one ofwhich we are broadening businesses with Canon and those

our growth areas.

offering potential for building solutions together. This category
would encompass offerings such as network cameras,

We will continue to explore opportunities to further
expand growth areas.

Q

Please tell us about your approach to shareholder returns.

A

Raised dividends for a third consecutive year
Our basic policy is to pay dividends after comprehensive

share, up ¥5. This was a third straight increase. The Canon MJ

consideration of our earnings forecasts, investment plans, andGroup will continue with concerted efforts to transform itself incash ﬂows. We target a consolidated payout ratio of at leastorder to reach its Long-Term Management Objectives Phase III

30%. For ﬁscal 2016, we paid cash dividends of ¥50.00 per

targets and generate solid returns for shareholders.

Q

What is your outlook for fiscal 2017?

A

Operate so we always meet customer expectations
In July through December 2016, our BtoB orders were a little

Regardless of changes in the operating climate, I am

weak, but orders from the start of ﬁscal 2017 have been quite

determined to create a ﬂexible organization that can change

good. I sense that the Japanese economy is growing

direction quickly, whether that be in BtoB or BtoC areas,

moderately. We should be able to grow as planned if

operating so that we always meet customer expectations. I lookgeopolitical factors overseas do not affect the Japanese

forward to the ongoing support and encouragement of oureconomy.

stockholders and other stakeholders in these efforts.

April 2017

Masahiro Sakata
President

19

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Canon Marketing Japan Inc. Annual Report 2016

At a Glance

The Canon MJ Group leverages close collaboration between its companies to add new value inall areas of life, work, and society for customers around the globe.

Business Solutions

50%

IT Solutions

Major Products

22%

Business-use multifunction printers (MFPs)
Commercial printing systems
Laser printers
Large-format inkjet printers
Maintenance services

Major Business
Systems integration (SI) services business
IT infrastructure and services business
Embedded systems business
Products business

Composition of
Net Sales in
FY2016

Imaging Systems

24%
Major Products
Digital interchangeable lens cameras
Compact digital cameras
Inkjet printers
Commercial imaging equipment

Industrial / Medical

4%
Major Products
Industrial equipment
Medical equipment

Canon Marketing Japan Inc. Annual Report 2015

Business Solutions

Sales(Billions of yen)In ﬁscal 2016, sales increased 1.1%, to¥330.3¥330,334 million. Operating income advanced
26.4%, to ¥11,362 million.
Operating income(Billions of yen)

¥11.4
IT Solutions

Sales(Billions of yen)

Sales declined 0.3% from a year earlier, to¥140.8¥140,843 million. Operating income rose
17.4%, to ¥4,854 million.
Operating income(Billions of yen)

¥4.9
Imaging Systems

Sales(Billions of yen)

Sales decreased 10.9%, to ¥159,207 million in¥159.2the year under review. Operating income wasdown 21.3%, to ¥10,887 million.
Operating income(Billions of yen)

¥10.9
Industrial / Medical

Sales(Billions of yen)Segment sales declined 5.8%, to ¥25,568¥25.6

million. Operating income was ¥123 million,
from an operating loss of ¥743 million in theprevious year.

Operating income(Billions of yen)

¥0.1

21

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Canon Marketing Japan Inc. Annual Report 2016

Segment Review and Strategies

Business Solutions
Major Companies / Organizations
Canon Marketing Japan Inc.
Business Solutions Company
Canon System & Support Inc.
Canon Production Printing Systems Inc.

Issues andOpportunities

Beyond core small & medium-sized enterprise customers, there is still scope for cultivating demand for MFPs
among mid-sized companies. We will draw on a completed lineup of new offerings to move up from a low shareof the market for mid-range models. In laser printers, we will focus away from regular ofﬁces toward markets
for sector-speciﬁc applications, where print volumes are huge. This should help us to expand cartridge sales.
In production printing, we will swiftly build our commercial printing expertise, creating a structure that proposes
optimal solutions for customers in specialty areas. In network cameras, we will leverage internal and external
resources to overcome the challenges of sales channel expansion and generate signiﬁcant growth.

Performance andMarket Conditions

MFPs
Shipments in Japan of MFPs declined, as slow demand among small & medium-sized enterprises offset solid
demand among large companies and public institutions. In the imageRUNNER ADVANCE range of MFPs, theGroup endeavored to expand sales with the C3300 series of compact A3 models for small & medium-sizedenterprises and the new C5500 for mid-sized companies. Sales were down slightly from a year earlier, however,reﬂecting a higher ratio of rental machines among the number of units shipped.

Production Printing
Sales were strong of the imagePRESS C800/C650 and imagePRESS C10000VP color on-demand models forcommercial printers. The Group also launched new continuous feed printers, but printer shipments to designﬁrms were down, so total sales decreased slightly.

Laser Printers
Domestic unit shipments of laser printers dropped, reﬂecting slow private enterprise demand and an ongoingshift among ofﬁces to MFPs. Amid lower sales of laser printers, the Group endeavored to cultivate the highspeed and the high-volume market by expanding sales of the monochrome Satera LBP8730i and other models
while launching the Satera LBP352i as the fastest machine in the Satera line. The Group thereby maintained its
top market share. Sales of toner cartridges rose amid increased shipments to high print volume sectors, such as
logistics and medical care.

Network Cameras
Sales increased owing to favorable demand for surveillance cameras and video management software.

Canon Marketing Japan Inc. Annual Report 2016

Our Business Management Policies
We will reinforce sales to mid-sized companies and increase our market share in ofﬁce MFPs.
For laser printers, we will strengthen sales for point-of-purchase applications in retailing,
pharmacies, and other speciﬁc markets to boost unit shipments and cartridge sales. We
will pursue the steady expansion of production printing and network camera businesses inCanon’s growth areas.
Sales

Operating Income(Billions of yen)(Billions of yen)

Masachika Adachi
Senior Vice President

330.3

FY

’12

’13

’14

’15

’16

11.4

FY

’12

’13

’14

’15

’16

Maintenance Services
Sales of maintenance services were up slightly. Despite ongoing declines in unit prices for MFPs, this reﬂected
an increase in the number of machines in ﬁeld (MIF), which boosted print volumes.

Group Companies
Canon System & Support Inc. performed well in security and equipment maintenance services in its IT solutions
business. It also secured several large accounts in ofﬁce MFPs, thereby progressing well and boosting sales.
Canon Production Printing Systems Inc. recorded a slight increase in sales after experiencing lower sales until
the third quarter. This was due to revenues picking up from the fourth quarter with continuous feed printershipments starting after delays.
Business Solutions segment sales therefore increased 1.1%, to ¥330,334 million. Operating income
advanced 26.4%, to ¥11,362 million.
Adjusting retroactively for ﬁscal 2016 for business transfers which was explained on page 25, segment
sales were ¥334,603 million, while operating income was ¥12,053 million.

Outlook and Key
Measures

We will endeavor to increase unit shipments of MFPs while expanding in such Canon growth areas asproduction printing and network cameras. In production printing, we will undertake full-ﬂedged efforts
to cultivate the commercial printing ﬁeld. Our goals in the network camera business are to foster
collaboration with Canon, Axis Communications AB, and Milestone Systems A/S and draw on the Group’s
customer base and sales capabilities to expand operations.
We therefore forecast that segment sales for ﬁscal 2017 will increase 3%, to ¥345.0 billion after
business transfers. Operating income is forecast to climb ¥0.2 billion, to ¥12.3 billion, with the increase ofmaintenance services and laser printer cartridges, both of which are highly proﬁtable.

23

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Canon Marketing Japan Inc. Annual Report 2016

IT Solutions
Major Companies / Organizations
Canon IT Solutions Inc.
Canon Software Inc.
Edifist Learning Inc.
6 other companies

Issues andOpportunities

Demand for greater business efﬁciencies is increasing as markets mature and society ages. There are
numerous opportunities in terms of business process improvements, catering to the need for concentratingon core businesses through cloud usage, and IT support for mid-sized companies and small & mediumsized enterprises.

Performance andMarket Conditions

While demand for hardware has continued to shrink in the domestic IT solutions market, demand for IT
services and packaged software has further expanded, particularly for large companies.

SI Services BusinessWe develop both customized systems and systems that employ solution packages. Sales surged in the period
under review due largely to an increase in sales to ﬁnancial institutions and manufacturers.

IT Infrastructure and Services BusinessWe offer data center, cloud, system platform construction, system operations, and business process
outsourcing services. During the term, we boosted sales after securing a large infrastructural project andbeneﬁting from steadily increased demand for data center services.

Embedded Systems BusinessWe develop software for embedding in products. Although we stepped up activities for the automotive sector,
sales were down owing to sluggish project demand from our primary customer in manufacturing.

Products BusinessWe sell IT hardware, packaged software, and licenses. Although demand was solid during the year for suchofferings as ESET security software, sales were basically unchanged even though there were distribution
channel changes with some products.
Segment sales therefore declined 0.3% from a year earlier, to ¥140,843 million. Operating income rose
17.4%, to ¥4,854 million.

Canon Marketing Japan Inc. Annual Report 2016

Our Business Management Policies
We aim to shift from being an entrusted developer to become a systems integrator, who cansuggest suitable solutions to our clients. We will pursue IT solutions development beyond oursegment and will encompass the entire Canon MJ Group.

Akihisa Kamimori
Sales

Operating Income(Billions of yen)

Senior Vice President(Billions of yen)
4.9

140.8

FY

’12

’13

’14

’15

’16

FY

’12

’13

’14

’15

’16

In January 2017, we paved the way to expansion in growth areas by moving outsourcing business ﬁrm
Canon BizAttenda Inc. and 3D computer-aided design (CAD) software company A&A Co., Ltd., from the IT
Solutions segment to the Business Solutions segment. We also shifted Canon ITS Medical Inc. from the IT
Solutions segment to the Industrial / Medical segment. Adjusting retroactively for ﬁscal 2016 for business
transfers, segment sales were ¥128,799 million, while operating income was ¥3,981 million.

Outlook and Key
MeasuresIn the large company market, we will deploy industry-speciﬁc solution strategies and endeavor to develop
individual markets. We will provide solutions that address IT personnel shortages and other issues that are
speciﬁc to mid-sized companies and small & medium-sized enterprises. Notwithstanding a decline in theembedded systems business we will endeavor to expand this segment as the SI services business—being
our core business—will lead growth, followed by the IT infrastructure services and the products businesses.
For ﬁscal 2017, we therefore project a 1% increase in segment sales after business transfers, to ¥130.0
billion. Segment operating income should rise 3%, to ¥4.1 billion, on the strength of gross margin growth.

25

26

Canon Marketing Japan Inc. Annual Report 2016

Imaging Systems
Major Companies / Organizations
Canon Marketing Japan Inc.
Imaging Systems Company
Canon Customer Support Inc.

Issues andOpportunities

We expect the digital interchangeable lens camera market to stop declining. We will expand our lineup of
mirrorless cameras and endeavor to maintain our No. 1 position in digital interchangeable lens cameras.
The impact of the Kumamoto earthquake on the supply of compact digital cameras has disappeared,
so unit sales of these products is expected to rise.

Performance andMarket Conditions

Digital Cameras
Domestic shipments of compact digital cameras plunged in the year under review, reﬂecting slower
production in the aftermath of the Kumamoto earthquake and chronically slow demand. Sales also declined
for the same reasons, although we maintained our top share of the market.

Inkjet Printers
In Japan, shipments of inkjet printers declined amid weak market conditions. Although sales dropped
signiﬁcantly through the third quarter of the year, sales were solid for such high-end offerings as the new
PIXUS TS9030 and PIXUS TS8030 in the fourth quarter, when demand is generally greatest. Demand wasfavorable for the MAXIFY series of business inkjet printers, so printer sales were down only slightly, and we
maintained our No. 1 market share. Sales of ink cartridges fell owing to a decline in the number of MIF andsmaller print volumes.

Professional Imaging Equipment
Demand for broadcast lenses was down owing to the decrease in orders from broadcasters, causing sales ofprofessional video equipment to decline.
Segment sales therefore decreased 10.9%, to ¥159,207 million. Operating income was down 21.3%,
to ¥10,887 million.

Canon Marketing Japan Inc. Annual Report 2016

Our Business Management Policies
The BtoC ﬁeld is unlikely to enjoy the growth of previous years. That said, this situation is an
opportunity to reduce expenses, increase prices, and streamline operations. We will expand
into such BtoB ﬁelds as commercial video and business inkjet printers.

Koichi Yagi
Sales

Operating Income(Billions of yen)(Billions of yen)

Senior Vice President

159.2
10.9

FY

’12

Outlook and Key
Measures

’13

’14

’15

’16

FY

’12

’13

’14

’15

’16

With an ongoing downturn having ended in ﬁscal 2016, conditions in the digital interchangeable lenscamera market should remain basically the same in ﬁscal 2017. We will bolster our lineup of mirrorlesscameras. We will also endeavor to maintain our top share of the market for digital interchangeable lenscameras, with total unit shipments remaining at ﬁscal 2016 levels. Unit sales of compact digital cameras
is projected to rise in view of a recovery in supply from disruptions that the Kumamoto earthquake caused
last year. The market for inkjet printers is expected to continue to shrink, with demand for hardware andcartridges remaining low, but we will endeavor to generate strong earnings by increasing the proportion ofhigh-end models in the sales mix.
We therefore anticipate a 1% increase in segment sales, to ¥161.0 billion, with operating income
gaining ¥0.1 billion, to ¥11.0 billion.

