CANON INC.

    Shinichi Aoyama

    General Manager

    Consolidated Accounting Div.

    Canon Inc.

Item No.1: Dividend from Surplus

The basic policy of the Company is to return profit stably and proactively to shareholders as primarily dividends after comprehensively considering the medium-term profit outlook, future investment plans, and cash flows, etc.

After comprehensively considering the above basic policy, we propose a term-end dividend of 65.00 yen per share, as follows.

As we have already paid an interim dividend of 65.00 yen per share, the full-year dividend will be 130.00 yen per share, which is the same amount as the previous business term that included payment of a special dividend (10.00 yen per share).

 Type of dividend

Cash

‚ Matters concerning allocation of dividend and its total amount

ƒ Effective date of the dividend from surplus

March 31, 2014

  Item No.2: Partial Amendment to the  Articles of Incorporation

   1. Reasons for Amendment

To accompany the invitation of Outside Directors, Paragraph 2, Article 28 is to be newly established to the effect that the Company may enter into contracts for limitation of liability with Outside Directors.

With respect to the new establishment of this paragraph, we have already obtained the consent of all Audit & Supervisory Board Members.

   2. Substance of Amendment

The substance of the amendment is as follows:

(The amended parts are underlined)

Current Articles of Incorporation

Proposed Amendment    

Chapter IV. Directors and Board of Directors

Chapter IV. Directors and Board of Directors

Article 18

Article 18.

  -

  -

Article 27.

Article 27.

Exemption from Liabilities of Directors

Article 28. Pursuant to the provision of Paragraph 1, Article 426 of the Corporation Law, the Company may, by a resolution of the Board of Directors, exempt Director(s) (including former Director(s)) from damage compensation liabilities resulting from negligence of the Director’s duty to the extent permitted by laws or ordinances.

(Newly established)

Exemption from Liabilities of Directors

Article 28. Pursuant to the provision of Paragraph 1, Article 426 of the Corporation Law, the Company may, by a resolution of the Board of Directors, exempt Director(s) (including former Director(s)) from damage compensation liabilities resulting from negligence of the Director’s duty to the extent permitted by laws or ordinances.

2. Pursuant to the provision of Paragraph 1, Article 427 of the Corporation Law, the Company may enter into a contract with outside Director(s) which sets forth the limitation on their damage compensation liabilities resulting from negligence of the Director’s duty, provided that the amount of the limitation on the damage compensation liabilities under the said contract shall be the amount provided by laws or ordinances.

  Candidate  
No.

Name

(Date of birth)

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

Number of the
Company’s shares held

4

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)

5

Yasuo Mitsuhashi  

(Nov. 23, 1949)  

As of

Apr. 1974:   Entered the Company

Mar. 2001:   Director

Apr. 2003:   Chief Executive of Peripheral Products Operations (present)

Mar. 2005:   Managing Director

Mar. 2009:   Senior Managing Director (present)

6

Shigeyuki Matsumoto  

(Nov. 15, 1950)  

As of

Apr. 1977:   Entered the Company

Jan. 2002:   Group Executive of Device Technology Development Headquarters

                    (present)

Mar. 2004:   Director

Mar. 2007:   Managing Director

Mar. 2011:   Senior Managing Director (present)

7

Toshio Homma  

(Mar. 10, 1949)  

As of

Apr. 1972:   Entered the Company

Mar. 2003:   Director

Mar. 2008:   Managing Director

Mar. 2012:   Senior Managing Director, Group Executive of Global Procurement

                    Headquarters (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

12   

Naoji Otsuka

(Apr. 24, 1958)

As of

Apr. 1981:  Entered the Company

Jan. 2010:  Group Executive of Inkjet Products Development Group

Apr. 2011:  Executive Officer, Deputy Chief Executive of Inkjet Products Operations

Mar. 2012:  Director, Chief Executive of Inkjet Products Operations (present)

13   

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

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

                   (present)

Mar. 2013:  Director (present)

14   

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

Mar. 2013:  Director (present)

15   

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

Apr. 2012:  Group Executive of Human Resources Management & Organization

                   Headquarters (present)

Mar. 2013:  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

19

Haruhiko Kato

(Jul. 21, 1952)

0 shares    

(Important concurrent posts)

— President and CEO of Japan Securities Depository Center,

   Incorporated

— Director of Toyota Motor Corporation

Notes:

1.

