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[Business Solutions]

・Net sales in 2Q were ¥79.9 billion, which was nearly the same as a year ago.

・Operating income increased ¥200 million year on year, to ¥1.9 billion, reflecting an increase in highly profitable stock business and the reduction of SG&A expenses.

(Office MFP)

・Although rental MFPs for large companies performed well, the unit sales of office MFPs declined year on year in response to large growth in the shipment of new products in the same period of the previous year.

(Page printers)

・Unit sales of page printers fell year on year, mainly because of the decline in large projects as well as the shift of office print to MFP.

・Sales of toner cartridges increased year on year as a result of the expansion of shipments to certain industries.

(Maintenance services)

・Sales were in line with the year-ago level due to the decline in the unit price of maintenance fees, although the print volume remained firm, mainly reflecting an increase in the number of business instruments in operation in the market.

(Production printing)

・Sales fell year on year mainly due to a delay in the shipment of new products for continuous form printers, which are mostly handled by Canon Production Printing Systems, a Group company.

(Network cameras)

・Sales increased year on year, thanks in part to the acquisition of large projects as well as the firm performance of products for security and monitoring applications.

(Canon Systems & Support)

・Net sales increased 4% year on year, to ¥30.2 billion, reflecting the continued steady performance of the IT Solutions business such as security products and IT maintenance services.

・Operating income fell ¥100 million year on year, to ¥800 million. The main reason for this decline was an increase in SG&A expenses.

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[IT Solutions] ・Net sales in 2Q were ¥34.9 billion, almost the same as a year ago, principally reflecting a decline in sales in the embedded business, while sales of SI projects for the financial and manufacturing industries and sales related to data centers increased. ・Operating income was up ¥600 million year on year, to ¥1.2 billion, thanks to an improvement in the gross profit margin mainly due to the higher utilization rate of SE and the reduction of SG&A expenses. (SI services business) ・Although the performance remained strong due to an increase in projects for the financial and manufacturing industries, sales declined year on year due to a fall in projects for the Group. (IT infrastructure & services business) ・Sales increased only slightly from a year ago as a reaction to large system infrastructure projects received in the same period of the previous year, although data center services remained firm. (Embedded business) ・Sales declined year on year due to a decrease in projects for main customers in the manufacturing. (Products business) ・Sales increased year on year because sales of ESET, a leading security product, and other products remained strong.

[Orders and order backlog] Both orders and order backlog increased year on year. Both are the result of acquiring a large project for Nishi-Tokyo Data Center.

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・In the Long-Term Management Objectives Phase III, which we announced in January, we regarded not only the IT Solutions segment, but also IT solutions of the Group as a whole as the growth drivers.

・Looking at segments other than the IT Solutions segment, sales increased year on year, primarily in the Business Solutions segment due to an increase in the sales of security products and IT maintenance for small companies and the recovery of business PCs.

・For reference, we have provided a year-on-year comparison of IT Security, which is included in the overall sales of IT Solutions.

・IT Security consists of the sales of security solutions sold and supported by the Group, such as ESET, antivirus software, FortiGate, firewall equipment, and GUARDIAN, an email security service. It is steadily increasing in tandem with the expansion of the market.

・In addition to the previously mentioned products and services, in IT Security we will focus more on network security for medium-sized and large companies going forward, taking advantage of the technical know-how the Group has cultivated over the years and the power of products the Group procures on its own.

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[Imaging System] ・Net sales declined 18% year on year, to ¥36.3 billion in 2Q because the market remained weak due to sluggish consumer spending. ・Operating income decreased ¥1.0 billion year on year, to ¥2.1 billion due to falls in net sales and gross profit. (Interchangeable lens digital cameras) ・The unit sales of interchangeable lens digital cameras decreased year on year because of the slow recovery of the market, despite the sales expansion, particularly in new products. (Compact digital cameras) ・The unit sales of compact digital cameras decreased year on year due to the contraction of the market. (Inkjet printers) ・ The unit sales of inkjet printers decreased year on year because the market remained weak. Sales of cartridges also declined year on year. (Commercial imaging equipment) ・Sales increased year on year due to an increase in sales of TV lenses for broadcast stations.

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[Industrial/ Medical] ・Net sales decreased 14% year on year, to ¥5.9 billion in 2Q, and operating income improved ¥300 million, to a loss of ¥100 million. (Industrial equipment) ・Although sales declined year on year due to smaller sales of services, operating income improved thanks to the reduction of expenses. (Medical-related) ・Income improved due to the review of the profit structure.

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[Business Solutions]

・In our projection from 3Q, or July to December, we expect sales to increase mainly due to the effect of new MFP products and the expansion of network cameras. However, we anticipate that income will decline, largely because of the increase in expenses for launching new products.

・Looking at office MFP, the market expects the shipment volume to be on par with the year-ago level, but we anticipate a year-on-year increase because we intend to promote the sales expansion of new products and the expansion of MIF.

・In regards to page printers, although we expect the volume to increase year on year from 3Q due to the launch of new A4 high-speed printers and the sales expansion of products for specialized applications, such as distribution and medical, the increase will fail to fully make up for the delay in the first half. Therefore, we will revise our annual volume plan downward.

・For maintenance services, we will revise our annual projection upward from the previous plan, given the results up to 2Q.

・We expect annual sales of production printing to increase, taking into account the increase in the sales of continuous form printers made by Oce, the shipment of which was delayed to in or after 3Q, and the sales of production machines of the Canon brand for which we have strengthened the sales system.

[IT Solutions]

・Although we expect sales to increase from 3Q, given the steady performance of the SI services business, the IT infrastructure &

services business, and the products business, we anticipate a decline in income due to an increase in expenses for the development

of software and services from the next year.

[Imaging System]

・We expect sales to increase year on year from 3Q due to the sales expansion of interchangeable lens digital cameras. However,

annual sales are expected to fall year on year because we will not be able to make up for the delay to 2Q.

・We will revise down the annual plan for compact cameras because production and sales will continue to be affected from 3Q by

damage to parts suppliers caused by the Kumamoto Earthquakes.

[Industrial/ Medical]

(Industrial equipment)

・While the market is expected to recover from the next year, we expect sales to remain flat from 3Q due to the effect of controlled

investments in the semiconductor-related markets.

(Medical-related)

・Although losses are decreasing thanks to the steady progress in the review of the business structure, we expect sales to decline and income to increase in our annual projection.

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・Finally, I would like to tell you about the progress of the Long-Term Management Objectives Phase III.

・The basic concept of the Long-Term Management Objectives Phase III is to go beyond the bounds of segments on a group-wide basis. To this end, we must consolidate and effectively use the Group’s resources.

・With respect to the Group reorganization in the education business, we will consolidate education-related sales departments, which are scattered about the Group, and place them under the ITS Company, transcending segments and working towards business expansion.

・To strengthen the sales function of IT security, we have established a new organization that will consolidate the Group resources for the security business that is expected to grow substantially.

・Although maintenance and repair services are our major source of earnings, we will be pursuing other means for further expanding earnings by establishing an after-sale service innovation project to build a cross-sectional service system for total optimization.

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