March

Date….

To Our Shareholders

We are pleased to present our notice of convocation of the Ordinary General Meeting of Shareholders for the 112th business term (from January 1, 2012 to December 31, 2012).

In the current business term, the business environment surrounding the Canon Group was extremely difficult as the global economy increasingly slowed down particularly in Europe, with a historically strong yen throughout the year. Amid this environment, although the Canon Group implemented a variety of measures to construct a solid foundation for growth as a means to accomplish our goals in Phase IV (2011 to 2015) of our “Excellent Global Corporation Plan” and devoted our full attention to improving business results, sales and income declined.

Despite these circumstances, we will propose a term-end dividend of 70.00 yen per share consisting of 60.00 yen per share of ordinary dividend and 10.00 yen

FUJIO MITARAI

Chairman & CEO

Securities Code: 7751

March 1, 2013

30-2, Shimomaruko 3-chome,

Ohta-ku, Tokyo

Fujio Mitarai

Chairman & CEO

Notice is hereby given that the Ordinary General Meeting of Shareholders for the 112th Business Term of Canon Inc. (the “Company”) will be held as described below and that you are invited to attend the Meeting.

If you do not expect to attend the Meeting, you may exercise your voting rights in writing or by electromagnetic means (Internet etc.) in accordance with the “Guidance Notes on the Exercise of Voting Rights” (pages 13 - 14). After reviewing the following Reference Documents for General Meeting of Shareholders, please exercise your voting rights by no later than 5:00 p.m. on March 27 (Wednesday), 2013 (Japan time).

1.  DATE AND TIME:

2.  PLACE:

(Please see the map at the end of this notice.)

3.  MATTERS CONSTITUTING THE PURPOSE OF THE MEETING

     Matters to be Reported:

1. Reports on the contents of the Business Report and Consolidated Financial Statements for the 112th Business Term (from January 1, 2012 to December 31, 2012), and reports on the Auditing Results of Accounting Auditor and Audit & Supervisory Board regarding the Consolidated Financial Statements.

2. Reports on the content of the Financial Statements for the 112th Business Term (from January 1, 2012 to December 31, 2012).

    Matters to be Resolved upon:

Propositions:

Item No.1 -

Item No.2 -

Item No.3 -

Item No.4 -

Item No.5 -

  Candidate  
No.

Name
(Date of birth)

Brief personal record, position, business in charge and important concurrent posts

Number of the

Company’s shares held

2

Toshizo Tanaka  

(Oct. 8, 1940)  

As of

Apr. 1964:   Entered the Company

Mar. 1995:   Director

Mar. 1997:   Managing Director

Mar. 2001:   Senior Managing Director

Mar. 2007:   Executive Vice President & Director

Mar. 2008:   Executive Vice President & CFO (present)

Apr. 2011:   Group Executive of Finance & Accounting

                    Headquarters (present)

Apr. 2012:   Group Executive of Facilities Management

                    Headquarters (present)

3

Toshiaki Ikoma  

(Mar. 5, 1941)  

As of

Apr. 2005:   Adviser of the Company

Jul. 2007:    R&D Adviser

Jan. 2008:   Special R&D Adviser

Jan. 2009:   Group Executive of Corporate R&D (present)

Mar. 2009:   Director, Executive Vice President & CTO

Mar. 2011:   Executive Vice President & CTO (present)

4

Kunio Watanabe  

(Oct. 3, 1944)  

As of

Apr. 1969:   Entered the Company

Apr. 1995:   Group Executive of Corporate Planning Development

                    Headquarters (present)

Mar. 1999:   Director

Mar. 2003:   Managing Director

Mar. 2008:   Senior Managing Director

Mar. 2012:   Executive Vice President (present)

5

Yoroku Adachi  

(Jan. 11, 1948)  

As of

Apr. 1970:   Entered the Company

Mar. 2001:   Director

Mar. 2005:   Managing Director

Apr. 2005:   President & CEO of Canon U.S.A., Inc. (present)

Mar. 2009:   Senior Managing Director (present)

Number of the

Company’s shares held

10

Haruhisa Honda  

(Oct. 14, 1948)  

As of

Apr. 1974:   Entered the Company

Mar. 2004:   Director

Mar. 2007:   Group Executive of Production Engineering

                    Headquarters (present)

Mar. 2008:   Managing Director

Mar. 2012:   Senior Managing Director (present)

11

Hideki Ozawa  

(Apr. 28, 1950)  

As of

Apr. 1973:   Entered Canon Sales Co., Inc.

