About the Fujifilm Group 2. Management Message 16. Message from the CEO 16 Interview with the COO 20. Corporate Governance 24. Business Activities 36

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2 CONTENTS About the Fujifilm Group 2 Value Creation Process 3 The Fujifilm Group s Value Creation History 4 Business Portfolio and Competitive Advantages 6 Financial Highlights 8 New CSR Plan / New Medium-Term Management Plan 1 New CSR Plan Sustainable Value Plan 23 1 New Medium-Term Management Plan VISION Management Message 16 Message from the CEO 16 Interview with the COO 2 Corporate Governance 24 Regarding Inappropriate Accounting of Overseas Sales Subsidiaries of Fuji Xerox Co., Ltd. 24 Status of Corporate Governance 26 Management Structure 32 Message from Outside Directors 34 Business Activities 36 Imaging Solutions 37 Information Solutions 39 Document Solutions 43 Sources of Corporate Value 45 Technological Strength 46 Corporate Culture / Brand Strength 5 Human Resources 51 Global Network 52 Financial Information / Non-Financial Information 53 Financial Highlights 54 Financial Analysis and Review 56 Business-Related and Other Risks 59 Consolidated Financial Statements 6 Non-Financial Information 67 Corporate Data 69

3 Editorial Policy This integrated report particularly focuses on information that is believed to be highly important for shareholders/investors among diverse activities disclosed through statutory disclosure reports, the sustainability report and other related materials. This voluntarily disclosed report describe growth strategies and stories, and it is intended to serve as a very useful tool. Information of Corporate Communication Tools We disclose the Fujifilm Group s business and diverse CSR activities to a wide spectrum of stakeholders, including local communities and society, customers, shareholders, investors, business partners and employees. FUJIFILM Holdings Corporation Sustainability Report This report describes various efforts of the Fujifilm Group to contribute to the sustainable development of society. URL FUJIFILM Holdings Corporation Corporate Site This site provides such latest information as the Fujifilm Group s corporate data and business activities, as well as information for shareholders/investors and on CSR activities. URL Fuji Xerox Sustainability Report This report describes various CSR activities to realize a sustainable society of Fuji Xerox and its affiliated companies. General Disclaimer The information contained in this integrated report concerning business performance and results forecasts, excluding statements of objective fact, are based on management s views that have been made in accordance with information available at the time of issue. These forward-looking statements involve risks and uncertainties. Actual results may materially differ from those discussed in the forward-looking statements due to a variety of factors, including trends in economic conditions and markets in which the Company operates as well as fluctuations in foreign currency exchange rates. The contents of amendment to earnings releases for prior fiscal years, which were announced in 217, have reflected on the numerical data for FY 211/3 to FY 216/3. Unless otherwise specified in this integrated report, the information herein is as of March 31,

4 About the Fujifilm Group Value from Innovation At Fujifilm, we are continuously innovating creating new technologies, products and services that inspire and excite people everywhere. Our goal is to empower the potential and expand the horizons of tomorrow s businesses and lifestyles. Corporate Philosophy We will use leading-edge, proprietary technologies to provide top-quality products and services that contribute to the advancement of culture, science, technology and industry, as well as improved health and environmental protection in society. Our overarching aim is to help enhance the quality of life of people worldwide. Vision Anchored by an open, fair and clear corporate culture and with leading-edge, proprietary technologies, Fujifilm is determined to remain a leading company by boldly taking up the challenge of developing new products and creating new value. 2

5 About the Fujifilm Group The Fujifilm Group s Value Creation Process We aim to achieve sustainable growth and increase the corporate value of the Fujifilm Group while contributing to the sustainable development of society by conducting sincere and fair business activities guided by the following corporate philosophy and vision common to the Fujifilm Group. Local communities and society Customers Shareholders Business partners Employees Create value from innovation Proprietary products and services Expectation / needs / trust Sustainable Value Plan 23 Imaging Solutions Governance Business Activities Information Solutions Document Solutions Providing photo-related products and services ranging from photo-taking to printing Engaging in a wide range of activities focusing mainly on B2B businesses including healthcare and highly functional materials, both of which are priority business fields Undertaking document-related business activities including the provision of digital multifunction devices for offices and related services P37 P39 P43 Sources of Corporate Value Technological Strength, Corporate Culture, Brand Strength, Human Resources, Global Network 3

6 About the Fujifilm Group The Fujifilm Group s Value Creation History The history of the Fujifilm Group is a history of innovation. The Fujifilm Group was established in 1934 to produce photographic film in Japan. Since its founding, Fujifilm has consistently anticipated the future during times of change, has amassed a wide range of technologies, and provided innovative products and services. Since 2, putting the Company s future at risk, we undertook drastic business restructuring due to the demand for photographic film, our mainstay product, has declined sharply due to digitization. The key, at that time, was the advanced and various technological capabilities of our photographic business. Fujifilm established businesses with a competitive advantage based on a variety of technologies such as optics, chemicals, and electronics, which are needed to develop and produce photo-related products. The Fujifilm Group, which had overcome a turbulent second foundation and gotten back on a growth track, has even more developed products, services, and solutions unique to the Fujifilm Group with the aim of strategic leap forward. Trends in total world demand for color film and changes in revenue composition (Index) Index is based on 1 for FY21/3 Peak Sharp decline 94/3 95/3 96/3 97/3 98/3 99/3 /3 1/3 2/3 3/3 4/3 5/3 6/3 7/3 8/3 9/3 1/3 11/3 (FY) Information Solutions 46% Imaging Solutions FY21/3 1,383.4 billion 46% 54% Document Solutions FY217/3 2,322.2 billion Imaging Solutions 15% 39% Information Solutions s Forged a robust position as a manufacturer of comprehensive photosensitive materials Expanded into the lens and optical equipment fields Diversified business operations into the medical, graphic systems, magnetic materials, and related fields Ashigara factory at time of establishment Engaging in the Domestic Production of Photographic Film / Establishing a Sales Network in Japan Groundbreaking product portfolio created by Fujifilm Group 1934 Motion picture film Plate-making film 1936 Photographic film X-ray film 1948 Still cameras 1954 Industrial X-ray film 1958 FUJITAC (TAC film) 1959 Videotapes for broadcasting Japan First World First s Expanding Business / Improvement of Technologies Commenced the development of a global network by establishing local overseas subsidiaries and offices Established Fuji Xerox Co., Ltd., as a joint venture with Rank Xerox Ltd. in the United Kingdom, and entered into the copy machine business field Pioneered the successful research, development, and commercialization of color negative films High-performance color negative film Fuji Color FII 4 Groundbreaking product portfolio created by Fujifilm Group 1962 Plain paper copier 1965 PS plates Magnetic recording tape for computers 1969 Filtration filter 1971 Home videotapes 1975 Full-color copy machine 1976 High-performance color negative film Fuji Color FII 4 Japan First World First 4

7 About the Fujifilm Group s Digitization / Accelerating Globalization Accelerating the pace of globalization by developing overseas production bases in a bid to forge a widely recognized global presence Pioneered efforts to digitize the photography, medical, and graphic systems fields Introduced a host of innovative products, including the FCR line of digital X-ray imaging diagnostic systems and digital cameras The world s first digital X-ray imaging diagnostic system FCR Groundbreaking product portfolio created by Fujifilm Group 1983 Digital X-ray imaging diagnostic system FCR 1986 QuickSnap, a one-time-use recyclable camera 1988 Full digital still camera (development) 1993 High-speed production publisher 1996 Digital minilab WV film Computer-to-plate (CTP) plates 1998 instax mini Medical-use picture archiving and communications systems SYNAPSE Japan First World First Second Foundation Converted Fuji Xerox to a consolidated subsidiary Implemented business structure transformation in response to rapid digitization Established FUJIFILM Advanced Research Laboratories Transitioned to a holding company structure by establishing FUJIFILM Holdings Corporation Focused on the healthcare field, including the pharmaceuticals business Groundbreaking product portfolio created by Fujifilm Group 23 Double-balloon endoscope 24 Full digital endoscope 26 Functional cosmetics 211 Magnetic recording tape for computers that utilizes Barium Ferrite (BaFe) particles 211 Next-generation inkjet digital printer Jet Press Endoscope with a laser light source system LASEREO Japan First World First FUJIFILM Advanced Research Laboratories, based on the concept of Intellectual Fusion, Innovation and Value Creation 214 Aiming for Strategic Leap Forward Formulated Value from Innovation as the Company s new corporate slogan to mark 8th anniversary Launched Open Innovation Hubs in Japan, the United States, and Europe Announced new CSR plan Sustainable Value Plan 23 and new medium-term management plan VISION 219 in 217 Groundbreaking product portfolio created by Fujifilm Group 214 Production printer Color 1i Press 215 Broadcast zoom lens compatible with 4K cameras equipped with 2/3-inch sensor 216 Integrated archive system SYNAPSE VNA 216 Tablet-type ultrasound image diagnostic equipment SonoSite iviz 217 Medium format mirrorless digital camera, equipped with a large sized sensor FUJIFILM GFX 5S Japan First World First Open Innovation Hub, a place for new value co-creation with business partners 5

8 About the Fujifilm Group Business Portfolio and Competitive Advantages We created our current business portfolio by leveraging the advanced and unique technological capabilities developed through our photographic business and overcoming the risk of disappearing incurred in our core business due to digitization. We are now pursuing a growth strategy centered on the three business fields of healthcare and highly functional materials, included in Information Solutions, and Document Solutions. Revenue for FY217/3 2,322.2 billion Imaging Solutions billion Photo imaging Imaging Solutions Photo imaging billion 15. billion 384. billion Optical device and electronic imaging Healthcare Develops photo-related products and services, ranging from photo-taking to printing Competitive advantages A wide range of technologies and know-how related to images cultivated in photographic film development Strong market position as a leading company in the imaging field Collective strength capable of providing services from photo-taking to printing Information Solutions billion 28.9 billion 47.6 billion Highly functional materials Recording media instax instant camera Annual worldwide sales volume 6.6 million units Optical device and electronic imaging billion Graphic systems Provides products such as the X Series of digital cameras, interchangeable lenses, and TV lenses 477. billion Office products Competitive advantages Superior descriptive capability and color reproducibility of a digital camera based on its unique imaging design technology cultivated in the development of high-performance lenses and photographic film Advanced optical technologies and high-precision processing and assembly technologies required in lens manufacturing that accommodate the high-definition digital age Document Solutions 1,8.9 billion billion billion Office printers Production services Broadcast zoom lens compatible with 4K cameras World First* * A portable broadcast zoom lens with optical performance compatible with broadcast 4K cameras equipped with 2/3 inch sensor (as of April 215 according to a survey by Fujifilm) billion Global services billion Other 6

9 About the Fujifilm Group Information Solutions Healthcare Develops businesses in the fields of medical systems, pharmaceuticals / bio CDMO, regenerative medicine, and life sciences; operates in three fields of prevention, diagnosis, and treatment Competitive advantages Proprietary image processing technologies capable of providing optimal images in diagnosis Advanced chemical compounds, design capabilities, and technologies that enable development of pharmaceuticals that respond to unmet medical needs High technological strength and productivity for Contract Development and Manufacturing Organization of biopharmaceuticals Extensive technologies and patent portfolio related to regenerative medicine, such as ips cell-related technologies Extensive chemical compound library of 2, types Medical-Use Picture Archiving and Communications Systems domestic market share global market share Approval and launch of regenerative medicine products Japan First Highly functional materials Provides display materials, industrial products including non-destructive testing equipment and various types of highly functional films, and electronic materials including semiconductor processing materials Competitive advantages Advanced technologies, such as functional molecules for imparting high functionality to film Advanced film forming and coating technologies capable of meeting market requirements for thinness and largeness Cost competitiveness and stable supply Rapid and accurate product formulation, development capabilities and global production systems that respond to customer needs Protective film for polarizers global market share Image sensor color mosaic global market share Recording Media Offer magnetic recording tape for computers with unique technologies such as barium ferrite (BaFe) particles and data archive service Graphic systems Offer inkjet digital presses, industrial inkjet printheads, plate-making films and computer-to-plate (CTP) plates Document Solutions Competitive advantages Excellent customer base leveraging a powerful direct sales structure in Japan and the regions of Asia and Oceania Diverse product lineups that meet customers wide-ranging needs, including links with various cloud services Consistent service provided globally in cooperation with Xerox Corporation Office products Provides digital multifunction devices and other devices for office use Office printers Provides printers for office use Production services Provides high-speed, high-quality digital printing systems and associated services Global services Supports finding solutions to customers document-related issues through improvements to corporate document solutions and operational processes A3 multifunction device Sales volume market share in Asia-Pacific region 7

10 About the Fujifilm Group Financial Highlights * Numerical data for FY27/3 through FY217/3 are posted on page 54 and 55. Revenue / Operating income / Operating margin (Billions of yen) 4, Revenue Operating income (right scale) Operating margin (Billions of yen) 4 3, 2, 1, 2, % , (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3-1 Net income attributable to FUJIFILM Holdings / ROE (Billions of yen) 15 Net income attributable to FUJIFILM Holdings ROE (right scale) (%) (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3-4 Total assets / Shareholders equity ratio (Billions of yen) Total assets Shareholders equity ratio (right scale) (%) 4, 8 3, , , 4 1, 2 (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3 8

11 About the Fujifilm Group R&D expenses / Ratio of R&D expenses to revenue (Billions of yen) 2 R&D expenses Ratio of R&D expenses to revenue (right scale) (%) (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3 Capital expenditures / Depreciation (Billions of yen) Capital expenditures Depreciation* 2 * These figures only include property, plant and equipment excluding rental equipment in the Document Solutions segment and others (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3 Cash flows (Billions of yen) 4 Net cash provided by operating activities Net cash used in investing activities Free cash flows* * Free cash flows: Net cash provided by operating activities + Net cash used in investing activities (FY) 27/3 28/3 29/3 21/3 211/3 212/3 213/3 214/3 215/3 216/3 217/3 9