27

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Canon Marketing Japan Inc. Annual Report 2016

Industrial / Medical
Industrial Equipment Business
Major Companies / Organizations

Medical Equipment Business
Major Companies / Organizations

Canon Marketing Japan Inc.

Canon Marketing Japan Inc.

Industrial Equipment Sales Headquarters

Medical Equipment Sales Headquarters
Canon Lifecare Solutions Inc.
ELQUEST CORPORATION
Canon Advanced Technologies Taiwan Inc.

Profile of Industrial Equipment Business
Sales

Our industrial equipment business handles semiconductor manufacturing equipment and inspection(Billions of yen)& measurement equipment from domestic/overseas companies. The business also offers Canonmachine vision systems employing proprietary optical and recognition technologies and 3D printers25.6

from 3D Systems, Inc., of the United States. We collaborate with partners globally that have leadingedge technologies to propose optimal systems and provide manufacturing support.

Performance of Industrial Equipment Business
Sales rose in ﬁscal 2016 as that of semiconductor manufacturing equipment, inspection &

FY

’12

’13

’14

’15

measurement equipment, and other products increased with the steady growth of maintenanceservices and repair parts.

Canon’s machine vision provides industrial robots with 3-D recognition capabilities.

3D Systems’ 3D printer provides solutions for prototyping to production in plastics and metals.

’16

Canon Marketing Japan Inc. Annual Report 2016

Segment Performance
Segment sales declined 5.8%, to ¥25,568 million. Operating income was ¥123 million, from an operating loss of ¥743 million in theprevious year. After adjusting retroactively for fiscal 2016 for business transfers, segment sales was ¥32,209 million, while operating
income was ¥186 million.

OutlookIn ﬁscal 2017, we anticipate higher sales on greater demand for semiconductor manufacturing equipment, 3D printers, and machine visionsystems in the Industrial segment, as well as for digital radiography systems, hydrogen peroxide gas sterilizers, and IT offerings in the Medical
segment.
After business transfers, segment sales should rise 4%, to ¥33.5 billion. We expect an increase of ¥1 billion in operating income, to ¥1.2
billion, reﬂecting higher gross margins from industrial equipment sales growth, as well as improvements from structural reforms in the medical
business and lower selling, general and administrative expenses in both of these businesses.

Profile of Medical Equipment Business
Operating Income

We sell Canon’s digital radiography systems, fundus cameras, and other medical diagnostics(Billions of yen)equipment from Japan and abroad, as well as hydrogen peroxide gas sterilizers and fully automated0.1

powdered medicine packaging machines. Leveraging our strengths in imaging and IT solutions
technologies, we offer medical imaging solutions such as cloud services for interpreting medical
images remotely.

Performance of Medical Equipment Business
FY

’12

’13

’14

’15

’16

Sales declined because transaction reviews for some low-margin products overshadowed steadysales for such offerings as digital radiography and non-mydriatic fundus cameras.

AZE VirtualPlace, medical image analysis software provides 3D medical imaging solutions
from CT and MRI modalities.

The Locomohelper system makes it easy to measure the motor functions of the elderly.

29

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Canon Marketing Japan Inc. Annual Report 2016

Sustainable Management

Philosophy

The Canon MJ Group undertakes CSR activities to help resolve
social issues while harnessing the power of marketing to create
economic value. In keeping with Canon’s corporate philosophy ofMission /VisionKyosei (which means living and working together for the commongood), we will continue to pursue synergistic progress for the— CSR is Marketing —Group and for society and enhance the corporate value and brand
CSR Awarenessby benefiting society through business. We will also contribute tosustainable social development by making CSR central to

Shared Philosophy:
The “Three Selfs” Spirit

corporate management.

CSR Awareness

CSR Policies

Our participatory approach to CSR is based on the sharing of the

We produced the Canon MJ Group CSR Activity Policy to enable all

Canon MJ Group’s CSR philosophy and values by all employees, andGroup employees to practice CSR in their work. We will contribute toon a commitment to accurate knowledge. Our efforts to foster CSR

sustainable social development by sharing and applying the policy

awareness in our employees are coordinated by the CSR Promotion

throughout the entire Group.

Division.
CSR Activity Policy

The “Three Selfs” Spirit
Our “Three Selfs” spirit is a central guiding principle that dates back to
the founding of Canon and is part of our corporate DNA. The principle
states that employees should proactively take the initiative (selfmotivation), conduct oneself responsibly and with accountability (selfmanagement), and know one’s position, roles, and circumstances (selfawareness). The Three Selfs spirit is the foundation of our CSR activities.

United Nations Global Compact
In December 2009, Canon MJ signed the UN Global Compact. Under
this initiative, companies commit themselves to universal principles
relating to human rights, labor standards, the environment, and theprevention of corruption. The underlying principle is that companies
should work to resolve global problems through responsible corporate• We will contribute to the creation of an enriched social
environment in which people can live in safety and with peaceof mind.
• We will provide dependable quality through all of our businessactivities.
• We will contribute to the development of human resources
capable of contributing to the improvement of society.
• We will conduct our business activities fairly and in good faith,with particular emphasis on dialogues with stakeholders.
• We will strive to develop safe, healthy working environments.
• We will contribute to the conservation of the environment andbiodiversity.
• We will respect human rights.

activities. By reﬂecting this principle in our business activities, we willcontribute to the realization of a better and more sustainable society.

FTSE4Good Index Series
Canon MJ has been included in the FTSE4Good Index Series for nine consecutive years. This index measures theperformance of companies demonstrating strong environmental, social, and governance (ESG) practices.

Canon Marketing Japan Inc. Annual Report 2016

Environmental Management

Social Contributions

The Canon MJ Group is contributing to social and environmental

As a good corporate citizen, the Canon MJ Group contributes to society

progress by reinforcing an environmental management approach thatthrough business and activities that help to create a society in which all

reduces the ecological impact of operations while collaborating withpeople can enjoy fulﬁlling lives.

communities and customers in initiatives to balance the wealth of life

School Building Reminiscences Projectand safeguarding this planet.

We undertook this social contribution project with Pentel Co., Ltd., to

Deploying Green Ratios

help preserve the memories of school buildings that are to be closed

The Canon MJ Group formulated the following three Green Ratios as

or demolished for more modern premises. Pentel donated painting

medium-term environmental benchmarks for monitoring annualmaterials and picture frames, while Canon MJ is lending cameras

progress.

and producing and donating large posters and photo albums. As of• Annual improvement in CO2 emissions intensity

March 2017, 16 schools had taken advantage of this project since it
1.2% (year on year)

began in 2014.

• Contributions to reductions in customer CO2 emissions
More than 150,000 metric tons
• Ratio of customer CO2 emissions reductions divided by the Canon
MJ Group’s own reductions
More than triple
Positive effect on the global environment
2020 target

Contributions to
reductions incustomer CO2
emissions

150,000
metric tons
or higher

±0

Green
Ratio
More thantriple1CO2 emissions of
the Canon MJ Group

Annual improvement in
CO2 emissions intensity
1.2% (year on year)

Negative impact on global environment

Receiving the Minister of Education, Culture, Sports,
Science and Technology Award (in the Large Company
Category)
The school building reminiscences project received the Minister of
Education, Culture, Sports, Science and Technology Award. This was
the most prestigious prize in the Ministry’s Corporate Awards for
Promoting Youth Experience Activities in ﬁscal 2016.
The award was in recognition of the efforts of Canon MJ andPentel to draw on their core businesses in enabling young people toenhance creativity and self-expression by recording memories throughpainting and photography and in collaborating with schools in planningand running the project.

31

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Canon Marketing Japan Inc. Annual Report 2016

Respecting Human Rights and Diversity

Initiatives to Employ People with Disabilities

The Canon MJ Group endeavors to prevent employee discrimination

The Canon MJ Group is committed to employing people withand harassment and fosters a corporate culture that values diversity.

disabilities, and accordingly endeavors to create a barrier-free work
environment.

Preventing Discrimination and Promoting Diversity

Employees with Disabilities (Non-Consolidated Basis)

The Canon Group aims to ensure that all executives and employees

Number of Employees with Disabilities

Percentage of Employees with Disabilities

alike understand and adhere to the Canon Group Code of Conduct,
2.12%

which encourages respect for individuals and individuality andprohibits discrimination, including in terms of race, religion,

2.19%

165

168

’13

’14

2.17%

2.16%

161

157

’15

’16

nationality, gender, and age.
Within the Canon MJ Group, we utilize email magazines sent
to all employees and compliance meetings for all work units toraise awareness among executives and employees about
discrimination issues.

Combatting Harassment
Canon MJ engages in various awareness-building initiatives to prevent
sexual and power harassment.

FY

Harassment issues are part of the agenda for training new
employees and managers. Compliance meetings also position
harassment as an issue for discussion within work units.
We make it easier for employees to seek advice about

As of June 2016, 2.16%* of Canon MJ’s employees were people
with disabilities, exceeding the Japanese government’s mandatory rateof 2.0%. The Group will continue pushing ahead with new graduate

harassment by offering consultations and by enabling the sharing ofand midcareer hiring of individuals with disabilities.

concerns by email or telephone.

* Calculated according to prescribed working hours, disability degrees, and other factors in keeping with
the Ministry of Health, Labour and Welfare standards.

Canon Marketing Japan Inc. Annual Report 2016

Corporate Governance
Overview of Corporate Governance at the Canon MJ Group• Organizational format: Company with Audit & Supervisory
Board members• Number of directors: 10• Number of outside directors: 2• Number of outside directors designated as independent: 2• Term of directors: 1 year
• Number of Audit & Supervisory Board members: 5• Number of outside Audit & Supervisory Board members: 3• Number of outside Audit & Supervisory Board members designatedas independent: 2• Term of Audit & Supervisory Board members: 4 years• Independent auditor: Ernst & Young ShinNihon LLC• Use of executive ofﬁcer system: Yes(As of March 29, 2017)

Corporate Governance Organization
General Stockholders’ Meeting
Appointment / Dismissal

10 Directors
Board of Directors

Appointment / Dismissal

Monitoring

5 Audit & Supervisory Board Members
Audit & Supervisory Board

Appointment / Dismissal

Cooperation

Audit of ﬁnancial
statements
Cooperation

Management Committee
CSR Committee

Internal Auditors Ofﬁce

Independent
AuditorCooperation

Disclosure Committee
Internal audits

Internal Controls Evaluation Committee
Group Companies

AdviceLawyers /Licensed Tax
Accountants

Staff Managers

Basic Stance on Corporate GovernanceWe recognize that sustainable growth in corporate value requires
ongoing improvement in such areas as management transparency andthe monitoring of progress toward management targets. This is reﬂectedin our wide-ranging initiatives to strengthen corporate governance. We
have implemented all principles of Japan’s Corporate Governance Code.

Protection of Minority Shareholders in Transactions with
the Controlling Shareholder and in General
The Company’s controlling shareholder is our parent company, Canon
Inc. We operate with the understanding that we enjoy a certain degreeof independence from the controlling shareholder, and the terms andconditions of transactions with the controlling shareholder are notdetermined arbitrarily. We protect the interests of all shareholders bycarrying out all transactions, not only those with the controllingshareholder, in ways that are appropriate and fair, and do not result inthe loss of independence or proﬁts for the Company.

Independence from the Parent Company
The Company’s parent company is Canon Inc., which held 58.5% of theCompany’s voting rights as of December 31, 2016. Within Canon Inc.’s
corporate group, the Company oversees sales, service, and marketingfor Canon products in the Japanese market. The Company also supplies
IT solutions and other services, clearly compartmentalizing its operations.

With regard to transactions with the parent company, the Company
has the exclusive right to sell all Canon brand products in Japan, theexceptions being semiconductor and LCD lithography systems.
Transaction terms are determined by presenting the Company’s asking
prices and engaging in conventional negotiations. None of theCompany’s directors concurrently serves the parent company.
It is because of this situation that the Company faces no restrictions
from the parent company in terms of operational activities and maintains
a certain level of independence from the parent company by making its
own management decisions on business activities and operations.
The Company ensures the effectiveness of its corporate governanceas a listed enterprise by bolstering its internal auditing department while
independently building diverse internal controls systems throughcollaboration with its Audit & Supervisory Board members and the
independent auditor and setting up committees.

Policy on Constructive Dialogue with Shareholders
The Company helps to drive sustainable growth and improve corporate
value over the medium and long terms by engaging in constructive
dialogue with shareholders, including through shareholders’ meetings,
brieﬁngs on management plans for the medium and long terms, results
brieﬁngs, and meetings with major institutional investors.

Board of Directors, Directors, and Executive Ofﬁcers

33

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Canon Marketing Japan Inc. Annual Report 2016

We maintain a structure in which the representative director oversees
Companywide business strategies and execution, while supervision ofbusiness domains and headquarters functions is primarily throughexecutive directors, and add at least two independent external directors
to ensure sound management. In accordance with laws and ordinances,the Board of Directors monitors important decisions and implementation.
Other decisions are handled by the representative director or under
the representative director’s direction and supervision through executiveofﬁcers whom the Board of Directors appoints through its resolutions toassume responsibility for making and implementing decisions forbusiness domains and headquarters functions.
The Board of Directors comprises 10 members, including two
outside directors. By limiting the term of ofﬁce for directors to one year,
we have created a management structure capable of adapting quickly tochanges 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 major subsidiaries.
On March 29, 2011, we introduced an executive ofﬁcer system. The
purpose of the system is to speed up management decision-making in theCanon MJ Group by separating management decision-making fromexecutive functions and reducing the number of directors. It also clariﬁes
responsibility for the performance of business operations and strengthens
executive systems. There are currently 28 executive ofﬁcers.