                   (present Canon Marketing Japan Inc.)

Apr. 2005:   President & CEO of Canon (China) Co., Ltd. (present)

Mar. 2007:   Director Mar. 2010: Managing Director (present)

12

Masaya Maeda  

(Oct. 17, 1952)  

As of

Apr. 1975:   Entered the Company

Mar. 2007:   Director

Apr. 2007:   Chief Executive of Image Communication Products

                    Operations (present)

Mar. 2010:   Managing Director (present)

13

Yasuhiro Tani  

(Jul. 30, 1956)  

As of

Apr. 1980:   Entered the Company

Jul. 2007:   Group Executive of Platform Technology Development

                   Headquarters (present Digital System Technology

                   Development Headquarters) (present)

Apr. 2008:   Executive Officer

Mar. 2011:  Director (present)

Candidate No.

Name

(Date of birth)

Brief personal record, position, business in charge and important concurrent posts

Number of the
Company’s shares held

18

Naoji Otsuka  

(Apr. 24, 1958)  

As of

Apr. 1981:   Entered the Company

Apr. 2011:   Executive Officer

Apr. 2012:   Director (present)

Apr. 2012:   Chief Executive of Inkjet Products Operations (present)

19

Masanori Yamada  

(Jul. 3, 1954)  

As of

Apr. 1981:   Entered the Company

Apr. 2008:   Executive Officer

Apr. 2008:   Deputy Chief Executive of Office Imaging Products Operations

Apr. 2012:   Senior Executive Officer (present)

Jan. 2013:   Group Executive of Network Visual Solution Business Promotion

                    Headquarters (present)

20

Aitake Wakiya  

(Nov. 8, 1955)  

As of

Apr. 1979:   Entered the Company

Jan. 2010:   Senior General Manager of Global Accounting Management

                    Center, Finance & Accounting Headquarters

Apr. 2011:   Deputy Group Executive of Finance & Accounting Headquarters

                   (present)

Apr. 2012:   Executive Officer (present)

21

Kazuto Ono  

(Jul. 20, 1957)  

As of

Apr. 1980:   Entered the Company

Jan. 2011:   Senior General Manager of Global General Affairs Management

                    Center

Apr. 2012:   Executive Officer (present)

Apr. 2012:   Group Executive of Human Resources Management &

                    Organization Headquarters (present)

Brief personal record

Shigeyuki Matsumoto

As of

Mar. 2004:   Director

Mar. 2007:   Managing Director

Mar. 2011:   Senior Managing Director (present)

Toshio Homma

As of

Mar. 2003:   Director

Mar. 2008:   Managing Director

Mar. 2012:   Senior Managing Director (present)

Masaki Nakaoka

As of

Mar. 2004:   Director

Mar. 2008:   Managing Director

Mar. 2012:   Senior Managing Director (present)

Haruhisa Honda

As of

Mar. 2004:   Director

Mar. 2008:   Managing Director

Mar. 2012:   Senior Managing Director (present)

Hideki Ozawa

As of

Mar. 2007:   Director

Mar. 2010:   Managing Director (present)

Masaya Maeda

As of

Mar. 2007:   Director

Mar. 2010:   Managing Director (present)

Yasuhiro Tani

As of

Mar. 2011:   Director (present)

Makoto Araki

As of

Mar. 2011:   Director (present)

Hiroyuki Suematsu

As of

Mar. 2012:   Director (present)

Shigeyuki Uzawa

As of

Mar. 2012:   Director (present)

Kenichi Nagasawa

As of

Mar. 2012:   Director (present)

Naoji Otsuka

As of

Mar. 2012:   Director (present)

Guidance Notes on the Exercise of Voting Rights

This is to introduce the procedure to exercise voting rights of shareholders of the Company in writing (using the Voting Form) or by electromagnetic means (Internet, etc.).

