Notice of Convocation(Translation for Reference)
This is a translation of the original convocation in Japanese language for convenience purposes only, and in the event of any discrepancy, the Japanese language shall prevail. NOTICE OF CONVOCATION OF THE 52ND ORDINARY GENERAL MEETING OF SHAREHOLDERS
DATE AND TIME: March 26 (Thursday), 2020 at 10:00 a.m. (Japan time) Index PLACE: Headquarters of Canon Marketing Japan Inc. NOTICE OF CONVOCATION ………………………………………………… 3 CANON HALL S, 3rd floor of CANON S TOWER REFERENCE DOCUMENTS FOR GENERAL MEETING OF SHAREHOLDERS…… 7 16-6, Konan 2-chome, Minato-ku, Tokyo BUSINESS REPORT………………………………………………………… 19 CONSOLIDATED FINANCIAL STATEMENTS………………………………… 34 NON-CONSOLIDATED FINANCIAL STATEMENTS…………………………… 36 AUDIT REPORTS…………………………………………………………… 38
Securities Code: 8060 To Our Shareholders
We would like to extend our sincerest gratitude to all of our shareholders for their continued support. Canon Marketing Japan Inc. is pleased to present this notice to convene the 52nd Ordinary General Meeting of Shareholders.
Looking back at our Group performance over the fiscal year in review (from January 1, 2019 to December 31, 2019), despite expansion in IT solutions, which is positioned as a growth business, we recorded a slight decline in sales, reflecting sluggish conditions on markets for digital SLR cameras and home-use inkjet printers. However, IT solutions generated higher gross profit on the back of increased sales, and operating income also rose, reflecting the continued reduction of SG&A expenses. At the 52nd Ordinary General Meeting of Shareholders, we will be proposing a year-end dividends of 30 yen per share. Together with the interim dividends (30 yen per share), this will bring the full-year dividends to 60 yen per share (unchanged from the previous fiscal year). Under our Three-Year Management Plan 2020 to 2022, we expect that market conditions for Canon main products such as cameras and printers will remain challenging. However, we will maintain profitability by increasing productivity through efficient business operations. We will also further strengthen IT solutions, which remains a pillar of growth, and improve their profitability. Through this, we aim to achieve growth in both sales and profits. We sincerely appreciate the continued support of our valued shareholders. Masahiro Sakata March 2020 President & Representative Director
Cover Photo: The Val d'Orcia in Italy from the 2020 Canon Marketing Japan Calendar “World Heritage Journey Sekaiisan wo Tazunete” by Kazuyoshi Nomachi
1 Canon Marketing Japan Inc. Results Highlights (Figures are rounded to the nearest unit) Fiscal year Net sales (Billions of yen) (Billions of yen) Comparison with Operating income Comparison with previous period previous period 0.1 12.1 646.0 629.3 632.2 621.6 621.1 32.4 30.4 28.9 26.6 27.7
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Ordinary income (Billions of yen) Pro t attributable to owners of parent (Billions of yen) Comparison with Comparison with previous period previous period 11.2 6.8 33. 31.5 30.5 28.0 28.7 20.7 20.8 22.3 18.2 15.7
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Pro t attributable to owners of parent per share (Yen) 172 159 161 140 Please see our website for more detailed business 121 results.
canon.jp/8060e-ir
2015 2016 2017 2018 2019
Canon Marketing Japan Inc. 2 NOTICE OF CONVOCATION
TO OUR SHAREHOLDER Securities Code: 8060 March 3, 2020 Canon Marketing Japan Inc. 16-6, Konan 2-chome, Minato-ku, Tokyo Masahiro Sakata President & Representative Director
NOTICE OF CONVOCATION OF THE 52ND ORDINARY GENERAL MEETING OF SHAREHOLDERS Notice is hereby given that the 52nd Ordinary General Meeting of Shareholders of Canon Marketing Japan Inc. (the “Company”) will be held as described below and that you are invited to attend the Meeting. If you do not expect to attend the Meeting, you may exercise your voting rights in writing or by the Internet, etc. After reviewing the following Reference Documents for General Meeting of Shareholders, please exercise your voting rights by no later than 5:30 p.m. on March 25 (Wednesday), 2020 (Japan time).
1. DATE AND TIME: March 26 (Thursday), 2020 at 10:00 a.m. (Japan time) 2. PLACE: Headquarters of the Company CANON HALL S, 3rd floor of CANON S TOWER 16-6, Konan 2-chome, Minato-ku, Tokyo 3. MATTERS CONSTITUTING THE PURPOSE OF THE MEETING Matters to be Reported: 1. Reports on the contents of the Business Report and Consolidated Financial Statements for the 52nd Fiscal Year (from January 1, 2019 to December 31, 2019), and reports on the Auditing Results of Accounting Auditor and Audit & Supervisory Board regarding the Consolidated Financial Statements. 2. Reports on the content of the Non-Consolidated Financial Statements for the 52nd Fiscal Year (from January 1, 2019 to December 31, 2019). Matters to be Resolved upon: Item No. 1 Dividends from Surplus Item No. 2 Election of Six Directors Item No. 3 Election of Three Audit & Supervisory Board Members Item No. 4 Election of Accounting Auditor Item No. 5 Payment of Bonuses to Directors
3 Canon Marketing Japan Inc. Internet (canon.jp/8060-ir). company’s the website on the on posted Financial Statements be will Non-Consolidated Financial Statements and Consolidated Report, Business Shareholders, of Meeting General for Documents Reference to the revisions Any Statements, which Accounting Auditor audited to prepare audit its reports. Financial Non-Consolidated of part (3) are item and above Statements Financial Consolidated of part are above Financial Statements, Board audited Members which to Audit prepare &Supervisory and item their audit (2) reports, Items (1) through (3) Consolidated the of Business above are part Report, Financial Statements and Non-Consolidated (3) Financial Statements to Consolidated Notes and (2) Assets Net in Changes of Statement Consolidated (1) the in included not therefore are and Incorporation of todocuments this attached Notice: Articles Company’s the 4 of 1 Article and regulations followingThe items are onthe Company’s posted website (canon.jp/8060-ir) in accordance with the related laws and pages. following the see etc, Internet, please by the or in writing rights voting exercise of the for procedures the About Meeting. the of place the at receptionist the to Form Voting enclosed the present please Meeting, the attending Upon to be described in the Business Report Business the in described to be Activities Implementation of Outline and Systems Operations Business of Appropriateness Ensuring for Non-Consolidated Statement of Changes in Net Assets and Notes to Non-Consolidated Financial Financial Non-Consolidated to Notes Statements and Assets Net in Changes of Statement Non-Consolidated
Canon Marketing JapanInc. 4
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders NOTICE OF CONVOCATION
Guidance Notes on the Exercise of Voting Rights Your voting rights to be exercised at the General Meetings of Shareholders are important rights. After reviewing the following Reference Documents for the General Meeting of Shareholders (pages 7-18), please exercise your voting rights.
The Voting rights can be exercised in one of the following three ways.
Exercise of Voting Rights by Attending the Meeting
DATE AND TIME: March 26 (Thursday), 2020 at 10:00 a.m. (Japan time)
PLACE: Headquarters of the Company CANON HALL S, 3rd floor of CANON S TOWER 16-6, Konan 2-chome, Minato-ku, Tokyo Please bring and present the enclosed Voting Form to the receptionist at the place of the Meeting.
Exercise of Voting Rights in Writing (Via Postal Mail)
Deadline for exercising voting rights: The Voting Form must reach us no later than 5:30 p.m. on March 25 (Wednesday), 2020 (Japan time)
Please indicate your for/against for each of the propositions on the enclosed Voting Form and return it by postal mail.
Exercise of Voting Rights by Electromagnetic Means (Via the Internet)
Deadline for exercising voting rights: The exercise of voting rights must be made no later than 5:30 p.m. on March 25 (Wednesday), 2020 (Japan time) Please enter your for/against for each of the propositions on the website for the exercise of voting rights (https://soukai.mizuho-tb.co.jp/) and send it.
* If voting rights are exercised in duplicate via the Internet and via postal mail, votes made via the Internet will be deemed to be valid. * If you exercise your voting rights more than once via the Internet, we will treat the last exercise of your voting rights as effective. * Please note that you may not be able to access the website for the exercise of voting rights depending on your Internet operating environment, your Internet service or the model of the device you use. * Any internet connection charges, communication charges or other fees incurred when you access the website for the exercise of voting rights shall be borne by you.
5 Canon Marketing Japan Inc. The electronic voting platform for institutional investors operated by Investor Communications Japan Inc. is available for nominee nominee for available is Inc. Japan Communications Investor in advance. by to proxies) suchplatform use that have applied standing etc. (including banks, operated services &custody astrust such shareholders investors institutional for platform voting electronic The Guidance Notes ontheExercise of Voting viatheInternet, Rights etc. Platform for Exercise Electronic of Voting Rights If you have any questions about use of the voting voting the of use about have you If any questions 4 3 2 1 voting rights voting of exercise the Website for website or “smart voting,” please contact: contact: please voting,” “smart or website Access the website for the exercise of voting rights. voting of exercise the for website Access the resolutions by following the directions on the screen. the on directions the by following resolutions the of disapproval or approval your Indicate form. voting your on shown password your Enter form. voting your on shown code voting your Enter How to the enter the voting code and password https://soukai.mizuho-tb.co.jp/ code. Enter voting button. “Next” Click the on “Log-in” button. Click the on password. Enter “Next” button. “Next” Click the on Operating Hours: 9:00 a.m. to p.m. a.m. (excluding 9:00 9:00 Hours: Operating Saturdays, Sundays and national holidays) (toll-free) 0120-768-524 Telephone: Ltd. Co., Trust &Banking Mizuho Department Agency Transfer Stock Dial: Help Internet * vote and again. form voting the on shown password and code voting byentering your login rights, voting exercise of the website for of version access PC voting,” the please by “smart rights exercising voting your vote your wish to you If after change voting.” ONLY by “smart rights ONCE voting your You exercise can How to code using the QR scan your smartphone Scanning the QR code again can take you to the PC version website for the the for website rights. version voting PC of exercise the to you take can again code QR the Scanning to enter your voting code or password. password. or to voting your code enter having voting to website without You the log-in can 2 1 resolutions by following the directions on the screen. the on directions the by following resolutions the of disapproval or approval your Indicate form. voting the of bottom-right the on printed code QR the Scan * “QRcode” isaregistered ofDENSO trademark WAVE INCORPORATED. “Smart voting” “Smart
Canon Marketing JapanInc. 6
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders REFERENCE DOCUMENTS FOR GENERAL MEETING OF SHAREHOLDERS Item No. 1: Dividends from Surplus We have comprehensively considered the business results, etc. for this Fiscal Year, and propose a year-end dividends as described below. Thus, the full-year dividends will be 60.00 yen per share, which includes interim dividends of 30.00 yen per share. Although it is provided in the Articles of Incorporation that the dividends from surplus, etc. may be decided by a resolution of the board of directors, we have made it a matter to be resolved at this Meeting to have an opportunity to hear the shareholders’ views directly.