None of the candidates for the Directors have any special interest in the Company.

2.

Mr. Kunitaro Saida and Mr. Haruhiko Kato are candidates for Outside Directors defined by Item 7, Paragraph 3, Article 2 of the Enforcement Regulations of the Corporation Law.

3.

The reasons we have selected Mr. Kunitaro Saida and Mr. Haruhiko Kato as candidates for Outside Directors are as follows.

(1)

The Company requests that Mr. Kunitaro Saida be elected as Outside Director so that the Company’s management may utilize his wealth of experience and advanced expert knowledge gained from his distinguished career as Superintending Prosecutor of High Public Prosecutors Offices (in Takamatsu, Hiroshima and Osaka) and later as an attorney in corporate legal affairs.

(2)

The Company requests that Mr. Haruhiko Kato be elected as Outside Director so that the Company’s management may utilize his wealth of experience and advanced expert knowledge gained from his distinguished career in fiscal operations of the national government as Director-General of Tax Bureau in the Ministry of Finance, and Commissioner of National Tax Agency as well as his managerial experience as President of Japan Securities Depository Center, Incorporated.

4.

At Sumitomo Osaka Cement Co., Ltd., where Mr. Kunitaro Saida serves as Outside Director, inappropriate accounting treatment in the settlement of accounts during the period from the first quarter of fiscal year ended March 31, 2010 through the second quarter of fiscal year ended March 31, 2012, was discovered, and the aforesaid company submitted amendment reports for Annual Securities Report, etc., issued a correction to the financial results report (Kessan Tanshin), and submitted a business improvement report to the Tokyo Stock Exchange. Mr. Kunitaro Saida regularly promotes awareness from the viewpoint of placing importance on compliance and internal controls, and with respect to the aforementioned matter, he was appointed as a member of the internal investigation committee where he proactively investigated the matter and advised from an independent standpoint on the proposals of measures to prevent recurrence. In addition, he expressed his opinion on corrective measures and measures to prevent recurrence such as strengthening measures.

5.

Although Mr. Kunitaro Saida does not have the experience of being involved in the management of a company other than in a position of an outside director or outside audit & supervisory board member, the Company judges that he will appropriately perform his duties as Outside Director due to his corporate legal affairs experience as an attorney.

6.

Should Mr. Kunitaro Saida and Mr. Haruhiko Kato be elected to the positions of Directors, it is planned that the Company will enter into contracts with them limiting the amount of their damage compensation liabilities defined in Paragraph 1, Article 423 of the Corporation Law of Japan to the limit prescribed by laws and regulations.

7.

Should Mr. Kunitaro Saida and Mr. Haruhiko Kato be elected to the positions of Directors, the Company plans to notify both of them as independent directors to each stock exchange in Japan on which the Company is listed as provided under the regulations of each stock exchange.

1.

Mr. Fujio Mitarai has been a Representative Director since March 1989.

2.

Mr. Toshizo Tanaka has been a Representative Director since March 2008.

3.

Mr. Toshiaki Ikoma has been a Representative Director since March 2011.

Notes:

1.

None of the candidates for the Audit & Supervisory Board Members have any special interest in the Company.

2.

Mr. Osami Yoshida and Mr. Kuniyoshi Kitamura are candidates for Outside Audit & Supervisory Board Members defined by Item 8, Paragraph 3, Article 2 of the Enforcement Regulations of the Corporation Law.

3.