If you attend the meeting in person, you do not need to follow the procedures for the exercise of voting rights in writing or by electromagnetic means.

The electronic voting platform for institutional investors operated by Investor Communications Japan Inc. is available for institutional investors that have applied to use such platform in advance.

(Materials delivered pursuant to Article 437 and Article 444 of the Corporation Law)

BUSINESS REPORT (From January 1, 2012 to December 31, 2012)

1. Current Conditions of the Canon Group

General Business Conditions

Looking at the general picture of the global economy during the current business term, the U.S. economy continued to experience a relatively firm recovery, the European economy was stagnant with government debt concerns. The speed of economic expansion in China slowed down slightly and other emerging economies in general also showed slower growth than the previous year. The Japanese economy was on a path to moderate recovery supported by domestic demand, but the pace of recovery slowed down slightly in the second half of the year.

The foreign exchange markets continued to see the strong yen with roughly the same level as the previous term against the U.S. dollar and a significantly higher level against the euro.

The markets in which the Canon Group competes were mixed, with robust demand for office multifunction devices (MFDs) in Japan and the U.S. combined with generally weak demand for laser printers particularly in Europe. Demand for interchangeable-lens digital cameras remained strong all over the world, although demand for compact digital cameras decreased due to, among others, the increasing popularity of smartphones and demand for inkjet printers also decreased due to the effect of the stagnant economy. Both semiconductor lithography equipment and flat-panel-display lithography equipment continued to experience a difficult market environment.

Image of “MREAL” in use

CINEMA EOS SYSTEM:EOS C500

Winner of a 2012 Technology & Engineering Emmy^® Award for improvements to large format CMOS imagers for use in high definition broadcast cameras

Under such business environment, entering into the 112th business term, the second year of Phase IV (2011 to 2015) of our “Excellent Global Corporation Plan,” our basic policy for this year was to pursue fundamental reforms, embracing the challenging environment as an opportunity to leap forward. Under this policy, we set and actively pursued eight priority goals.

In order to “boost the competitiveness of current core products,” one of these eight goals, we expanded the product line of “imageRUNNER ADVANCE” in the areas of office multifunction devices (MFDs) and digital production printing systems, in addition to the launch of products developed jointly with Océ N.V., which become a consolidated subsidiary in 2010. In the market for interchangeable-lens digital cameras, we further strengthened the “EOS” series by launching a model that offers high image quality together with a small size and light weight.

To “successfully launch and expand new businesses,” we entered the retail photo market by launching the “DreamLabo” commercial photo printer. The “CINEMA EOS SYSTEM” digital cinema cameras were received enthusiastically all over the world and quickly gained a high market share. In addition, we launched the “MREAL” mixed reality (MR) system based on graphic information processing technology that can combine the real world with computer graphics for the purpose of, for example, realizing more efficient product design.

Business Conditions by Operations

The overall market condition for office multifunction devices (MFDs) was generally favorable with market growth in Japan where there was extra demand fueled by reconstruction activities following the Great East Japan Earthquake, as well as Asia and Oceania. Our sales, particularly in the domestic market, increased due to the effect of aggressive new customer development as the “imageRUNNER ADVANCE C5000” series in particular delivered a strong sales performance. Our unit sales increased from the previous term also in the U.S. and Europe where the market shrank slightly, and color machines enjoyed a steady sales growth in Russia and other emerging economies. In China, led by the brisk sales of the “imageRUNNER ADVANCE C2000” low to mid-speed color machine series, unit sales grew steadily, while sales in other parts of Asia and Oceania also outperformed the previous term.

imageRUNNER ADVANCE C5255

A3 medium to high-speed color multifunction device with productivity features and image quality superior to its predecessors. It is equipped with various security functions to protect against threats such as office data theft.

The market for digital production printing systems expanded in Asia and was generally firm in other parts of the world. Under this market environment, our unit sales of light-production monochrome machines and mid-production color machines increased in Japan as well as in Asia where the overall market grew. In the U.S. and Europe, sales of the

Océ VarioPrint 135

Jointly developed digital production printing system that combines a newly developed engine by Océ with a high-performance finisher and scanner by Canon. It realizes high-resolution output approaching that of offset printing.

