CANON INC.

Eiji Shimizu

General Manager

Consolidated Accounting Division

Canon Inc.

As a result of the above, on a consolidated basis, we recorded net sales of 1,657.5 billion yen (down 9.5% from the first half of the previous term), income before income taxes of 126.8 billion yen (down 23.0%), and net income attributable to Canon Inc. of 81.4 billion yen (down 20.3%) for the first half of the current business term.

For the interim dividend, from the perspective of ensuring a stable return to shareholders, we decided to pay 75.00 yen per share. The dividend is payable on August 26.

In this business term, the Canon Group embarked upon a new five-year management plan, Phase V (2016 - 2020) of our “Excellent Global Corporation Plan.” Under the basic policy of “Embracing the challenge of new growth through a grand strategic transformation,” the Canon Group will promote innovation in all aspects of development, production, and sales in addition to strengthening and expanding new businesses and accelerating the development of future businesses. Although the business environment surrounding us will continue to be far from reassuring due to, among others, concerns about further increasing uncertainty in the European economy following the Brexit, we will endeavor to improve our performance and corporate value by incessantly pushing ahead with measures under Phase V.

We look forward to our shareholders’ continued support and encouragement.

August, 2016

Chairman & CEO

FUJIO MITARAI

To Our Shareholders

P.     1

Excellent Global Corporation Plan

P.     3

Phase V 2016 - 2020

Highlights of Consolidated Results

Office Business Unit

Imaging System Business Unit

Industry and Others Business Unit

Technology Topics

P.     9

Management Topics

CSR and Environmental Initiatives

Consolidated Balance Sheets ^.

Consolidated Statements of Income

Shares of the Company ^.

P.   14

Information for Shareholders

Excellent Global Corporation Plan

Phase V    2016 - 2020

1996-2000

To strengthen its financial base, Canon transformed its mindset to total optimization and a focus on profit. The company instituted various business innovations, including selection and consolidation of business areas, and reform activities in such areas as production and development.

Aiming to become No.1 in all major business areas, Canon focused on strengthening product competitiveness along with the changing times, stepping up efforts to digitize its products. The company also conducted structural reforms across all Canon Group companies around the world.

Canon moved ahead with such growth strategies as enhancing existing businesses and expanding into new areas. Through the thorough implementation of supply chain management and IT reforms, the company targeted the realization of “real-time management” to respond quickly to changes.

Due to weakness in the global economy, Canon revised its management policy from a strategy targeting expansion of scale to a strategy aimed at further strengthening the financial structure. While undertaking M&A activities, the company aimed to restructure its business at a foundational level to introduce new growth engines for future expansion.

Highlights of Consolidated Results

In the first half of the current business term, the recovery in the world economy in general was only moderate and the Canon Group continued to face a severe business environment. Although we worked to expand sales of new products in all businesses and achieved a significant increase in the sales of industrial equipment, our consolidated net sales decreased 9.5% in comparison to the first half of the previous term, impacted by the yen’s rapid appreciation and other factors.

Despite our initiatives to improve profitability such as shifting to high value-added products, cutting costs, and promoting expense-reduction activities, net income attributable to Canon Inc. decreased 20.3% from the first half of the previous term on a consolidated basis, mainly due to the impact of exchange rates.

Office Business Unit

In the area of office multifunction devices, the shift in demand from monochrome to color machines has progressed further and unit sales of monochrome machines decreased, while sales of color machines such as the “imageRUNNER ADVANCE C3300” series remained firm. In the area of digital production printing systems, sales of color machines such as the “imagePRESS C10000VP” series were brisk and overall sales including monochrome machines also outperformed the results of the first half of the previous term. Regarding Océ, while it struggles against tough competition in certain business lines, there were some bright spots such as the brisk orders received for the high-speed sheet-fed inkjet press “Océ VarioPrint i300.” Sales of laser multifunction printers and laser printers declined due to the shrink of the market.

As a result of the above, sales for this business unit decreased by 14.6% on a consolidated basis, in comparison to the first half of the previous term.

As for interchangeable lens digital cameras, although the challenging market environment in Asia, including Japan, persisted, the U.S. and Europe showed a trend of modest recovery. Under these conditions, the newly launched flagship model “EOS-1D X Mark II” and an advanced amateur model “EOS 80D” sold well. As a result, unit sales of interchangeable lens digital cameras stayed flat from the first half of the previous term and the Canon Group was able to maintain its high market share. In the area of compact digital cameras, although the “Premium Lines” delivered a strong performance, overall sales, including other series, decreased. As for inkjet printers, focusing on the promotion of sales of products targeting a new customer base, such as models with large-capacity ink tanks for emerging economies and the A2-size professional photo printer “imagePROGRAF PRO-1000,” the Canon Group maintained unit sales at roughly the same level as in the first half of the previous term despite the shrinking market. In addition, unit sales of large-format inkjet printers increased from the first half of the previous term.

As a result of the above, sales for this business unit decreased by 12.2% on a consolidated basis, in comparison to the first half of the previous term.

Semiconductor lithography equipment was affected by, among others, the postponement of capital investment by memory manufacturers, and its unit sales decreased. As for FPD lithography equipment, sales were strong supported by the expansion of demand for large-size panels as well as proactive capital investment for mobile devices by panel manufacturers. As for the medical equipment, although unit sales of digital radiography systems, our mainstay, increased, sales of such systems fell due to the effect of price declines caused by intense competition. Consequently, sales of the medical equipment fell as a whole. As for network cameras, sales grew significantly supported by the growth of the market, combined with the expansion of the product lineup. Sales of organic LED (OLED) panel manufacturing equipment of Canon Tokki Corporation increased significantly supported by healthy capital investment by its customers.