The reasons we have selected Mr. Osami Yoshida and Mr. Kuniyoshi Kitamura as candidates for Outside Audit & Supervisory Board Members are as follows.

 (1)

The Company requests that Mr. Osami Yoshida be elected as Outside Audit & Supervisory Board Member so that his wealth of experience and advanced expert knowledge in corporate accounting gained from his longstanding practice in corporate accounting as a certified public accountant may be utilized to monitor the overall management and to realize stricter propriety in auditing.

 (2)

The Company requests that Mr. Kuniyoshi Kitamura be elected as Outside Audit & Supervisory Board Member so that his perspective as a businessman and his suitable degree of knowledge in company management gained from his longstanding service in a life insurance company, which exposed him to a broad range of fields, may be utilized to monitor the overall management and to realize stricter propriety in auditing.

4.

 (1)

Although Mr. Osami Yoshida does not hold experience of being involved in the management of a company other than in a position of an outside director or outside audit & supervisory board member, the Company judges that he will appropriately perform his duties as Outside Audit & Supervisory Board Member through his longstanding practice in corporate accounting as a certified public accountant.

 (2)

Although Mr. Kuniyoshi Kitamura does not hold experience of being involved in the management of a company other than in a position of an outside director or outside audit & supervisory board member, the Company judges that he will appropriately perform his duties as Outside Audit & Supervisory Board Member due to his suitable degree of knowledge in company management gained from his longstanding service in a life insurance company, which exposed him to a broad range of fields, such as sales, planning, and being in charge of the investigations division.

5.

Mr. Kuniyoshi Kitamura has served as Audit & Supervisory Board Member of the Company for four years.

6.

The Company has entered into a contract with Mr. Kuniyoshi Kitamura limiting the amount of his damage compensation liabilities defined in Paragraph 1, Article 423 of the Corporation Law to the limit prescribed by laws and regulations. Should he and Mr. Osami Yoshida be elected to the positions of Audit & Supervisory Board Members, it is planned that they will enter into the contract with the Company limiting the amount of their damage compensation liabilities defined in Paragraph 1, Article 423 of the Corporation Law to the limit prescribed by laws and regulations.

7.

The Company has notified Mr. Kuniyoshi Kitamura as an independent auditor to each stock exchange in Japan on which the Company is listed as provided under the regulations of each stock exchange. Should he and Mr. Osami Yoshida be elected as Audit & Supervisory Board Members, the Company plans to make both of them independent auditors.

Deloitte Touche Tohmatsu LLC, where Mr. Osami Yoshida was employed in the past, is not the auditing firm charged with the accounting auditing of the Company. Moreover, although there are transactions based on service consignment agreements between the Company and the aforesaid auditing firm, the annual gross amount of these transactions is less than 1% of either the Company’s or the aforesaid auditing firm’s annual net sales, and the Company judges that his independence is not affected by the aforesaid circumstances.

Mr. Kuniyoshi Kitamura used to work for The Dai-ichi Life Insurance Company, Limited. The aforesaid company is a shareholder of the Company but its shareholding ratio is approximately 3.3%. Moreover, although there are transactions based on life insurance contracts between the Company and the aforesaid company, the annual gross amount of these transactions is less than 1% of either the Company’s or the aforesaid company’s annual net sales, and the Company judges that his independence is not affected by the aforesaid circumstances.

Items Required to be Agreed on for the Exercise of Voting Rights via the Internet

(1)

You may exercise your voting rights via the Internet only through the website for exercising voting rights specified by the Company (see “Specific Procedures to Exercise Your Voting Rights via the Internet” (1) below). Please note that you cannot exercise your voting rights via the Internet by a mobile phone.

(2)

When exercising your voting rights via the Internet, the “Code for the Exercise of Voting Rights” and the “Password” described in the enclosed Voting Form are required.

(3)

If you exercise your voting rights twice, in writing and via the Internet, we will only accept the exercise of your voting rights via the Internet as effective.

