Canon Marketing Japan Inc. Investor RelationsManagement PolicyCorporate Governance

As of September 29, 2017

Basic Views

We recognize that the ongoing improvement of management transparency and enhancement of management supervisory functions, with an eye on monitoring progress toward achieving management targets, are crucial for sustainable growth in corporate value. This recognition is reflected in our wide-ranging initiatives to strengthen corporate governance.

Protection of minority shareholders in transactions with the controlling shareholder and in general

Our company's controlling shareholder is our parent company, Canon, Inc. We operate with the understanding that we enjoy a certain degree of independence from the controlling shareholder, and the terms and conditions of transactions with the controlling shareholder are not determined arbitrarily. We protect the interests of all shareholders by carrying out all transactions, not only those with the controlling shareholder, in ways that are appropriate and fair, and do not result in the loss of independence or profits for our company.

Concerning our independence from our parent company

The parent company of the Company is Canon Inc., and it holds 58.5% of the voting rights of the Company’s shares as of June 30, 2017. There is a clear compartmentalization of businesses in the corporate group of the parent company, and the Company controls the sales, related-services, and marketing of Canon products in Japan. It also provides IT Solutions and other services.

In regards to transactions with the parent company, the Company has the exclusive right in Japan to sell all the products that Canon Inc. manufactures by attaching the Canon Brand (excluding semiconductor exposure devices and liquid crystal substrate exposure devices). However, transaction terms are determined through negotiation with the parent company in the same manner as general transactions by submitting the Company’s preferred prices after taking the market prices into account. In regards to the involvement of personnel between the Company and the parent company, none of the Company’s Directors concurrently hold positions in the parent company.

As the aforementioned circumstances show, the Company believes that a certain degree of independence from the parent company is ensured. This is reflected in the fact that the parent company places no restrictions on the Company’s business activities, and that the Company conducts business activities and makes management decisions based on its own independent business judgment.

To ensure the effectiveness of corporate governance as a listed company, we are independently working to build a multifaceted internal control system through the improved internal audit division, collaboration between Audit & Supervisory Board Members and the accounting auditor, and the establishment of various committees.

Strategic Shareholdings

1. Policy for Strategic Shareholdings

The Canon Marketing Japan Group only holds shares of other listed companies when these shareholdings help to improve the corporate value and the mid- and long-term development of the Group, taking into consideration things such as management strategies, business alliances, the maintenance and strengthening of transactions, the development of collaborative businesses, and the creation of new forms of synergy.

2. Review of the reasonableness of Strategic Shareholdings

The Company reviews the reasonableness of strategic shareholdings by assessing the significance of major holdings, the business results of each corresponding investment target, and by reporting results of the review to the Board of Directors on a regular annual basis.

3. Policy for exercising the voting rights of Strategic Shareholdings

While respecting the management philosophy, business strategies, etc. of each investment target, the Company exercises its voting rights of strategic shareholdings after deciding to approve or reject proposals based on whether they contribute to the interests of shareholders in general.

Policies and procedures in determining the remuneration of the senior management and Directors

1. Policies

The remuneration of Representative Directors and Directors consists of base compensation of a fixed amount paid on a monthly basis as compensation for the performance of duties based on the sharing of roles, and a bonus linked to the business results of the business year.Outside Directors are only paid basic compensation of a fixed monthly amount. They receive no bonus.

2. Procedures

The amount of basic compensation for each Director is determined based on a basic calculation guideline established by a resolution of the Board of Directors. The compensation is within the limits of total compensation for all Directors (maximum amount) approved by the General Meeting of Shareholders. The bonus amount for each Director is determined based on a basic calculation guideline established by a resolution of the Board of Directors within the total amount approved by the General Meeting of Shareholders for each business year.

Policies and procedures in the appointment of the senior management and the nomination of candidates for Directors and Audit & Supervisory Board Members

1. Policies

In principle, we select candidates for Directors and Audit & Supervisory Board Members 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.

<Representative Directors and Directors>

The candidates must have a true understanding of the Company’s corporate philosophy and Code of Conduct, a broad and deep understanding of the Company’s business and operations through experience gained as Executive Officers, etc., and must be able to make effective judgment from a comprehensive perspective of multiple businesses and headquarters functions.

<Independent Outside Directors>

The candidates must satisfy the independence standards and qualifications separately prescribed by the Board of Directors and must have a high degree of professionalism and abundant experience in corporate management, risk management, law, economics, and other fields.

<Audit & Supervisory Board Members>

The candidates must have a high degree of professionalism and a wealth of experience in corporate management, financial and accounting matters, internal controls, and other fields. One or more candidates for Outside Audit & Supervisory Board Members of the Audit & Supervisory Board must satisfy the independence standards and qualifications separately prescribed by the Board of Directors.

