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June 8, 2012

Medium-Term Vision Toward Realization of New Olympus

Regaining credibility through "Back to Basics"
- Rebuilding Olympus and creating new corporate value

Olympus Corporation (hereinafter, "the Company") is announcing a new medium-term vision for the five years from fiscal year ending March 2013. This vision is based on the new management structure established on April 20, 2012, with "Back to Basics" as the slogan. The Company aims to return to the basic values it had at founding and make a fresh start in order to regain the credibility of its stakeholders, build itself anew, and create new corporate value.

Corporate Management Policies

Under the new management structure, we have designated three corporate management policies: "Back to Basics," "One Olympus," and "Profitable Growth." Expressing regret for our past misconduct, we aim to achieve growth with profitability by adopting "Back to Basics" as the principle behind all our actions and strategies. We will make a concerted effort to share values and goals among all our employees around the world with the aim of building "One Olympus."

Back to Basics
We aim to regain the credibility of our stakeholders, rebuild Olympus, and create new corporate value by going back to the basic values that existed when Olympus was first established and looking ahead to a fresh start.

(Olympus' founding basic values)

  1. Our mission to contribute to society and its development through products and solutions.
  2. Continuously strive to develop the world's first and best products
  3. Focus on customers and customer needs.

One Olympus
We will strive to maximize our corporate value by making a concerted effort to share values and goals among all our employees around the world, harnessing their collective wisdom and demonstrating teamwork.

Profitable Growth
We will redefine our core business domains as "Medical Business," "Life Science & Industrial Business" and "Imaging Business." This will enable us to abandon our previous excessive emphasis on sales, comprehensively review our cost structures and achieve growth with profitability while pursuing efficiency

Basic Strategies

With these management policies as a foundation, we will implement the following basic strategies to rebuild Olympus and create new corporate value.

1.Rebuilding of the Business Portfolio and Optimal Allocation of Management Resources

By designating the "Medical Business," "Life Science & Industrial Business" and "Imaging Business" as our core business domains, we will invest our management resources strategically with a special focus on the "Medical Business."

In the Medical Business, we will ensure that expansion of emerging markets, etc. results in increased profitability while securing steady revenue streams by reinforcing the foundation of our gastroenterological endoscope business. In the surgical business, we aim to achieve drastic growth by expanding our market share of the operating room imaging field and by establishing the foundation for an energy business (electrosurgical knives, ultrasound scalpels, etc.) to meet the pressures placed by societal aging, capture the increased demand for minimally invasive therapy and respond to the calls for reduced medical costs.

In the Life Science & Industrial Business, we aim to achieve growth in the industrial business field by proactively enhancing our product lineup utilizing the backbone technologies of the Group and expanding our target markets. In the life science business field, we will carry out drastic earnings structure reform by reducing manufacturing costs through a review of production sites as well as curtailment of SG&A expenses by exerting global control over parts procurement and enhancing operational efficiency.

In the Imaging Business, we will review our product lineup by allocating management resources with a focus on mirrorless interchangeable-lens cameras and high-end compact cameras while improving profitability. In addition, we will strive to achieve profitability in fiscal year ending March 2013 and establish a revenue structure that will enable us to continue generating a steady income stream in the following years. We will do so by enhancing productivity through the restructuring of our existing manufacturing functions, selection and concentration of our advertising expense and reduction of SG&A expenses through personnel optimization.

In our non-business domains, we will reconsider the optimal measures to enhance the value of each business and subsidiary. Specifically, after evaluating their correlation with our business domains and reviewing the best way to improve their value, we will take drastic measures to sell, downscale, liquidate or withdraw from businesses whose continuous operation within the Olympus Group is judged to be difficult from the perspective of profitability and potential. In principle, we will not make new growth investments in non-business domains.

2.Review of Cost Structures

In order to improve the earning capability of the Group, we will significantly reduce COGS and SG&A expenses. Specifically, we will aggressively promote the measures for "personnel optimization," "reduction in costs through the restructuring of production sites and reinforcement of procurement capability" and "acceleration of Group-wide activities to curtail SG&A expenses."