(4)

If you exercise your voting rights more than once via the Internet, we will only accept the last exercise of your voting rights as effective.

(5)

The cost of Internet access (access fees to providers, telecommunications fees, etc.) shall be borne by the shareholders.

Specific Procedures to Exercise Your Voting Rights via the Internet

(1)

Access the website for exercising voting rights specified by the Company (http://www.it-soukai.com).

(2)

Enter the “Code for the Exercise of Voting Rights” and the “Password” described in the enclosed Voting Form and click on the “Log-in” button.

(3)

Exercise your voting rights by following the directions on the screen.

System Requirements

  Personal Computer

Windows^® computer

  Browser

Microsoft^® Internet Explorer 5.5 or higher

  Internet Environment

Internet access such as through a contract with an Internet service provider

  Monitor Resolution

1024×768 pixels or higher is recommended.

*Microsoft and Windows are registered trademarks or trademarks of Microsoft Corporation in the United States and other countries.

Security

You may exercise your voting rights safely due to the encryption technology (SSL128bit) used to protect your voting information from being tampered with or wiretapped.

In addition, the “Code for the Exercise of Voting Rights” and the “Password” described in the Voting Form are very important to authenticate shareholders, so please ensure that you do not disclose them to other people. Please note that the Company does not make any inquiries regarding your “Password.”

For Inquiries with Respect to the Exercise of Voting Rights via the Internet

Please contact:

Internet Help Dial Stock Transfer Agency Department Mizuho Trust & Banking Co., Ltd.

Telephone: 0120-768-524 (toll-free) Operating Hours: 9:00 a.m. to 9:00 p.m. (excluding Saturdays, Sundays and national holidays)

Regarding our efforts toward “thoroughly strengthening sales in accordance with respective market characteristics,” we implemented a new sales strategy in the office products domain targeted at global enterprises that have offices all over the world. In China, we restructured our sales system and carried out further market development, while in other emerging markets such as India, Russia, and South America, we expanded the sales network and introduced products to meet the needs of each market.

Moreover, to “relentlessly pursue cost reductions and accelerating optimization of global production,” we promoted prototype-less activities using computer simulation, strengthened the procurement department, and expanded the scope of in-house production. We also put into operation new factories for multifunction devices and inkjet printers in Thailand, laser printers in the Philippines, and cameras in Brazil.

Simulation using super computer

Retail store in Huaxi district, China

As a result of such efforts, we recorded net sales of 3,731.4 billion yen (up 7.2% from the previous term), income before income taxes of 347.6 billion yen (up 1.5%), and net income attributable to Canon Inc. of 230.5 billion yen (up 2.6%), all on a consolidated basis. On a non-consolidated basis, we recorded net sales of 2,128.8 billion yen (up 0.7%), ordinary profit of 236.7 billion yen (up 0.4%), and net income of 170.4 billion yen (up 8.1%). In the face of the difficult business environment, we achieved sales revenue and profit growth.

In the area of OEM-brand laser multifunction printers and laser printers, both unit sales and sales revenue rose from the previous term as orders from OEM customers increased owing to the expansion of the market size for laser multifunction printers in the second half of the year.

Sales of high speed continuous feed printers manufactured by Océ were strong particularly for the “ColorStream 3000” series.

As a result of the above, sales for this business unit increased by 13.8% on a consolidated basis and by 12.0% on a non-consolidated basis, both in comparison to the previous term.

  Océ ColorStream 3000 Twin series

High-speed, continuous feed commercial printer for applications requiring high speed and high quality such as invoice, direct mail, etc. as demanded by the data print services (DPS) market.

 Main facilities completed during this term

l  Canon U.S.A., Inc.:

l  Canon Zhuhai, Inc.:

l  Canon Business Machines (Philippines), Inc.:

 New Headquarters (Office Business Unit, Imaging

 System Business Unit, Industry and Others

 Business Unit)

 Location: New York, U.S.A.