12 New CSR Plan / New Medium-Term Management Plan New CSR Plan Sustainable Value Plan 23 Contributing to solving social issues through Sustainable Value Plan 23 We have formulated Sustainable Value Plan 23 ( SVP23 ), a new CSR plan specifying targets for the fiscal year ending March 231 (FY231/3). The Fujifilm Group believes that solving social issues provides opportunities for business growth. By actively creating new value as part of our efforts to address each challenge, we are committed to continuously contributing to the development of a sustainable society as a key management priority. Such commitment is further reinforced through formulation of SVP23. In this new CSR plan, we show our strong will to contribute to resolving social issues of the global scale through business activities. FUJIFILM Holdings has been creating new value to resolve social issues through Sustainable Value Plan 216, a medium-term CSR plan for FY215/3 through FY217/3. Through the new formulation of long-term goals for FY231/3 in SVP23, the Fujifilm Group is aiming to contribute further to the realization of a sustainable society, with increased efforts to resolve social issues through its business activities by providing innovative technologies, products and services. In the global society, a number of long-term goals have been published recently with the aim of resolving social issues. The Sustainable Development Goals (SDGs*), which were adopted by the United Nations in September 215, identified 17 goals for the global society to make efforts to resolve these social issues by 23. In addition, the global decision was made over the Paris Agreement, which entered into force in November 216. The agreement aims to strengthen the global response to the threat of climate change to keep a global temperature rise well below 2 degrees Celsius above pre-industrial levels. SVP23 is a new CSR plan targeting FY231/3 which aims to contribute to the achievement of goals related to the resolution of social issues identified by international initiatives such as the SDGs and the Paris Agreement. SVP23 defines the environment, health, daily life and working style as four key areas, which will be addressed from the perspectives of both resolving social issues through business activities and considering environmental and social impacts through business processes. Furthermore, as a global company, SVP23 specifies the stronger CSR foundations, in terms of environmental, ethical and human rights issues affecting the whole supply chain and also refer to the stronger governance required to achieve the further penetration of an open, fair and clear corporate culture. In the area of the environment, we will contribute to solving environmental issues as well as reducing our own environmental burden. In particular, the plan identifies numerical targets for CO 2 emissions and water usage to be achieved by FY231/3. The targets for CO 2 emissions are to achieve a 3% reduction in the volume of CO 2 emitted across the entire product lifecycle compared to FY214/3, and contribute to a 5-million-ton reduction in the volume of CO 2 emitted in a society by encouraging wider use of the company s products and services. This reduction offsets the equivalent volume of CO 2 emitted by the company between FY218/3 and FY231/3. The Fujifilm Group is committed to reduce water usage of the entire group by 3% in comparison to FY214/3, keeping overall usage below 35 million tons in FY231/3. In addition, the Fujifilm Group is aiming to contribute to the processing of 35 million tons of water per year in FY231/3 through the provision of highly functional materials and services used for water processing. It aims to achieve the environmental contribution that is equal to or greater than the environmental impact of the Company s business activities. In the area of health, the Fujifilm Group is aiming to create a healthy society through the process of prevention, diagnosis and treatment in healthcare. The group s aims in the area of daily life are to support the tangible and intangible aspects of social infrastructure in people s lives through various products, services and technologies. In the area of working style, the Fujifilm Group is aiming to extend in-house work-style reforms to change society so that everyone can be satisfied with his/her job. By focusing on these areas, the corporate group aims to resolve these various social issues through its business activities. The Fujifilm Group will work to contribute to the resolution of social issues and raise the company s corporate value by promoting activities along with SVP23 and creating new value through the development of products, services and technologies. * SDGs are new sustainable development goals adopted by the United Nations General Assembly in September 215 in order to follow on from the Millennium Development Goals (MDGs) which were established in 21. SDGs states no one will be left behind as its slogan, and has 17 sustainable development goals and 169 targets for global society to tackle as social issues by 23. 1

13 New CSR Plan / New Medium-Term Management Plan SVP23 Philosophy Environment Realization of a Sustainable Society Health Environment Working Style Supply Chain Daily Life Reduce our own environmental impacts and contribute to the resolution of environmental issues. Priority Issues 1. Address climate change. 2. Promote recycling of resources. 3. Address energy issues toward a non-carbon society. 4. Ensure product and chemical safety. Health Create a healthy society through the process of prevention, diagnosis and treatment in healthcare. Priority Issues 1. Fulfill unmet medical needs. 2. Improve accessibilities to medical services. 3. Contribute to identifying diseases at an early stage. 4. Contribute to health promotion and beauty. 5. Promote management of health and productivity. Daily Life Support the tangible and intangible aspects of social infrastructure in people s lives through various products, services and technologies. Priority Issues 1. Contribute to creating a safe and secure society. 2. Contribute to enriching humanity and relationships between people. Working Style Imaging Solutions Governance Business Fields Information Solutions Document Solutions Extend in-house work style reforms to change society so that everyone can be satisfied with their job. Priority Issues 1. Create an environment that leads to job satisfaction. 2. Develop and utilize diverse human resources. Supply Chain Corporate Code Corporate Philosophy / Vision / Code of Conduct Priority Issue Strengthen CSR foundations across the entire supply chain including factors affecting the environment, ethics and human rights. Governance Priority Issue Improve and maintain governance structures by further penetrating an open, fair and clear corporate culture. 11

14 New CSR Plan / New Medium-Term Management Plan New Medium-Term Management Plan VISION219 We have drawn up a new medium-term management plan VISION219, covering the three-year period from the fiscal year ending March 218 (FY218/3) to the fiscal year ending March 22 (FY22/3). This is a concrete action plan for the next three years to achieve Sustainable Value Plan 23. Through a series of structural reforms, Fujifilm has been able to establish a solid management base that generates profits. By efficiently utilizing these profits, the Company has built a diversified and extensive business portfolio. The VISION219 aims to further enhance this portfolio by reinforcing each of the business segments and thus achieve sustainable growth. Overview of the medium-term management plan, VISION219 The VISION219 maps out its Imaging, Information and Document solution businesses to the following three stages: (1) improving the profitability to generate stable cash-flow, (2) accelerating the growth of main business areas to expand revenues and profits, and (3) developing businesses with high profitability that will constitute the cornerstones of its future business operations, thereby further strengthening the business portfolio to achieve a strategic leap forward. Fujifilm will also pursue further growth by enhancing its overseas sales foundation, established through existing business operations, while accelerating overseas deployment of healthcare products and new highly functional products. With these initiatives, Fujifilm plans to achieve 2,6 billion in revenues, a record 23 billion in operating income and a record 15 billion in net income attributable to shareholders in FY22/3, which is the final year of this three-year plan. Shareholder returns will be boosted to 3 billion in dividends and share buybacks over the three-year period from FY218/3 to FY22/3, raising Return on Equity (ROE) to 7.3% by FY22/3 as a target reflecting organic business growth. A total of 5 billion will be set aside as an investment fund for strategic M&A over the three-year period for further growth in revenues and profits, achieving ROE of 8.% in FY221/3. Improving profitability Accelerating growth Investing for the future Imaging Information (healthcare) Information (highly functional materials, etc.) Document Next Stage Strengthening of governance Accelerating global business deployment Delivering a record profit Enhancement of shareholder returns (Enhancement of shareholder returns) Improving the ROE Total 3 billion Share buybacks: 2 billion Dividends: 1 billion 7 in FY217/3 95 in FY22/3 (dividend increase for 1 consecutive years) M&A investment Strategic leap forward Total 5 billion Investment allocation for further accelerating revenues and profits Performance targets FY22/3 Revenues 2,6 billion 1% Operating Income / operating margin Recordhigh 23 billion 8.8% 12 Net income attributable to shareholders ROE Recordhigh 15 billion 7.3% 5.8% FY221/3 Achieving ROE of 8.%

15 New CSR Plan / New Medium-Term Management Plan Profit Growth Investment * The three icons Profit, Growth, and Investment refer to the stages of each business within its lifecycle. Profit is improving the profitability to generate stable cash-flow, Growth is accelerating growth to expand revenues and profits, and Investment is investing to develop businesses that will constitute the cornerstones of its future business operations. Imaging Solutions Delivering highly competitive products that incorporate proprietary technologies to generate stable profits, while contributing to the development of photographic cultures (Billions of yen) Photo Imaging Profit Growth Investment With regard to the instax instant camera and film, expand the sales of existing products and square format products. Expand printing service solutions with added convenience, e.g., by incorporating Artificial Intelligence (AI), to boost printing demand from smartphones to maintain the upward trend in profits. Optical Device and Electronic Imaging instax SQUARE SQ1 Profit Growth Investment In digital cameras, work toward capturing No.1 market share in the premium mirrorless camera market, promoting the X Series that continues to evolve with premium image quality, fast speed and mobility, alongside the medium format GFX Series that uses a large sized sensor, 1.7 times bigger than that of full size, to pursue the pinnacle of image quality. Reinforce the lineup of highly reputable interchangeable lenses to continue to achieve increased revenues and profits in the mirrorless system business as a whole. Broaden the lens business by expanding the lineup of 4K broadcast lenses, launched ahead of the rest of the world, as well as the lineup of lenses for the fast-growing new video production market, including online video. FUJIFILM GFX 5S (FY) 14/3 17/3 2/3 Revenue: Photo Imaging Revenue: Optical Device and Electronic Imaging Operating Margin Operating Income FUJIFILM X-T2 FUJINON UA Information Solutions segment The Bio CDMO and Medical systems business will drive sales growth to ensure increased revenues and profits. R&D is accelerated for Pharmaceuticals and Regenerative medicine under controlled profit loss balance. (Billions of yen) Healthcare Pharmaceuticals and Bio CDMO* Profit Growth Investment In Bio CDMO business, expand its production capacity through capital investments and technological development, and boost profitability through scale merit to accelerate business growth, so as to achieve two-digit sales growth per annum, outstripping the market growth. In innovative drug development, target disease areas with high un-met medical needs, such as Alzheimer s disease and cancer and promote efficient R&D. Further push forward developing our pipeline which includes Alzheimer s disease drug T-817MA. Accelerate initiatives for commercial application of formulation technology that makes use of our proprietary technologies such as micro-needles and liposomes. (FY) 14/3 17/3 Revenue Operating Margin Operating Income 2/3 * CDMO stands for Contract Development & Manufacturing Organization. CDMO provides clients such as pharmaceutical and biotechnology companies with a wide range of services from cell line development in the early stage of pharmaceutical development to process development, stability testing, process development and manufacturing of investigational drugs, and commercial drug manufacturing. Culturing tank for biopharmaceutical manufacturing Micro-needles array 13

16 New CSR Plan / New Medium-Term Management Plan Healthcare Regenerative Medicine Profit Growth Investment Medical Systems Profit Growth Investment Accelerate business growth by expanding the lineup of ips cell-derived differentiated cells in the drug discovery support business, and promoting the sales of autologous cultured epidermis / cartilage in the cell therapy business. In cutting-edge regenerative medicine products using ips cell, accelerate R&D in the areas of eye diseases, heart diseases, neurological disorders and cancer. Broaden the contract cell culture business and deploy the culture medium business globally. Provide solutions to customers with its far-reaching product lineup, covering X-ray imaging diagnostic systems, endoscopes, ultrasound units and IVD systems, advanced medical IT systems having a strong competitive edge, and the comprehensive capabilities based on these technologies. Offer products and services that meet the needs of local markets in fast-growing emerging economies to achieve sales growth of 7% per annum. Promote the medical ICT business that makes maximum use of medical imaging data. Autologous cultured epidermis JACE Autologous cultured cartilage JACC Life Science Profit Growth Investment Reinforce the skin care brand ASTALIFT with the introduction of the top-of-the-range ASTALIFT IN-FOCUS series to attract new customers and increase per-customer spending among existing customers. Target the markets of growth potential for lifestyle disease prevention and healthy aging skincare for business expansion with the introduction of foods with function claims. Medical-use picture archiving and communication system SYNAPSE Functional Cosmetic ASTALIFT series Tablet-type ultrasound image diagnostic equipment Sonosite iviz Endoscope system equipped with a laser light source LASEREO Highly Functional Materials, etc. We will maintain the competitive edge of existing business operations, and make use of proprietary technologies to introduce highly profitable products that meet local market needs in a timely fashion to ensure expansion of sales and profits. (Billions of yen) Electronic Materials Profit Growth Investment Achieve business growth outperforming competitors through expanding the sales of existing products such as photoresists, photolithography peripherals and CMP slurries, and expanding the product range by introducing new peripheral materials. Display Materials Utilize our thin-film and multi-layer coating technologies to expand the sales of materials for OLED and touchscreen panels, thereby raising the sales ratio of new materials to 3%. Industrial Products Profit Growth Investment Profit Growth Investment Expand the sales of highly functional products that use proprietary technologies, such as the touch panel sensor film EXCLEAR and the precision filtering Micro Filter. Enter into the inspection services business for social infrastructures, such as tunnels and bridges, by utilizing our diagnostic imaging technology. (FY) 14/3 17/3 Graphic/Inkjet/Recording Media Revenue Highly Functional Materials Revenue Operating margin Operating income EXCLEAR touch panel sensor film 2/3 14

17 New CSR Plan / New Medium-Term Management Plan Fine Chemicals Profit Growth Investment Market the chemical compounds from its wide range chemical compound library through Wako Pure Chemical Industries, Ltd. s extensive sales network across Japan. Integrate the two companies technologies to develop competitive chemicals and reagents. Wako Pure Chemical Industries, Ltd., a core subsidiary of Fujifilm s fine chemical business, will utilize Fujifilm s resources including the overseas sales networks to accelerate the overseas deployment as well as the products in the medical systems and electronic materials business fields, and thus achieve double-digit sales growth in FY22/3 from the FY217/3 level. Recording Media Profit Growth Investment Increase the market share in the magnetic tape market by offering greater storage capacity compared with the current mainstream, LTO6, with Barium Ferrite (BaFe) magnetic particles using its proprietary technologies. Accelerate the overseas introduction of the dternity data archive solution. Promote the switchover from hard disks to magnetic tapes as a solution that accommodates the advancement of Big Data. Graphics and Inkjets Profit Growth Investment Promote the sales expansion of high value-added products in the field of CTP plate, including process-less CTP plates with its high environmental performance. Promote the company s industrial printheads and inks, known for advanced image quality and durability, not only in commercial printing but also to explore new fields of growth potential, such as industrial applications and 3D printing. FUJIFILM LTO Ultrium 7 Data Cartridge Document Solutions segment We will shift operational focus to profitability while maintaining the No.1 market position, so as to strengthen the corporate structure, bringing the ratio of operating income to 1% by FY221/3. (Billions of yen) Office Products and Printers Profit Growth Investment Link multifunction devices to cloud services to provide new value. Develop cost-competitive products that meet market needs. Reviewing the profitability model through expanding high-end models and solutions. (FY) 14/3 17/3 Revenue Operating Income Operating Margin 2/3 Production Services Profit Growth Investment Solutions & Services Profit Growth Investment Strengthen inkjet systems and expand printing applications for business growth. Tap into the strong customer base to accelerate the delivery of services covering the entire printing workflow. Strengthen value provided through solutions and services, and optimize the structure for solution and services delivery. Make greater use of ICT to improve competitiveness of Managed Print Services (MPS) and Business Process Outsourcing (BPO). Make active investments to create new value that facilitates work-style and productivity reforms by way of utilizing offices massive Big Data and technologies such as IoT and AI. Versant TM 31 Press In an effort to strengthen business operation, optimize the product lineup with the emphasis on profitability, and enforce thorough cost reduction and cut-backs in fixed costs. Add Group-wide cost reduction measures and streamline operations through integration of the business management divisions. 15

