Operating income decreased, reflecting the decline in gross profit associated with lower sales in Imaging System.

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2 The summary of the results for the third quarter were as follows. Net sales decreased because a large number of compact cameras were affected by the Kumamoto Earthquakes. In inkjet printers, sales declined in both main units and cartridges due to the weak market. In addition, because low-profit businesses were re-examined in Medical as a result of the review of its business structure, the fall in sales temporarily expanded. Operating income decreased, reflecting the decline in gross profit associated with lower sales in Imaging System. However, operating income for the first three quarters, from January to September, increased 200 million year on year. 1

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7 [Business Solutions] Operating income increased year on year, reflecting the strong performance of toner cartridges and the reduction of SG&A expenses. (Office MFP) Unit sales of office MFPs increased year on year in response to the smooth launch of the new product ir- ADV5500 Series and an increase in shipments to large companies. (Page printers) Unit sales of page printers rose year on year, mainly because of the acquisition of several lot projects and progress in the sales expansion into certain industries such as medical and distribution. Sales of toner cartridges increased year on year as a result of the expansion of shipments in certain industries with a large print volume. (Maintenance services) Sales were in line with the level a year ago due to the decline in the maintenance fee per print, although the print volume remained firm, mainly reflecting an increase in the number of MIF (Machine In the Field). (Production printing) Sales fell year on year mainly due to a delay in the shipment of new products for continuous feed printers, which are mostly handled by Canon Production Printing Systems, a Group company. (Network cameras) Sales increased 21% year on year, driven by a shift from analog to digital for security and monitoring applications and by lot projects for line monitoring systems at plants, etc. (Canon Systems & Support) Net sales increased slightly year on year, reflecting the steady performance of the IT Solutions business such as security products and IT maintenance services. Operating income declined year on year, mainly due to an increase in SG&A expenses. 6

8 [IT Solutions] Net sales in 3Q declined year on year due to a fall in sales in the embedded business, while sales of SI services and in the IT infrastructure & services business increased. Operating income declined, reflecting a fall in income associated with smaller net sales. (SI services business) Sales increased year on year, due to the strong performance of projects for the financial, manufacturing and education industries. (IT infrastructure & services business) Sales increased year on year because the performance of data center services remained robust, in addition to large infrastructure building projects. (Embedded business) Sales declined year on year following a decrease in projects for certain customers in manufacturing. (Products business) Sales remained almost flat year on year due to the effect of changes in commercial distribution in the Group, although sales of ESET, a leading security product, and other products remained strong. [Orders and order backlog] Orders decreased, affected by the decline in projects for certain customers. Order backlog increased significantly, due to the effect from acquiring a large project for Nishi-Tokyo Data Center. 7

9 This shows the overall sales for IT Solutions. Sales other than the IT Solutions segment declined slightly as a reaction to the large projects for commercial data collection terminals in the same period the previous year, although sales of security products and IT maintenance for small companies increased in the Business Solutions segment. In IT Security, which is included in the overall sales of IT Solutions, sales of ESET, antivirus software, FortiGate, firewall equipment, and GUARDIAN, an security service, increased steadily. Canon IT Solutions Inc., a Group company, is ranked first in the antivirus products section of the Nikkei Computer Customer Satisfaction Survey for the fourth consecutive year. As this achievement indicates, the security business of the Company is highly valued by customers. 8

10 [Imaging System] Net sales declined year on year in 3Q because the sales for compact cameras, which were affected by the Kumamoto Earthquakes as well as the contracting market, and inkjet printers, where the market was sluggish, decreased. Operating income decreased due to a fall in gross profit. (Interchangeable lens digital cameras) The unit sales of interchangeable lens digital cameras increased year on year because of our efforts to focus on the launch of new products and expand sales of products by conducting various user campaigns. (Compact digital cameras) The unit sales of compact digital cameras decreased significantly year on year due to the impact of the Kumamoto Earthquakes on the Company, in addition to a weak demand. (Inkjet printers) The unit sales of inkjet printers decreased year on year because the termination of old models was earlier this year than last year for the smooth introduction of promising new products. There was also a delay in the launch of new products, in addition to the weak market. Sales of cartridges also declined year on year. (Commercial imaging equipment) Sales decreased year on year because sales of leading TV lenses remained weak, although sales of information cameras for broadcast stations remained firm. 9