“Océ VarioPrint 6000/135” series mid-production monochrome machines posted strong performances. In addition, the “imagePRESS C6010/C7010VPS” series, which was developed jointly with Océ N.V., was favorably received in the market particularly in the U.S. and Europe. Also U.S. and European sales through the Océ channel achieved a steady growth, which are examples of the positive effect of the integration with the company.

Sales of high speed continuous feed printers and wideformat printers manufactured by Océ N.V. underperformed the previous term despite the efforts to expand sales of these products including “ColorStream 3500” and “ColorWave 650.”

Imaging System Business Unit

The market for interchangeable-lens digital cameras continued from the previous term to expand in all regions. Under this market environment, the “EOS 5D Mark III” and “EOS 60D” in the advanced amateur model and “EOS KISS” series in the entry-level model contributed significantly to sales. As a result, interchangeable-lens digital cameras outperformed the previous term in both unit sales and sales revenue and we maintained our No.1 unit sales share at the global level. In various sports events throughout the world including the London Olympics, the flagship “EOS-1D X,” which was launched in June 2012, came to the front. In addition, we further expanded the product line by launching “EOS M,” which was Canon’s first camera to employ a non-reflex system, and the “EOS 6D” full-size model that offers a small size and light weight.

In the compact digital camera market, demand decreased worldwide. The Canon Group strived to expand sales by launching attractive new products, such as “IXY 220F” and “PowerShot A2300,” in both Japanese and overseas markets, thereby preventing unit sales and sales revenue from declining significantly regardless of the severe business environment.

EOS-1D X

Interchangeable-lens digital camera for professionals that achieves phenomenal picture quality and speed using a newly developed 35mm full-frame CMOS sensor with approximately 18.1 megapixels and a new image engine dual DIGIC 5+.

In the digital camcorder market, as demand declines worldwide, we implemented a strategy focused on profit. As a result, the “HFG10” highest-end model in the high-definition segment gained the No.1 share by price range. In addition, “CINEMA EOS SYSTEM,” which we launched with a view of entering the motion picture production industry, was highly rated in various places. In November 2012, we added new products to the product line, including “EOS C500,” which can record high-resolution 4K videos.

The broadcast equipment market saw a significant rise in the demand from broadcasting stations in Japan, in addition to many business inquiries received from Europe where the London Olympics was held. These, combined with other factors such as brisk sales of “DIGISUPER 95” field lens, helped our sales to increase.

DIGISUPER 95

HDTV compatible field zoom lens suitable for live broadcasts such as sporting events. Thanks to a wide focal length of 8.6mm and a 95x zoom ratio, it offers wide angle to telephoto.

In relation to semiconductor lithography equipment, capital investment by memory manufacturers was sluggish due to the weak PC market, while investment in equipment used to manufacture semiconductor devices, such as image sensors and logic circuits used in smartphones and tablet PCs, was firm on the back of increasing demand. Under such conditions, we strived to secure orders from semiconductor manufacturers particularly for i-line steppers such as “FPA-5510iZ” suited to the manufacturing of image sensors and the new product, “FPA-3030i5+” suited to the manufacturing of green devices designed to reduce environmental stress. As a result, unit sales and sales revenue from semiconductor lithography equipment fell only slightly from the previous term.

As for flat-panel-display lithography equipment, capital investment in equipment for the small to mid-sized panels used in products such as smartphones was strong, while investment in equipment used to manufacture large-sized panels – the equipment at which Canon excels – was weak. Both unit sales and sales revenue, therefore, were down for the term.

FPA-5550iZ

The i-line stepper employing the FPA-5500 platform with proven high performance and reliability, which enables high throughput such as short exposure time through a high-acceleration wafer stage.

OCT-HS100

Canon’s first Optical Coherence Tomography (OCT) product that inspects retinal diseases in 3D. Providing the industry’s highest level* of image resolution, it is equipped with automatic adjustment features and high-speed scanning, which allows for fast shooting of highly detailed images.