Audit & Supervisory Board and Auditors
The Audit & Supervisory Board functions independently of the Board of
Directors, and comprises individuals who are familiar with theCompany’s business or corporate management and who haveaccounting or other expertise. At least one outside Audit & Supervisory
Board member is an outside auditor who fulﬁlls the independence
criteria that the Board of Directors separately determines.
The Audit & Supervisory Board cooperates with the independent
auditor and the Internal Auditors Ofﬁce to assess performance andcorporate assets and ensure sound management.

There are ﬁve Audit & Supervisory Board members, of whom three
are outside auditors. Their duties include attending Board of Directors’
meetings, speaking with directors and other parties, and perusing
important accounts documents in line with the auditing policies andwork allocations that the Audit & Supervisory Board stipulates, andconducting rigorous audits by examining operations and property.

Internal Auditors Ofﬁce
Internal audits are conducted by the Internal Auditors Ofﬁce, an
independent specialist unit that also assesses and advises Canon MJ
and its subsidiaries on legal compliance, the effectiveness of processes,
internal control systems, and information security. The Internal Auditors
Ofﬁce works in coordination with similar units established in major
subsidiaries. The Canon MJ Group has 49 audit staff members.

Audit of Financial Statements
Canon MJ’s ﬁnancial statements are audited by the Company’s
independent auditor, Ernst & Young ShinNihon LLC. The independent
auditor rotates responsible partners who have been involved in audits ofany company for more than seven years and lead partners for more thanﬁve years.

Outside Directors and Outside Audit & Supervisory Board
Members (as Deﬁned under the Corporation Law)
Canon MJ has two outside directors and three outside Audit &Supervisory Board members. Pursuant to the consent of all Audit &Supervisory Board members and a resolution of the Board of Directors,
we implemented our independence criteria for outside Audit &Supervisory Board members to clarify the standards for ensuringoutside directors and auditors in keeping with the Corporate Governance
Code and standards of independence. Our outside directors and Audit &Supervisory Board members satisfy the independence criteria and help
maintain and improve the transparency and accountability of the Boardof Directors.

Reasons for Appointing Outside Directors
Independent director

Reason for appointment

Norihisa Doi**

Mr. Doi has served as a university professor and as a board member of academic societies, and also met
requirements for appointment as an independent director.

Akio Dobashi***

Mr. Dobashi has amassed ample expertise in corporate management as a senior executive of a general trading
company, and also met requirements for appointment as an independent director.

* Mr. Dobashi previously worked at Sojitz Corporation. Although the Company has a contract with Sojitz to maintain business and other equipment, management concluded that in view of the scale and nature oftransactions there are no prospective conﬂicts of interest with the Company’s stockholders.

Reasons for Appointing Outside Audit & Supervisory Board Members
Independent Audit &Supervisory Board
memberShigeo Hasegawa**

Mr. Hasegawa has many years of accounting and auditing experience as a certiﬁed public accountant, and also met
requirements for appointment as an independent audit & supervisory board member.
Mr. Tedo worked for many years in accounting in the Canon Group, and served as a Senior Vice President at Canon
U.S.A., Inc., with his expertise positioning him well to independently monitor the Company’s management.

Kunihiko Tedo
Nobuyasu Kusumi*

Reason for appointment**

Mr. Kusumi served as an insurance company executive for many years, and also met requirements for appointment
as an independent audit & supervisory board member.

* Mr. Kusumi has served as a senior executive at Sompo Japan Nipponkoa Insurance Inc. and Sompo Japan Nipponkoa Himawari Life Insurance, Inc. The Company has an insurance policy with Sompo Japan Nipponkoa
Insurance and a contract with that company to sell and maintain business and other equipment. The Company also has a contract with Sompo Japan Nipponkoa Himawari Life Insurance to sell and maintain businessand other equipment. Management concluded, however, that in view of the scale and nature of transactions there are no prospective conﬂicts of interest with the Company’s stockholders.
** Have notiﬁed the Tokyo Stock Exchange as an independent director or an audit & supervisory board member as prescribed by the Exchange.

Canon Marketing Japan Inc. Annual Report 2016

The Company does not maintain a specialist organization orprovide full-time staff to assist outside directors or outside Audit &Supervisory Board members. Directors in charge of operations andother ofﬁcials provide outside directors with prior explanations ofBoard of Directors’ meeting agendas as needed. Internal auditors,
directors in charge of operations, and other ofﬁcials provide outside

Audit & Supervisory Board members with prior explanations of Boardof Directors’ meeting agendas as needed. Outside Audit & Supervisory
Board members attend Audit & Supervisory Board meetings, which
are held at least once monthly, as well as liaison meetings and othergatherings conducted as required to exchange information on
important items and make decisions as the Board.

Policies and Procedures for Determining Remuneration for
Senior Executives and Directors

below. For retail investors, the president, the managing executiveofﬁcer overseeing IR, or other executives conduct company brieﬁngs. In
2016, the president conducted a company brieﬁng in April and the
managing executive ofﬁcer overseeing IR and other members held four
company brieﬁngs at brokerage branches. In August, we exhibited at
an event for retail investors. For analysts and institutional investors, themanaging executive ofﬁcer overviews our results at quarterly brieﬁngs.
The president presents medium-term management plans upon theﬁscal results announcements. In addition, we welcome meeting
requests from analysts and institutional investors, and hold individual
meetings and teleconferences with foreign institutional investors.

Remuneration for the representative director and directors consists ofbasic remuneration, which is a ﬁxed basic monthly fee for executing
their roles and duties, and a bonus linked to performance during theﬁscal year. Outside directors only receive basic remuneration.
Individual basic remuneration amounts are in accordance with thebasic approach to calculations determined through resolutions of theBoard of Directors within the maximum total remuneration for all
directors approved at general meetings of stockholders. Individual
bonuses are in keeping with the basic approach to calculations
determined through resolutions of the Board of Directors based on totals
approved at general meetings of stockholders for each ﬁscal year.

Canon MJ IR website

http://cweb.canon.jp/eng/ir/
IR Activities
We formulated the Canon MJ IR Policy in 2008 to clarify our stance on
disclosure, which is through the ofﬁcial investor relations (IR) website

Message from Outside Director

Message from Outside Director

I believe that the basic roles of outside directors
are to help propel corporate activities while also
checking business execution.
I perform these two roles by participatingin Board of Directors’ meetings as well as
business report meetings and executive ofﬁcer
meetings to provide advice and proposals as
needed. I frequently voice dissent. When taking
Norihisa Doi
part in these meetings, I obtain detailed
Outside Director
brieﬁngs on the contents of management
meetings and implementation progress from corporate planning staff, and alsoendeavor to understand corporate activity details by engaging in discussions
about individual projects, as needed.
Three years have passed since my appointment as an outside director ofCanon Marketing Japan. I sense that the Company maintains a robust
corporate governance structure through its Board of Directors, business reportmeetings and management meetings, CSR Committee chaired by the
President, Audit & Supervisory Board, and other bodies.
I am a computer science and information security expert, with particularstrengths in software, and I have experience in practical matters. I strive todraw on this experience so Canon Marketing Japan can steadily progress with
Long-Term Management Objectives Phase III and promptly expand its IT
solutions business using the Group’s collective capabilities as the foundationsof its future activities.

I believe that the Board of Directors conducts
meetings that are free, vigorous, andconstructive and establishes goals tomaximize corporate value in keeping with theCompany’s management philosophy andstrategy. Canon Marketing Japan has
engineered systems to foster appropriate risktaking and maintains a full range of
Akio Dobashi
committees to enhance management
Outside Director
efﬁciency and transparency. I will continue tomonitor whether these bodies function effectively.
Canon Marketing Japan rolled out a medium-term management plan tomaterialize Long-Term Management Objectives Phase III, which seeks to help
resolve social issues by expanding businesses that integrate imaging andinformation technologies. Management is accordingly pushing forward withbusiness structure and process reforms. I leverage my objective perspectives
to monitor whether the plan is progressing steadily and speedily.

35

36

Canon Marketing Japan Inc. Annual Report 2016

Board of Directors and Audit & Supervisory Board Members(As of March 29, 2017)

Board of Directors

Representative Director,
Chairman

Representative Director,
President

Haruo Murase

Masahiro Sakata

Director

Director

Director

Director

Director

Yutaka Usui

Koichi Yagi

Akihisa Kamimori

Yoshiyuki Matsusaka

Masachika Adachi

Director

OutsideOutsideShiro Hamada

Norihisa Doi

Akio Dobashi

Audit & Supervisory Board Members

Standing

Standing

Standing, outside

Standing, outside

Standing, outside

Masahiro Shimizu

Fumio Ogaki

Shigeo Hasegawa

Kunihiko Tedo

Nobuyasu Kusumi

Canon Marketing Japan Inc. Annual Report 2016

Management Systems
Raising the value of the Canon MJ Group’s corporate brand is an

We distribute the Canon Group Code of Conduct and otherongoing priority. We do this by maintaining high standards ofhandbooks and Compliance Cards to all Group employees andcorporate ethics Groupwide, and by developing structures capable ofenhance awareness through education and training. We convene theresponding to a variety of management risks.

semiannual Compliance Meeting to conﬁrm compliance risks andcountermeasures at each work site. We also maintain an ongoing

Risk Management

internal reporting system.

The Canon MJ Group has taken steps to ensure the continuity of its
business activities in the event of a major earthquake, an inﬂuenza

Information Security

outbreak, or other contingencies that could impact its activities.

The Canon MJ Group regards the reinforcement of information

These initiatives for the Group overall are coordinated by the BCM1

security as part of its responsibilities toward the creation of a more

Committee, a subsidiary organization of the Management Committee.

secure society, and as essential to meeting customers’ expectations

1 BCM: Business continuity management

in line with our Customer Focus philosophy.
We have taken various steps to bolster information security

Internal Controls
Based on the Companies Act, the Board of Directors resolved the basic
policy for an internal controls system to ensure appropriate businesspractices, and is deploying that system in line with that policy.
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 forthe 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.

Corporate Ethics and Compliance
For the Canon MJ Group, compliance is not simply a matter of obeying
laws and regulations. We deﬁne compliance as obedience to regulatory
requirements and social rules, a commitment to social justice, andcontinuing efforts to meet the expectations of society. Our complianceactivities are designed to encourage high ethical values and respect for
the law in individual employees through awareness activities, employee
education, and organizational activities.
In keeping with the rules that it sets, the Board of Directors
carefully deliberates and decides on important management mattersand receives reports from representative and executive directors andexecutive ofﬁcers on business implementation progress.

governance, moving forward with objective assessments and ongoing
improvements. We formulated the Basic Policy on Information
Security for the Canon MJ Group and rolled out the Information
Security Management System (ISMS) and Personal Information
Protection Management System (PMS) for the Group to standardize
and streamline management. We are optimizing our information
security countermeasures, training information security personnel,
and have secured and maintained certiﬁcation under the ISMS
Conformity Assessment Scheme and Privacy Mark. We deployed theCanon MJ Computer Security Incident Response Team to reinforce
cybersecurity. We also issue the Information Security Report.

37

38

Canon Marketing Japan Inc. Annual Report 2016

Business Risks
Impacts of Market Competition and Fluctuations

Credit Risks

In the Business Solutions segment, price competition continues in

The Canon MJ Group could experience unforeseen credit losses, asofﬁce MFPs and maintenance services. Although the Group is

it engages in many transactions in which it collects payments after

endeavoring to avoid such competition by differentiating itself throughproviding goods and services. The Company therefore draws on credit

initiatives to add value to its offerings, proﬁtability could deteriorate if

information from external credit bureaus and other sources as part ofprice competition intensiﬁes. An increase in unit sales of third-party

thorough credit management efforts while hedging risks through tradelaser printer toner cartridges could constrain revenues from genuine

credit risk insurance and other means. The Company provides

Canon counterparts.

allowances for doubtful receivables to cover the risks of losses on

In IT Solutions, the Company carefully manages work hours invarious SI projects to prevent losses. Nonetheless, such factors ascollection. Large unforeseen uncollectible amounts could detract fromthe Group’s results and ﬁnancial position.

additional customer speciﬁcations, altered requirements, or mismatches
in the Company’s and customers’ interpretations of speciﬁcations orRelationship with Parent Company

progress could hamper results.