 Date of Completion: January, 2013

 New Production Base (Imaging System Business

 Unit)

 Location: Guangdong Province, China

 Date of Completion: October, 2013

 New Production Base (Office Business Unit)

 Location: Province of Batangas, the Philippines

 Date of Completion: February, 2013

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

l  Kawasaki Office of the Company:

l  Tamagawa Office of the Company:

l  Canon Ecology Industry Inc.:

 New Administration and Development Building

 (Headquarters Operations)

 Location: Kawasaki-shi, Kanagawa Pref., Japan

 New Administration and Development Building

 (Headquarters Operations)

 Location: Kawasaki-shi, Kanagawa Pref., Japan

 New Production Base (Office Business Unit)

 Location: Bando-shi, Ibaraki Pref., Japan

 *To be leased to Canon Ecology Industry Inc. by

 the Company

 Bolstering Strengths of Existing Core Businesses by Creating Outstanding Hit Products

Canon aims to secure further market share for existing core businesses, developing appealing products that provide excellence, not only in terms of basic performance, but also in all other aspects. Canon will also promote the development of businesses derived from existing core businesses (e.g., “CINEMA EOS SYSTEM” and “DreamLabo” commercial photo printer) even more vigorously. Moreover, Canon will further strengthen the solution service in order to develop it into a profitable business together with its hardware business.

 Securely Launch and Steadily Expand New Businesses

Canon will work to accelerate the business expansion of network camera systems, for which significant growth is expected, by accumulating a track record of successful solutions to satisfy customer needs. Canon will also focus on strengthening its business foundation for 4K reference displays and mixed-reality systems, while also concentrating on the commercialization of Super Machine Vision, which is expected to be applied effectively in production sites. In the medical field, Canon aims to realize the early launch of DNA diagnostic systems.

 Holistically Developing Global Sales Forces

In emerging markets, Canon will work to expand sales networks and enhance product lineups in accordance with conditions in each country. In developed countries, in the consumer products domain, Canon will boost its ability to respond to Internet-based direct-order sales in addition to existing sales channels, while in the office products domain, Canon will strengthen its response to the centralized purchasing practices used by global corporations when procuring office products. Through these efforts, Canon will aim to increase market share in both domains.

 Optimizing the Global Production System

Based on such factors as changes in local conditions in each country, Canon will work to realize the optimized global allocation of its production assets in consideration of both economic rationality and risk diversification. Canon will also work to maintain or expand its production in Japan through automation, while also accelerating localized production of mainly consumables in the Americas and Europe through automated production systems.

 Exploring a New Dimension of Cost Reductions

Through the promotion of procurement reform activities, Canon will thoroughly ensure the procurement of materials at a reasonable cost. In addition to further enhancement of in-house production of parts, Canon will promote further automation. Additionally, Canon will work to significantly reduce product development times and achieve cost savings, promoting prototype-less production activities through the utilization of its state-of-the-art super computer.

Net Sales
(100 millions of yen)

Income before Income Taxes
(100 millions of yen)

Net Income Attributable to Canon Inc.
(100 millions of yen)

Basic Net Income Attributable to Canon Inc. Stockholders Per Share
(yen)

Total Assets
(100 millions of yen)

Total Canon Inc. Stockholders’ Equity
(100 millions of yen)

Notes:

Net Sales
(100 millions of yen)

Ordinary Profit
(100 millions of yen)

Net Income
(100 millions of yen)

Net Income Per Share
(yen)

Total Assets
(100 millions of yen)

Net Assets
(100 millions of yen)

Note:

Operations

Company Name

(thousands of U.S.$)

The ratios of the Company’s voting rights in Canon Marketing Japan Inc. and Canon Europa N.V. are calculated together with the number of voting rights held by subsidiaries.

(9) Canon Group Global Network

Canon Inc.

R&D, Manufacturing and Marketing

Manufacturing

Headquarters [Tokyo]

Canon Electronics Inc. [Saitama Pref.]