18 Management Message Message from the CEO Contributing to resolving social issues through business activities to achieve a strategic leap forward Shigetaka Komori, Chairman and Chief Executive Officer 16

19 Management Message We help enrich society through our technologies, products, and services I believe that the purpose of any company is to help make people s lives better and enrich society through their technologies and the products and services they provide; that is, to contribute to resolving social issues through business. The Fujifilm Group, as an example, has made a valuable contribution to society for years by providing photographic film, making people happy by helping to preserve the pleasure they experience and brilliant memories they build up in their life. The advance of digital technology caused demand for photographic film to decline drastically, putting the Group s viability at risk. However, the Group has overcome this difficulty through business restructuring based on technologies it has cultivated. This was made possible by human resources, sound and appropriate decisions by management, and the high levels of technological capabilities developed through the research, development and manufacture of photographic film. The Group put these capabilities together and tapped into new businesses in various fields, successfully developing a business structure that can stably generate cash flows. Some think that when a technology has had its day, a company dependent on it is no longer needed and is better replaced by a company with new technology. However, I believe that companies can continue to generate new value by combining and putting to use their management resources which include excellent human resources, technologies, and corporate culture. In that sense, a company is an extremely rational and efficient organization capable of generating new value. The Group will capture changes in society, create innovations and continue to deliver new value to society while continuing to grow as a going concern. Viewing social changes as opportunities for and driving growth of businesses Based on these ideas, the Fujifilm Group formulated Value from Innovation as its corporate slogan in 214. In addition, the Group drew up the Sustainable Value Plan 216 (SVP216), its medium-term CSR plan, and the medium-term management plan VISION216, the action plan detailing concrete measures to achieve SVP216. The Group has made every effort to achieve the objectives of these plans. In SVP216, we made a commitment to implementing CSR activities from the new perspective of contributing to resolving social issues through its business activities, in addition to the existing policy of being conscious of the environmental and social impact within business processes. Based on this policy, the Group devoted its efforts to contributing to resolving social issues in the priority fields of health and environment through the provision of energy-saving products and services in the healthcare and other businesses. Under VISION216 positioning the healthcare, highly functional materials, document business fields as growth drivers, the Group has expanded revenue, market share, and profits using the growth drivers with sales promotions and new product launches, enhanced its business portfolio and achieved steady growth in each business. As a result, the Group achieved revenue of 2,322.2 billion and operating income of billion for the fiscal year ended March 31, 217 (FY217/3), the final year of VISION216. Excluding the negative impact of the appreciation of the yen (a decrease in revenue of billion and operating income of 33.6 billion), the Group achieved an increase in both revenue and profits, with net income attributable to Fujifilm Holdings rising to a record high of billion and ROE reaching 6.5%, the highest for Fujifilm Holdings. In this manner, the Group has succeeded in attaining solid results during the past three years by simultaneously contributing to resolving social issues and growing its businesses with linking the two plans of SVP216 and VISION

20 Management Message Carrying through VISION219 and achieving a strategic leap forward The Fujifilm Group drew up SVP23 and VISION219 in August 217 based on the results and experience of the preceding two plans to ensure further growth. SVP23 is a CSR plan specifying targets for FY231/3 in accordance with the Sustainable Development Goals (SDGs) adopted by the United Nations in September 215. In this CSR plan, the Group expressed its renewed strong commitment to contributing to resolving social issues on a global scale through its business activities. The new medium-term management plan VISION219 is the action plan specifying concrete measures to realize the vision the Group will strive to achieve through SVP23. Under VISION219, we will further enhance the business portfolio developed by the Group with the aim of achieving a strategic leap forward. Specifically, the plan maps the Imaging, Information and Document Solutions businesses to the stages of improving profitability, accelerating growth and investing for the future, and is designed to implement appropriate measures according to each stage in order to further strengthen the profitability of individual businesses. I believe what is critical is to overcome the two challenges of driving strong growth in the healthcare field as a core business by improving the profitability of the pharmaceutical and regenerative medicine businesses and strengthening the document business field amid the changing business environment. In the healthcare field, we will enhance the production capacity for the contract manufacturing of biopharmaceuticals and the development bases for production processes. In addition, the Group will accelerate business growth by stepping up research and development in fields where the Group can capitalize on its technologies, such as research and development of pipeline and drug delivery systems. In the document business, the Group will improve profitability by pursuing thorough cost reduction and reduction of fixed costs to strengthen the business structure, and firmly utilize its offices big data to achieve the streamlining of operations and working style, as well as productivity reforms through artificial intelligence (AI) and Internet of things (IoT) to attain an operating income ratio of 1% in FY221/3. Based on the organic business growth, the Group will aim to achieve a record high operating income of 23 billion and net income attributable to Fujifilm Holdings of 15 billion for FY22/3, the final year of VISION219. We will aim for an ROE of 7.3% in FY22/3 with the target of achieving an ROE of 8.% in FY221/3. Meanwhile, a total of 5 billion will be set aside as an investment fund for strategic M&A and shareholder returns will be boosted to 3 billion. We plan to pay annual cash dividends of 95 per share applicable to FY22/3, making consecutive dividend increase for 1 years. For the Group to carry out these targets, it is necessary for all employees to accept SVP23 and VISION219 as their own plans, and carry out the missions assigned to them as members of a truly global company with a more proactive and longer-term perspective. Operating income / Operating margin (Billions of yen) 8.8% (%) % Net income attributable to FUJIFILM Holdings / ROE (Billions of yen) 15. (%) % % (FY) 13/3 14/3 15/3 16/3 17/3 2/3 (Target) Operating income Operating margin (right scale). (FY) 13/3 14/3 15/3 16/3 17/3 2/3 (Target) Net income attributable to FUJIFILM Holdings ROE (right scale). 18

21 Management Message Bringing together the Fujifilm Group s strengths in diverse fields to create innovation The Fujifilm Group is a global company with 15 business fields and 277 Group companies around the world with around 79, employees. For the Group s employees in each country and region to face issues in their local areas, explore business opportunities on their own, and deliver appropriate products and services to customers, it is essential that they collaborate with many people and organizations. To enable this, it is critical that the Group create an open, fair, and clear corporate culture which is diverse and accepts different values. We would like to express our deepest regrets to our shareholders and stakeholders for any inconvenience and concerns caused due to the delay in the announcement of our consolidated financial results for FY217/3. This was to review the inappropriate accounting conducted by overseas sales subsidiaries of Fuji Xerox which is engaged in the document business. In order to prevent the recurrence of such an issue, the Group is implementing measures to strengthen governance, such as dispatching management personnel from Fujifilm Holdings to Fuji Xerox, integrating the accounting and auditing departments, and establishing the Committee for Strengthening Governance. Fuji Xerox created the market as a pioneer in the field of office document solutions and, as a leading company in the industry, has outstanding capabilities, such as its excellent approach to customers, technological capability, marketing capability, and strength in proposals. I believe it is important that, through the new management structure, we will merge Fujifilm s strengths such as high strategic capability, speed of execution, and fairness with those of Fuji Xerox to make it a better company. We have already launched initiatives to demonstrate the synergy of the two companies in the graphics business and other businesses to make these challenges into opportunity. The Group will combine the strengths of the two companies with an open, fair, and clear corporate culture as the guiding principle, and make all-out efforts for creating new innovations and lead them to the growth of each of its businesses. As the management and employees will make a united effort toward attaining VISION219, we request the continued support and understanding of all stakeholders of the Fujifilm Group. Cash dividends per share (Yen) (FY) 1/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 2/3 (Plan) (Plan) 19

22 Management Message Interview with the COO Toward Achieving VISION219, the New Medium-Term Management Plan Kenji Sukeno, President and Chief Operating Officer Q1 Tell us about the results of the medium-term management plan VISION216, which has been completed, and the remaining challenges. To sum up our achievements under the previous medium-term management plan VISION216, we accelerated the growth of our growth drivers of the healthcare and highly functional materials businesses by efficiently utilizing the stable profit and cash generated from the business portfolio that was established through our successful restructuring of business structure, and succeeded in improving the profitability of all our businesses. In addition, we have made progress in fulfilling our business portfolio and strengthening the ability to stably generate profits. As a result, I believe we have, for the most part, achieved the targets set out in VISION216. Specifically, our main accomplishments are as follows. In the Imaging Solutions segment, the Fujifilm Group achieved significant profit improvements in the photo imaging business, centering around the instax instant photo systems, and the electronic imaging business, for which we have successfully shifted the focus to high-end mirrorless digital camera models which significantly improved profitability. In the optical device business, the Group advanced the development of high value-added products, such as 4K broadcast lenses, and promoted cost reduction through the downsizing of unprofitable businesses, optimization of production systems, and improvement of production processes. In the healthcare business field of the Information Solutions segment, we achieved steady growth in the four priority fields (endoscopes, ultrasound diagnosis, medical IT, and IVD (In Vitro Diagnostics)) in the medical systems business, and maintained an operating income ratio of 1%. In the pharmaceuticals business, the Group made progress with the development of a pipeline of potential new drugs went as planned, and turned the Bio CDMO (Contract Development & Manufacturing Organization) business into a high growth and high profitability business by applying technologies which it cultivated through photographic film manufacturing. In the regenerative medicine business, we solidified the business foundation by transforming Japan Tissue Engineering Co., Ltd. (J-TEC) into a consolidated subsidiary and acquiring Cellular Dynamics International, Inc. (CDI). In the highly functional materials business field, we acquired major customers by expanding the lineup, mainly of advanced products, in the electronic materials business and maintained high 2

23 Management Message growth in revenues and profits. In the flat panel display materials business, we continued to secure a high level of profits through the stable supply of TAC films, while advancing the development of new materials. In the industrial products business, sales expansion of highly functional products, such as the EXCLEAR sensor film for touch screen panels, contributed to the sales growth of the Group. In the recording media business, Fujifilm introduced large capacity tapes that use barium ferrite (BaFe) particles based on its unique technologies, and successfully drove sales and profit in step with the expansion of the data archive market. In this manner, the Fujifilm Group strengthened many businesses that comprise its business portfolio. However, reinforcement of the Document Solutions segment remained an issue to be addressed. In the Document Solutions segment, although growth strategies were implemented, the Group was unable to make up for the negative factors that occurred during the VISION216 period, such as increased costs due to the appreciation of the US dollar, the effects of depreciation of exchange rates of countries in the Asia-Oceania region, and maturing of the printer market. As a result, both sales and profit in this business fell below our targets. In the pharmaceuticals business field, sales of low-molecular antimicrobial drugs, one of the major profit sources, were affected by generic drugs, and therefore profits did not improve. What the Fujifilm Group will strive to achieve through the new medium-term management plan VISION219 is to take appropriate measures for these two issues and further expand the results attained through VISION 216. Q2 Explain the growth strategies of the new medium-term management plan VISION219. The new medium-term management plan VISION219 is a three-year plan designed to lead the Fujifilm Group to the phase of achieving a strategic leap forward by further enhancing our business portfolio through deepening the profitability improvement in all projects that was achieved with VISION216, and through well-modulated business resources allocation. The VISION219 maps the Imaging, Information, and Document solution businesses to the three stages of improving profitability, accelerating growth, and investing for the future in accordance with the growth stage of each business segment. In addition, the plan clarifies current stage of each business and promotes the generation of stable cash-flow by improving profitability, expanding revenues and profits through acceleration of growth of main business areas, and development of businesses with high profitability that will constitute the cornerstones of the Group s future business operations, thereby further strengthening the business portfolio to achieve growth across the Fujifilm Group. For businesses which are at the stage of improving profitability, we will draw up and implement far-sighted strategies to achieve cash flow generation through the further improvement of profitability. Specifically, we will improve profitability by taking the following measures. In the photo imaging business, such as color paper, and the graphic systems business, such as computer-to-plate (CTP) plates, we will maintain high profitability by further expanding market share and sales of high value-added products, despite a decline in total demand. In the optical devices business, we will promote the sales expansion of highly competitive products that make use of our proprietary technologies, such as 4K broadcast lenses. In the display materials business, we will ensure stable supply of TAC film and other materials. In the office products and office printers business, we will promote the switchover in product mix from low-end models to high-end models. For businesses which are at the stage of accelerating growth, we will accelerate the maximization of revenue and profits, in addition to the promotion of growth strategies we have implemented to date. Specifically, we will aim to achieve further growth by taking the following measures. In the electronic imaging business, we will continue to expand sales of favorable mirrorless digital cameras. In the medical systems business, we will aim for an annual sales growth of 7% by pursuing a sales expansion strategy based on the far-reaching product lineup unique to Fujifilm, covering X-ray diagnostic imaging systems, medical IT, endoscopes, ultrasound, and IVD systems. In the bio CDMO business, we will aim for an annual sales growth of over 1% by expanding production capacity through capital investment and production process development. In the inkjet business, we will expand our business by leveraging high-quality and high-durability industrial heads and inks to develop new fields such as industrial applications and 3D printing, which are expected to grow. In the recording media business, we will promote even higher capacity with BaFe particles and aim to raise market share in the magnetic tape market, which is growing in demand 21

24 Management Message Interview with the COO for archiving applications. In the solutions & services business, we will aim to achieve further growth by offering high value-added solutions according to the types of business and operations of customers and supporting work-style and productivity reforms by way of utilizing offices massive Big Data and technologies such as artificial intelligence (AI) and Internet of things (IoT). For businesses which are at the stage of investing for the future, we will identify and concentrate management resources into areas where we can capitalize on our technologies and strengths in order to drive the growth of those businesses into engines of growth of the Fujifilm Group in the future. Specifically, in the pharmaceuticals business, we will pursue the development of the existing pipeline that targets disease areas with unmet medical needs. In the drug delivery system (DDS) field, we will work to attain the commercial application of formulation technology that makes use of our proprietary technologies, such as micro-needles and liposomes. In the regenerative medicine business, we will accelerate our business growth by expanding the lineup of ips cell-derived differentiation cells in the drug discovery support business, and promoting the sales of autologous cultured epidermis / cartilage in the cell therapy business. In cutting-edge regenerative medicine products using ips cells, we will accelerate R&D for the areas of eye disease, heart disease, neurological disorders and cancer. In addition, we will work on business expansion by expanding the contract cell culture business and deploying the culture medium business globally. In businesses other than the above-mentioned businesses, we will also take measures according to the stage of each business, and enhance business capability to further reinforce our business portfolio. Through these measures, we will aim to achieve the targets for revenues and profits for the final year of VISION 219. The performance targets of the medium-term management plan VISION219 are targets for organic business growth and do not take into account business expansion through M&A. We will pursue technological synergies and execute strategic M&A that will make one plus one equal three or four, and aim for revenue and profits that exceed targets. In drawing up the new medium-term management plan, we discussed which measures need to be taken now based on a simulation of how our businesses should look in three years with an eye on changes in the economic and market environments. We will strengthen collaboration between business divisions and utilize the strengths and assets of each function, such as sales, marketing and technology, thereby leading to the expansion of each business. We will unite efforts toward achieving the targets set out in VISION219. The Fujifilm Group looks forward to meeting your expectations on growth in the next three years. 22 Q3 Tell us how the three initiatives you have set out upon your appointment as President to strengthen and develop new businesses, to improve management efficiency, and to strengthen global development activities are reflected in VISION219. Strengthening and developing new businesses, improving management efficiency, and strengthening the global development activities are important methods for achieving our targets of VISION219. From the perspective of strengthening and developing new businesses, an important task in achieving the targets is to turn the pharmaceuticals, bio CDMO and regenerative medicine businesses, which are priority business fields of VISION219, into profit. In the pharmaceuticals and bio CDMO business, we will make capital investment and drive sales and profit growth, and accelerate progress in the research and development of pharmaceuticals by narrowing down themes to those in fields in which Fujifilm can draw upon its strengths. In the regenerative medicine business, we will expand the lineup of ips cell-derived differentiated cells in the drug discovery support business, and promote the sales of autologous cultured epidermis / cartilage manufactured by J-TEC in the cell therapy business. In addition, we will collaborate with regenerative venture companies and research institutions with advanced technologies, such as universities, and government agencies, and build the foundation for the regenerative medicine business. From the perspective of improving management efficiency, we manage with particular emphasis on numerical targets, and allocate resources for capital investment and R&D expenses to each business based on priorities according to which of the abovementioned three stages it is in. For businesses which are at the stage of improving profitability, we will make capital investment only in projects designed to improve profitability. For businesses which are at the stage of accelerating growth and investing for the future, we will proactively make the investments necessary to drive sales and build a business foundation for the future. In this manner, we will allocate resources