Canon MJ is a subsidiary of Canon Inc., which owned 58.5% of its

In the Imaging Systems segment, unit shipments could decline if

stock as of December 31, 2016. Canon MJ has the exclusive right tothe market for digital interchangeable lens cameras matures further,sell products (excluding semiconductor and LCD lithography systems)

prolonging repurchase cycles.

manufactured by Canon Inc. under the Canon brand in Japan. In ﬁscal

The market for compact digital cameras could shrink further amid
competition with smartphones, and the inkjet printer market ismaturing. While the Company is endeavoring to cultivate new demand,

2016, Canon MJ’s purchases from Canon Inc. amounted to ¥212.6
billion, or 63.4% of its total purchases.
Because of this relationship, a major shift in the management

such as through offering new applications or cloud service-linked

policies or business activities of Canon Inc. could have a signiﬁcantproducts that simplify printing from smartphones, sales of hardware

impact on the business activities, performance, and ﬁnancial position

and inkjet cartridges could decline if the markets mature further. Printof the Canon MJ Group. If it becomes impossible to maintain thevolumes in Japan tend to increase when people are preparing

superiority of Canon products in relevant industries for whatever

traditional New Year’s greeting cards. The production of fewer cards

reason, the Group’s results could be adversely affected.

could affect inkjet cartridge sales.
In the Industrial / Medical segment, capital spending among

Information Management

semiconductor and device manufacturers greatly affects orders for

The Canon MJ Group holds important information about various

semiconductor fabrication and optical measuring equipment. ResultsGroup operations as well as a considerable amount of sensitive

could stagnate if these manufacturers reduced such expenditure. The

information about companies and individuals. As such, we formulate

Pharmaceutical and Medical Device Act (formerly, the Pharmaceuticalinformation management policies and rules, educate and train

Affairs Act) makes it mandatory to appoint sales administrators, set

employees to increase awareness of the importance of information

up post-marketing traceability information systems, and reinforce

management, implement and check the status of system security

safety management structures. While the Canon MJ Group does its

measures, and create and deploy an information security management

utmost to maintain systems to comply with such requirements,

system. Notwithstanding these measures, information that leaks

transactions with medical institutions and medical equipment dealers

externally as a result of cyber attacks could greatly inconvenience

could decline if its safety management structure or information

business partners and other stakeholders or lower the credit standing

systems do not perform as envisaged.

of the Canon MJ Group, thus possibly hampering its operations,

Each business segment offers goods purchased from parent
company Canon Inc. and many other manufacturers, creating the riskof insufﬁcient supplies of goods following natural disasters, major
accidents, or other events. Results could be affected if such situations
hamper sales activities.

results, and ﬁnancial position.

Canon Marketing Japan Inc. Annual Report 2016

Financial Section
40

Ten-Year Consolidated Financial Summary

42

Financial Review

44

Consolidated Balance Sheets46

Consolidated Statements of Income

47

Consolidated Statements of Comprehensive Income

48

Consolidated Statements of Changes in Net Assets

49

Consolidated Statements of Cash Flows

50

Notes to Consolidated Financial Statements

67

Independent Auditor’s Report

39

40

Canon Marketing Japan Inc. Annual Report 2016

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

2016

2015

2014

2013

Net sales (Note 5)¥ 629,314¥ 646,003¥ 659,432¥ 657,216

Operating income

27,676

26,64725,08817,013For the year:

Profit (loss) before income taxes

28,90327,49825,85817,055

Profit (loss) attributable to owners of parent

18,162

15,67016,03010,168At year-end:
Total assets

497,728

486,502479,747

467,076

Total stockholders’ equity (Note 4)

280,473

277,008

270,061

256,795

Cash flows:
Cash flows from operating activities

33,30629,73038,191

28,781

Cash flows from investing activities(19,461)(44,536)(15,221)(25,757)

Cash flows from financing activities(6,086)(6,225)(4,545)(9,105)

107,286

99,574

120,607

102,183¥ 140.06¥ 120.84¥ 123.62

Cash and cash equivalents

Per share of common stock:
Profit (loss) attributable to owners of parent (Note 2)
Cash dividends (Note 3)
Stockholders’ equity (Note 4)

¥

76.67

50.00

45.00

40.00

24.00

2,162.96

2,136.22

2,082.60

1,980.22

Notes 1. The figures have been presented in U.S. dollars by translating all Japanese yen amounts at ¥117 to U.S.$1, the prevailing exchange rate as of December 31, 2016.
2. Profit (loss) attributable to owners of parent 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.

Net Sales and Return on Sales (ROS)

Operating Income and Operating Margin

Working Capital(Billions of yen / %)(Billions of yen / %)(Billions of yen / Times)

Net Sales

ROS

Operating
IncomeOperatingMargin2.9

Total
Current
Assets

Total
Current
Liabilities

Current
Ratio

369

36.9

905
2.4 2.4

827
2.2
687 674

4.4
4.1

328

4.1

302 302 302

3.8
632 659 657 659 646 629
1.6

1.4
1.1

1.5

26.6

25.4

362
2.3

27.7
2.1

3.1
2.6

16.8

0.6

1.9
214
184

0.9
6.3

1.1

2.0

2.0

2.0

17.0

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

340 348
2.2

25.1
2.5

-0.6

317 325

1.3
1.7

1.8

1.9
154 157 151 163

165 165 160 157

7.7 8.4

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

Canon Marketing Japan Inc. Annual Report 2016

Millions of yen

Thousands of U.S. dollars(Note 1)

2012

2011

2010

2009

2008

2007

2016

¥ 659,218¥ 632,419¥ 674,159¥ 686,615¥ 827,487¥ 905,137$ 5,378,752

16,802

8,442

7,736

6,297

25,41636,886

236,547

17,52910,972

8,584

(595)

22,22935,452

247,034

10,579

6,764

3,724

(4,343)

11,186

20,033

155,231462,574

447,765448,592

449,607484,937

526,125

4,254,085

253,862

250,671

246,680

246,829

255,220

266,086

2,397,205

33,767

8,716

35,18618,144

41,122

47,214

284,667(16,067)(12,108)(13,012)(25,834)(28,967)(21,912)(166,333)(11,813)(3,811)(8,171)(4,324)(21,738)(16,345)(52,017)108,260

102,373

109,575

95,575

107,589

117,206

916,974
U.S. dollars

¥

77.45

¥

49.30

¥

26.70

¥

(31.62)¥78.63¥ 134.84

$

1.20

24.00

20.00

20.00

20.00

40.00

40.00

0.43

1,907.50

1,827.25

1,798.16

1,797.31

1,858.39

1,817.59

18.49

4. Total stockholders’ equity in the above table represents the total of stockholders’ equity and accumulated other comprehensive income in the consolidated balance sheets.
5. Effective fiscal 2013, we have changed to an accounting method that deducts a portion of sales incentives (which had previously been accounted for under selling, general andadministrative expenses) from net sales; therefore, the amount of net sales for fiscal 2012 and relevant key management indicators have been adjusted retroactively.

Total Stockholders’ Equity and ROE(Billions of yen / %)Total Stockholders’Equity266

255 247 247 251 254 257
7.6

ROE

Total Assets and Total Stockholders’ Equity Ratio

Profit (Loss) Attributable to Owners of Parent(Billions of yen / %)(Billions of yen)

Total Assets

Total Stockholders’Equity Ratio

280
270 277
526

6.1

6.5
5.7

485

463 467498
480 48718.2

450 449 448
56.9 56.4
54.9 55.0 56.3
54.9 55.0
52.6
56.0
50.6

4.2

4.3

20.0
16.0 15.7

11.2

10.6 10.2

4.0
2.7
6.8
1.5

3.7

-1.7
-4.3

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

FY ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16

41

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Canon Marketing Japan Inc. Annual Report 2016

Financial Review
Business Performance

The embedded systems business experienced a downturn in sales,
as sluggish demand from key manufacturing customers overshadowed

Net Sales
For the year ended December 31, 2016, consolidated net sales

stronger marketing to the automotive industry.
In the products business, sales were flat owing to changes in the

declined 2.6%, to ¥629,314 million. This reflected a delayed recovery

distribution flow of some merchandise, which overshadowed favorable

in personal consumption that overshadowed extensive efforts to expand

sales of ESET security software and other products.

sales of new products and propose solutions.

Segment sales thus decreased 0.3%, to ¥140,843 million.

Segment Information

Imaging Systems

Business Solutions

Although we retained our No. 1 market share in digital interchangeable

Sales decreased slightly for office multifunction printers (MFPs). Thislens cameras on the strength of new product launches and extensive

was because of an increase in the rental business, offsetting efforts tosales efforts, sales were down due to a market slowdown.

boost compact A3 C3300 to the new customers.
Production printing sales were not significantly changed. Sales

Although, we similarly maintained our No.1 market share incompact digital cameras, unit shipments and sales were off owing towere favorable for color on-demand models for print shops, butparts production fall stemming from earthquake damage innotwithstanding the launch of our continuous feed printers, unit

Kumamoto Prefecture and a prolonged drop in demand.

shipments were down to design houses.
While sales of laser printers were down, we maintained our No. 1
market share in this category by cultivating markets for fast, highvolume machines. Toner cartridge sales were up, reflecting expanding
shipments to certain sectors promising high print volumes.
Sales of network cameras increased on higher demand for camera

We were again the market leader in inkjet printers, although sales
were down slightly. Ink cartridge sales decreased, reflecting lower
machine sales and smaller print volumes.
Sales of commercial imaging equipment were down amid sluggish
demand for broadcast lenses that led to lower broadcast station orders.
Sales of this segment thus declined 10.9%, to ¥159,207 million.

bodies and steady sales of image management software.
Sales of maintenance services for office MFPs increased slightly,

Industrial / Medical

as print volume rose steadily owing to a greater number of machines inIndustrial equipment sales rose on the strength of higher sales ofthe field, offsetting an ongoing drop in copy charges.

semiconductor fabrication equipment and inspection / measuring

Our subsidiary, Canon System & Support Inc., boosted its sales onfavorable demand for its security business, IT equipment maintenanceservices, and business equipment.
At Canon Production Printing Systems Inc., a subsidiary of theCompany, sales were up slightly owing to the delayed inspection of thecontinuous feed printers, which began shipping during the term.
As a result of these factors, Business Solutions sales rose 1.1%,
to ¥330,334 million.

IT Solutions
The Systems Integration (SI) services business increased sales fromexpanding orders for financial institutions and manufacturers.
Sales of the IT infrastructure and services business were up,
reflecting new large infrastructure project orders and steady demandfor data center services.

equipment and commensurately steady demand for maintenanceservices and repair parts.
Medical business sales were down, after the transaction reviews toeliminate low-margin products overshadowed steady sales for digitalradiography and non-mydriatic fundus cameras.
Segment sales therefore dropped 5.8%, to ¥25,568 million.

Canon Marketing Japan Inc. Annual Report 2016

Income Analysis

Cash Flows

Consolidated net sales were down 2.6%, to ¥629,314 million.

Net cash provided by operating activities amounted to ¥33,306 million,

Cost of sales decreased 2.3%, to ¥403,307 million. Gross profit
dropped 3.0%, to ¥226,007 million.
Selling, general and administrative expenses were down 3.9%,
to ¥198,331 million.
Operating income therefore climbed 3.9%, to ¥27,676 million.
Total other income jumped 44.2%, to ¥1,227 million.

from ¥29,730 million a year earlier. This change was due to ¥28,903
million in profit before income taxes, as well as ¥14,870 million in
depreciation and amortization, a decrease of ¥1,248 million in notes
and accounts receivable-trade, partially offset by ¥10,983 million inincome taxes paid.
Net cash used in investing activities was ¥19,461 million, compared

Profit attributable to owners of parent thus increased 15.9%,

with ¥44,536 million in the previous year. The main factors wereto ¥18,162 million. Profit attributable to owners of parent per share¥10,991 million in payments for purchases of property, plant andwas ¥140.06, up ¥19.22 from a year earlier.

equipment and a ¥9,990 million increase in short-term loans receivable.
Net cash used in financing activities amounted to ¥6,086 million,

Financial Position

compared with ¥6,225 million in the previous year, mainly because of

Total current assets increased ¥14,599 million from the end of thedividends paid of ¥5,844 million.

previous year, to ¥362,142 million. This reflected increases of ¥7,712

As a result of these factors, cash and cash equivalents at themillion in cash and cash equivalents and ¥9,990 million in short-term

end of the year stood at ¥107,286 million, up ¥7,712 million fromloans receivable.

a year earlier.

Non-current assets decreased ¥3,373 million, to ¥135,586
million. The key factors were declines of ¥1,826 million in software and¥1,576 million in land, which outweighed an increase of ¥499 million
in buildings and structures, net.
Total current liabilities decreased ¥2,712 million, to ¥156,967 million.
This was because of a ¥3,150 million decrease in accrued expenses,
which offset an ¥828 million rise in notes and accounts payable.
Total long-term liabilities increased ¥10,457 million, to ¥59,842
million. This stemmed from a ¥10,746 million increase in net defined
benefit liabilities.
Total net assets increased ¥3,481 million, to ¥280,919 million.
Factors in that rise included ¥18,162 million in profit attributable toowners of parent, ¥5,835 million in dividend payments, and a decreaseof ¥8,319 million in remeasurements of defined benefit plans.
Total stockholders’ equity ratio was 56.4%, down 0.5 percentage
points from a year earlier. Stockholders’ equity per share increased¥26.74 to ¥2,162.96.