Oita Canon Inc. [Oita Pref.]

Kawasaki Office [Kanagawa Pref.]

Canon Finetech Inc. [Saitama Pref.]

Nagasaki Canon Inc. [Nagasaki Pref.]

Ayase Plant [Kanagawa Pref.]

Canon Precision Inc. [Aomori Pref.]

Canon Chemicals Inc. [Ibaraki Pref.]

Hiratsuka Plant [Kanagawa Pref.]

Canon Components, Inc. [Saitama Pref.]

Oita Canon Materials Inc. [Oita Pref.]

Oita Plant [Oita Pref.]

Canon ANELVA Corporation [Kanagawa Pref.]

Fukushima Canon Inc. [Fukushima Pref.]

Tamagawa Office [Kanagawa Pref.]

Canon Machinery Inc. [Shiga Pref.]

Nagahama Canon Inc. [Shiga Pref.]

Kosugi Office [Kanagawa Pref.]

Canon Tokki Corporation [Niigata Pref.]

Marketing

Toride Plant [Ibaraki Pref.]

Canon Marketing Japan Inc. [Tokyo]

Fuji-Susono Research Park [Shizuoka Pref.]

Canon System & Support Inc. [Tokyo]

Yako Office [Kanagawa Pref.]

Canon IT Solutions Inc. [Tokyo]

Utsunomiya Office [Tochigi Pref.]

Canon Software Inc. [Tokyo]

Ami Plant [Ibaraki Pref.]

Americas

Asia, Oceania

Marketing

Marketing

Canon U.S.A., Inc. [U.S.A.]

Canon (China) Co., Ltd. [China]

Canon Latin America, Inc. [U.S.A.]

Canon Hongkong Co., Ltd. [Hong Kong]

Canon Canada Inc. [Canada]

Canon Korea Consumer Imaging Inc. [Korea]

Canon Mexicana, S.de R.L. de C.V. [Mexico]

Canon Singapore Pte. Ltd. [Singapore]

Canon do Brasil Indústria e Comércio Limitada [Brazil]

Canon India Pvt. Ltd. [India]

Canon Chile, S.A. [Chile]

Canon Australia Pty. Ltd. [Australia]

Manufacturing

Manufacturing

Canon Virginia, Inc. [U.S.A.]

Canon Dalian Business Machines, Inc. [China]

Europe, Middle East, Africa

Canon Zhuhai, Inc. [China]

Marketing

Canon Zhongshan Business Machines Co., Ltd. [China]

Canon Europa N.V. [Netherlands]

Canon (Suzhou) Inc. [China]

Canon Europe Ltd. [U.K.]

Canon Inc., Taiwan [Taiwan]

Canon (UK) Ltd. [U.K.]

Canon Hi-Tech (Thailand) Ltd. [Thailand]

Canon France S.A.S. [France]

Canon Vietnam Co., Ltd. [Vietnam]

Canon Deutschland GmbH [Germany]

Canon Opto (Malaysia) Sdn.Bhd. [Malaysia]

Canon Ru LLC [Russia]

R&D

Canon Middle East FZ-LLC [U.A.E.]

Canon Information Systems Research Australia Pty. Ltd. [Australia]

Canon South Africa Pty. Ltd. [South Africa]

R&D, Manufacturing and Marketing

Manufacturing

Canon Electronic Business Machines (H.K.) Co., Ltd. [Hong Kong]

Canon Giessen GmbH [Germany]

Canon Bretagne S.A.S. [France]

R&D

Canon Research Centre France S.A.S. [France]

R&D, Manufacturing and Marketing

Océ Holding B.V. [Netherlands]

OPTOPOL Technology Sp. z o.o. [Poland]

(10) Other Important Items Regarding Current Conditions of the Canon Group

Aiming to accelerate development of its next-generation semiconductor lithography systems, the Company entered into an agreement with U.S.-based Molecular Imprints, Inc., which possesses cutting-edge nano-processing technology, on February 5, 2014, to make it a wholly owned subsidiary.