1 Type of dividend: Cash
Matters concerning distribution of 30.00 yen per common share of the Company 2 dividend and its total amount: Total amount of dividend 3,889,986,870 yen
3 Effective date of the dividend from surplus: March 27, 2020
70
60
50 30 40 35 35 30 30 25 25 20 14 12 10 10 30 10 25 25 15 20 20 10 10 10 12 0 43rd 44rd 45rd 46rd 47rd 48rd 49rd 50rd 51rd 52nd Business term Business term Business term Business term Business term Business term Business term Business term Business term Business Term (Plan) Full-year dividends Year-end dividends
7 Canon Marketing Japan Inc. Changes inthenumberofmembersBoard ofDirectors
symbol indicates amember. The organization Committee oftheNominationandRemuneration ispresented onpage15. In the above list forIn the candidates for Committee, as members of the Nomination and Remuneration Directors who currently the serve “ Candidate Item No. Item ofSixDirectors 2:Election 2015 No. 6 5 4 3 2 1 9 1
2016 Appointment Reappointment Reappointment Reappointment Reappointment Reappointment 10 Directors 2 2 New
2017 10 2 2 Independent Independent Independent OutsideDirectors included Independent Outside Outside 2018 2 7 2 Masachika Hirukawa Masahiro Hamada Hatsumi Dobashi 2019 Adachi Osawa Sakata Yoshio 2 6 2 Shiro Akio Name (Candidates) 2020 6 2 2 Service &Support Service Director incharge ofGroup Planning andGroup Director & Vice President Group Auditing Director incharge ofGroup Accounting and Director & Vice President Director ofEnterprise BusinessUnit Director &Senior Vice President Executive President President &Representative Director and Outside DirectorOutside DirectorOutside Present Position andAreas ofResponsibility Directors after theelection after Directors Independence oftheBoard of at theCompany Two out ofsixDirectors Outside Directors Directors Outside ” symbol denotes and the the chairperson “ Independent Independent
Board ofDirectors’ (16/16) (16/16) (14/16) (15/16) (15/16) Attendance at 100% 100% 88% 94% 94% Meetings Canon Marketing JapanInc. Member ofNomination Member Advisory CommitteeAdvisory and Remuneration ” 8
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
Brief personal record, position, business in charge and important concurrent posts Candidate No. As of Apr. 1977: Entered the Company Mar. 2006: Director 1 Mar. 2009: Managing Director Mar. 2011: Director & Senior Vice President Mar. 2013: Director & Senior Vice President Apr. 2013: Company President of Business Solution Company Mar. 2015: President & Representative Director and Executive President (present)
Masahiro Sakata Reason for Nomination as Director (April 11, 1953) Mr. Sakata led various business fields for many years. He has managed the Company as 33,403 shares the President & Representative Director, and has considerable experience, knowledge of management for the Company and excellent expertise. Thus, he has again been selected as a candidate for a Director.
Brief personal record, position, business in charge and important concurrent posts Candidate No. As of Apr. 1982: Entered the Company Jul. 2009: Group Executive of MA Business Sales Headquarters, Business Solutions Company 2 Mar. 2013: Vice President Mar. 2015: Director & Senior Vice President Apr. 2015: Company President of Business Solutions Company Jan. 2018: Director of Enterprise Business Unit (present) Apr. 2019: Director & Senior Vice President (present)
Masachika Adachi Reason for Nomination as Director (March 30, 1960) Mr. Adachi led various business fields for many years. He has held the posts of Director and Executive Officer, and has considerable experience and knowledge of management 13,012 shares for the Company. Thus, he has again been selected as a candidate for a Director.
9 Canon Marketing Japan Inc. Hatsumi Hirukawa Candidate Candidate 3,851 shares 3,851 11,634 shares Appointment 4 3 No. No. New Shiro Hamada (August 31,(August 1961) (January 8, 1965) 8, (January management for the Company and deserves to be involved in the Company’s Company’s Director. for asacandidate the selected newly in been has he Thus, management. involved be to of deserves and Company knowledge the and for experience management considerable has Officer, Executive of post the held has He many for years. Planning fields and Business led has Mr. Hirukawa Hatsumi Director. a for a candidate as selected been again has he Company. Thus, the for management of Director and Executive Officer, and has considerable experience and knowledge of posts the held has He many for years. Accounting Finance and the Mr. field led Hamada Apr. of As Apr. Mar. Apr. Jul. Apr. of As 2018:Jan. Jan. Jan. Apr. Apr. Jul. Jan. Reason forReason Nomination asDirector personalrecord,Brief concurrent position,businessincharge posts andimportant forReason Nomination asDirector personalrecord,Brief concurrent position,businessincharge posts andimportant 2011: 2020: 2020: 1984: 2016: 2019: 1987: 2013: 2015: 2015: 2016: 2017: Entered the Company the Entered Executive Officer Group Executive of Accounting Headquarters (present) Inc. Solutions IT Canon of Headquarters Administrative of Executive Chief Deputy Director in charge of Group Accounting and Group Auditing (present) Accounting Auditing Group Group of in charge and Director President (present) &Vice Director Director of Service & Support Headquarters (present) Headquarters &Support Service of Director Director in charge of Group Planning and Group Service & Support (present) &Support Service Group Planning and Group of in charge Director Vice President (present) Executive Officer Executive Group Planning Headquarters Manager General Senior Group Area Promotion Business Headquarters Company Area Sales Solution Business Company the Entered
Canon Marketing JapanInc. 10
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
Brief personal record, position, business in charge and important concurrent posts Candidate No. As of Apr. 1972: Entered Nichimen Company, Limited (presently Sojitz Corporation) Apr. 2004: Representative Director, President & CEO of Sojitz Corporation 5 Jun. 2005: Representative Director, President & CEO of Sojitz Holdings Corporation Oct. 2005: The corporate name was changed to Sojitz Corporation due to the merger of Sojitz Holdings Corporation and Sojitz Corporation Representative Director, President & CEO of Sojitz Corporation Apr. 2007: Representative Director and Chairman of Sojitz Corporation Jun. 2015: Outside Director of OSJB Holdings Corporation Mar. 2016: Outside Director of the Company (present) Akio Dobashi Jun. 2017: Outside Director of Maeda Corporation (present) (January 2, 1949)
0 shares Important concurrent post
Outside Director of Maeda Corporation Outside Independent Reason for Nomination as Outside Director
Mr. Dobashi has actively performed as a top executive at a general trading company for many years. He has considerable experience and excellent expertise in company management. We assessed that he could accomplish the duties as the Outside Director appropriately from such experience and excellent expertise. Thus, he has again been selected as a candidate for an Outside Director. His term as an Outside Director will be four years as of the close of this Meeting.