With regard to personnel optimization, we will reduce the number of employees by approximately 2,700 (approximately 7% of worldwide employees as of March 31, 2012) by March 31, 2014, by restructuring subsidiaries, global production sites, etc., in addition to enhancing the efficiency of the indirect workforce at headquarters and in each business domain.

As a way to reduce costs through restructuring production sites and reinforcing our procurement capability, we aim to strengthen our cost competitiveness by restructuring through elimination and consolidation approximately 40% of the 30 production sites currently operating around the world by fiscal year ending March 2015. Furthermore, we will take measures to curtail procurement costs by controlling the Group's procurement functions in an integrated manner.

Under the planned group-wide activities to curtail SG&A expenses, we will accelerate the measures that have been promoted since April 2011. Specifically, over the five years up until the fiscal year ending March 2017, we aim to reduce fixed expenses such personnel expenses and lowering the SG&A ratio in our three core business domains (Medical, Life Science & Industrial and Imaging) by approximately 6.6 points, by enhancing the efficiency of our business functions and optimizing personnel.

3.Restoration of Financial Health

We will build up shareholders' equity through the steady earnings from operations to be secured by implementing our business strategies. Furthermore, we will be focusing growth investment - including R&D and capital expenditures - on the Medical Business in order to improve our investment efficiency, maximize cash flows, and reduce our interest-bearing debt. In addition, we will make efforts to streamline our assets through the prompt disposal of inefficient assets such as unutilized noncurrent assets and reduce our overall inventory so that we can improve our equity ratio to bring stability to management. Finally, we recognize strengthening of capital as an important management matter from the standpoint of strengthening the financial base to support investments in future growth and to enhance the foundations of our business in rebuilding Olympus.

4.Restructuring of Governance

Based on the new corporate governance mechanism that was resolved and approved at the Extraordinary General Meeting of Shareholders held on April 20, 2012, we will manage the Company through the clear segregation of execution and management supervision, which is comprised of highly independent board members. At the same time, to ensure that we never repeat our past errors in which we deferred posting our losses, all Olympus Group employees will make a concerted effort to engage in the restructuring of our corporate governance by expressing integrity in all their actions, making changes in compliance awareness, and strengthening our compliance promotion system.

Performance Indices and Targets

Results of implementing these basic strategies will be monitored based on four performance indices, including "return on invested capital (ROIC)," "operating margin," "free cash flow" and "equity ratio."

(Performance indices) (Results for FY ended March 2012) (Targets for FY ending March 2017)
Return on invested capital (ROIC) 2.7% 10% or more
Operating margin 4.2% 10% or more
Free cash flow -4.8 billion yen 70 billion yen or more
Equity ratio 4.6% 30% or more

Return on Invested Capital (ROIC)
ROIC is an index that measures income generated on a Company's invested capital (IC). At Olympus Corporation, ROIC is calculated using the following assumptions:
Return (Operating income after taxes) / IC (Shareholders' equity + interest-bearing debt)



(Consolidated Financial Plans)

(Units: Billion yen)

  FY/March 2013 FY/March 2015 FY/March 2017
Net sales 920 1,010 1,160
Operating income
(Operating margin)
Ordinary income
(Ordinary income ratio)
Net income
(Net income ratio)
(EBITDA margin)

[ Assumed foreign exchange rates ] US$1 = 80 yen, 1 EUR = 100 yen

(Business Segment Financial Plans)

(Units: Billion yen)

  FY/March 2013 FY/March 2015 FY/March 2017
Net sales Medical 383 470 570
Life Science & Industrial 97 108 120
Imaging 149 160 170
Information and Communication 237 234 245
Others 54 38 55
Total 920 1,010 1,160
Operating income Medical 75 97 126
Life Science & Industrial 5.5 8 14
Imaging 1 7 9
Information and Communication 5 5 5
Others -6.5 1 5
Elimination and Corporate -30 -28 -29
Total 50 90 130
Operating margin(%) 5% 9% 11%
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