*  Of the ophthalmic OCT devices available on the market as of September 1, 2012.

In medical equipment, we strived to expand sales of the mainstay digital radiography systems focusing on wireless products and products that can handle videos. Meanwhile, in ophthalmic equipment, we launched “OCT-HS100,” which was our first optical coherence tomography (OCT) product. Sales also increased due to M&As carried out by subsidiaries in both the previous term and the current term.

Sales of document scanners manufactured by Canon Electronics Inc. recovered in North America in addition to brisk sales in China, India and other Asian countries. As a result, overall unit sales increased.

Sales of organic LED panel manufacturing equipment made by Canon Tokki Corporation recorded steady sales from aggressive capital investment by organic LED panel manufacturers on the back of increasing demand for smartphones and tablet PCs.

Main facilities completed during this term

l  Canon Inc., Taiwan

l  Hita Canon Materials Inc.

l  Canon Zhongshan Business Machines Co., Ltd.

 New Production Base

 (Imaging System Business Unit)

 Location: Taiwan

 Date of Completion: June, 2012

 New Administration and Welfare Building / New

 Production Base (Office Business Unit)

 Location: Hita-shi, Oita Pref., Japan.

 Date of Completion: February, 2012

  *Leased to Hita Canon Materials Inc. by the Company

 New Production Base

 (Office Business Unit)

 Location: Guangdong Province, China

 Date of Completion: March, 2012

Main facilities under construction for establishment / expansion as of the end of this term

l  Canon Zhuhai, Inc.

l  Canon Business Machines (Philippines), Inc.

l  Canon Chemicals Inc.

 New Production Base

 (Imaging System Business Unit)

 Location: Guangdong Province, China

 New Production Base

 (Office Business Unit)

 Location: Province of Batangas, the Philippines

 New Production Base

 (Office Business Unit)

 Location: Kasama-shi, Ibaraki Pref., Japan.

  *To be leased to Canon Chemicals Inc. by the Company

Share Options Held by the Directors and Audit & Supervisory Board Members of the Company as of the end of this term

Category

Number of share options (Exercise price per share)

Class and number of shares  

to be acquired

Directors

Audit &
Supervisory
Board
Members

Issue Price of Share Options

Other Conditions for Exercise of Share Options

One (1) share option may not be exercised partially.

Each holder of share options must continue to be a director, executive officer or employee of the Company until the end of the Company’s Ordinary General Meeting of Shareholders regarding the final business term within two (2) years from the end of the Ordinary General Meeting of Shareholders at which the issuance of such share options was resolved.

Holders of share options will be entitled to exercise their share options for two (2) years, and during the exercisable period, even after they lose their positions as directors, executive officers or employees. However, if a holder of share options loses such position due to resignation at his/her initiative, or due to dismissal or discharge by the Company, his/her share options will immediately lose effect.

No succession by inheritance is authorized for the share options.

Besides the above, other conditions shall be stipulated in an agreement to be executed between the Company and grantee of share options, based on the resolution of the Board of Directors meeting.

Directors

Audit & Supervisory Board Members    

Notes:

The above persons include 5 Directors and 1 Audit & Supervisory Board Member who have retired at the conclusion of the Ordinary General Meeting of Shareholders for the 111th Business Term held on March 29, 2012.

Directors’ remuneration and other amounts do not include amount paid as salary for employees to those Directors who are also employees.

Directors’ remuneration and other amounts include accrued director’s bonuses for this term in the amount of 191 million yen.

Directors’ remuneration and other amounts include expenses related to the share options issued pursuant to the resolution of the 109th Ordinary General Meeting of Shareholders, held on March 30, 2010, and the share options issued pursuant to the resolution of the 110th Ordinary General Meeting of Shareholders, held on March 30, 2011, in the amount of 220 million yen.

The above remuneration and other amounts include an increased amount of accrued directors’ retirement benefits for this term of 240 million yen. Retirement allowance system for Audit & Supervisory Board Members has been abolished at the conclusion of the Ordinary General Meeting of Shareholders for the 109th Business Term held on March 30, 2010.