11 Canon Marketing Japan Inc. Notes: Candidate 0 shares 5. 4. 3. 2. 1. Outside 6 No. with them. 423ofthe Companies ofJapan to Act thelimitprescribed by lawsArticle andregulations. bereelected, Shouldthey theCompany willcontinuetheaforementioned contract The Company hasentered withMr. andMr. into Dobashi acontract Akio Yoshio definedinParagraph1, Osawa limitingtheamountoftheirdamagescompensationliability therefore, meetsthestandards forStandards for Directors Independence by determined theCompany Independent (pleaseseepage16). and theCompany, is lessthan1%oftheconsolidated revenue theannualamountof thetransactions and theCompany ofSCSKCorporation respectively. Mr. Yoshio Osawa, andtheCompanyCorporation respectively. Similarly, althoughthere are inareas SCSKCorporation transactions suchhasITequipmentandbusinesssalesbetween Sumitomobusiness equipmentsalesbetween andtheCompany, Corporation isless than1%oftheconsolidated revenue theannualamountoftransactions ofSumitomo Mr. Yoshio for Osawa hasworked Sumitomo bothofwhichdobusinesswiththeCompany. andSCSKCorporation, Corporation Althoughthere areinareas transactions suchhas respectively. Mr. therefore, Dobashi, Akio Board (pleaseseepage16). meetstheCompany’s Members Standards forDirectors/Audit Independence Independent &Supervisory between Sojitz Corporation and the Company, the annual amount of the transactions is less than 1% of the consolidated revenue of Sojitz Corporation and the Company for whichdoesbusiness withtheCompany. Corporation, Mr. hasworked Sojitz Dobashi Akio Althoughthere areinareas transactions suchhasbusinessequipmentmaintenance Should Mr. andMr. Dobashi Akio Yoshio Osawa beelected, theCompany bothofthemindependentdirectors undertheregulation willmake ofthe Tokyo Stock Exchange, Inc. None ofthecandidates for theDirectors have any specialinterest intheCompany. Yoshio Osawa (January 22, 1952)(January Independent the close of this Meeting. of close the a as selected asof years two newly be will Director His Outside Director. asan term been Outside an for candidate has he Thus, appropriately. director outside of duties the accomplish could that he weassessed this basis, On in company management. expertise excellent and experience considerable has He many company for years. services IT and company trading at ageneral asatop executive Mr. performed Yoshi actively has Osawa Watch Citizen of Co., Ltd. Director Outside Apr. 2005: Apr. Jun. Apr. of As Apr. 2008: Jun. Apr. Apr. Jun. Mar. Jun. Jun. Reason forReason Nomination Director asOutside concurrent post Important personalrecord,Brief concurrent position,businessincharge posts andimportant 2008: 1975: 2011:
2016: Concurrent post as director of Sumitomo Computer Service Corporation Corporation Service Computer Sumitomo of asdirector post Concurrent 2003: 2013: 2019: Representative Director, Assistant to Corporation Sumitomo PresidentCEO of Director,and Assistant Representative 2013: 2018:
Executive Officer of SumitomoExecutive Officer Corporation (presently SCSK Corporation) Entered Sumitomo Corporation Corporation Sumitomo of Officer Executive Managing and Director Representative Managing of Sumitomo Executive Officer Corporation Corporation Sumitomo of Officer Executive Managing Senior and Director Representative Representative Director, President &COO Corporation SCSK Representative of Adviser of SCSK Corporation Chairman of the Board of the Directors, SCSK Corporation SCSK Directors, the of Board the of Chairman Outside Director of Citizen Watch Citizen of Co., Ltd. Director (present)) Outside Company (present) the of Director Outside
Canon Marketing JapanInc. 12
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT Item No. 3: Election of Three Audit & Supervisory Board Members The term of offices of Audit & Supervisory Board Members Mr. Masahiro Shimizu, Mr. Kunihiko Tedo and Mr. Nobuyasu Kusumi will expire at the end of this Meeting. We would like you to elect three Audit & Supervisory Board Members. Further note that prior consent has been obtained from the Audit & Supervisory Board concerning the submission of this item. The candidates for the Audit & Supervisory Board Members are as follows:
Brief personal record and position Candidate No. As of Apr. 1984: Entered the Company Jul. 2012: Senior General Manager of Consumer Business Promotion Group, Consumer 1 Sales Headquarters, Imaging System Company Jul. 2020: Principal Staff Manager of Consumer East Japan Sales Group, Consumer Business Unit (present)
Reason for Nomination as Audit & Supervisory Board Members Masatoshi Tanise Mr. Masatoshi Tanise led various business fields for many years. He has extensive operational experience and expertise in a wide range of fields and, on this basis, we (March 1, 1962) assessed that he could accomplish the duties as an Audit & Supervisory Board Member 1,625 shares appropriately. Thus, he has been newly selected as a candidate for Audit & Supervisory Board Member.
New Appointment
Brief personal record and position Candidate No. As of Apr. 1984: Entered The Yasuda Fire & Marine Insurance Co., Ltd Apr. 2010: General Manager, Eastern Hokkaido Branch, Sompo Japan Insurance Inc. 2 Jun. 2012: General Manager, Osaka Corporate Sales Dept. 2 and General Manager in charge of Sales Promotion Office Apr. 2016: Executive Officer and Director, Hokkaido Headquarters, Sompo Japan Nipponkoa Insurance Inc. Apr. 2019: Managing Executive Officer and Director, Kanto Headquarters (present) Business Unit (present) Iwao Hashimoto Reason for Nomination as Outside Audit & Supervisory Board Members (June 12, 1961) Mr. Iwao Hashimoto was involved in insurance company management for many years. He 500 shares has extensive experience and expertise in a wide range of fields and, on this basis, we assessed that he could accomplish the duties as an Outside Audit & Supervisory Board New Appointment Outside Independent Member appropriately. Thus, he has been newly selected as a candidate for Outside Audit & Supervisory Board Member. 13 Canon Marketing Japan Inc. Notes: Nobutoshi Matsumoto Candidate 0 shares Appointment 7. 6. 5. 4. 3. 2. 1. 3 No. New damages compensation liability definedinParagraph1,damages compensationliability 423oftheCompanies ofJapanto Act thelimitprescribed by laws Article andregulations. Should Mr. Masatoshi Tanise, Mr. Hashimoto, Iwao andMr. Nobutoshi beelected, Matsumoto theCompany willenter withthemlimitingtheamountoftheir into acontract For years, thepasttwo Mr. Nobutoshi hasreceived Matsumoto compensationfrom CanonasoneofitsExecutives. Inc. ofShareholders Meeting oftheCompany. General Ordinary oftheparentwhich are (subsidiaries company) specifiedrelated oftheCompany. parties Board ofbothcompaniesbefore Member Heplansto the resign asAudit &Supervisory For Board atCanon Precision thepastfive Member years (to thepresent), andCanon Components, Inc. Mr. asan Audit Inc., &Supervisory Nobutoshi hasserved Matsumoto Shareholders oftheCompany. positionHis at Canon Inc. is as shown in in his brief personal record. Mr. Nobutoshi Matsumoto plans to resign from Canon Inc. before the General Ordinary Meeting of For the past five years (to the present), Mr. as an executive (parent company) Nobutoshi at Canon which has is served a specified Matsumoto related Inc., of the Company. party Board Members. Directors/Audit &Supervisory Inc. and Insurance theof Company Sompo Japan Nipponkoa respectively. Mr. Hashimoto, Iwao therefore, meets the Company’s Standards Independence for Independent equipment sales Inc. between Insurance and Sompo Japan the Nipponkoa Company, the annual amount of the is transactions less than 1% of the consolidated revenue whichdoesbusinesswiththeCompany. Inc., Insurance Mr. for Hashimoto JapanNipponkoa hasworked Sompo Althoughthere Iwao are inareas transactions suchhasbusiness Board (pleaseseepage16). Members Standards forDirectors/AuditIndependence Independent &Supervisory Should Mr. Hashimoto beelected, theCompany Iwao himindependentdirector undertheregulation willmake ofthe Tokyo Stock Exchange, HemeetstheCompany’s Inc. Board have Members any specialinterestNone ofthecandidates for intheCompany. theAudit &Supervisory (Match 22, 1962) Outside Supervisory Board Member appropriately. Thus, he has been newly selected as a as selected newly been Member. Board has he Audit & Supervisory Outside candidate for Thus, appropriately. Member & Audit Board Outside an as Supervisory duties the accomplish could he that assessed we basis, this on and, in this field, expertise outstanding and experience extensive has He many years. for Inc. at Canon accounting of operations in charge Mr. been has Matsumoto Nobutoshi Apr. 2014: Finance Div. of Finance Manager Div., of Finance Accounting General Center, 2013:Aug. Apr. 1985: of As Reason for Nomination as Outside Audit & Supervisory Board Members forReason Nomination Audit asOutside &Supervisory personalrecordBrief and position Accounting Headquarters (present) Accounting Headquarters Finance Div., of Manager Finance Accounting Center,General Finance & Finance & Accounting Headquarters Entered Canon Inc.
Canon Marketing JapanInc. 14
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
(Reference) Structure and Other Details of the Board of Directors and the Audit & Supervisory Board Structure of Board of Directors We have established a structure that mainly consists of Representative Directors who oversee company-wide business strategies and their execution, and Executive Directors who oversee each business domain or each headquarters function. In addition, two or more Independent Outside Directors are included as members of the Board of Directors to ensure the soundness of management. The Board of Directors handles important decision-making and oversees the performance status of business operations in accordance with laws and regulations.
Structure of Audit & Supervisory Board As an auditing organization independent from the Board of Directors, the Audit & Supervisory Board consists of persons who have considerable knowledge of the Company’s business and corporate management, and persons who are well-versed in accounting and other professional fields. At least one of the Outside Audit & Supervisory Board Members is a person who satisfies the independence standards and qualifications separately prescribed by the Board of Directors. The Audit & Supervisory Board made up of these Members works together with the accounting auditors and the internal audit division of the Company to audit the execution of duties by Directors and the status of assets of the Company to ensure the soundness of management.
Policies and procedures in the Nomination of Director and Audit & Supervisory Board Member Candidates 1. Policies In principle, we select candidates for Directors and Audit & Supervisory Board Members appointed as higher positions from among the persons who are recognized as being able to perform the corresponding duties fairly and accurately, who have deep insight, and who satisfy the following requirements, regardless of their gender, nationality, age, or other personal attributes.