43

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Canon Marketing Japan Inc. Annual Report 2016

Consolidated Balance Sheets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2016 and 2015

Millions of yen

ASSETS

2016

2015

CURRENT ASSETS:
Cash and cash equivalents (Notes 8 and 9)¥ 107,286¥ 99,574

Notes and accounts receivable (Note 8)

124,475

125,907

Inventories (Note 5)29,98030,006

Deferred tax assets (Note 11)

4,215

5,281

Short-term loans receivable (Note 8)

90,04480,054

Other current assets

6,263

6,923

Allowance for doubtful receivables

(121)

(202)

362,142

347,543

Land (Note 3)

34,36435,940

Buildings and structures (Note 3)

Total current assets

PROPERTY, PLANT AND EQUIPMENT:

89,797

88,201

Machinery and vehicles

205

328

Furniture and fixtures

18,253

19,474

Rental assets

36,83634,987

Lease assets

958

1,323

180,413180,253(83,711)(80,943)

96,702

99,310Total
Accumulated depreciation
Net property, plant and equipment

INTANGIBLE ASSETS:
Goodwill (Note 2)

—

820

6,443

8,269

Lease assets

54

77

Utilization rights

317

318

5

15

6,819

9,499

7,422

7,789

10

11

Lease deposits (Notes 14 and 15)

4,825

5,275

Deferred tax assets (Note 11)17,66914,768Other investments

2,484

2,605

Allowance for doubtful receivables

(345)

(298)

Software

Other intangible assets
Total intangible assets

INVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 3, 8 and 9)
Long-term loans receivable

Total investments and other assets

32,06530,150Total non-current assets

135,586

138,959¥ 497,728¥ 486,502

Total assets

Canon Marketing Japan Inc. Annual Report 2016

Millions of yen

LIABILITIES AND NET ASSETS

2016

2015

¥ 102,662¥ 101,834

176

222

Accrued income taxes (Note 11)

4,689

6,201

Consumption taxes payable

4,297

5,132

Accrued expenses

18,96922,119Reserves

4,088

4,172

Other current liabilities

22,08619,999156,967

159,679

Lease obligations (Note 15)

206

321

Deferred tax liabilities (Note 11)

422

582

7

26

962

943

53,56942,823CURRENT LIABILITIES:
Notes and accounts payable (Notes 3 and 8)
Lease obligations (Note 15)

Total current liabilities

LONG-TERM LIABILITIES:Deferred tax liabilities for land revaluation (Note 11)
Allowance for long-term continuous service rewards (Note 2)
Net defined benefit liabilities (Notes 2 and 10)
Other long-term liabilities (Note 15)

4,676

4,690

59,842

49,38573,30373,303

Capital surplus

82,82082,820Retained earnings

163,364

151,037

Treasury stock (Note 7)(31,915)(31,912)287,572

275,248

Total long-term liabilities

CONTINGENT LIABILITIES (Note 4)

NET ASSETS (Note 2):
STOCKHOLDERS’ EQUITY (Note 16):
Common stock (Note 7):
Authorized 299,500,000 shares; Issued 151,079,972 shares in 2016 and 2015

Total stockholders’ equity
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

2,329

2,775

Deferred gains or losses on hedges

Net unrealized gains on available-for-sale securities

(15)

1

Foreign currency translation adjustments

147

225

Remeasurements of defined benefit plans
Total accumulated other comprehensive income (loss)
NON-CONTROLLING INTERESTS
Total net assets
Total liabilities and net assets• See accompanying notes to consolidated financial statements.

(9,560)(1,241)(7,099)

1,760

446

430

280,919

277,438¥ 497,728¥ 486,502

45

46

Canon Marketing Japan Inc. Annual Report 2016

Consolidated Statements of Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2016 and 2015

Millions of yen

NET SALES

2016

2015

¥ 629,314¥ 646,003

COST OF SALES

403,307412,898

Gross profit

226,007

233,105

198,331206,458

27,676

26,647353

407

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense

(15)

(27)

Insurance income

609

599

Foreign exchange losses

(78)

(123)

Gain on sales of fixed assets

775

349

Insurance income due to disaster—

35

Loss on impairment of fixed assets

(131)

(3)

Gain on sales of investments in securities

661

82

Gain on sales of shares of subsidiaries and affiliates—

57

Loss on sales and disposal of fixed assets

(986)

(369)

Loss on disaster

(28)

(15)

Special extra retirement payments

(6)

(524)

Corporate reorganization-related expense

—

(103)

Other, net

73

486

Total other income (expenses)

1,227

851

28,90327,498Current

8,789

10,302

Deferred

1,918

1,468

10,707

11,77018,196

15,72834

58¥ 18,162¥ 15,670

Profit before income taxes

INCOME TAXES (Note 11):

Total income taxes
ProfitPROFIT ATTRIBUTABLE TO:
Non-controlling interests
Owners of parent

Yen

PER SHARE OF COMMON STOCK (Note 2):
Profit attributable to owners of parent¥

140.06¥120.84

Cash dividends applicable to the year

¥

50.00

¥

45.00

• See accompanying notes to consolidated financial statements.

Canon Marketing Japan Inc. Annual Report 2016

Consolidated Statements of Comprehensive Income
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2016 and 2015

Millions of yen

PROFIT

2016

2015¥ 18,196¥ 15,728

(447)

1,071

OTHER COMPREHENSIVE INCOME (LOSS) (Note 6)
Net unrealized gains or losses on available-for-sale securities
Deferred gains or losses on hedges

(15)

1

Foreign currency translation adjustments

(81)

(20)

Remeasurements of defined benefit plans, net of tax
Total other comprehensive income (loss)
Comprehensive income(8,320)(1,243)(8,863)(191)¥ 9,333¥ 15,537¥ 9,302¥ 15,451

31

86

COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent
Non-controlling interests• See accompanying notes to consolidated financial statements.

47

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Canon Marketing Japan Inc. Annual Report 2016

Consolidated Statements of Changes in Net Assets
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2016 and 2015
Millions of yen

Number of sharesof common stock
BALANCE AT JANUARY 1, 2015
Cumulative effect of changes in accounting
policies
Restated balance at beginning of year
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Sales of shares of consolidated subsidiaries
Profit attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Other, net
BALANCE AT JANUARY 1, 2016
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Sales of shares of consolidated subsidiaries
Profit attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Other, net
BALANCE AT DECEMBER 31, 2016

151,079,972

Commonstock¥ 73,303

151,079,972

73,303

Stockholders’ equity
CapitalRetained
surplusearnings¥ 82,820¥ 143,864

Treasurystock¥ (31,905)(2,662)
82,820141,202
15,670(5,835)(31,905)(7)0

0

151,079,972¥ 73,303¥ 82,820¥ 151,037
18,162(5,835)¥ (31,912)(3)

151,079,972¥ 73,303¥ 82,820¥ 163,364¥ (31,915)

Millions of yen

BALANCE AT JANUARY 1, 2015
Cumulative effect of changes in accounting
policies
Restated balance at beginning of year
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Sales of shares of consolidated subsidiaries
Profit attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Other, net
BALANCE AT JANUARY 1, 2016
Profit attributable to owners of parent
Cash dividends
Purchase of treasury stock
Disposition of treasury stock
Sales of shares of consolidated subsidiaries
Profit attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Other, net
BALANCE AT DECEMBER 31, 2016

Accumulated other comprehensive income (loss)
Net unrealized
Deferred gains Foreign currency Remeasurements Non-controlling
gains on available- or losses ontranslationof defined benefit
interests
for-sale securities
hedgesadjustments
plans¥ 1,705
—
¥ 272
¥
2
¥ 292

Total net
assets¥ 270,353(2,662)

1,705

1,070
¥ 2,775(446)¥ 2,329• See accompanying notes to consolidated financial statements.

1

1
1

(16)
¥(15)

225

(47)
¥ 225

(78)
¥ 147

(1,241)430(1,243)¥ (1,241)

63
58
(11)
28
¥ 430

(8,319)¥ (9,560)

34
(10)
(8)
¥ 446

267,691
15,670(5,835)
(7)
0
63
58
(11)
(191)
¥ 277,438
18,162(5,835)
(3)
—
—
34
(10)
(8,867)¥ 280,919

Canon Marketing Japan Inc. Annual Report 2016

Consolidated Statements of Cash Flows
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Years ended December 31, 2016 and 2015

Millions of yen

2016

2015

¥ 28,903¥ 27,498

14,87015,524

CASH FLOWS FROM OPERATING ACTIVITIES:Profit before income taxes
Adjustments for:
Depreciation and amortization
Loss on impairment of fixed assets

131

3

Amortization of goodwill

799

242

Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in net defined benefit liabilities
Interest and dividend income
Interest expense
Loss (gain) on sales and retirement of property, plant and equipment, net

(34)

30

(1,271)

(918)

(353)

(407)

15

27

78

(26)

Loss (gain) on sales of investments in securities

(661)

(70)

Decrease (increase) in notes and accounts receivable-trade

1,248

2,599

Decrease (increase) in inventories

88(2,162)

Increase (decrease) in notes and accounts payable-trade

843

497

Other, net(716)(2,972)

43,94039,865Interest and dividends received

367

407

Interest paid

(18)

(27)

(10,983)(10,515)33,30629,730Sub-total

Income taxes paid
Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:Payments for purchases of property, plant and equipment(10,991)(12,384)

Proceeds from sales of property, plant and equipment

2,308

801

Payments for purchases of intangible assets(1,442)(3,002)

Payments for purchases of investments in securities

(455)

(132)

Proceeds from sales of investments in securities

797

169

Proceeds from sales of shares of affiliates—

125(9,990)(30,000)

312

(113)

(19,461)(44,536)

Repayments of finance lease obligations

(239)

(375)

Payments for purchases of treasury stock

(3)

(7)

(5,844)(5,844)—1(6,086)(6,225)(47)(2)

Decrease (increase) in short-term loans receivable, net
OtherNet cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

7,712(21,033)

Cash and cash equivalents at beginning of year

99,574

120,607¥ 107,286¥ 99,574

Cash and cash equivalents at end of year
• See accompanying notes to consolidated financial statements.

49

50

Canon Marketing Japan Inc. Annual Report 2016

Notes to Consolidated Financial Statements

1

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Canon Marketing
Japan Inc. (the “Company”) and its consolidated subsidiaries (the “Group”)
are prepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to application anddisclosure requirements of International Financial Reporting Standards,
and are compiled from the consolidated financial statements prepared by

2

the Company as required by the Financial Instruments and Exchange Law
of Japan.
Certain accounts and items presented in the original consolidated
financial statements in Japanese have been reclassified for theconvenience of readers outside Japan.

Summary of Significant Accounting Policies(a) Principles of Consolidation
The accompanying consolidated financial statements for the year ended
December 31, 2016 include the accounts of the Company and all of its 24(26 in 2015) subsidiaries.
All intercompany accounts and transactions are eliminated inconsolidation.
Goodwill is amortized generally over five years.
(b) Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
and its consolidated subsidiaries consider all highly liquid investments,
including securities, time deposits and certificates of deposit, all of whichmature or become due within three months of the date of acquisition, tobe 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 asa separate component of net assets. Available-for-sale securities whose
fair value is not readily determinable are stated at cost determined by themoving-average method.
(d) Inventories
Merchandise and service parts are valued at cost determined by themonthly moving-average method. The carrying amount in the balance
sheet represents the amount after write-downs due to decreased
profitability.
Work in process is valued at cost determined by the specificidentification method.
Supplies are valued at cost determined by the last-purchase pricemethod. The carrying amount in the balance sheet represents the amountafter write-downs due to decreased profitability.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computedby the declining-balance method for property and equipment, with the
exception of items that are depreciated by the straight-line method at rates
based on the estimated useful lives of the respective assets.
These items are buildings purchased on or after April 1, 1998
(exclusive of furniture and fixtures) and structures purchased on or after
April 1, 2016, all buildings and structures of the Company’s Makuhari
office, property and equipment of certain consolidated subsidiaries, andrental assets in the Business Solutions segment.

The useful lives are as follows:
Buildings, from 5 to 75 years; furniture and fixtures, from 2 to 20 years;
and rental assets, 3 years.
Normal repairs and maintenance, including minor renewals andimprovements, are charged to income as incurred.
(f) Accounting Method for Retirement Benefits(1) Method of attributing estimated amounts of retirement benefits toperiods
In calculating retirement benefit obligations, the estimated amount of
retirement benefits attributed to a period up to the current fiscal year is
primarily determined using the benefit formula basis.
(2) Amortization of unrecognized actuarial gains and losses and priorservice cost
Unrecognized prior service cost is amortized by the straight-line method
over the average remaining service period of the eligible employees at thetime when it arose. Unrecognized actuarial gains and losses are amortizedfrom the fiscal year following the year in which they arose by the straightline method over the average remaining service period of the eligible
employees.
(3) Application of simplified method at smaller-sized companies, etc.
Certain consolidated subsidiaries apply the simplified method for
calculating net defined benefit liabilities and net periodic benefit costs.
Under this method, the payments for voluntary early retirement of alleligible employees at the end of the fiscal year are recognized as
retirement benefit obligations.
(g) Leases
Leased assets under finance lease contracts are depreciated by thestraight-line method over their respective lease contract term with zero
residual value.
(h) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided in the amount required
to cover possible losses on collection. It is determined by adding
individually estimated uncollectible amounts for specific items to an
amount based on the actual rate of uncollected receivables of the Group inprior years.
(i) Income Taxes
Deferred tax assets and liabilities are recorded to reflect the impact of
temporary differences between assets and liabilities recognized forCanon Marketing Japan Inc. Annual Report 2016

