Canon 2002 Annual Report Download - page 39

37
subsidiaries provide guarantees to third parties of certain
obligations of their consolidated subsidiaries. At December 31,
2002, these guarantees amounted to ¥23,634 million
(U.S.$197 million). To a lesser extent, consolidated subsidiaries
provide guarantees to third parties of obligations of other
consolidated subsidiaries. All intercompany guarantees are
eliminated in consolidation and therefore are not reflected in
the above figure.
At December 31, 2002, Canon had outstanding
commitments of approximately ¥29,539 million (U.S.$246
million) to purchase property, plant and equipment for use in
the ordinary course of its business. Canon anticipates that funds
needed to fulfill these commitments will be generated internally
through operations.
RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES
Canon is now in Phase II of its Excellent Global Corporation
Plan, which started in 2001 and will end in 2005. The
management plan aims to guide Canon to the No.1 position
worldwide in all core business areas, to build on its R&D
capabilities, to continually create new businesses and to further
strengthen its financial position.
As a direction to take for Canon’s R&D, we formulated the
“Canon Over IP” concept, in which we intend to connect our
digital products to the Internet and lay the foundations for
Internet-businesses for the future.
Canon has R&D centers worldwide, including the one in the
U.S., that closely collaborate in their R&D activities. Some
regional R&D centers conduct basic research into technology,
and others apply their expertise to develop new products and
businesses. The Canon Research Center in Japan, for example,
develops basic and advanced technologies for future businesses
in a time frame of five to ten years while other centers in Japan
develop key components, environment-conscious technologies,
next-generation displays, and electronic devices.
R&D activities at Canon Inc. are structured in the following 5
organizations.
• Core Technology Development Headquarters (where
component engineering and base technology R&D, such
as in new materials, nanotechnology and production
engineering, is conducted)
• Platform Technology Development Headquarters (where
platform technologies for digital network device R&D is
conducted)
• Device Technology Development Headquarters (where
key device R&D, such as for semiconductor devices, is
conducted)
• Display Development Headquarters (where display devices
R&D is conducted)
• Ecology Research Center (where solar cell battery R&D is
conducted)
Global diversification drives Canon’s activities in the
individual regions such as the United States, Europe, and Asia to
develop original products and promote business.
Canon had R&D expenditures of ¥233,669 million
(U.S.$1,947 million) in fiscal 2002, ¥218,616 million in fiscal
2001 and ¥194,552 million in fiscal 2000. The ratio of R&D
expenditure to total net sales for the past three years were
7.9%, 7.5% and 7.2%, respectively.
Canon seeks to produce new products that are protected by
patents and to establish a standard in a market in order to
enhance its predominance. The United States Patent and
Trademark Office (USPTO) announced that Canon secured the
number-two spot for private sector patents received in 2002.
The achievement marks Canon’s 11th consecutive year in the
top three patent-receiving organizations.
MARKET RISK EXPOSURES
Canon is exposed to market risks, including changes in foreign
exchange rates, interest rates and prices of marketable securities
and marketable investments. In order to hedge the risks of
changes in foreign exchange rates and interest rates, Canon uses
derivative financial instruments.
Equity price risk
Canon holds marketable securities included in current assets for
short-term investment. In general, highly-liquid and low-risk
instruments are preferred in the portfolio. Marketable
investments included in noncurrent assets are held as
longer-term investments. Canon does not hold marketable
securities and investments for trading purposes.
Maturities and fair values of such marketable securities and
investments were as follows at December 31, 2002.
Thousands of
Millions of yen U.S. dollars
Cost Fair Value Cost Fair Value
Due within one year ¥6,068 6,190 $ 50,567 51,583
Due after one year through
five years 545 608 4,542 5,067
Due after five years 7,276 7,051 60,633 58,758
Equity securities 6,457 8,076 53,808 67,300
¥20,346 21,925 $169,550 182,708