15 Canon Marketing Japan Inc. consideration Japan’s Corporate Governance Code (Principle exchanges setby securities 4.9)andtheindependencecriteria inJapan. ensuring independence of Independent Directors/Audit Board & Supervisory Members of Canon Marketing Japan Inc., taking into Members” Board resolved Members, in order by the tothe boardstandards clarify of fordirectors with the consent of all Audit & Supervisory Canon Japan Marketing Inc. hereby establishes the “Independence Standards for Independent Directors/Audit Board & Supervisory Japan Inc. Board Members” Standards“Independence for Directors/Audit Independent & Supervisory of Canon Marketing * * * * * (Notes) 7. 6. 5. 4. 3. oranexecuting JapanInc., 2. Alarge personofsuchshareholder shareholder ofCanon Marketing 1. shareholders). independent from the management of Canon Japan Marketing Inc. and unlikely to have conflicts of interest with general and doesnotfallinto any oftheitems below, isan Board Member” Director/Audit“Independent &Supervisory (apersonwhois prescribed by exchanges setbyMembers theCompanies securities ofJapan,andmeetstheindependencecriteria Act inJapan, Board deems that a personwhosatisfies the requirements Japan Inc. forCanon Marketing Outside Directors/Audit & Supervisory recipient isaperson) or1%oftheannualgross sales ofsuchconsultant,etc. (incaseswhere therecipient isanorganization). item 4, In “a large amount” received meansincases where thetotal orotherproperties by amountofmoney saidconsultant,etc., exceeds ¥12million (incaseswhere the this item has applied inany fiscalyearthelast3years). during item 1to 3,and6,an In “executing person” meansanexecutive director, executive officerandemployee includingmanager(initems 1to 3,includingapersonto whom gross incomeofsuchrecipient (incaseswhere therecipient is an organization), for JapanInc. any fiscalyearthelast3years during ofCanon Marketing item 3, In “a large amount” meansincaseswhere exceeds thetotal amountofcontributions ¥12million(incaseswhere therecipient isanindividual)or1%oftheannual item 2, In “a large shareholder” meansashareholder JapanInc. whodirectlyorindirectlyholds5%more ofthetotal votingofCanon Marketing rights JapanGroupclient exceeds orsuchclient. 1%oftheconsolidated salesofCanon Marketing item 1, In “major” meansincaseswhere thetotal JapanGroup amount(for andsuch any Canon between Marketing fiscalyear thelast3fiscalyears) during oftransactions as directors, executive officers of companies and partners of advisory firms as directors, ofadvisory executive officersof companiesandpartners of items 1to 6;provided, however thatthepersonsto executing whom thisisapplicableshallbelimited to personssuch key An immediate familymember(spouseandarelative ofany withintheseconddegree of thepersonslisted ineach ofkinship) Board ofsuchothercompany Member director/Audit andSupervisory An executing personofanothercompany isanoutside JapanInc. incaseswhere anexecuting personofCanon Marketing Group (including any suchaccountantto whomthisitem hasappliedinthelast3fiscalyears) Japan auditofCanon Marketing publicaccountant belonging thestatutory engagedto to conduct theauditfirm A certified organization.) the recipient is a corporation, or partnership any other organization, this item applies to any person belonging to said JapanGroup, Board (if fromMember Canon Marketing other than as compensationfor beingaDirector/Audit &Supervisory A consultant, accounting professional or legal professional who has received a large amount of or money other properties of suchorganization A person/organization receiving JapanGroup, large from amountsofcontributions Canon Marketing oranexecuting person client JapanGroup,the same)isamajorclient,orclientofCanon Marketing oranexecuting personofsuchorganization or hereinafter anditssubsidiaries; JapanInc. A person/organization JapanGroup for (Canon Marketing whichCanon Marketing Independent Directors/Audit Board Members &Supervisory Independence Standards for
Canon Marketing JapanInc. 16
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT Item No. 4: Election of Accounting Auditor Ernst & Young ShinNihon LLC will retire as the Company’s Accounting Auditor due to expiry of its term of office at the conclusion of the Ordinary General Meeting of Shareholders. Based on the decision of the Audit & Supervisory Board, we would like you to elect Deloitte Touche Tohmatsu LLC for the position of Accounting Auditor. Although Ernst & Young ShinNihon LLC has good systems for ensuring that accounting audits are conducted properly and appropriately, given that it has been auditing the Company’s accounts for a long period of time and also prompted by consideration of a change of accounting auditor by Canon Inc., the parent company, the Audit & Supervisory Board judged that it is time for a change of accounting auditor. Accordingly, the Audit & Supervisory Board concluded that Deloitte Touche Tohmatsu LLC is an appropriate candidate for the new accounting auditor given that, in light of its independence, expertise, quality control system and other factors, Deloitte Touche Tohmatsu LLC will conduct audits properly and that a change in accounting auditor can be expected to result in audits from a fresh perspective. Details of the candidate for accounting auditor including its name, main place of business and history, are as follows. (As of December 31, 2019)
Name Deloitte Touche Tohmatsu LLC Main place Marunouchi Nijubashi Building, 3-2-3 of business Marunouchi, Chiyoda-ku, Tokyo History May 1968: Tohmatsu Awoki & Co. established May 1975: Joined Touche Ross International (“TRI”) alliance February 1990: Change the company name to Tohmatsu & Co. July 2009: Converted to a limited liability company and changed company name to Deloitte Touche Tohmatsu LLC Overview Contributed capital 1,041 million yen Partners (Certified Public Accountants) 528 Specified Partners 52 Professional staff (Certified Public Accountants) 2,759 Successful applicants of the CPA examination, 1,078 including junior Certified Public Accountants (includes part-qualified accountants) Other professional staff 2,188 Administrative staff 175 Total 6,780 Number of audit engagements 3,306 (as of the end of May 2019)
17 Canon Marketing Japan Inc. year, etc. year, year, in appreciation theirof during services this fiscal year, which totals ¥35,750,000 considering the results for this fiscal It is that proposed bonuses will paid to be the four Directorsexcluding Director as the Outside the of end this of fiscal Item No. Item 5:Payment to ofBonuses Directors
Canon Marketing JapanInc. 18
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT (January 1, 2019 to December 31, 2019)
1. Current Conditions of Canon Marketing Japan and its consolidated subsidiaries (the “Group”) (1) Business Progress and Achievement General Business Conditions Looking back at the Japanese economy over this year, business confidence continued to deteriorate, especially in the manufacturing industry, amid rising trade tensions. However, businesses tended to increase their IT investment and other capital investment. Meanwhile, the outlook for consumer spending remains unclear, despite measures such as the introduction of reduced tax rates for everyday essentials to limit the impact of the consumption tax hike, and consumer sentiment continued to appear weak. Against this economic backdrop, although sales of IT solutions to large enterprises and SMEs grew, sales of digital SLR cameras, industrial equipment and other products fell, and we recorded net sales of ¥621,134 million (down 0.1% from the previous year). In terms of income, mainly due to higher gross profit on the back of increased sales of IT solutions and lower expenses, we achieved operating income of ¥32,439 million (up 12.1%) and ordinary income of ¥33,937 million (up 11.2%). Profit attributable to owners of parent came to ¥22,250 million (up 6.8%).
Starting with this Year, the segment classification has been changed. In the year-on-year comparisons contained in this report, the prior-year figures have been adjusted to reflect the new classification.
Constitution of Net Sales by Segment Professional Net sales ¥43,675 million 7% Consumers 21% Net sales ¥132,790 million
42% Area Enterprise Net sales ¥195,828 million Net sales ¥268,309 million 30%
The constitution is calculated based on the simple total of Other * the net sales of each segment. * “Other” includes call centers, BPO service business and Net sales ¥(19,470) million elimination of inter-segment transactions.
19 Canon Marketing Japan Inc. 1. Current Conditions of Canon Marketing Japan and its consolidated subsidiaries (the “Group”) subsidiaries consolidated its and Japan Marketing 1. Canon of Current Conditions came to ¥6,865(down 6.5%from theprevious year). As aresult, netsalesinthissegment totaled ¥132,790million(down 11.6%from theprevious year). Operatingincome inproductssuchasgamingPCs. steady performance Sales of IT products declined, reflecting decreased sales of consumables such as SD cards and despite peripherals a year running. to volume. a reduction in printing primarily We maintained the largest for share the sixth of the inkjet market printer offset inkjet printersdecline amid in sluggish home-use conditions. decreased market Sales of owing ink cartridges grewSales ofinkjetprinters mainlydue to tankGIGA strong capacity with theextra-large salesofprinters TANK, which digital camerasrespectively. market. We continuedto for maintaintop shares digital inthemarkets SLRcameras, camerasand compact mirrorless interchangeable lenscamerasalsofell. Meanwhile, digital cameras alsodecreased salesofcompact dueto theshrinking camera. Sales of digital SLR cameras declined as a result of market contraction, and overall sales of digital seen the previous fiscal year,KissM to despite expand sales of products such as EOS efforts RP, a full-frame mirrorless camerasdecreasedSales ofmirrorless growth intheabsenceof sharp inthesales volume ofmodelssuchasEOS Consumers BusinessConditions by Segment EOS RP Printers tank GIGA capacity withtheextra-large TANK Operating income Net sales
¥132,790 Canon Marketing JapanInc. ¥6,865 million million 20
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT Business Conditions by Segment Net sales ¥195,828 million Enterprise Operating income ¥10,070 million
Sales to the financial sector increased, reflecting strong revenue from large projects such as SI projects for securities firms and investment product sales support systems for shinkin banks. Sales to the manufacturing sector grew on the back of steady revenue from a demand forecasting system project for a drinks manufacturer and a large commercial data gathering terminal project for a food manufacturer. Sales to the distribution sector rose, bolstered by steady revenue from a POP production system project for the retail industry, a large office MFP project for the telecommunications industry, and large network camera projects for security firms and trading companies. At Canon IT Solutions Inc., sales of SI services rose slightly due to the acquisition of numerous projects mainly for the manufacturing industry, offsetting the absence of large projects for the financial industry recorded the previous year. Canon IT Solutions also performed well in data center services and won a number of large infrastructure system projects as well as projects in other areas such as embedded system projects. As a result, it reported an increase in sales. Meanwhile, sales of office MFP printers in the Enterprise segment decreased, reflecting the absence of large projects recorded the previous year and tighter control of unprofitable projects. Sales of laser printers grew, largely due to an order received for a large project for a life insurance company.
Laser printers
21 Canon Marketing Japan Inc. sales of highlysales of solutions. profitable IT million (up 19.2%) due to higher gross profit associated ¥14,398 to with increased amounted income Operating year). previous the from aresult,As net sales in this segment totaled ¥268,309 million (up 4.2% the upon efficiency business increasing for replacement business of software PCs. of types various and ESET software antivirus the HOME, for Windows7.support 365 for SalesOffice also service grew, support bundled proposals IT the of cloud-based reflecting increased sharply due to the progressive replacement business of among SMEs PCs as aresult the of end extended of Year, This Inc. System mainly by Canon are & Support provided solutions IT AreaIn the segment, shipment volumes replacement business of PCs. MFPs, to thanks progress expanding sales to industries proposal specific introduction of and active to coincide with the MFPs mainly among core customers. Meanwhile, sales laser of printers grew, despite their continued integration in office Sales business of weak equipment shipment declined, reflecting volumes to SMEs despite expansion in office sales of businesses at Solutions. Canon IT profitable highly in performances strong and sales increased million (up 15.4%) largely due to higher gross profit as aresult of ¥10,070 was income Operating year). previous 4.1% the from aresult,As net sales in this segment totaled ¥195,828 million (up Area BusinessConditions by Segment IT support cloud service, cloudservice, IT support Operating income Net sales HOME Nishi-Tokyo DataCenter
¥268,309 ¥14,398 Canon Marketing JapanInc. “ESET” software security million million 22
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT Business Conditions by Segment Net sales ¥43,675 million Professional Operating income ¥1,617 million
(Production Printing) Sales decreased due to weak business related to continuous feed printers and wide-format printers. (Industrial Equipment) Sales declined due to the termination of a distribution agreement with an overseas manufacturer who was a major customer in the semiconductor sector, despite a strong performance in maintenance services associated with increased plant utilization rates. (Healthcare) Sales rose due to good performances in IT systems for hospitals and digital radiography.