financial reporting purposes and such amounts recognized for tax
purposes. These deferred taxes are measured by applying the statutory
income tax rate to the temporary differences.
(j) Translation of Foreign Currency Accounts
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at thecurrent exchange rates in effect at the balance sheet date. The foreignexchange gains and losses on translation are recognized in theaccompanying consolidated statements of income.
(k) Foreign Currency Financial Statements
The balance sheet accounts of the foreign subsidiaries are translated into
Japanese yen at the current exchange rates in effect at the balance sheet
date, except for the components of net assets excluding non-controllinginterests which are translated at their historical exchange rates.
Revenue and expense accounts are translated at the averageexchange rates prevailing during the year.
(l) Per Share Amounts of Common Stock
Profit attributable to owners of parent per share is calculated using profit
available to holders of common stock, and the weighted average numberof shares of common stock outstanding for the period.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective fiscal years, including dividends to be paid after the end of therespective fiscal years.
(m) Bonuses to Directors
The estimated amount payable for the next round of directors’ bonuses,
which are classed as expenses for the current year, has been included in
the accounts for the current fiscal year.
(n) Allowance for Long-Term Continuous Service Rewards
In order to set aside money for payment of rewards to employees who
have given long-term continuous service determined in accordance with
the Company’s internal regulations, an allowance for long-term continuous
service rewards is recorded based on the amount the Company andcertain consolidated subsidiaries expect to pay in the future.
(o) Recognition of Revenues and Expenses and Recognition of
Revenue from Customized Software Development
For software development contracts in progress as of December 31, thepercentage-of-completion method is applied in cases where the outcomesof such software development contracts can be estimated reliably. Whenthe percentage-of-completion method is applied, the percentage ofcompletion at the end of the fiscal year is determined based on actual
costs incurred and estimated total contract costs. For all other contracts,
the completed-contract method is applied.
(p) Application of Consolidated Taxation System
The Company and certain consolidated subsidiaries have adopted theconsolidated taxation system.
(q) Changes in Accounting Policies(Application of Accounting Standard for Business Combinations)
From the year ended December 31, 2016, the Company applied the
Accounting Standard for Business Combinations (ASBJ Statement No. 21,
September 13, 2013), the Accounting Standard for Consolidated Financial
Statements (ASBJ Statement No. 22, September 13, 2013), the AccountingStandard for Business Divestitures (ASBJ Statement No. 7, September 13,2013), and other standards. As a result, any difference arising from achange in the Company’s ownership interest in a subsidiary when the
Company retains control over the subsidiary is accounted for in capitalsurplus, and acquisition-related costs are expensed in the year in whichsuch costs are incurred. For a business combination on or after the
beginning of the year, the Company changed to a method to reflectrevisions due to the finalization of the purchase price allocation based on
the provisional amount recognized in the consolidated financial statements
for the fiscal year in which the business combination occurs. In addition,
the presentation of net income was amended and minority interests waschanged to non-controlling interests. The consolidated financial statements
for the previous fiscal year were restated to reflect the change inpresentation.
The aforementioned accounting standards were adopted from the
beginning of the fiscal year ended December 31, 2016, according to thetransitional treatment provided for in Paragraph 58-2 (4) of the AccountingStandard for Business Combinations, Paragraph 44-5 (4) of the AccountingStandard for Consolidated Financial Statements and Paragraph 57-4 (4) of
the Accounting Standard for Business Divestitures.
In the consolidated statement of cash flows for the fiscal year ended
December 31, 2016, cash flows from changes in ownership interests in
subsidiaries that did not result in a change in the scope of consolidation
are recognized under “cash flows from financing activities.” Cash flows forcosts related to the purchase of ownership interests in subsidiaries that
result in a change in the scope of consolidation or which do not result insuch change are recognized under “cash flows from operating activities.”
There was no financial impact on the consolidated financial statements
or per-share information as a result of the changes in accounting policies
for the year ended December 31, 2016.
(Application of Practical Solution on Change in Depreciation Owing to Tax
System Reform in 2016)
In line with tax system reform, from the year ended December 31, 2016,
the Company applied the Practical Solution on Change in Depreciation
Owing to Tax System Reform in 2016 (Practical Issues Task Force No.
32, June 17, 2016). The Company changed from declining-balance tostraight-line depreciation for furniture, fixtures and structures acquiredon or after April 1, 2016.
The impacts of these changes on operating income, ordinary income,and profit before income taxes for the year ended December 31, 2016,
were minimal.
(r) Accounting Standards Not Yet Applied• Guidance on Recoverability of Deferred Tax Assets(ASBJ Guidance No. 26, March 28, 2016)(1) Overview
Entities are classified into one of five categories under the framework
applied in Auditing Guidance No. 66, “Auditing Treatment for Judgmentof Recoverability of Deferred Assets”, with regard to assessing therecoverability of deferred tax assets. The Company basically follows theframework for estimating total deferred tax assets in keeping with therelevant categories, making the necessary adjustments for the following
treatments:(I) Treatment for entities that do not satisfy any criteria for categories
1 through 5(II) Criteria for categories 2 and 3(III) Treatment for unscheduled deductible temporary differences at
category 2 entities

51

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Canon Marketing Japan Inc. Annual Report 2016

(IV) Treatment for determining reasonable estimable periods of futuretaxable income prior to adjustments for deductible temporary
differences at category 3 entities(V) Treatment for situations in which entities that satisfy the criteria forcategory 4 are classified in category 2 or 3

3(2) Application Date
The changes will be applied from the beginning of the fiscal year ending
December 31, 2017.
(3) Effect of Applying Accounting Standards
The effects of the adoption of the accounting standards are currently being
evaluated.

Assets Pledged as Collateral
Assets pledged as collateral as of December 31, 2016 and 2015 were as follows:(1) Pledged assets
Millions of yen

2016Time deposits

¥ 55

2015
¥

62

Land

—

647

Buildings

—

437

Total

¥ 55

¥ 1,146(2) Liabilities secured by the above assets
Millions of yen

Accounts payable
Total

4

2016

2015

—

¥ 301

—

¥ 301

Contingent Liabilities
Contingent liabilities as of December 31, 2016 and 2015 were as follows:
Millions of yen

Guarantees for employees’ housing loans
Total

2016

2015

¥ 25

¥ 37

¥ 25

¥ 37

Canon Marketing Japan Inc. Annual Report 2016

5

Inventories
Inventories as of December 31, 2016 and 2015 were composed of the following:
Millions of yen

2016

2015

Merchandise¥ 25,888¥ 25,801

Service parts

2,383

2,526

Work in progress

834

792

Supplies

742

735

Other

133

152

¥ 29,980¥ 30,006

Total

Note: For the software development contracts from which contract losses are expected, the inventory relating to such contracts and relevant reserves for contract losses do not
offset each other and have been recorded in gross amounts in current assets and current liabilities, respectively.

6

Other Comprehensive Income (Loss)
The following table shows amount arising during the year, reclassification adjustments, pre-tax amount, tax effect and net-of-tax amount for eachcomponent of other comprehensive income (loss) for the years ended December 31, 2016 and 2015.
2016

2015

Net unrealized gains or losses on available-for-sale securities
Amount arising during the year
Reclassification adjustments

¥

(29)

¥ 1,551

(661)

(82)

Pre-tax amount

(690)

1,469

Tax effect

243

(398)

Net-of-tax amount

(447)

1,071

Deferred gains or losses on hedges
Amount arising during the year
Pre-tax amountTax effectNet-of-tax amount

(22)

1

(22)

1

7

—

(15)

1

Foreign currency translation adjustments
Amount arising during the year
Pre-tax amount

(81)

(20)

(81)

(20)

Tax effect——Net-of-tax amount

(81)

(20)

(10,506)(661)(1,511)(1,155)(12,017)(1,816)

Remeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments
Pre-tax amountTax effect

3,697

573

Net-of-tax amount(8,320)(1,243)¥ (8,863)¥ (191)

Total other comprehensive income (loss)

53

54

Canon Marketing Japan Inc. Annual Report 20167

Consolidated Statement of Changes in Net Assets
Current Fiscal Year (from January 1, 2016 to December 31, 2016)
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

Increase

Decrease

End of the current fiscal year

(Thousands of shares)(Thousands of shares)(Thousands of shares)(Thousands of shares)

151,080
151,080————

151,080
151,080

21,40821,4081
1——

21,40921,409Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Note: The increase of 1 thousand shares of treasury stock was due to the purchase of fractional stock.

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

Total dividends

Dividend per share(Millions of yen)

(Yen)

Common stock¥ 3,242

Common stock¥ 2,593

Type of stock

March 29, 2016
General stockholders’ meeting
July 25, 2016
Board of Directors’ meeting

Base date

Date effective¥ 25

December 31, 2015

March 30, 2016

¥ 20

June 30, 2016

August 26, 2016

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

Type of stock

March 29, 2017
General stockholders’ meeting Common stock

Funds used to pay
the dividend

Total dividends

Dividend per share(Millions of yen)

(Yen)

Retained earnings¥ 3,890¥ 30

Base date

Date effective

December 31, 2016

March 30, 2017

Previous Fiscal Year (from January 1, 2015 to December 31, 2015)
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

Increase

Decrease

End of the current fiscal year

(Thousands of shares)(Thousands of shares)(Thousands of shares)(Thousands of shares)

151,080
151,080————

151,080
151,080

21,405
21,4053
3

0
021,40821,408Issued stock
Common stock
Total
Treasury stock
Common stock
Total

Notes: 1. The increase of 3 thousand shares of treasury stock was due to the purchase of fractional stock.
2. The decrease of 0 thousand shares of treasury stock was due to the sale of fractional stock.

2. Matters regarding dividends(1) Payment of dividends
Resolution
March 26, 2015
General stockholders’ meeting
July 22, 2015
Board of Directors’ meeting

Total dividends

Dividend per share(Millions of yen)

(Yen)

Common stock¥ 3,242

Common stock¥ 2,593

Type of stock

Base date

Date effective¥ 25

December 31, 2014

March 27, 2015

¥ 20

June 30, 2015

August 26, 2015

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

Type of stock

March 29, 2016
General stockholders’ meeting Common stock

Funds used to pay
the dividend

Total dividends

Dividend per share(Millions of yen)

(Yen)

Retained earnings¥3,242¥25

Base date

Date effective

December 31, 2015 March 30, 2016

Canon Marketing Japan Inc. Annual Report 2016

8

Financial Instruments
1. Information on financial instruments(1) Policies for financial instruments
The Group limits its asset management to financial instrumentscharacterized as very safe and believes that financing should mainly be
conducted through the use of Group finances whenever necessary. The
Company enters into derivative transactions to hedge against foreignexchange fluctuation risks and not for speculative purposes.
(2) Types and risks of financial instruments and systems to control thoserisks
Operating receivables, consisting of notes and accounts receivable, areexposed to credit risks of customers. The Group strives to mitigate theserisks by strict credit control utilizing credit information provided by external
credit agencies, as well as by credit insurance and other risk-hedging
means.
Short-term loans receivable are mainly the loans to the parent
company by the Company, rendered in compliance with the internal
regulations for investment and management of funds.
Short-term investments in securities and investments in securities
consist primarily of held-to-maturity debt securities and equity securities
issued by business counterparties of the Group, and are exposed to market
price fluctuation risk. Regarding this risk, the Group periodically monitors
the fair values of the securities and the financial condition of their issuersi.e., business counterparties. In addition, for securities other than held-tomaturity debt securities, the Group continuously reviews the status of
security holdings, taking market conditions and relationships with businesscounterparties into consideration.
Trade payables, consisting of notes and accounts payable, are mainly
those due within six months.
Derivative transactions consist of forward exchange contracts to hedge
against the risks of fluctuations in foreign currency denominated trade
payables.
(3) Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include not only values based onmarket quotations, but also values calculated on a theoretical basis incases where market quotations are not available. Such values may varydepending on different assumptions, as variables are factored into thecalculation of such values.
2. Fair values of financial instruments
The book values of financial instruments in the consolidated balance
sheets as of December 31, 2016 and 2015, their fair values, and thedifferences between the two are as follows. The table below, however,excludes the financial instruments whose fair values are not readily
determinable (see Note 2).

Millions of yen

2016Book value(1) Cash and deposits

Fair value

Difference¥ 76,786¥ 76,786—(2) Notes and accounts receivable

124,475

124,475—(3) Short-term investments in securities and investments in securities

36,81436,814—(4) Short-term loans receivable

90,04490,044—¥ 328,119¥ 328,119—¥ 102,662¥ 102,662—¥ 102,662¥ 102,662—

Total assets(5) Notes and accounts payable
Total liabilities

Millions of yen

2015Book value(1) Cash and deposits(2) Notes and accounts receivable

Fair value

Difference¥ 36,774¥ 36,774—

125,907

125,907—(3) Short-term investments in securities and investments in securities

69,782

69,782—(4) Short-term loans receivable

80,05480,054—¥ 312,517¥ 312,517—¥ 101,834¥ 101,834—¥ 101,834¥ 101,834—

Total assets(5) Notes and accounts payable
Total liabilities

55

56

Canon Marketing Japan Inc. Annual Report 2016

Notes: 1. Calculation methods of fair values of financial instruments and other matters relating to securities are as below:
Assets(1) Cash and deposits, (2) Notes and accounts receivable, and (4) Short-term(3) Short-term investments in securities and investments in securities
loans receivable
The fair values of equity securities are based on the prices at the security
The book values of these assets are used as their fair values, since they are to
exchanges, and those of debt securities are based on the prices at the security
be settled in the short term and accordingly their fair values approximate theirexchanges or quotations obtained from counterparty financial institutions. Details
book values.
of securities by holding objectives are described in Note 9 Securities.
Liabilities(5) Notes and accounts payable
The book values of these liabilities are used as their fair values, since they are to be settled in the short term and accordingly their fair values approximate their book values.
2. The book values of financial instruments whose fair values are not readily determinable as of December 31, 2016 and 2015 were as follows:
Millions of yen

2016

2015

Book value
Equity securities

¥ 439

¥ 312

Investments in investment partnerships

¥ 669

¥ 495

These financial instruments are not included in (3) Short-term investments in securities and investments in securities in the preceding table of fair values, since they do
not have market prices and therefore their fair values are not readily determinable.