25 Management Message based on priorities and ensure the efficient use of cash flow across the Fujifilm Group. We will manage capital investment within depreciation in principle, and aim to reduce the ratio of R&D expenses to sales from 6.9% in the FY217/3 results to 6% or below in FY22/3, the final year of VISION219. In each of the businesses and back-office departments, we will continue with measures for improving efficiency, such as review and reduction of various expenses and promotion of shared services. In the pharmaceuticals and the document businesses in particular, we will promote thorough cost reductions and management and reduction of fixed costs while securing capital investment in their growth fields. In addition, we will promote management that places emphasis on speedy decision making and management by encouraging each employee to think about and implement what they should do to deliver innovative results in a short time and improve their work efficiency. Strengthening global development activities is the key to achieving sales growth through VISION219. To this end, we will work to expand sales of instax instant photo systems and film in emerging countries, in addition to the United States and Europe, where the product is enjoying strong sales. In the medical systems business, we will strengthen comprehensive solution proposals centering on medical IT solutions worldwide, and deliver products and services that meet local needs, in particular in emerging markets such as the Middle East and Africa. In the bio CDMO business, we will make capital investment mainly in the United States and the United Kingdom. In addition, we will advance business partnerships with China Resources (Holdings) Company Limited, one of China s largest business conglomerates, and JSC R-Pharm, one of Russia s leading pharmaceuticals companies, to expand business in the vast markets in China and Russia. In addition, we will seek to expand sales of products of Wako Pure Chemical Industries, Ltd., which became our consolidated subsidiary in April, by utilizing Fujifilm s overseas sales channels. In the Document Solutions segment, we will pursue global business development by maintaining the top position in the growth markets of China and Asia and strengthen collaboration with Xerox Corporation. Q4 What are Fujifilm s initiatives to strengthen governance under VISION219? We express our deepest regrets for that the issue of inappropriate accounting at Fuji Xerox New Zealand and Australia have caused concern and inconvenience to our shareholders and stakeholders. This is an issue that the entire Fujifilm Group must deal with, and VISION219 therefore maps out the strengthening of governance as a key issue to develop the foundation for promoting its business strategy. The Group established the Committee for Strengthening Governance, where I serve as Chairman, in July. Under the committee, the Company launched five theme-based projects, which are a project for enhanced management of group companies, project for enhanced accounting, project for enhanced auditing, project for enhanced compliance, and project for enhanced IT governance, and is working on addressing each issue. In line with this policy, the Group has implemented governance enhancement measures. For instance, we implemented compliance re-education for all management-level personnel and employees. In addition, we established the Subsidiaries Administration Division in August, and integrated Fujifilm s financial accounting functions and audit function with those of Fuji Xerox in September. I had face-to-face discussions with all the management personnel of the Fujifilm Group in August, and the details were communicated to all employees of the Fujifilm Group companies, including overseas subsidiaries. On that occasion, I shared what the inappropriate accounting incident had made realize. Wishful thinking that minor misconduct like this won t be a problem can erode the trust of the public and inflict serious damage that could threaten the existence of a company. It takes a long time to build trust but it only takes seconds to destroy it, and it is harder to restore lost trust than to start again from scratch; and it is important to eliminate the communication gap and talk openly among Group companies, superiors and subordinates, organizations, etc. I believe our employees have become aware of the importance of these things. We will announce to our shareholders and stakeholders the progress of the initiative to strengthen governance through financial results briefing sessions and on other occasions. Anchored by a solid corporate governance system, we will strive to attain the targets of VISION

26 Corporate Governance Regarding Inappropriate Accounting of Overseas Sales Subsidiaries of Fuji Xerox Co., Ltd. With respect to inappropriate accounting conducted in the past by overseas sales subsidiaries of Fuji Xerox Co., Ltd. ( FX ), a consolidated subsidiary of FUJIFILM Holdings ( FH ), we deeply apologize to our shareholders, investors, customers and other stakeholders for any inconvenience and concerns caused. This section explains the revealed facts and recurrence-prevention measures to be taken by the Fujifilm Group. Outline It was identified as being necessary to review certain accounting practices related to certain sales leasing transactions in and prior to FY216/3 at Fuji Xerox New Zealand Ltd ( FXNZ ), an overseas sales subsidiary of FX. As an initial step, FH established an internal investigation committee to conduct investigations. Furthermore, to enhance the objectivity of the investigations, we established the Independent Investigation Committee, consisting of outside experts that do not have any financial or other interests in the Fujifilm Group in April 217, to clarify all the facts. In June 217 the report from the Independent Investigation Committee showed that in addition to FXNZ, Fuji Xerox Australia Pty. Ltd. ( FXA ) also conduced inappropriate accounting. The accumulated impact of the inappropriate accounting on the net income attributable to FUJIFILM Holdings through FY211/3 to FY216/3 is a loss of 28.1 billion. The results of the investigation by the Independent Investigation committee also raised an issue with regard to FX s internal controls. Currently, FH is engaged in initiatives to prevent recurrence and strengthen governance. About the Inappropriate Accounting Practice FXNZ had been selling equipment, by introducing Managed Services Agreements (MSAs) that bundled together equipment sales and maintenance services. Under MSAs, sales equivalent to the price of the copying machines are recorded as a single sale as a capital lease upon installation of equipment during the first fiscal year, and following that, the sales price is recovered as a copy service fee determined by multiplying the actual number of copies by the copy unit price, which is set according to the monthly target volume. In order to treat contracts as capital leases, they must satisfy certain conditions including possibility of the recovery of a minimum payment of lease fees. In the case of FXNZ, however, all transactions, including those with conditions that did not satisfy the capital lease conditions, were recorded as capital leases. Consequently, there were many transactions in which receivables could not be recovered, and this became common practice. A similar accounting practice was also conducted at FXA. Background and Managerial Issues As the background to the inappropriate accounting and managerial issues, the Independent Investigation Committee indicated the following points: Background to Inappropriate Accounting The system of incentives including bonus payments for the managing director and employees at FXNZ, based on the sales target achievement, led to continue the inappropriate accounting practice, recording sales early. At FXNZ, there was a concentration of authority with the managing director of FXNZ, and supervision by the board of directors did not function effectively, resulting in the lack of transparency in the business management process. There were problems including an insufficient subsidiary management system at Fuji Xerox Asia Pacific Pte Ltd and the lack of control over the audit system and administration department at FX. (Accordingly, information was blocked in the process of reporting within FX and appropriate information on the actual situation did not reach the Chairman and President of FX.) There were systemic deficiencies in FH monitoring of FX and its subsidiaries, the audit system of the audit department and the information sharing system. (Accordingly, appropriate information on the situation was not reported by FX to FH.) Managerial Issues Issues to be addressed at FXNZ Review of incentives emphasized on sales achievement Improve the internal system to correct the reporting line centralization Issues to be addressed at FX Strengthen the system of managing subsidiaries and affiliates Strengthen information sharing within FX and improve transparency of the business management process Strengthen the supervisory function of the board of directors and the audit function of the audit & supervisory board members and the audit department Strengthen the checking function of the accounting department Improve awareness of compliance with laws and regulations Issues to be addressed at FH Strengthen the function of managing FX 24

27 Corporate Governance Main Measures Taken by FH in Response FH has implemented personnel actions in response to the problem. Three directors, one senior vice president and one full-time corporate auditor at FX were subject to mandatory retirement, and one corporate vice president was demoted. Ten officers, namely the president, the other fulltime corporate auditor, two corporate auditors at FX and the aforementioned six officers, had their compensation and bonuses reduced by 1-5% for three months. The chairman and president of FH also returned 1% of their compensation over the three-month period. FH makes progress in strengthening of governance as following. Strengthening of governance structure of FH June 217 Changes to governance structure of FH Reducing the number of directors from 12 to nine for greater operational flexibility, promoting active deliberation by the board of directors and making quicker management decisions Appointing a total of three outside directors to raise the ratio of outside directors on the board to 1/3 to ensure the appropriateness of decision-making by incorporating opinions from multiple perspectives Strengthening of governance and the business management process of group companies June 217 Dispatching of management personnel from FH to FX Dispatch seven officers including the chairman, deputy president, executive vice president, and senior vice president from FH to FX July and August 217 Strengthening and thorough reinforcement of compliance education Conducted compliance re-education to directors of all divisions of FH, Fujifilm Corporation ( FF ), and FX, and presidents of all subsidiaries Provide compliance re-education to all employees August 217 Establishment of the Subsidiaries Establish the Administration Division to develop a mechanism to ensure appropriate information provision within the Fujifilm Group September 217 Integration of the financial accounting function Integrate the accounting function of FF and FX with the Accounting and Finance Division of FH to strengthen the business management process Establishment of the Global Audit Division Establish the Global Audit Division to strengthen the audit function through out the group November 217 Establishment of the whistleblowing system at FH Set up the common whistleblowing system so that all domestic and overseas employees of Fujifilm Group can report incidents directly to FH, to detect early and respond promptly to signs that lead to misconduct or violation of law at the companies and organizations July 217 Establishment of the FH Committee for Strengthening Governance The committee, which is chaired by FH President, has set up a comprehensive project system to implement through and continuous governance enhancement. Five projects are underway to address different themes. FH Committee for Strengthening Governance Projects for enhancing management of group companies Projects for enhancing accounting Projects for enhancing auditing Projects for enhancing compliance Projects for enhancing IT governance We express our deepest regrets regarding inappropriate accounting by overseas sales subsidiaries of FX. Taking these findings seriously, we will make every possible effort to restore the trust of stakeholders under the new management structure with a stronger governance system. 25

28 Corporate Governance Status of Corporate Governance Basic Policy of Corporate Governance The Company aims to achieve sustainable growth and increase the corporate value of the Group while contributing to the sustainable development of society by conducting sincere and fair business activities. The Company has positioned corporate governance as an important management priority to achieve this aim. Activities for Strengthening Corporate Governance The Company has implemented such measures as appointment and addition of outside Directors, revision of the payment of remuneration to Directors and Audit & Supervisory Board Members, formulation of Corporate Governance Guidelines, and evaluation on the effectiveness of the Board of Directors. In addition, it will promote group-wide measures to strengthen governance in response to the inappropriate accounting in overseas subsidiaries of Fuji Xerox Co., Ltd. to further strengthen the corporate governance system. Past Activities Year/month Activities for strengthening governance Purpose Transitioned to a holdings company structure To strengthen consolidated management of the Fujifilm Group FY27/3 First appointment of outside Director To properly supervise and audit performance of duties to ensure transparency of the management, while promoting active discussion by asking for appropriate advice and necessary explanation at the Board of Directors meetings from an objective viewpoint FY28/3 Introduction of stock option system To make the Company s Directors (excluding outside Directors) share the stockholders interest in the fluctuation of the stock FY21/3 Abolition of retirement benefit program for Directors and Audit & Supervisory Board Members price of shares of the Company and enhance their motivation and morale to contribute towards increasing the corporate value of the Company FY215/3 Increase in the number of outside Directors to two persons To further strengthen proper supervision and audit of performance of duties, while promoting active discussion by asking for appropriate advice and necessary explanation at the Board of Directors meetings from an objective viewpoint FY216/3 Formulation of Corporate Governance Guidelines Commencement of the evaluation of the effectiveness of the Board of Directors To present the Company s basic policy on corporate governance from a wide range of perspectives to ensure accountability to all stakeholders To ensure the effectiveness of the Board of Directors FY218/3 Increase in the number of outside Directors to three persons, thereby raising the ratio of outside Directors on the Board of Directors to one-third To further incorporate stakeholders perspectives and sense of value into the management To enhance transparency of decision-making of the Board of Directors with advice given based on their expertise and experience 26

29 Corporate Governance Corporate governance structure (As of June 29, 216) Corporate organization Company with an Audit & Supervisory Board Number of Directors (number of outside Directors) 9 (3) Number of outside Directors deemed to be independent* 1 3 Directors term of office One year (the same term of office applies to outside Directors) Incentive compensation to Directors Introduction of a stock option system geared toward in-house Directors Number of Audit & Supervisory Board members (number of outside Audit & Supervisory Board members) 4 (2) Number of independent officers* 2 5 Adoption of an executive officer system Yes Independent auditors KPMG AZSA LLC Introduction of Countermeasures (Takeover Defense Measures) for Large-Scale Purchases of Company Shares None* 3 *1 Compliance with the Company s Criteria for Independence of Outside Directors and Outside Audit & Supervisory Board Members *2 Independent officers as stipulated by Tokyo Stock Exchange, Inc. *3 If the Company receives a proposal seeking to acquire a controlling interest, it will strive to help shareholders make a decision by proactively gathering information and disclosing it in a timely manner, while taking appropriate measures within the scope permitted by relevant laws and regulations, such as the Companies Act and the Financial Instruments and Exchange Act, to increase corporate value and secure the common interests of shareholders. Details of the Company s Organizational Structure Directors and the Board of Directors The Company has positioned the Board of Directors as the organization for determining basic Group management policies and strategies and other important matters relating to business execution as well as supervising the implementation of business affairs. The Company s Articles of Incorporation stipulate that the Board can consist of up to 12 Directors. Currently, the Board has nine Directors, including three outside Directors. The Board s regular meetings are held in principle once a month, with extraordinary Board meetings held on an as-required basis. In addition, certain matters are determined on a flexible decision-making basis at the Board of Directors meetings by Directors with special authority. To better clarify their missions and responsibilities, the Company s Directors are given a one-year term of office. Number of Board of Directors meetings held (in FY217/3) 13 Average attendance rate of Directors 95 % (including outside Directors)* 1 Average attendance rate of Audit & Supervisory Board members 95 % (including outside Directors)* 2 *1 Average attendance rate of each Director *2 Average attendance rate of each Audit & Supervisory Board member Raise the ratio of outside Directors on the Board of Directors to one-third to strengthen governance Previously From June 29, 217 onward Outside Director Outside Director 27