As a result, net sales in this segment totaled ¥43,675 million (down 5.9% from the previous year). However, operating income reached ¥1,617 million (up 89.9%), mainly due to cost cutting.
Digital radiography
23 Canon Marketing Japan Inc. ・ Strengthen2. IT solutions business ・ ・ ・ ・ Canon’s of products major 1. profitability the Maintain initiatives the implementing by below.described performance our improve and operations business our expand to work will We strengthen ourfurther business domain where we can demonstrate our characteristics. to means other and M&A through acquired we strengths other various and capability technological IT the and solutions document through up we built base customer strong the is to business leverage solutions IT in the challenge Our trend. that the market solutions, for IT expect which we position as business, agrowth will remain continue to show an expansionary implement strategies to maintain by profitability increasing even in a contracting market. productivity the other On hand, we printers, MFPs office and laser printers that to we sell, contract and we is believe expected we must urgently formulate and Against this economic backdrop, market the domestic for Canon’s in other major words, products, the digital cameras, inkjet in in financial fluctuations of and capital markets, and other factors. the by caused demand in decline to due consumption hike tax as well surrounding as uncertainty unclear the outcome disputes trade of and overseas economies, remain the impact will economy Japanese the for outlook the that expect We (3) Issues to Addressed be tools, and ancillary and facilities fittings, fixtures at our Nishi-Tokyo Data Center. capital expendituresThe by the Group during this fiscal year totaled ¥19,921 million, which are mainly as rented assets, (2) Expenditures Capital Achieve high in SI business services productivity and expansion in business scale Laser printersLaser Inkjet printers Inkjet cameras digital lens Interchangeable Office MFPs Office we will translate this into increase cartridges. sales of We will continue to sales to expand industries specific with large printing volumes to increase our market share and provision-based SI utilizing software. packaged shift from existing contract-based system development to proposal-based development and service We will make use of our effective customer base to expand business specific solutions and we will also seek to our of maintenance improvefurther efficiency services. We will to seek increase our market share through competitive and well-aimed solution products proposals as well as We will work to high value expand models added for use home and business printers and tank large printers. capacity also to seek reenergize the market as the leading digital manufacturer. camera We will to seek sales by strengthening expand our lineup mirrorless of cameras focusing models. onfull-frame
Canon Marketing JapanInc. We will 24
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
・Increase added value of IT services business The Nishi-Tokyo Data Center, including Phase II which will go into operation this year, will play a central role in expanding added value business such as system monitoring and security operation and cloud-based services in a bid to strengthen profitability. ・Expand IT solutions business for SMEs As an “IT concierge” that meets the IT needs of SMEs, our largest customer base, we will increase profitability by proposing solutions based on backbone packaged software and security products and by seeking to expand IT-related maintenance services. ・Expand BPO business We will establish businessspecific BPO models based on a thorough knowledge of each type of business and provide services with high levels of expertise and productivity. ・Secure SEs and professional human resources We will seek to increase SEs and human resources with expertise in each business area to accelerate the realization of a growth scenario in the IT solutions business.
Basic Strategy under the Three-Year Management Plan for 2020-2022
Transform into a highly profitable business group Aim to maximize profitability by providing solutions ahead of changes in society and customers
Growth strategy Reinforcement
Focus on the ITS Business of profitability Resolve social issues Maintain profitability of Resolve management issues Canon’s main businesses Provide high-value added Enhance internal business productivity using IT
IT technical strength Canon brand Customer base
25 Canon Marketing Japan Inc. (5) Business Main Note: Profit to owners attributable ofparent pershare iscalculated basedontheweighted average numberofoutstandingshares theyear. during (4) Status of and Assets Earnings Consolidated Profit to owners attributable of Profit to owners attributable of Operating income parent pershare Ordinary income Ordinary parent Professional Consumers Enterprise Total assets Segment (Millions ofyen) (Millions ofyen) (Millions (Millions ofyen) (Millions ofyen) (Millions ofyen) (Millions Net assets Net sales Area
(Millions ofyen) (Millions
(Yen) machines andITsystems to pharmacies (Healthcare) Provides modalities andsolutionsto medicalinstitutions, various aswell asdispensing manufacturers.electronics device andmeasurement mainlyto manufacturers andotherinspection devices semiconductor Equipment) Provides systems(Industrial and manufacturing products suchassemiconductor industry. toprinters theprinting (Production Printing) Provides high-speedcontinuousfeed andhigh-speed cutsheet printers Provides solutionsfor customers ineacharea. small andmedium-sized businessesinJapan. Provides andsolutionsthathelpcustomers inputandoutputdevices solve businessproblems for problems for large companies. Provides to Canonandsolutions thatcontribute inputandoutputdevices solvingbusiness Provides to individualcustomers. productssuchasdigital primarily camerasandinkjetprinters 48th Fiscal Year48th to Dec.31, 2015) (Jan.1, 2015 (Jan.1, 277,438 486,502 646,002 120.84 15,670 28,040 26,647 49th Fiscal Year49th to Dec. 31,2016) (Jan. 1,2016 (Jan. 280,919 497,727 629,313 140.06 18,161 28,717 27,676 50th Fiscal Year50th Business to Dec. 31,2017) (Jan. 1,2017 (Jan. 297,522 510,832 632,189 159.48 20,679 31,491 30,406 51th Fiscal Year51th to Dec. 31,2018) (Jan. 1,2018 (Jan. 303,570 498,790 621,591 160.61 20,826 30,519 28,941
Canon Marketing JapanInc. 52th Fiscal Year52th to Dec. 31,2019) (Jan. 1,2019 (Jan. 325,092 503,698 621,134 171.60 22,250 33,937 32,439 26
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
(6) Main Location of Operations The Company Principal Subsidiaries Headquarters Tokyo Canon IT Solutions Inc. Konan Office Makuhari Office Chiba Canon System & Support Inc. Tokyo Sapporo Branch Hokkaido Canon Production Printing Systems Inc. Sendai Branch Miyagi Nagoya Branch Aichi Canon Lifecare Solutions Inc. Osaka Branch Osaka Hiroshima Branch Hiroshima Fukuoka Branch Fukuoka
(7) Employees Consolidated
Number of Employees Change from the end of the previous year 17,001 persons Decrease of 281 persons from the previous year
Segment Number of Employees Change from the end of the previous year Consumers 547 persons Decrease of 19 persons from the previous year Enterprise 5,080 persons Decrease of 81 persons from the previous year Area 6,309 persons Decrease of 36 persons from the previous year Professional 1,139 persons Decrease of 277 persons from the previous year Other 3,926 persons Increase of 132 persons from the previous year
27 Canon Marketing Japan Inc. 2. 1. number consolidated of The subsidiaries was 19. (8) Parent Company Subsidiaries Principal and Company’s profit is not in with harmed the the transactions Parent company. the and Parent the Company is secured, from independence certain judgments, management Company’s own the on based Thus, the directorsboard of assesses that the Company is conducting business and managementmaking activities decisions CompanyThe lends funds to the Parent Company by the interest rates determined reasonably into taking account market rates. CompanyThe sells consumables equipment for to office the Parent Company terms onthe same based as regular transactions. prices. market terms are negotiated and determined for each year by presenting the preferred prices from the Company into taking account substratecrystal exposure devices, by Parent manufactured Company under the In Canon brand. purchasing the such products, CompanyThe holds the exclusive right to sell within Japan excluding all products, semiconductor exposure devices and liquid Principal Subsidiaries Matters aboutthe Transactions withParent Company, etc. Parent Company Consolidated Status Canon Inc. The Company transferred all shares of its subsidiary Canon Lifecare Solutions Inc. to Canon Medical Systems Systems Medical Canon to Inc. Solutions Corporation 1, onJanuary 2020. Lifecare Canon subsidiary its of shares all transferred Company The Company Parent Name Canon Production Printing Systems Inc. Canon System Inc. & Support Canon Lifecare Solutions Inc. Canon IT Solutions Inc. Ohta-ku Ohta-ku Location Tokyo Company Name industrial equipment industrial of theoffice, imaging systems and andproductioninthefield Development Activities (millions of yen) of (millions Capital StockCapital 2,744 2,533 4,561 3,617 Ratio of Voting Rights Rights Voting of Ratio of the Company (%) Company the of Number of Voting Voting of Number 100.0 100.0 100.0 100.0 Rights (Ratio of of (Ratio Rights Voting Rights) 757,086 (58.5%) and consumablesmedicalimage systems Sales ofmedicalequipment,healthcare related equipment etc. andprovision etc. services, ofprinting services, aswellsheet printers asconsumables, provision ofmaintenance Sales ofhigh-speedcontinuousfeed andhigh-speedcut printers Canon productsandtheITsolutions ofothercompanies for Consulting, andmaintenance services sales, support softwares various anddevelopment andsaleof SI andconsulting, ITservice the Parent Company intheJapanmarket. by oftheproductsmanufactured andmarketing services The Company iscomprehensively to sales, conducting Relation with the Company the with Relation Business
Canon Marketing JapanInc. 28
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
2. Status of Shares of the Company
(1) Total Number of Shares Authorized 299,500,000 shares
(2) Total Number of Issued Shares, Capital Stock, Number of Shareholders As of the end of the Previous Year Change during This Year As of the end of This Year Total number of issued shares (shares) 151,079,972 - 151,079,972 Capital stock (yen) 73,303,082,757 - 73,303,082,757 Number of shareholders (persons) 12,406 Decrease of 964 11,442
(3) Major Shareholders Name of Shareholders Number of Shares Held (thousands of shares) Shareholding Ratio (%) Canon Inc. 75,708 58.4 Canon Marketing Japan Group Employee Stock Ownership Association 5,753 4.4 The Master Trust Bank of Japan, Ltd. (Trust account) 3,752 2.9 Japan Trustee Services Bank, Ltd. (Trust account) 2,611 2.0 STATE STREET BANK AND TRUST COMPANY 505001 1,623 1.3 Japan Trustee Services Bank, Ltd. (Trust account 9) 1,405 1.1 The Bank of New York, Treaty JASDEC Account 1,250 1.0 Canon Marketing Japan Group Business Partner Stock Ownership Association 1,215 0.9 Japan Trustee Services Bank, Ltd. (Trust account 5) 1,139 0.9 Mizuho Bank, Ltd. 1,001 0.8 Note: The shareholding ratio is calculated by deducting the number of treasury shares (21,413,743 shares) from the total number of issued shares.