3. The redemption schedule of monetary claims and securities with maturities as of December 31, 2016 and 2015 was summarized as follows:
Millions of yen

2016
Due after 1 year Due after 5 years
Due within 1 year
Due after 10 years
but within 5 years but within 10 years
Cash and deposits
Notes and accounts receivable¥ 76,786———

124,475

—

—

—

—

—

—

—

30,500———90,044———¥ 321,805———

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

Millions of yen

2015
Due after 1 year Due after 5 years
Due within 1 year
Due after 10 years
but within 5 years but within 10 years
Cash and deposits
Notes and accounts receivable¥ 36,774———

125,907

—

—

—

—

—

—

—

62,800———80,054———¥ 305,535———

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

Canon Marketing Japan Inc. Annual Report 2016

9

Securities
Securities as of December 31, 2016 and 2015 were classified and included in the following accounts:
Millions of yen

2016

2015

¥ 7,422¥ 7,789

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

30,50062,800¥ 37,922¥ 70,589

The carrying amounts and aggregate fair values of investments in securities at December 31, 2016 and 2015 were as follows:
Millions of yen

2016
Cost

Unrealized gains

Unrealized losses

Fair value

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

¥ 3,030¥ 3,296¥ (24)¥ 6,302

10

2

—

12

¥ 3,040¥ 3,298¥ (24)¥ 6,314

Millions of yen

2015
Cost

Unrealized gains

Unrealized losses

Fair value

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

¥ 3,061¥ 3,942¥ (33)¥ 6,970

11

1

—

12

¥ 3,072¥ 3,943¥ (33)¥ 6,982

Available-for-sale securities whose fair value is not readily determinable as of December 31, 2016 and 2015 were as follows:
Millions of yen

2016

2015

439

¥ 312

Available-for-sale:
Equity securities
Investments in investment partnerships
Total

¥

669

495

¥ 1,108

¥ 807

57

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Canon Marketing Japan Inc. Annual Report 201610

Employees’ Retirement and Severance Benefits
1. Overview
The Company has a defined contribution pension plan, a pension plan witha market-based variable accumulation rate (quasi-cash balance plan), anda lump-sum severance payment plan, and its domestic consolidated
subsidiaries have defined benefit corporate pension plans, and lump-sum

severance payment plans. The Company sometimes provides retiring
employees with extra retirement payments not included in the retirement
benefit obligations actuarially calculated in line with its retirement benefit
accounting.

2. Defined benefit plans(1) Reconciliation of retirement benefit obligations at beginning and end of year
Millions of yen

Retirement benefit obligations at beginning of year
Cumulative effect of changes in accounting policies
Restated balance at beginning of year
Service costs

2016

2015

¥ 207,485¥ 202,476

—

4,062

207,485

206,538

7,040

7,402

Interest costs

2,156

2,110

Actuarial gains and losses

10,255(1,827)

Benefit paid

(6,800)(6,738)

Prior service costs(3,333)—¥ 216,803¥ 207,485

Retirement benefit obligations at end of year
(2) Reconciliation of plan assets at beginning and end of year

Millions of yen

2016

2015

Plan assets at beginning of year

¥ 165,254¥ 165,178

Expected return on plan assets

4,543

4,562

Actuarial gains and losses(3,333)(2,488)Contributions from the employer

3,508

4,174

Benefit paid
Plan assets at end of year

(6,098)(6,172)¥ 163,874¥ 165,254(3) Reconciliation of retirement benefit obligations at beginning and end of year for which the simplified method was applied
Millions of yen

Net defined benefit liabilities at beginning of year
Net periodic benefit costs

2016

2015

¥ 592

¥ 565

112

91

Benefit paid

(32)

(33)

Contributions to plans

(32)

(31)

¥ 640

¥ 592

Net defined benefit liabilities at end of year

(4) Reconciliation of retirement benefit obligations and plan assets at year-end and net defined benefit liabilities and assets in consolidated balance sheets
Millions of yen

Funded retirement benefit obligations

2016

2015

¥ 197,295¥ 190,471

Plan assets

164,163

165,505

33,132

24,966

Unfunded retirement benefit obligations

20,437

17,857¥ 53,569¥ 42,823

Net liabilities and assets in consolidated balance sheets

Net defined benefit liabilities¥ 53,569¥ 42,823

Net liabilities and assets in consolidated balance sheets¥ 53,569¥ 42,823

Note: Includes plans for which the simplified method was applied.

Canon Marketing Japan Inc. Annual Report 2016

(5) Retirement benefit costs
Millions of yen

Service costs

2016

2015

¥ 7,040¥ 7,402

Interest costs

2,156

2,110

Expected return on plan assets(4,543)(4,562)

Amortization of actuarial gains and losses

1,925

1,525

Amortization of prior service costs(3,687)(2,680)Net periodic benefit costs using the simplified method
Retirement benefit costs of defined benefit plans

112

91

¥ 3,003¥ 3,886

Note: In addition to the above retirement benefit costs, the Group recorded ¥433 million (including ¥6 million of special extra retirement payments) and ¥893 million (including¥524 million of special extra retirement payments) for extra retirement payments for the years ended December 31, 2016 and 2015, respectively.

(6) Remeasurements of defined benefit plans before income tax effect adjustment
Changes in unrecognized prior service costs and unrecognized actuarial gains and losses for the years ended December 31, 2016 and 2015 were as follows:
Millions of yen

2016
Unrecognized priorservice costs

At beginning of year

Unrecognized actuarial gains
and losses

Total¥ (9,700)¥ 11,566¥ 1,866

Net change

353

11,66312,016

At end of year

¥ (9,347)¥ 23,229¥ 13,882

Millions of yen

2015
Unrecognized priorservice costs

At beginning of year

Unrecognized actuarial gains
and losses

Total¥ (12,380)¥ 12,430

Net change

2,680

(864)

¥

1,816

50

At end of year

¥ (9,700)¥ 11,566¥ 1,866

2016

2015

Bonds

16%

24%

Stocks33(7) Plan assets
1. Main components of plan assets
Ratios for main components of plan assets were as follows:

Pooled funds

48

48

Life insurance company general accounts

20

21

Other
Total

13

4

100%

100%

Note: The composition of pooled funds was 50% in bonds and 50% in stocks for the year ended December 31, 2016, and 49% in bonds and 51% in stocks for the year ended
December 31, 2015.

2. Methodology for setting long-term expected rates of return
The long-term expected rate of return on plan assets are determined by considering current and projected plan asset allocations and current andanticipated long-term rates of return from diverse plan assets.

59

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Canon Marketing Japan Inc. Annual Report 2016(8) Actuarial assumptions
The principal actuarial assumptions as of December 31, 2016 and 2015 were as follows:

Discount rates

2016

2015

0.03 - 0.69%

0.1 - 1.2%

Long-term expected rates of return on plan assets

1.0 - 3.0%

1.0 - 3.0%

Estimated rates of salary increases

1.7 - 2.6%

1.7 - 3.0%

3. Defined contribution plan
The required contributions of the Company and consolidated subsidiaries to defined contribution plans totaled ¥2,045 million and ¥1,939 million for theyears ended December 31, 2016 and 2015, respectively.

11

Income Taxes
The effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of December 31, 2016 and 2015, were as follows:
Millions of yen

2016

2015

¥ 1,249¥ 1,898

DEFERRED TAX ASSETS:
Sales promotion expenses

1,188

1,333

Accrued business tax and business office tax

Accrued bonuses to employees

654

668

Loss on disposal and devaluation of inventories

469

400

Provision for loss on orders received

143

175

Net defined benefit liabilities

16,67013,859Loss on devaluation of investments in securities

780

734

Excess amortization of software

735

987

Excess depreciation of fixed assets

727

657

Loss carried forward

429

790

Asset retirement obligations

419

393

Allowance for long-term continuous service rewards

298

303

Loss on valuation of golf club membership

118

123

Lump-sum depreciable assets

101

94

Loss on impairment of fixed assets

68

79

1,209

2,299

Gross deferred tax assets

25,257

24,792

Less: valuation allowance(1,350)(2,460)¥ 23,907¥ 22,332¥

995¥ 1,197

1,407

1,450

Other

Total deferred tax assets
DEFERRED TAX LIABILITIES:Net unrealized gains on available-for-sale securities
Deferred capital gain
Other

50

244

¥ 2,452¥ 2,891

Deferred tax liabilities for land revaluation¥¥

Net deferred tax assets¥ 21,462

Total deferred tax liabilities

7

26¥ 19,467

Canon Marketing Japan Inc. Annual Report 2016

A reconciliation between the statutory income tax rate and the effective income tax rate for the years ended December 31, 2016 and 2015 was as follows:

2016

2015

33.0 %

35.0 %

Entertainment and other expenses permanently not deductible for tax purposes

1.0

1.2

Per-capita levy of inhabitants’ taxes

1.2

1.2

Valuation allowance

(1.0)

(1.2)

Dividend income not taxable

(0.0)

(0.0)

Decrease in deferred tax assets due to tax rate changes

1.9

5.9

Other

0.9

0.7

37.0 %

42.8 %

Statutory income tax rate

Effective income tax rate
(Additional Information)
In line with the Japanese Diet’s enactment on March 29, 2016, of the “Actto Partially Revise the Income Tax Act, etc.”, and the “Act to Partially Revise
the Local Tax Act, etc.”, and the enactment on November 18, 2016, of the“Act for Partial Amendment of the Consumption Tax Act for the Drastic
Reform of the Taxation System for Ensuring Stable Financial Resources forSocial Security” and of the “Act for Partial Amendment of the Local Tax Act
and Local Tax Allocation Act for the Drastic Reform of the Taxation System
for Ensuring Stable Financial Resources for Social Security”, the effective

statutory income tax rate used to calculate deferred tax assets andliabilities declined from 32% to 31%.
As a result of this change, deferred tax assets, net of deferred tax
liabilities, decreased ¥663 million. Income taxes-deferred increased ¥558
million, while net unrealized gains on available-for-sale securities increased¥32 million. Deferred gains or losses on hedges decreased ¥0 million,
while remeasurements of defined benefit plans decreased ¥137 million.

61

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Canon Marketing Japan Inc. Annual Report 2016

12

Segment Information
1. Segment Information(1) Description of Reportable Segments
Reportable segments are constituent units of the Group for which separate
financial information is available and they are subject to periodic reviewsby the Board of Directors to determine the allocation of management
resources and assess their respective operating results.

The Company has four reportable segments, Business Solutions, IT
Solutions, Imaging Systems and Industrial/Medical, all of which are
determined based on the organizational structure of the Group and include
companies of the Group.

Major companies and organizations in each segment
Reportable Segment

Business Solutions

IT Solutions

Imaging Systems

Major companies / organizations
Canon Marketing Japan Inc.
Business Solutions Company
Canon System & Support Inc.
Canon Production Printing Systems Inc.
Canon Marketing Japan Inc.
ITS Company
Canon IT Solutions Inc.
Canon Software Inc.
Canon ITS Medical Inc.
12 other companies
Canon Marketing Japan Inc.
Imaging System Company
Canon Customer Support Inc.
Canon Marketing Japan Inc.
Industrial Equipment-Medical Equipment BusinessIndustrial/Medical

Canon Lifecare Solutions Inc.
3 other companies

Major products and services in each segment
Reportable Segment

Major products / services

Business Solutions

Multifunction Printers (MFPs), print-on-demand (POD) digital presses, Continuous Feed Press, laser
printers, large format ink-jet printers, office-use facsimiles, liquid crystal projectors, document scanners,
industrial printers, teleconference system, network cameras, document solutions, service and support

IT Solutions

Systems Integration services business, IT infrastructure and services business, embedded systems
business, products business

Imaging Systems

Digital cameras, interchangeable lenses, digital video cameras, ink-jet printers, compact photo printers,
personal-use scanners, calculators, commercial imaging equipment

Industrial/Medical

Semiconductor manufacturing equipment, optical measurement equipment, 3D printers, medical
equipment (digital X-ray cameras, ophthalmic equipment), medical system, sterilization and cleaningsystems, fully automated pharmaceutical dispensing systems(2) Methods of measurement for sales, segment income (loss), assets, and other items for reportable segments
Accounting methods for reportable segments are the same as the accounting methods described in Note 2 Summary of significant accounting policies.
Segment income (loss) is measured based on the amount of operating income. Intersegment sales and transfers are based on market prices.

Canon Marketing Japan Inc. Annual Report 2016(3) Information by reportable segment for the years ended December 31, 2016 and 2015 were as follows:
Millions of yen

2016Year ended or as of December 31,
Reportable Segment
Imaging
Systems

Industrial/
Medical

Other¥ 330,334 ¥ 114,180 ¥ 159,207¥ 25,568¥

Business
Solutions

IT Solutions

Total

Adjustments

Consolidated

Net sales:
External customers
Intersegment
Total

—

26,663——25 ¥ 629,314—— ¥ 629,314

26,663 ¥ (26,663)—¥ 330,334 ¥ 140,843 ¥ 159,207¥ 25,568¥

25 ¥ 655,977 ¥ (26,663) ¥ 629,314

Segment income (loss)¥ 11,362 ¥¥¥450 ¥ 27,676— ¥ 27,676

Segment assets¥ 141,484 ¥ 66,926 ¥ 71,021¥ 17,434¥ 9,195 ¥ 306,060¥ 191,668 ¥ 497,728¥ 10,589 ¥¥¥

4,854 ¥ 10,887

123

Other items:
Depreciation and amortization
Amortization of goodwill
Changes in the amount of property, plantand equipment and intangible assets

2,146 ¥

1,562

—

254

—

8,157

4,259

529

452

121 ¥ 14,870— ¥ 14,870

545

—

799

—

799

224

—

13,169—13,169Notes: 1. “Other” represents operating segments which are not included in the reportable segments, and includes operations such as the shared-services business.
2. Major items of adjustments of segment assets are surplus operating funds (cash, cash equivalents and short-term investments in securities) of the Company andassets of administrative departments.
3. Segment income (loss) corresponds to operating income stated on the consolidated statement of income.