30 Corporate Governance Executive Officer System The Company has adopted an executive officer system to facilitate agile business execution. Executive officers carry out business affairs in accordance with the basic policies and strategies formulated by the Board of Directors. The Company currently has 13 executive officers, including six concurrently serving as Board members. The executive officers have a one-year term of office, the same as the Company s Directors. Management Council The Management Council makes decisions on the submission of matters to be exclusively deliberated by the Board of Directors. At the same time, the Council deliberates on the measures adopted by executive officers to implement particularly important initiatives in accordance with the basic policies, plans, and strategies formulated by the Board of Directors. Internal Audits The Company established a Global Internal Audit Division in September 217, which currently comprises 56 personnel, as an internal auditing unit that is independent from business operations. Integrating the internal auditing function of the Group companies, the Company has established a global auditing system to strengthen the auditing function of the entire group through enhancing the auditing capability and efficiency by using IT. In addition, the division is in charge of assessing internal control over financial reporting by the Company and its Group companies in response to the April 28 application of the internal control reporting system in Japan. The Company compiles the outcome of the assessment in a Management s Report on Internal Control over Financial Reporting. Moreover, designated staff are appointed to operating companies and audits are conducted across a wide range of areas, including the environment, quality control, security, labor, export control, and issues relating to the Pharmaceutical Affairs Law of Japan. Audit & Supervisory Board and Audit & Supervisory Board Members The Company has adopted an audit and supervisory board system with an audit and supervisory board, which consists of four members, including two outside Audit & Supervisory Board members. Both of Outside Audit & Supervisory Board members, Hisayoshi Kobayakawa and Shiro Uchida are registered Certified Public Accountants and possess considerable knowledge about finance and accounting. As an independent organization with key roles and responsibilities in the Company s corporate governance system to ensure transparent and fair decision making in the business as a whole, Audit & Supervisory Board members audit the entire scope of Directors performance of their duties following audit policies and an audit plan in conformity with the Audit & Supervisory Board members audit standards determined by the Audit & Supervisory Board. At meetings of the Audit & Supervisory Board, which are held in principle once a month, information on audit results is shared among Board members. In addition, all Audit & Supervisory Board members attend meetings of the Board of Directors, while the full-time Audit & Supervisory Board members attend every Management Council meeting, regularly exchange opinions with the representative Directors, and audit the entire range of business execution. With the aim of strengthening the audit functions of the Audit & Supervisory Board, the Company has established the Audit & Supervisory Board Office and currently appointed six personnel. Accounting Audits The Company engages KPMG AZSA LLC as its independent auditors. KPMG AZSA LLC expresses an audit opinion on the Company s financial statements from an independent standpoint. Number of Audit & Supervisory Board meetings held (in FY217/3) 13 Average attendance rate of Audit & Supervisory Board members 98 % (including outside Directors)* * Average attendance rate of each Audit & Supervisory Board member 28

31 Corporate Governance Corporate governance structure of FUJIFILM Holdings Corporation and Internal Control System Shareholders Meeting Board of Directors Determination of Group management policies and strategies Decisions on important matters relating to business execution Supervision of business execution Audit & Supervisory Board Independent Auditors Chairman, Representative Director and CEO Staff of Audit & Supervisory Board Members Business Execution Management Council President, Representative Director and COO CSR Committee M&A Investment Committee Executive Officers Internal Audit Committee for Strengthening Governance PR / IR Corporate Planning Subsidiaries Administration Accounting and Finance HR General Administration Legal CSR IT FUJIFILM Corporation Fuji Xerox Co., Ltd. Toyama Chemical Co., Ltd. 29

32 Corporate Governance Approach to Compliance, Risk Management, and Internal Control System The Company ensures that the activities and behavior of its officers, and employees are in compliance with laws and regulations and social ethics. Specifically, the Company has formulated the Fujifilm Group Charter for Corporate Behavior and the Fujifilm Group Code of Conduct, and established the CSR Committee and dedicated compliance divisions to maintain and improve compliance. In its approach to risk management, the Company builds appropriate risk management systems at all Group companies. Complementing these systems, in the case of important risk matters, the CSR Committee conducts reviews and promotes basic policy development and appropriate measures from a group-wide perspective. Moreover, the Company has established an internal control system based on the Basic Policy on Establishing a Structure for an Internal Control System decided by resolution of the Board of Directors. Each year, the Company checks the implementation status of the internal control system and reports the result to the Board of Directors. Remuneration to Directors and Audit & Supervisory Board Members The Company discloses the number of individuals to whom remuneration is paid and the total amount of remuneration by Directors as well as Audit & Supervisory Board members. Remuneration and other important matters relating to Directors as well as Audit & Supervisory Board members are determined by way of resolution at the Company s annual general meeting of shareholders. In this manner, steps are taken to determine the total maximum amounts of compensation payable to Directors as well as Audit & Supervisory Board members. Remuneration (including bonuses) paid to each Director is determined by a resolution of the Board of Directors. Remuneration (including bonuses) paid to each Audit & Supervisory Board member is determined based on deliberations between Audit & Supervisory Board members. The basic remuneration of Directors as well as Audit & Supervisory Board members is paid as a fixed remuneration amount in accordance with individual duties and status, whether full or part time. Directors bonuses are determined in accordance with the Company s business results and individual Director s responsibilities and performance. The Company has introduced a stock option system in connection with the payment of remuneration to Directors (excluding outside Directors). The stock option system was introduced as an incentive to further motivate Directors to enhance corporate value. In determining the number of stock options allocated, consideration is given to each Director s position, responsibilities, authority, and other factors and determined by the Board of Directors in accordance with established rule. Amount of remuneration paid to Directors and Audit & Supervisory Board members* (For FY217/3) Subject of Remuneration Number of People Remuneration Amount Directors million (Outside Directors) (2) ( 19 million) Audit & Supervisory Board members 5 55 million (Outside Audit & Supervisory Board members) (2) ( 11 million) Total million (Outside Directors, Audit & Supervisory Board members) (4) ( 31 million) * The following items are also included in the aforementioned amounts of remuneration. 1. Bonuses paid for FY217/3 Directors: 1 million paid to 11 Directors ( 3 million paid to two outside Directors) Audit & Supervisory Board members: 4 million paid to three Audit & Supervisory Board members ( 1 million paid to one outside Audit & Supervisory Board member) 2. Amount of remuneration paid by way of stock options Directors: 371 million paid to 1 Directors 3. Number of Directors receiving compensation Includes two Directors who resigned during FY217/3 4. Number of Audit & Supervisory Board members receiving compensation Includes two Audit & Supervisory Board members who resigned during FY217/3, excluding one Audit & Supervisory Board member with no compensation. Other Overview of IR Activities At Fujifilm, top management is actively involved in IR activities and works to strengthen the relationship of trust with shareholders and enhance IR activities. In addition, we are working to reduce the gap between intrinsic corporate value and market ratings by continuously expounding the Company s management policy and utilizing management to assist the capital markets in forming their opinions. Specifically, in addition to the quarterly results briefings attended by senior management and executive officers, we actively provide points of contact, by joining IR conferences for the benefit of institutional investors in Japan and overseas, holding business briefings, and individual meetings. We are thereby working to further enhance communications with our shareholders. For the sake of overseas investors, we post English-language information in a timely manner on our website and are enhancing our global IR activities, such as through closer communication by establishing our IR bases in North America and Europe. For individual investors, we post content on the website that explains the Group s businesses in an easily understood manner and hold Company briefings in major cities in Japan. Main IR activities (FY217/3) Activity Number of times For institutional investors / analysts Results briefings 4 Conferences hosted by securities companies 8 Business briefings and factory tours 7 Overseas IR road shows 5 For individual investors Company briefings 25 The Company conducts IR activities in accordance with the IR Information Disclosure Policy can be viewed at the following URL. policies_and_systems/ir_policy/ 3

33 Corporate Governance Reasons for selecting outside Directors and outside Audit & Supervisory Board members Outside Directors* 1 Outside Audit & Supervisory Board Members* 1 Tatsuo Kawada Newly elected Reasons for Selection Mr. Kawada has served as representative director of a general textile manufacturer for many years. With his strong leadership, he has achieved transformation of the company s business model, creation of innovation, and organizational reform. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing his ample experience and wide range of knowledge as a corporate executive to give suggestions and advice on many aspects of the Company s management. Hisayoshi Kobayakawa Reasons for Selection Mr. Kobayakawa has ample experience and a wide range of knowledge as a certified public accountant. The Company deems he appropriately executes his duties as an outside Audit & Supervisory Board member from an objective viewpoint based on such experience and knowledge. Attendance Meetings of Board of Directors 13 / 13 Meetings of Audit & Supervisory Board 13 / 13 Makoto Kaiami Reasons for Selection Mr. Kaiami has served in important positions such as Presiding Justice of the Division of Tokyo High Court and President of Tokyo District Court, and has ample experience and wide range of knowledge accumulated over his many years as a judge. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing this experience and knowledge to give suggestions and advice on many aspects of the Company s management, including from the perspective of compliance and internal control. Kunitaro Kitamura Newly elected Newly elected Reasons for Selection Mr. Kitamura has served as representative director of financial institutions for many years, demonstrating strong leadership. He has ample experience and wide range of knowledge in the fields of loans, finance, and capital markets. The Company deems that he is capable of executing the duties expected of an outside director in an appropriate and sufficient manner by utilizing this experience and knowledge to give suggestions and advice on many aspects of the Company s management. Shiro Uchida Reasons for Selection Mr. Uchida has ample experience and a wide range of knowledge as both a certified public accountant and as a corporate manager. The Company deems he appropriately executes his duties as an outside Audit & Supervisory Board member from an objective viewpoint based on such experience and knowledge. Attendance Meetings of Board of Directors 2 Meetings of Audit & 8 / 1* Supervisory Board 9 / 1* 2 *1 For a brief history of each outside Director and outside Audit & Supervisory Board member, please see page 32 (Management Structure). *2 Applicable to the Board of Directors meetings and Audit & Supervisory Board meetings held after the election on June 29,

34 Corporate Governance Management Structure * Fuji Photo Film Co., Ltd., was renamed FUJIFILM Holdings Corporation in October 26. The operating company FUJIFILM Corporation took over the businesses of Fuji Photo Film Co., Ltd. Board of Directors (As of September 3, 217) Chairman, Representative Director & CEO Shigetaka Komori 1963 Joined the Company 2 President, Representative Director of the Company 26 CEO of the Company (to present) 212 Chairman, Representative Director & CEO of the Company (to present) Chairman, Representative Director & CEO of FUJIFILM Corporation (to present) Significant Concurrent Positions Chairman, Representative Director & CEO of FUJIFILM Corporation Chairman, Representative Director of Fuji Xerox Co., Ltd. Director Masaru Yoshizawa 198 Joined the Company 214 Corporate Vice President of the Company (to present) 216 Director of the Company (to present) Director of FUJIFILM Corporation Significant Concurrent Positions Director & Executive Vice President of Fuji Xerox Co., Ltd. President, Representative Director & COO Kenji Sukeno 1977 Joined the Company 212 Corporate Vice President of the Company Director of FUJIFILM Corporation 213 Director of the Company 215 Director & Senior Vice President of FUJIFILM Corporation 216 President, Representative Director & COO of the Company (to present) President, Representative Director & COO of FUJIFILM Corporation (to present) Significant Concurrent Positions President, Representative Director & COO of FUJIFILM Corporation Director of Fuji Xerox Co., Ltd. Chairman, Director of Toyama Chemical Co., Ltd. Director (Outside) Tatsuo Kawada 1987 President of SEIREN CO., LTD. 211 Chairman and President of SEIREN CO., LTD. 214 Chairman and CEO of SEIREN CO., LTD. (to present) 217 Director of the Company (to present) Significant Concurrent Positions Chairman and CEO of SEIREN CO., LTD. Outside Director of Hokuriku Electric Power Company Member of the Board (external) of Daikin Industries, Ltd. Director serving as Audit and Supervisory Committee member of Hokuhoku Financial Group, Inc. Director & Chief Innovation Officer (CIO) Kouichi Tamai 23 Joined the Company 26 Corporate Vice President of the Company (to present) 28 Director of FUJIFILM Corporation 21 Director of the Company (to present) 213 Executive Vice President of FUJIFILM Corporation 216 Director & Vice President, CIO of FUJIFILM Corporation (to present) Significant Concurrent Positions Director & Vice President, CIO of FUJIFILM Corporation Deputy President, Representative Director of Fuji Xerox Co., Ltd. Director (Outside) Makoto Kaiami 1978 Assistant Judge of Tokyo District Court 2 Presiding Justice of the Division of Tokyo District Court 27 Associate Vice-Minister of Justice in charge of Litigation Affairs, Minister s Secretariat of Ministry of Justice 29 Judge of Tokyo High Court President of Wakayama District and Family Court 211 President of Nagano District and Family Court 212 Presiding Justice of the Division of Tokyo High Court 214 President of Tokyo Family Court 215 President of Tokyo District Court 216 Retired office at mandatory retirement age 217 Registered as Attorney at Law (to present) Joined Sophiacity Law Office as Of counsel (to present) Director of the Company (to present) Significant Concurrent Positions Of counsel of Sophiacity Law Office Director & Chief Technical Officer (CTO) Yuzo Toda 1973 Joined the Company 28 Director of FUJIFILM Corporation 29 Director of the Company (to present) 215 Executive Vice President of FUJIFILM Corporation 216 Corporate Vice President of the Company (to present) Director & Vice President, CTO of FUJIFILM Corporation (to present) 217 Director of Anicom Holdings, Inc. (to present) Significant Concurrent Positions Director & Vice President, CTO of FUJIFILM Corporation Director of Anicom Holdings, Inc. 198 Joined the Company 214 Director of FUJIFILM Corporation (to present) 216 Corporate Vice President of the Company (to present) Director & Senior Vice President of FUJIFILM Corporation (to present) Director (Outside) Kunitaro Kitamura 211 Representative Director and Deputy President of Sumitomo Mitsui Trust Holdings, Inc. Representative Director and Deputy President of The Chuo Mitsui Trust and Banking Company, Limited (current Sumitomo Mitsui Trust Bank, Limited) 212 Representative Director and President of Sumitomo Mitsui Trust Holdings, Inc. Chairman (Representative Director) of Sumitomo Mitsui Trust Bank, Limited 217 Representative Director of Sumitomo Mitsui Trust Holdings, Inc. (to present) Chairman (Director) of Sumitomo Mitsui Trust Bank, Limited (to present) Director of the Company (to present) Significant Concurrent Positions Representative Director of Sumitomo Mitsui Trust Holdings, Inc. Chairman (Director) of Sumitomo Mitsui Trust Bank, Limited Significant Concurrent Positions Director & Senior Vice President of FUJIFILM Corporation 32 Director Norio Shibata