(4) Shareholding Ratio by Category
Financial Foreign Individuals Treasury shares institutions Other domestic companies companies, etc. and others 11.3% 51.1% 11.2% 11.5% 14.2%
Securities companies 0.7%
29 Canon Marketing Japan Inc. Notes: (1) and Directors Board Audit Members &Supervisory
3.Status of Directors and Audit &Supervisory Board Members President & Representative Director Director President &Representative Audit & Supervisory Board Member Board Audit & Supervisory Member Board Audit & Supervisory Member Board Audit & Supervisory Member Board Audit & Supervisory Member Board Audit & Supervisory Director Senior Vice President Vice Senior Director President Vice Senior Director 2. 1. Mr. andMr. Dobashi Akio Yoshio Osawa allofwhomare Directors are OutsideDirectors. 3. 4. 5. 6. 7. the Company islisted asprovided undertheregulations of Tokyo Stock Exchange, Inc. Mr. Board to Members NobuyasuKusumiandMr. ShigeoHasegawa asindependentAuditTokyo &Supervisory Stock Exchange, onwhich Inc. The Company hasnotifiedDirectors Mr. andMr. Dobashi Akio Yoshio Board Members Osawa asindependentdirectors andAudit &Supervisory the limit of amount set forth intheParagraphthe limitofamountsetforth 425oftheCompanies ofJapan. Act 1,Article Board to limittheirliabilitiesto Members compensate damagesunderParagraph 423oftheCompanies ofJapan, to Act 1,Article Supervisory The Company has entered into contracts, in accordance with the of Articles Incorporation, with the Outside Director and the Audit & Supervisory Board Members. Supervisory Mr. Kunihiko Tedo, Mr. Board NobuyasuKusumiandMr. are Members Outside Audit & ShigeoHasegawa all of whomare Audit & Supervisory wealth of expertise infinanceandaccounting. wealth ofexpertise in the Company Board and has accounting experience Members forMr. many years Masahiro and Shimizu has is a an Audit & Supervisory and has a wealth of expertise infinanceandaccounting. and hasawealth ofexpertise Mr. Kunihiko Tedo inCanonourparent Board Inc., andhasaccountingexperience company, Members isAudit for &Supervisory many years finance andaccounting. Public in Board andqualified as Accountanta Certified Member Mr. andhasa wealth ofexpertise Shigeo Hasegawa is Audit & Supervisory Director Vice President Vice Director Executive President Director Director Position Yoshiyuki Matsusaka Nobuyasu Kusumi Nobuyasu Masachika Adachi Masachika Shigeo Hasegawa Shigeo Masahiro Shimizu Masahiro Masahiro Sakata Masahiro Shinichi Inoue Kunihiko Tedo Shiro Hamada Yoshio Osawa Akio Dobashi Akio Name Director in charge of Video Solutions Co-creation Center Co-creation Solutions Video of in charge Director Unit Consumer Business of Director EC Planning Center and Marketing Digital of in charge Director Communications Group Planning and Group of in charge Director Outside Director of Citizen Watch Citizen of Co., Ltd. Director Outside Outside Director of Maeda Corporation Accounting Audits Group Group of in charge and Director Unit Business Enterprise of Director Business in Charge or Important Concurrent Posts Concurrent Important in or Charge Business
Canon Marketing JapanInc. 30
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
(2) Remuneration to Directors and Audit & Supervisory Board Members Directors 7 persons ¥296 million Audit & Supervisory Board Members 5 persons ¥104 million Notes: 1. The total amount of remuneration paid to 2 Outside Directors and 3 Outside Audit & Supervisory Board Members is ¥77 million. 2. The above number includes one Director who retired at the close of the 51st Ordinary General Meeting of Shareholders held on March 27, 2019. 3. Directors’ remuneration include provision for directors’ bonuses for this fiscal year in the amount of ¥35 million.
(3) Status of Outside Director and Outside Audit & Supervisory Board Members Relation Between Important Organization of Concurrent Post and the Company
Name Concurrent Post Organization of Concurrent Post Relation with The Company
Akio Dobashi Outside Director Maeda Corporation No special relation (Outside Director)
Yoshio Osawa Outside Director Citizen Watch Co., Ltd. No special relation (Outside Director)
Principal Activities
Name Principal Activities
Akio Dobashi Attended 14 out of the 16 Board of Directors meetings held during this fiscal year, and provided input based on (Outside Director) his experience and knowledge in the field of corporate management.
Yoshio Osawa Attended all 16 Board of Directors meetings held during this fiscal year, and provided input based on his (Outside Director) experience and knowledge in the field of corporate management.
Kunihiko Tedo Attended all of 16 Board of Directors meetings and 18 out of 20 Audit & Supervisory Board meetings held (Outside Audit & Supervisory during this fiscal year and provided input based on his experience and knowledge in the field of accounting. Board Member) Nobuyasu Kusumi Attended all of 16 Board of Directors meetings and all of 20 Audit & Supervisory Board meetings held during (Outside Audit & Supervisory this fiscal year, and provided input based on his experience and knowledge in the field of corporate Board Member) management. Shigeo Hasegawa Attended 15 out of 16 Board of Directors meetings and all of 20 Audit & Supervisory Board meetings held (Outside Audit & Supervisory during this fiscal year and provided input based on his insight as a Certified Public Accountant when necessary. Board Member)
31 Canon Marketing Japan Inc. the dismissal or non-reappointment of the Accounting Auditor. Board will the contents decide Supervisory the of item to at proposed Shareholders of Meeting aGeneral be regarding the of independence or Accounting Auditor, making it unlikely qualifications that the Accounting the Auditor an audit, will able to the Audit be properly perform & impact negatively to occur anything should above, the to addition In when Auditor Accounting confirmed that the Accounting the Auditor falls dismiss under any Item will Paragraph of 1, the of Companies 340 Article Act. needed, as agreement, unanimous by Board, & Supervisory Audit The Accounting the of Auditor Non-Reappointment or Dismissal Either on Decision Regarding Policy (3) Notes: (2) Remuneration and Amounts Other to Accounting Auditor for This Fiscal Year Ernst &Young ShinNihon LLC (1) Name of Accounting Auditor
(ii) Total amount of cash and other financial benefits payable by the Group to Accounting Group the bythe Auditor payable benefits (ii) Total financial other and cash of amount (i) Status of Accounting 4.Status of Auditor of the Certified Public Accountants Public Act Certified the of 1, 2 in Paragraph Article defined services the Company for bythe payable amounts other and Remuneration
1. 2. 3. 2, Paragraph Public Accountings 1oftheCertified Act. The Company pays considerationto accountingauditors for agreed concerning work uponprocedures specifiedinArticle otherthanthework both oftheseauditingservices. and Exchange Accordingly, Act. Instruments theamountsshown in(i)above represent total amountsofremuneration andotheramountsfor breakdown into a separate remuneration amountfor auditing in accordance withthe Companies and in Act accordance withtheFinancial theaudit agreementIn theCompany between andtheAccounting Auditor, remuneration without amountsare on alump-sum determined for maintainingandimproving auditquality. Board reached anagreement regardingthe Audit &Supervisory theremuneration to Accounting Auditor, uponjudging itto bearationallevel auditfor theprevious year, theauditplan,statusofperformed confirming andtheestimated remuneration for thisfiscalyear. As aresult, from the Directors, documents Boardand reports has received related necessary divisions, internal andthe Accounting Auditor, in addition to Board reached anagreement regarding thattheAuditReason &Supervisory theremuneration to Accounting Auditor: The Audit &Supervisory
Canon Marketing JapanInc. ¥108 million ¥108 ¥183 million ¥183 Amount 32
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders BUSINESS REPORT
5. Policy Regarding Decision of Dividends from Surplus, etc. The Company made its basis policy, with respect to profit distribution, to pay the dividends based on a consolidated payout ratio of 30% taking into consideration comprehensively the medium-term profit plan, investment plan, and cash flows to be generated. As to the dividends for this fiscal year, the Company plans to pay a year-end dividends of 30 yen per share, totaling 60 yen per share (consolidated payout ratio of 35.0%) as a full-year dividends together with the interim dividends (30 yen per share).
Note: The amount and the number of shares described in this report are rounded down to the nearest number of the units indicated. Profit attributable to owners of parent per share are rounded off to two decimal places.