Millions of yen

2015Year ended or as of December 31,
Reportable Segment
Imaging
Systems

Industrial/
MedicalOther¥ 326,871 ¥ 112,622 ¥ 178,701¥ 27,153¥

656 ¥ 646,003

Business
Solutions

IT Solutions

Total

Adjustments

Consolidated

Net sales:
External customers
Intersegment——¥ 326,871 ¥ 141,201 ¥ 178,701¥ 27,153¥

656 ¥ 674,582 ¥ (28,579) ¥ 646,003

Segment income (loss)

¥

¥

¥

421 ¥ 26,647

Segment assets¥ 140,511 ¥ 65,305 ¥ 74,981¥ 19,212¥ 9,395 ¥ 309,404 ¥ 177,098 ¥ 486,502¥ 10,680 ¥

¥

¥

Total

—

8,991 ¥

28,5794,136 ¥ 13,842

(743)

—

— ¥ 646,003

28,579 ¥ (28,579)—— ¥ 26,647

Other items:
Depreciation and amortization
Amortization of goodwill
Changes in the amount of property, plantand equipment and intangible assets

2,151 ¥

1,996

170 ¥ 15,524— ¥ 15,524

—

97

—

145

527

—

242

—

242

10,621

2,399

1,080

446

7

14,553—

14,553

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

63

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Canon Marketing Japan Inc. Annual Report 2016

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

2016Year ended or as of December 31,
Reportable Segment

Impairment loss

Business
Solutions

IT Solutions

Imaging
Systems

Industrial/
Medical

¥ 80

—

—

¥ 51

Other

—

Total

¥ 131

Adjustments

Consolidated

—

¥ 131

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

Millions of yen

2015Year ended or as of December 31,
Reportable Segment

Impairment loss

Business
Solutions

IT Solutions

Imaging
Systems

Industrial/
Medical

¥ 3

—

—

—

Other

—

Total

¥ 3

Adjustments

Consolidated—¥ 3

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

2016Year ended or as of December 31,
Reportable Segment
Other

Business
Solutions

IT Solutions

Imaging
Systems

Industrial/
MedicalAmortization of goodwill

—

¥ 254

—

¥ 545

—

Goodwill at December 31, 2016

—

—

—

—

—

Total

Adjustments

Consolidated

¥ 799

—

¥ 799

—

—

—

Millions of yen

2015Year ended or as of December 31,
Reportable Segment
Business
Solutions

IT Solutions

Imaging
Systems

Industrial/
Medical

Other

Total

Adjustments

Consolidated

Amortization of goodwill

—

¥ 97

—

¥ 145

—

¥ 242

—

¥ 242

Goodwill at December 31, 2015

—

¥ 275

—

¥ 545

—

¥ 820

—

¥ 820

5. Information on gain on negative goodwill
There were no applicable items for the years ended December 31, 2016 and 2015.

Canon Marketing Japan Inc. Annual Report 201613

Related Party Transactions
Current Fiscal Year (from January 1, 2016 to December 31, 2016)
Parent company and major corporate stockholders, etc.

Category

Name ofcompany, etc.

Address

Capital orinvestment
capital(Millions ofyen)

Related contents
Percentage
Board
Business possession ofcontents or voting rights members
Businessholding
occupation (Ownership)
relationships
concurrent(%)
positionsContents of transactions

Transaction
amount(Millions ofyen)Accounts

Balance at
end of fiscal
year(Millions ofyen)¥ 212,620

Accounts
payable¥ 70,744¥ 6,371

Accounts
receivableand others¥ 2,235¥ 10,000

Short-term
loans¥ 90,000

Purchases of
products

Parentcompany

Development
andmanufacturing(Ownership)in the office,Canon Inc. Ohta-ku,Tokyo ¥174,762
Direct 58.5
imaging system,
Indirect 0.0
and industrial
equipmentareas

0 holdconcurrent
positionsOperating
Manufacture transactions Sales of officeequipmentof products
andsold byconsumables,
Canon MJ
etc.

Nonoperatingtransactions

Loans ofcapitalNote: Transaction amounts do not include consumption tax, etc., however, the account balances include consumption tax, etc.

Transaction conditions and policies for deciding transaction conditions, etc.
(1) Purchases of products are decided based on price negotiations each fiscal year, after considering market prices and the affiliated company’s proposals
regarding desired prices.
(2) Sales of office equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is not accepted.
Previous Fiscal Year (from January 1, 2015 to December 31, 2015)
Parent company and major corporate stockholders, etc.

Category

Name ofcompany, etc.

Address

Capital orinvestment
capital(Millions ofyen)

Related contents
Percentage
Board
Business possession ofcontents or voting rights members
Businessholding
occupation (Ownership)
relationships
concurrent(%)
positionsContents of transactions

Transaction
amount(Millions ofyen)Accounts

Balance at
end of fiscal
year(Millions ofyen)¥ 226,661

Accounts
payable¥ 69,764¥ 7,051

Accounts
receivableand others¥ 2,766¥ 30,000

Short-term
loans¥ 80,000

Purchases of
products

Parentcompany

Development
andmanufacturing(Ownership)in the office,Canon Inc. Ohta-ku,Tokyo ¥174,762
Direct 58.5
imaging system,
Indirect 0.0
and industrial
equipment
areas

Two hold
concurrent
positionsOperating
Manufacture transactions Sales of officeequipmentof products
andsold byconsumables,
Canon MJ
etc.

Nonoperatingtransactions

Loans ofcapitalNote: Transaction amounts do not include consumption tax, etc., however, the account balances include consumption tax, etc.

Transaction conditions and policies for deciding transaction conditions, etc.
(1) Purchases of products are decided based on price negotiations each fiscal year, after considering market prices and the affiliated company’s proposals
regarding desired prices.
(2) Sales of office equipment and consumables, etc. are subject to similar conditions as general transactions.
(3) With regard to loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is not accepted.

65

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Canon Marketing Japan Inc. Annual Report 201614

Asset Retirement Obligations
The Group recognizes restoration obligations under real estate rental
agreements of buildings and other real estates as asset retirement
obligations.
Instead of recognizing liabilities, the Group reasonably estimates theuncollectible amount of lease deposits relating to the real estate rental

15

agreements, and accounts for the portion of such estimated amountattributable to the current fiscal year as an expense.
The outstanding balances of lease deposits considered uncollectible
as of December 31, 2016 and 2015 were ¥1,860 million and ¥1,832
million, respectively.

Lease Obligations, Long-Term Loans Payable and Deposits
Lease obligations, long-term loans payable and deposits as of December 31, 2016 and 2015 were as follows:
Millions of yen

Average interest rate (2016)

2016

2015

Lease obligations
Current portion of lease obligations¥

Lease obligations (excluding current portion)

Long-term loans payable (excluding current portion)
Deposits
Total

16

—
0.01%

176

¥

222

206

321

382

543

—

—

4,065

4,044

¥ 4,447¥ 4,587

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

The Company has met said criteria and amended its Articles ofIncorporation at the annual general stockholders’ meeting for fiscal 2006.
The Corporate Law provides that an amount equal to 10% of the amountto be disbursed as distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal reserve) be transferredto the capital reserve and the legal reserve, respectively, until the sum of
the capital reserve and the legal reserve equals 25% of the common stock
account. However, such appropriation cannot be made if the aggregate
amount of the legal reserve exceeds 25% of common stock (i.e. theaggregate amount of the Company’s legal reserve has already reached
25% of its common stock).

Canon Marketing Japan Inc. Annual Report 2016

Independent Auditor’s Report

67

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Canon Marketing Japan Inc. Annual Report 2016

Canon MJ Group Companies
As of April 1, 2017

Segment

Company nameLines of businessBusiness Solutions

Canon System & Support Inc.

Solutions consulting, sales, support, and maintenance services, mainly for
Canon’s products

Canon Production Printing Systems Inc.

Sales and maintenance services for production printers and consumables, development
and delivery of workflow systems, and provision of printing services

Commercial Printing Lab Inc.

Creation of digital printing business, content production, and printing business(inkjet continuous feed printers, production printers, and offset printing machinery)

Canon BizAttenda Inc.

Consulting, support for business process optimization, back office business processoptimization, office support, contact center, temp staffing, and services

A&A Co., Ltd.

Exclusive domestic sales, including for Japanese localization of Vectorworks 3D computeraided design (CAD) software, and planning, development, and sales of related software

Canon IT Solutions Inc.

Systems integration (SI) and consulting, IT services, and software development and sales

Canon Software Inc.

Development of embedded software development and quality verification services

SuperStream Inc.

Planning, development, and sales of SuperStream NX management infrastructure solution
for accounting and salaries

Qualysite Technologies Inc.

Java systems development, and data center operations, maintenance, and auxiliary
services

Edifist Learning Inc.

Human resources development consulting, training, and auxiliary services

Canon Software America, Inc.

Development of business applications software and document solutions for Group
companies

Canon Information Systems (Shanghai) Inc.

SI and consulting for Japanese and Group companies and development and sales ofsoftware relating to Canon products

Canon IT Solutions (Thailand) Co., Ltd.

Business liaison for Group companies in Thailand and Vietnam

Material Automation (Thailand) Co., Ltd.

Proposals, sales, and service related to IT hardware through software

ASAHI-M.A.T. Co., Ltd.

Sales and support for CAD, manufacturing, and engineering in Thailand

MAT Vietnam Company Limited

Proposals, sales, and service related to IT hardware through software in Vietnam

Imaging Systems

Canon Customer Support Inc.

Contact center operations focusing on Canon’s consumer products, consumer productservices, and photo business support

Industrial / Medical

Canon Lifecare Solutions Inc.

Sales of medical and healthcare devices equipment and related consumables andmedical imaging systems

ELQUEST CORPORATION

Design, production, and sales of dispensing, infection prevention, medical, and healthcare
equipment

Canon ITS Medical Inc.

Providing IT solutions for the medical and healthcare field, systems development, network
construction, and hardware sales

AZE, Ltd.

3D medical image analysis and other systems development, production, and sales

Canon Business Support Inc.

Facilities management and real estate and office services for Group companies

IT Solutions

Shared services

The Group comprises 25 consolidated subsidiaries (including domain name management companies).

Canon Marketing Japan Inc. Annual Report 2016

Corporate Data
Headquarters

Number of Stockholders

Canon S Tower, 16-6, Konan 2-chome, Minato-ku,

13,170Tokyo 108-8011, Japan

Number of Employees

Date of Establishment

Consolidated: 18,011

February 1, 1968

Non-consolidated: 5,332

Common Stock(As of December 31, 2016)¥73,303,082,757

Main Locations of Operations

Number of Shares Issued

Headquarters, Makuhari office and branches

151,079,972 shares(Sapporo, Sendai, Nagoya, Osaka, Hiroshima, and Fukuoka)(As of April 1, 2017)

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

Major Stockholders
Name of stockholder

Number of shares held
(thousands)

Percentage of ownership(%)

75,708
6,298
2,644
2,125
1,507
1,402
1,213
1,163
1,001
969

58.4%
4.9
2.0
1.6
1.2
1.1
0.9
0.9
0.8
0.7

Canon Inc.
Canon Marketing Japan Group Employee Stock Ownership Association
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
STATE STREET BANK AND TRUST COMPANY 505001
CBNY-GOVERNMENT OF NORWAY
Canon Marketing Japan Group Business Partner Stock Ownership Association
Japan Trustee Services Bank, Ltd. (Trust Account 9)
Mizuho Bank, Ltd.
THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT
Note: The percentage of ownership is calculated excluding the number of treasury stock (21,409,021 shares).

Shareholder Composition

Canon MJ Investor Relations Website

Financial Institutions
9.5%

Canon MJ maintains a comprehensive investor relations (IR) website to further

Securities Companies
0.5%

facilitate communication with stockholders. The website contains:

Treasury Stock
14.2%• News for investors
Other Domestic Companies
51.3%

Individuals and Others
12.9%• IR calendar• Financial results and other financial information• Information on Long-Term Management Objectives Phase III (FY2016–2020)and Three-Year Management Plan

Foreign Companies, etc.
11.6%

• Stock information• Annual reports

http://cweb.canon.jp/eng/ir/
Stock Price Range and Trading Volume
3,000

Stock Price (Yen)

Trading Volume (Shares)
10,000,000

2,500

8,000,000

2,000
6,000,000
1,500
4,000,000
1,000
2,000,000

500
0

2014
1

3

5

7

9

11

2015
1

3

5

7

9

11

2016
1

3

5

7

9

11

2017
1

0
3

69

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

Canon Marketing Japan Website(Investor Relations)
http://cweb.canon.jp/eng/ir/

Printed in Japan