35 Corporate Governance Audit & Supervisory Board Members Executive Officers Audit & Supervisory Board Member Mamoru Matsushita Audit & Supervisory Board Member Kazuya Mishima 198 Joined the Company 28 Managing Director of FUJIFILM UK Ltd. 212 General Manager of Secretary Office of the Company General Manager of Secretary Office of FUJIFILM Corporation 213 President of FUJIFILM Italia S.p.A. 216 Audit & Supervisory Board Member of the Company (to present) Audit & Supervisory Board Member of FUJIFILM Corporation (to present) Significant Concurrent Positions Audit & Supervisory Board Member of FUJIFILM Corporation 1978 Joined the Company 29 General Manager of Legal Group of Corporate Planning Division of the Company General Manager of Legal Department of FUJIFILM Corporation 212 Corporate Vice President of the Company Corporate Vice President of FUJIFILM Corporation 214 Director & Senior Executive Officer of FUJIFILM Business Expert Corporation 215 President & Representative Director of FUJIFILM Business Expert Corporation 217 Audit & Supervisory Board Member of the Company (to present) Audit & Supervisory Board Member of FUJIFILM Corporation (to present) Significant Concurrent Positions Audit & Supervisory Board Member of FUJIFILM Corporation Audit & Supervisory Board Member of Toyama Chemical Co., Ltd. Chairman and CEO President and COO Corporate Vice President and CIO Corporate Vice President and CTO Corporate Vice President Corporate Vice President Corporate Vice President Corporate Vice President Corporate Vice President Corporate Vice President Corporate Vice President Corporate Vice President and CDO* Corporate Vice President *Chief Digital Officer Shigetaka Komori Kenji Sukeno Kouichi Tamai Yuzo Toda Norio Shibata Masaru Yoshizawa Hiroshi Kurihara Shigenobu Inenaga Masato Yamamoto Shigeru Sano Masahiro Fukuoka Akira Yoda Chisato Yoshizawa Audit & Supervisory Board Member (Outside) Hisayoshi Kobayakawa 1968 Registered as Certified Public Accountant (to present) 1996 Senior Partner of Price Waterhouse (currently PricewaterhouseCoopers Co., Ltd.) Executive Representative Partner of Aoyama Audit Corporation 2 Audit & Supervisory Board Member of General Sekiyu K.K. (currently TonenGeneral Sekiyu K.K.) Full-time Audit & Supervisory Board Member of TonenGeneral Sekiyu K.K. 27 Audit& Supervisory Board Member of TonenGeneral Sekiyu K.K. Full-time Audit & Supervisory Board Member of TonenGeneral Sekiyu K.K. 214 Substitute Audit & Supervisory Board Member of the Company 215 Audit & Supervisory Board Member of the Company (to present) 1986 Registered as Certified Public Accountant (to present) 21 CEO of PricewaterhouseCoopers Co., Ltd. 212 Chairman of PricewaterhouseCoopers Co., Ltd. 215 Chairman, Representative Director of SAP Japan Co., Ltd. (to present) 216 Audit& Supervisory Board Member of the Company (to present) Audit & Supervisory Board Member (Outside) Shiro Uchida Significant Concurrent Positions Chairman, Representative Director of SAP Japan Co., Ltd. Outside Director of Nihon Trim Co., Ltd. 33

36 Corporate Governance Message from Outside Directors Three outside Directors, who have been newly elected for FY218/3, express their resolutions on the appointment as the Company s Directors. Contribute to growing the business and strengthening governance from the perspective of corporate manager SEIREN CO., LTD., where I currently serve as Chairman and CEO, has supplied Fujifilm with shielding components for photographic film, what it calls teremp (shielding cloth) for film cartridges, which was developed about 3 years ago. With the declining demand for photographic film, the Company s business with SEIREN is shrinking substantially. However, this appointment as the Company s outside Director makes me keenly aware of my 3-year relationship with the Fujifilm Group. The Fujifilm Group, a creator of innovative products and services in a wide variety of fields, continues to create value with the use of leading-edge, original technologies, which are undoubtedly its core competence, generating strength that is not seen in other companies. Moreover, strong leadership of the management has been a driving force to build togetherness and forward momentum with the Group s employees, and achieve innovation in acting on their own to reform the Company. The Fujifilm Group presently has 93 domestic companies and 184 overseas companies as a global company group. As the Fujifilm Group continues to grow up, how Fujifilm will strengthen governance, while drawing on the strength of each company this will become a more important issue in the future management. Outside directors play a role in supervising the Tatsuo Kawada Director (Outside) Chairman and CEO of SEIREN CO., LTD. Outside Director of Hokuriku Electric Power Company Member of the Board (external) of Daikin Industries, Ltd. Director serving as Audit and Supervisory Committee member of Hokuhoku Financial Group, Inc. management from a different viewpoint from inside directors and contribute to enhancing the corporate value of the Fujifilm Group by raising issues and giving advice. Effective this fiscal year, the Board is comprised of three outside Directors, which, I believe, raises expectation for active exchange of opinions based on broader knowledge. By utilizing my experience in corporate management I will also contribute to achieving growth of the Fujifilm Group, where every employee has a dream, thereby which can provide society with dreams. Seeing my role as a member of the Group by utilizing my experience as a legal expert I worked as a judge for 38 and a half years until I retired from the post of Director General of the Tokyo District Court in October 216. I have been working as a lawyer since February 217. Although I have never been involved with corporate management, I am committed to fulfilling my roles and the expectations placed on outside Directors by drawing on my experience as a legal expert. Today, corporations are facing the big challenge of not only improving corporate value in pursuit of a greater business scale and larger profit, but creating social value that contributes to the world. The Fujifilm Group has been creating new value through innovation in various lives and industrial fields, thereby contributing to society. The Fujifilm Group s achievement in the medical field to support people s health is one of the major accomplishments. Makoto Kaiami Director (Outside) Of counsel of Sophiacity Law Office 34

37 Corporate Governance In terms of compliance that is to be observed as a public institution of society, such issues as inappropriate accounting at overseas sales subsidiaries of Fuji Xerox and deficiencies in internal control were found. This finding creates the need to review group-wide operations to improve and strengthen the governance system and fully ensure our members are aware about compliance. I feel that Board of Directors of FUJIFILM Holdings Corporation discusses matters in an open and active manner, showing the Company s willingness to positively receive opinions from outside parties. I see it as my role to raise issues and give proper advice to the Board of Directors based on my knowledge and experience relating to law, from a position where I can check the management with outside viewpoints, especially as a legal professional. In order for corporations to achieve sound growth, the important point is that each and every employee works passionately and enthusiastically, being aware that their work has been useful for society. The Fujifilm Group possesses such positive corporate culture, enriching soil for value creation. I am committed to fulfilling my role as a member of the Fujifilm Group with the aim of building a company that will achieve sustainable development with society. Providing support in corporate management through supervision and advice given based on the experience and knowledge accumulated in a financial institution My 4-year service in Sumitomo Mitsui Trust Bank gave me opportunities to meet various corporations from the position of a financial institution. Among them, I have never found a case like that of the Fujifilm Group. Although the Company once faced the situation where its mainstay products were at risk, it overcame the difficult period and later developed businesses even greater than before. I believe that this is because Fujifilm Group tackled the challenge of restructuring and reform through concerted efforts with the management and employees, realizing its vision through actions full of esprit and vitality. It could not have been achieved without the management s leadership and strong will that each employee had developed voluntarily and independently, with ideas such as we will do it and we want to change like this. This is very proof of the open, fair, and clear corporate culture of the Fujifilm Group, which has been a source of creation of value from innovation. Corporation management is prone to peer pressure even though discussions are made freely and audaciously. This unconscious vulnerability should be mitigated through proper supervision and advice from the viewpoint of external parties such as outside directors to ensure management transparency, thereby leading to stronger governance. Every business of the Fujifilm Group supports the industrial community by providing cutting-edge, proprietary Kunitaro Kitamura Director (Outside) Representative Director of Sumitomo Mitsui Trust Holdings, Inc. Chairman of Sumitomo Mitsui Trust Bank, Limited technologies and enriches people s lives. When employees truly feel that business growth and development are directly linked with contributions to society, they will find their efforts very rewarding, thereby generating higher motivation. Recently, financial institutions have been expected to fulfill responsibilities to meet consumer needs with a high sense of ethics under the concept of fiduciary duty. I believe that such truly customer-oriented viewpoint is also applied to non-financial institutions. I will give my support in corporate management with the consciousness of such viewpoint. 35

38 Business Activities Business Activities The Fujifilm Group operates businesses in three business segments: Imaging Solutions, Information Solutions, and Document Solutions. This section shows a performance summary and analysis on change in revenue and operating income for FY217/3. Sustainable Value Plan 23 Governance Business Activities Imaging Solutions Providing photo-related products and services ranging from photo-taking to printing Information Solutions Engaging in a wide range of activities focusing mainly on B2B businesses including healthcare and highly functional materials, both of which are priority business fields Document Solutions Undertaking document-related business activities including the provision of digital multifunction devices for offices and related services P37 P39 P43 Sources of Corporate Value Technological Strength, Corporate Culture, Brand Strength, Human Resources, Global Network 36

39 Business Activities Imaging Solutions Proportion of revenue Photo Imaging Provides photo-related products and services, ranging from photo-taking to printing Optical Device and Electronic Imaging Provides products such as the X Series of digital cameras, interchangeable lenses, and TV lenses Performance Summary of FY217/3 In the Imaging Solutions segment, consolidated revenue amounted to billion (down 3.2% from the previous fiscal year), due to the negative impact of the yen s appreciation ( 32. billion) and other factors. Consolidated operating income amounted to 36.8 billion (up 15.1% from the previous fiscal year), due to the improvement in profitability in each business, though a negative impact from the decreased sales due to the yen s appreciation was observed. Reasons for Change in Revenue from FY216/3 to FY217/3 Increases Strong sales were seen for instant photo systems such as the instax series and instax films, especially in the United States and Europe. The Wall Decor and other value-added printing businesses also enjoyed solid sales. Favorable sales were seen for mirrorless digital cameras such as FUJIFILM X-T2 and FUJIFILM X-T2 as well as their accompanying interchangeable lenses. Strong sales were seen for FUJIFILM GFX 5S, a medium format mirrorless digital camera equipped with a large sized sensor. Decreases Sales of camera modules for use in smartphones decreased. Reasons for Change in Operating Income from FY216/3 to FY217/3 Increases Sales of instant photo systems were strong Profitability improved in the electronic imaging field, reflecting the further shift to such high-end digital camera models as the X Series and the FUJIFILM GFX 5S Decreases Negative effect of the yen s appreciation Revenue (Billions of yen) % 31% (FY) 13/3 14/3 15/3 16/3 17/3 Photo imaging Optical device and electronic imaging Operating income (loss) / Operating margin (Billions of yen) (%) % (FY) 13/3 14/3 15/3 16/3 17/3-5. Operating income (loss) Operating margin (right scale) (Billions of yen) FY Revenue Operating income (loss) (.8) Total assets Depreciation Capital expenditures

40 Business Activities Photo Imaging Revenue billion YoY 5.1% Down Principal Products and Services Instant photo systems Printing materials Photographic paper and chemicals for color prints Inkjet paper and ink Thermal paper and ribbon Printer devices Minilabs (silver type, inkjet type) Thermal photo printers Labs and photo printing services Value-added printing business such as Photobook Photo printing services Photographing sensitive materials Color negative films Reversal films QuickSnap Performance Highlights and Major Initiatives Sold 6.6 million units of the instax instant camera on a global basis. Sales of instant photo systems such as the instax series and instax films that enable users to enjoy output photos on the spot were strong, especially in the United States and Europe. Fujifilm launched instax SHARE SP-2 responding customers demand for a device that can produce instax prints taken and edited by smartphone in accord with the spread of smartphone. It is popular that it finishes a photo with a instax-like atmosphere and Fujifilm has succeeded in expanding new users and developing new sales channel. Sales of value-added printing business were strong such as Wall Decor printing services that enable users to enjoy decorating their rooms by displaying the users favorite photos in a panel and a framed canvas, and Photobook services including Year Album which select and layout photos automatically. instax mini 8+ Optical device and electronic imaging Revenue 15. billion YoY 1.5% Up Principal Products and Services X Series digital cameras GFX series medium format mirrorless digital camera equipped with a large sized sensor Interchangeable lenses for digital cameras TV lenses, cinema lenses Security lenses Projector lenses FUJIFILM GFX 5S FUJINON MK18-55mm T2.9 Performance Highlights and Major Initiatives Electronic imaging Strong sales were seen for FUJIFILM X-T2 and FUJIFILM X-A3, which were released in September 216, as well as their accompanying interchangeable lenses. Sales increased for FUJIFILM GFX 5S, a medium format mirrorless digital camera equipped with a large sized sensor, which was released in February 217, and FUJIFILM X1F and FUJIFILM X-T2, which are the latest models of the X Series that uses original color reproduction technologies to achieve premium image quality. Optical devices Sales of camera modules for use in smartphones decreased. FUJINON MK18-55 mm T2.9 cinema lenses, which were released in March 217, are highly regarded in the market for their high optical performance, extremely lightweight design and excellent cost performance. FUJIFILM X-T2 Photo Imaging business Create demand for new photography, imaging and printing services in the age of digital devices and smartphones For the fiscal year ended March 31, 217, sales of the instax instant camera increased significantly, thereby contributing to the overall sales of the Imaging Solutions segment. Instax has been popular among young digital-native generations especially in Asia. Fujifilm, thereafter, has continued to release attractive new products that satisfy users needs for self-expression. Our products have been accepted instantly by a wide variety of users around the world especially in North America and Europe, thereby enhancing the new enjoyment of photography. We have also been developing and providing highly convenient printing services by adopting digital marketing and AI (Artificial Intelligence) technology to meet diversifying customers needs. In February 217, we have started operating new services that enable users to automatically create Photobook perfectly suited for a trip and wedding and have received a high evaluation from customers. While conveying the attractiveness of analog technology, we continue to provide innovative products, services and solutions adopting advanced digital technologies in order to contribute to the development of the culture of photography. Tetsuya Iwasaki General Manager of Photo Imaging Products Division, FUJIFILM Corporation 38