2. Shares of the Company

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

  Japan Trustee Services Bank, Ltd. (Trust Account)

  The Dai-ichi Life Insurance Company, Limited

  State Street Bank and Trust Company 505223

  Barclays Securities Japan Limited

  Moxley and Co. LLC

  Mizuho Bank, Ltd.

  Northern Trust Co. (AVFC) Sub A/C American Clients

  Sompo Japan Insurance Inc.

  Nomura Securities Co., Ltd.

Notes:

Shareholding ratio is calculated by deducting the number of treasury shares (196,764 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.

Category

Number of Share Options (Exercise Price Per Share)

Class and Number of Shares  

to be Acquired

Directors

Audit &

Supervisory

Board

Members

4. Directors and Audit & Supervisory Board Members

(1) Directorsand Audit & Supervisory Board Members

Chairman & CEO

CEO

Audit & Supervisory Board Member of The Yomiuri Shimbun Holdings, Director of Japan Post Holdings Co., Ltd.

Executive Vice President

Toshizo Tanaka

Executive Vice President

Executive Vice President

Senior Managing Director

Senior Managing Director

Senior Managing Director

Senior Managing Director

Senior Managing Director

Senior Managing Director

Managing Director

Managing Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Audit & Supervisory Board Member 

Audit & Supervisory Board Member 

Audit & Supervisory Board Member 

Audit & Supervisory Board Member 

Audit & Supervisory Board Member 

Notes:

1.

Directors with asterisk were newly elected at the Ordinary General Meeting of Shareholders for the 112th Business Term held on March 28, 2013, and assumed their office.

“Business in Charge or Important Concurrent Posts” of Executive Vice President Mr. Toshiaki Ikoma, as of January 1, 2014, has been changed as follows.

Toshiaki Ikoma CTO, Group Executive of Corporate R&D, Group Executive of Medical Equipment Group

Audit & Supervisory Board Members Mr. Tadashi Ohe, Mr. Kazunori Watanabe and Mr. Kuniyoshi Kitamura are Outside Audit & Supervisory Board Members defined by Item 16, Article 2 of the Corporation Law of Japan. Also, the Company has notified the above Outside Audit & Supervisory Board Members as independent auditors to each stock exchange in Japan on which the Company is listed as provided under the regulations of each stock exchange.

Audit & Supervisory Board Member Mr. Shunji Onda had experienced accounting operation at the Company for many years and has a wealth of expertise in finance and accounting.

Audit & Supervisory Board Member Mr. Kazunori Watanabe is qualified as a Certified Public Accountant and has a wealth of expertise in finance and accounting.

  Directors

  Audit & Supervisory Board Members    

Notes:

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 206 million yen.

Directors’ remuneration and other amounts include expenses related to 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 50 million yen.

The above remuneration and other amounts include an increased amount of accrued directors’ retirement benefits for this term of 46 million yen.

Retirement allowance system for Directors has been abolished at the conclusion of the Ordinary General Meeting of Shareholders for the 112th Business Term held on March 28, 2013. As part of the abolition of this system, a resolution was made at the same meeting to pay a final retirement benefit payment of gross amount 1,865 million yen to the 18 Directors who were reelected, to be paid at the time of each Director’s retirement.

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 11 out of 12 Board of Directors meetings and all 19 of the Audit & Supervisory Board meetings held during this term, and provided expert input as an attorney when necessary.

  Kazunori Watanabe  

Attended all 12 of the Board of Directors meetings and all 19 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 12 of the Board of Directors meetings and all 19 of the Audit & Supervisory Board meetings held during this term, and provided input based on his insight in business management when necessary.