2. Procedures

Candidates for Directors and Audit & Supervisory Board Members are recommended by the Representative Directors from among persons who are recognized to satisfy the prescribed requirements, and are determined by deliberation at the Board of Directors’ meeting. In regards to candidates for Audit & Supervisory Board Members, deliberation at the Audit & Supervisory Board is conducted and the consent of the board is obtained prior to deliberation at the Board of Directors.

Status of concurrent holding of positions by Directors and Audit & Supervisory Board Members

The Company discloses reasons for electing each candidate for Directors or Audit & Supervisory Board Members and the status of candidates who concurrently hold positions as officers of other listed companies in the convocation notices of general meetings of shareholders in cases where proposals for the election of Directors or Audit & Supervisory Board Members are to be submitted for approval by shareholders.In addition, once every year the Company confirms the status of all Directors and Audit & Supervisory Board members who concurrently hold positions, and discloses the status in convocation notices of the general meeting of shareholders in the previously described manner.


Adoption of anti-takeover measures

The Company has not introduced any anti-takeover measures.

Policy for constructive dialogue with shareholders

1. Policies

To contribute to the sustainable growth and mid- to long-term enhancement of corporate value, the Company holds constructive dialogue with shareholders through various means, such as general meetings of shareholders, meetings to explain mid- and long- term business plans, business results briefings, and interviews with major institutional investors.

2. System to promote dialogue

a)The accounting, IR, public relations, and legal divisions collaboratively take charge of promoting dialogue with shareholders. Their activities are controlled by the officer in charge of the IR division.

b)At the beginning of each year, the Representative Directors host a meeting to explain the mid- and long- term business plans to analysts and institutional investors. In addition, the officer in charge of the IR division holds business results briefings on a quarterly basis. Furthermore, the Company provides opportunities for interviews as needed. Regarding individual investors, the Company holds explanation meetings from time to time and uses the page for individual investors on its official web site* to post its management policy, business results, financial data, and other information in an easy-to-understand manner.

The Investor Information section of Canon Marketing Japan Inc. is disclosed on the Company’s official web site below.

c)Opinions or requests received through dialogue with shareholders are reported to management meeting by the department in charge on a regular basis, and important points and suggestions are reported to Representative Directors or the Board of Directors by the officer in charge of the IR division.

3. Management of insider information

The Company ensures that it does not carelessly provide important undisclosed information during dialogue with shareholders by maintaining strict control of important undisclosed information in accordance with the Regulations Concerning the Prevention of Insider Trading, which also set out the procedure for disclosing information.

Organizational form

Company with Audit & Supervisory Board Members

Board of Directors, Directors, and Executive Officers

The Board of Directors has 10 members, consisting of 8 Directors from within the Company and 2 Outside Directors who are Independent Directors. The Board aims to conduct management decision-making rationally and efficiently. The term of office for Directors is one year, and we have created a management structure capable of adapting quickly to changes in the business environment. Under the current structure, important decisions are made after active discussions by the Board of Directors which normally meets once a month, temporary meetings of the Board of Directors that are held when needed, and at management meetings attended by the officers of the Company and the presidents of major subsidiaries of the Canon Marketing Japan Group. In addition, on March 29, 2011, the Company introduced an executive officer system. The purpose of this system is to speed up management decision-making within the Canon Marketing Japan Group by separating management decision-making from business execution functions and reducing the number of Directors. It also clarifies the responsibilities for the performance of business operations and strengthens the executive systems.

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.

< Status of collaboration between Audit & Supervisory Board Members and accounting auditor>

Audit & Supervisory Board Members constantly work to improve audits when they formulate audit plans through discussions with the accounting auditor at the beginning of each fiscal year. They exchange information and opinions with the accounting auditor through reports of the results of regular audits and meetings held as needed, and are present during the on-site audits conducted by the accounting auditor and during the time when the accounting auditor explains the results of the on-site audits.

< Status of collaboration between Audit & Supervisory Board Members and internal audit division>

Audit & Supervisory Board Members receive explanations about the annual plans and policies for internal audits from the internal audit division. They also exchange information with the division through the receipt of monthly reports on the status of conducting internal audits. In addition, the internal audit division provides assistance to Audit & Supervisory Board Members, and provides assistance with the Board’s secretarial affairs when asked by Audit & Supervisory Board Members for assistance following discussions.

An Overview of Corporate Governance at Canon Marketing Japan Inc.

Independence Standards for Independent Directors/Audit and Supervisory Board Members