33 Canon Marketing Japan Inc. Consolidated Balance Sheets CONSOLIDATED FINANCIALSTATEMENTS Non-current assets Non-current Current assets Assets Investments andotherassets Intangible assets Property, plant andequipment Allowance for doubtfulreceivables Other Lease deposits Deferred taxassets Net definedbenefitasset Long-term loansreceivable Investments insecurities Other ofusingfacilities Right Lease assets Software inprogressConstruction Lease assets, net Land assets,Rental net Furniture andfixtures, net equipmentandvehicles,Machinery, net Buildings andstructures, net Allowance for doubtfulreceivables Other loansreceivable Short-term andsupplies materials Raw Work inprocess Merchandise andfinishedgoods Securities Notes andaccountsreceivable Cash anddeposits Total assets Dec. 31,2019 ¥377,403 ¥503,698 126,295 As of 170,012 112,666 82,813 39,011 20,792 11,037 14,095 28,918 26,948 33,281 53,993 4,469 9,403 3,315 6,197 2,775 4,358 4,148 (382) 622 206 500 393 315 (75) 35 31 99 2 2 Dec. 31,2018 ¥383,349 ¥498,790 115,441 As of 117,041 71,987 38,188 70,500 10,842 23,039 28,918 28,657 31,182 65,071 90,014 5,265 1,191 3,059 7,792 2,832 4,423 4,940 7,985 (432) 112 647 304 316 333 (91) 36 63 2 5 Current liabilities Liabilities Non-controlling interests Accumulated othercomprehensive Income Shareholders' equity Netassets liabilities Non-current Total liabilities andnetassets Remeasurements ofdefinedbenefitplants Foreign translationadjustments currency Deferred gainsorlosseshedges Valuation difference onavailable-for-sale securities Treasury stock earnings Retained Capital surplus Capital stock Other Net definedbenefitliabilities rewardsAllowance for continuousservice long-term Deferred taxliabilities Lease obligations Other Provision for lossonorder received Provision for productwarranties Provision for directors' bonuses Provision for bonuses Consumption taxes payable taxesAccrued Income Accrued expenses Lease obligations Notes andaccountspayable Total netassets Total liabilities (Millions ofyen, amounts lessthanonemillionyen are(Millions rounded down) Dec. 31,2019
¥503,698 ¥120,023 325,092 326,979 178,606 As of 202,783 (31,926) 58,582 (2,504) 82,820 73,303 53,956 32,101 17,855 51,542 (6,497) 3,929 3,480 1,042 3,373 5,901 8,235 616 103 189 651 51 11 99 72 Canon Marketing JapanInc. - Dec. 31,2018 ¥498,790 ¥129,903 303,570 314,156 195,220 (11,129) As of 189,957 (13,725) (31,924) 65,317 82,820 73,303 59,887 22,151 16,676 75,831 2,518 4,264 1,019 3,437 4,063 6,967 542 100 116 147 447 75 79 29 1 34
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income (Millions of yen, amounts less than one million yen are rounded down)
From January 1, 2019 From January 1, 2018 to December 31, 2019 to December 31, 2018
Net sales ¥621,134 ¥621,591 Cost of sales 420,107 403,417 Gross profit 201,026 218,173 Selling, general and administrative expenses 168,586 189,231 Operating income 32,439 28,941 Non-operating income 1,667 1,807 Interest income 196 197 Dividend income 154 153 Insurance income 767 547 Gain on investments in investment partnerships 247 494 Other 302 413 Non-operating expenses 169 229 Interest expenses 12 12 Other 157 216 Ordinary income 33,937 30,519 Extraordinary income 15 830 Gain on sales of non-current assets 13 126 Gain on sales of investments in securities 2 489 Gain on sales of shares of subsidiaries and associates - 214 Extraordinary losses 649 641 Loss on sales and disposal of non-current assets 206 311 Impairment loss 82 15 Loss on disaster - 64 Loss on valuation of investment securities 329 158 Reorganization expenses - 57 Other 31 34 Income before income taxes 33,302 30,708 Income taxes-current 12,626 9,893 Income taxes-deferred (1,663) (77) Profit 22,339 20,893 Profit attributable to non-controlling interests 89 66 Profit attributable to owners of parent ¥ 22,250 ¥ 20,826
35 Canon Marketing Japan Inc. Non-Consolidated Balance Sheets NON-CONSOLIDATED FINANCIALSTATEMENTS Non-current assets Non-current Current assets Assets Investments andotherassets Intangible assets Property, plant andequipment Allowance for doubtfulreceivables Other Lease deposits Deferred taxassets Long-term prepaid expenses Claims provable claimsprovable inbankruptcy, inrehabilitation andother Shares andassociates ofsubsidiaries Investments insecurities Other ofusingfacilities Right Lease assets Software Lease assets Land assets Rental Furniture andfixtures Machinery Structures Buildings Allowance for doubtfulreceivables Other Forward exchange contracts Accounts receivable -other loansreceivable Short-term Prepaid expenses Advance payment -trade andsupplies materials Raw Work inprocess Merchandise andfinishedgoods Securities Accounts receivable claims-operating recordedElectronically monetary Notes receivable Cash anddeposits Total assets Dec. 31,2019 ¥344,084 ¥489,371 145,287 As of 170,206 52,784 89,124 13,058 63,366 27,952 13,178 27,318 90,034 37,246 3,377 5,193 1,692 8,214 1,993 1,272 1,905 8,729 3,266 9,402 1,660 (328) 481 384 832 512 500 826 293 110 (61) 10 99 16 - - 0 Dec. 31,2018 ¥351,466 ¥495,585 144,118 As of 54,879 85,034 70,500 10,840 11,545 63,696 27,901 13,764 25,999 89,772 55,072 90,400 4,204 4,848 1,799 8,811 2,409 1,307 1,927 5,928 4,091 1,740 (331) 112 494 729 589 529 661 299 110 (72) 24 74 0 2 1 Current liabilities Liabilities Valuation andtranslation adjustments Shareholders' equity Netassets liabilities Non-current Deferred gainsorlosseshedges Valuation difference onavailable-for-sale securities Treasury stock earnings Retained Capital surplus Capital stock Total liabilities andnetassets Retained earnings brought earnings forward Retained reserve General retained earnings Other Legal retained earnings capitalsurplus Other Legal capital surplus Other rewardsAllowance for continuousservice long-term Provision for retirement benefits Lease obligations Provision for productwarranties Provision for directors' bonuses Provision for bonuses receivedDeposits Advances received Consumption taxes payable taxesAccrued Income Accrued expenses Accounts payable -other Lease obligations loanspayable Short-term Accounts payable recordedElectronically obligations-operating Total liabilities Total netassets (Millions ofyen, amounts lessthanonemillionyen are(Millions rounded down) Dec. 31,2019
¥489,371 ¥153,708 297,426 167,905 294,482 191,945 As of 165,051 (31,930) 85,204 73,303 38,237 83,351 81,700 85,198 33,868 10,504 14,324 61,500 47,818 2,932 2,943 2,853 3,691 1,718 3,343 2,933 6,554 2,753 1,678 673 534 11 35 Canon Marketing JapanInc. 5 4 7 Dec. 31,2018 ¥495,585 ¥168,781 292,521 164,013 290,593 203,064 As of 161,160 (31,928) 85,204 73,303 34,282 79,460 81,700 85,198 29,250 10,452 13,897 56,100 71,529 1,926 1,927 2,853 4,387 1,571 3,228 1,754 5,617 2,317 1,800 638 444 27 40 1 5 5 36
Reference Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For Notice of Convocation Statements General Meeting of Shareholders NON-CONSOLIDATED FINANCIAL STATEMENTS
Non-Consolidated Statements of Income (Millions of yen, amounts less than one million yen are rounded down)
From January 1, 2019 From January 1, 2018 to December 31, 2019 to December 31, 2018
Net sales ¥473,229 ¥475,741 Cost of sales 341,303 343,063 Gross profit 131,926 132,677 Selling, general and administrative expenses 116,257 116,528 Operating income 15,669 16,148 Non-operating income 3,513 3,672 Interest income 193 166 Dividend income 2,204 2,078 Insurance income 758 541 Gain on investments in investment partnerships 246 494 Other 111 391 Non-operating expenses 195 205 Interest expenses 57 49 Share related expenses 53 55 Other 84 101 Ordinary income 18,987 19,615 Extraordinary income 1 3,334 Gain on sales of non-current assets 1 4 Gain on sales of investments in securities - 489 Gain on extinguishment of tie-in shares - 2,659 Gain on sales of shares of subsidiaries and associates - 180 Extraordinary losses 581 620 Loss on sales and disposal of non-current assets 193 147 Impairment loss 50 14 Loss on disaster - 51 Loss on valuation of shares of subsidiaries and associates 329 - Loss on valuation of investment securities 8 158 Bad debt expenses for subsidiaries and associates - 247 Other - 2 Income before income taxes 18,407 22,328 Income taxes-current 7,088 5,621 Income taxes-deferred (1,969) (252) Profit ¥ 13,287 ¥ 16,959
37 Canon Marketing Japan Inc. AUDIT OFACCOUNTING REPORT AUDITOR ONCONSOLIDATED FINANCIALSTATEMENTS AUDIT REPORTS (TRANSLATION) Canon Marketing JapanInc. Canon Marketing The Board ofDirectors We have nointerest Public intheCompany Accountants whichshould bedisclosedincompliancewiththeCertified Act. ofInterest Conflicts generallyaccepted inJapan. withtheaccounting principles 31,2019inconformity ended December JapanGroup,operations oftheCanon Marketing whichconsisted oftheCompany andconsolidated subsidiaries, applicableto thefiscalyear ouropinion, the consolidated financialstatements referredIn to above present fairly, respects, inallmaterial thefinancialpositionandresults of Opinion We we believe thattheauditevidence have obtainedissufficient andappropriate to provide abasisfor our auditopinion. statements. reasonableness ofaccounting estimates madeby management,aswell theoverall asevaluating presentation oftheconsolidated financial the circumstances. theappropriateness Anaudit alsoincludesevaluating ofaccountingpoliciesused, themethodoftheirapplication,and entity’s preparation andfairpresentation oftheconsolidated financialstatements inorder to design auditprocedures thatare appropriate in on theeffectiveness oftheentity’s assessmentstheauditor controls considersinternal theserisk control, internal relevant to the butinmaking financial statements, whetherdueto fraudorerror. ofanaudittheconsolidatedThe financial statements purpose isnotto express anopinion The procedures dependontheauditors’ selected judgment, misstatement ofmaterial oftheconsolidated includingtheassessmentofrisks An auditinvolves procedures to performing abouttheamountsanddisclosures obtainauditevidence intheconsolidated financialstatements. audit to obtainreasonable assuranceaboutwhethertheconsolidated financialstatements are free from misstatement. material ourauditinaccordanceconducted withauditingstandards generallyaccepted inJapan. Those standards require the thatwe planandperform Our responsibilityisto express anopinionfrom onthese consolidated anindependent perspective financialstatements basedonouraudit. We Auditors’ Responsibility error. the preparation andfairpresentation oftheconsolidated financialstatements thatare free from misstatement, material whetherdueto fraudor generally accepted principles in Japan,and for to enable designing control and operatingsuchinternal as is necessary management determines isresponsibleManagement for thepreparation andfairpresentation oftheseconsolidated financialstatements inaccordance withtheaccounting Management’s for theConsolidated Responsibility Financial Statements 31,2019. December (the JapanInc. the consolidated financialstatements ofCanon Marketing 1,2019through applicableto thefiscalyear from“Company”) January the consolidated balancesheet,theconsolidated statement ofincome, theconsolidated statement ofchangesinnetassetsandthenotes to Pursuant to Paragraph 444oftheCompanies we Act, have audited 4,Article theaccompanying consolidated financialstatements, whichcomprise Report of Independent Auditors ofIndependent Report
Wakino Mamoru Keiichi Wakimoto Shigeru Sekiguchi Ernst &Young ShinNihon LLC
Designated andEngagementPartner Certified PublicAccountant Designated andEngagementPartner Designated andEngagementPartner Certified PublicAccountant Certified PublicAccountant
Canon Marketing JapanInc. February 10,2020 38
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders AUDIT REPORTS
AUDIT REPORT OF ACCOUNTING AUDITOR ON NON-CONSOLIDATED FINANCIAL STATEMENTS
(TRANSLATION) Report of Independent Auditors February 10, 2020
The Board of Directors Ernst & Young ShinNihon LLC Canon Marketing Japan Inc. Shigeru Sekiguchi Certified Public Accountant Designated and Engagement Partner Keiichi Wakimoto Certified Public Accountant Designated and Engagement Partner Mamoru Wakino Certified Public Accountant Designated and Engagement Partner
Pursuant to Item 1, Paragraph 2, Article 436 of the Companies Act, we have audited the accompanying non-consolidated financial statements, which comprise the non-consolidated balance sheet, the non-consolidated statement of income, the non-consolidated statement of changes in net assets, the notes to the non-consolidated financial statements, and the related supplementary schedules of Canon Marketing Japan Inc. (the “Company”) applicable to the 52nd fiscal year from January 1, 2019 through December 31, 2019.