  (i)

Remuneration and other amounts payable by the Company for the services defined in Paragraph 1, Article 2 of the Certified Public Accountants Act

  (ii)

Total amount of cash and other financial benefits payable by the Company and its subsidiaries to the Accounting Auditor

In the audit agreement between the Company and the Accounting Auditor, remuneration amounts are determined on a lump-sum without breakdown into a separate remuneration amount for auditing in accordance with the Corporation Law and in accordance with the Financial Instruments and Exchange Law. Accordingly, the amounts shown in (i) above represent total amounts of remuneration and other amounts for both of these auditing services.

The Company pays remuneration to the Accounting Auditor for their advisory services in addition to the services defined in Paragraph 1, Article 2 of the Certified Public Accountants Act.

Among the Company’s principal subsidiaries, Canon U.S.A., Inc. and Canon Singapore Pte. Ltd. are audited by Ernst & Young LLP, Canon Europa N.V. is audited by Ernst & Young Accountants LLP, and Canon Vietnam Co., Ltd. is audited by Ernst & Young Vietnam Limited.

(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)    

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)    

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.

(4)    System for Assuring Directors’
Efficient Execution of Duties

(i)    The Executive Committee and Management Committees are established and important matters are carefully deliberated in advance by Directors, Executive Officers and relevant managers to promote prompt and appropriate decision making by Directors.

(ii)    Based on explanation of management policies in long-term management plans, the Company goals are given concrete shape in medium-term plans, and each division is thoroughly informed of the content of these plans. Furthermore, annual and quarterly short-term plans and monthly budgetary control are used to monitor performance progress, through which the Company makes optimum use of management resources.

(5)    System for Ensuring Appropriate
Operations of the Corporate Group
Comprised of Corporation, its
Parent Companies and Subsidiaries

(i)    Based on the “Canon Group Code of Conduct,” the Company promotes Groupwide compliance and infuses an awareness of compliance and corporate ethics to share as a set of common values for the Group.

(ii)    Policies and measures set forth by the Committee managing and overseeing the “Canon Group Code of Conduct” are implemented at each Group company by compliance staff assigned to each company.

(iii)   The internal auditing, legal, and other divisions enhance compliance by providing guidance and monitoring with regard to the observance of laws in the business activities of all Group companies.

(iv)   The soundness and efficiency of the Group’s business activities are ensured through the formulation of Groupwide medium-term plans and deliberations in the Management Committee.

(6)    Matters Regarding Employees Who
Assist the Duties of Audit &
Supervisory Board Members When
Audit & Supervisory Board Members
Request Assignment of Such Employees

(i)    A division is established specifically to assist Audit & Supervisory Board Members with their duties.

(ii)    Full-time employees of a requisite number are assigned to the division.

(7)    Matters Regarding Independence of
the Employees in (6) Above From
Directors

(i)    The specific division is an organization independent of the Board of Directors.

(ii)    Changes in the division’s personnel require the prior consent of the Audit & Supervisory Board.

(8)    System for Directors and Employees
to Report to Audit & Supervisory
Board Members and System for
Other Types of Reporting to Audit
& Supervisory Board Members

(i)    Directors promptly report to Audit & Supervisory Board Members matters that may have a significant impact on the Company when such matters emerge or are likely to emerge.

(ii)    Directors, Executive Officers and employees deliver reports periodically to Audit & Supervisory Board Members regarding matters Directors and the Audit & Supervisory Board Members have previously agreed upon in consultations.

(iii)   Audit & Supervisory Board Members attend the Executive Committee and other important meetings.

(iv)   An in-house hotline system is adopted to allow Audit & Supervisory Board Members to receive information from employees.

(9)    Other Systems for Securing the
Effectiveness of Auditing by Audit &
Supervisory Board Members

(i)    Audit & Supervisory Board Members periodically receive reports from accounting auditors.

(ii)    The Company establishes the systems for providing cooperation and allowing field audits of internal divisions and affiliates to be performed efficiently by Audit & Supervisory Board Members.

As of Dec. 31,
2013

 ASSETS

 Current assets:

Cash and cash equivalents

Short-term investments

Trade receivables, net