11 [Industrial/ Medical] (Industrial equipment) Sales declined year on year as a reaction to the strong sales of semiconductor manufacturing equipment in the same period in the previous year. Operating income improved thanks to an increase in the sales of services and the reduction of expenses. (Medical-related) Sales declined due to the revision of handling for certain low-profit products, although sales of digital radiography systems and others increased. Income increased. 10

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15 [Business Solutions] In our projection for 4Q, we expect sales to increase due to the start of installation of monochrome continuous feed printing systems, of which shipping has been delayed, in addition to an increase in key hardware products such as MFP and LBP. Operating income is expected to decrease primarily due to an increase in expenses for the release of new products. Looking at office MFP, while we expect the number of units sold in 4Q will be higher year on year as a result of sales expansion of new products and the expansion of MIF, we have revised our annual projection downward, taking into account the declines until 3Q. In regards to page printers, we expect the volume to increase year on year in 4Q due to the sales expansion of conventional office products and an emphasis on the promotion of products for certain applications, such as distribution and medical services, which require a large volume of documents. The annual projection, however, has been revised downward since we are unable to compensate for the fall in the first half of the fiscal year. As for cartridges, we have revised the annual plan upward due to growth in shipping for specific operations. For maintenance services, we have revised our annual projection upward, given the progress made by 3Q. We expect a substantial year-on-year increase in sales of production printing in 4Q, taking into account the start of installation of monochrome continuous feed printers made by Oce, the shipment of which was delayed. The delay until 3Q, however, could not be offset, and we have revised our annual projection downward from the previous plan. [IT Solutions] In the IT solution segment, we expect sales in the IT infrastructure & services business to decline in 4Q due to a temporary decrease in infrastructure building projects; however, we expect sales in the SI services business to grow in the financial service, education, and other segments, resulting in overall sales that remain generally where they were in the previous year. Operating income is expected to decrease due to strategic investments made for the next and subsequent years. As for annual sales, we have revised our projection downward, considering the delay in the IT infrastructure & services business and embedded business. Our projection for operating income remains unchanged from the previous plan based on the growth of profitable businesses, the reduction of SG&A expenses, and other factors. 14

16 [Imaging System] We expect to see increased sales in 4Q as a result of market stimulation through various user campaigns and the promotion of new products in our lines of cameras and inkjet printers. We will increase operating income by raising the component ratios of profitable products while simultaneously reducing expense. The annual sales projection has been revised downward from the previous plan, considering the delay in interchangeable lens digital cameras. Operating income has also been revised downward. The number of interchangeable lens digital cameras sold in 4Q is expected to grow year on year based on our efforts to boost new products. The annual number of units sold is expected to fall due to the delay until 3Q. The number of compact digital cameras sold in 4Q is expected to decline significantly despite gradual recovery from the impact of the Kumamoto earthquakes. For the annual basis we also expect to see a significant fall in the number of units sold as a result of shrinking markets. Inkjet printers are expected to decrease by 1% in 4Q in terms of the number of units sold due to the contraction of the market; however, we will work to raise profitability by focusing on the promotion of high-priced products such as the new models resulting from the major renewal to a compact cube design. [Industrial / Medical] The industrial and medical segment expects lower sales and income in 4Q primarily as a result of reassessing low-profitability products in the medical business. Annual sales are expected to decline year on year; however, we have revised our annual operating income projection upward based on an increase in maintenance services for industrial equipment and reduced expenses in both businesses on top of the results of efforts in the medical segment. 15

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