Management’s Responsibility for the Financial Statements and the Related Supplementary Schedules Management is responsible for the preparation and fair presentation of these non-consolidated financial statements and the related supplementary schedules in accordance with accounting principles generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the financial statements and the related supplementary schedules that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion from an independent perspective on these non-consolidated financial statements and the related supplementary schedules based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the related supplementary schedules are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the related supplementary schedules. The proceduresselected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements and the related supplementary schedules, whether due to fraud or error. The purpose of an audit of the non-consolidated financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the non-consolidated financial statements and the related supplementary schedules in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used, the method of their application, and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the related supplementary schedules. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the non-consolidated financial statements and the related supplementary schedules referred to above present fairly, in all material respects, the financial position and results of operations of Canon Marketing Japan Inc. applicable to the 52nd fiscal year ended December 31, 2019 in conformity with accounting principles generally accepted in Japan.
Conflicts of Interest We have no interest in the Company which should be disclosed in compliance with the Certified Public Accountants Act.
39 Canon Marketing Japan Inc. AUDIT BOARD’S &SUPERVISORY REPORT (3) (2) (1) ofAudit2. Results consolidated financialstatements). financial statements for therelevant fiscalyear (theconsolidated balancesheets, theconsolidated statements ofincome, theconsolidated andthenotes statements to ofchangesinequity the schedulesaswell astheconsolidated the statements ofincome, financialstatements) andthenotes andtheirsupplementary thestatement to ofchangesinequity thenon-consolidated financialstatements schedules, forBased ontheabove thenon-consolidated therelevant procedures, fiscalyear anditssupplementary (thebalancesheets, we examinedtheBusinessReport February 12,2020 (2) (1) Board Board andAudit Members &Supervisory andSubstanceofAudit1. Methods by Audit &Supervisory asfollows. l, 2019 to31,2019,andreports the52ndfiscalyear December during from JapanInc. January of dutiesby theDirectors ofCanon Marketing to theconduct Board pertaining Members prepared Board hasdiscussedandprepared basedontheauditreports We, by eachoftheAudit thisAudit &Supervisory Report Audit &Supervisory In ouropinion,theauditingmethodsusedandconclusionsreached Auditor, byIn theIndependent Ernst Young LLC, ShinNihon are appropriate.. ofexaminationtheconsolidatedResults financial statements ouropinion,theauditingmethodsusedandconclusionsreached byIn theAccounting Auditor, Ernst Young LLC, ShinNihon are appropriate. schedules ofexaminationthefinancialstatementsResults andtheirsupplementary d) c) b) a) etc. ofexaminationtheBusinessReport, Results iv) iii) ii) \\i) understanding withtheDirectors, auditofficeandotheremployees, theinternal etc. information to andimprove collect theauditingenvironment. Ourauditprocedures were asfollows. to theauditingstandardsWhile confirming Board endeavored asdecidedby Member us, theauditingpoliciesandallocationofduties, to facilitate etc., mutual eachAudit &Supervisory and received executed onthestatusofwork areport from Auditor theDirectors andtheIndependent andrequested theirexplanationsasnecessary. We Board Member, duties, decidedontheauditingpoliciesandallocationofwork andtheresults etc., from received eachAudit performed ontheauditingwork &Supervisory areport noting with regard to the description in the Business Report andtheDirectors’noting withregard intheBusinessReport to thedescription withtherelevant control internal oftheirdutiesinconnection systems; and performance ouropinion,thesubstanceofdecisionsmadeby theBoardIn ofDirectors withregard Control to theInternal Systems isappropriate. Furthermore, we found nomatters thatrequire fairly presentfairly thestate oftheCompany’s affairs; oftheCompany and ofIncorporation withtheapplicablelaws schedulesconformity andregulations ofJapanandtheArticles anditssupplementary ouropinion,thebusinessreport In considered by Board ofDirectors andtheBoard of Directors’ thatmightbeadverse assessmentandfactors to theCompany’s interests. With with the Parent respect to the transactions Company, we etc. have found that are in this Business Report, described no matters that require noting with regard to the matters performance oftheirduties;and performance withtheDirectors’We inconnection have constitutingaviolationofany ofIncorporations found applicablelaws fact ormaterial andregulations nomisconduct ofJapanortheArticles Auditing (issuedby theBusinessAccounting 28,2005),andotherrelevant Council standards, onOctober andrequested explanationsasnecessary. theappropriate 131 oftheRules Corporateensuring Accounting) execution were ofoperations(pursuantto Article Control dulydeveloped inlinewith the Quality Standards for Accounting Auditor onthestatusofoperations, andrequested explanationsasnecessary. We alsoreceived from systems theAccounting for reports Auditor statingthatthenecessary We monitored received whethertheindependenceofAccounting andverified from Auditor the reports wasmaintainedand whetheranappropriate auditwasbeingundertaken, the Ordinance for Enforcement into accountthestatusofdeliberationsBoard oftheCompaniesDirectors, taking Act, etc. We examinedthecontents for ofthematters withtheParent considered thetransactions andtheassessmentreasons detailedinthisBusinessReport 118of Company underArticle substance ofthedecisionsmadeby theBoard ofDirectors withregard Control to theInternal Systems. the Directors, employees regarding andothers, requested Control thedesign explanationsasnecessary andimplementationoftheInternal Systems, andexpressed opinionsonthe The following Control systems (Internal System) were by determined aBoard ofDirectors’ resolution anddesigned basedonthisresolution. We received from periodically reports subsidiaries, andreceived onbusinessfrom asnecessary. thesubsidiaries reports and majorbusinesssites.Board addition,withrespectto ofthe thesubsidiaries, Members we In communicated andexchanged information withtheDirectors andAudit &Supervisory documents,requested etc., their explanations decision-making as internal necessary,material inspected and investigated the status of the operations and assets of the headquarters We meetings, attended themeetingsofBoard received executed onthestatusofwork ofDirectors andotherimportant reports from theDirectors and theemployees and
(b) (a) under Article 100,paragraphs land3oftheOrdinance forunder Article Enforcement oftheCompanies Act. A system for theDirectors’ ensuring JapanGroup, oftheadequate operations ofCanon Marketing whichconsistsof the Company asstipulated performance anditssubsidiaries ofdutiesby ofIncorporation. theDirectorsA system complieswiththeapplicablelaws for andregulations thattheperformance andArticles ensuring Audit Report (Outside Audit & Supervisory Board Member) Board &Supervisory Audit (Outside Member Board &Supervisory Audit Member) Board &Supervisory Audit (Outside time) (full Member Board &Supervisory Audit Member) Board &Supervisory Audit (Outside time) (full Member Board &Supervisory Audit time) (full Member Board &Supervisory Audit time) (full Member Board &Supervisory Audit Audit &SupervisoryBoard,CanonMarketingJapanInc.
Shigeo Hasegawa Kusumi Nobuyasu Kunihiko Tedo Shinichi Inoue Shimizu Masahiro Canon Marketing JapanInc.
40
Audit Reports Financial Statements Consolidated Financial Business Report Reference Documents For General Notice of Convocation Statements Meeting of Shareholders