41 Business Activities Information Solutions Proportion of revenue Healthcare Develops businesses in the fields of medical systems, pharmaceuticals, bio CDMO, regenerative medicine, and life sciences; operates in three fields of prevention, diagnosis, and treatment Highly Functional Materials Provides display materials, industrial products including non-destructive testing equipment and various types of highly functional films and electronic materials including semiconductor processing materials Recording Media Provides products including computer tape and data archive services Graphic Systems Provides inkjet digital presses, industrial inkjet printheads, plate-making films and computer-to-plate (CTP) plates Performance Summary of FY217/3 In the Information Solutions segment, consolidated revenue amounted to billion (down 4.5% from the previous fiscal year) due to the negative impact of the yen s appreciation ( 63.5 billion) and other factors, while sales increased in the display materials business, electronic materials business and others. Operating income amounted to 83. billion (down 8.5% from the previous fiscal year), reflecting such factors as the sales decline impacted by the yen s appreciation. Reasons for Change in Revenue from FY216/3 to FY217/3 Increases In medical systems business, sales in growth fields of In-vitro Diagnostic (IVD) systems, endoscopes and others were strong. In pharmaceuticals business, Bio CDMO performed well. In display materials business, sales of WV films and films for VA mode were steady. In industrial products business, EXCLEAR delivered good sales results. In electronic materials business, sales of advanced products related to photolithography materials and others were strong. In recording media business, sales of data storage tapes were solid. In graphic systems business, sales grew for inkjet digital presses and industrial inkjet printheads. Decreases In pharmaceuticals business, sales decreased mainly due to the influence of generic drugs in the category of small-molecule drugs. Reasons for Change in Operating Income from FY216/3 to FY217/3 Increases Profitability improved in each business Decreases The negative impact of the yen s appreciation Revenue (Billions of yen) 1, % 23% 5% 29% (FY) 13/3 14/3 15/3 16/3 17/3 Healthcare Highly functional materials Recording media Graphic systems Operating income / Operating margin (Billions of yen) % (%) (FY) 13/3 14/3 15/3 16/3 17/3. Operating income Operating margin (right scale) (Billions of yen) FY Revenue Operating income (loss) Total assets 1,33.3 1, , , ,542.4 Depreciation Capital expenditures

42 Business Activities Healthcare Revenue 384. billion YoY 4.3% Down Medical Systems Principal Products and Services Digital X-ray imaging diagnostic systems: FCR, DR Medical-use picture archiving and communications systems SYNAPSE Endoscope systems Ultrasound diagnostic equipment In-vitro diagnostic (IVD) systems X-ray films Medical-use picture archiving and communications systems SYNAPSE Performance Highlights and Major Initiatives In the X-ray imaging diagnostic field, sales of the CALNEO series, a DR cassette digital X-ray imaging diagnostic system, were strong. In the medical IT field, sales of systems, particularly SYNAPSE increased steadily. In the endoscope field, strong sales were seen particularly in LASEREO, the endoscope system paired with laser light, and in the new series of gastroscopes. In the ultrasound diagnosis field, sales increased steadily in a range of ultrasound imaging diagnostic devices that were newly launched, such as the compact sized, light weighted and tablet typed Sonosite iviz. In the IVD field, a mycoplasma antigen inspection kit FUJI DRI-CHEM IMMU- NO AG Cartridge Myco was launched in October 216, as the vitro diagnostics reagent for use with FUJI DRI-CHEM IMMUNO AG1. Pharmaceuticals, Bio CDMO Principal Products and Services Small-molecule drugs Contract development and manufacturing organization of biopharmaceuticals Radiopharmaceuticals Principal Products and Services ips cells for drug discovery support Recombinant peptide Autologous cultured epidermis/cartilage OZEX fine granules for children (15%) Regenerative Medicine Life Sciences Principal Products and Services Functional cosmetics Nutritional supplement products Hair care products Autologous cultured epidermis JACE Performance Highlights and Major Initiatives In March 217, the Bio CDMO Division was established, the market that is expected to make strong growth to expand its contract development and manufacturing operations for biopharmaceuticals. The Bio CDMO business progressed steadily. Sales in the small-molecule drugs decreased mainly due to the influence of generic drugs. As the nation-wide stockpile in Japan of the anti-influenza drug Avigan Tablet 2mg was announced by the Japanese government in March 217, the supply of the anti-influenza drug has started. In the field of new drug development, Fujifilm is promoting the development of pipelines, for example, in the United States in March 217, initiating Phase II of the clinical investigation of FF-151, an anti cancer drug for refractory myelodysplastic syndromes as a type of hematological malignancies. Performance Highlights and Major Initiatives In June 216, Cellular Dynamics International, Inc. (CDI), which is a leading company in the development and manufacturing of ips cells, established a Cooperative Research and Development Agreement, related to the treatment of retinal degenerative disease with the National Eye Institute (NEI) in the United States. In September 216, a new company was established in the United States in order to develop cell therapy for the treatment of retinal diseases utilizing ips cells in cooperation with Dr. David Gamm, a world authority on treatment of retinal diseases. In September 216, CDI was granted a patent in Japan related to the technology required for the safe and efficient generation of ips cells, following the United States and Australia. Performance Highlights and Major Initiatives The high-function skin lotion ASTALIFT MOIST LOTION and the whitening skin lotion ASTALIFT WHITE BRIGHT LOTION were released in September 216 and March 217, respectively. Sales of new products including skincare products and nutritional supplement products were strong. 4 Functional cosmetics series ASTALIFT

43 Business Activities Highly Functional Materials Revenue 28.9 billion YoY 3.3% Up Display Materials Revenue 97.8 billion YoY 1.9% Up Principal Products and Services FUJITAC protective film for polarizers WV film for expanding viewing angles FUJITAC protective film for polarizers Performance Highlights and Major Initiatives Sales of WV films and films for VA mode and IPS mode were steady. While maintaining sales of products for LCD TVs, Fujifilm is working to expand sales of high-end products for use in small and medium-sized displays including OLED related products and actively develop such new business fields as the materials related to touch panels Industrial Products, Electronic Materials Revenue billion YoY 4.6% Up Principal Products and Services Non-destructive testing equipment and materials Touch panel materials Solar cell materials Semiconductor processing materials EXCLEAR touch-panel sensor film Performance Highlights and Major Initiatives Industrial Products Strong sales in new business fields such as the touch-panel sensor film EXCLEAR were seen. Revenue decreased due to the yen s appreciation and slower sales in existing business fields such as industrial-use X-ray films. Electronic Materials Strong sales were seen for such photolithography materials as advanced photo resists, developers and treatment agents, CMP slurries, and Image Sensor Color Mosaic. Fujifilm continues to expand sales to large accounts utilizing the broad product lineup, including Ultra Pure Solutions, Inc., a U.S. solvent manufacturer and marketer, which became a consolidated subsidiary in December 215, and Wako Pure Chemical Industries, Ltd. which became a consolidated subsidiary in April 217, with the aim of further enhancing business. Regenerative Medicine business Accelerate the development of regenerative medicine by holding three key components Regenerative medicine is the process of using yourself or others cells for damaged tissues and organs that are difficult to reproduce, to restore the function. There are 3 key components, cells, culture medium / cytokine and scaffolds to realize regenerative medicine. Fujifilm has generated high-quality scaffolds by using materials technologies, cultivated in the development and production of photographic film. We gained capabilities of development, manufacturing and sales in the cellular field through the acquisition of Japan Tissue Engineering Co., Ltd., which is the first Japanese company that developed and commercialized regenerative medicine products, and Cellular Dynamics International, Inc., which is a world leading developer and manufacturer of ips cells, in 214 and 215, respectively. Thereafter in 217, Wako Pure Chemical Industries, Ltd., which is an operator of culture medium business, became a consolidated subsidiary, thereby making us hold all the three key components of regenerative medicine in the Fujifilm Group. We will accelerate development by harnessing the synergies within the Group, and drive the industry forward as a leading company in regenerative medicine. Aiichiro Hiruma General Manager of the Regenerative Medicine Division, FUJIFILM Corporation Electronic materials business Speedily and steadily provide high-value-added products that support technological innovation In the electronic materials business, we develop, produce, and globally supply materials essential for semiconductor manufacturing, such as photo resists, developers and treatment agents, CMP slurries, and Image Sensor Color Mosaic. By ascertaining needs of not only semiconductor manufacturers but also peripheral companies such as manufacturing equipment makers, we achieve development utilizing design and compound synthesis technologies relating to organic compounds, and supplying products in a highly clean production process. As the IoT and other technological innovation advances, the importance of semiconductors, which underpin such advancement, is rising every day. We will continue to provide high-value-added products quickly and steadily, while precisely foreseeing future needs so as to achieve growth that goes beyond that of the industry. Keiji Mihayashi Director & Senior Vice President, General Manager of Electronics Materials Division, FUJIFILM Corporation 41

44 Business Activities Recording Media Revenue 47.6 billion YoY 2.1% Up Principal Products and Services Magnetic recording tape for computers Data archive service Performance Highlights and Major Initiatives Revenue grew owing to solid performance of data storage computer tape with unique technologies such as Barium Ferrite (BaFe) particles technology. While expanding sales of BaFe products to data archive field in accord with swelling digital data, Fujifilm will steadily respond to customer needs in the big data era by further disseminating its data archive service dternity. FUJIFILM LTO Ultrium 7 Data Cartridge computer tape with BaFe magnetic particles Graphic Systems Revenue billion YoY 1.2% Down Principal Products and Services Printing materials, CTP plates Digital printing equipment Inkjet digital presses Industrial inkjet printheads Performance Highlights and Major Initiatives In January 217, the Inkjet Business Division was established with the aim of responding to diverse consumer needs with inkjet technologies and further expanding businesses. While sales grew for inkjet digital presses and industrial inkjet printheads, revenue decreased due to the appreciation of the Japanese yen. Acuity Select series Industry-use inkjet head (Starfire) C O L U M N Solving social issues through business CO 2 emissions reduction with energy-saving data storage system To address global warming prevention through business, the Fujifilm Group is developing products and services that are highly effective for reducing CO 2 emissions, aiming to achieve its target of a reduction in CO 2 emissions of 2 million tons by FY221/3 (compared with FY26/3). The introduction of the dternity On-site Archive, an energy-saving data storage system, is one of those examples. This product stores low-use data in a high-capacity magnetic tape, thereby reducing power consumption and CO 2 emissions by roughly 74% compared to all the storage of data on HDD. The high-capacity magnetic tape uses Barium Ferrite (BaFe) particles developed and commercialized for the first time by Fujifilm with a dramatic improvement in data tape capacity. 42

45 Business Activities Document Solutions Proportion of revenue Office products Provides digital multifunction devices and other devices for office use Production services Provides high-speed, high-quality digital printing systems and associated services Office printers Provides printers for office use Global services Supports finding solutions to customers document-related issues through improvements to corporate document solutions and operational processes Performance Summary of FY217/3 In the Document Solutions segment, consolidated revenue amounted to 1,8.9 billion (down 7.2% from the previous fiscal year), due to the sales decrease in export shipments to the United States and Europe centering on the office printer business, the negative impact of the depreciation of Asian currencies against the yen ( 57.2 billion) and other factors. Operating income amounted to 82.7 billion (down 6.% from the previous fiscal year), mainly due to the negative impacts from the decline in export shipments to the United States and Europe and the yen s appreciation despite enhanced efficiency of selling, general and administrative expenses. Reasons for Change in Revenue from FY216/3 to FY217/3 Increases In the office products business, positive sales were seen for the new ApeosPort-VI C and DocuCentre-VI C series of A3 full-color multifunction devices which can be linked with various cloud services. The number of units sold in Asia and Oceania increased for both monochrome and color multifunction devices. In the production services business, the sales of color on-demand publishing systems increased steadily. In the global services business, Managed print service business proceeded smoothly both in Japan and the Asia-Oceania region. Decreases The sales of office printer declined mainly in exports to Europe and the United States. Negative impact of the depreciation of Asia s local currencies Reasons for Change in Operating Income from FY216/3 to FY217/3 Increase Enhanced efficiency of selling, general and administrative expenses Decrease Drop in exports to Europe and the United States and negative impact of the yen s appreciation. Revenue (Billions of yen) 1,2 1, ,8.9 44% 15% 13% 17% (FY) 13/3 14/3 15/3 16/3 17/3 (Billions of yen) % Office products Office printers Production services Global services Others Operating income / Operating margin % (%) (FY) 13/3 14/3 15/3 16/3 17/3. Operating income Operating margin (right scale) (Billions of yen) FY Revenue 1,8. 1, , , ,8.9 Operating income Total assets 1,69.8 1,19. 1, , ,115.4 Depreciation Capital expenditures

46 Business Activities Office Products Revenue 477. billion YoY 5.1% Down Principal Products and Services Office-use color/ monochrome digital multifunction devices ApeosPort-VI C7771 Performance Highlights and Major Initiatives Sales were strong in the Asia-Oceania region, especially in China. Positive sales were seen for the new ApeosPort VI C / DocuCentre-VI C series of A3 full-color multifunction devices capable of linking with various cloud services, which were released in Japan as well as in the Asia-Oceania region in December 216. Overall sales volume remained unchanged from the previous fiscal year, while sales volume decreased in Japan, reflecting the backlash against the replacement of multi-function devices in major domestic convenience stores in the previous fiscal year and decrease in sales volume centering on monochrome models in export shipments to the United States and Europe. Office Printers Principal Products and Services Color/monochrome office printers Revenue Performance Highlights and Major Initiatives The sales volume of export shipment especially to Europe and the United States declined. DocuPrint CM31 dw billion YoY 15.% Down Production Services Principal Products and Services On-demand publishing systems Computer printing systems Revenue billion YoY 1.5% Down Performance Highlights and Major Initiatives Sales of printing system for mission-critical operations were strong in Japan. Sales of production printers Versant 31 Press and Versant 18 Press, which meet various finishing needs for on-demand printing were steady. Versant 31 Press Global Services Principal Products and Services Managed print services(mps) Business process outsourcing Document Solutions Revenue billion YoY 3.8% Down Performance Highlights and Major Initiatives Sales decreased due to the negative impact of the depreciation of Asia s local currencies The managed print services business proceeded smoothly in both Japan and the Asia-Oceania region. To help our customers create values in their business The phenomenal innovation of communication technologies has led to the development of a worldwide network connection. The further acceleration of ICT and IoT will certainly increase the volume of distributed information. Under such circumstances, Fuji Xerox has been establishing a communication environment that enables business people to simply and safely use the necessary information anytime, anywhere and with anybody in the optimal form with the use of communication technologies and know-how centering on documents. Our focus is to provide our customers with various solutions in diverse business scenes, including optimization of business flow and strengthening of customer relationships in order to improve their businesses. We will continue to offer services that will eventually lead to solving social issues, while enlarging our focus to cover municipalities and local communities. Hiroshi Kurihara President and Representative Director, Fuji Xerox Co., Ltd. 44