The directors’ retirement allowance paid to Directors and Audit & Supervisory Board Members during this business term is as shown below.

(i) Directors’ retirement allowance paid pursuant to the resolution of the Ordinary General Meeting of Shareholders for the 111th Business Term held on March 29, 2012

    Directors          5 persons          446 million yen

(ii) Directors’ retirement allowance for Audit & Supervisory Board Members paid pursuant to the resolution of the Ordinary General Meeting of Shareholders for the 109th Business Term held on March 30, 2010

    (The payment made during this term as the final payments due to the abolishment of the retirement allowance system)

    Audit & Supervisory Board Member          1 person          7 million yen

    The above amounts include the increased portion of accrued directors’ retirement benefits disclosed in the business reports for this business term and prior business terms.

Tadashi Ohe

Outside Audit & Supervisory Board Member

Marui Group Co., Ltd.

No special relation

Outside Audit & Supervisory Board Member

Kao Corporation

No special relation

Kazunori Watanabe

Outside Audit & Supervisory Board Member

Canon Electronics Inc.

Subsidiary

Kuniyoshi Kitamura

Tadashi Ohe

Attended 16 out of 18 Board of Directors meetings and all 22 of the Audit & Supervisory Board meetings held during this term, and provided expert input as an attorney when necessary.

Kazunori Watanabe

Attended all 18 of the Board of Directors meetings and all 22 of the Audit & Supervisory Board meetings held during this term, and provided expert input as a Certified Public Accountant when necessary.

Kuniyoshi Kitamura

Attended all 18 of the Board of Directors meetings and all 22 of the Audit & Supervisory Board meetings held during this term, and provided input based on his insight in business management when necessary.

(1)     System for Ensuring the
Performance of Duties by Directors and Employees to Comply with Laws and Articles of Incorporation

(i)

Based on the spirit of the “Three Selfs” (self-motivation, self-management, and self-awareness)—a Canon universal principle dating back to the Company’s founding—the Company established the “Canon Group Code of Conduct” as a standard to which Directors, Executive Officers and employees must adhere when performing their work. A Committee that manages and oversees this code promotes compliance activities to develop law-abiding, independent and strong individuals with a high sense of ethics.

Policies and measures set forth by the Committee above are implemented throughout the Company with the assistance of compliance staff assigned to each division.

Each division establishes internal rules and guidelines to help ensure that Directors, Executive Officers and employees thoroughly understand the laws and regulations of Japan and other countries.

The Company ensures Directors, Executive Officers and employees the implementation of the basic policy that provides not to have any relation with antisocial forces under any circumstances, and also maintains and improves the cooperation structure with external institutions such as police by establishing a department in charge.

The Company’s internal auditing, legal, and other divisions work to strengthen compliance through law-abidance guidance and monitoring on its business activities.

An in-house hotline system is employed to promote internal self-checks to prevent illegal or unethical activities and help prevent improprieties.

(2)     System for Maintaining and
Managing Information Relating to the Performance of Duties by
Directors

Information relating to the performance of duties by Directors is maintained and managed in accordance with the Company’s basic rules for document management addressing the creation, sending and receiving, storage, retention, and destruction of documents, and other in-house rules.

A system is established that enables Directors, Audit & Supervisory Board Members, and internal auditing to access this information anytime.

(3)     Rules and Other Systems Regarding Management of Risk of Loss

Important matters are carefully deliberated at the Executive Committee and in other Management Committees on specific action plans to eliminate or reduce business risks.

Business processes are specified and risks are evaluated based on guidelines set forth by a committee that oversees financial risk management to ensure the accuracy and reliability of financial reporting. These are all documented in writing, and the status of control activity is regularly confirmed to make risk management work effectively.

A risk management system is created through the formulation and observance of various in-house rules to protect the Company from diversifying risks (quality, environmental, disaster, information-related, export management, etc.) and maintain public faith. In particular, Basic Policies Regarding Product Safety has been established, which govern efforts in supplying customers with safe products that will allow comfortable and satisfactory use.

Wide-ranging audits of various types by internal auditing and promotion of the in-house hotline system are carried out for the early detection and resolution of risks.