As a result of the above, sales for this business unit increased by 22.1% on a consolidated basis, in comparison to the first half of the previous term.

Canon EXPO 2015-16

Canon embarked upon Phase V (2016 - 2020) of the Excellent Global Corporation Plan in 2016. Getting a head start on this, from 2015 to 2016, in New York, Paris, Tokyo and Shanghai, Canon exhibited its vision for the future and new value such as the Canon Group’s technology, solutions, etc. for the future.

Products and technologies such as genetic testing systems and network cameras received attention at the EXPO in New York, while

the products and technologies of companies included in the Canon Group such as Océ, Axis, and Milestone Systems, received attention at the EXPO in Paris. At the last EXPO held in Shanghai, exhibits ranged from current products to future technologies such as 8K video, which made the EXPO a great success.

Canon’s Vision for the Future

Canon, through its corporate DNA with an emphasis on technology, has created unprecedented value by merging a diverse range of ideas and technologies. These innovations include ground-breaking nanoimprint lithography, which was realized after overcoming numerous technical challenges, and a UV curable printer that reproduces various textures, which Canon and Océ are working in unity to develop. Other examples range from high-sensitivity network

cameras to 8K cameras. Canon is enriching the lives of people around the world by creating such technological innovations.

Reforming the Management Structure, in Preparation for the 5 Years of Development during Phase V

On January 27, 2016, it was announced that the following personnel changes would be made: Representative Director, Chairman (President) & CEO Fujio Mitarai will be appointed as the Representative Director, Chairman & CEO, and Senior Managing Director Masaya Maeda will be appointed as the Representative Director, President & COO. In 2016, Canon embarked upon Phase V of our Excellent Global Corporation Plan. Taking this opportunity, Canon strengthened the management structure by electing new President & COO and reforming the structure of directors and officers for clarifying the duties of management and execution.

In regard to President Maeda’s appointment, Chairman Mitarai referred to his many achievements including: Assisting the rapid

growth of digital cameras and maintaining the top market share of digital cameras even in severe businesses environments, being the innovator who brought new business to the world, such as the CINEMA EOS SYSTEM (Digital Cinema Camera) and MR (Mixed Reality), and strengthening production engineering technology and in doing so securing jobs for Canon’s employees.

During Phase V, based on the new management structure, Canon will pursue further growth of existing businesses, and also once again develop toward a growth track by expanding business into the B2B domain in addition to B2C domain with new businesses such as production printing systems, network cameras, nanoimprint technology, and medical equipment as the focal point.

Among Japan’s important cultural properties, there are many pieces that have travelled overseas or that, despite being in Japan, are rarely available for viewing. In 2007, in collaboration with the Kyoto Culture Association (NPO), Canon started the Tsuzuri Project, a social and cultural support activity with the goal of preserving original cultural properties and utilizing high-resolution facsimiles.

In March 2016, as one of the works from Stage 9 of the Tsuzuri Project, a high-resolution facsimile of “Scenes from The Tale of Genji”, which is in the collection of the Metropolitan Museum of Art in the U.S., was produced utilizing Canon’s input-output technology. “Scenes from The Tale of Genji” was created by Tosa Mitsuyoshi, a painter who was active during the Azuchi-Momoyama era. The facsimile was donated to the Byodoin Temple, which is in Uji-shi in Kyoto prefecture, an area with ties to The Tale of Genji.

Moving forward, Canon will continue to contribute to the protection of cultural properties.

Canon Europe Ltd., a Canon Group company, is the first Japanese-affiliated company awarded a top prize (People’s Choice Award) at The Circulars 2016, having received recognition for the Toner Cartridge Recycling Program that the Canon Group has been working together on. The Circulars 2016 is held once a year, by the Forum of Young Global Leaders, a part of the World Economic Forum, in collaboration with Accenture.

Toward realizing a recycling society, Canon began the Toner Cartridge Recycling Program in 1990, moving ahead of our industry. This program is currently carrying out collection programs in 24 countries and regions around the world.

Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.

Shares of the Company As of June 30, 2016

Authorized Shares

:

Shareholding Ratio by Category

Issued Shares

:

Number of Shareholders

:

336,076 persons

(Increase of 41,932 persons from the end of the previous term)

Major Shareholders (Ten shareholders)

Name of Shareholders

The Master Trust Bank of Japan, Ltd. (Trust Account)

63,726

5.8

Japan Trustee Services Bank, Ltd. (Trust Account)

51,313

4.7

The Dai-ichi Life Insurance Company, Limited

37,416

3.4

Barclays Securities Japan Limited

30,000

2.7

Mizuho Bank, Ltd.

22,558

2.1

Moxley and Co. LLC

21,767

2.0

State Street Bank West Client - Treaty 505234

17,466

1.6

Sompo Japan Nipponkoa Insurance Inc.

17,439

1.6

OBAYASHI CORPORATION

16,527

1.5

Japan Trustee Services Bank, Ltd. (Trust Account 9)

15,509

1.4

Notes:

Shareholding ratio is calculated by deducting the number of treasury shares (241,692 thousand shares) from total shares issued.

With respect to The Dai-ichi Life Insurance Company, Limited, in addition to the above, there are 6,180 thousand shares of the Company’s stock included in trust property relating to retirement allowance trust.

With respect to Mizuho Bank, Ltd., in addition to the above, there are 9,057 thousand shares of the Company’s stock included in trust property relating to retirement allowance trust.

Eligible shareholders are the shareholders who are stated on the register of shareholders as holding at least 100 shares as of the end of June 2016, and who have also appeared on the register of shareholders under the same shareholder number, stated as holding at least 100 shares on both the end of June and the end of December for three years.