47 Sources of Corporate Value Sources of Corporate Value We believe that our five sources of corporate value Technological Strength, Corporate Culture, Brand Strength, Human Resources and Global Network are essential components for the Fujifilm Group to meet the expectations, needs and reliability of our stakeholders through our business activities. This section shows these five components which support the creation of corporate value. 45

48 Sources of Corporate Value Technological Strength Analog silver halide photographs, a business that the Fujifilm Group has been involved in for many years, consist of various accumulated technologies. Currently, the ratio of photographic film as a percentage of Companywide sales is just under 1%. However, the technologies, which hold competitive advantages, developed from silver halide photographs are still utilized in many businesses in different forms. 1 Competitive Advantages Cultivated in Silver Halide Photographs Photographing Development/Printing Camera Ensuring high-quality design and manufacture of lenses, hardware, and systems Fujifilm began developing lenses shortly after its establishment, and they have been highly rated under the FUJINON brand. Moreover, Fujifilm possesses unique strengths in camera hardware and system design. Photographic film Coating multiple layers of functional materials simultaneously on a thin film base The surface of the photographic film is coated with multiple layers of materials that boast a variety of functions. Fujifilm possesses the technology to make an optically warp-free, thin, uniform film base in units of microns. In addition, it is possible to design functional materials at the nanometer level, align and maintain minute homogeneous particles, and on a base of these, uniformly coat at high speed multiple layers at the same time. Minilabs / Color paper Precisely controlling chemical reactions of coated functional substances In the developing and printing of photographs, Fujifilm achieves high color reproducibility and image preservability by precisely controlling the chemical reactions of a variety of functional substances coated on photographic film and color paper. Moreover, Fujifilm boasts high-level system design technologies that help build systems for printing equipment including minilabs. Technologies in use Imaging technology High-precision Forming Technology Technologies in use Film Formation Technology Functional Molecules Technology Grain Formation Technology Technologies in use Redox Control Technology High-precision Coating Technology System Design Functional Polymer Technology Nano Technology High-precision Coating Technology Functional Molecules Technology System Design 46

49 Sources of Corporate Value 2Development of Applications of Unique Technologies Since its founding, the Fujifilm Group has been accumulating the fundamental technologies that have supported the Company s business. These technologies include organic and inorganic materials chemistry, optical technologies, and analytical technologies. Based on these fundamental technologies, we have honed our proprietary core technologies, which are central to continuously building up our competitive advantage. By combining these technologies, we have provided a wide range of products and services which create new value that will open the way to the future. We will make continuous efforts to create new value by applying these technologies in various industries. Highly Functional Materials Healthcare Functional value Heat barrier film Life Sciences Functional cosmetics Supplements Pharmaceuticals Cultivation of cells Medical systems Digital X-ray imaging diagnostic system Endoscope systems Medical-use picture archiving and communications systems Ultrasound diagnostic equipment Drug delivery system Regenerative medicine Recombinant peptide (RCP) Autologous cultured epidermis/cartilage Nano technology Delivery of solids and liquid Redox Control technology Material Chemistry Grain Formation technology Control of light Core Technologies Fundamental Technologies Film Formation technology Imaging Optics Analysis Sensor film for touch panels Photo resists Optical film for displays High-precision Coating technology Separation of gas Functional Polymer Prevention of penetration by gases/liquid Backsheets for solar cell Gas separation membranes Semiconductor processing materials Computer tape Recording of images/information Recording Media Display of images Bio engineering Bio-chemistry Mechanical Design Production System Functional Molecules CTP plates Software Electrical, Electronic Ink for inkjet printers System Design MEMS technology Wide-format UV inkjet systems Transfer of information 4K HDMI/IP optical transmission system High-precision Forming technology Imaging technology Inkjet digital press VCSEL Multi-function devices / Printers Printing of images Capturing of images Printing of images Optical lenses Digital cameras Graphic Systems Document Digital Imaging 47

50 Sources of Corporate Value 3 Linking Technology with Growth R&D Reforms in Business Restructuring and Activities of New Business Creation Aiming to create a new business to replace photographic film, for which the market was rapidly shrinking from its peak in 2, the Fujifilm Group has promoted R&D reforms along with business restructuring. In order to build a new growth strategy, we took inventory of our technologies by dividing and organizing new and existing technologies and markets into four quadrants. Based on the results, we selected priority business fields from three viewpoints: being able to use our technologies, future potential for market growth and staying competitive (Figure 1) and concentrated capital expenditures and R&D investment on them. We also continue to invest R&D resources in key growth areas (Figure 2). Regarding the R&D structure, we reorganized one in which laboratories was linked to plants, thereby having the structure remain devided by function. The Company created a vertical structure by establishing Divisional Laboratories under the business divisions to carry out R&D directly linked to each business. At the same time, it also established a horizontal structure to provide, from a Companywide perspective, the necessary technologies to each business by creating Corporate Laboratories to research fundamental technologies, such as material chemistry, imaging, analysis, and production system. Fujifilm has promoted speedy new product development and new business creation to drive growth through a structure whereby the R&D Management Headquarters centrally manages this vertical and horizontal matrix (Figure 3). Further, in August 215, Fujifilm established within the Corporate Planning Division the Innovation & Strategy Planning Division, which consists of management staff responsible for business strategy and technical staff with expertise on the Company s technology, thereby enhancing swift and effective new business creation. Figure 1: Key theme selection at time of restructuring Key themes have been selected after taking an inventory of technologies by dividing and organizing new and existing technologies and markets into four quadrants. Existing market New market Three questions to ask when selecting key themes New technologies Existing technologies High-quality digital cameras Medical-use picture archiving and communications systems Digital printing devices Endoscope system with a laser light source PS plates, CTP plates Photographic film Compact digital cameras X-ray film Pharmaceuticals Functional cosmetics Ultrasound diagnostic equipment Material for regenerative medicine Optical film for displays Sensor films for touch panels Gas separation membranes Backsheets for solar cell Is it a growth market? Do we have the technology? Can we stay competitive? Figure 2: R&D expenses / Ratio of R&D expenses to revenue Invest R&D expenses in key growth areas and promote effective R&D (Billions of yen) (%) Figure 3: R&D Structure R&D Management Headquarters Creation of new value through Intellectual Fusion and Innovation FUJIFILM Advanced Research Laboratories Seeking leading-edge, proprietary technologies Corporate Lab. Frontier Core-technology Lab. Synthetic Organic Chemistry Lab. Advanced Marking Research Lab. Informatics Research Lab. Analysis Technology Center Production Engineering & Development Center Imaging Technology Center (FY) 9/3 15/3 16/3 17/3 Imaging Solutions Information Solutions Document Solutions Corporate Ratio of R&D expenses to revenue (right scale) * FY29/3 has been recorded on a gross basis. Seeking the technologies directly connect to business Divisional Lab. Highly Functional Materials Research Lab. Pharmaceutical & Healthcare Research Lab. Regenerative Medicine Research Lab. Medical Systems R&D Center Optical Device & Electronic Imaging Products Development Center Display Materials Research Lab. Recording Media Research & Development Lab. Electronic Materials Research Lab.

51 Sources of Corporate Value Open innovation for new values by collaboration Fujifilm has opened Open Innovation Hubs in Japan, the U.S. and Europe as places that allow outside business partners to become familiar with Fujifilm s fundamental/core technologies, which are the source of competitiveness of the Fujifilm Group, as well as materials, products and services to which these technologies are applied, and to co-create new value. Since the opening, a total of about 9,8 people from 1,9 companies (as of October 31, 217) have visited the three locations, and collaboration is proceeding in various forms. Further, Fuji Xerox created the Customer Co-creation Laboratory in its R&D center located in Yokohama Japan with the aim of responding to the rapidly changing business environment and the increasingly diversified expectations of our customers. The company introduces to customers case examples in which it worked to resolve its business challenges, then works together with customers to solve their business challenges. Reinforcing information fundamental technologies for advanced ICT that accelerates innovation In April 216, Fujifilm established the Informatics Research Laboratory that engages in the R&D on cutting-edge technologies in the field of information sciences including data analysis and software fundamental technologies, with the aim of building a structure that covers advanced ICT such as the IoT (Internet of Things) and AI (Artificial Intelligence). Further, in order to accelerate groupwide ICT use by combining technologies accumulated to date with new technologies, the Company established the ICT Strategy Management Office in October 216. We will apply ICT not only to create new materials and products, and solution services that respond to IoT society, but also to overall corporate activities such as effective marketing activities based on accurate demand forecast and formation and execution of business plans. Location of Open Innovation Hubs Tilburg, the Netherlands Tokyo, Japan California, U.S. 49

52 Sources of Corporate Value Corporate Culture The Fujifilm Group creates an open, fair and clear corporate culture that allows it to discern objective facts in a sincere and straightforward manner, make rational decisions, and continuously take on challenges with courage in the course of business activities. With this corporate culture, we will further hone our leading-edge, proprietary technologies to remain a vigorous company, consistently creating new value and exercising pioneering leadership. Respect for Human Rights Compliance is the core of the Company s open, fair, and clear corporate culture and respect for basic human rights is the most important aspect of compliance. The Fujifilm Group has clearly stated its commitment to this point in the Fujifilm Group s Charter for Corporate Behavior and Code of Conduct, asking employees to sign the declaration at the end of the Code. We are aware that observing such principles as prohibition of discrimination and harassment, protection of privacy, respect and protection of basic labor rights are essential to truly enhance productivity. We promote understanding of these concepts by periodically holding training seminars on respect for human rights and eliminating discrimination. Charter for Corporate Behavior Fujifilm Group Code of Conduct Occupational Health and Safety / Promotion of Health Creating a workplace where employees can work with vigor and in good health, both physically and mentally this is a basic condition to achieve sustainable growth and development of the Group. Considering that the securing of employees occupational health and safety is the primary issue in our corporate activities, we implement the Occupational Health and Safety Program and prevention measures for workers accidents, especially in the production sites. For health promotion, we established a group-wide health Promotion Council composed of the Fujifilm group. The council has since been working to promote activities focusing on four priority areas: preventing serious lifestyle-related diseases, quitting smoking, mental illness, and preventing overwork. In a high evaluation of these activities, we were recognized as a 217 Certified Health and Productivity Management Organization (Large Enterprise Category) -white 5 in FY217/3. 1. A Trusted Company 2. Social Responsibility 3. Respect for Human Rights 4. Global Environmental Conservation 5. Vibrant Workplaces 1. Respect for Basic Human Rights 2. Open, Fair and Clear Corporate Activities 3. Protection/Preservation of Corporate Assets and Information 4. Environmental Conservation and Protection Brand Strength The FUJIFILM brand has enhanced its value through continuous offer of innovative products and services based on advanced proprietary technologies accumulated in photography. Improving customer satisfaction is one of our efforts. For this purpose, we pay special attention to communicating with our customers at customer centers which are our point of contact with them. We are also building a system that enables us to correctly grasp customers views and link these views to improvements in work processes and product development. Efforts to Raise Customer Satisfaction Fujifilm s businesses cover a wide range of fields, it responds to customer s voices in a way that takes into account the characteristics of each product. Customer proposals and requests collected at customer centers are reported to the relevant departments related to the products to help to improve its products and services and support the development of new products. For example, the Net Print Service System helps improve FAQs with AI (Artificial Intelligence) features on a website, thereby enabling customers to solve issues alone even during the non-business hours of customer centers. At Fuji Xerox, we believe that it is fundamental to place importance on interactive communication with the customers to understand their demands and expectations, and sincerely accept their views and engage in continual improvements. In addition, we have prepared a website that provides employees with information from customers viewpoints. The bilateral communication between customer contact, including sales, maintenance, etc, and the areas of product development, marketing and quality control that the website allows is expected to foster greater customer understanding. 5

53 Sources of Corporate Value Human Resources In order to create and develop prospective business and accelerate global expansion, it is essential to have skilled human resources. Having recognized that human resources are one of the sources of corporate value, the Fujifilm Group is working on developing an environment where diverse human resources can maximize their abilities, while focusing on the development of global and executive talented people from a long-term viewpoint. Development of Global Human Resources Those who think and act on their own in the global and diversified society, and are actively reforming and expanding our businesses for the next generation giving top priority to developing such global and executive talented people, the Fujifilm Group is implementing systems to develop human resources based on an international viewpoint across the Group. We also offer the FUJIFILM Way training to familiarize domestic and overseas employees with an overview of ideal human resources for the Group and working practice. Fujifilm is implementing measures to foster global human resources based on scheduled training to develop global skills and mindsets and creating the capabilities of our employees to work globally. It is building a training system that offers planned practical training for Japanese employees who are appointed to positions overseas, overseas trainee system and short-term onsite training system that give opportunity to young employees to gain overseas experience, as well as training program for technicians. At Fuji Xerox, we not only continue to provide global training to the next generation of leaders, but also enhance our program to develop management-level candidates from overseas affiliates through study in Japan at graduate schools or in long-term OJT. Fujifilm s Training to Develop Global Human Resources (below) For Japanese employees For employees appointed to overseas positions Training prior to overseas appointment Training to develop overseas managers Overseas onsite training For interested employees Short-term onsite training system Overseas trainee system Overseas study system Language lessons, distance-learning (languages) For technical positions MOT (technical management) training For employees of overseas subsidiaries FUJIFILM WAY Training at FUJIFILM Belgium N.V. Achieving Diverse Working Styles Development of global leadership Dissemination of corporate philosophy FUJIFILM Global Leadership Seminar FUJIFILM Regional Leadership Seminar FUJIFILM WAY Training Fujifilm has been implementing Work Style Innovation activities, enabling diverse employees to utilize their individual strengths and demonstrate their own capabilities in an effective way of working that produces results. As a part of these activities, Fujifilm is working on improving its support to employees with responsibilities for childcare and caring for other family members by introducing various programs, such as the Home Working System and the Paid-Leave by the hour system. It also promotes recruitment of employees with disabilities as well as retirees by setting a mediumto long-term expansion goal. Fuji Xerox has also been promoting a work style with higher productivity (shorter working hours and flexible working systems). It has implemented the Program for Accompanying a Spouse s Transfer and a next-generation women leaders program (development program for selected candidates) in view of women s career advancement. In support of older employees, the Second Life Program has been introduced to make use of the abilities of employees after retirement, as well as support their livelihood in retirement. Skill exertion of diverse employees Working style innovation Enhancement of support systems Aiming to become a company where diverse employees can demonstrate their skills Developing their own strengths and producing results through efficient ways of working. consists of the three pillars: Skill exertion of diverse employees Working style innovation Enhancement of support systems Aiming at being a company where diverse employees can demonstrate their skills, build their strengths, and reform our company culture for better productivity based upon efficient ways of working. 51